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[Audio Gap] Live Walker webcast or it's actually not live or recording it, and we'll play it next week. And welcome to, hopefully, a really good engaging conversation with Sean Dobson on where the markets are, single-family, SFR, multifamily from someone who has, A, timed markets impeccably in the past, has an incredible mind as it relates to both the financing behind housing and then actually the building and management of housing. And I would say, finally, Sean, just an incredible perspective as it relates to trading in these markets. I thought a lot about where to start this morning.

You kind of set this up here with the expectations a little too high.

Yes. No, it's great. I would start here. Fed raised by 25 basis points yesterday. Other than the fact that the cost of capital just went up. What's your take on that raise and what that does either from a price stability standpoint, if you listen to Fed Chair Warsh or a broader view, as I just said, on CNBC, which is after raising by 0.25 point, I didn't see the memo come in from the Iranians that the Strait of Hormuz is now open and the oil is going to drop by $25 a barrel.

Diesel doesn't get cut in half overnight.

So I'm sort of like what are we trying to accomplish here by 25 basis points.

Yes. Well, thank you guys for having me. I'm a big Ivy Zelman fan. So congratulations on your affiliation with Ivy, she is fantastic. As far as interest rates, it might help a little bit to understand our business. We're an investment manager co-investor kind of merchant investor. And most of our investment programs are 10-, 15-, 20-year programs. So the next month, the next week, the next year is always so hard for anyone to forecast. I don't think we have any special expertise that anyone else doesn't have in terms of the short term. We think that in terms of the overall economy and what the Fed is trying to do, we think they're late and they've been late for about 7 or 8 years. We think they were very late in taking away the subsidies post the financial crisis by a long time. So they kept rates too low for too long.

And then when COVID came around, they kind of had a chance to let things settle back in and didn't and then they over eased and kept them really at a level that was never seen before in terms of interest rates relative to economic activity. And when you do that, housing and what we're all talking about today takes the brunt of those mistakes in both monetary policy and fiscal policy. So I think that raising rates today is fighting inflation that was caused a couple of years ago, and we don't need to keep inflating it.

I think the bigger that you mentioned cost of capital, I think the -- what I'd like to say is kind of the yellow blinking check engine light that we're all kind of whistling past every day is that if you take a look at the return on TIPS, it's way too high. And it just means that America's cost of capital has gone up about 100 to 150 basis points, which is a lot. So as a nation, our cost of capital is now at a level that's going to hurt growth in the economy and raising the nominal rate is not going to help them.

Right. So you made a lot of money and a lot of good bets around the GFC. Anything you're saying today?

I think I keep it. I'm still you're working here.

It's all good, Sean. Anything you're seeing today that is a similar setup to the big bet you made on the GFC?

I tell people that the problem with finding something as big as the mispricing in mortgage credit was when we founded in 2004, 2005 is that you spend the rest of your career looking for another one. And it may have been an accident that we found it in the first place and there may never be another one. I would say that if you simplify the ingredients to what happened in the GFC, the primary cause of home prices getting out of control was Greenspan lowering interest rates into a growing economy. So this was lowering interest rates because of the dot-com bust, which was way more contained than they thought it was going to be, while PCE and consumer spending and the unemployment rate stay just fine on a macro basis.

So what happens in the United States is when consumers are making generally more money every year in nominal dollars and you crash down long-term interest rates, their buying power for housing goes up quickly and it goes up way faster than the rest of us can respond to create houses for those buyers who now have incremental more buying power because mortgage rates drop so fast.

Now if mortgage rates are dropping at the same time the economy is shrinking, then you don't get this explosion you get when you lower mortgage rates into an increasing economy. So that's what's happened post-COVID is that we dropped interest rates into a growing economy. When the economists -- when it's finally okay to criticize the government for their response to COVID, the economists, I think, will conclude that the monetary response was ridiculously too large and the fiscal response was ridiculously too large. And we did them at the same time, which means that the government printed it and literally gave away money at the same time that long-term interest rates were held at 2%, 3% for a very long time.

When those things happen, what happens is the buying power for housing goes way up. And the economy tries to react -- the system tries to react to more supply, but really just drives up prices. So when you have that big of a stimulus for demand, you just drive prices up.

But it sounds like on the GFC, you only had the fiscal side that caused the problem. On this one, you've got both the fiscal and the monetary. Why is this not a bigger train wreck than the GFC?

Well, on the metric -- the model that told us to short the housing market in 2005 thinks that home prices are more expensive today than they were in 2005, 2006. So relative to -- and your homebuilders talked about the low end is hard to supply to. It's not because there aren't a lot of people that make $80,000 a year that would like to buy a nice home. It's because people that make $80,000 a year can't get a mortgage big enough to buy a nice home. So on a pure affordability perspective, you would say that today is the best time ever to short the housing market. The problem is that the problem with that theory and the reason we're not recommending that. As a matter of fact, we're going to recommend the opposite is that you have to keep up with the supply/demand and you have to keep up with this float of housing versus stock of housing issue.

What was unique about the financial crisis wasn't so much that home prices had overrun fair value. What was unique is they were all temporarily financed. So there was a catalyst to create a glut of supply. The catalyst was just that the teaser payment was going to expire. The adjustable rate mortgage was going to be -- was going to reset. Remember, we had the pay option mortgage where you didn't even have to pay the interest. So all the tricks to get the monthly payment to be small relative to the loan balance had temporary features to them. And so you could just forecast when the music was going to stop.

Now it took a long time, like we were short in 2005, 2006. So okay, this is never going to happen. You don't have that catalyst today. You're going to have the third catalyst of 3 million, 4 million, 5 million new for-sale homes in the market. As a matter of fact, you have the opposite. So we kept -- when I talk about the mistakes, and it's easy for me to say I've never -- will be a Fed governor. But what I like to think about is in retrospect, COVID was never going to be a 30-year problem, right? It was never going to be a 10-year problem. It's either going to be the Spanish flu, in which case 30%, 35% of the population was going to die in a matter of 18 to 24 months or it was going to be what it was, a nonevent.

We took long-term interest rates to 3%. We took mortgage rates to 3% on 30-year fixed rate mortgages. When we did that, not only did we create more buying power per unit of monthly payment that manifests itself into asset price inflation, we took those homes off the market for a long time. It's -- I'd say it's tantamount to burning them down. So we talk about the supply of housing. Are there 4 million underbuilt or 3 million underbuilt. And yes, they're underbuilt.

But the real issue is not so much how many homes there are. It's how many homes are tradable. Like what's the -- not the stock of number of homes out there, but the float of homes that are freely tradable. And freely tradable means a couple of things. It means that the mortgage is less than the value, so there's equity. And it means that the cost for the seller to transfer to a new home isn't prohibitively expensive. And so we talk about the lock-in effect, and we've been writing about it for 5 years, and Ivy has been writing about it for a long time since interest rates went up. But I think that it's -- you can't almost overstate the impact it has on keeping home prices unsustainably high. So we think housing is in a technical short. Home prices are high for technical reasons, not because of fundamental reasons. Technical price squeezes break because of a catalyst. And we don't think that catalyst is going to happen.

So I want to come back to that in a moment, but I want to dive in for a moment when you have that short on back in '06 and '07. What -- a, you just talked about a number of different data points that got you to put that position on. There wasn't one yellow blinking light that said that's the one piece to it. But once you put it on, to maintain the conviction to see it out, there had to have been almost daily moments where you said, why do we have this thing on and this isn't going to actually happen?

People thought we were crazy. We thought we were crazy. There's this crazy bond convention that happens every year in Florida. And it's like a convention that dentists are like, I don't know, anybody would have in the industry. Where literally different law firms and investment banks set up booths and you walk around and you talk to people. It's a crazy thing you've ever seen. But everyone competes to hand out the best tchotchkes, key chains out. So in 2005, our little thing that we handed out to people was a hard hat that had Amherst on the front, on the back and said, beware falling home prices. People we thought we were out of our minds. Like home prices had been lock limit up really since 1997, 1998, and there was nothing on the horizon. So by the end of 2006, that conference came back around, home prices hadn't gone down.

Why did you change?

How did you go over the next year? But I think that for us, to stick with the trade, there are 2 things happened. One is it got our first trades were terrible. So we got short bonds that were trading 300 over and then pretty soon, they were trading 200 over. And so we got smoked by 30%. But I think that what we're really betting on was that this catalyst. We could see that by 2006, 2007, the consumers in the homes couldn't afford the payment that they already signed up for. So you didn't have to have like some weird thing happening. You just had to have time pass. So really, when home prices in 2006 underperformed inflation, we tripled everything because the reason we were losing money is because easier credit was supporting higher home prices -- and the new loan paid off the old dumb loan. And so you make a dumber loan and a dumber loan to pay off the previous dumb loan, and it doesn't look like you can make any loan dumb enough. They're all genius.

But when home prices kind of capped out, it meant that there was no cash out refi to pay off the last dumb loan. So that's when it kind of all was over.

It's funny you talk about that new dumb loan to pay off the old dumb loan. When they announced the bond buying program of going out and buying long-dated securities and issuing short-dated securities to do so, it reminded me of back in CMBS days when they used to take a B-rated bond and put it with a B-rated bond and miraculously became an A-rated bond. And it was sort of like how does this actually work?

Exactly. Exactly.

So you talked about what happens to the stock and like burning it down. One of the reasons you started your single-family rental business was you were looking at the market in 2010, 2011 and saying, we've had kind of a permanent dislocation in the single-family space. There needs to be a new homes for rent, but there's also all this inventory out there that's just sitting there as if it had been burned down, that wasn't being used and wasn't capable of being bought. Talk about that moment and the focus of you and your team, Sean, on how you entered the SFR space.

Well, it was -- it looks better now to did it than at that time.

Just one quick side to that. I was with Sam Zell back in 2011 or 2012, and John Schreiber from Blackstone showed up at this conference that we were both at. And Schreiber and Head of Colony are sitting there talking about the single-family rental idea they have. And Sam, in typical Sam fashion, stands up and goes, that's the stupidest F***ing idea I've ever heard. And he looks at everyone in the room and he goes, has anyone in this room ever washed a rental car. And of course, nobody in the room raised their hand and say, that's exactly it. These people are going to come rent these homes. They're going to drive them into the ground. You're not going to be able to take care of them. The maintenance is going to be a huge cost. That's a terrible idea. And lo and behold, it's John Schreiber and Blackstone did pretty well by their SFR.

He wasn't totally wrong. We started out with -- well, how we got into the business was our Amherst customer base are maybe the 300 largest investors in the world. And they -- we work with them on their U.S. residential exposure. And when you're these types of accounts, when you're a sovereign wealth fund or you're a global life company or you're -- whatever, these huge pools of capital, there they need to move in scale, right? So a 1% position has a lot of zeros, and they need something that's going to last a long time. So these are not pools of capital that are like hedge funds running from this quarter to that quarter. They're very -- they're mostly either not-for-profits or taxpayer money of some kind, and they're invested for 20, 30 or infinite life cycles.

So they lean on us, we lean on them for big things, U.S. housing because U.S. housing is the largest private market in the world. It's almost the same scale as the whole S&P -- the whole stock market combined, and it's very liquid. So when you get back to the housing market crash, you had 7 million homes in mortgages in default and home prices in a free fall. We looked around, there was a bunch of things to do that were interesting, right? You could buy bonds that have been mispriced. You could -- every mortgage bank was busted, the banks were busted. There was lots of things like don't invest that you could do, sorting the baby off the bathwater. But we sat back and said, what would be something that the customer base and really is designed around the long term.

And what we decided, and it was ingenious, right, is that the $2 trillion lost in subprime mortgages was probably going to be a pretty big lesson for lenders, and they were just not going to wade back into giving mortgages to people who had less than pristine credit. And that meant that there was forever going to be a new customer in the housing market that was going to be renting instead of owning. And it was a function of -- and that's happened. There's been almost no subprime origination to speak of in terms of like what it was, say, 2001, '02, '03 before the boom times. It's maybe 1/3 or less what it was.

So that was the whole view is that the houses are there. We can probably operate them as commercial real estate. The customers are there. And when people look at the rental industry historically, the customer base was sort of the -- it's kind of the minus of the homebuyer customer base. So it was a fairly hard customer to manage because it was a customer that couldn't get a subprime mortgage, right? So that was the thesis is that the customer quality was going up, the home price had crashed and the returns were high, and we thought we could operate.

And our original strategy was all outsourced operations. We took a lot of lessons from the people that buy defaulted mortgages and work them out through their vendor networks. The GSEs have big vendor networks that repair homes and manage homes. And so we had this big idea to go buy hundreds of thousands of homes, operate them as rentals and package them up to investors the same way that we've spent the last 25 years in the mortgage market, providing up a sort of turnkey investment for a large investor that they buy their books and everything happens, the way mortgage pool works.

But you moved into -- I mean, you basically vertically integrated that business. So you went from really being a trading house and hedge fund to being an actual owner and operator of a vertically integrated SFR business.

Don't remind me. Like we had to. We had to. So what happened is you could find -- a lot of people don't know this. A lot of the -- a lot of the mortgage crisis was fraud. A lot of people, you probably know by now, lied about their income. They were -- the most common fraud was really in purpose of the mortgage. They would say they were lived there and they actually were SFR operators. So a huge chunk of the mortgages that defaulted in the financial crisis were speculators who own 15, 20 homes. those speculators had an ecosystem of real estate agents, leasing agents and property managers to help them manage their portfolio. So we tried to leverage all that.

And what you found is just this -- and you see this today, you guys are talking about family -- a single-family or residential housing conference, you break out single-family from multifamily. The multifamily ecosystem is a super professional ecosystem, everything from design to build to manage to price and they think long term, how am I going to put the carpet in that doesn't work out on the turns. Well, single-family, and I love these -- the guys here from the builders who have done an amazing job given the fact that they've had.

But those same decisions are not made in any part of the single-family ecosystem. Their average hold period for home is 6 months, right? Multifamily developers developing for 15, 20 years. So we ran into that operations. All the thinking was short term. They couldn't spell NOI. They were not compliant with fair housing. There was all kinds of problems at ecosystem. So we just said this isn't scalable. It's not compliant. It's not fair. It doesn't have the reputational protections that we would require. So we built it from the ground up. And that's why the United States is the greatest economy in the planet because you could build it from the ground up.

And so today, you have 100,000 homes.

So it's 50,000 homes.

50,000.

Which is way underperformed our expectations, right? This is -- if you look at the -- there's 4 million, 5 million missing subprime mortgages post-GFC that should have been originated. And that's benchmarks to like way pre-GFC credit standards. The people -- there's been 5 million families that have been told no to buying a home that we think should have been told yes. Those 5 million families are out there in rentals. and we only have 50,000 homes. The industry has had a very difficult time growing.

Why?

Cost of capital in the beginning. This asset was priced by the investors as if it was way riskier than it really is. It took a long time to get market acceptance over price. Then we just had a series of sort of calamities here. I mean, COVID is a big issue. It took -- it hurt the industry dramatically. And now you have, and a lot of the pushback for growth was this narrative, this narrative that SFR is a bad thing, private equity is a bad thing and private equity and housing is a bad thing. And that really limited the investor base. So this investor base started out with sort of adventurous speculator types who would put a very small allocation to see if you could operate the thing. And it took us 5 or 6 or 7 years is this a business or is this a trade? Can you operate it? And now you guys are going to hear from Jessica Thorsheim, who runs our operator. We run as tight a ship as your best multifamily operator, so you can't operate.

So in that 5 years, growth was slow because the cost of capital is really, really high. As the cost of capital came down, you could expand a little bit more, but then we ran into the interest rate spike and we ran into COVID and then we ran into this interest rate spike. So those 2 things have really been heavy headwinds against the industry getting to where it will be eventually, which is part of the housing ecosystem, a solution between the 2-bedroom apartment and the 3-bedroom home you own. And it will lay next -- in the portfolio, lane next to securitize and structured products and scale. But it's hard to start a new industry.

I walked in to meet with some treasury officials yesterday. And as I was walking into the conference room, they said, "Do you want to talk about the ROAD to Housing Act and SFR BFR. And I said, we can talk about that, but I'm like not here to actually like talk about that specifically. And they were like, okay, because if you are, we've got to like bring in a whole another team of people. And so as we were going through the meeting, I sat there and said, so what's your take? I'm asking them the question. What's your take as it relates to the qualified institution as it relates to sale and purchase of SFR communities. And I said to them, my friend, Dallas Tanner, who runs Invitation Homes says it's all up to the rulemaking. And literally all 3 people I was meeting was smiling and go, did he pay you to say that? And I said, no, he didn't pay me to say that. But what's your take on the ROAD to Housing Act and what either headwinds that presents for you all as it relates to growing the portfolio or the value of your existing portfolio given potential constraints from a rule-making standpoint?

It's interesting. So this is the last 6 months of my life has been part-time lobbyist.

I think everyone in your industry has become part-time lobbyist.

Yes. We've all been -- and we're all very fatigued from the whole mess.

Do you think that -- I mean, at the end of the day, the Senate bill was a train wreck. The House bill worked out the kinks in the Senate bill. Obviously, it's going to come down the rulemaking, but are you okay with the legislation?

Yes. I think that everyone, including French Hill and other senior grownups in D.C. and there are some grownups left in D.C. realized that a bunch of people were about to lose housing and they're about to lose the opportunity for housing. And French Hill really saved the day. Honestly, if you had to put an on person French. I've never met French Hill, but...

I know him quite well. He's an exceptional leader of the House Financial Services Committee.

And the guys that I know that are his vintage and his demeanor are leaving in droves from D.C. So it's kind of -- it's upsetting. But anyway, we think it landed in a fine place. It's -- given the choice of ROAD Act, no ROAD Act, I'd rather have no ROAD Act. Given the choice of the thing that the Senate was trying -- that the original bill was ridiculous. This one has meaningful exceptions that allow us to serve those 5 million families that the mortgage market won't serve. That's just 5 million since the GFC. We can still buy, renovate -- obviously, you can build, do BTR, which we have some of that business. You can renovate a home. It just means that you have to make sure that you're really renovating homes, you're not just competing on MLS for the ready-to-go home that consumers can buy. There's exceptions for homes that are operated with real path ownership programs in place, which we're implementing.

So I think it's fine. I think if there's a silver lining around it, it's that it does create a standard that didn't exist before. So the industry is something to point to that says the government has looked at this, they determined what they liked and didn't like and they've given us a way that they approve us to do business before we were kind of operating in kind of a vacuum. So I think that's the best component. The exceptions are well written and well structured.

And yes, the rule-making will clarify some vague portions of the exceptions, but it can't change them. So the way the law is structured, if you own an existing pool of homes, you're carved in as a permanent exception and those homes are carved in as an exception. So there's an argument that the existing SFR portfolios are kind of have a Bitcoin, a little flavor to them because it's really hard to create a scalable portfolio.

It's a little bit of regulatory capture.

Maybe, maybe. We'll see. But the exceptions are -- some of the exceptions are going to allow you to grow. I honestly don't think -- kind of the ironic thing is we weren't buying homes anyway because post-COVID home prices got so high, the return expectations kind of got below our targets. So they banned us from doing something that no is really doing anyway. But the exceptions may be broad enough that it's not regulatory capture that you can still grow.

And so as it relates to that, how big a portfolio -- is there anything here that is super beneficial to you as it relates to gaining scale? I mean, in other words, given you've got that exception, you and others.

Yes. Well, this exception we're talking about carve in the homes that you owned pre the law pass, right. So that's just about 550,000 doors that will carry this sort of unique identifier. But there are other ways to get homes to add to that. Well, they're pretty -- they're not super hard, and they're pretty consistent with how we do business anyway. So I think that when investors are going to look at the risk tolerance, the regulatory risk tolerance, they're going to say, some of the investors are going to say, I read that exception, but if I read it wrong, it's a $1 million fund every time I read it wrong. I don't want to rely on that exception. The one about existing inventory is easy. So there's almost no risk to that exception. So some investors will put a big premium on that but it's hard to say how much.

So you started building this portfolio back in '11, and we're now in '26. So it's been 15 years. During that period of time, given trading on the single-family side, opportunities on the multifamily side, you've decided to stay in the SFR space. Why no additional bets on the single-family side or on the multifamily side?

We have had a decent business on the credit side for a while. We wound down a bunch of those positions. The single-family thing, it is a belief, and we could be wrong, but it's a belief that this is a new sector that will be larger than almost all of commercial real estate combined. A single-family guys kind of look at the CRE space as quaint, right? So when I sold my investment bank to Banco Santander, and we're just a little investment bank you never heard of, and we were buying and selling about $50 billion a month worth of real estate debt. So the resi space is $9 trillion of UPB outstanding in first lien mortgages. It's -- I think it's $55 trillion in market cap for single-family homes.

So like we think that having the ecosystem that allows a large investor to responsibly deploy capital in scale into an asset class that big is a remarkable thing to have. And there's really only 4 or 5 of these things that exist in terms of acquisition development, property management, financing, portfolio optimization. So we made the bet that they were in the past. And we built the entire ecosystem that the multifamily housing sector has across multiple umbrellas. And when I say the sector, I mean, think about everything from someone that develops land, right, to a securitization issuer to a fund manager, right? That whole ecosystem, we have -- for single-family, we have all of that. So we're buying raw land and turning it into build-to-rent.

On one side, we're out doing the glamorous things of fixing air conditioners and toilets on one end and handling our own -- we internalize 65% or 70% of the service calls on our portfolio on that end. On the other end, we issue our own securitizations. We generate our own funds, run our own funds, and we're launching a new big vehicle that will be even more flexible larger. So it's kind of cool to think that you're at the beginning of something that in 10 or 15 years will just be, yes, there's the office space, there's the multifamily space, but then there's this giant sector out here that really represents a core inflation protected position that's very -- that's -- I'm trying -- I'm not saying it clearly, but U.S. consumer, their largest expense is housing, as you know, the largest chunk of that is in single family. So it's not like hardly any other thing in the economy.

So double-click on a moment there about your inflation-protected investment.

Yes.

We're -- I was with somebody yesterday who's trying to raise a fund -- a multifamily fund, and they're taking off for a trip to Asia next week. And they said, it was hard enough to try and get attract investment to U.S. commercial real estate before we had rates go to where they are. And now that we've got rates where they are, it's super difficult for us to go raise capital to come in and invest in a $1.5 billion multifamily investment fund. But you just hit on a point that I think is super important from an overall return standpoint.

Yes, real estate gets hard to sell to traditional real estate investors when the cap rate gets below the financing cost. It's like that investor base of the people I say they want their cake and eat it too, right? So they want to have a high ROE, assuming no revenue growth and then they want the revenue growth. So it's good work if you can get it. But most of the time, when that cap rate is that far above your financing cost, the fair bet is that your revenue is going down, not up in the future, right?

So today, when you have cap rates this far below or equal to or this far below financing cost, you have to wonder, is it a fair bet that your revenue growth is going to make up for that deficit. And we believe it's kind of a very easy bet on the rental side that the revenue growth will well outpace inflation from here. And it's a lot of the dynamics we just talked about. There's -- rental growth has been not great, but steady for the last 3 years during a point in time when all the build-to-rent stuff came on the market, all the multifamily stuff hit the market. You have all this migration going on. And now that whole supply glut is drying up, and it's going to really dry up now that diesel fuel is $6 a gallon and interest rates are this high. So the demand for rental will be high.

But on -- remember, these programs could be 10, 15 years or 20 years. If you study the revenue side of residential real estate for the last 50, 60 years, we did the study. It's kind of fun. We're like what other thing can you buy instead of housing that produces the same risk-adjusted revenue. And the only sectors in the S&P 500 that come close are tobacco, alcohol and caffeine. They're the only people that have the pricing power. So Coca-Cola, the tobacco companies, the beer companies. And of course, the alcohol guys are in trouble now. But over time, recession growth and if you go look at those revenue streams, you look at housing revenue streams, they're very, very similar in terms of durability and ability to reprice when inflation goes up.

The difference is that our housing portfolios, multifamily and single-family run at 60%, 70% margins. Those other companies run on 15%, 20%, 30% margins, which means that as you have inflation, their revenue inflates, but so do their expenses. For us, our expenses go up, but they're such a small share of our revenue that you can really turbocharge the inflation into the investment itself.

So the good news is that the lower going-in yields are not really an issue because they compare very favorably to other things that are as inflation protected. The kind of the bad news for single-family is that it's not risky enough. So when it lies in the private equity allocation of a pension fund, that money is laid over there to earn 15% or something. Housing has the price risk of like a 5-year treasury. So it's really like a 5-year tip is really how you think about. I mean home prices move 4% or 5%, it makes the news, right? So you can't have an asset with a 5% price volume and a 15% return. I mean that would be amazing, but it's not the case.

We think you can easily underwrite single-family rental to be inflation plus 6% year in, year out over decades. The house we build is more durable than the house that the homebuilders build. The house that we renovate is renovated to look more like multifamily than single-family. We run it like multifamily. And we think that over time, people will start to figure out that there's almost no reason to own a bond if you can own a big diversified portfolio of residential real estate at going in yields that are anywhere close to where bonds are yielding because, one, you get the yield plus inflation, one, you get the yield minus inflation. And the long-term bet is that our government is not going to become less oriented to create inflation.

So you just said we can -- it's not risky enough. You can make it riskier.

You can leverage it, but it's like that's all just going to be like time functions, you can make it riskier for a 4- or 5-year function. So you can. And I don't think that's a problem the industry is going to have actually is that securitization terms are 5 years and they should be 15 years. So there's a bunch of this debt that's going to roll and people are going to have to figure out how to deal with that with much higher interest rates.

Does that maturity wall concern you, Sean?

No, I mean, I think everyone is looking at it. I doubt many people -- we're pretty hedged against it. But yes, I mean, the debt markets have been incredible. What's -- we issued a securitization right before the ROAD Act, it was before it became law and after it was published, at our tightest nominal spreads that we've issued to date at our highest advance rate. So the debt markets have been just incredible. They've been incredibly flexible on allowing us to issue securities at a discount when the pay rate needs to come down to effectively prepay the interest. So I'm not too worried about it. I would we prefer longer-term mortgages because it's such a low vol long-dated asset.

And as it relates to spreads, given the pending wall of maturities and that much paper coming out of the market, you've got to expect that spreads are going to gap out.

I don't know. It's like spreads are...

I thought you were going to say yes, definitively there. So I do -- no, I mean that. So why?

Well, if you look at the issuance of fixed income, like where the money, where the issuers are coming from. And if you run a big book, right, there's only so much data center exposure you can take. There's only so much U.S. auto exposure you can take. And remember, those 5 million families that were told no to buy a home. That's 5 million mortgages that investors didn't get to invest in. So there's an enormous hole out there in the debt capital markets for this asset class that is under allocated to. So I don't think this particular asset class looks particularly tight on a relative to any basis. I think if anything, high-grade fixed income is a little bit wide relative to inflation. And that's the biggest issue, like I was saying is that treasury yields are sort of inflation plus 2.5%. They used to be inflation plus 1. During COVID, they were inflation minus 1. So like that 100 to 150 basis points of tax that every bond has in it is the problem.

I think that like overall spreads don't look like crazy tight given how strong the economy is. Now $6 a gallon diesel fuel, we have the Fed raising rates, fighting inflation from 2 years ago, they can mess this up. And the U.S. economy is very fragile. It's -- so it can be best -- the key number that we -- there's a bunch of numbers we look at. So we'll watch our rent collections every month like crazy. It's like unemployment Friday every first of the month to see how our customers are behaving. And knocking on wood, they've been -- they've proven incredibly resilient. Our rent-to-income ratios are in the low 20s. And our velocity of rents is -- our velocity of homes is Jessica's team puts 2,000 or 3,000 homes up for rent every month and they rent 40% of them in the first 30 days, 50% way different than multifamily absorptions.

So we don't think the underlying economy deserves a higher credit spread is the short answer. the quantum of capital that's being borrowed may move nominal rates in a direction you don't want. But the credit risk in the U.S. economy is not that great.

But with that as the backdrop, Sean, then we've got plenty of debt capital. We've got a 5 million previous subprime homeowners who need to live in a single-family rental. All the backdrop sounds like that's perfect. Why not go another -- go buy another 50,000 homes?

Well, and if the capital was out there for it, I mean, in other words, if this is low leverage, so our platform -- at its peak, our platform was buying $0.5 billion of homes a month. And Jessica and our construction team were turning these into fully renovated homes in 60 to 90 days and getting leased up. It's hard to run a business at that scale doing that many small trades. The reason we're not running that pace today is primarily our belief that we'll be able to get a better entry point that you get a better entry point, either more clear rent growth that you're not sort of having to look so far through the fog to see it or a better entry point in cost of build.

So go down on that one. Cost to build or cost to buy.

Cost of build. Cost to buy is tough because there's just nothing for sale, right? The for sale inventory is off still 35% or 40% from pre-COVID times. So the float of housing is difficult. Cost to build, we're investing heavily in our factory to do off-site construction. We build a regular IRC code home, not a manufactured home Cavco does, which is pretty cool. It will be awesome to see them be able to stretch more into something that's a permanent home and will stretch more into something that looks like a home as well. There are efficiencies to be gained in that cost. There's efficiencies to be gained there in required margin to that business. I think one of the things we all talk about with the homebuilders as we see their 20%, 25% gross margins. Like it was interesting the question about AI. Like the question for AI really would be, can AI run the rest of the company so efficiently that you don't need a 25% gross margin to build a home.

So on the -- one of the slides that Ivy showed previously was basically, the death in America versus the births in America, we're go negative on that one. And there are a ton of homes where, if you will, the owners are no longer alive and therefore, that's coming back into the inventory. We talked previously about the lock-in effect on the mortgages and once that's done. Would any of that sort of, if you will, older inventory be back into the rental pool and you go out and try and buy those homes? Because clearly, you're not going to buy homes from Pulte and Lennar, but would you go out and buy that excess inventory?

We would. And the main thesis behind our off-site construction is basically that. And this doesn't tie it one for one. But throughout the South, if you start at Charlotte and you whip all the way around to maybe as far west as Dallas or Houston, what you'll see...

Is that your sweet spot?

That's kind of our sweet spot. That's kind of where people are moving to. It's where the weather is better, the tax is better.

So you stop in Dallas, you don't complete the smile over in Seattle.

We have homes all the way up to Seattle, but really, those markets are so hard to -- it's like the friction points for supply are important, right? So in that smile, you can build. And I think this is the part that surprised people about home price appreciation in the last 4 or 5 years have been way lower in the smile than it has been in other places because when people migrated to those areas post-COVID, those local governments allow to build. And so the supply showed up to meet that demand. So that's what's going on. But I think there's a chunk of housing inventory that's just coming to the end of its useful life. And you can go see it. And it's in great locations, but it's on big lots but they're very small homes and there's millions of them. And there's homes built in the 40s, 50s and early 60s. Those need to come down. And what needs to go back is this missing middle concept that people always talk about something that's either a 5 -- 4- to 7-unit multifamily thing or 2 or 3 homes on kind of flat micro flag lots.

I think that, that's -- we're spending a lot of time on that because I think that's this urban infill trade where the local governments are in favor of density. We don't do a lot of build-to-rent because we can't get comfortable with the locations of many times is that you're kind of underwriting in like this because you can see that people want to live down the highway 15 minutes and they're willing to pay $1.50 a foot to live down there, but you're 15 minutes further from the grocery store, you're 15 minutes further from work, and those rents don't fully translate.

In this urban infill thing, you don't have that risk. But the risk you have is that you can't go do 200 doors with one construction ecosystem, the way that the big builders do, where they've got one person that does 10 foundations, another team does 10 frames, team does 10 roads. That doesn't work when you build one over here and one over there. This one starts in January, that one starts in March. So you have to use our -- the off-site strategy.

And it sounds like you're more focused on high growth as it relates to migration, job growth and employment growth than you are on supply-constrained markets.

Yes. I remember the length of these programs. I would say it was -- I knew you're going to ask the question about like where it's so much easier for us to figure out where or not.

Right. Give us where or not?

No, we're not. I don't have the stock answer, but the where or not, you can run on the list. The where or not price, right? So California, for a myriad of reasons, you just -- unless you're going to live there and enjoy it, I don't know how long world you buy a piece of real estate in California, right? So it's the most beautiful state probably in the union, but the most difficult to do business in by far. So California is out basically because of price.

Just one quick aside to California. I just read a research report by a firm called 13D that puts out really interesting research, and this was on El Nino and the fact that 2026 will go down as the hottest year. They went back -- I don't know how they get to this, but they said it's a top 5 hot year over the last 125,000 years okay? So I'm not exactly sure how they had day goes back to 1,250 years ago. But anyway, they basically were talking about how hot it is and then they were going forward to this coming El Nino year and what it could mean to moisture levels in the state of California and some incredible destruction that could come in to California if you get one of these -- I don't think it's called [indiscernible], but it's like this. If you have even [indiscernible] comes through, the damage that could happen in the state of California, and it was a pretty scary report I read. But so California, you're not touching.

California, the market dynamics there between local governments not wanting you to build, the people want to live within 3 miles of the ocean. It's an incredible economy with lots of wealthy people. So there's plenty of demand for high prices. So California is just kind of off the table. Illinois is off the table. The level of state deficits there are going to show up on property owners' books at some point. So you just can't figure it out. There are places that are like in the East Coast where the combination of density, product type and local regulations just make it very difficult to operate in scale. So like Pittsburgh is a really cool town actually and an awesome place, but nearly impossible to scale up a portfolio.

