BETHESDA, MD-Walker & Dunlop, which has been aggressively building out its financial offerings and geographic footprint over the past few years, took a significant leap forward with its latest endeavor: the debut of a CMBS lending platform from which the company hopes to originate $1 billion a year, starting at the beginning of 2014.

Walker & Dunlop entered into a partnership with an affiliate of a fund managed by Fortress Investment Group to form the venture, which in fact will serve as more than just a conduit. Also part of the mix will be high-yield whole loans, mezzanine debt and preferred equity. The JV will be called Walker & Dunlop Commercial Property Funding, LLC and it will be headquartered in New York City, headed by industry veteran Tim Koltermann. Koltermann tells GlobeSt.com that the company is in the process of hiring "a senior group of people" who will join next month.

One reason for the launch is that the agencies have started to pull back from their multifamily finance operations and W&D saw the need to step in, Koltermann says. But that was only one, small reason. In the bigger picture, W&D sees itself as providing a range of debt and equity products to borrowers who, in the past, have had to go elsewhere if W&D wasn't able to fill their needs.

"We like CMBS and we feel it fits in well with W&D's existing sales force and customer profile. And we definitely think the agency business will remain fruitful for us."

"But as we look at the marketplace, because of Dodd-Frank and Basel, there is a lot of activity that money banks can no longer finance--they can't offer an all-end solution under one roof anymore," he says. "So that is what we are trying to do."

W&D is entering the CMBS market at an interesting time: When 2013 dawned, experts assumed the year would close out with some $55 billion in CMBS volume completed. Now, here we are in the third quarter and some $60 billion has been racked up, and the general consensus has changed to a $80 billion to $85 billion prediction.

Much of the year's activity has been characterized with single borrower deals, but now as floating rate deals are becoming more attractive to with the steepening of the yield curve.

Also fueling CMBS, notes Brian Olasov with McKenna Long & Aldridge is the pullback by the GSEs this year in multifamily investments.

This March, as Koltermann alluded, the Federal Housing Finance Agency dropped a bombshell on the multifamily industry: it was announced there would be a 10% reduction target in business volume from 2012 levels—achieved through some combination of increased pricing, more limited product offerings, and tighter overall underwriting standards.

"One of the changes we have seen this years is that, as the GSEs took their foot off the pedal, CMBS and banks moved in to pick up the multifamily business," Olasov says.

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Erika Morphy

Erika Morphy has been writing about commercial real estate at GlobeSt.com for more than ten years, covering the capital markets, the Mid-Atlantic region and national topics. She's a nerd so favorite examples of the former include accounting standards, Basel III and what Congress is brewing.

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