Walker & Dunlop to Acquire Johnson Capital’s Loan Platform

Walker & Dunlop Inc. has signed on to acquire the loan origination and servicing platform of Johnson Capital.
Willy Walker, Walker & Dunlop

Willy Walker, Walker & Dunlop

Walker & Dunlop Inc. has signed on to acquire the loan origination and servicing platform of Johnson Capital, a national commercial real estate mortgage company that has a two-decade long history with the commercial real estate financing solutions provider. The price tag in cash and stock: no one is saying.

W&D ranks as the #1 Fannie Mae DUS lender and the #3 Freddie Mac Seller Servicer, but with the Johnson Capital agreement, it grows ever more clear that the Bethesda, Md.-based company is about so much more than government-sponsored enterprises

“We’re loving our position as one of the dominant players in the GSE space, but we’ve also been focusing on expanding our platform into new geographies as well as new assets classes, and Johnson Capital is a great way to do that,” Willy Walker, Walker & Dunlop chairman & CEO told Commercial Property Executive.

Irvine, Calif.-based Johnson Capital, one of W&D’s largest mortgage banking correspondents, affects funding transactions ranging from $1 million to more than $300 million, executing an annual average of $1.3 billion in commercial loans for the last three years. Notable transactions include the arrangement of a $100 million credit facility secured by the iconic Farmers Market in Los Angeles on behalf of an entity by A. F. Gilmore Co., which has owned the property since 1880. Johnson Capital also orchestrated $60 million in fixed-rate senior debt for the refinancing of a 150,000-square-foot retail condo in downtown Chicago’s One North State office building.

Looking at W&D’s $8.4 billion of commercial real estate loans in 2013, the combined platforms will yield nearly $10 billion in annual origination. Johnson Capital also brings $590 million in HUD servicing to the table, adding to W&D’s existing $40 billion servicing portfolio.

As Walker noted, “What we pick up is a brokerage operation that has got a very broad footprint [with a prominent presence in the West and Southwest]; lots of great customers; a very significant presence in the multi-family market where they can leverage very effectively off of Walker & Dunlop’s very strong position in the multi-family market; and then our ability to grow our originations in non-multi-family, including office, retail and hospitality.”

And much to Walker’s delight, Johnson Capital’s founder & CEO, Guy Johnson, will stay aboard to assist W&D in the expansion of its platform.

W&D is no novice at selecting complementary companies and bringing them into the fold successfully. In 2009, the real estate financing concern acquired Column Guaranteed L.L.C.’s $5 billion servicing portfolio, along with its Fannie Mae, Freddie Mac and HUD operations.  Three years later, in 2012, came the purchase of commercial real estate lender CWCapital L.L.C. in a $220 million transaction.

“One of the things I said to Johnson Capital employees yesterday during my first phone call with them is that we understand that there is a unique culture at Johnson Capital, and there are things that it does very well and we want to make sure that we get the best out of both Johnson Capital and W&D,” added Walker. “I think that we’ve been very good with both CWCapital as well as Column, figuring out what they do, what we do and making sure that one plus one equals more than two.”

W&D, which was recently named Fortune magazine’s 100 Fastest-Growing Companies list, has also been making smaller moves to increase its business over the last couple of years, snapping up brokerage teams in Florida, Wisconsin, Arizona and Southern California.

“We do have certain business lines that we’ve entered that we’ve grown organically, but for anything to move the needle on our financial statements, it needs to be a significant splash,” Walker said. “One of the reason’s we went public in 2010 was to raise capital so we had enough to be able to grow the business and go out and be acquisitive and take advantage of the opportunities  that were presenting themselves to us. Johnson is a great move down that path, but instead of adding a two- or three-person team on an every-other-quarter basis, which is what we’ve basically been doing for the last two years, this allows us to add 40 originators in one fell swoop, get them onto the W&D platform and try and take their game to a new level and also expand our platform dramatically.”

The Johnson Capital acquisition transaction is on track to close on or around November 1, 2014.