What about the DMV, District, Maryland and Virginia?

We tried hard to be in the Northeastern Virginia and just couldn't figure it out. Just couldn't figure out operations, couldn't figure out cost. When you're -- our core business is scattered sites, single-family rental. And you need to have pretty easy access to trades. So those unions -- those markets that are heavily union-dependent like the union doesn't want you work in there, but the union doesn't provide the services that you need. So you end up with kind of a mess. The local government is super important.

So even in like St. Louis, there are cities because we say we invest in St. Louis, but it's in a bunch of cities that are around St. Louis. There are some cities that are just off limits because the city government is just noncooperative. They won't issue permits. They won't give you a C of O out of like principal. So there's -- you find that more common kind of in the Midwest and then bending around to kind of the New York area. And that's tough because those are huge populations there. We just marked off 25% or 30% in the United States in terms of headcount.

Anything here? Do you like Boston?

Price?

Yes.

Price. I love Boston. But the -- like whenever you get a Gini coefficient like you have in Boston or like you have in California, you find that like we serve the middle American family. We serve a family that makes $110,000 a year. They're paying 25% of their income and rent incredibly affordable. Our rents are $1.40 a foot a month. But that family has a reason -- like 85% of them have a reason they're not buyers. And it's not because they don't want to be, right? It's 15% don't want to be. 85% would like to own the home and there's -- they either don't have the kind of family that you think about, right? So maybe they're not married, maybe there's 2 sets of kids in there. Maybe they're just roommates. Maybe it's a single mom with some kids and kind of a factoid for you is like all this revolves back to is that the mortgage market hasn't -- doesn't serve the modern family. and the mortgage market is still looking for the Cleavers. And there's a lot of families that don't look like the Cleavers, right?

Do you think that the view on housing as a store value and an appreciable asset has fundamentally changed in this next generation of Americans?

I think we don't talk about this enough because it's one of these sacred cows that everyone needs to own a home and you got to own a home. But what I'd like to say is that if we were regulated by FINRA for years, it's like the SEC of the small firms. And there's all this training you do when you talk to a customer about giving the financial advice, which we had to take the training and then go sell to a sovereign wealth fund. But like if your cousin came to you and said, my financial adviser said, I should take 80% of my liquidity and I should go borrow then another 4x that, and I should invest in one asset in one corner on one street in one city, in one state. you'd say fire that financial adviser, say what in the world are you doing? And that's what we've sort of expect our young families that are forming today to do is to go get completely illiquid, completely levered up and take a bet on that one asset in that one location.

I love those people as an employee.

Exactly, they're motivated. But I think that -- but when we got this idea of the American dream and you need to own the home and you're going to have your 3.2 children, your other investment choices were very different. The cost to invest is very high. There were still people calling up and selling you penny stocks. The risk of investing other things was outrageous. So if you took a look at the balance sheet of a family that was 35 years old, you probably wouldn't allocate them something in this scale that has a 5% risk to it. That has a 5%. You would try to get the ball up through leverage.

Now there's a bunch of societal benefits for people to think and act like owners in their community and in their neighborhood and do they wash the car or not wash the car. And all of those are true. But I would tell you, for the families that -- what we call our -- we say the words our families a lot, like the families in our homes, they are not to be disrespected. I had to sit in Washington, D.C. and say this over and over again. And I was told by our electric representatives, stop talking about your residents, no one cares, okay? And this whole discussion around the ROAD Act, every time I said, hold on. The argument is I bought the house and now they can't, okay? The government gives grants 98% of the mortgages in this country, and they will not finance my families.

So what you're really saying is you don't want those people living in those homes. So if you're going to say that at least have the guts to stand up behind your lectern when you're running for campaign and say, I don't want people to look like that, living homes that look like that because that's the policy you're actually advocating. And I got to tell you, it really didn't land. They really didn't understand it.

So I think that this idea of ownership is 100% correct. I think that arguing that somehow that our families are hurting the neighborhood is completely uninformed. I can tell you that we have people that have been in our homes for 2 years, 3 years, 5 years, 7 years, 8 years. Their homes that look a lot better than some of my family's homes in terms of how they care for them. They act and think like it's their home. And that's what we tell them. There's a difference like we buy a house and they make a home. And the fact that our name is on the title and theirs isn't is interesting.

But I got to tell you, the average American family is sitting out there today, particularly our families, like here's a factoid for you that you may not know. When you get divorce, only one person gets the FICO score, right? So there's a lot of single moms out there who have no credit score. They're not going to get a mortgage and living in our homes. Does this whole conversation about how much equity does she need to have in her home and what's her portfolio allocation? And is it better for her to own the home seriously. She's got a couple of kids she's got in school. She's a nurse. Right now, she lives in a 3-bedroom home. She has a place where her kids are safe in school. Domino's delivers like Domino's delivered every house in the United States. So we put her in a home in a suburb that she's got no other way to live in.

So in terms of these bigger ideals of like should people own their homes, I made almost all my money in the mortgage market. So I feel like I've contributed more to homeownership than probably anybody know. And I'm all for us doing everything we can to increase access to homeownership, and that means more subprime mortgages. But to act like we're ever going to get above 63% or 64% homeownership rate is ludicrous.

That was where I was going.

When we got to 69%, we almost [indiscernible] civilization.

So the other 1/3, but it wasn't -- I mean, but on that, I mean it was fiscal and monetary policy that got us there, not an ownership society that got us there.

You made it super easy to go buy a home or 10 homes or 20 homes. And you just -- look, it's not complicated. You add a bunch of demand to a market that can't create supply, you're going to change the price. And the interesting thing is, and this is -- I spent a lot of my time in foreign countries. they just are mesmerized by a 30-year fixed rate mortgage. And the 30-year fixed rate, what I tell people is you don't really want to buy a house, which you really want to get us a 30-year fixed rate mortgage, right, because that's the most inflation protected thing you can do. But that 30-year fixed rate mortgage basically transfers those mistakes in monetary policy directly to the value of the asset and then locks it up for years. Now not for 30 years.

The turnover rate, I was looking at it yesterday, the largest cohort of mortgages that trade in America are -- there's $700 billion worth of 30-year 2s. The bondholders getting paid at 2, and they're prepaying at about a 5% per annum rate. So 12, 14 years, that group homes will turn over. And so that's the give and the take of the 30-year mortgage is a wealth-creating machine for American consumers, the counterbalance of it is you go to be very careful with how low you let that rate go because you can create these big discontinuities between affordability for the people that don't own and the price that the people have their own.

So a couple final things. First, the wealth transfer that's coming up as those boomers are no longer with us.

I love Ivy slide this morning with the $90 trillion.

Yes, $90 trillion. I've heard it be even a little bit than that. It's a huge amount of money. Does that present headwinds on the SFR side versus the buy side?

I don't know. I don't know. What I thought was fascinating about that is that there's $45 trillion of debt on the government's balance sheets that, that same generation may have left us. So like we could pay half of it down with that.

I think you could.

But there's -- but I think that we spend a lot of time talking about the impacts on longevity on the housing market. On the one side, we talk about the fact that we've lived through the most amazing time for longevity of any generation in the last 300 years.

I got to say, Sean, it's still to come. I mean come on.

The gains are narrowing, right? But like I'd say like in my lifetime, this happened in my life my father's lifetime. So my father was born in 1937, life expectancy of 63 years. He's still with us. He'll be 89 this year.

Exactly the same as my father.

He's the smartest guy I know to this day. My son was born in 2003, life expectancy of 86 years. So you're like, okay, what does that mean? Well, it's 23 years on a 63 base. I mean we're going on like we made these human machines almost 50% increased lifespan. What does that mean?

But you got to think that, that accelerates.

Well, it will accelerate. But if you look at that population pyramid that Ivy was talking about, right, the impact of the acceleration, well, it's not accelerating, but it is high. I mean it's -- we're not going negative. But the big gains have probably already been made, right? Like someone born today is probably not going to get the same -- the same 50-year expansion or 40-year expansion that my dad got.

I just had my COO get his hip replaced and he was back on a bike in like 5 days.

Yes, it's fascinating. But when you get to housing, like what does all this mean for housing? It means several things. It means that this whole reaction to like, oh my God, first-time homebuyers are 40 years old, there must be something with the housing market is completely misguided because today's 40-year-old is not the 40-year-old from 1965, right? Today's 40-year-old is going to live to be 100, right? So we did this funny stat that if you looked at first-time homebuyer, not by the age they bought it, but by the life expectancy they had when they buy it, it hasn't moved in like 50 years.

Same thing with marriages, by the way. So what this has to do is the housing ecosystem has been suffering because the older generation has been keeping their houses way longer than expected and the younger generation is putting off marriage and kids and housing way longer than we would expect on their time. And so everything has been pulled. But that pull is kind of like coming to like the baby boomers are running out of runway.

Final thing. You've been really good at looking for that flashing yellow light. We've talked about national debt. We've talked about mortgage rates. We've talked about demography. We've talked about migration trends. What's the thing that you and your team are watching right now that says, we're long SFR. We like this asset class. We like where we sit, but we would revise that bet...

If X happened?

Well, I think if we thought that there was -- well, I would say the biggest blinking light now is the risk of stagflation. And stagflation is just a destroyer of wealth for almost whoever you are. And if the Fed keeps trying to fight 3 years ago's inflation, they run a real risk of stagflation. So this is oil prices go up, interest rates go up and incomes go down. That's probably the -- if there was a 4% chance of this 2 years ago, that's tripled at least. So that's kind of the biggest concern is, are we going to drive up the cost of capital at the same time we drive down the economy. And we keep looking closely for like how does this war, how does oil, how does a larger and larger government and a larger and larger federal deficit do those things sort of conspire to bring down GDP and drive up inflation.

So the biggest thing we all are looking for right now with rates going up is are we actually going to have a recession? Or if you don't anticipate that recession, it's going to be super, super, super painful. And housing.

The flip side to that is that a recession would actually be good for housing because we probably get rates coming down.

You would get recessions. Well, I mean, recessions can be good, but like recessions need lower rates. So if you get rates going down. But as we talked about before, there is so much demand on the debt dollar that we talked about like will spreads come in. The reason spreads are tight is because nominal rates are going up. So if the U.S. government keeps printing deficits at this level, you could have a recession in higher rates. And that's the biggest problem. And so it's not just so much SFR. It's like it's every financial asset we own is in trouble in that case. So I'd say that's the biggest reason. But...

But you've got that at a 12% chance right now.

It's not that high, but it's one of these things where it's high enough that you have to pay attention to it.

Sean, thank you so much for your time. Thank you, everyone.

Thank you, guys.

Good afternoon, and welcome to another Walker Webcast. It's my great pleasure to have my friend, my colleague, the exceptional analyst, Ivy Zelman join me today. Hi, Ivy.

Hi. Love it, thank you. Nice to be here again.

It's great to have you. Since I have you alone today, usually when we have Chris Mikkelsen and Aaron Appel joining us, I kind of dive right into the questions. And since I have you a loan today, I'm going to do a full bio on you because it's been a while since I've done that bio, and most people who listen to the Walker Webcast know you and know of your background, but I think it is worthwhile to run back through it today as we have a little bit more time of just a one-on-one conversation.

So Ivy bear with me as I embarrass you a little bit on how extraordinary this background is. So Ivy Zelman is one of the most influential housing analysts in the United States and is currently Executive Vice President and Co-Founder of Zelman, a Walker & Dunlop Company. She has spent more than 30 years analyzing housing, homebuilding, mortgage finance, building products, demographics and the broader residential real estate ecosystem. She began her career at Salomon Brothers in 1990, initially in investment banking before moving into equity research covering housing.

She joined Credit Suisse First Boston in 1998 when those firms were still Credit Suisse First Boston, where she became Managing Director and one of Wall Street's highest-ranked housing analyst. She and her team ultimately earned 11 #1 Institutional Investor All-America Research Team rankings. What made Ivy famous was her willingness to make big calls against the prevailing consensus. In 2005, she called the top of the U.S. housing market, becoming increasingly bearish even as much of Wall Street remain bullish. Her skepticism culminated in her well-known challenge to then Toll Brothers CEO during the 2006 earnings call. Then after the financial crisis, she called the housing market bottom in 2012. Those two calls are central to her reputation as one of the industry's most independent and insightful analysts.

In 2007, Ivy cofounded Zelman & Associates with Dennis McGill, building an independent research and investment banking firm, focused exclusively on housing and related industries. A distinctive feature of Zelman's approach is combining traditional financial analysis with proprietary surveys and direct intelligence from homebuilders, brokers, lenders, building products companies and other industry participants. Walker & Dunlop acquired a controlling interest in Zelman in 2021, bringing the firm's housing research and investment banking capabilities into W&D.

Ivy earned a BS in Accounting from George Mason University. She has repeatedly been named in Barron's 100 Most Influential Women in U.S. Finance, has been inducted into the California Homebuilding Foundation's Hall of Fame. I didn't -- I haven't seen a clip of that one, Ivy. And has taught as an adjunct professor of finance at Cape Western Reserve. She is also the author of the 2021 memoir, Gimme Shelter: Hard Calls and Soft Skills From a Wall Street Trailblazer, which combines her career story with lessons about leadership, conviction, relationships and making difficult calls.

So there's the bio, Ivy. I should dive back into so many component parts of that, but given the research report that you and your team just put out entitled A Decade Divided, I kind of wanted to jump into that as a headline because there's so much right now with where rates are, with where housing is, where inflation is, et cetera, et cetera, that I kind of want to roll up our sleeves and dive into some of the data.

You and I have spoken in the past about a housing shortage in America. A Decade Divided seems to challenge that narrative. Are we undersupplied in housing?

Well, first, again, thank you. I think my bio needs to be cut down. It's a little long.

I love it. Given you're a member of our team, I love talking about it. Go ahead.

I appreciate it. I'd say that our view is that the housing market is more balanced than what we hear from other trade associations and people that are in the housing ecosystem. And certainly can dig into why we believe it's balanced, and I think that I can elaborate or you can ask me and I'm happy to respond, but we think it's a balanced market.

So if it's balanced, what are others missing because we continue -- I mean, all you have to do is watch CNBC, everyone who goes on CNBC other than you now, says, we've got a 3 million to 4 million household shortage in America. And so what are they missing if we're in balance?

Well, I think it has a lot to do with what inputs you're assuming and where we are. So for example, if we're looking at the future and looking at sort of the inputs that drive the need for more supply, we really focus on household growth, and household growth is a derivative of population growth. They're not 100% correlated, but they move directionally together. And we've been seeing a downward trajectory for both population household growth for decades. But we're at a pivotal point in our history because we're now seeing -- approaching by 2030, we'll have more people that will die in this country that are born. And the only other variable that matters for population growth is immigration, which has pretty much come to a bit of a standstill as we know with the current administration.

So when we look at what does that mean for household growth, our view is that the current supply is meeting the level of household growth. Some economists are looking at more optimistically overall households living -- I'm sorry, young adults living at home. We think that's a variable that may be more optimistically assumed on a go-forward basis. And the other variable that really makes a difference in any prediction or forecast is going to be vacancy rate. And so again, happy to dig further into there. But those are things we don't get to see other trade associations, how they derive their narrative of a shortage, but that's what we believe would be the major differences.

So let's double-click on all three of those. Coco, will you pull up the graph here? And to those who are listening to this and not looking at it, this is a pretty dramatic graph that comes from A Decade Divided, which shows U.S. births versus deaths and where we are from a population growth standpoint. Ivy, talk through this slide for a moment as it relates to what this is showing because it's just such a -- the thing that struck me about it is it's not that long ago that this number was wildly positive, close to 2 million, and now we're down to almost flat.

Yes. Unfortunately, it's not a positive trajectory as we know, and it's quite troubling. I think it starts with the three components. I mentioned birth rates, young women today are opting to have children later, part of that is assumed because they're pursuing higher education. They're also dealing with uncertainties in the economy and affordability concerns, inflation. So many are opting to be one-and-done or not at all. And so the birth rates have been under pressure.

A lot of it initially was coming from what was a good thing, young women that are teenagers that were getting pregnant. And that's really a big portion of what helped to put a cap on population growth was that we had young women that were unfortunately having children too young, and that really was arrested, so that's a positive, but overall birth rates are below replacement right now for this country. In fact, we are what I would say, much better off than most other developed nations. We're higher in terms of our birth rates, but we're still below replacement as are the other developed countries.

So that's the birthrate story. The other component, immigration. We know with this administration, whether self deportation, legal immigration becoming more challenging as well as illegal and deportation. All of that has resulted in less than 0.5 million people entering this country annually. And we believe that even with the new administration, let's assume the Democrats take the White House, they're not going to open the borders again, and we might see some modest improvement in legal immigration, but we don't think the illegal portion would really change very much. So that was the lever that could really help population.

And then we have, respectfully, death rates that while death rates are actually improving as we have wellness and longevity improvements, the absolute level of death has been rising. And annually, we will continue to see, call it, incrementally 50,000 incremental vacancies coming from deaths and or politely aging out. So you add up all three, that results in a pretty steep decline in what would be population growth. Why we called it A Decade Divided is that the first half of the decade actually had very strong household growth which is really a function of, we believe, these young adults leaving home at a pretty significant level because there was not only a desire for distance and space, but there was a lot of stimulus dollars and interest rates were very, very low, as we know.

And as a result of that, there's another chart that we've included that we can look at, but we saw a big reversal of young adults living at home, and that has definitely created this pop in overall, the first pass of the decade, we had about 7% household formation, which was comparatively even in the decade 2010 to 2020 was only 8.7% in total. But for this decade, even with the second half slowing to, call it, 3%, 4%, we'll be over 11% in terms of household growth. But the minute rates went up in '22, Willy, household, or young adults leaving households reversed and went back to close to levels that were pretty onerous and at peak levels, and we're assuming improved modestly, but not much. And that could be a big variable where other economists are more optimistic about the future and assuming we have young adults leaving home.

So let's jump in on a number of the points you made there. First of all, as it relates to the death rate, you did talk about it accelerating even though we have longevity. Is that acceleration due to the pandemic and that, that then burns off, if you will, as we get those numbers out over time? In other words, did our birth rates in the first half of the decade accelerated death rates accelerated because of the pandemic and therefore, in the second half, that comes down significantly with the aging population that then mutes that?

Well, the death rate itself, because it's improving, I think it has a lot to do with longevity and people living longer. The impact from COVID absolutely had an impact on death that did spike them in the first half, first 3 years of the decade, but then we've normalized that. But even with that normalizing, death rates are improving, However, again, absolute deaths are still going to rise by like 50,000 per annum. You're talking about 2-plus million per annum are dying or aging out.

Which will then put what you said was 50,000 housing units sort of back on the market because of that net downturn in population? .

Incrementally, because estate sales, you'll start to incrementally add 50,000 plus per annum from -- that would result in more vacant units on the market.

So the second thing you said there was that in up to 2022 -- what you pinned it to was interest rates moving precipitously after 2022. Do you think that this is young adults living at home and then moving out to start their own homes? And you said that was moving in a very positive trajectory until '22 when rates started to go up. Do you pin it all on rates and affordability? Or is it more lifestyle? And we did just at that point, come out of a pandemic, where during the pandemic, there was clearly a move for, I need my own space. I don't want to be around my older parents who might be getting COVID and all that stuff. Is it an economic issue? Or is it a more social norm/societal issue?

I think a little of both. I mean I think that what happened post '22 is we know that inflation kind of ran rapid. And when you think about people that are living -- young adults living at home, they're assumingly trying to save so they can start their own household, whether they're renting an apartment or buying a home with help, I think there's also a part that inflation kept people unfortunately unable to generate enough savings to do so even with living at home. But I also think that affordability being extremely stretched had a lot to do with it and still does, but from a secular perspective, it's nice to live at your parents' house now. They made -- we've made it so nice for them, they don't want to leave.

I know I was going to say your three daughters and my three sons might be retreating to our homes these days even though they're bounding out on their own, but our kids are about the same age. And I was actually thinking about that in reading the report. It was sort of like, yes, one of the things that's happened as America has gotten wealthier and more people own single-family homes that have an extra bedroom, have two extra bedrooms. It used to be 50 years ago that it was cramped and the moment that you had the opportunity to get out on your own jumped out because it wasn't that comfortable living at home. In today's world, a, it's quite comfortable; b, it's obviously affordable; and c, in some instances, remote work has allowed younger adults to be able to basically work from wherever, and therefore, they're not forced to go rent that apartment in a distinct city from where their parents are because they can work remotely over Zoom.

Absolutely. And I think you have to recognize that we're really following Europe's lead. Europe has multigenerational living and a lot of that is due to the lack of availability of product coupled with how expensive it is, even though the affordability here is stretched, it's even more stretched in Europe, so we've been seeing more multigenerational living. In fact, homebuilders are offering product that accommodates multigenerational living. That's been a growing part of the housing market. So not surprised, but I think the negative stigma of living in your parents' basement is gone. When I was 18, I was out, I'm sure you were as well. You couldn't wait to get out. And now is it because our Gen Z and millennials, are they a little entitled? Are we to blame? I blame myself, helicopter parents, fall the -- we wanted our kids to have what we didn't have, so we make it really nice for them. And I don't think, therefore, it's just about a lack of affordability.

There's -- first of all, Europe has plenty of things that we ought to both respect and strive for. There are certain things that we might not want to. I'm not sure that, that is a piece of what we ought to go for, but there was a -- you may have seen it. There was a great 60 Minutes piece, it's got to be -- it would be a decade ago now. But a great 60 Minutes piece on how Italian men, that the culture in Italy is that single Italian men still live at home until they're 40 and 50 years old. They did this great piece about the fact that one after the other young single Italian men would just hang out with mom and dad, and that was the way that you kind of got yourself both on from a career standpoint and then found your ultimate [ mate ], but it was a fun piece and seen at that time, totally antithetical, if you will, to the way that Americans grew up and lived. And it was like this -- well, it was a 60 Minutes piece, which obviously made it noteworthy of sort of, wow, look at the way that they live versus the way that we live. And as you're pointing out, we're more and more looking like that.

Going towards that, for sure.

Yes. Coco, let's pull up the slide that they have in A Decade Divided as it relates to this number because Ivy on this one, this slide, to those that are listening, is just the percentage of 20- to 39-year olds in America living at home, and as this slide shows, it has increased from 15% back in 1980 up to 22.4% in 2026. And Ivy, talk for a moment about that, the note on this as it relates to every 100 basis point change.

Right. So if you think about the 2020 time frame when we were at peak at 23.7%, it looked like that was only going to be sustained. However, as rates dropped, again, COVID came to fruition, we saw a reversal of that. And when we think about that 21.7% that is that likely to keep going lower, we've seen a reversal already reflective in the '25 ACS data showing that people are now -- more people are staying at home. But what we wanted to show you is that the sensitivity is for every 100 basis point change plus or minus, that results in an annualized change of about 0.5 million households. So very sensitive to what it means for -- we're going to add incrementally 500,000 new households and therefore, we need incrementally more 500,000 of incremental supply, that's why it's a very important variable when you're forecasting if we're either in a deficit or if we're a balanced or oversupply.

And that's a super important one, if you think about it in the context of what you said on the aging boomer population and the death rate adding in 50,000 units a year versus if you got a 1 percentage point or 100 basis point change in that 20 to 40 cohort living at home, you're going to have 500,000 units of demand coming into the market or lack of absorption if they stay at home.

Right. Absolutely. And frankly, given the state of the current economy with uncertainty around interest rates and continuing to move higher, today the tenure was at 4.8%, it's not looking great for any improvement on the horizon, unfortunately. But I was going to say, bigger picture, I think that when you factor in what the death rate or just incremental deaths mean, I think today, the average longevity of men and women, call it, 80 years old, we also have that aging boomer and aging Gen X that will benefit the housing market, we think. So that not everybody will just die and be gone. You're also seeing benefits like, for example, Pulte Homes has now introduced a product called Explore product where there are people buying, call it, retirement home, but in their 40s, and it is designed to really accommodate an active family still raising children, but eventually that will be the retirement home. So there's positives within the ecosystem that come from aging. And I just wanted to make sure we address that because it's not -- they're not all dying, but there's benefits as we age of which parts of the housing equation are doing better.

And if you think about -- you just commented on interest rates. And interest rate is obviously hugely important to the overall housing ecosystem, and we can dive into that in a moment. But it's really jobs, I would think that is going to drive that cohort of 20 to 39-year-olds out of home and into forming their own household. And we're at, I think the number is 4.3%, 4.4% unemployment in America today. When we saw unemployment come down well into the 3s Ivy, if you look at that graph as it relates to the number of people, 20 to 39 living at home, that didn't materially move that trend. In other words, people were still staying at home even as you picked up almost 100 basis points in the unemployment rate to the positive of getting down towards 3% unemployment.

So like what's the driver there that gets these people moving out? Is there -- I mean I sit there and look at it and say, okay, well, unemployment rate goes from 4.3%, 4.4%, down to 4% or 3.75%. How much does that then bring that living at home number down to spur that 500 to 1 million needed new homes from that migration effect, if you will. Is it all related to employment? Is it all related to -- I mean, this is back to the question I asked previously as it relates to is this habits and socio sort of the way that people are living? Or is this more economic?

Well, I think based on the chart that you had up there, if you look at multi decades, we're showing the decade average, not a point in time, so it's at the end of the decade. And each of the decades has moved with the exception of 2000 where it moved down, we've been a secular trend moving higher. And I'll make everyone laugh, my daughter who's 26, and she'll kill me, but I'm going to tell it, I couldn't get her to move out. So I bought a car and the car is going to be here soon. And I told her, I said, listen, our cars are not going to fit in the garage side by side, so you're welcome to stay. But the Cleveland winters are pretty hard, so you'll be out in the driveway and I'll be in the garage. And guess what she moved out in June because real kick in the butt, and she helped the rental market in Cleveland, Ohio, which is quite affordable relative, but has a roommate, so it would catalyst.

I recommend it if you have something similar. But I do think that young adults, you mentioned remote work, more people can work from home. That could also be the variable where employment even improving doesn't necessarily drive people to leave as quickly if they're not required to move to a different city. So I think there are a lot of variables. But back in the '90s, Forbes did a -- it was either Fortune or Forbes, the disease of affluenza, and more families that are affluent or want to be affluent, want to create the households that are very comfortable for their adult children, so nobody is really pushing either. I think that has something to do with it. I think that parents are more accommodating for kids living at home longer, and it might be that they finally leave when they get married and they're getting married later in life. My daughter's boyfriend's 27, and he bought a house and it was like, "Oh my god, the first-time buyer market, the age is 40 now " So it was very impressive that he bought his house already. So it's a very different dynamic in today's society than it was when you and I were growing up.

And is there anything in all that, that we hear the numbers as it relates to the wealth transfer that's going to come up from the baby boomer generation to the Zs and the Ys and the Xs and everybody else. And the numbers are astounding when you look at them on the aggregate. I just had somebody who's in the wealth management space say to me, over the next 20 years, there's going to be $110 trillion transferred from one generation to the next. I can't even get my head around $110 trillion. And let's just say it's only $60 million rather than $110 million. It's still an enormous wealth transfer that's going to happen here.

In the interim, does that have some impact on the ability for people to go and put the down payment on a new home? Are we seeing the baby boomers be more generous with their kids to underwrite the down payment and help them actually get into their own space? I mean you just talked about the incentive you put in place. My eldest son just bought a house in Boulder, Colorado, and I was absolutely shocked at how little he could buy for the amount of money he spent. And I was also shocked at -- I kind of had some guilt in the sense that we went to look at the house and asked the broker what it was going to take and the broker said it's going to take a 5% premium over the ask, and if you can close all cash with no financing contingency, you can win this, and I sat there at the open house looking at these young couples who are coming in, and this was going to be their starter home for their life and in I come with the ability to back up my son to be able to do 5% premium all cash and we ended up winning it.

And I sort of at the end of the day, it was sort of like, wow, that gives you a sense of the frustration that these people have of, a, on a per square foot basis, it was -- it was $890 a square foot for a complete starter home, 1954 built, brick construction, home in a cul-de-sac where every home was exactly the same, kind of cookie cutter back from 1954. It's a great fixer upper over time, and I'm quite certain that my son will make money on it, but it just sort of -- I was sitting there saying, wow, if you're somebody who thought that this was the one you're going to get into, it was a significant down payment to get the house and all of a sudden, in we walk and get it basically for all cash because we can do that.

So my question here is, are more people of yours and my generation, helping kids? And can we bank on that a little bit over the next 5 to 10 years that might actually spur some of that increased demand?

Sure. And we believe that the wealth transfer is happening to some extent, maybe not entirely. When you have, obviously, parents passing or grandparents passing, you get a bigger portion of that wealth transfer. But what we see today is an increase in cash purchases, roughly around 30% right now. We're kind of more in the mid to low 20% range historically, according to NAR. So I do think cash sales are indicative or supportive that parents are helping, like yourself, maybe they're taking a loan against their parents or getting a mortgage later. But my ex-brother-in-law bought all three of his kids homes. And I know many family members and friends that are doing the same with their kids. So you have definitely a benefit to the market.

If you look at what people own and what generates their wealth, their homes are their largest asset. And so are they waiting until they pass -- likely to pass that home along, but then we have issues with capital gain taxes. And so that's going to be an issue, especially if these homes are larger and maybe older and need repair and remodel. But I do think that the wealth transfer is happening. According to FHA, roughly 20% of the loans for the first-time buyer are actually getting down payment assistance. And I think that, that's been an increasing number. And even in conventional, we see the same thing. So we don't have the data to really even aggregate estate sales or know specifically when they're coming to market and where they're being transferred. But we believe that more and more adults are helping their children today in various ways.

So you talked about where interest rates are and you talked right there about the home being the #1 asset in most families' financial picture. And as you and I have discussed in the past, many of those homeowners locked in historically low mortgage rates back in 2020 and 2021 that set them up to continue to accumulate equity in the home because they've got such a low mortgage rate.

There seems to be, I mean, you mentioned a 4.80% 10-year treasury, which is having a real impact on both the single family as well as the commercial and multifamily industries right now. But if inflation is here sort of to stay, Ivy, if we're -- Kevin Warsh just came -- was in Wyoming last week in Jackson Hole, and it's pretty clear that he was like, we got to get this thing under control. And so if he's going to raise here, we're dealing with inflationary pressures for quite some time. Are people missing the value of real estate as it relates to an inflation hedge as they look at nominal returns on real estate rather than looking at it from an inflation-adjusted basis?

I think your entry-level buyer doesn't look at it inflation adjusted. I think when we get into where the market is the strongest, $10 million and higher is hot right now. And if you go into Southern California markets, brokers that are selling luxury homes above $10 million can't sell enough. It's very, very strong. And most of the country, I'd say that you're seeing that strength. Whereas you go down below $10 million, it gets more challenging, depending on where you are. But the most challenge is that entry-level buyer who probably is not sophisticated enough to appreciate the inflation hedge where that luxury buyer is.

And I think that today, you're right, inflation is obviously a concern going forward. And I think one of the things that we talked to a bunch of brokers who are hosting our housing summit in a few weeks in Boston and prepping for the conference talking to some brokers yesterday, what I'm hearing, it's not so much that they can't afford it. They're looking at the rate today with a lot of uncertainty. And maybe they -- they called it marry the house, date the rate, date the rate, marry the house. That was a good idea because even though it's a little stretched for me, but in 2 years, I'll refi. And therefore, there was the behavioral -- it was okay to buy because I can refi.

Now they're not clear on what rates are going to do 2 years from now. So the buyer behavior, at least within the resell market is uncertainty has really put a lid on overall demand. And we've seen a cooling throughout the summer as we've seen more of the risk that inflation is still not only a problem but is reaccelerating. But when we look at the stuck factor and you look at where we were in 2022 and December '22, 88% of homeowners that had a mortgage were locked in below 5% and 50% were locked in below 3.5%. Fast forward to today, in May of '26, we're now at 68% below 5% and 39% below 3.5%, and by the end of '27, we'll be at 59% below 5% and 33% below 3.5%. And I'd give you those numbers because I do think the stuck factor diminishes people's willingness to give up that low rate.

But as it gets better, slowly, we call it this grind, life changes. And the three Ds that brokers like to talk about are the three Ds of real estate, death, divorce, default. Those are the three D that will drive a transaction no matter what the economy is doing. And then if you add the fourth D, which is discretionary buying, I think the fact that they're stuck mitigates discretionary selling, where I want a new house. No, I'm not going to give up this low rate. But if I'm getting a divorce, you're going to get a new house, you're going to go buy another house because you're not going to live together. Some people actually still live together because affordability is so constrained anecdotally. But I think those are some of the dynamics that are in the market today. And I definitely think that the retail market earlier in the spring, we saw green shoots as we approach the 6% mortgage rate, and we did see incremental demand because people always say to me, what's the magic rate that's going to make the market healthier, and what we see, it's more about rate of change. And as rates were headed lower, people were getting more comfortable with the idea, okay, maybe it's not the lowest rate in the world, but I'm really missing the opportunity to buy a new home or buy a resale and fix it up. I think we did incrementally start to see improvement. That is now sequentially and unfortunately, decelerated.

Do you think that Bessent's move to buy at the long end of the curve and sell at the short end of the curve is going to have a material impact on rates in the market and potentially get the long end of the curve down?

Not smart enough to know the answer, but I think it's...

Come on. I'm not going to let you say that. Come on.

My personal opinion is the fact that Scott Bessent has to notify the markets that they are going to buy at the long end of the curve when there's a $40 trillion deficit didn't make me feel warm and fuzzy. And we saw that rates just bounce back higher after the initial announcement. So I don't think you can control the long, and they don't have enough funding to do that. I know that Fannie and Freddie buying MBS helps, that's keeping the spreads down. And I think that they can control mortgage rates more they can control the tenure. But I don't think that they can really control the long end as it relates to the amount of bonds that they're buying. It signals to the rest of the market, we'll sell it to that. Go ahead, buy as much as you want, but we want out. And I think that unfortunately had been the case that foreign sellers had been putting pressure on the bond market. But most of the buying and selling is now -- is less foreign and more domestic.

But on that, then so -- I mean, you underscored it, $40 trillion of U.S. debt today. We've got -- the current administration is projected to add $2 trillion -- sorry, $10 trillion to the national debt in the 4 years that the Trump administration is in place. $10 trillion, $2.5 trillion a year. And the alternative is the Democrats who haven't found a spending bill, they dislike either.

And so I guess the question here is it feels like the bond market is trying to give us a wake-up call saying that this profligate spending is unsustainable, and yet the alternative used to be, okay, well, the Republicans are for lower taxes and lower spending. And now we have the Republicans of lower taxes and more spending, and we have the Democrats of higher taxes and more spending. It feels like no solution is going to actually address the core problem, which is $40 trillion of outstanding debt is concerning the bond market as it relates to the U.S. being able to actually pay those interest payments in the future and therefore, going to need a higher coupon rate to accept that risk. And therefore, that drives into the housing market, both single-family as well as multifamily on the financing cost, which has always been a core component of it. And therefore, I mean where's the relief, I guess, what's the off-ramp here?

Right. Well, you just saw the announcement that Social Security will run out by 2032. And maybe that's putting some pressure on Congress to contemplate doing something about it. That was like a recent article maybe last week, and really what they should do is lower -- to raise the retirement age and figure out how to generate incremental funds that we need desperately. And until they do something that creates austerity, no one trusts this government. And so there's a lack of confidence in their ability to control spending either side of the aisle. And I think that what they need to contemplate is raising the retirement age. We're living longer, we're working longer. We're both at of age we'll probably work for the next 10 years, you and I, or longer and yet people are getting retirement, Social Security at 65 or even earlier if they want to accelerate it.

So I think that's -- at least that's my thought. But I don't think that this -- legislators that we currently have, want a risk getting fired by the constituents because the people that vote the most are the oldest, the elderly boat. They're the largest voters in the country. So I don't know how else to solve for the challenges that we have, but do we get this administration to focus on spending reduction. I don't see that in the cards right now, not what this war going on.

So if we're in balance from a housing standpoint, and housing is an important issue for whichever administration, I don't -- whether it's the Trump administration now or whatever the next administration is going to be. Housing has always been a core tenant of more people should own a home, single-family homes are the place where people have a store of value. As you said previously, it's typically the largest component of wealth for families and for retirees. And so if you were to look at the policies that are being put into place now, and we obviously just got the ROAD to Housing Act passed by Congress unsigned by the President, but put into law. Where would you direct U.S. policy as it relates to being supportive? Maybe not stimulative, maybe you're saying we don't need more stimulus, but supportive of the U.S. housing market?

Well, let's just take a step back for a moment because one thing we didn't talk about with respect to shortage or balanced or oversupplied is the vacancy rate in the country. So we can come back to that. I just want to make sure we highlight that, that's a very...

Let's just jump on that. Coco, pull up the slide that shows the vacancy rate on multifamily versus single-family rental because this will guide some of Ivy's comments. So to those of you who are just listening not seeing, this is a slide that shows single-family and multifamily vacancy rates in America. And today, multifamily is at 8.3% per Zelman and single-family rental is at 6.2%. Anything else you want to point out on this slide, Ivy, before you go into your comments? .

No, I think it's important to recognize that, obviously, vacancy levels fluctuate, but national vacancy rates are not reflective of what's happening per the differentiated pieces of shelter. So multifamily right now is oversupplied. We're seeing completions come down, starts have come down. So we do expect that supply will get absorbed and get back into balance. Same thing with SFR, we had a lot more build for rent. And now that the housing act has been signed or didn't get signed but got put into law, we are seeing BFR come back a little bit. So I think generally, we'll get there.

The areas that are undersupplied within the ecosystem is really on the seasonal side. Second homes were bought up during COVID, and there's a lack of second home availability, and I think that could be a bright spot for builders, developers to contemplate. But I think the reason I really want to highlight that is if you make an assumption that we're at a 10% vacancy rate, then you could say, "Oh, well, their vacancy rate is going to be coming down and therefore, we're going to have improvement." It really matters what number you're using. And that's the variable that I think there's different opinions and different various firms. Like for example, CoStar is at the same level we are at 8%. Others are using multifamily is at 10%. So it matters what you're assuming and therefore, to forecast whether we're imbalanced or over supply makes a big difference.

You mentioned CoStar. I just -- random thought on this, but I saw it yesterday in a Bisnow article, focusing in on President Trump's 1,680 stock trades in 2026, one of the stocks that he sold they pointed out was CoStar. I just thought it was so funny that like they're sitting there peering into that and trying to see what the President is trading on. I won't withhold judgment on that.

So if we're looking at that type of vacancy on the multifamily side, it feels like we've gone from sort of an index market in the sense that you could buy multifamily in 2012 to 2022, pretty much. And there was a really great macro backdrop to not enough supply, rates being low, a renter nation, if you will, more than a buyer nation, and you could kind of bet the index, and it did really, really well. It feels like we're now back into kind of a stock pickers market, if you will, as it relates to multifamily and most particularly, which markets are showing strength in green shoots in which markets are still lagging.

One of the big things that you have pointed out over the past couple of years, Ivy, was the strength in the urban gateway markets just because there was a lack of supply when the Sun Belt got overbuilt. And so the Sun Belt has been lagging while the urban gateways have actually held up pretty well. And we're now sort of at that inflection point, if you will, where some of the excess supply in the Sun Belt markets has been absorbed. And yet you still sort of have the same demographic and job trends in the urban gateway cities that you had ahead of time. So if you're going to be a stock picker if you will, but instead of stocks, you're going to look at either regions or cities, where is your view right now from a multi standpoint as it relates to where people ought to be making bets?

Multifamily. Well, I think that you're right, the lack of supply in areas like San Francisco is definitely the perfect example when you don't have starts there for more than 5 years. We now have rents up double digits there. And so I don't see that changing. I think where we have a deficit of starts you're going to continue to see rents reaccelerate. The Sun Belt has lagged. We just published recently our survey for July for multifamily operators as well as in the June survey, we saw that things were decelerating. We had green shoots that were coming apparent in May, and June to some extent, on occupancy. But then in July, occupancy and rents decelerated more than seasonal, when those are the two strongest months of the year, supposedly.

So a lot of that is still from the Sun Belt. Because if you go into the Midwest where there's a lack of supply, you're still seeing very healthy rent growth. So I would still bet on the markets that are not seeing starts reaccelerate as a way to profit from stronger fundamentals. Not to say it's great out there everywhere, but there are markets that are seeing not only inventories coming down for single-family availability, i.e., Miami. I take Miami has been where we've seen green shoots for sale. But overall, lack of availability, Miami inventory this year is down 17%. So what is available there in terms of multi will benefit from the lack of supply that is now becoming apparent in the for-sale market. So I would bet on Miami, if I was a developer that will start to thrive as the inventory gets cleared because of the lack of that for-sale availability.

And that would be the same in markets like San Francisco, I mentioned, Tampa is showing green shoots as it relates to improvement with inventories coming down double digit. So multifamily operators might benefit there as well. Keep in mind, multifamily is the better right now asset class fundamentally from the perspective that we are seeing incremental accelerating renter households while owner households are decelerating because the affordability is clearly much more compelling to be a renter than an owner. If you're comparing an apartment, maybe not the best apples-to-apples to a single-family starter home, it's about $900 all-in differential between monthly payment. Property taxes and HOA and mortgage insurance are factored in, and overall insurance.

So I think it's looking more promising from our perspective to be in the multifamily sector, if I'm making bets than in the for-sale market right now, especially in the new home market, even as inventories -- spec inventories are down double digit from where they were last year, but there's a lot of more challenges in for sale and in the new home market than in multifamily, we think.

And you went to Miami there and Tampa and San Francisco, what about the darlings of the sort of 2019 through 2022 era of the Austin, Texas, the Nashville, Tennessee or the Charlotte, North Carolina? Those were the boom markets. They got oversupplied. Austin last year had the -- we call it rent growth because we're all so used to seeing rent growth, but it was the biggest rent decline year-on-year of 7.7% in Austin. When does Austin go from catching a falling knife to actually hitting bottom and starting to build back out?

Based on the supply that we see there, the level of, call it, lease-up necessary and what's still coming. I have a quartile the markets into we'll see maybe 3 to 5 years of continued supply -- oversupply that will need to be absorbed at a decelerating rate but still oversupplied. So it might be a few more years before we really see Austin reaccelerate because of the significant overbuilding that happened there. That's the same in a lot of the other cities, whereas in the Carolinas specifically, I think they're better positioned because South Carolina was the #1 state for population growth through the most recent data. So you're still seeing better migration and overall growth in those markets than in Austin.

And what about -- as you talk about a market like South Carolina, it makes me think about Boise, Idaho, and it makes me think about the growth that we've seen in Boise. Boise being one of the biggest boom markets. It's actually your most recent homebuilder survey has the sentiment on the Boise market as being the #1 market in the country from a homebuilder standpoint. A lot of that, all of that is due to Micron and Micron's tremendous run as it relates to being one of the major chip manufacturers in the world. Its stock price is going through the roof.

I actually heard somebody the other day, Ivy, go from the Mag 7 to something like the -- I can remember what they called the 9, but they included Micron in that 9. So they added them in is like the big stocks that are driving the stock market today. But as you think about that as it relates to AI, where data centers are being built where the knowledge economy, if you will, is growing such as San Francisco, which you mentioned previously, is one of the fastest-growing economies in the country. Boise is up there. Scottsdale, Arizona is getting the Taiwan semiconductor plant that's being built there.

How important is job growth to this overall housing mosaic, and if it is based on that, obviously, you and I both know that growth markets are distinct from good real estate markets. I mean you can have a high-growth market with unlimited supply, and it doesn't turn into a really good real estate market. You can also have modest growth with no new supply, and it actually is a pretty good real estate market. So as you sit there and look at your kind of heat map of where from either single-family or multifamily, you'd put bets, are you going after that job growth? Or are you looking at a supply-demand that says, "I'm going to be a real estate owner for the next 10, 20 years " It's much more to do with the supply-demand curve than it is with the job growth curve.

There's not a single variable that we would look at. We're going to look at -- actually, for our housing summit, we'll be talking about relative market scorecard, like where the best markets are, but a lot goes into that, but employment would be at the top of the list because builders have always used something called an EP ratio, which is the incremental change in jobs divided by the incremental change in permits to kind of gauge where the market is. So a really high EP ratio would indicate that you're going to need more supply because you have very strong job growth.

On market, you didn't mention Columbus, Ohio has been a darling because they're building a chip plant, and there has been a lot more inbound. But it's not because necessarily we're seeing jobs there, but we're seeing developers recognize there'll be jobs there. So they're coming there where they hadn't been there previously to try to get in front of that and add more supply. And that, I think, is the right strategy for a market that's seeing job growth. But that's not the only variable. We want to look at other factors like what is the inventory picture look like right now, overall inventory, for sale inventory, was multifamily in terms of the availability of supply as well as other factors, household growth, what's happening with new employers or job growth. But there's a lot that goes into that, the demographics also. So we have a secret sauce that will determine the ranking of the markets, and we'll publish a report after the summit about it.

Sticking on the sort of stock picker theme and to your point about there are a lot of inputs to it. It's not just job growth, it's supply-demand characteristics, et cetera. But many people in the multifamily industry are like survived at '25 and then '25 came in, and we saw no rent growth. And everyone has sort of jumped over '26 to sort of -- and I use this term when we were together in Sun Valley, a slice of heaven, in '27. But when do we start to see rent growth? And is the answer to that you're not going to see national rent growth anytime soon, but you might see it in specific markets, and therefore, pick up the Zelman research report, and we'll dive in and tell you that Nashville is going to start to grow then and San Francisco is already growing at sort of unbelievable rates, but you're not going to see national rent growth across the board, and it's not going to be a sort of monolithic market. Which is it? And if you can, I know people listening to this would love to know what markets you think have the components for rent growth to hit sooner rather than later?

Well, we are forecasting rent growth to increase in '26 to roughly for multifamily, 1.5% nationally, and then we have that increasing to 2.6%. There's a little bit of a downward...

In '27?

'27, correct. That doesn't get back to trend line, though, until '28, we get to 3.7%. So obviously, there is subject to downward pressures if rates remain as elevated, and we're not seeing any abatement in inflation, but that's our current forecast. And therefore, we are seeing the fortunate benefit of reacceleration with the exception of the July data I just mentioned that saw slowing in blended rent growth. So we're optimistic that lease-up competition is improving. One of our survey questions to our owners and operators are the level of lease-up competition has been coming down and the use of incentives has been plateauing in terms of concessions. So as we start to read the tea leaves, we do see markets will start to show improvement. More likely, it's delayed in '26 into '27 to see any real acceleration. But I think it's slowly getting better and be happy to share the relative performance when we finish the analysis.

One of the things that you and Chris Mikkelsen and I have discussed is just that many people who are buying right now in the multifamily space are buying on, if you will, negative fundamentals and at the moment that you start to project out rent growth in the pro forma that it is going to change the calculus immediately and that all of a sudden, you're going to get all these properties that have been sort of sitting out there waiting for an actual bid on them to actually get real bids, and we're going to start moving in the right direction in a pretty dramatic fashion. So hearing you talk about some in '26 and then that starts to actually get well below trend up in 2-plus percent in 2027 is encouraging.

Yes, I agree. And I think we're, again, more optimistic. There's demand, and we have demand supported by renter households accelerating. We have very favorable affordability. The rent-to-income ratios are not really much above trend line. So there's really much stronger fundamentals for multifamily. Underwriters today that are looking at transactions, they're looking at cap rates going the wrong way because of where rates are. So I think we need to see rates kind of stabilize, but I don't disagree that there's a lot of pent-up demand in the transaction market that will be unleashed, whether it's getting improvement at the long end of the curve for a 10-year paper or we have more confidence that rent growth is going to reaccelerate.

And it might be just because the for-sale market will remain so much in the doldrums as rates are keeping affordability at very, very stretched levels that people do need shelter. And even if young adults are not moving out as early as they've done, you will have incremental households. And I think multifamily will be the beneficiary of that, so more optimistic for sure there.

So to wrap this conversation up, A Decade Divided, which is the follow-on to your cradle-and-grave analysis, which was exceptional. But in A Decade Divided, you read it, and you are the CEO of a homebuilder, you are the CEO of a multifamily either developer or owner, or you are the CEO of a build-for-rent SFR company. Once you've read it, what would you expect or want to see one of those CEOs do as it relates to their strategy based off of the data that comes out of it? So let's start with homebuilder, then we'll go to multifamily and then we'll go to SFR, BFR.

Well, I actually presented the question to your panel in Sun Valley to Ryan Marshall, asked if A Decade Divided or any of the demographic analysis would make its way into the boardroom and would it possibly change your strategy. And the answer was no. Although I would give Pulte credit because they're the only public builder that's really made -- put a stake in the ground to go after active adult. And now again, this Explore product. So I think directionally, they're taking advantage of the changing demographics. And they're actually doing a very large study that will be supportive, I believe, of their strategy. That is not the case everywhere for our homebuilders, so Pulte might be unique in that respect. But I think that it's such a big amoeba in some respect that's so far away, no one's really worried about it. But when you look at one of the exhibits in the report, we're currently call it, running 1.4 million starts.

Now if we start to see the 2030 and beyond that we're going to see household growth go as low as we're forecasting, we're going to have starts come down or we will oversupply the market. And will builders recognize this and pull back on starts, I think that's debatable. And I think when you look at the market share of the public companies for the new home market at 55%, they're driven by shareholders that want them to grow. So I can't imagine that they're going to adhere or think about 5, 10 years out that we should really be buying a lot less land or land banking less land and be more, let's say, nimble given what could be troubling demographics. I don't -- I'd like to say that I think they're going to start thinking about it, but it probably has to hit them in the face to some extent before there's really any major changes. Again, they don't control what others are doing, but it is so concentrated.

Unlike multifamily, where if you talk to CEOs that might be more regionally focused, it does matter where you are and where you operate. If you're a national multifamily operator, I think you'd have a similar maybe reaction to what a large public builder that's national might think, okay, this is too far out for me to worry about it. We're talking about 2030 and beyond. But we do likely have a scenario where if renter households, if we're going to have household growth, it could still be more skewed to renters. Absolute numbers for owner households are much higher, but if renter households are going to grow, you could capitalize on that depending on, again, where markets go back more layered down than just the demographics, where are we seeing regional differences as it relates to the underpinnings of the other aspects of the fundamentals.

So I think it seems as if there's not a lot of attention to this. I know talking with clients of W&D, some are very focused on it and really more on repairing and remodeling existing multifamily product than starting and developing incremental new product. I think we might see a shift to that for multifamily operators in the transaction market, more value add than we would new construction if they started to appreciate some of the risks that we're highlighting. I think they would be quicker because they have an alternative, Willy. Builders don't have an alternative.

Just on that, you were talking about the aggregate number of homes. I think the numbers that I pulled from one of your research reports is there are about 95 million single-family homes in America and about 40 million multifamily units in America today. And so if you look ahead a decade, Ivy, where do those two numbers go as it relates to -- I mean, right now, we're at a homeownership rate in America of somewhere around 64%. I think I'm right on that, something like 64%, 65%. We got to our peak close to 70% back in the Bush 2, George W. Bush administration in the early 2000s and have been sort of firmly in the mid-60s.

Is it -- you've talked about in this hour the fact that right now, because of affordability, it's sort of advantage multi over single-family. But project forward 10 years and say, does that 95 million single-family homes move up well over 100 million because there's just going to be a need for that single-family product? Or does the 40 million multifamily homes move from 40 million to 45 million or 50 million because we become more of a renter nation?

Just thinking about the bookends, births versus deaths and recognizing that more people will be dying than born in this country, when you think about, therefore, again, incremental homes coming to market through estate sales, it would feel like we're going to see a shrinking of homeowners as opposed to acceleration, whether it's going to shrink dramatically or it's going to modestly come down, but you're having less people start buying starter homes. They're starting buying homes at 40 as opposed to in their 20s. And if they're selling because they're -- people have passed, we're going to see probably a lid on growth and maybe more pressure on absolute numbers because of the phenomenon of the demographics.

Flip side would be multifamily would be the beneficiary of that, but might also not grow significantly higher than where we are currently because overall households are going to continue to decelerate. But I would put more, I guess, weight on multifamily improving than I would on the single-family ownership. And today, people say, "Housing can't be that bad." Our homeownership rate has been roughly 65%, 64%, and that's pretty much trend line. But I think it's very bifurcated and it's not -- the composition looks very different of who owns and at what age.

Yes. Super interesting. Ivy, thank you. As always, great to spend an hour with you. I get the luxury of having you around all the time, but for those people who listened in today, I hope you enjoyed our conversation. As you can tell, the A Decade Divided research report that Zelman put out is a fantastic report with a lot of data that gives you a very broad view of housing and housing over the next 5 years in the 2020s, and then that then sets up what's going to happen after 2030. So Ivy, thanks so much. I hope you have a great day, and thank you, everyone, for listening in. We'll be back next week with another Walker Webcast.

Good day, and welcome to the Second Quarter 2026 Walker & Dunlop Earnings Call. Today's conference is being recorded. At this time, I would like to turn the conference over to Amy Hopkins, Senior Vice President of Investor Relations. Please go ahead.

Thank you, Karen. Good morning, everyone. Thank you for joining Walker & Dunlop's Second Quarter 2026 Earnings Call. This call is being webcast live on our website, and a recording will be available later today. Joining me today are Willy Walker, Chairman and CEO; and Greg Florkowski, our CFO.

Before we begin, please note that statements made on this call, which are not historical facts, may be deemed forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Investors are urged to read the forward-looking statements language in our press release, which was posted this morning to the Investor Relations section of our website. More detailed information about risk factors can be found in our annual and quarterly reports filed with the SEC.

Additionally, we'd like to remind you that during this call, we will discuss some non-GAAP financial metrics. Reconciliations of these non-GAAP financial metrics are included in our most recent earnings release and earnings call presentation, which can be found on our website. And with that, I will now turn the call over to Willy.

Thank you, Amy, and good morning, everyone. This is Amy's first Walker & Dunlop earnings call since joining us to run Investor Relations, and I'd like to welcome Amy to the Walker & Dunlop team. Thank you, everyone, for joining us. Walker & Dunlop continues to demonstrate the strength and resilience of our platform despite the uncertain macroeconomic environment in commercial real estate due to geopolitical tensions and associated interest rate volatility. W&D is gaining market share, expanding our capital relationships, generating durable recurring cash flows and deepening the client relationships that have differentiated our company for decades. Those fundamentals remain as strong today as they ever have been. Importantly, our clients continue to choose Walker & Dunlop because of the exceptional execution of our team, the quality of our people and the breadth of our capital relationships around the globe.

Our core operating business performed very well during the quarter, as shown on Slide 3. Transaction volumes increased 3% from a year ago to $14.4 billion. Debt financing volume increased 8% to $12.5 billion, led by 43% growth in HUD originations. Brokered lending grew 17% in the second quarter and comprised a larger percentage of total transaction volume, which reflects progress on our strategic plan to expand our capital relationships in the United States and Europe. We expect brokered volumes to continue growing throughout the year due to the volume of maturing non-multifamily loans and the broad supply of capital for commercial real estate lending.

Our Fannie Mae and Freddie Mac lending volumes were down 10% on the quarter due to an extremely active Q2 last year. And yet year-to-date, our market share with the GSEs is up 350 basis points to nearly 15%. This is a tremendous accomplishment by our team and positions us extremely well to end 2026 once again at the top of the GSE's league tables. Fannie and Freddie have only deployed $62.5 billion of capital through the first half of the year or about 1/3 of their combined lending capacity. So with $114 billion remaining for 2026 and our increased market share to 15%, we see a very constructive backdrop for our GSE lending over the balance of the year.

Our property sales pipeline has strengthened meaningfully compared to last quarter. And if our clients decide to transact in 2026, we are well positioned to finish the year with property sales volume above last year despite the slower start to 2026. Increased property sales activity would also support stronger multifamily debt financing volumes in the remainder of the year.

Our servicing portfolio continues to grow and reached a record $146 billion at the end of Q2, up 6% year-over-year, providing durable recurring revenues and cash flows while deepening client relationships that generate future financing and advisory opportunities. 52% of the loans in our portfolio mature over the next 5 years and will generate refinancing and sales opportunities with our existing clients.

To further enhance our client offering and connectivity, we launched WDSuite last year, giving clients a single digital platform to manage their loan with Walker & Dunlop. Through WDSuite, clients can access loan documents, make loan payments, run analytics such as payoff calculations, get real-time property valuation data, research investment opportunities near their property and connect directly with our financing, appraisal, research and property sales teams. WDSuite brings the full breadth of our commercial real estate services platform into one digital experience, reducing friction for our clients while strengthening our relationship with our borrowers.

We feel very good about the underlying fundamentals of our business, yet our financial results year-to-date have been negatively impacted by loan repurchases and credit marks related to a borrower fraud investigation that began 1 year ago. We are pleased to report that Freddie Mac's loan-level review related to the investigation is complete, and we are very close to being finished with Fannie Mae. Greg will discuss the loan-level charges we have taken this quarter and the projected charges related to the Fannie Mae investigation in a moment.

I must say it feels very good to be close to putting all of this behind us. The investigations have been extremely challenging for our company, for our financial results, and for our team. I cannot express sufficiently my thanks to many members of our team for the countless hours of double and triple work they invested while these investigations were ongoing.

Importantly, the investigations indicate that these credit issues were almost exclusively related to a small group of fraudulent sponsors that originated loans with one Walker & Dunlop banking team that is no longer at the company. And while all of this has been costly and time-consuming, we have learned a great deal from this process and emerge a stronger company. As Nelson Mandela once said, "I never lose, I either win or I learn." We have learned plenty, and our underwriting processes and partnerships with the GSEs are more robust than ever before. Together, we have strengthened our underwriting, fraud detection, and review processes while reinforcing the culture of accountability that has always been central to W&D.

Our focus going forward is to execute on the 5-year strategic growth plan called the Journey to '30 that we outlined for investors earlier this year. The Journey to '30 is designed to make Walker & Dunlop the best commercial real estate capital markets company in the world. An important component of that plan is adding the very best talents across geographies and asset classes to expand our origination volumes, deepen our client relationships, and generate exceptional financial returns. Our move into the hospitality investment sales in 2025, along with the opening of an office in London, England, were the first 2 investments in this broader capital markets strategy. And as we expand the scope of our services and our geographic reach, we must continue winning new client relationships.

Year-to-date, 19% of our transaction volume has come from new clients to Walker & Dunlop, and 3/4 of the loans we refinanced were new loans to our portfolio. Winning new clients and new loans has been and will continue to be central to our growth and market share gains over the coming years.

As transaction and refinancing activity accelerates over the coming years, our strategy is to continue winning new business while deepening the relationships with our existing clients. Our bankers and brokers need to expand those relationships with new products and services to increase Walker & Dunlop's wallet share while retaining the loans that already exist in our portfolio.

As seen on Slide 9, on a trailing 12-month basis, our average transaction volume per banker/broker reached $288 million, almost to our 2026 goal of $300 million of production per banker/broker. Because that production flows through a cost structure and producer base we have already built, increased transaction activity per banker/broker should drive greater economies of scale and margin expansion. And because every agency origination becomes part of the servicing portfolio that we retain for the life of the loan, each new transaction has a recurring revenue stream that generates value well beyond its initial closing.

With that, I'll turn the call over to Greg to walk through our financial results and our outlook for the balance of the year. Greg?

Thank you, Willy, and good morning. Our capital markets team navigated a challenging macroeconomic environment this quarter, reinforcing our clients' trust in our team and enabling us to gain market share and deliver solid financial results within our core business. At the same time, our reported diluted earnings per share reflects $23 million of charges and operating costs related to previously identified problem loans. These charges are meaningful, yet isolated to a small number of fraudulent borrowers and not related to new repurchase exposure or deterioration within our broader portfolio. Adjusted core EPS increased 3% this quarter to $1.19, demonstrating the strength of our core business, while diluted EPS of $0.09 reflects the cost of resolving legacy repurchase issues.

Turning now to our Capital Markets segment. As Willy highlighted, Capital Markets generated $14.4 billion of transaction volume during the quarter. Revenue for the segment was down slightly, while net income was down 10%, primarily reflecting a greater mix of broker transactions relative to GSE lending, which reduced non-cash MSR income. We told you in March, we expected MSR margins to be broadly consistent between 2025 and 2026, and that remains the case. Importantly, that mix shift demonstrates the availability of capital to the commercial real estate sector and the scale and quality of our debt brokerage business.

Turning to our servicing and asset management, or SAM segment. The servicing platform continues to generate stable recurring earnings and cash flow, and the recurring revenues of the managed portfolio continued to grow steadily. The servicing portfolio increased 6% from a year ago, and while revenue for the segment was down 5% from last year, the decrease was driven by a reduction in earnings from joint venture investments in our affordable business that was driven by transaction timing and not an underlying trend. The fundamentals of the servicing platform remains strong, and continued execution from our Capital Markets business in the coming quarters should drive additional servicing portfolio expansion as we move through the year.

Turning to credit. As I referenced earlier, charges and operating losses associated with our repurchased loan portfolio impacted our financial performance this quarter. Before getting into the details of the quarter, let me briefly provide some background. As we previously disclosed, about a year ago, we began an investigation in coordination with Freddie Mac that identified a small group of fraudulent sponsors that originated loans with a specific banking team at Walker & Dunlop. Through that investigation, it was determined that banking team did not adhere to our policies and procedures, and they are no longer with the company. The investigation was then expanded to include broader loan-level reviews by both Freddie Mac and Fannie Mae.

Freddie Mac's review is now complete, and we do not expect additional repurchase requests related to that process. Fannie Mae's review is almost complete, and based on our analysis and communication with Fannie Mae, we expect to recognize credit-related charges of $12 million to $16 million in the third quarter this year related to the final resolution of their review without the need to repurchase any loans. At this point, the investigations will be completed imminently, and the capital and financial impacts are known and sized. We can now turn our attention to getting back to business as usual with the GSEs.

Turning specifically to the second quarter, the $23 million in charges and operating costs recognized this quarter were primarily driven by 2 events. First, a group of previously repurchased loans defaulted during the quarter. These loans were performing when we agreed to repurchase them at the end of last year. As a result of the default, we performed property-level inspections and increased our loss estimates to reflect the current condition of the assets. Second, Fannie Mae completed a portion of its loan-level review during the second quarter, and we agreed to increase our loss sharing on a subset of loans rather than repurchasing them.

With regard to loans we previously repurchased, we are actively executing our disposition strategy. Since quarter end, we sold $40 million of properties at prices very close to our estimates, and we are preparing to market another $41 million that will be sold later this year. We expect all sales and repurchased assets to be completed by early next year, with any future valuation adjustments dependent upon ultimate selling prices relative to our current estimates. To put this all in perspective, 95% of the losses we have recognized to date relate to a small group of fraudulent sponsors and loans originated by the banking team that is no longer with Walker & Dunlop.

We are nearing the end of this process, and after reviewing broad portions of both that team's production and our broader portfolio, alongside the GSEs and outside advisors, we have not identified similar issues elsewhere in our portfolio. We have significantly strengthened our ability to detect and prevent the type of coordinated fraud that led to these events and believe the control enhancements we have implemented alongside the GSEs will materially reduce the risk of this happening in the future.

Our broader at-risk portfolio continues to demonstrate strong underlying credit performance, as shown on Slide 11. At quarter end, just 28 basis points of the portfolio was in default. The operating fundamentals of our at-risk portfolio remain excellent, operating at a weighted average debt service coverage ratio of 2x and a weighted average underwritten loan-to-value of 61%. We remain confident in the underlying credit quality of the at-risk portfolio.

We continue generating consistent recurring cash flow from our servicing platform and ended the quarter with a strong balance sheet that provides the flexibility to continue investing in the growth of the business while resolving the remaining legacy repurchase issues. We have a robust recruiting pipeline, and we will continue prioritizing reinvesting in the growth of our business in pursuit of our long-term strategic objectives. Meanwhile, our dividend remains a key component of shareholder returns, and yesterday, our Board approved a quarterly dividend of $0.68 per share, consistent with last quarter, and payable to shareholders of record as of August 20.

Turning to our outlook, our guidance at the beginning of the year, shown on Slide 12, did not predict the significant repurchase-related charges recognized during the first half, nor the potential for the additional costs I just outlined related to Fannie Mae's review. Excluding repurchase-related costs, we remain confident in our core earnings outlook. The ultimate outcome for the year will depend largely on the pace of transaction activity during the second half.

Capital remains broadly available and spreads remain competitive, but the absolute cost of borrowing is currently elevated and could continue to delay financing and property sale decisions. If current market conditions persist, we believe the core business is on a path to finish toward the lower end of our original guidance. Meanwhile, an improvement in the market conditions would likely unlock additional transaction activity and position the core business to perform within the middle to upper portion of our range. Nothing we saw in the first half changes the structural case we made at Investor Day, moderating supply, durable rent demand, a large wall of maturing commercial real estate loans, and a market-leading multifamily finance and sales business established the foundation of our Journey to '30 objectives.

While work remains to resolve the legacy repurchase loan portfolio, we now have significantly greater clarity around the remaining exposure and a defined path towards resolution with the GSEs. More importantly, our capital markets platform is gaining market share, and our servicing business continues generating steady recurring cash flow. We remain focused on executing our strategy, investing in the business, and creating value for our shareholders. Thank you for your time this morning. I'll now turn the call back over to Willy.

Thank you, Greg. As we've discussed this morning, the repurchase portfolio has impacted our earnings and has been an extraordinarily challenging situation to manage over the past several quarters. Despite the investigations and a challenging market environment, our team has continued executing for our clients and advancing our business. Looking ahead, what defines Walker & Dunlop is the exceptional execution of our team, the quality of our people, and the breadth of our capital relationships around the globe. These competitive advantages remain firmly intact today and position us well for the opportunities ahead.

As shown on Slide 13, the Mortgage Bankers Association forecasts continued growth in commercial real estate lending over the next several years, and our people, brand, and technology will help us capture that growth. The improving outlook for multifamily, the asset class Walker & Dunlop is known for, is supported by several key fundamentals, beginning with supply. After the largest wave of apartment deliveries in decades, new development is slowing rapidly. As you can see on this slide, annual multifamily starts have fallen to approximately 274,000 units, roughly 50% below their recent peak, while deliveries are beginning to moderate, creating a healthier supply-demand balance over the coming quarters.

With regard to demand, during the first half of 2026, the market absorbed approximately 279,000 apartment units, making it the second-strongest first half on record and stronger than any pre-pandemic year. A large driver of demand is that renting is still significantly cheaper than owning. As this slide shows, the gap between the cost of paying principal and interest on a home mortgage for a median-priced home versus renting has widened to approximately $420 per month. As home prices increase and interest rates remain high, renting remains the most economic option. As supply and demand get back into alignment, occupancy has now increased for 4 consecutive months.

And as Slide 17 shows, apartment vacancy continues to decline. Vacancy also declined on a year-over-year basis for the first time in more than 4 years, marking an important inflection point for the sector. These are exactly the type of leading indicators we would expect to see before transaction activity accelerates.

Taken together, moderating supply, increased demand, improving property fundamentals, and an abundant amount of lender capital, suggests we are in the early stages of the next investment cycle for multifamily. Given W&D's scale, multifamily lending, sales, servicing, valuation, and research businesses, as the next cycle takes hold, so will W&D's growth and financial performance. And while the macro backdrop is very important to our business fundamentals and financial performance, the things we fully control are what happens inside our company each and every day.

And in May, Walker & Dunlop was named one of Fortune magazine's 100 Best Companies to Work For for the first time in our history. This recognition means so much and underscores that the people of Walker & Dunlop are our greatest asset and competitive advantage. As we pursue the Journey to '30, our people and culture will continue to be the foundations of our success. They attract exceptional talent, drive innovation, and enable us to consistently deliver for our clients. To every W&D are listening, thank you for your passion, commitment, and everything you do for our clients and for one another every day. The Fortune magazine best companies to work for recognition belongs to you.

Walker & Dunlop's future is defined by the strength of the company we have built, the clients we have been fortunate to win and serve, and the fantastic team members who make their careers at W&D. This month, we welcome Frank Cassidy back to Walker & Dunlop following his tenure as FHA Commissioner and Assistant Secretary of the Department of Housing and Urban Development. We're thrilled to welcome Frank back to our team as we work with Fannie Mae, Freddie Mac, and HUD to increase the supply of safe, affordable housing in America.

We have endured some significant challenges over the past several years and believe we have emerged a better, more robust company. And as commercial real estate fundamentals improve and transaction activity accelerates, we and our shareholders will benefit. Thank you for joining us this morning, and I'd ask Karen to open the line for questions. Thank you.

[Operator Instructions] We'll take our first question from Kyle Joseph with Stephens.

Just want to go through expectations for deal flow and kind of mix shift for the remainder of the year. I know you talked about the potential GSE pipeline being really strong. What would we really need to see for that to come to fruition? And remind us, I mean, just based on that, the mix shift between broker and GSE you're expecting?

Kyle, thanks for joining us. So first of all, as it relates to the agencies and their 2026 caps. Freddie Mac has been very explicit that they are focused on getting to their cap. And we are seeing Freddie Mac be quite aggressive in the market right now as it relates to pricing and winning deals. Fannie Mae has not been as explicit as it relates to focus on the caps and meeting the caps or getting to the cap. But we would expect that both agencies are very focused on trying to deploy the amount of capital that they are allowed to under the scorecard in 2026. And as Greg outlined in his prepared remarks, Kyle, depending on where they get to as it relates to the deployment of those caps will have a big impact on our overall production numbers as well as the economics behind the business.

Getting into the specifics of how much is going to be Fannie, how much is going to be Freddie, and how much is going to be brokered, as you well know, is impossible to predict. What you can, I think, point to is that in the first half of the year, we gained market share with both Fannie and Freddie of 350 basis points to take us to just under 15% market share with the agencies on a combined basis. So if the agencies crank up their volume in the second half of the year, that will be very, very beneficial to us given our positioning with both of them.

And at the same time, there is a huge amount of capital in the marketplace from debt funds, from CMBS, from banks. And our team has been extremely capable at deploying that capital into commercial real estate. And that has been both a competitive source of capital to the GSEs, but it's also been very, very beneficial to our clients, which has been fantastic to see and fantastic to watch our team deploy that capital.

Great. Really helpful. And then just a quick follow up. For Greg, just in terms of the timing on the joint venture earnings related to affordable, should that be a tailwind into 3Q as we think about the servicing segment?

No, I think it'll just be more consistent on a go-forward basis, Kyle. It was a unique quarter this time around relative to last year. This year, there were a few little bit -- a few losses that we picked up from some of those joint venture investments, whereas going forward, it's going to be positive to -- flat to positive earnings. So not too much of a tailwind, I would say, with that segment. That segment is driven by the size of the servicing platform, the steady cash flows that flow off of that, and we'll see a lot more benefit from that in the second quarter than pickups from the joint venture investments.

Our next question comes from Jade Rahmani with KBW.

I wanted to ask what you're hearing from multifamily investors. Are they taking a glass-half-full outlook, because candidly, the supply absorption, I know absorption trends have been strong, but supply continues to remain elevated. And I think the rent growth recovery has been delayed, and it's probably still uncertain at this point. So expectations might be getting pushed out. At the same time interest rates are higher than expected this year. So if you could comment on how those 2 factors might be impacting multifamily sentiment.

Jade, what you just outlined is very much where the market sits today. As you know, there was a saying in the market which was survive 'til '25. And in '25, the excess supply would have been burned off and that owners were going to be able to start to put rent increases back into their properties. That didn't materialize in '25 and everyone entered '26 saying kind of, how do we get through '26? And, right now, you are starting to see rent growth in certain pockets across the country. And I would say, were it due to just the fundamentals of the real estate supply demand, you will see the market continue to recover and the ability to start to see rent growth in the back half of '26 and into '27.

I was asked at an event I was speaking at probably 3 weeks ago, what was more concerning, the fundamentals of multifamily or the regulatory/political backdrop as it relates to rent and rent control. And I said, without a doubt, the second. That the fundamentals appear to be improving nicely. And if left alone, that will be a strong underpinning for multifamily performance going forward. But as you well know, our country today is faced with sort of political crosswinds, if you will. And so were you to see increased rent control measures across the country, I think that will have impact on specific markets. And if you don't and you see it be, if you will, from a regulatory standpoint, business as usual, I think you have a bettering market as we move through '26 and into '27.

And then, I think the unfortunate part about the repurchased loan requests is that it muddies the water with respect to underlying credit performance. So let's leave that aside. And if you could comment on the underlying credit performance, and if there was any credit deterioration, because I think generally real estate fundamentals do continue to improve, but we've seen somewhat of a mixed quarter this quarter from a credit perspective across the space.

So I think Greg was pretty clear, Jade, in talking about the broader portfolio and has a full paragraph in our prepared remarks that says that as we look at what we have had to take losses on, that portfolio was isolated to the borrower base and the origination team at Walker & Dunlop and not broader in the portfolio and that the broader portfolio continues to operate very well.

And so if we weren't specific or clear enough in our prepared remarks on that, we can obviously reiterate that, but I believe the stat that Greg showed was that 26 basis points (sic) [ 28 basis points ] of the portfolio today are in default, which on a scale portfolio of our size is a very low number, and that the fundamentals of the overall portfolio, while there are clearly pockets and challenges across the country, as there always are on a scaled portfolio like ours, continues to operate very well. And so the broader portfolio looks very good. And the issues we've identified and taken financial hits on has been isolated to that borrower base and that origination team that is no longer with Walker & Dunlop.

Jade, I will jump in on with some specifics to reinforce what Willy said there. We did have 2 smaller loans default during the quarter. It was about $20 million worth of loans. We recorded some specific reserves against those loans. But as Willy said, I think, our overall credit quality is excellent. We have 28 basis points of our, you know, $71 billion at-risk portfolio are defaulted. So, I think that, that, just from a top-line perspective, is excellent.

And then, the operating fundamentals that we referred to continue to perform at a very high level with a 2x weighted average debt service coverage ratio and an underwritten LTV of 61%. So I think given where we are through the cycle, some of the things that you mentioned with respect to multifamily writ large, I think we're pretty, we're quite happy with where the portfolio is today and how it's performing, and we didn't see much deterioration at all with only those 2 new defaults during the quarter. So still feel very good about how things are performing overall.

We'll take our next question from Chris Muller with Citizens Capital Markets.

So great to see the Freddie investigation has concluded. I just wanted to ask a couple clarifying things around that. Are the increases to reserves in the quarter part of the investigation conclusion, or was that driven by the specific issues at the property level that you guys talked about in your prepared remarks?

So, Chris, great to hear you. Thanks for joining. There's 2 parts that drove the majority of those credit-related charges in the quarter, the first was just the default as you referred to, and then the second was we did have Fannie Mae wrap up a portion of its loan-level review. And at the conclusion of those 2 loans, there were 2 loans that we identified that we recorded some additional reserves as we agreed to increase our loss sharing in lieu of repurchasing the loans.

And Fannie Mae, they've communicated to us that, that would be the intent of how they wrap up and resolve their portion of the investigation, which is why we only expect an additional credit mark in the third quarter as we finalize that review. And we don't expect any further repurchases from either at this stage as a result of the investigation. So from a capital perspective, we'll manage the losses, but we don't have to at this point feel like we need to be focused on actually repurchasing the full UPB of a loan. So hopefully, that came through, but -- and that answers your question.

Got it. Yes, that's very helpful. And then I guess on the Fannie investigation, is that $12 million to $16 million of expected credit losses in the third quarter, is that related to the $15.9 million increase in loss-sharing reserves, or is that separate from that?

That'll be a new charge as we finalize that discussion and overall review with Fannie Mae. So we just have -- we're pretty close to being finalized there. As we said, we're hoping that wraps up imminently here. And certainly by the time we get on the next quarterly earnings call, we'll be able to say both investigations are done. But as we wrap that final, you know, those final loans up in review, we'll finalize what that loss sharing will look like in lieu of repurchasing the loans, and we'll take that charge in the third quarter. So, it's unrelated to anything we've recorded to date.

Got it. That's helpful. And then maybe just changing gears a little bit. As you guys open an office in Europe now, can you just talk about maybe the differences in that market versus the U.S. and just how quickly you think that market can ramp up?

Sure, Chris. That office has a tremendous -- has a fantastic team at it. We've started to see them closing loans after taking a little bit of time to get up and get going and get the W&D brand in the European market. I think the biggest differentiator between Europe and the U.S. is that there's no agencies there. So the W&D brand, if you will, that has been so strong in agency financing and therefore in multifamily, given the role that the agencies play in multifamily in the United States, you don't have that in London or in France or any of the other countries in Europe where we are focused on lending. And so it's a very robust capital market without the presence of Fannie Mae and Freddie Mac, obviously.

And the team has done a fantastic job of both establishing the brand, and it shouldn't come as any surprise, but our first 3 large deals have come from existing Walker & Dunlop clients in the United States who also happen to operate in Europe. And so we're leveraging the platform in the U.S. into U.S. commercial real estate owner-operators into Europe, and our European team is leveraging off of that to, find deals and execute on those deals.

And so it's a true brokerage operation. And 1 of the things that we are right now about to expand is bringing investment sales into that lending or debt brokerage team so that we're not doing just debt and equity, but then we're also getting into the asset sales business, which has been such a key component of the growth of our debt business in the United States.

[Operator Instructions] It appears there are no further questions at this time. I'd like to turn the conference back over to Willy Walker for any additional or closing remarks.

I'd like to reinforce my thanks to the W&D team for all you do. Congrats on the great place to work. Thank you to everyone who joined us today, and I hope everyone has a terrific day.

This concludes today's call. Thank you again for your participation. You may now disconnect and have a great day.

It's really a pleasure to talk with Tom Nides. As Willy introduced earlier, Thomas is an extraordinary person normally, politics and business don't really mix. They often have contempt for each other, sometimes tolerance. But Tom is a remarkable person who's been able to succeed really to extraordinary levels in both of these different venues.

So Tom, your path was very interesting. You went from Capitol Hill to Fannie, Fannie to Secretary Clinton, Clinton to Credit Suisse, Credit Suisse to State Department, State Department to Morgan Stanley, Morgan Stanley to Ambassador to Israel, and Ambassador to Israel to Vice Chair of Blackstone.

So the first question is, why can't you hold down a job? What's going on? We'll talk about that.

Is that before I did Everest twice? Willy, you forgot that I did Mt. Everest twice. Willy, this is remarkable how you could actually be involved in bringing the audience down from what we just witnessed on the cameras. I told everyone I was going to go back to my house before I show -- decided to show up after watching that. That was an extremely unbelievable story.

So Willy, congratulations to him in his achievements. And I know they're going to do a Netflix series on me, given the fact that I gained 10 pounds when I was an Ambassador to Israel. So I think there is hugely -- I can hugely see the trajectory here. And the reason I've had all of these jobs is that I have not had a chance to fully read Steve's book, The Alpha Trap, which really means how to stop taking new jobs and assuming your success of where you had it, and I can't wait for that to come out or to talk a little bit more about his book later. He thought he was interviewing me. I'm going to interview him.

Listen, Willy knows this really well because I've known Willy for a long, long time. And I hear [ Mary Diane ] here, too. Are the Walkers here? Oh, hey, guys. Hi Dianne. They don't pay attention to me. Will you tell her I said hello to her. But I've known the Walkers for a long time and I've adored the family and obviously, Willy and I are very close friends. And I have seen what this company has there's very few 3 generation companies, as they likely refer to them, as the 3Gs, very hard to do this, hard to keep them together. But the idea that Willy's grandfather and then his father and then Willy has been able to put together, this institution is a testament to the family and the values. And Willy, I'm honored to be here and to be part of this.

And listen, I've been really lucky, like many -- all of us in this room, we got the lucky gene. I've had all these opportunities and being able to go from politics to business, to diplomacy to foreign policy, that's kind of cool. And we all have kind of -- I don't get to climb Mt. Everest, but I've been able to like serve the government in a whole variety of different ways, and I like making money. I'm more than happy to say I'm a great capitalist. So I like doing that as well. It's better to do these jobs in government when you're not poor. So you can pay your American Express bill. So I've been able to achieve both. So that's sort of why I can't keep a job because I like switching around all the time.

Let's talk about that. So I mean, in seriousness, and we'll get to Iran off the back because there's some things going on there. They're pretty important that you have a unique knowledge of. But what do you think has made you successful? What are the different skills that require -- that are required for success in politics versus required in business? Are they -- to what degree are they similar? And what are the things that are unique?

I think it's not just similar to all of you in this room. You can't take yourself too seriously. I mean we're all smart. We're all lucky. We're all probably brighter than the other person. But if you actually start believing that you got to these jobs because you're the best of the business, you're going to be a loser. And I think, ultimately, for me, personally, one of the skill sets I have been able to do in both these worlds, both in business and in politics is not take myself that seriously. And more importantly, believe fundamentally that both business and politics have a lot more similarities than people recognize.

People always say to me, "Hey, Tom, how can you go from being a Chief Operating Officer of Morgan Stanley to be the Deputy Secretary of State? Isn't that kind of a pretty difficult thing? Not really. In most cases, the people in government think most people in business are kind of only selfish and only care about themselves.

And people in the business world believe fundamentally the people the government just screw up and waste your money. When you have people that have both these experience, it's just great for humanity. You can explain to people, not everyone in government are a bunch of jerks and want to ruin your life. And people in business aren't a bunch of sleazebags. And the combination of having both those skill sets, I think, has made me a better executive on Wall Street and in business, and it's certainly maybe a better government official.

So I don't know. I think it is really -- it's a mindset about how you look at people and jobs. And if you treat people with respect and dignity, regardless if you are the COO of Morgan Stanley or the Vice Chairman of Blackstone or the Ambassador to Israel, or whatever, or the President of the Washington Post, Steve, you know this better than most. You've got to understand your role, but you're only going to do this if you actually believe that the people around you are what making you succeed.

Right. Let's dive into the current events, Iran. So talk about your thoughts about how -- I know you don't necessarily believe that Bibi Netanyahu sort of forced us into this. But how do you think we got into this? How do we get out of it?

Well, in diplomatic terms, this is what we've referred to as a s*** show, okay?

Thank you, Tom. That's a kind of extraordinary insight that we can expect from Tom.

A lot of experience have been able to articulate that in a very sophisticated way. So let's step back for a minute. One thing about foreign policy, a lot of things can be true at the same time. Make no mistake, Iran is a cancer in the Middle East, okay? This hasn't changed since the Shah left in 1979, okay? They have spread their tentacles of hate and destruction to the region for -- since that and continues today. And they've done it not only through the development of their attempt to create a nuclear weapon, but that's beyond the point. It's their ballistic missiles, it's their proxies. They fund every evil empire inside the Middle East. It's Hamas, the Houthis, Hezbollah, the amount of cancer that the Iranians has spread through the Middle East should not, in any way, be diminished and discounted at any way. So that is 100% true.

It's also true that every single president I have worked for, and I've worked for Clinton and I've worked for Obama and I've worked for Biden and Trump one and actually going back to Bush, every single president has faced the issue about, how do you stop Iran for obtaining a nuclear weapon, okay? And Bibi Netanyahu, to his credit, okay? I have a lot of bones to pick with Bibi Netanyahu. But to his credit, for 40 years, he has been talking about the threat of Iran to the state of Israel.

In his office, in the Prime Minister's office, you walk into his office and on the wall of his office is not a map of Israel, it's a map of Iran.

So he has been consistent about this. Everything else is secondary. He has been consistent about the threat to the state of Israel has been Iran, and he is attempting to try to convince each and every president to do what President Trump has done.

What has happened here is the President was convinced, and again, to be clear, I'm not going to be particularly political here. I mean, obviously, you realize I'm a Democrat. But I don't find it's necessary to talk about foreign policy and political terms. I will say, however, when we did this thing called the -- again, most of you don't dine out of this nonsense like I do, but when we did the original nuclear deal, the JCPOA, which basically stopped the nuclear programs, it wasn't a perfect deal by any imagination, didn't deal with ballistic missiles, didn't deal with the proxies, they didn't deal with a lot of stuff. But it was a deal that Obama did. And the idea was to basically stop the nuclear program and begin a negotiation.

When President Trump decided to rip up that agreement, presidents have prerogatives, he ripped up the agreement, and he made a commitment that he was going to basically stop the Iranians from getting a nuclear weapon after he ripped up the agreement.

Unfortunately, this is where we are today. And the problem is, in my humble view, recall the Strait of Hormuz, which everyone was talking about, wasn't closed a year ago, okay? We're now fighting to open something that was never closed in the first place. And so we got the President, unfortunately, for good or for bad, is in the [ cul-de-sac ]. He did a lot of good by diminishing the ballistic missiles, getting rid of some of the gray nuclear dust, which is a little bit absurd, but going nuclear, I don't want to be partisan, nuclear dust. But the reality of this is that the President now, the Iranians understand that the President wants to end this war. He's made it very clear he wants to end this war.

So the Iranians know that Trump is trying to end the war. But the Iranians won't let him end the war. And so we are in a very, very, very difficult place. And I'm very -- I'm scared. I was in Israel a couple of weeks ago. It's very dangerous for the Israelis. The Israelis are very unhappy right now in the current situation. They're the victims of this. They're very unhappy. They want Trump to keep going. Trump can't really get keep going because of oil prices and the midterm elections.

So we're in a very dangerous place because as we all know, my biggest fear is some huge accident is going to happen or something on purpose is going to happen, meaning one of these drones is going to hit one of our bases in Bahrain or Qatar or Kuwait and God forbid, hurt a number of our military, okay? That hasn't happened yet. But when it happens, all hell is going to break loose. At that point, it's going to unleash something that I think none of us have yet to see, and that scares the hell out of me, okay?

So you've got -- we're in a very, very dangerous place. And my hope is that cooler heads will prevail. The Iranians will come to their senses. President Trump will stop saying things on Monday and change his mind on Tuesday and change his mind on Thursday. I hope we'll get to get some reality put in place here to begin getting this resolved. But this is a very, very dangerous place to be in.

Taking a step back, can you talk about why the Israel relationship is so important to the United States? And has this war strengthened or weakened that relationship?

Listen, I'm a Zionist. I saw some of my fellow -- some Orthodox Jews in the audience, I don't know where you guys went, But I saw you walking. There you are. Hey, guys. There are very few yarmulkes here in Sun Valley. So glad to see you here.

I think it is -- this crushes me. I was just -- I was coming in here and someone just showed me a poll that 82% of Democrats have a negative view of Israel, okay? I mean really? And I saw a poll that 35% of Republicans also share that view. There's going to be a vote today in the House about cutting the assistance out of Israel. As a Zionist, as someone who cares deeply about the state of Israel, thinks deeply about the security of the State of Israel, it sickens me okay? It really is a -- we're in a very, very difficult place right now for the bilateral relationship.

We'll get -- I like to tell -- I gave a speech in Miami a couple of weeks ago at the AJC, which is one of these. I've now become a professional Jew. But one of the -- at some one of these groups, and I said, we're -- they didn't like this, but I said we're sort of like -- we have to be like alcoholics. And they're like, "What do you mean?" They all looked at me and like, "What do you mean?"

We have to admit that we have a problem before we can deal with the problem. And we have a problem. But I say we're jews, we can figure this out. And we're going to have to figure this out because if you're 30 years old today and you are younger, the only thing you know about Israel right now is the Gaza War and Bibi Netanyahu. And that's unfortunate because the magic of Israel is this little country that was created in 1948. It is the only democracy in the Middle East. You can stand in the middle of the street in Tel Aviv and hold a sign and say, I hate Bibi Netanyahu. Bibi Netanyahu should go to jail. That's not mine, I'm just saying what the sign would say. And you will not get arrested in Israel.

This is a democracy. This is the only democracy. It is our only true, true friend in the Middle East. They are our friend everywhere in the Middle East. This is the startup nation. It is a country of 9 million people, of which 2 million of them are Arabs, okay? So we've lost that whole narrative. And someone who cares passionately about Israel, cares passionately about the security of Israel, we have a huge problem. And I think we're going to have to have -- spend a lot of time -- and by the way, it's not just the liberal democrats. Some of my more conservative Jewish friends will say, "Oh, it's all you, liberals, who hate Israel." This is actually not true.

Tucker Carlson, last time I checked, is not a Liberal Democrat.

And so we got a big problem, and we'll get through it. I believe we need new leadership in Israel. I think we need to get through this, But the security in the state of Israel is paramount. We need to make sure Israel has the security it needs to protect itself, but we are in a very, very dangerous place. It's interesting in one little footnote. Iran has not shot missiles into Israel over the last 10 days. They do not want to get Israel sucked into this again because they know the amount of terror in which Israel will bestow on Iran if they have an opening here. So it will be a very interesting dynamic here in the next 72 hours and how far this goes. But it's getting precariously close, this thing, tipping over into a complete chaos.

And as part of the problem that you have 4 different groups that are distinct with some overlap. You have the Israeli people, the Jewish people, you have the Israeli government. You have the Palestinian people and you have Hamas. And people always conflate those and people talk about criticizing the Israeli government is due to being antisemitic. Whereas if you go the other way, you're an enabler. Is that part of the problem?

Let's discuss. Yes, I tell people -- I'm one of the few people who admit that they have friends in AIPAC and at J Street. I'm very close to the policy and leadership. I mean one of the things I was lucky enough -- I'm not ideological. I mean, yes, I'm a little Democrat, but I don't -- I came to Israel, and I was like, listen, guys, I'm not a religious guy, I'm a liberal reform Jew from Duluth, Minnesota. I'm the youngest of 8 kids. I mean, my parents were like community leaders. They were the head of the UJA and [ the temple ] and all sorts of stuff.

So I came there without a bias one way or the other. I had all -- a lot of friends of Haredi community, had a lot of friends in the real hard left. And the reality is Israel is a melting pot. I mean the reality is people don't know that Arabs work side-by-side with Israeli in Israel. I mean they've lost that whole set of narratives. I mean, go to a hospital, a school and educational facility, there's -- the Arabs are at the heartbeat of the country. In fact, if it hadn't been for the Arab parties, the last Prime Minister, I had 3 Prime Ministers when I was Ambassador, I had Bennett, I had Lapid, and I had Netanyahu. The only reason Bennett and Lapid were actually Prime Ministers because the Arabs voted for them, okay?

So the reality is people don't know all that because it's too confusing and they hear all this stuff. The reality is the people talk about a 2-state solution, like we got to have a 2-state solution. I talk about it all the time because you have to, you have to say it, and I hope it would happen. But put that aside for a second. What Israel needs to do is treat the Palestinians with dignity and respect. And things like housing and education and health care in parts of the West Bank need to be implemented.

We lose sight because everyone uses all these rhetorical terms. We need 2-state solution. I believe I need that we need to say [indiscernible]. In the meantime, people need schools, need health care. So when I was an Ambassador, I spend a lot of time on the little things. It's like your business. It's the little things that make your business. It's not that if you're in a servicing business and a mortgage servicing business, it's making sure those mortgages get serviced. It's not the kind of overall arching idea of interest rates is great.

But in your business, in my view, we need to do more for the Palestinian people. The Hamas is a terrorist organization and they should be destroyed. But everyone in Gaza aren't Hamas. We get stereotyped, every idea that every Palestinian is a terrorist, that is complete nonsense. It's like everyone in Gaza is a member of Hamas, it's complete nonsense. It's not every Israeli hates Palestinians. It's nonsense. It's the small minority that creates the chaos for the rest of us. It's a small minority of people who create the insanity in which all these wars begin and we have to understand that.

And you were uniquely suited to look at the Middle East, take a bigger view of the Middle East. How do you think things have changed with the UAE with Saudi Arabia, the Abraham Accords. How do you see that? How has that evolved? And how do you see it evolving going forward?

First off, I give Trump Administration a huge credit for the Abraham Accords. I don't know how many of you understand it or are involved like I was. But Jared Kushner in Trump's first administration, I like Jared, I think he's a really smart guy. I'm not sure he should be -- I think he should be doing this either full time. This idea, you have a private equity fund and you're doing diplomacy is a little bit, I wish I knew that. I would have never given up my stock at Morgan Stanley. But just kidding, of course. I'm not trying to be partisan.

But to his credit, he formulated something which should -- he really should have gotten the -- I don't know about the Nobel Peace Prize, but something close to it. It was the first time a negotiation that occurred that the Morocco, the Emirates, UAE and Bahrain recognized the State of Israel. It was referred to as the Abraham Accords. This was a big deal because even after October 7, after October 7 in Israel, when the Hamas did the atrocities on the State of Israel, those 3 countries stuck with Israel. They never broke relationships with Israel.

This is what could be. We were so close to getting the Saudis involved in the Abraham Accords. I mean I worked -- I was telling some report of this yesterday, I did some TV interview yesterday. Lindsay Graham, I love Lindsay Graham. I mean he was sort of nuts, but I really love Lindsay Graham because he wanted to do the right thing. I always want to do the right thing. And so I was sitting in the hotel lobby of the King David Hotel. And Lindsay Graham, I knew Lindsey Graham because he had called me, when I was Deputy Secretary of the State, he asked me for a favor, and you love Senators who call you and ask you for favors, especially when you need them to help you on something else. I mean it's sort of like Wall Street.

So anyways, he called me and he asked me for his -- he had a constituent that has some sort of textile problem. I didn't know what it was. So I asked one of my staffers to take care of it. And again, I hope it was legal. Anyway, one day, he called me later, he goes, "Tom?" Lindsay. "I'll never forget you, what you did for my constituent. It was really, really -- he's my best friend." And like, I still, to this day, have no idea what I did. But he singlehandedly helped me get elected, helped me get confirmed in the Senate twice. He literally called Republican Senators, made sure I was confirmed unanimously, both for his deputy sector and his -- so he was my guy. So I couldn't tell them, my liberal friends, that because they'd be really mad.

So I'm standing in the King David hotel. And as you recall, MBS, the leader of Saudi Arabia, as you know, sort of had a bad day when he, unfortunately, was involved in the Khashoggi killing, right? As you remember, the Washington Post, up a letter, you probably knew Mr. Khashoggi. And there was a lot of hatred towards MBS for being involved in that untimely death of Khashoggi.

And Biden, President Biden pledged during the campaign at that the Saudis were basically terrorists and he would never see MBS and he would never spend time with MBS because he was a killer. And so Biden was coming to Israel for his 10th visit right in the middle of COVID when I was Ambassador. And he -- we pushed Biden to go to Saudi Arabia and mend fences with MBS, or not mend fences, but have a meeting. And by going there would by nature.

So I'll go to Lindsey Graham thing in a minute. So we convinced Biden to go because we thought, you can't be fighting with everyone. We're right before the midterm elections. We've got to make sure oil prices are stable. And it's -- everything in life is politics. And Biden, to his credit, agreed to go, but he said, "I'm not going to shake his hand." It was right in the middle of the COVID season. So we practiced fist bumping, okay? And so he fist bumped MBS. So we didn't have the photo of him greeting -- it was all kind of nonsensical, but that's what you do.

Anyway, so I'm sitting in the lobby of the King David Hotel with Lindsey Graham. And Lindsey Graham, just like Biden was trashing MBS, kept saying all sorts of nasty things about MBS. And he said -- but he said, "Tom, I think there's an opportunity to normalize Saudi Arabia with Israel." I said, "Well, Senator, how are we going to do that? You've been trashing MBS, too." He goes, "Tom, wait to see what I do." He said, "I'm going to do an interview in about an hour with George Stephanopoulos in the lobby of the King David Hotel. Just watch what I do.

And that guy sat in that chair and he reversed himself on his hatred of MBS. Basically said, I think I can do business with that guy, MBS. And from that moment on, for the next 2 years before October 7, Lindsey Graham spent all his energy working on getting normalization between Saudi Arabia and Israel, working with the Biden administration. He was totally into it. And then obviously, it all fell apart after October 7 because the Saudis couldn't talk to Israel, and the whole thing fell apart.

But I say this because Jared Kushner created the platform of these things called the Abraham Accords, and then layered on top of that with the potential of Saudi Arabia. If we can get back to that, it will be dreamy. Now we're dealing with the war in Iran. So who knows. And I think ultimately, I don't know how it's all going to shake out for the rest of the Middle East. But the reality is the Saudi piece of it could be really important, the Abraham Accords was exceptionally important, and we should use that as a foundation.

It just shows how difficult these conversations are because when I hear about an employee in the Washington Post who was killed and chopped up with a bone saw, we kind of think that guy isn't a great guy. But you have to think of the bigger picture. These are tough conversations.

So you talked about October 7. So you were watching a preseason basketball game in Dubai, NBA basketball game. And Jack Lew had been named, but not confirmed, as your replacement as Ambassador to Israel, and you found out about October 7. Can you take us through what that was like? What happened? What you were asked to do?

It's even worse than that. So I'm in -- the Timberwolves were playing with the Dallas Mavericks in the first exhibition game in Abu Dhabi. And Miriam Adelson had just bought the Mavericks. I knew that, but no one else knew that. And she invited me and we get into the whole Miriam Adelson shtick in a minute.

So she invited me to come to Abu Dhabi for the game because Timberwolves -- I'm from Minnesota. So I said, this is going to be cool. So we're sitting at dinner in Abu Dhabi with all of the players from the Mavericks and the Timberwolves. And I have all the diplomatic core from the Middle East, and I have a bunch of Jews from Israel. And I've got the UAE Ambassador who was instrumental in the Abraham Accords, Yousef Al Otaiba. And I stand up. And I'm toasting the success of the Abraham Accords, and long live the Abraham Accords and bla bla bla, and I'm like, going on and on probably too long. And 2 hours later, our phones start lighting up.

There's something really crazy going on in Israel, like really crazy, like crazy like we've never seen before crazy. And it just was the beginning of what we saw play out, and so all of us left. None of us obviously went to the game the next day. We all got on planes. I flew back to -- I felt terrible because I just left a month earlier. And my wife runs CNN. So she was like, your next wife can follow you to Israel, sort of going up like Mount Everest, but she did not want to go. And she visited me however. And so I left early and I felt terrible because my DCM, my deputy was in charge. And she is really great. This happens to be now the Ambassador of Bahrain. So she was dealing with what arguably was the biggest crisis in the state of Israel has had since the beginning of the country, okay?

I mean the amount of just terror, I mean I had 3 or 4 friends who lost her kids at the festival. And for all of you to remember, I don't -- again, I don't -- I can't imagine all of you to spend much time thinking about this, except for my friends back there. But the reality is what happened on October 7 since that, no larger number of Jews were killed in a single day since the Holocaust on that day on October 7, okay?

And it wasn't just the killings of the Jews and Arabs, by the way, on October 7. The kids that were in that, the concert was like burning man, okay? They went to this concert to show you could have a concert at the wall, the fence dividing Israel to Gaza, it was a bunch of kids having a fun time. These were not protesters, these weren't -- these are kids getting high and having fun and listening to music. It's sickening what Hamas did on October 7. And then not only the brutality of the number of people that were killed, but the brutality of ripping all these people and bringing them to Gaza and showing them in the tunnels. And it is beyond anyone's imagination.

And if you -- for all of us, I think all of us in this room have had tragedy, you wouldn't be -- all of us have had some sort of tragedy, right? We all have it. This is a level of tragedy that I don't think any of us could ever, and God forbid, ever endure. I spent a lot of time with the hostage families who basically woke up every day just trying to get their kid back.

And then I had my friend [ Ruby Chen's, ] -- all he wants his kid's body back. He knew that the kid was dead. He just wanted his body back to bury him. You can't -- again, I don't mean to get on this. So the level of what happened on that day changed Israel forever, forever. And that's what -- for me, as the former guy, I felt a little bit like -- so I know I basically then spent the next 6 months just working on behalf of the community and trying to raise money and do the things you do when you can't be there on the ground to help.

Thank you. So shifting gears a little bit, thinking about DOGE, and you were obviously were the Deputy Director of State Department, and you've seen what's happened, 300,000 federal workers cut in just the first 1.5 years of the Trump administration. Only 28 of the 150 ambassadorships are filled. For people on the right, they might say, well, we've discovered massive inefficiencies because the world seems to be working fine. Have these been efficiencies have been uncovered? Or are there things that we're going to regret later on? What's your view with all this.

Again, I'll try to be disciplined here. I think Elon Musk is a brilliant guy, okay? Listen, SpaceX, what he's done on Starlink, what he did on electric cars. I mean no one will take it away from him. But I thought what he did on DOGE was disgusting. Now, I don't blame him, I blame how they did it. To be clear, the President of the United States that cut more civil service jobs in any president in the United States was Bill Clinton and Al Gore. Al Gore was in charge of reinventing government. I was involved in this, okay? He actually replaced more government employees than Elon Musk. There's a way to do this, and there's a way not to do it. Is there a waste at the government, 100%? Is there waste in budget of your companies, yes, probably. I mean, maybe, don't take that personally. But just hypothetically, okay? Yes, okay? There is a way of doing this and there's a way of not doing this, okay?

The reality of this is to pick on the civil service of our country, it makes me sick to my stomach, okay? The men and women who wake up every day want to do the right thing. Are there bureaucrats who slow things? Sure. But the vast majority of the people that I work with want to do the right thing. And do I believe we can do things better and faster? 100%.

Let's just take an example, okay? USAID. USAID reported to me. I was the Deputy Secretary of State. What people don't understand about USAID. USAID, which is not perfect and needs reform, I get all that. But USAID represents to our country, soft power, you know what soft power is? Hard power is our military might. Soft power is what makes America, America. It is what distinguishes us from China. It's what we do in countries in how we make countries better. And it's not just what George Bush did with using USAID to eliminate AIDs in parts of Africa, it's everything in between. It's water, it's democracy building, it's community building. The guys who are the most biggest advocates for USAID, the U.S. military.

I used to call Dave Petraeus. Every time I had to testify in the Congress, I said, General, I need your help. He goes, count on it. I will go and sit next to you and advocate for the support of USAID because my strategy is very simple. The military can clear, right? They can clear enemies out, but to hold them takes the guys in the short pants, the soft power guys. That's the only way. And by the way, we're learning this lesson right now in real time in Iran. The only way we're going to end this thing in Iran is you can blow the bejesus out of them, okay? But we're going to have to have a diplomatic response. That's the only way you can get at the end of the day, long-term peace is through diplomacy. You can't bomb your way into peace. You can get them to the table but you better have a program. We learned that after World War 2. We've learned that historically. We've learned this everywhere.

And so the idea you come in and you say, you know what, USAID sucks. Let's just shut it down. Really? So I think ultimately, reforms need -- be needed. To be clear, I have no problem of doing reforms. Listen, I have fired, sadly, way many people in my job that I have had running several financial institutions. I get how to do this. I know it's not perfect. But I think what they -- how they conducted themselves in how they did this, I think we'll be paying a price for this for a very long time.

Are there particular -- USAID is one. Are there particular areas where you think the cuts are going to bite us?

Listen, I think it's -- I go back to -- I think, again, people is like, "I don't care about Voice of America, who cares?" Well, I'm telling you guys, when you wake up and you realize where the staining of America is around the world, some of this is, yes, part of this is somewhat of President Trump style. It's somewhat different than some other presidents. I appreciate that. Some of it is the pressure we put on rightly on NATO to spend more money on their own defense, totally support that.

But I think the reality of this is, is that if you look across our government and the things that we do internationally, I'm on the Board of a thing called the IRC, the International Rescue Committee. The job is basically to help refugees who we settle here in the United States and help refugees in countries and war-torn countries. The budgets has been dramatically reduced because obviously, we're not letting refugees come into the United States anymore, and how we use those money overseas. These organizations are really, really important guys.

At the end of the day, what made America, America, was our kind of -- we were the -- we are the shining light on the mountain top, as Ron Reagan used to say. That's what made us who we are today. And again, I'm not being critical about the administration. But I do think, ultimately, we got to get back to a little bit of that. And maybe we went too far, maybe we were too open, maybe we were to this. But I think ultimately, for our country to have the strength that we need, we need the soft power as much as we need the hard power.

And so speaking of things generally viewed as helpful. We asked NATO countries to spend more on defense, and that's -- and they're doing that. So does that make us safer or less safe with a more militarized Europe?

Listen, you look at what's going on here. We have a raging war going on in the Middle East. Do I want to remind any of you? We also have a massive problem with Russia-Ukraine. We're not talking about it very much, but it is a -- quite frankly, that is a bigger threat to the security of our European allies than the Iranian capacity to get a nuclear bomb, okay? We're not talking about because it was supposed to be resolved in the first few days of the Trump administration. But sadly, these things are really, really complicated, and the Ukrainians aren't giving up and the Russians aren't giving up. And the more the Ukrainians push the Russians, there's a chance that Putin may say, "I got to go much more aggressive." And then all better off, okay?

So do I think a unified NATO is helpful? Yes, I do. I mean I didn't like the idea. I really didn't like the idea that when President Trump picked up the phone and called Macron and Starmer in the U.K., and Macron in France and said, I need your help on Iran, at the Strait of Hormuz, that he got basically the Heisman, okay? I don't like that. I don't -- I think the American President, when he picks up the phone, this is what our NATO allies are supposed to do, are supposed to help us. And I think this may be the future that we're at. And much of this is for a whole variety of reasons. It's fighting around things like Greenland. It's about Iran. It's about Ukraine and Russia. It's about Zelenskyy. That's very complicated.

But at the end of the day, a strong European allies, a strong NATO is good for the United States. Make no mistake. Yes, we paid too much. They need to pay more. No question about it. But we need their help, we need their support and we need to be working collectively together. Breaking up NATO is a terrible idea. Weakening NATO is a terrible idea. At some point, the United States needs to support. It may not be the military support, but we need the support of our NATO allies.

Do you -- how confident are you in the alliance structure being able to survive? And related to that, what do you think the chances are of a military conflict involving Taiwan?

On -- well, survival. Again, not to be political, but President Trump will only be in office for 2 more years or 2...

Not clear, but probably true.

I could actually give you the hours, but no, no. But so I don't think even the next Republican President, if a Republican becomes the president. I don't think -- this is -- he's taken a very unusual position vis-a-vis NATO, personalized the relationships in a way that might be -- I don't think that any Democrat or Republican president necessarily is going to follow it.

Now he set the standard on the idea of them paying more for the defense, and I appreciate it. The thing about President Trump is that people have this Trump derangement syndrome like everything he does is terrible. That's not true. And I've tried to be somewhat balanced. That is not true. But the problem is he does do things and then he goes to one click too far, and that's kind of like to dilute some of the good that he's doing. And getting NATO and spending money in the defense was quite good. I think ultimately next, the personalizing his relationships with some of these NATO leaders and then meeting them, probably not so good. But we can talk about that later.

China, in every security meeting I was in, have been in, it was clear the Chinese have a goal of taking over Taiwan, Make no mistake. They believe it belongs to them. We've had a very kind of delusional kind of idea how we talk about Taiwan, all of our assessments were that in 2027, that the Chinese would in fact go in and try to take Taiwan. That was basically the assessment during the Biden administration. I'm not expressing anything that hasn't been reported, I don't think or I'm going to go to jail. But I think that was clearly the intention of the Chinese.

A lot of things have happened since then. One was obviously COVID and the COVID shutdown had huge financial implications on the Chinese. The Chinese real estate market completely collapsed, and had also a huge impact. President Xi purged his whole security apparatus because he felt that the military operation around him wasn't efficiently loyal to them and focused.

I think ultimately, President Xi has an enormous amount of desire to take Taiwan. I do not believe he will do this in the next year or even the next 2 years. The reason for it in my view -- and by the way, I could certainly could be wrong. He needs to fix his own fiscal house. You saw the GDP numbers today in China dropped dramatically from last quarter. He has an aging population. He obviously wants to do what he wants to do is succeed in AI. He's probably doing a better job on using -- thinking about jobs around AI than we are in the United States, but that's still a hugely significant issue.

So I think ultimately, his desires are clear. The real question is, will he take Taiwan now because he thinks there's an opening because he has Trump? Maybe. Do I think when Trump was in Beijing 4 weeks ago when he was in the middle of this whole Iran negotiation, they didn't have a little pull aside and said, listen, President Xi, buddy, I need your help on Iran, and because he knows that the Chinese -- the Iranians only care about the Chinese because they don't want to buy their oil. And do I think at the same time, do I think the President Xi said, big guy, I need your help on Taiwan, meaning don't sell them the arms that they already had, Congress already approved them. I think both those things are true. So ultimately, I think that he will not go at Taiwan in the short term, but the desire there is there.

Right. So one thing I'd love your thoughts on that the theory the Supreme Court has of this sort of powerful executive that the President should be more powerful. And the recent things with the election committee where the President can now fire a bipartisan, basically fire all the Democrats in certain committees, not there are certain protections still.

But do you worry that in terms of predictability, think about your own real estate investors and we want -- investors want predictability and our allies want predictability. Is there a problem with more powerful executives that we could just have pendulums that swing back and forth, and people, business people and our allies can say, I don't know, I may trust you, but I don't know what's going to happen in 4 years. Are we -- how do we recover the trust of allies? And how do we deal with this from there?

Listen, Willy and I have had this conversation before. Listen, this is problematic. I mean listen, good news is the court did step in on the Fed, okay? I don't think Trump is going to necessarily stop his badgering I think, quite frankly, in my humble view. I think Kevin is -- Kevin Warsh is going to be very similar to Jay Powell. They have the same temperament, the same ideal. I think they're going to have -- basically, Trump is going to regret the idea that somehow that Kevin Warsh is going to browbeat the Fed governors to lower rates anytime before he believes it's ready. And obviously, the Fed's certain goal is to keep inflation in place.

Kevin Warsh basically has said that. Ultimately, I'm sure the rhetoric is going to get cranked up even more so. President Trump, when he realizes that probably Kevin Warsh is going to actually march to his own drummer. And I think it was reinforced by the Supreme Court's decision that they couldn't fire Cook. And ultimately, I think that's good for all of us. It's good for humanity. If by the way, it's good for -- if the next -- if a Democrat wins the presidency, I think that's really important.

I think this whole issue of presidential power is one of the issues that no one's really talking about because here's what's going to happen, folks. If a Democrat wins the White House in 2028, guess what they're not going to do. They're not going to say, "Oh, you know, all those presidential powers that Donald Trump gave, I'm going to give them back. I'm going to give back to Congress because I don't really believe in a strong presidency." BS, okay? The next Democrat President is going to basically take those powers and do the things probably that many of you in this room are not going to like because they will say, we don't have to reverse a lot of the stuff that Trump did.

And so I think this is like -- this is the one little thing that people don't talk about because I've seen this happen. Listen, Biden did a lot of executive orders when he became the White House and to a point that people were like, oh, I think he actually had done more executive orders than Obama had done and the Trump first administration, and now Trump obviously doubled down on that in his second term.

So I worry about presidential powers because we need balance. I mean we need balance. I don't want -- I can't say this to my friends. But I don't think having a Democratic President, a Democrat Senate, a Democrat House is necessarily great, okay? You need people to have checks and balances. And this is why I think ultimately, if the House becomes -- gets into Democratic hands, which I predict will happen, I think it's better to have some checks and balances. Now it's not going to make Trump particularly happy, but I do think there is some of that, but I do think it's a issue about presidential power and his ability to fire anyone is not great, especially in these jobs like the FCC, and the SEC, and basically the idea of having some bipartisanship is important because they disagree with you.

If you fire them, I don't think it makes our business any easier because you're 100% right. These massive swings, you can't do a 5-year business plan when you're not sure exactly who's going to be running the regulatory agencies that you guys are trying to manage through. So I don't think it's great for your business. I don't think it's great for humanity. But I don't see any idea that this is going to change under the next president either.

So shifting gears because we have a real estate audience. You are Vice Chair of one of the largest real estate owners.

The largest.

The largest. Who's counting?

[ Just saying ].

[ Just saying ]. So you don't sit directly under UB talk to investors a lot. And so what are people saying? Where do you think the big opportunities are? Where are the problem areas? How worried are you about private credit? I know you have a balanced portfolio, but what do you think?

Well, okay. So step back, listen, you guys are real estate guys. You know Blackstone's positions, obviously. We had a very tough 4 or 5 years in our BREIT business. There's a lot of anxiety among our investors, liquidity, and everyone thought the world was going to come to an end. And since we are the largest real estate owner in the world. Obviously, we have huge exposure to multifamily and single-family and commercial properties, we have only 5%, just saying 5% of our portfolio is in offices. Sometimes it's better to be lucky than smart.

But we have a massive exposure around the world. We got through that period of time, like many of you in this room, okay? We got through the period of COVID, and we've now seen a huge uptick in our real estate, not only inflows of cash coming in but even the performance of some of those assets, yes, we have plenty of assets still need to be worked through. But ultimately, the fundraising in our big funds have dramatically increased. And we are very much focused on hard assets. As you know, we are the largest developer of data centers in North America. We own a company called QTS, which is -- massively took a public company, turned it to private, bought for like $20 billion. We now probably is worth $100 billion, $125 billion. We bought a company in Austria called AirTrunk.

So we are very much focused on hard assets, not just data centers per se, but our infrastructure fund, which includes everything from ports to airports and then, of course, the energy to drive those data centers. So natural gas, the alternatives, we own a big alternative wind solar company in Illinois. So we are very focused on the surround sound on the platform.

So we feel pretty good about the real estate business today as it sits. Obviously, we'd like rates to come down, it would make our business even feel a little bit better, so we could actually sell some of these assets. But we feel quite positive.

On private credit, it's funny. It's sort of like the BREIT of it all, right? And everyone's over the BREIT since we are the largest private credit player in the world, too. It's sort of like someone gets a cold then we get the flu or something like that, I guess. And ultimately, you all know, guess what, private credit isn't going anywhere. I know that's shocking to people. It's been around for 20, 25 years. As long as private credit performs better than traditional fixed income assets, we will be doing just fine. Are there going to be disruptions in the private credit business? Sure. We have exposure to software companies, like everyone else does. We have a smaller percent of it. But we've seen a little bit of disruption.

But I'd like to remind people, and I want to be disciplined here maybe. But the people who have been screaming about the private credit business that the hair is on fire and the world is going to end were the big banks. And they're my friends. We love all the big banks. I love Jamie Dimon. I think he's a phenomenal executive. He's done a great job, and he's been the biggest drummer of the beating of the private credit business bubble.

One of the reasons is he sort of kind of want to get back into the business. As you know, the banks were pushed out of the private credit business during CCAR and the cost of doing that business became very difficult for them. They want back in. So I think, ultimately, the private credit business, as you see in the inflows, the people who hit the sell button on private credit were our retail clients. Many of you in this room I'm sure got a little bit panicky. The people who stuck with it are the institutional players. They like the returns, they like the stability. So we feel pretty good about private credit. But like everything else, it's like BREIT will come back and things will get stabilized.

But when you have a company like Blackstone, which you have in $1.2 trillion of assets under management to have all these different asset classes from everything from data centers to Jersey Mike's. It's not a bad business to be in, and it's all about diversification.

So Willy talked yesterday about this idea of who's going to win the stock market or the consumer. So the idea was the consumer confidence index is the lowest level it's been in 60 years. And yet the stock market goes up and up. We see the famous stat of 37% of Americans couldn't handle a $400 surprise. And yet over the last 1.5 years, their costs have gone up $6,000 to $12,000 and wages haven't kept pace.

So there's this massive income inequality. There's this change, there's a shift. And you see this not surprisingly, with this kind of disparity of rich getting richer, poor getting poorer. You see the socialist waves at these kind of -- some of them sort of crazy socialist, the woman in New York, who says she's not sure that murders should be incarcerated. So what do you think this -- how worried are you about income inequality? And what do you think about the political ramifications of that?

It's a problem, but it's been a problem for the last 50 years. This is not unusual guys. I think where it's going to manifest itself is how they deal with AI, okay? I'm sure you've done a bunch of AI stuff at the conference. But to me, that is really where this is going to matter. It's certainly already been manifested and people are distressed about data centers, okay?

Now most of you don't know what a data center is. And they're like, because it's this machine, they think, and there's this poll that done last week by Publicis that the more people are likely to want a nuclear power plant next to their house than a data center, okay? So that is not about the data centers. That's about people's anxiety about AI, about what's going to happen to their job. And it's not about blue collar jobs. I worked with the Clinton Administration, I did NAFTA. And everyone was worried about Ross Perot calling me and saying, "Oh, here is a sucking sound of jobs from U.S. to Mexico." It's not about blue collar. Now, it's about white-collar jobs. It's about kids who are graduating college like many of you in this room are like fearful what your kids are going to do, and it's people trying to figure out what AI implications is going to have.

We all talk about productivity. Productivity is a shorthand, we're doing more with less, and less is a lot of people in this room or people who work for us. So that is to me -- this is what's going to be the #1 issue in the 2028 election. It's not going to be Israel. It's going to be how politicians talk about AI and talk about what we're going to do, and that's going to manifest itself in this whole issue about economic inequality, job anxiety. That's all people care about.

I mean people don't -- I mean, yes, they care about Iran and they care about -- I mean they care about Ukraine and they care about, right. But at the end of the day, they care about their family, they care about their food, they care about their education, they care about buying a house, and they're worried and they're really worried about what this thing, what AI is going to mean for their lives and how people -- and so politicians are going to have to wake up and they are going to need regulation around this in a way that people feel more comfortable around it. And so that's how it's going to map itself. But yes, 100%, richer getting richer. We've all had a very good, great few years. That is not new. But how you talk about is going to be really important.

And that is, by the way, how Donald Trump got himself elected. Donald Trump got himself elected by convincing people that he was going to fix the economy. That Joe Biden was too old, too feeble, and he's going to do 2 ways. He's going to bring down inflation, make the economy better and he's going to stop illegal immigrants coming in and taking your jobs away. And he was really successful in articulating that. And that is why he's at 35% approval rating because people are not sure that's actually happened yet. So this is going to be the fight.

And by the way, the fight with the Democrats are going to be the left saying we should do way, way more. And the moderate parts of the Democratic party will say, if you do that, you're not going to get electable. And that's going to be the big fight among the Democrats, and I have no idea how it's going to come out.

Can we do one thing before we go? So I do want to just spend a second talking about your book because I think it's, for me -- and I know I wasn't supposed to do this, but I want to do it anyway. Your book is about how like Alpha People, people who are like us in this room are successful business leaders, how we transition from being successful business leaders to being fulfilled individuals. So I don't -- I haven't obviously read the book. We have a lot of people who wrote -- blurbs about the book. Just spend a minute talking about your book for a minute. I know...

This is how Tom became a politician.

Because I'm done with this, okay? I've done talking, but I'd like to hear -- just spend a minute talking about your book for a minute.

Now I'm going to do them a favor after this.

Just talk about, just to talk about your book.

So it's a little bit like, I think, what Albert Brooks was talking about it. If you want to check it out, there's thealphatrap.com. You can go there and actually do an assessment of to what degree you're an alpha and to what degree you potentially have -- what aspects of your life you can fill in.

I interviewed about 100 people, all sort of Alpha's, Willy was one of them and talked about what are your -- what's made you successful. And looking at sort of the biology of it, what's made people successful over time? And then what gets in your way of connections of happiness of fulfillment. And sometimes those same drives actually don't serve us well, particularly in sort of the second chapter. And so it also talks about people and examples of people of what they've done, specific practices of how people have done that. So if you want to go to thealphatrap.com.

What are the couple of things you'd recommend people to do? Let's assume hypothetically. You can't -- all of us cannot be as successful as Willy is. But hypothetically, some of us are somewhat successful. How do you do that?

So one thing is there's a thing on this -- on the website, you go to, it's a wheel. It identifies what are the gaps. Is it -- are your gaps between your current state and your desired state? Is it about health? Is it about your relationship with your friends, relationship with your spouse, contribution, inner peace, trying to first identify where the gaps are. And then practically, how do you close those gaps. So the tendency is even though maybe success and status and money isn't what we need more of, we're so used to try to achieve those that we keep striving against the same things as opposed to looking at things that offer more balance.

He is a guy, by the way, just to record, who is the President of the Washington Post, an unbelievable success. Then started -- my kid took a class from him and he teaches at Georgetown. And best class my son has ever done. Also writes music, all sorts of things. Now writing a book. So he's got this down. So I was -- you better buy the book when the book comes up.

Yes, you're very kind. You're very kind. So I'll just ask, Tom, one last question or a couple of questions. So the first is, so do you have a front runner for the 2028 on the Democrats and on the Republican side? What -- do you have any predictions?

I'm going to make a prediction. On the Republican side, first, Dave McCormick is going to run for President, okay? I don't know if this for -- I've been mistelling you. Dave McCormick will be very interesting. I know everyone talks about JD Vance and Marco Rubio. I think -- I don't even know if he's going to run -- but I'm telling you, I think Trump is going to be there today in Pennsylvania doing an event with McCormick doing something else, but he'll be a very interesting candidate for Marine, Ranger, Pennsylvania. He could be -- he'll shake up the Republican primary ballot. So that's -- think about that. You won't remember I told you that, but when it comes through, he's like, I remember that guy, I don't know.

On the Democrat side, who the hell knows? We're going to have 18 people running on the Democrat side. You're going to have governors. You're going to have the governor from Pennsylvania, from Illinois, from Kentucky, potentially from Maryland. You're going to have 4 or 5 senators. You're going to have people like Rahm Emanuel, you're going to have -- who knows if Mark Cuban, you're going to have all sorts of people getting on the Democrat side. And there's going to be a fight in the Democrat side, as I just mentioned, between the people on the left, there's going to be someone on the left. There's going to be someone like AOC or someone like that who's going to flurry around and get a lot of attention.

And ultimately, I don't think that person will emerge as the nominee, but you're going to have a big fight among the Democrat Party and you're going to have a big fight in Republican party because JD Vance is going to believe that it's his to get because he's JD Vance. Marco Rubio, very clever is I predict that Marco Rubio by the end of this year, you're going to see stories in the New York Times saying, Marco Rubio is thinking about he needs. He's exhausted. He is to spend more time with his family. He needs to step back from being Secretary of State and National Security Adviser and he's going to leave to spend more time with his family, which means he's going to end up running for President because he got to get out of the administration.

So I think you're going to have a lot of interesting dynamics. And just remember this one thing. Every election is a reflection from the last election. So who the Democrats and Republicans pick will be a reflection upon what people believe Donald Trump did or didn't do going into the next election.

Well, Tom, thank you for your extraordinary wisdom, your thoughts. We appreciate your time.

Thank you guys very much.

Thanks, Tom.

Good morning, everyone, and a pleasure to be here. I'm Ivy Zelman and run Research and Investment Banking at Walker & Dunlop. And I'm excited to have such a prestigious panel with myself. Steven DeFrancis with Cortland is going to be our multifamily expert; Ryan Marshall with Pulte Homes, CEO, will talk about single-family; and Dallas Tanner, who runs Invitation Homes, will talk about single-family rental.

So Willy talked about a lot of things today. I'm going to hit on some of them, but I want to kick it off with a discussion about demographics. We're just about to publish an updated version of a report we did back in 2021 that was pretty unpopular, called cradle to grave. And really, probably the reason it was unpopular, it was pretty troubling to look at the demographics of this country's future. And I want to revisit that because right now, with immigration being predominantly shut off, we do have a very troubling outlook.

We have an aging population. I politely say many of those people are aging out. And currently, our fertility rate is below replacement level. So when we look at future population growth, which drives household growth, it doesn't look very good, and it's going to only get worse unless something changes around immigration because I don't think young adults today, predominantly women, are that interested in having children. I can tell you my 25-year-old tells me she doesn't want children, which breaks my heart, but a lot of them are saying they're one and done or frankly, don't want them at all for many reasons, political ideology to can't afford it.

But with that said, I'd like to kick it to first, each of the gentlemen to talk -- I should have done this, I apologize. Why don't you just walk through your footprint and give people some perspective on your operations.

Dallas, do you want to start?

Yes, sure. Great to be with everybody. Ivy, thanks for hosting us. Dallas Tanner, CEO of Invitation Homes. We're a publicly traded single-family rental business. We basically cover the West Coast, Southwest and Southeast. We have about 110,000 homes that we own and operate. Average customer is sort of 38, 39 years old. They have a combined household income of, call it, $150,000, and they stay with us about 5 years. And so we have a lot of, obviously, interesting information on what that sort of consumer is up to.

Thanks, Dallas.

Good morning, Ivy. Thanks for having us. The view this way is spectacular. Hopefully, it's probably not nearly as good looking this way, but it's really nice to be here in Sun Valley. So Willy, thanks to you and Ivy and the W&D team for hosting us. I'm Ryan Marshall, I'm the CEO of Pulte Homes. We're headquartered in Atlanta, Georgia. We're a national homebuilder. Most of what we do is all for sale. We do a little bit of single-family rental with partners like Dallas. We're in almost every single -- top 50 housing market and many of the top 75 housing markets.

Last year, we built about 30,000 single-family for sale homes, most of those being single-family. We do a little bit of condo, a little bit of townhome in a few markets. The majority of our business is in the Southeast, Florida; Texas, Southwest. We've got a fairly decent Midwest business, including Ivy's hometown of Cleveland, which we love building in, and we don't want anybody else to go there because it's quite lucrative for us right now. We do a little bit of a business in the Northeast as well, Boston, D.C., New Jersey, New York. Average price point for us is $560,000, and we serve everything from the entry level to the move-up, luxury, and we have a big active adult business as well.

Great. Steven?

Good morning. Steven DeFrancis. I'm the CEO of Cortland. We're based in Atlanta. We're a vertically integrated multifamily investment manager, meaning we buy, build, develop, renovate and operate multifamily communities. We have about 80,000 units today and the markets we focus on are the -- we consider the growth markets of the U.S. So I think naturally the Sunbelt, Mountain West, Mid-Atlantic and in the middle of the country, the bread basket of our country. So we're in most places that aren't the Northeast or the West Coast.

Great. Well, thank you. So let's get back to my demographic discussion. Ryan, I'll start with you. As it relates to discussions in the boardroom, recognizing after COVID or during COVID, we had massive migration to the Sunbelt and yet home prices surged, and we all are now dealing with a lot of affordability issues and overbuilding. So do you discuss recontemplating where to go strategically? And do you still want to be in the Sunbelt given that we're seeing migration reverse outside of the Sunbelt?

To your question, Ivy, about the boardroom, we talk about it a lot. And the report you mentioned, cradle to grave, was not one of my favorite reports. I read it multiple times and tried to find all the reasons I didn't agree with it. But there's a lot I did agree with, and there are a lot of things in there that could potentially be problematic both for sale and multifamily developers because we need population growth ultimately to continue to grow our businesses. So we pay attention to it a lot. We really focus on where population growth is going, and we also talk maybe more importantly, where the jobs going because ultimately, population follows the jobs.

The post-COVID environment was certainly a very beneficial one for us because all of the land that we had bought pre-COVID, we got a real nice lift in gross margins as prices went crazy. I think we're dealing with some of the fallout of the post-COVID environment in markets like Austin and Denver, a little bit in Phoenix, where things maybe went too high, too fast. There was too much population growth, followed by rapid price increases and you're seeing some of that reset. And then you mix in all the things that we've seen with interest rates, and I'm sure we'll touch on that at some point in time.

But getting back to the question that you asked, do we focus on it in the boardroom? 100%. And one of the things that we've tried to do as a company is to own less land and have more optionality and more flexibility so that we're not stuck in an owned land position forever. There was a point in time when we were, and we learned some of those hard lessons in the great financial crisis.

But you have expanded more than other public builders into the Midwest, and that strategy seems to be really serving you well right now.

Yes. Rather than expanding there, that's where our company started. We were founded in Detroit, and we expanded into Denver, Chicago, Washington D.C. and Atlanta were the first 4 cities that our company expanded into 75 years ago. And we've continued to grow a Midwest business. We often, in our investor marketing information, we tout that we're the most geographically diverse homebuilder. And the reason that we can say that is because of our Midwest business. And it's Indianapolis, Columbus, Minneapolis, Cleveland, Chicago. Those are all markets that aren't the sexiest, highest growth markets, but there's a lot of people that want to be there. They're more affordable. They've got good jobs. They're very stable. And because there's arguably less competition there, they've been great markets for us.

Steven, your thoughts?

Yes. So we talk about it a lot. Like Ryan's, our focus is on where the jobs are going and then the population follows the jobs. So a lot of those markets have been -- from a multifamily standpoint, have been struggling over the last few years because of oversupply. But that's still where the population growth is going. And yes, population growth is down overall, which I think makes it that much more important to be mindful of where there is population growth.

Right now, the coastal major markets are doing well relatively in the multifamily space. However, in most of those places, they're -- if they don't have immigration, they're losing population. So they are net negative until people immigrate into those places, which long term is obviously very tough to run a housing business. So we are focused on where is population going and where is the growth going, really where is the job growth going.

But at this point, you're not changing the footprint or expanding and exiting, you're kind of staying pat.

We're sort of always looking. We were very close to moving into Boston a few years ago. Then, like right before COVID, we had a portfolio chasing, then COVID happened, so we lagged off. And then once we got ready to move back in because we like the market, then the regulatory environment up there really started to shift, and so we've held off. So we're not -- there's no red lines on markets. We're just always watching what's going on with the population growth and then...

Now I want to come back to on immigration a moment. So Dallas, have you made any decisions to expand into new markets or exit markets given changing dynamics and population growth?

Yes. I mean sometimes we look at our business just based on where we have dislocation from a concentration perspective. And if you think about the way we grew our company, I mean, 90% of our assets came out of the GFC, where we were buying homes one by one, and we basically did 30,000 homes one by one in 18 months. And so we had to go where the puck was in terms of where the discounts were the greatest, where we saw an ability to achieve scale. And then over time, we've sort of fine-tuned our portfolio. So like, for example, today in Florida, we have 26,000 homes in Florida. We love the market. It's high growth, a little bit higher property tax, which sort of hurts our margins. So those things we take into consideration.

But you might look at that market and say, okay, we have a lot. And on a relative basis, where else could we invest capital and sort of diversify in a way that would give us better risk-adjusted return. There are markets like Nashville where we're looking at trying to do more, Salt Lake City, which we're pretty small in, but we see that as high growth. To your point around demographics, people are still having kids in some of these markets, like those are the sort of places where we like the opportunity long term.

And then there's -- and Ivy was kind of busting my chops on this in the back room, like California. We still own 12,000, 13,000 homes in California, which we bought really cheap in 2012, and that's a 75% margin business for us with 6% plus revenue growth year-over-year. The challenge is it's California. And for all of you that own or operate in California, you're just always dealing with extracurricular noise based on something.

So you sort of weigh that out, we're not doing a pivot from the Sunbelt to say that we think the growth stopped by any stretch. In fact, I probably have a longer view that I would be more bullish on the Southeast and the Southwest based on all the different reasons. I think demographics will sort of shift, immigration reform will sort of shift back and forth. And then I think at the end of the day, people want to be where the sun is shining and where -- I hate to make it so partisan, but like red states are easier to do business in than blue states. And there's a lot of red states in the South and the Southwest and the Southeast. And so I just think they're going to be a net winner sort of over the long haul. And I think as an operator, warmer weather is a little easier on your assets and everything else as well.

Ivy, if I can, I give you maybe a compare and contrast of 2 markets that we contemplated going into 5 or 6 years ago, Greenville and Boise. We looked at Greenville and saw a big job opportunity, job growth, population growth, affordability, good quality of life. You had a lot of attractive things about Boise with a lot of population growth that was coming from California as people were fleeing California for a variety of reasons in the kind of pre-COVID, post-COVID environment.

The thing that we couldn't wrap our head around with Boise is job growth. And while there are jobs there, it didn't seem to be as robust and sustainable as what we saw in Greenville. So we elected to expand into Greenville. We're very happy about it. We elected not to pursue an opportunity in Boise, and I'm pretty happy about that -- 2020 being perfect.

Yes. And Boise certainly had a lot of reversal of that migration when people were called back from working remote. So maybe in hindsight, it's a good decision. One of the things that the demographics also, I think you've capitalized on, Ryan, is the active adult segment. And by the end of 2030, we'll have 20% of the population will be 65 or older. It feels like that's still the where to be, and you've capitalized on that going into active adult into a somewhat different strategy. Do you want to elaborate a little bit on that?

Yes. So we've -- about 1/3 of our company is in active adult, which is we predominantly do with our Del Webb brand. You may be familiar with that. It was a company that we bought in the early 2000s. It was its own stand-alone publicly traded company that we acquired in 2001. And we've continued to operate that Del Webb brand as a stand-alone business unit. So our Sun City or our Del Webb communities are -- you've got to be over the age of 55 to live in them. They've been incredibly successful in large part due to some of the slides that Willy showed about net worth and balance sheet. And so you've got a population that's over the age of 55. They love owning homes. In some cases, they own multiple homes. They've got a lot of wealth tied up in their existing home. They can liquidate that and they can come and pay cash and downsize into a community that perfectly fits their lifestyle.

It's a little bit about the piece of real estate that we're selling. More than anything, it's creating a lifestyle opportunity for these individuals that are either retired or moving towards retirement to be around people that are like them, that are active, that are wearing their WHOOP strap and they're kind of living their best version of their retired life. So it's been a very important part of our company. One of the things that we've started to identify and we're moving there now is that as that boomer population continues to get older and older and older, is that a problem for us because it's no longer a growing demographic. If anything, it's flatlining. And so we've launched a new brand called Explore by Del Webb, which will be targeted toward the Gen Xers.

And I personally right square smacked out in the middle of the Gen X population. I'm not ready to retire. I'm not old enough to be in an over the age of 55 community. But I might want to start moving toward that at some point in time. And we think there's a whole population of folks that are over the age of 40 that are still working that would like the benefits of living in a highly amenitized resort-style community. And so that will be, we think, a big growth opportunity for the company over the next decade.

I was surprised to see the stats for the number of second homeowners predominantly are in their 40s, which I thought was -- I would have thought it would have been older. But as we think about the aging population, maybe, Steven, you can start with, is there an opportunity to provide rental communities for active adults or people in that 40 age cohort, 40-plus?

Well, first, I have to say my perspective has changed recently as of a couple of months ago, I became 55-plus eligible.

We'll sell you a home, Steve. We'll give you a discount, friends and family discount.

No. So we actually, in about 2014 or '15, after looking at the demographics and the demand growth, got into that business and started a sub-brand called Attiva, and we did about, I don't know, around a dozen deals, bought some and did value add and then built some and frankly, we got out of that business several years later because while they were all working, we were frankly had to be honest with ourselves and recognize that they were working because everything was working in the market at that time, not because the idea. At the end of the day, what we learned was the profile that we were serving in our 55-plus communities, a, you could have gone to all of ours and never found a WHOOP strap. So it was a much older demographic.

And what we found was the demographic we were serving was extremely thin. So if you were below that, you couldn't afford to live there. And largely, their biggest concern was outliving their money. And so they would prefer to go in a traditional multifamily deal, get more value out of that instead of paying a premium to be in a senior specific development. But most of them, frankly, would rather be in your product where they -- or even Invitation Home where they can rent a home and still be in a house.

And so really, what we found was it was largely an older demographic that was being pushed to do it by their adult children and most of them were actually being subsidized by their adult children. So we felt like that was really too thin of a demographic to commit to projects. So we stopped doing it. We got lucky because of the timing. But we are seeing that the population of folks 55 and older in our traditional multifamily is going up. It's in the high teens today as a percentage of overall population. And so we are serving more and more of those folks in our traditional multifamily.

Got it. And Dallas, we spoke about it, but with respect to the SFR invitation strategy, any reason to try to capitalize on that aging population and have age-restricted communities?

The BTR stuff is sort of along the same lines as Ryan talked about. From a segment perspective, you can highly amenitize some things. I've spent a bunch of time recently like understanding that Margaritaville concept, which I think is really cool. If you haven't been to one, go check it out. It will totally expand the way you think about highly amenitized sort of senior experiences.

It's when seniors become teenagers.

100%, maybe worse than...

Yes. So worse than their teenagers.

Look, there's going to be a lot of opportunity. I do think private capital can play a meaningful role. I like where Ryan went that the mobility, to your point around second homes, this thing in terms of how flexible our lives have become because of the cell phone. There's obviously ways that people want to explore living differently. I think there's going to be many opportunities for private capital to step in, create new experiences. Some will be gimmicky and won't work. I think some could have like a sticky factor like a Margaritaville.

And I certainly think that there's a way to create operating companies around those very specific segments. I mean just think about the way we travel. We travel so much differently than we did 30 or 40 years ago. Some people want to river cruise through Europe, and that's all they want to do. And there's segments that are available for that now that didn't exist 40 years ago. I think living can be the same way. And I think it will just -- there'll be a lot of ebbs and flows and some of it will work and some of it won't.

Got it.

Ivy, one of the failures that we had trying to do rental in -- and I had this idea because we had so much success working with companies like Dallas' company doing single-family rental where we would take part of the community, we would build it, we would sell it to Dallas. They would rent it out. And you'd have owners living next to renters and you couldn't tell the difference. In some cases, Dallas' homes look better than the ones that we sold to an individual because he actually cuts his grass. It was nice.

And so we said, well, why can't we do that in the Del Webb community where we build a bunch of homes and we sell them to Dallas and he rents them out to people that want to live in the Del Webb community, maybe they don't want to make the commitment of buying. And Dallas and some of his competitors, they said, "No, it won't work. It won't work." I said it's ridiculous. They absolutely will work, and we're going to do it. So we built about 10 homes in one of our communities in Phoenix. We put them on the rental market. And guess what happened? Nobody rented them. And I'm like, how is this possible? We must not be marketing it well enough. And so I dove into the marketing strategy.

And what we found out was there are owners that we sold homes to and they're renting their homes at significantly below market rate because they're not living there for that period of time. And so a home that should be renting for $4,500 a month.

That's a good price.

They were put on the market for $2,500 a month. And so guys like Dallas, they're not successful by accident. They couldn't make money, and they couldn't make a return. So we learned it the hard way. We didn't rent any homes. The homes that we built, we sold, and I'm going to chalk that up to affiliate.

Well, back to your bread and butter. So tried it, it didn't work. So thinking about just the competitive landscape and recognizing whether we're talking about owning or renting, it feels like the housing ecosystem is really intertwined now. So Steven, when you think about the overbuilding that happened post-COVID or during COVID, how does the SFR, BFR, for sale impacts your multifamily operations?

Was multifamily overbuilt? Yes, when things are working close to normally, it doesn't impact it a lot because it's definitely a different segment. When the market got really tough last year, maybe the year before, it definitely -- it's all one pot, A class, B class, C class, for sale, for rent, single-family, it all impacted the market. So we're growing out -- or as Willy said, you saw the demand numbers for this year. And so we've been growing out of that hole. We look at each market individually and evaluate by market where we think each market or really submarket is going to get back to a point of stabilization where you can get normal rent growth.

And if you look across all of our markets where we operate, probably 40% of them are -- or maybe 25% are at that point, probably got half of the balance are popping along the bottom. They're not gaining, but they're not losing ground. And the other half of the remainder are close to turning, and we think probably next spring, all of it will have turned. We don't think it's going to go -- next year is going to go running off the page with performance, but we think you'll get back to a more normal rent growth type of year and starts continue to -- thankfully, developers continue to struggle to be able to make deals pencil. And hopefully, that will continue for a few more years to give the market time to cycle.

That's the subject I wanted to talk about, whether we think that we're in a shortage or we're oversupplied right now. And I think one of the interesting things has been that rhetoric hasn't really been discussed lately. I haven't heard a lot of people talking that we have this major housing shortage when we have empty apartments, empty houses and you guys are sitting with competitive forces that are impacting multi because the friction with SFR, BFR is close enough it impacts you. Thinking about the dynamics of the oversupply.

Ryan, we'll talk about the new legislation from the government. But as it relates to the competitive landscape, Willy showed a slide that showed the monthly payment for an apartment is substantially less than an owner would have to pay to buy the -- a first-time buyer of $410,000. But you're buying mortgage rates down. So that actually is not really in effect what's happening. That segment of the market, it feels like that segment of the market doesn't have a chance to really drive for affordability. Why even be in that market? Why are you continuing to build starter homes when, frankly, people can't afford them and you're being forced to crush your margin doing so?

Yes, it's a fair question, Ivy. And if you went back to 2013, 2014, the question that we were being asked, and in fact, I think you were the one asking the question, if I'm not mistaken, was why aren't you building more single-family entry level because that's where all the growth opportunity was. And we -- at that point in time, it was probably 25% to 30% of our business. Today, it's 37% or 38% of our business. So like all things, first time, move up, active adult, they go through cycles. We're in a cycle right now that's maybe not as ideal for that first-time buyer. We've adopted the philosophy and strategically said we're going to be a significant player in every single consumer group, entry-level included. It's not the most attractive, but it's also -- it's not bad.

And we also tend to play at the higher price point of the entry-level buyer. So if we look at our entry-level product, it's in the high 300s, low 400s. We're not building very many homes in the kind of high 200s. I'm not sure anybody is in the high 200s, but if I had a do over or I could do something today to tweak it slightly, I'd bring our entry-level business down to kind of 32%, 33% of our business, and I would take those 4 or 5 points that I'd be giving up and I'd move it into the active adult. I think there's more opportunity there right now, but...

Well, your point ebbing and flowing definitely. But as we know, we have a K-shaped economy. And for those that are not familiar with the term, we have directionally, the wealthier getting wealthier and the poor are getting poorer. And so when you think about what the administration has been focused on is really more the likelihood that we need more rental product because people can't afford to buy because they have difficulty solving for affordability. And the recent legislation really -- tell us what do you think? I mean you got away with still allowing to do BFR, but you can't buy an MLS. And does this really help affordability?

This is where I roll the grenade in the room. It's been a very interesting 6 months. I just want to piggyback on something Ryan said. I do think there is a misnomer in terms of like who the average homebuyer is today. And I think the unfortunate piece -- and it's not all wrong. I want to be fair to like all sides of the argument. But like it's not a 23- or 24-year-old trying to buy a house today. I bought my first home when I was -- my dad let me a little bit for the down payment when I was 24, 25. I just got married. That is not -- by the way, just to kind of compare and contrast what you said about your daughter, like probably very different thought process 20-some-odd years later, 20 years later.

I would say, if you go back to LBJ, the homeownership rate in this country has been about 67% continuously, okay? So for the last 50, 60 years, about 2/3 of the country owns something and about 1/3 of the country leases something. Willy talked about it earlier in terms of the lock-in effect, like mortgage rate volatility has tons to do with what happens in the housing market. We all know that, but you have to actually like believe it.

So when you think about Ryan's business, these guys have done a wonderful job buoying up housing prices over the last 3 to 5 years by buying down mortgage rates. The percentage of new home sales as a total aggregate of all home sales is abnormally high right now and has been for the last 2 to 3 years. So you sit there and you say, well, what's going on? It's like looking at a pool of water, like it's really stagnant. You have about 4 million sales a year right now happening, 4.1 million, 4.2 million. That's 1 million units light.

That's the pool that got painted blue?

It's got reflection pool challenges. But what I would say is like Steve's business benefits, my business benefits, Ryan's business benefits from more transaction volume. So if we have 4 million sales a year in the U.S., it's probably 20%, 25% light. So you have people staying put. You have more disposable income availability, as Willy talked about also earlier. So people just aren't as much focused about like, let me burn my awesome 3.5% mortgage rate, and let me go buy a 5.75% rate and see my payment go up 60% for what at this point in time. And so it's just a little bit of a tricky balance.

So to Washington's credit, I think both sides of the aisle are trying to say like, well, how do we stimulate sort of both the politics of a good story around housing growth and everybody deserves the American dream, but also the real practical application, which is we need people. The economy is sort of built on housing to some degree. I think the current -- we got caught up as sort of the -- when I say we, like our industry, if you look at that housing bill, am I okay to go here?

Yes. Go for it.

If you look at that housing bill, it's like 300-some-odd pages, the final version to get through. The piece about SFR, which got sort of the most attention when the tweet was in January, it's about 20 pages. And where I came encouraged from the process, we obviously spent a lot of time in D.C. I came very encouraged that both sides of the aisle were open to healthy discussion. Now it's really clear to me very quickly, both sides of the aisle and I'd say the administration, treasury as well, is that the politics that are interplaying in all this totally dilute the messaging we all hope would be really pure. Makes sense. It's like that around pharmaceuticals. It's around oil and gas. Housing is no different.

So our industry got sort of painted as a bogeyman. But I think the one helpful thing through the process for the industry was that for 10 years, we couldn't get a fair media article written on our industry. We had hundreds between January and June, where everyone is like, guys, these aren't the companies that are really creating the issues. By the way, we don't even buy really any homes on the MLS. We haven't since about 2017. So the reality is we're all out building. We're trying to create new supply. I think the government, from a federal perspective, wants to create a narrative where supply can be more easily induced into the market.

I do think there's some good things in the bill that sort of incentivize local municipalities to deregulate, to do some things that are smart. I think unfortunately, a lot of the energy and the momentum around that bill was caught up in sort of the false narrative around supply being taken or this, that and the other, which isn't true. The challenge for the federal government is that they can't have the impact that the local and the states have. We all know that in this room. And so the waterfall effect is, hopefully, local and state sort of gravitate to the good things in that bill, which will help obviously open up better pathways for developers and operators and institutional or private capital to play more of a meaningful role.

Now that being said, and I know all 3 of us would answer this the same. If we can't see the demand, we're certainly probably not going to take the risk. And so you have to be incentivized in some of these parts of the country where maybe a Midwest market, take for example, wants more housing units. There's got to be sort of a risk/reward trade-off if we're not sure what those absorption statistics are going to say or do. And I think that's the tricky part because when you get down to the brass tacks, even with the politicians. And I would say, look, to be fair, I was very impressed with a few people on both sides of the aisle that are truly trying to tackle this. And I give fair credit to the administration as well, legislative affairs office, the back office that was really trying to kind of strike the right balance. Everyone was collaborative.

I think the challenge is the noise around housing, and it's a very easy pinata to put out there to say, do you want something cheaper? I do. I don't know about anybody else in the room. But the reality is like the market is what moves that. So to Willy's last point around stand up for capital is -- you also have to stand up for free markets. Because when markets dislocate, that's when usually the opportunity either comes or the wiping of the bad decision-making occurs and then the market can kind of course correct. And so I think the challenge is as a consumer, and I'm speaking about myself now, we've all been so stuck on hot money in housing for so long that sort of the overhang effect isn't that fun, Steve, like we talked about the last couple of years. But we have to pay the piper at some point.

Right. And with respect to the oversupply that we're now dealing with, in reality, Ryan, really the way the market will adjust is if we have capitulation by land sellers and that's not happening.

That hasn't happened yet.

So really, how does the government get involved in creating affordability? I don't think they really can unless they start using a big stick to governors and saying, you need to figure out at the local level how to bring more housing. But I guess, Steven, on our prep call, we talked about, do we even need more housing. I mean you mentioned the multifamily starts. They're running still at 400,000 roughly annually. And arguably, if you go back historically, that's still slightly above a trend line. So tell me what you think as it relates to supply. Do we need more supply?

I would say no to all of the developers in the room.

[indiscernible] a hike this afternoon, Steven.

Exactly. We need more single-family for sale. Ivy, to your point, starts have not gone down nearly as much as everybody would have assumed they would have given the fact that we're in probably the fourth year of softer declining fundamentals in areas which cover probably more than half of the population of the country. I think there's a -- it's become a political narrative that we don't have enough housing in the U.S. and we truly do not have, but you talked about the K-shaped recovery.

At the bottom leg of the K, we truly do not have enough affordable housing. I don't know that we can solve that. It's -- and telling developers to develop more at numbers, where that housing is needed, by and large, you could build that deal for free and still not cover the operating expenses. So I don't know the solution, but it's not get the developers to just build more housing. I don't know of any industry that is as efficient at overbuilding the market it serves as definitely the apartment market, if not the whole housing market. And you...

I think we're all good at overbuilding.

Yes, we're all really good at it and all pro. And you've seen that in the last few years where in most -- all the markets where we operate, wages have continued to grow and rents have been soft. I do want to give one plug since we're here in Sun Valley to Boise because we did go and it's been a great -- it's been interesting to watch. It's been a proxy for us because it's the smallest market we're in.

You're happy with it.

Well, to your point, it went down. So it was the first one to struggle, but it was also the first one to come out. And it's our -- this is not a plug for everybody to go there, but I think our rents today are probably -- our trade-outs are over 10% year-over-year. And so we're hopeful if we can get all of them there, but it's been a good market. It's small. So it's a lot of volatility, as you can imagine. But we don't need more housing today in most of the markets in the U.S.

And one of the things about the multifamily industry that I find fascinating back in '09, I started researching multifamily and having only done single-family, the turnover was, call it, 55% to 60% per annum. And now it's like 35% to 40%. So people just don't want to move because there's too much friction in moving. And as a result, bringing so much more supply, you just don't have that competitive pressure that you would have hoped that people would want to move up from a Class B, let's go to Class A. So the dynamics of the food chain don't seem to be working as fluidly.

Yes. There's a couple of things driving that. Well, one is -- the most obvious and hopefully short-term one is that because people can't buy houses, they're just not moving. We don't have nearly the numbers of folks move out to buy houses that we would have...

Do you have any stats on that? Because it used to be like in the teens and now it's in the single digits?

Yes. I mean, so if you compound that over several years, it's a big impact to that renewal number. And the other thing is multifamily rentals are serving a much higher demographic than we have historically. And so our average resident is probably making $95,000 a household and paying around $2,000 a month for rent. And these are people who have invested in that as their home. They decorated it. So...

And you guys have made the amenities and everything you offer is so much better.

We're not going to go spend. 20 years ago, almost every resident we had could move with one pickup truck. Today, these are higher demographic. They hire movers and they've decorated their apartment. And so to go spend, I don't know, $5,000 or $10,000 to move to save $300 a month on the rent. It's a big savings on a relative basis to the rent they're paying, but it's a big cost to move. And by the way, they're making -- they're paying less of their income for rent than they ever have in our case. And so our average renter is probably paying 18%, 19% of their income for rent. So it's just not as material a benefit for them. It's a big cost and not as material a benefit. So I just think that's causing a lot more people to stay put.

Yes. Interestingly, the national numbers show that renters are really burdened. So your footprint is showing something different. But more than 50% of renters are spending more than 30% of their income on their rent. And that isn't just the coastal markets because I looked it up, and it's like nationally 52% and then it's like 40%, but it's inclusive of all the other incremental costs that are inflation and things that are impacting that.

The low is the bottom leg of the K everywhere. And it's a good bit of the upper leg in those coastal markets where...

One thing I wanted to ask you, Dallas, and then I want to talk a little bit about factory built because we had -- Pulte has gone in and out of that. But Dallas, reluctant landlords, reluctant landlords or accidental landlords. From a competitive perspective, how much is that impacting you? And how is multi oversupply impacting both BFR and SFR?

It's interesting. We survey coming in and we survey going out. So 80% of our customers that come in are coming from a single-family rental home prior to choosing our single-family rental. So we don't see as many people saying, "Hey, I'm done with the Cortland property, and I'm coming." It's a different customer type. We have a couple of kids, dogs, multiple cars, things like that. [indiscernible].

[indiscernible] homes are slightly bigger, right? You're slightly more expensive.

Yes. So our average square footage is probably right around 2,000 feet, and our average rent is about $2,500. We do see in the numbers on the supply side on listings, on available listing data. Now the single-family rental industry, we have terrible data in terms of what another competitor is actually leasing their homes. We have no clue. What we see are listing data, so we get all the access to the Zillow and all the public data, but we really don't know where people are closing on leases. There's no information system that includes all that.

We certainly saw in '24 and '25, an increase of homes available for lease in multiple listing services in some of those markets. So that puts some pressure on rents for sure. This year's rents, we talked about this on our earnings call, feel a lot better than they did at this time last year. And I would say the same thing, we peaked out in rents last year earlier in the cycle. So for us, we typically peak in June. Last year, we peaked in like April and May. And I think that had a lot to do with the amount of supply that was on the market.

One other thing I wanted to bring up before I go to the factory built, Steven, as it relates to the immigration stat that Willy brought up, suggesting that occupancy or rents are not growing because of the lack of incremental immigrants coming to our markets. Do you agree with that?

Yes.

I know he's the guy hosting the conference.

I always agree with Willy, no matter what he says here.

There you go. Where is he?

We do not serve that clientele for the most part. But when the market moves materially, it's hard to separate. It all impacts -- every piece of it impacts the whole market. And so I'm sure that impact is -- the lack of immigration is impacting our portfolio differently in each market, but it definitely created a meaningful lack of new renter demand, which is clearly impacting the overall rental market.

Right. So the bottom, bottom of the food chain because every operator that we survey, every multifamily public company REIT has not had an impact from deportation or the lack of incremental immigration. So I think it has to be that households are doubling and tripling up, and they don't really get the benefit of immigration for a few years to come. So I disagree with you, Willy. But apparently, Steven doesn't, at least based on the data that we have, as it relates to the competitive pressures out there and we think about ways to solve for affordability, there's been a lot of discussion about factory-built housing.

And we had Katerra for a while that really got the market excited about the factory-built opportunities, and that kind of died pretty dramatically. But Pulte has gone in and out of doing factory. ICG recently exited after purchasing what would have given you backward integration in '21. So talk about why you went in and why you're not staying and what you think about the future of factory-built for the U.S.

We bought a company 6 years ago called Innovative Construction Group, and they were a factory -- an off-site modular building component manufacturer. So they were building walls and they were building floor trusses. And the idea was that we were going to take what they were doing. There's nothing really novel about wall trusses, floor trusses and wall panels. But the idea was that we could go in and we could integrate electrical plumbing and do window installation and then sheath exterior of the wall and ship essentially a wall unit to the job site.

There's something there, and I still believe that it's possible, and it really stems from this idea that you've seen no manufacturing efficiency in housing in 40 years. You can look at every other manufacturing system and process, and you've seen real gains, meaningful gains in labor efficiency, not in construction. We've had 0. Maybe our biggest invention is the nail gun. That's it. And I really do think that's got to change. It's got to be part of the affordability, kind of solve an equation. The business that we built, we got some benefits out of it. We learned some good things. We learned some bad things. Ultimately, we decided is we're not the best operator of it. There are some companies like BFS and Saint-Gobain that are putting millions and millions and millions of dollars into innovation. I think they can do it way better than what we can. You also need real scale in really close geographies to your plant in order to make the transportation efficiencies of those manufactured products work. So us trying to be an owner of it, even as big as we are, we were too geographically dispersed in order to get the efficiencies that you really need to have with the production side. So...

And you said the returns just weren't attractive enough.

I mean they were positive returns, but they're not the kind of returns that our shareholders want when they give us capital. They've got a different expectation for return on capital that they give to us than on return on the capital that they give to like a BFS as an example. So we're going to continue to use those products in our building system -- in our construction system. I'd just rather be a buyer of it than an owner-operator of it. I think there's just folks that are way better at it than we are.

Just one segue because the recent activity, M&A activity has been pretty significant from nonpublic homebuilders. So we've got -- the Japanese have been very active as well as Berkshire Hathaway recently buying Taylor Morrison because the Japanese have come in, in a big way. They now have like 20% market share. It's pretty significant. Do you think their plan -- maybe you talk to some of the leaders there that are looking at factory built like they have in Japan? Or is the geography in Japan versus the size of New York?

Yes. So a couple of things there. One, I think it's a sub kind of story that nobody is talking about. If there was an understanding of how much of U.S. housing is now owned by Japanese-based companies, it would scare and shock a lot of people in the United States. And they've been doing it very, very quietly over the last 15 years coming in and buying founder-led, entrepreneur-led homebuilders to the point where 3 Japanese companies own somewhere about 20%, 25% of U.S. housing.

Now I think from a geopolitical standpoint, we've got good relationships with Japan. But I don't know that you want a foreign country owning 25% of something so critical as housing in the United States. So that's -- somebody else is going to have to figure that out, but I do think we need to pay attention to it. And then your question on...

The reason they do, by the way, is because they have no population growth. So we're respectfully probably doing better than other nations from the developed world countries, but not looking good again.

And these Japanese companies have demonstrated they know how to do manufacture -- off-site manufacturing with housing. I think the difference there, Ivy, is what you talked about, the geographic proximity and the densification, the density in which they build, it works. And here in the United States, when we're talking about places like Sun Valley, where we have just mass expanses and highway systems and the way that we live as Americans, I'm just not sure that, that model is going to have the same level of success that it does in a country like Japan.

Yes. I think the Japanese that came over for the World Cup figured that out when they went to Costco and a few other places that it's a little different here.

Yes. I mean when you're trying to take home a gallon jug of [indiscernible].

Ryan is stressing, right? Yes. So Dallas, you made an acquisition, ResiBuilt. Thank you for letting Walker & Dunlop do that, Zelman. In terms of the opportunities for consolidation and thinking about SFR that's become more mature now, where do you see the industry going directionally? Is it kind of staying packed? Or you think there'll be more backward integration through building yourself developers? Will you continue to work with Pulte? Or will you focus solely on your ResiBuilt for development?

It's probably like 4, 5 years ago, Ryan and I had this goal like building 5,000 houses together. And we would still say out loud, I think both of us, we share that same goal. The ResiBuilt acquisition was sort of nichey. These guys are in 4 or 5 markets. They do a really good job. Jay, who runs that company, we've known for 10 years. And I think for Invitation Homes, our natural sort of progression has been to stand up and stabilize the operating company, start to expand into relationships with homebuilders.

I don't see us being a homebuilder like a Pulte Homes. I mean like we're just not -- that's just not our core competency. But I think having a partner or an affiliated partnership with a, call it, an in-house development platform where if they can build us 1,000 or 2,000 units a year 5 years from now, great, we should still be buying 5,000 or 10,000 units a year from Ryan.

I'm still waiting for him to buy the first 5,000.

He doesn't offer that same friends and family discount he offered Steve. And I would just say the reality is that it is going to be very helpful. It gives us unique insight into some of the challenges. We were talking backstage about Denver. The impact fees in Denver are ridiculous right now. Like we can't build a home in Denver, and we want to build a home in Denver that would work for somebody in the for-rent space. It's just hard to make the math work.

So I think our view is sort of continue to lean in with our homebuilder partners, build as many as we can with the companies that want us in their communities. And then I think off to the side, the nice thing that works for ResiBuilt is it's sort of a bespoke opportunity set where we can do a 50-unit development, a 75-unit development, which wouldn't be on the radar for some of the big builders or even some of the bigger regional guys. So it allows us to sort of fit into some of these nooks and crannies that make sense where the demand is there, but it's just not a big enough project.

And then all the while, we're continually -- and we bought last month, probably $25 million worth of homes from homebuilders. And so we want to do that every month. We would love to 2x, 3x those numbers if the cost of capital is there. So the goal is to just continually be active. And I think, look, the scattered sort of buying from the resale person in the MLS really hasn't been a business model for probably 8 years. I would say you have to have a real depressed overall housing story going on for those sort of assets to make sense. You're just much better off building today.

I remember when Jonathan Gray and I had lunch and he said, we're an army, we're invading the country and now we occupy and we don't need to do it, let us start operating. And when you think about SFR back when the GFC allowed for that depressed pricing for you guys to come in and acquire, do you anticipate more of the multifamily industry coming into SFR because some of the public REITs were really negative initially, and now they seem to be slightly more positive or some of them actually getting into BFR, SFR.

Some of them have done it. I mean, to be totally fair to both businesses, like they've been around for hundreds of years. So you've had the mom-and-pop landlord who leased a home to somebody in the 1800s, right? That's just starting to professionalize post-GFC. And so now you have companies and technologies and smart home tech, and we can put a washer and dryer in your house, don't worry about it, like that's on us. Like there's things that can just make it much more feasible, which to be fair, we've stolen from multifamily, who made a lot of those amenitized offerings a much more seamless experience.

I think on the inverse, there are still a huge segment of the country, 16 million people that want a multifamily apartment. They want that experience. They want highly amenitized stuff next to running pass and all that. We can't compete with that. But we also have parents that have 2 or 3 kids that want to live in Sandy Springs, Georgia, and they need to check the neighborhood out for 3 or 4 years before they buy. And so they're just -- they just exist, and there's enough space for all the different type of...

Steven, any thoughts about getting into BFR, SFR?

No. As mentioned earlier about the average, I think Invitation serves a resident that makes a little more than our average resident, but they're paying 25% more for a unit that's about twice the size. And so I think our average population tends to be a lot -- more centrally located and is looking to be more centrally located. I think one mistake a lot of us apartment developers make is that we mistake suburban or ex-urban areas where people are willing to move to, to get into a house as a place that people want to go rent an apartment. And there's just no reason to because you can rent that same apartment much closer to town for the same price because it doesn't cost materially more to develop.

So we think, as Dallas said, it's just a different market. And so our population tends to be closer to town, not all urban, but inner suburban areas and urban areas. And I think we're serving that need before they graduate into his population.

Got it. So I can't leave the panel without finally talking about AI and thinking about the implications of AI in your businesses. So maybe we start with you, Steven.

Yes. So I think half the population is convinced that all the jobs are going to disappear tomorrow. And the other half is convinced that there's going to be such an increase in economic activity that it's going to create a whole new set of jobs that we're not thinking about. We're watching what's going on. We don't have -- we have not taken an opinion either way. We think it's still early to make that decision.

Have you implemented AI into your business?

We're implementing AI. So two different questions, I guess. One is, are you using it and how are you using it? One is, are you making business decisions based upon the long-term impact on the job market? The second one, we're not. We're watching it. We don't know whether it's going to be A or B, but we tend to think B is probably what happens.

On the implementation side, we are using it in a number of different ways in prop tech, operations, our construction and purchasing execution. None of these are sort of Elon Musk level AI uses, but there's dozens of little ways where our teams have created more efficient ways to operate and to underwrite and find or evaluate opportunities. And that's growing pretty regularly, as you could imagine with the...

Has it resulted in incremental net jobs down or up?

I would say neither yet for us. I do feel -- obviously, we can read a lot in the media about a lot of these big tech firms, which are cutting jobs, huge numbers of jobs because of AI. There's also a lot of folks that I speak to who are not hiring low-end jobs or staffing their low-end positions because they're depending on those people that are there just to use AI to sort of accomplish that expanded execution need.

But if you look at the jobs numbers, you're not seeing it in the jobs numbers. There were some concerns earlier this year jobs for newly -- young people, newly out of college or in that age, but that seems to have corrected itself in the second quarter. I don't know where all those folks are going because they're not becoming households. Obviously, a lot of them and the data are staying with their parents. But the job seems to have corrected and as we...

But for you, for Cortland, you're not incrementally hiring and you're waiting to see how AI develops and benefits the business before incrementally starting to bring in a lot of new bodies. Is that fair?

Yes. I mean we've always had a pretty big data science team. So we're not hiring a significant amount of new people specific to AI because we've tended to...

It seems like everyone I talk to, and I'm curious, Ryan, whether I'm talking to Lennar or I'm talking to Home Depot, there's this -- we're just going to see how it goes before we incrementally start hiring. And our ecosystem is under pressure. But tell us about what you're doing. We've only got 4 minutes, so you got 2 and then Dallas, you got 2.

Yes. And we're really trying to experiment with it and use it in kind of back office to make our employees more efficient. So we just gave more than half of our workforce Cowork or Copilot. We're experimenting with a bunch of the other models. And I think we are seeing some efficiency out of it. It's not caused us to reduce staff at all. Maybe it's slowed hiring just a tad, but it has not eliminated it by any stretch. The one that I'm probably most excited about is efficiencies in the loan origination process. We have our own mortgage company. 80% of the homes that we build and sell, we do the mortgages for.

We have 1,000 employees in that space, and it cost us $9,000 per loan, $9,000 to manufacture a loan. It's absurd. You think about $9,000 worth of paperwork to create a 30-year fixed rate mortgage, it's absolutely crazy. And so I think there's a big opportunity in that business where we can potentially reduce -- significantly reduce the cost and the labor hours that go into originating a loan. We'll see if it pans out.

We are also -- and I've got -- my team has got a strategic offsite in a couple of weeks. One of the topics that we're really trying to study is if AI plays out the way that some are talking about and there's real changes in the workforce, what does it do to some of the migratory and demographic trends that we started talking about? And what does that ultimately mean for housing?

Is that the study I participated in?

It is. It's a study -- yes. It is one that you participated in, Ivy. And I don't think it's a 3- or a 5-year question. I actually do think it's a 5-, 10-, 15-year question, and we're thinking about that and how it impacts our land strategy.

Yes.

Lots of low-hanging fruit, centralized leasing functionality, HOA management. We manage 45,000 disparate HOAs. And so a lot can get sort of -- that's a very archaic industry in itself. So just like deconfusing the coordination there. We've seen some headcount reduction in a few areas, but nothing that I would say is earth shattering. The fun stuff is I was actually showing a friend this last night, like my Claude Cowork, it scrapes every night and it presents a CEO summary every morning of just things that's picking up around macro policy, legislative at the state levels, industry. Now you still have to kind of curate it and fine-tune it, but like every iteration gets a little bit better. So I think having information quicker that makes me a little bit more nimble on my feet when I'm talking to my ops team, talking to my finance group or my head of legal affairs, I think it's been pretty helpful so far. So I think it's -- nothing is like reinventing the wheel, definitely making our teams faster.

Yes. And what about hiring?

No. I mean, look, I would say there's definitely going to be some functionality in our company that will get quicker with automation and will, in fact, reduce some heads, like more back-office functionality. It can't change the way one of my 500 guys in a maintenance van shows up and does great customer service. So I wouldn't expect like anything like that. It's definitely made our investments team a bit more efficient.

So like if Ryan's team sends us a tape of 2,000 homes that they're sort of thinking about selling down the road, that would have taken us a couple of days to go through. I can get a pretty good desktop in a couple of hours now, which would sort of give us some leading indicators of how to give feedback. So I feel like our evaluations are getting a lot quicker in terms of how we can sort of work with partners.

And maybe that just ultimately contributes to what Jamie Dimon said, AI is going to give us all a 3-day a week work week or a 4-day weekend.

Or Elon says no working, and we'll just be utopia. So we'll see how it goes. Well, everyone, thank you so much for joining us. Thank you, gentlemen.

Coming in. It's an honor to have you here. we're going to start recording the Walker Webcast, and we're going to play this is a Walker Webcast next week. And so I guess I ought to do an official welcoming to Phil Washington, who runs the Denver Airport Authority after having run the Los Angeles metro system for many years. And prior to that running Denver RTD. And so Phil was in Denver that went to L.A., was extremely successful down in L.A. and then came back to Denver, and we are the great beneficiaries of Phil running a couple of things that are just really noteworthy.

First of all, it is the largest employer in the state of Colorado. It is 10% of Colorado's GDP is at DEN, 10%. By far, the largest contributor to the state of Colorado's annual GDP is the Denver Airport. It is the third largest airport in the United States of America. It is quickly growing to become #1, with 84 million passengers in 2025. Correct on that?

82.4 million.

82.4 million. I want you to correct me on my stats here, Phil. So 83 million passengers last year, very focused on 100 million and going well beyond 100 million. 100 million by 2030?

If not sooner.

If not sooner. Takes getting to 105 million annual passengers to surpass Atlanta is the busiest airport in the world?

Correct.

Right. So that's a growth trajectory that most airports, most companies would love to have in front of it.

What's the biggest challenge right now as it relates to expanding DIA from 84 million annual passengers to 100 million and then on to 125 million?

Well, first of all, thank you for having me.

It's great to have you.

Willy, it's wonderful to be here with all of you. I think our biggest challenge is making sure the facilities match the growth. We're talking about an airport at Den that was built and designed and built for 50 million annual passengers. And so having to make sure that we can accommodate this tremendous growth is probably the #1 thing and also doing it safely. Safety obviously is our #1 priority. But this growth that we're seeing, not just at Dan, I mean, Dan is the fastest-growing airport, I think, in the country, but also making sure that we are multimodal and making sure that it's not just by passengers.

Obviously, that's our #1 priority, but we want to branch out into other sectors. And hopefully, we can talk a little bit about that. But the biggest thing is the modernization and keeping up with that growth, I would say.

So a couple of things that you've done recently. First of all, to give people a sense you have a competitive advantage because of the land you have.

Yes.

So the airport itself is as large as the city of Miami to -- or the City of San Francisco or 2 reference points as it related to how much land you have. You have 6 runways 1 of which is 16,000 feet long.

The longest in North America.

The longest in North America, which allows any size jet to land and land comfortably.

Correct.

They're also wider than most landing stretch. Correct?

Yes, yes,.

So all that comes into being an advantage in what way?

Well, as you said, I mean, we can land any aircraft in the world right here. the land, 53 square miles gives us an incredible advantage in terms of development, in terms of things that we can do and what we can accommodate with regard to development as well. It also allows us to expand our cargo operation, which is, I think, one of the huge, huge potential avenues to bring more cargo into Dan. So this land thing is incredible. It really is. And there are some challenges with that as well, having all that land. I mean you would be shocked to know that we've got a lot of wild life out there. We've got...

You've got people who jump the fence.

Yes, we do. We do.

Are you -- can you talk about that at all? Or is that something because of what happened? You just tested -- I mean, I don't want to ask you a question, you can't. I mean if you say I can't talk about it, that's fine.

No, I can talk about it. I mean, I can talk about what we've said in public.

Anyone who doesn't know an individual jump defense in DIA 2 weeks ago, ran out under the runway and got hit by a Frontier flight that was taking off for Los Angeles was killed that has been deemed to be a suicide.

Correct.

So it's them that he did it on his own fruition and was there purposefully, if you will. Anything?

Well, I mean, it bears mentioning that we have about 36 miles of fence of perimeter fence. So when we talk about the land that we have, there's a lot of it unfortunate incident, we are assessing our security right now. We always do that anyway. NTSB, National Transportation Safety Board, is -- has an active investigation on it. But it was unfortunate. I'm very, very concerned. i was very concerned about the passengers on that flight and concerned about our operations and maintenance people who had to clean all of that up. And we had that runway back open the next morning at 10 a.m., after working all night to make sure that we clean that runway up. So safety, obviously, is #1. We're still working on this.

We're talking to Frontier Airlines, which is our hometown airline here in Denver. We have a very, very close relationship with all the airlines, but especially the hometown airline here, but a very unfortunate incident.

Does that engine -- can it be repaired? Does that have to be replaced?

I am actually talking with the CEO of Frontier next week. I hesitate to say it can be repair. I mean it's a tough thing. But these engines are very resilient, you know what I mean, and there's a lot of repair that goes on with the engines and the aircraft. So our hope is that it can be salvaged.

So 6 runways very wide, very long, gets you to a flight cancellation rate that is way lower than any other major airport. You're at 0.85% of flights canceled on an annual basis last year. To give people a reference point to that, Atlanta was at about 1.5% of flights were canceled in the last year. And ORD or Chicago was at 1.85%, so almost 2% of their flights were canceled last year. What does that give you as well as the airlines that fly in and out of Den as it relates to consistency, cheaper to operate? There seem to be a lot of derivative effects from having that low flight cancellation rate. And it's not like the weather here is any better than it is in Atlanta or in Chicago. So is that all based off of the length and the width of the landing strips?

I think it's some of that, and it's our people, too. who keep runways open, who maintain runways. We close the runway in the summer every year just to do runway maintenance. And so when we talk about just maintenance in general, that is a huge part of it. And you mentioned the winter. We know snow here at this airport. And it's amazing that our snow crews can actually plow a runway in about 15 to 20 minutes with the equipment that we have. And so all of that plays into it. So you've got runway maintenance, you've got our ability to increase non-aeronautical revenue that keeps cost low for airlines. There's something called cost per enplanement. We are very low or sort of middle of the row with the large airports around the country. That means a lot because we keep airline costs low in terms of how we handle our business and handle maintenance and financial management as well.

Last year, we -- from all 3 credit rating agencies, we got the highest rating in the history of Denver International Airport. And so all of those things kind of play into how we are attractive to airlines to come in and out of Denver International Airport. So all of that plays into it.

That's got to help you with your borrowing cost and your $7 billion of debt.

That's right.

We talked a little bit about the ability to grow the airport. You also talked about passengers. TSA wait times at DIA are shorter than they are at any of the other major airports buying quite some bit. Your average wait time right now is 6 to 10 minutes on your TSA lines that stacks up to 15 to 20 minutes at all the other majors and some even 20 to 25 on the TSA. How do you pull that off?

Well, a couple of things and great on the stats.

I have -- that's why I have a pause -- about aviation. I also love it. And I also happen to live at DIA. I mean I'm in and out of that airport all the time. So all this stuff is a big interest of mine.

I'd point to a couple of things. One, we invested heavily in the new security equipment. And we wanted to get it in very -- as quickly as we possibly could. And so the biometrics that we have there, the various -- the 4 stations, if you will, that we had at 3 or 4 stations that we have in one lane has taken us from about 140 passengers per hour per lane to over 200 per hour per lane, and that is a big deal.

So I point to the technology that we have brought in on the security side. And we want to do more of this. We think we can do more in terms of AI with security and different things to move folks through much, much faster. So we were very, very proud of the fact during the shutdown that we did not have these issues in Denver that you saw in Houston and some of the other places. But it's the investment that we have made in security technology that has gotten us there. And we're going to do more of that.

When you look at the East and West security checkpoints, we are going to have 12 additional lanes on Level 5 as well as we build out that entire terminal or great haul, if you will. But I point to the technology that has helped us keep those wait times low.

So people get through the security and then they go down the escalator and they get to the trams.

Yes.

And so the trams went down over your last fiscal year, 130 times that when I first read that fill, I was like, well, that's a lot. And then I read a little bit further. They went down 130x, but for an average time of 4 minutes, which gave you a redundancy rate or the network being up 99.903% of the last fiscal year. Okay. So everyone in the telecom industry used to always say five 9s that you needed your network to be 99.9999% reliable for it to actually be a network that you would be able to go and actually sell. You're at one 9, but that's still damn good.

It is, but I want 100%. And look, I -- we need redundancy at Denver International Airport for the trains. Now my operations folks tell me that all the time, "Hey, Phil, we got 99.86% uptime for the train." When that train is down, it's chaos at the airport. I mean it's...

We've got 160,000 people a day using, right?

That's right. That's right.

160,000 people a day using it.

It's incredible. -- the airport, when the train goes down, the airport is really quiet. You have been in a quiet airport, it's scary actually. So we need that redundancy. And I was talking to one of the -- Mayor Federico opinion, Secretary opinion not long ago. And I was joking with him and with others that we must atone for what I consider the original Sin of Den, SIN, the original sin was not having redundancy for that train. And we want to atone for that by having redundancy.

Redundancy in another train or redundancy in walkways?

We're looking at either or both or actually the train itself, how can we have redundancy from A to B, C. And so we have been working on that. And...

I know you're going to go from C to D because as someone who spends a lot of time in that airport, when I'm at Gate 92. I don't mind walking long distances. It's a long way. how further can you go east, west before you go north, south?

Well, a couple of things. We don't want to do a Concourse D. And the reason we don't want to do a Concourse D is that is more strain on the train. And so for us to get to 100 million, there is an expansion that we're doing on Concourse C West, Sea West. That is the last expansion that we can do on the existing Concourse infrastructure, right? We've already expanded all of the other Concourses.

In the last 5 years, we have built and opened 39 new gates. That's like another airport. That's like Kansas City. Anybody from Kansas City, yes, that's likew Kansas.

We don't like people from Kansas City. They got to go football team.

Well, they got good barbecue ribs, too. But -- so the last expansion we can do is Concourse West, which we have already started, that is 11 additional gates. That gets us to 100 million. Beyond that, we've got -- well, we actually have forecast for 120 million by 2045. What we want to do is expand the terminal itself. So think about the terminal. The south end of the terminal is where the hotel is. We want to expand to the north end. There's space there to expand that with a new, what I call a, processing facility and then have walkable concourses off that area. So you can walk to the concourses that we will build off that new facility that will have airline counters and security and all of that. So it's a walkable concourses with 25 gates each.

We have already started sort of the preconstruction utility relocation work on the facility that we have to build first to lead to 4 additional concourses, 2 on the north and 2 on the south end by the hotel.

Will you charge more for those gates? Is there any difference in cost between Gate C82 and A10?

We have use in lease agreements for the airlines. And so there's not much difference. I mean closer to the center core, they may be a little bit more expensive.

But that's typically for bigger jets, too.

Correct. And we have international gates as well on A that might cost a little bit more as well.

So someone brings in and Well, A380 is different because it's a double deckers. So let's just stick with 1 level airplanes. But someone brings in a Dreamliner versus the 737. The 737 is out on one of the far gates, the 7 -- the Dreamliner is on one of the closed gates just because of the number of passengers. But does that airline paying more for having a bigger jet come and use that gate?

There's a difference yes. There is, yes. Absolutely.

Okay. I was talking about the cost of operating and why airlines like flying out of DEM, jet fuel is another one, okay? So right now, the WTI crude is trading at $100 a barrel today, a barrel of Jet 1a is trading for $165 a barrel. So to give everyone a sense of how much more refined jet fuel is than just normal crude that shows you the price differential of a 65% premium on jet fuel. So all the airlines today are trying to come to the cheapest. I pulled up you, Atlanta and Dallas. And it didn't surprise me that Dallas was the cheapest, you're in the middle and Atlanta is significantly more expensive on a gallon of Jet A. How do you keep your cost so low and how do you get the fuel?

Well, we have pipelines. We have fueled this truck in as well.

But it's predominantly from the pipeline that goes straight to the refinery, correct?

Yes. That's right. That's right. Well, on the cost, I think the first thing is increasing non-aeronautical revenue as best we can. That's parking, that's a number of other concession revenue, things like that, where we can keep airline costs down. And I mentioned that cost per enplanement piece that CPE, please, where we are sort of in the middle of the pack, and that's actually a good thing.

What airports are really, really struggling with right now is how to increase non-aeronautical revenue. And I was at a conference not long ago and we have this form of the 100 top airports -- the CEOs from 100 top airports. And you go around room and they mentioned their challenges or whatever. And you come up with this word salad thing. Yes, what this thing. And every one of the predominant thing was growth, modernization, keeping costs down and increasing non-aeronautical revenue. And so what we have done in a big way is the parking is our biggest revenue generator.

So you got 51,000 parking spaces at DIA today.

Correct. Correct. About 51,000 or so. And we also have...

You're going to grow that? Is it going to 70,000?

At some point, we likely will grow that, but we're also looking at what public transits can do as well, namely the A-line, which happy to say I had a part in when I was running RTD. But we may have to -- as these numbers grow, we may have to look at parking, we may have to look at additional parking, but we'll look at that. We haven't decided on that just yet. We want to increase transit usage.

Will there be new parking space in the new rental car facility?

We're looking at that. We are building a new consolidated rental car facility. We are well on our way with that. We have a professional team that's helping us with that. We're going to start design and construction. We're looking at perhaps employee parking likely on the top level of that. We're looking at about 16,000 to 18,000 spaces in that consolidated rental car facility.

Quick story, though, when you look at all of that rental car space when you're driving a long [indiscernible], I was talking to one of the pioneers of building the airport and he said, "Phil, that space was temporary." And I thought, well, temporary for 31 years, which -- so one of our big priorities is to build out that space or build out that consolidated rental car facility and really EV chargers and all of that on our way to a zero emission airport.

It will be a great spot for a data center, except for the fact that City Council just passed a law that says you can't put a data center in Denver.

I know. I know. yes. It also -- and I should mention this ties to our efforts around energy resiliency and being energy independent.

So you had a blackout. You had an energy loss in March, which was at Excel substation. So when that happened, what happens? Do you have just massive generators that kick in? I know you've got solar out there, but can you run without connection to Excel?

We do have some redundancy, but we depend on Excel. We've got generators and all of that. But is not optimal. When that outage happen, and we have quite a few of them, as you mentioned, all the escalators and the elevators and all of that stopped at an airport. That's -- it was, again, very, very eerie. And so what we've done is that we want -- and we've put out a request for information to the private sector on how we can be energy independent eventually. And I stand by that.

I mean we cannot be down. We cannot afford to be no airport can afford to be down. I mean we saw the outage in Madrid last year, another in Heathrow last year as well. In Atlanta, in 2017, they were down like 10 hours. I mean can you imagine that? And so we've had these outages. And so we went out to the private sector and said, "We want alternative energy options for this airport." It's like a problem statement in college. You put out this. We put out our problem statement, our challenge statement and said, how can we eventually be energy independent. And let's put a pathway or a road map together to energy independence.

And so we put out that RFI, a request for information. We got 31 proposals from all over the world on how we can do this. We would be the first airport in the world to be energy independent. And so we're on our way to doing that, which will bring in a whole new industry to the Rocky Mountain region. That is that multi-modalism and multi-industry focus that we have a whole energy industry we could do here at Denver.

So as you think about other revenue sources, first of all, revenues in DIA now are $1.2 billion, $1.3 billion?

Yes, neighborhood, yes.

And by law, you don't return any , if you will, they're not profits that come out of DIA that go to the city of Denver. It all stays at DIA and then you continue to reinvest. So we, as a community, benefit from about $40 billion of economic activity that happens around DEN, but it's not as if the city of Denver is there and says, well, we got a windfall on us a check for $300 million last year, and so we don't have to go and do X, right?

Right, right, right.

And that doesn't change. That's by federal law federal -- that's federal off. So you take this cash flow and just pour it back into it with the thought of being the best airport in the world, potentially the largest airport in the world, but then also bringing other economic development to the city of Denver and the State of Colorado.

Yes, that's correct. And let me just put a finer point on it. We use no sales tax dollars, right? We are an enterprise. So we actually live on what we make, to your point, right, through those revenue-generating mechanisms that I mentioned. And so what we generate must stay at the airport. If it leaves the airport for any reason, that is called diversion of revenue. And that diversion of revenue is a violation of federal law, as you mentioned.

So the revenue we generate, we plow back into the airport, and we need to do that. We absolutely need to do that primarily because of the growth that we're seeing. And it's not just us. We are probably the fastest growing. But when you think about like the 20 largest airports in this country and in the world, all of them have what's called a capital improvement program. And so this capital improvement program, or CIP, when you hit that term, that CIP is in the billions of dollars.

Yours is $12 billion?

Ours is about $12 billion over a 10-year period. I spent a lot of time in Los Angeles, LAX. Theirs is something like 20-some billion.

But they don't have any space to grow.

No, they don't. They don't.

So they're going to continue to go into the existing infrastructure and just upgrade the infrastructure, but they've got no ability to say, let's move from X number of passengers to Y because they can't put another runway down.

That's exactly right. And so we have this incredible benefit, this incredible resource of land here where we can spread and we can develop and maybe we'll talk about that development piece in a minute as well.

What's a new -- what's runway 7 cost? If you just said tomorrow, I want to go build runway 7. What's the runway cost?

Between $700 million and $1 billion.

That's pretty cool. That's a lot of money.

Right, right.

And that's just trading and paving.

Yes. Yes. But I mean, this thing is very deep. It's not like paving your driveway.

No, I got it. And on that, what about putting radiant heat underneath that -- could you do that?

We could. I mean there's technology...

Are there airports that have radiant heat underneath the...

I can't think of one right now. I think there are some, but 6 runways. We are doing the pre environmental work on a seventh runway right now. There's a lot of discussion about that.

What's the environmental work cost you? I'm asking this because you know my next question is going to be about the penny Bolivar. But what's the environmental cost to go? And by the way, we're talking about farmland between here and Kansas City.

Yes. Yes. That's right. That's right.

I'm a Denver resident. I like to have clean water. I like to make sure we don't have chemicals running off and into the rivers, all that kind of stuff. But you're going to spend millions on an environmental impact study to try and build Runway 7 when it farmland.

Yes, yes. Well, I mean, I've been in this role for almost 5 years. And the environmental contracts for the seventh runway was let before I got here. So that pre-environmental was awarded about 5.5 years ago, 6 years ago.

To do a pre environmental study?

Environmental overall. So we're still in the pre environmental stage. But but that contract was let for all of the environmental for a seventh runway. And so that's being done. Now the issue is -- and what we've run into from various stakeholders is, namely the airlines is, are you fully optimizing the 6 runways you have? So therefore, do you need a seventh runway?

Now what I've said and what we've said is that once we go over 100 million, in order to sustain, we need a seventh runway because of the rate of departures and takeoffs and all of that. And so we know at some point, with forecast for 2045 of 120 million, we're going to need a seventh runway.

Talk that through for a second as it relates to -- everyone in this room has flown in and out of DIA. My understanding is that the slope that your jets come in is the exact same slope at every single 3%, which is the same at every major airport. So you can only have 2 coming in simultaneously and 2 taking off simultaneously. Is that correct? Or if you added a seventh, you could actually add a third inbound or a third take off?

I believe we could, yes. Yes. We could do that.

Is there any other for that's done that where they've got 3 jets taking off simultaneously...

I don't know of any. I don't know of any right now. But keep in mind that we're geographically, we have wind conditions and all that. So we change runways like all the time based on wind conditions and all of that. So...

But you don't have to worry about any buildings and you don't have to worry about any noise ordinance. And as a result of that, you have a massive advantage.

Well, we -- I would say we don't have to worry about noise. I mean...

Really?

We have a 1988 intergovernmental agreement with Adams County that talks a lot about noise and measure and noise and all of that. So we're always concerned about noise. It's inevitable at an airport, though. But I wouldn't say we don't worry about that. We do. We're very concerned about that in many ways.

That's surprising. So you've got, I think, 350 miles of roads out there. If you add it all together, that's from D.C. to Boston of continuous roads that you've got to maintain.

Yes.

You've also got more snowfall than another major airport. You and I have talked about this before. What do you do with all that snow?

Well, hopefully, it melts.

But you've got a melter.

Yes. We've got a melter. We've done very, very well with snow management, if you will, a melter...

Big environmental issues to it, right? So it all gets melted and then what happens to the water? Does it get recycled? Does it get...

Yes, we look to retain and capture all of the water. We look to retain and reuse the deicing fluid and all those things, that sustainability piece that we have. But we look to capture and recycle as much water as we possibly can. And I think we do a pretty good job of it.

And is there anything that doesn't meet the eye that goes on at DIA? So for instance, you've got like 1 of the things that I looked up First of all, you got a jail there. Hopefully, nobody in this room knows what the jail at DIA looks like.

Yes, we've got a morgue there, too. So...

You've got a morgue there too. How many passengers die on an airplane and end up at DIA to be taken care of, back of the envelope?

A year, I don't know, probably 10% or below I mean we -- I mean it's not as rare as you think. We have a lot of emergencies on aircraft. We have a lot of emergencies and not deaths, fortunately. But we take care -- I mean, in the concourses in the terminal, we have a lot of medical emergencies.

You have the largest service dog training facility in the state of Colorado. Why is that?

Yes. Well, the CATS program, the C9 program is really a fantastic program. Keeps people calm this whole idea of neuro diverse and all of that, and people get nervous when they fly. And so the K9 program, the CATs program really -- I mean, you would be amazed. When we bring all those dogs, those K9 in, it really calms a lot of people now, especially kids and seniors as well. And so that is one of our great programs.

People that own these lines that bring them in, I'm forever grateful to them, bring in their dogs and they got to pass a test. I don't think -- we don't have any rock wides or anything in that K9 program.

And as it relates -- I mean, all of us look at Instagram, and we see all these very sad kind of road rage that happens inside of the cabin of airplanes. Just last night happened to see one of the Southwest Airlines fight between 2 women. It just kind of came up and I don't need to see that. But that happens. How often do your either EMTs or law enforcement get called out to a plane to take care of sort of what I would call road rage would be what I call even though it's plan rage?

Yes, plane rage, air rage. It happens -- I won't say frequently, but...

I thought you happens more than I thought.

No. It happens occasionally, I will say. Where we have a disturbance on an aircraft. We have a fair number of planes that are sent to den for various reasons or -- and it might be a disturbance in the air. It might be a medical emergency and they are diverted to Dan. I think a lot of that happens when they are sent to us is because they know that our teams are very, very proficient, both our medical teams, both our fire department there. We pay for those services from downtown as well, police and fire and all of that. We pay the city for that, by the way.

But I think many of these are sort of referred to Dan because they know we have the personnel to handle pretty much any situation.

When you have police, you have paramedics, you have gate agents, you have pilots, you have passengers, you have caterers, you have fuel -- 40,000 people working in this ecosystem. They're not all your employees.

Correct.

How do you manage the access/safety component when they all have access to your facility and are all participating there. But if some, let's just say, Southwest Airlines gate agent decides that he or she doesn't want to act the way that they're supposed to act in going to the gate and being engaged with a flyer who may be or not be flying with Southwest, how do you deal with that?

Well, I think the first thing is creating a culture within the entire ecosystem, even though we don't handle everyone. We're not responsible for everyone. I think that we can really lay out a vision of safety and excellence and all of those things and create that culture ecosystem wide. And so we've done that. We meet with the airlines once or twice a month as a sort of a consortium of all the airlines. And so we talk about this culture thing. We talk about safety. We talk about all these things.

And the airlines, they handle their business as well. Airline employees, the example that you gave, all of the vendors, the concessions and all of these folks out there, I think -- I want to think that they understand what the culture is and what the vision is of the airport itself. And I think they adhere to it. That's not to say we don't have issues, we do. But I think for the most part, everyone understands that we need to run a good ship, and we have done that.

Is there a person -- so United has 90 gates at DIA, Southwest has like 40%. Is there a person at United who sort of is the station manager, everything that goes on at DIA. So you call him or her and say, "Hey, we got an issue where they call you and say, "Hey, we were on Gate A20 and something is that happening?

Absolutely. We talk to those station managers on a daily basis. You mentioned United. They have a wonderful lady who is the station manager, great professional, and we talk to her frequently. Again, probably almost every day. The same thing with all of the other airlines. And then we meet as a group, at least once a month. And I'm in that meeting. Several other folks from our team are in that meeting. So we work through these issues.

If we have an incident, we talk about the lesson learned. We talk about the after-action review that we do. So it works. I mean it's a big ecosystem and people find it hard to imagine how we control all that. But we've got good people there at the airport that help us do that.

I was looking at what your biggest city payers are. I was surprised that Phoenix is your largest city payer. And then it goes to Phoenix, Vegas, I believe, then Dallas and then L.A. But I was surprised about those. I would have -- I think about this being a regional hub and people coming in here and then going off to places like Boise that don't have a whole lot of direct access or -- but all 4 of those airports are major international airports. They've got lots of international flights coming into them. That surprised me that those were your biggest city payers. And I guess the question would be, how much are you working on getting flights from Asia to fly over San Francisco, fly over L.A. and come to Denver to then allow passengers to spread out into the United States. -- because your #1 international destination is Cancun, which is just Denver rights going to Cancun or someone from Boise who comes through here to go to Cancun. That's not necessarily someone in Tokyo, saying I'm going to New York. And I'm not going to go direct to New York, I am going to Denver and transfer across. What's the opportunity there?

Well, I think what we bill ourselves, what we've been saying over the last 5 years is that we are the gateway to the West. So it's -- in my mind, it's not just about Denver. The gateway to the West is come into Denver, catch that connecting flight to Phoenix or whatever. And so we have been sort of promoting ourselves that way internationally. We have been very, very aggressive over the last 5 to 6 years on international. We believe that with the rise of the middle class in Asia, in Africa, that travel will just -- we're already seeing the growth.

And so we have taken delegations to the continent of Africa. We are really targeting the continent of Africa. We actually went to Otis Ethiopia, Otis Ethiopia and took a delegation there and met with the government because Ethiopian Airlines owned and managed by the government of Ethiopia. And met with the Prime Minister there about a flight from Otis to Denver. There are some challenges with that. Otis is actually a higher elevation than Denver. And so we would have to take off from here with a less than full tank because of the weight that is involved with that. But I see tremendous growth on the continent of Africa, Asia as well.

Quick story, I was in Istanbul about a year ago. And we're in a setting like this, we had a delegation that went there because we got a direct flight, Turkish Airline. And the gentleman from the Chamber of Commerce came in and said, "We don't aspire necessarily to a big house like Americans do and the picket fence and all of that. We aspire to travel." So we're not so much concerned with maybe how Americans think about a house and all of that. Because what he said was we can't afford it, but we want to travel and our children want to travel. And I thought, you know what, that's pretty incredible to me. And we need to put Denver on the map, if you will, and not just have it as the flyover city. And so that is why this whole idea of economic development and us being a generator of $47 billion a year, whatever it is. It really boils down to what's happening here in Denver that people want to come to, and the West.

And so all of these things that city government is doing, the mayor is doing and all of that really ties into the potential that we have for folks to come here from all over.

You're talking about flights from Africa or from the Middle East or from -- you won't make it from the Middle East, that's too far right now. But from Asia and from Europe. What about space? Could DIA ever be a landing pad for people who go up to space and come back to space, given you got long runways, you've got runways that have very, very sturdy runways below them and you're pouring concrete down? How deep is that concrete? Is it 6 feet?

Yes, it's at least 6 weeks.

Really. Have you guys thought about space?

We have. We actually have -- listen, we've got a space for it within 5 miles of the airport, right? And we meet with the folks from Spaceport all the time. I absolutely believe that we are in the best position of any airport in this country to have space travel from. Now we've got to build the infrastructure and all that. But I think that we're so well suited. We talked about the land that we have and we talked about the space that we have to build. We talk about -- we haven't talked too much about the opportunities for development that we're doing right now. But I absolutely believe when I think about 20, 30, 40 years from now, Dan is the launching pad. It's the launching pad.

So if you think about that in the context of SpaceX and Tesla, and how Elon Musk is the S3 on -- or S1 on SpaceX came out yesterday that gives lots of insight into what the FaceXIPO is going to look like. And in it, they -- one of the things that I thought was so interesting was the fact that Elon has these 2 ecosystems between Tesla and everything that's in Tesla and SpaceX and everything that is SpaceX. And it's all co-mingled. You've got base buying the Tesla SUVs, right? You've got his -- all of these different companies are interacting with each other. So you're sitting here saying we're positioned as potentially the best airport to try and attract space activity, and yet the Denver City Council yesterday banned the development of data centers. You think Elon Musk comes to Denver?

What I will say from an infrastructure standpoint, what I feel our team's job is, is to prepare the way. I am not, of course, an elected official.

No, but I'm trying to push you on this front.

Yes. I'm an infrastructure guy. I was an infrastructure guy since I was a kid. You know what I mean. I was just like when my mother worked 14 hours a day and wondered when the next bus would come as we lived in public housing. My mom is a single mother. I was enamored with infrastructure for the good of humanity. I'm talking about -- I'm talking sidewalks, water, transit and all of that. We want to do what we can in our Fox hold, if you will, to show that we can prepare the way in terms of infrastructure for anything that we can dream of. And when I think about space, I think about what do we need to do at Denver International Airport to prepare that facility with the hope, with the hope that the politics will follow, right?

To much to ask for the politics to lead.

I think so.

Fair answer.

I think so. And I'm not just here. I'm talking about just nationally. I think that if I think about how I can prepare the way, and I think about all these things. I think about -- that we've talked about, I think about energy independence pave the way for that. Whether that is geothermal, whether that is small modular reactors that I get beat up on, but I stand by it, though. Absolutely.

How much would a small scale reactor to be able to give you enough energy cost?

Well, I mean, I think right now, I think about the need to run -- have energy and electricity, 24/7 days a week or whatever. And it's not just SMRs. It's a combination of all these things.

Could you do it on just SMRs?

I think eventually, we will be able to.

And any idea what that would cost?

I don't know. I don't know. Right now, it costs too much to do that right now, but I'm looking down the road.

Even with you having a $12 billion capital campaign right now. So it's bigger than that.

Yes, I think so. I think so. I think so. But I mean, these things are expensive now. SMRs, there's no real...

Could you pull it off on solar or the storage doesn't allow you to do?

I think solar -- I don't think we have enough solar to do that. Even though we have more solar arrays, and we have the -- probably the largest solar farm of any airport in this country. We can't do it just on solar. And so I think we're going to need a little bit more. And so I'm not just stuck on SMRs. I think we can do this across the board. I think we can do a combination of various alternative energy options to get us where we want to go, which is energy independence.

Final couple of questions. I talked earlier about the environmental impact study on Runway 7. You've got an environmental impact study going on, on the widening of Penny Boulevard. Of all the bottlenecks, you've gone and you've changed the TSA lines and brought it down to the best in the country. You've got your canceled flights down at the best in the country. You've got more growth than any other airport in the country. And yet Penyu Boulevard is still 2 lanes out and 2 lanes back. And to anyone who goes out there all the time sits there and says, "Why am I waiting longer to get in my car out there than I am to get through security into my gate.

Exactly.

Are we going to get some relief here?

Absolutely. And listen, we are talking about improving Penyu.

Well, that's just tightening it, isn't it?

Well, we cannot predetermine the outcome during the environmental period. Actually, that's against the law. So I have my ideas, but this is why we are going through that environmental process.

This is a $12 million environmental impact study.

I forget how much it is, but it is...

I believe it is $12 million.

Yes, yes.

But to figure out whether a swallow is going to have its migratory pattern change by us adding 2 more lanes to Pennar Boulevard?

Yes. It's we are looking to accelerate that environmental process as best we can, but we've got to go through it.

You want to make a -- do you want to make a bet with me that you've got a fix to your duality on the trams before Pena gets widened?

No, I'm not going to bet. I'm not going to bet. But I will tell you this, we are scheduled to get to what's called a preferred alternative by the end of this year. Now the preferred alternative says, this is what we want and plan to do. Now you got to go through this community thing and all of that, right, which we're nearing the end of. And at the end of this year, we're going to come out with that preferred alternative. Widening is one of the alternatives that we are out there shopping.

Sorry, what would be something else?

I can't remember all of the alternatives.

Beyond just widening it. Is it we're just widening it?

Well, there's a couple. There's there's the widening -- I'll come back to you with the other ones. But there's a transit element that we're doing to -- we've got 20 recommendations for what's called transit demand management, 20 recommendations that we can improve the transit side. But people don't realize that we own Pina, the airport does. And we're responsible for maintaining it. But to your point, the fact that Penya has not changed in 31 years. It's about time that we do something about -- and we are. We're at the end of that environmental period. And here's a bit I'll make with you.

Great. I'm not sure I'll take it, but you put it out there.

I bet that they will be a lot of consternation with whatever preferred alternative we come up with or people might just say, "Hey, that's great, Phil." But listen, this is something that we need to do. I mean we've had to explain to people that we cannot go from 50 million annual passengers, airport design for 50 million to 100 million and not do something about Pena.

100%.

Yes. I mean, just like we're doing with all this other stuff, right, we are doing the consolidated rental car facility. We are looking at a seventh runway. We're building the North Terminal expansion to get us to 120 million. We are expanding Concourse C to the West to get us to 100 million. We're doing all the sustainability things. alternative energy options, all of this. We've got to focus on the road that gets us to the airport. And I'm happy to say over the last 4 or 5 years, we have done that. And we're nearing the end of it towards the end of this year, where we are going to announce that preferred alternative.

So as I was getting myself ready for all this and looking at all the stats, I looked at what impact what you manage has on this state, and I said it at the top, it's got tens of thousands of employees, the largest employer in the state of Colorado. It's got 10% of the state's GDP. There's no other company or government service that has that much of a contribution to our state's GDP. It's innovating, and it's growing faster than almost anything else, and you run it. So I was sitting there saying, is Phil the most important person in the state of Colorado. And I will tell you, you're damn close to it. The governor may have more sway over an overall GDP growth and where he puts his finger on the scale to say that needs to grow or that doesn't or we're going to invest there. But barring the governor, I don't know someone else who I could have had to this conversation, who has a bigger impact on growth and the GDP of the state of Colorado.

And so thank you for all you do. Thanks for answering all of my very detailed questions. I love what you do. I love flying in and out of your airport, and I really appreciate you joining us today.

Thank you so much for having me. Thank everyone that's here or online or whatever and thank you for being just such a supporter of Denver International Airport and aviation in general.

Phil has the one drawback of knowing me as well as I know, Phil, is that he gets these texts from me at random time. I have been for 32 minutes from my value -- hasn't shown up on Carousel SP1 And he's like, it's coming really. I've got the team on. It's all good.

I remember that.

Yes. That actually, I'm not -- I hope everyone in the room who's watching this knows, I don't do that. What I did do once as I was coming back to the international terminal and literally the baggage cares. I was literally exploded in front of me. So I text it Phil said it baggage carousel on in the international terminal and the thing literally just exploded. He's like, thank you very much for audit. So I'm not quite as bad as my bags are taking me a long time the holding had blown up.

Well, what's funny about that. What you didn't know was that I was on an international flight right behind you.

Was it fixed by the time you got there?

No. No. But I had just landed and I was behind you on another flight, and I walked in and saw that. And our folks text it, our folks were working on it when I get to the international car sales, great.

So Phil, thank you so much. It's been great -- great conversation. Thank you all.

Thank you.

Good day, and welcome to the First Quarter 2026 Walker & Dunlop Earnings Call. Today's conference is being recorded.

At this time, I would like to turn the conference over to Kelsey Duffey. Please go ahead.

Thank you, Lisa. Good morning, everyone. Thank you for joining Walker & Dunlop's First Quarter 2026 Earnings Call. I have with me this morning our Chairman and CEO, Willy Walker; and our CFO, Greg Florkowski.

This call is being webcast live on our website, and a recording will be available later today. Both our earnings press release and website provide details on accessing the archived webcast. This morning, we posted our earnings release and presentation to the Investor Relations section of our website, www.walkerdunlop.com. These slides serve as a reference point for some of what Willy and Greg will touch on during the call.

Please also note that we will reference the non-GAAP financial metrics, adjusted EBITDA, and adjusted core EPS during the course of this call. Please refer to the appendix of the earnings presentation for a reconciliation of these non-GAAP financial metrics.

Investors are urged to carefully read the forward-looking statements language in our earnings release. Statements made on this call, which are not historical facts, may be deemed forward-looking statements within the private -- the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements describe our current expectations and actual results may differ materially. Walker & Dunlop is under no obligation to update or alter our forward-looking statements, whether as a result of new information, future events, or otherwise, and we expressly disclaim any obligation to do so. More detailed information about risk factors can be found in our annual and quarterly reports filed with the SEC.

I'll now turn the call over to Willy.

Thank you, Kelsey, and good morning, everyone. I want to start the call by thanking Kelsey for her incredible 12 years at Walker & Dunlop. She is going to take early retirement to spend more time with her family and everyone at Walker & Dunlop and Greg and I particularly are extremely appreciative of all you have done for Walker & Dunlop over the last 12 years. So thank you, Kelsey.

We started 2026 with active commercial real estate capital markets across the industry, and Walker & Dunlop closed $13.7 billion of total transaction volume, up 94% from Q1 2025, as shown on Slide 3. That strong transaction activity, coupled with continued growth in our servicing portfolio drove total revenues of $301 million, up 27% year-over-year, and diluted earnings per share of $0.46, up 475% over Q1 of 2025. Adjusted EBITDA grew to $74 million, up 14% year-over-year.

Our Q1 2026 financial performance reflects Walker & Dunlop's teamwork, brand, and continued standing as one of the best commercial real estate capital markets firms in the industry.

Debt originations totaled $11.8 billion, more than doubling year-over-year as activity accelerated across nearly every part of our financing business. Agency lending volume was up 109% to $5.2 billion, led by $3.1 billion with Freddie Mac. Our strong quarter with Freddie included a $1.7 billion refinancing of workforce housing assets for Starwood Capital Group, a deal that demonstrates our team's ability to execute on scaled, complex transactions.

$4.7 billion of originations for the GSEs increased our market share from 11.2% at the end of 2025 to 12.3% at the end of Q1, a nice step-up. Brokered debt volumes totaled $6.5 billion, up 155% year-over-year, reflecting our fantastic team and ability to place capital across commercial real estate asset classes with a multitude of capital providers. The debt capital markets are flushed with capital and allowing owners who don't like pricing in the sales market to refinance.

As Slide 5 shows, on Zelman's quarterly research, buy, sell, build sentiment index, only 6% of multifamily owners are currently sellers with 64% buyers and 30% builders. This phenomenon is tempering investment sales volume, which was solid, but only up 4% on the quarter to $1.9 billion. We expect investment sales volumes to increase over the course of the year due to increased capital flows as well as values. One important indicator of our growth and productivity is transaction volume per banker broker.

As you can see on Slide 6, on a trailing 12-month basis through Q1 '26, our average production per banker broker was $282 million, up from $248 million at the end of 2025. This increase reflects the pickup in industry activity as well as the large portfolio transaction I mentioned previously. As we continue to use technology and focus on increasing our team's productivity, we expect that this metric will continue to improve to hit our goal of $300 million of transaction volume per banker broker by the end of 2026.

Loan repurchases and indemnification agreements with the GSEs have required a tremendous amount of time and effort from our servicing and asset management teams over the past 2 quarters. During the first quarter, our total GSE loan repurchase exposure was lowered from $222 million to $192 million, which is welcome progress. Both Fannie Mae and Freddie Mac will be performing their annual reviews of Walker & Dunlop, and we are hopeful that those reviews in conjunction with the conclusion of any loan-specific investigations will be resolved later this year and allow us to move past these repurchase issues.

We have strengthened our underwriting processes, enhanced our teamwork and protocols, and reinforced our culture of accountability to make us an even better lender going forward.

I will now turn the call over to Greg to talk through our financial performance and financial outlook in more details. Greg?

Thank you, Willy, and good morning. We delivered a strong start to 2026 with a meaningful year-over-year improvement across all key financial metrics, driven by a significant rebound in transaction activity.

Total transaction volume grew 94% to $13.7 billion, reflecting improving market conditions and continued strength across our platform. This translated into diluted earnings per share of $0.46, up 475% from the prior year period, alongside a 14% increase in adjusted EBITDA, and a 20% increase in adjusted core EPS.

Our Capital Markets business is benefiting from improving market-wide activity that is fueling the expansion of our servicing and asset management business, which continues to generate consistent and durable cash flows.

Before I discuss our segment results, I'll briefly update you on our loan repurchase exposure. During the quarter, we repurchased one additional loan for approximately $5 million and also negotiated an indemnification agreement for a $34 million portfolio of loans without the requirement to repurchase the portfolio. As a result, our total repurchase exposure declined to $192 million at quarter end.

We recorded approximately $10 million in expenses related to these assets in the quarter, split almost equally between credit reserves and operating costs. We have begun executing on our disposition plan and expect to have 2 assets under contract in the second quarter with a goal of reducing our repurchase exposure to between $100 million and $125 million by the end of the year. Overall, we are making steady progress reducing this exposure and expect the portfolio to become less of a factor in our results in the coming quarters.

Turning to our segments, on Slide 7. Our Capital Markets segment delivered a strong start to the year and was the primary driver of our financial performance this quarter. Transaction volumes increased 94% and were led by growth in Freddie Mac, HUD, and broker transactions, driving segment revenues up 58% to $162 million.

Earnings growth for the segment was also strong with net income of $28 million, up $26 million from the prior year and adjusted EBITDA of $3.9 million, up from a loss of $13.3 million last year. As expected, personnel expense increased with transaction activity. However, the majority of that increase was driven by variable compensation and directly tied to production growth. Importantly, personnel expense declined to 68% of segment revenue from 84% of revenue last year, demonstrating the operating leverage and economies of scale of the platform as volumes recover. As financing and acquisition activity continue to improve, we expect the Capital Markets segment to be a key driver of growth in 2026.

As shown on Slide 8, our Servicing and Asset Management, or SAM segment, continues to generate stable earnings and cash flow. The servicing portfolio grew to $146 billion and generated $85 million of servicing fees, up 4% year-over-year, contributing to total segment revenues of $138 million, up 5%. Despite the $10 million of incremental provision and repurchase-related expenses this quarter, net income for the segment increased 12% and adjusted EBITDA rose 3% to $112 million.

The performance of this segment will be driven by 2 primary factors. First, as we execute our plan to sell repurchased loans, we expect to reduce the operating drag caused by this portfolio and further improve earnings and cash flow. Second, continued growth in our capital markets business will drive expansion of the servicing portfolio, increasing the long-term profitability of the segment. Taken together, this positions SAM to deliver consistent performance today with a clear path to incremental earnings growth over time.

Turning to credit on Slide 9, which highlights key metrics for our Fannie Mae At-Risk portfolio. There are over 3,200 loans in the $69 billion At-Risk portfolio and just 14 are in default at the end of the first quarter, unchanged from the end of 2025 and representing only 24 basis points of the portfolio.

We will be collecting and analyzing full year 2025 results for every property in the portfolio through the end of this month. Based on the financial data collected to date, which is nearly 80% of the portfolio, the weighted average debt service coverage ratio remains strong at over 2x and only 1% of loans collected to date are below 1x.

Credit fundamentals also remain sound with an average underwritten LTV of 61% for the entire portfolio and just 4% of loans above 75% LTV. We continue to actively monitor the portfolio and remain confident in the strength and stability of the underlying credit performance at this point in the cycle.

Our business continues to generate strong, steady cash flow, and we ended the quarter with $193 million of cash on the balance sheet. During the quarter, we deployed $13 million of capital to repurchase 283,000 shares of stock at a weighted average price of $47.13, leaving us with $62 million of remaining capacity under our 2026 authorization. We see a healthy pipeline of strategic opportunities and we'll balance investing in the growth of the business with returning capital through opportunistic repurchases.

Our dividend remains a key component of our shareholder returns. And yesterday, our Board approved a quarterly dividend of $0.68 per share, consistent with last quarter and payable to shareholders of record as of May 21.

Turning to our annual guidance, on Slide 10. We established our outlook assuming a gradual stabilization in interest rates and a corresponding increase in capital markets activity over the course of the year. While geopolitical dynamics have introduced some uncertainty around inflation and the near-term path of interest rates, we have seen limited disruption to transaction activity and the broader environment for commercial real estate remains constructive.

We are entering the second quarter with a healthy pipeline, consistent with this time last year. Given our strong start to the year and visibility into our near-term pipeline, we remain confident in our ability to achieve our guidance and deliver on our expectations. We're encouraged by the strong start to the year and the momentum we're seeing across both sides of the business. Capital markets activity continues to improve, and our servicing portfolio remains a strong source of stable, growing cash flow. We're entering the second quarter with a healthy pipeline and good visibility into an active transactions market, and we remain confident in our ability to deliver on our full year 2026 guidance.

Thank you for your time this morning. I'll now turn the call back over to Willy.

Thank you, Greg. As Greg just outlined, our business is delivering solid financial results as Walker & Dunlop's people, brand, and technology continue to differentiate us across the industry. I want to discuss today's market through the lens of signal versus noise and, importantly, what that means for Walker & Dunlop as we look ahead.

If you start on Slide 11, the market came into the year with a very constructive set of expectations, lower energy prices, deregulation, tax reform, and a pickup in M&A activity. That backdrop, if realized, would have supported a strong commercial real estate transaction market.

But as Slide 12 depicts, the markets have been volatile due to policy shifts, tariffs, and the Iran conflict. Unlike during many past conflicts, investors did not seek safety in treasury bonds. And as a result, equity markets fell as bond yields increased. Yet even with this volatility in the equity and debt markets, overall transaction volume in commercial real estate is normalizing.

Multifamily sales volume today is only modestly below pre-COVID levels, as you can see on Slide 13.

And as you can see on Slide 14, due to more capital being called than returned over the past decade, the black line on this chart shows the 5-year rolling average at negative $240 billion. Investors are seeking capital return, which is forcing owners to sell. We expect this phenomena will push transaction volume up, which drives both sales and financing activity at Walker & Dunlop.

As shown on Slide 15, commercial real estate lending volumes are projected to increase meaningfully over the next several years as the next investment cycle begins to take hold. We have confidence in this forward look for 2 primary reasons. First, industry volumes over the past 3 years have been significantly under trend, meaning there is a lot of pent-up financing and sales demand.

Second, look at the 2019 and 2020 financing volumes on this chart, $602 billion and $614 billion, respectively. That volume of lending was predominantly 10-year loans set to mature in 2029 and 2030. If you then look at 2024 and 2025, a ton of that lending was done with 5-year terms. For Walker & Dunlop, 54% of our 2025 GSE lending was 5-year term.

As a result, 2029 and 2030 are setting up to be enormous financing years. At the same time, the near-term opportunity for Walker & Dunlop remain very attractive as our clients are choosing shorter-term loans to buy optionality to sell or refinance assets more quickly. This will likely accelerate the financing and sales cycle and increase transaction volumes over the next 1 to 3 years. Multifamily fundamentals are very strong as you look at affordability versus single-family and the forward supply curve.

As Slide 16 shows, if you purchased a single-family home in 2019 when the median home in America cost $275,000, you paid $1,400 shown by the black line in principal and interest versus $1,600 to rent the average apartment in America. If you could afford the down payment, owning was cheaper than renting.

But as you can see from the bar chart, the average home price skyrocketed, driving the black line through the blue line, representing homeownership becoming wildly more expensive than renting. That is a structural advantage to multifamily over single-family today, and it will remain so until either home prices fall, interest rates fall, or multifamily rents rise significantly. Many Americans are also opting for single-family rental as an attractive alternative to owning.

From a monthly payment perspective, it is currently 20% more expensive to live in an owned single-family home than a single-family rental, making SFR an extremely important piece of the solution to the affordable housing crisis in the United States. Our team is very focused on growing SFR financing volumes. And while we are in support of the ROAD to Housing Act, we have been working with other industry leaders to remove the 7-year provision sale that would severely diminish institutional investment in DFR and SFR assets.

On the forward supply curve, as you can see, multifamily starts peaked in 2023, deliveries peaked in 2025, and we are headed towards significantly less supply over the coming years. This dynamic will drive improved fundamentals, increased transaction volumes, and deal flow for Walker & Dunlop.

We have a deep foundation and brand recognition in the multifamily market, a sector with significant tailwinds that I just described. But we've also diversified our capabilities to meet the expanding needs of our client base. The 155% increase in debt brokerage volume in Q1 is due to these investments and the strength of our team. And while W&D is known for multifamily, nearly 45% of our Q1 debt brokerage volume was on non-multifamily assets.

Similarly, while we have tremendous partnerships and scale with the GSEs, in 2025, we worked with over 250 capital providers [ nearly $22 billion ] of non-agency debt financing. We will continue to invest in capital markets bankers, brokers, appraisers, researchers, and technology in both the U.S. and Europe over the coming months and years to become the very best real estate capital markets firm in the world.

This is the mission of our newly announced 5-year strategic growth plan, the journey to '30. From a financial perspective, the plan involves significantly growing total transaction volumes to generate $2 billion of revenues by 2030. As we embark on this journey, we will continue to add the very best talent across geographies and across asset classes, expand our client base, invest in technology, and meet our clients' needs every day while growing our top and bottom line for our shareholders.

We have a strong Q2 pipeline of deal flow and confidence in achieving our 2026 guidance. We are focused on delivering growth in 2026 and making progress towards our ambitious journey to 30 goals, knowing that we have made the investments in people, brand, and technology to do so.

Thank you for your time this morning. I will now ask the operator to open the line for any questions.

[Operator Instructions] We'll take our first question from Jade Rahmani with KBW.

It looks like a very strong quarter. I was wondering if you could give some color on the mix shift between 10-year and 5-year deals, if you're seeing continued mix toward the 5-year and when you expect that potentially to inflect the other way or maybe it already has begun to do so?

Jade, good morning, and thanks for joining us. We and I personally watch that number quite closely. I will say this, we were actually, I think, seeing kind of a trend back towards more 10-year money. And then we had the rates go up by about 50 basis points and the steepening of the yield curve.

And I will say, since that movement, while as Greg and I both said, aggregate volumes have actually held in nicely, many borrowers have moved from longer term to shorter term just because of the pricing differential between 5-year paper and 10-year paper. It's my hope that when and if rates settle down, we get the reversion back to longer-term duration. But for right now, given that 50 basis point increase in the long bond, many people just from an overall proceeds and rate standpoint have opted for shorter maturity.

Secondly, can you just talk about the drivers of the strength in transaction volumes that you're seeing right now? How much of it is refinancing volume versus new acquisitions? And what would you say is driving the strength as WD posted leading industry growth?

So as we mentioned, Jade, investment sales activity Q1 to Q1 was pretty much flat, only up about 4%, whereas you saw debt volumes go up by over 100% in both GSE as well as non-GSE volumes. So it's very heavily on refinancing right now versus acquisitions.

While the -- I will say that at the same time, the investment sales pipeline is very strong. We have a very significant pipeline there as it relates to properties that we've done broker opinions of value on and have a lot of sellers waiting to go to market. But I think that what we have seen, particularly in the last sort of 6 to 8 weeks since the Iran conflict began, is that the sales market has somewhat gone sideways, whereas people still need to transact because they've got a debt maturity coming up.

And so as you can imagine, we're giving them pricing on a sale versus a refinancing. And what we have seen is many people sit there and say, I don't like what the price is I'm seeing in the market today. I'm going to go a short-term refinancing to sort of bridge through to a future sale. And therefore, they're going and putting the financing on.

And as I said in my prepared remarks, what that is going to do is give us, if you will, increased volume in the shorter term, people aren't taking the asset, putting 10-year financing on it. We won't see that for another 9 years. It's going shorter term, which would say that they're trying to buy optionality to either put it back in the market to sell it or they're going to be required to refinance it sometime in the next 4 to 5 years if they've gone with a 5-year instrument.

So we view that as a huge opportunity for us as well as our competitor firms as it relates to sort of increased cycle time in the industry.

[Operator Instructions] We'll take our next question from Chris Muller, Citizens Capital Markets.

Congrats to Kelsey. She's been great to work with over the years. So nice to see the repurchase loan exposure going down a little bit in the quarter. And if I'm reading correctly, it looks like you guys have reached indemnification agreements on all 3 portfolios now. So I guess, first off, is that correct? Am I reading that correctly?

And then I guess on the broader situation, should we assume that no news is good news in regards to Freddie doing their own investigation? I think you guys said on your 4Q call that you expected them to be wrapped up with that in 90 days. So just any updates there would be very helpful.

Chris, great to hear your voice on the call. Good to have you. So yes, you are reading that correctly. The $134 million of loans that we were working through on our last call, we've now reached either a repurchase and indemnification or just an indemnification agreement on. So that's behind us.

And then with respect to the review with Freddie, as Willy said in his remarks, we're working with them closely on that. We're sending them what they need from us in order to complete that review. And as much as we hope it will be done in the near term, maybe in the next couple of quarters, we don't control that timing, but we certainly think it will be wrapped up here in the near future.

And then I guess it's nice to see the pickup in HUD originations in the quarter. And it looks like that was the highest origination volume since 4Q '21 for that business. Is there anything driving that strength from a government policy standpoint? And should we expect that business to continue above 2025 levels?

So Chris, first of all, good catch because we didn't mention that and you just went and did your own homework on that. The HUD pipeline is strong. And I think it is reflective of Secretary Turner and the team at HUD and what they've done to increase processing times and streamline that business and making that business more competitive.

So I think you're spot on it that that's a very attractive sort of financing option today for many of our customers. And we have a very solid HUD pipeline for 2026. So feeling quite good about that. And as you well know, those loans carry with them very long maturities and very healthy mortgage servicing rights.

And so as we see an uptick in volumes there on HUD, while not a large part of our business from a volume standpoint, those MSRs are long-term and therefore quite significant from a financial standpoint.

And we'll move to our next question from Kyle Joseph with Stephens.

Congrats on a strong start to the year. And, yes, Kelsey, we'll miss you. Just wanted to touch base. First on, Greg, you kind of overlaid your plan for improving the profitability of the SAM segment. Can you kind of walk us through a few more details there and more specifically kind of how you're envisioning the time line for that?

Sure. Great to have you back, Kyle. It's an early morning for you. I appreciate you joining. So look, I think, first, what we've talked about now for the last couple of quarters is just our focus on reducing the portfolio of repurchased loans. That has been a $3 million to $5 million quarterly operating drag for us. And we have a couple of deals in the market right now, hoping to get those either sold or right around the end of Q2 or shortly thereafter.

And we're still evaluating the remaining part of the portfolio and think that by the end of the year, we should get the overall portfolio reduced by about half to $100 million to $125 million, which would be really nice progress.

And then, look, most importantly, we've got a capital markets business that is delivering top end market share right now, and that just feeds the servicing portfolio. The portfolio is going to continue to grow. We don't have a lot of near-term maturity risk or maturity pressure over the next 2 years. And as long as our team is delivering on the capital markets side, that's going to feed that portfolio and feed the growth of our servicing revenues and related fees.

So I think that that has a real clear near-term growth path. And that segment overall is just going to continue to generate the cash we need to grow this business.

It appears there are no further questions at this time. I'd like to turn the conference back to Willy Walker for any additional or closing remarks.

I want to thank everyone for joining us today. One final thanks to Kelsey for all she's done at W&D. Enjoy the time with the kids. And thanks, everyone, for joining us. I hope you have a great day.

And this concludes today's call. Thank you for your participation. You may now disconnect.

I love going and speaking at universities across the country. And it's a real honor for me when I go to universities that I could have never gotten into. And in some instances, that's a debatable point. But at MIT, that's a very clear point that I could have never gotten into MIT. So it's a real honor for me to be here today and talking to all of you.

The other thing that I would say, my friend, Sharmil Modi, just walked in and Sharmil went to Harvard College up the road, but was -- he was his Class A speaker at Harvard. And if any of you get a moment, you ought to go take a look at Sharmil's Class A speech because it's a real -- it's a great one.

With all that said, it's really fun to be at MIT today and having gone to business school just up the river. It's always fun to come back to Cambridge and see the Charles River with all the activity going on in the crew shells. And I ran the marathon a number of times when I was here, and that was just last week, and I had 3 of my business school classmates who ran with me way back in the dark ages, who all went and actually ran last Monday, which was really great for the 3 of them.

So let me dive into the presentation. I want to get the signal versus noise. As Denise said, I typically like questions during presentations. But I guess from an AV standpoint, it's better for us to wait until the end when we have the mic that's going to go around. So just if you got something that comes up in the middle of it, just hold the question and we can back up to the slide if you need to. But it's just easier from an AV production standpoint for us to do all the questions at the end when we've got the mic going around the room.

So titled Signal versus Noise, what are we -- it seems like there's a lot of noise in the markets today, not just in the commercial real estate markets, but just sort of broadly. And so the idea was to just kind of dive into a little bit of the data that might be able to pull out Signal versus Noise and what we're seeing in the market. So let me dive in here. So what was expected in Trump 2?

What was expected in Trump 2 is lower energy prices, immigration reform, lower taxes, increased M&A and deregulation. Those are the things that sort of everyone said, this is what the second Trump administration is going to bring to the world that we live in. And on pretty much all of those, the Trump administration has been very effective at actually putting in policies that have sort of delivered on all of that.

You can see here M&A back and being bolder than almost ever, hasn't quite hit the peak of 2021 that you can see in the middle there, but #2 over the past decade as it relates to actual M&A activity. The other thing on that black line is that's the number of transactions. So as you can see, the transaction is actually getting bigger, right? As that goes down and the aggregate amount goes up, it's just bigger companies, more M&A activity, which was something that we'd expected to see. And 2026 from both an M&A standpoint as well as from an IPO standpoint is looking like it's going to be a wildly active year in the capital markets.

One of the big questions that I have is, as companies like SpaceX and some of the AI companies go public, sort of where does that capital come from? If SpaceX goes public for $1.5 trillion valuation or a $2 trillion valuation, that's capital that has to come from somewhere. Are people selling other holdings and migrating into it? Are they getting out of a private credit position to go buy into those IPOs? Where does that capital come from? And what does that mean for the broader markets as you get trillions of dollars of IPOs coming out in 2026.

Tax cuts. The big beautiful bill gave tax cuts across the board to every level, every quintile of taxpayers has more in their pockets. I think one of the big things that people were projecting for right now, if you look -- if you rewind the clock when the big beautiful bill got passed last summer, many people were saying there's going to be a tax refund that goes to a great number of Americans, and they're going to get an average check of $2,200 in May of 2026, and that's going to stimulate a lot of economic activity. And then the Iran conflict happened and sort of everything has kind of gone to the side. But in a normal course of business, you would have been getting these refund checks off of the big beautiful bill that would have put $2,200 on average into people's pockets, which is sort of like the stimulus bill that went through during the pandemic, which would have driven a lot of retail spending. We'll see whether all that plays out given the backdrop of the macro situation today.

Border encounters, you can see here, the Trump administration clearly has been extremely, if you will, effective in implementing the border security that they had campaigned on and said that they were going to get to. I will show later on something that shows the implications of this as it relates to the demand side of the equation on rental housing, not an insignificant issue.

And then crude prices. One of the interesting things on this is you can see back here when Trump came into office, crude prices were at $80 a barrel. They got down over here on the far right in January, down into $56, $57 a barrel. The back of the envelope number on what that means to inflation is that for every $10 change in the price of a barrel of oil, you pick up about 20 basis points in the CPI. So as you went from $80 a barrel down to $60 a barrel, you're picking up $20 or you're picking up almost 40 to 50 basis points in the CPI because oil flows through everything.

And so in that, you could have seen from going up here down to there that the probably new Fed Chair, Kevin Warsh, would come into his new role with a backdrop of inflation sort of being under control. And then all of a sudden around hits and we see where oil prices have gone. And so now you go to the other end of that. So from $60 to $100, do the math, you're adding almost 1 percentage point to the CPI print if oil prices stay up at that level.

And on consumer sentiment, this is the one side to it all. You kind of look at the -- where the stock market has gone, and I got a chart in a second on that. But this is the one that I think probably confounds people in the Council of Economic Advisors as well as the President himself, which is that they look at the stock market doing great. They look at all the innovation that's happening in our country. They look at our country versus other countries and they say, "Man, we are doing a great job." And then they look at this chart and they say, "Oh, but the consumer isn't sort of behind us. The consumer isn't feeling good. The consumer isn't right now feeling any better off than they were when Trump came into office back here. And you can see it's actually fallen kind of off a cliff.

And so clearly, forget about the politics of all that in the midterm elections. This is one of those data points that I'm sure they look at all the other charts of what they set out to do and have delivered on, they look at this and they say, "What are we missing here?"

As I said, where are we on the equity markets? This slide is a pretty interesting one. If you look at inauguration day where you had the 10-year is the black line and the blue line is the S&P 500. And those 2 were inverted in the first year of the administration, they drove the cost of debt down, and they drove the equity markets up. And most people would look at that and say, "Hey, we're doing a great job." Then all of a sudden, obviously, they converge together at the beginning of the Iran conflict. And then you can see the recovery that's happened.

The question I would have right now is, if you will, how real is that recovery? Like do these 2 charts continue to move away from each other and S&P continues to go up and the cost of debt continues to go down? Or do they turn around and get back to the 2 convergence points you see on this in July of last year and then in March of this year?

K-shaped economy. You hear a lot about this. This slide back to January of '23 really shows you what has happened as it relates to consumer spending on the upper portion of the economy and the lower portion of the economy. So since '23 and the great tightening where the cost of debt went up, credit card payments go up, the cost of flying on an airplane goes up, everything else, you can see here that the top 1/3 of the economy earning over $250,000 annually, that's actually smaller than 1/3 are the ones driving the spending. And then the rest, which is earning less than $75,000 annually has sort of fallen off precipitously.

A lot of people have talked about the sort of the fatigue or that the U.S. consumer is going to kind of give up. So far, that hasn't played out. You look at consumer credit card default rates, while they have gone up significantly since the post-pandemic era where they got to historic lows, they're no different than they have been on a historic average as it relates to both DQs -- delinquencies as well as default rates. And so the consumer has actually held in better than many people had thought, but the K economy here really does show you that the majority of consumer spending is happening in the top part of the economy, not in the lower parts of it.

How is the K economy played into multifamily? This is kind of an interesting slide for two reasons. One, you can clearly see here on the 76 basis point difference between Class A and Class C multifamily, that there is a huge difference of the newer product, more amenitized, has a big pricing advantage. But then look at vintage for a moment because I think vintage is really interesting. You sort of ask yourself, how is it that assets that are newer or from 2020 until today are trading at a higher cap rate or as you all know, a lower value than a 2010 or 2000 vintage. And the issue on that one is the fact that core capital has basically pulled out of the commercial real estate market over the past couple of years, and it's been that value-add capital that has actually been active in the market for the past couple of years. Hence, those investors of value-add capital are driving down cap rates and the pullback in core capital is what has made Class A newly delivered actually trade at a higher cap rate or a lower value. But as you can see here, I spoke to AvalonBay's development group last week, and AvalonBay is going right at that higher-end product. And what they're building and what they own is directly targeted at the upper part of the K economy. And as a result of that, they're seeing rent growth and they're in the right markets with the right clients.

This is an interesting -- this is on multifamily investment sales volumes. So a couple of things jump out to me on this slide. First of all, look how consistent the market was from 2015 to 2020. Like you sit there and you're like, oh, there'll be 1 year that's good and 1 year that's bad and whatever. I mean it's literally like right on top of each other for an entire 5-year period up to the pandemic. And then obviously, we have a big dip down and then we have this big spike back up. The thing to keep in mind here is we're talking about kind of a recovery of the markets right now, and you'll hear myself and other CEOs of services firms talk about the markets are recovering. The market is pretty much recovered.

If you look at the average volume for the last year, it's back to pre-pandemic levels. The thing about it is that a lot of us look at this and say, investors in Walker & Dunlop look back and they say, well, why don't you back at these volumes? Who knows whether we ever get back to those types of volumes. But from a normalized market standpoint, you can see the hiking period, the trough, and now we're in that recovery period. But as it relates to overall volumes, we're pretty much -- as far as multifamily investment sales, we're sort of back to pre-pandemic levels.

This is an interesting slide, which doesn't take all of you with your MIT soon-to-be degrees to understand this. Hindsight is obviously always 2020 vision. But go back and look at the spread, okay? So this is cap rates versus the 10-year. Light blue is the cap rates. The dark line is the 10-year treasury, okay? And then the bottom one is WME Track institutional sales. So this is multifamily institutional sales and the volume of multifamily institutional sales, okay?

Obviously, you've got the pandemic that comes in right here in this moment. And so you have no activity during the pandemic, everyone's gone home, nothing is happening. But look at the spread between cap rates and interest rates. It does not take an MIT degree to realize that this is a really good time to be buying commercial real estate and buying multifamily.

The spread between what you're paying in interest rates and where you are from a cap rate standpoint. And then, of course, everyone sees this and they go, great, now it's time to buy. And look at what happens to volume. Everyone gets the memo here and they get to a point here. The problem with that is you really didn't want to be a buyer right here. And by saying what I just said, I'm insulting every single Walker & Dunlop client, okay?

So I know this is going out on our webcast and to everyone who's going to be watching in on this, I'm not trying to be -- I'm not trying -- but hindsight's 2020 vision and almost -- not all the deals that happened here are "in trouble," but this is sort of a vintage of deals here where cap rates and interest rates have compressed, where that's not a great vintage. If you bought there, you're probably not getting into your promote. And I just put this out here because as you go into your careers. And you see a chart like this, you just sort of say, let's make sure we're looking at the data when we can see a spread like that and say, let's take advantage of it. And then you see this collapsing of the two and you sort of say, "Maybe now is not the time for me to be buying."

What's amazing to me is the amount of institutional capital that sees all of this and they say, we need it on the party, like got to go, let's go buy." -- and they made a buy here or here that they now look back on and say, maybe we shouldn't have jumped into the party at that point. So this slide is on debt volumes. The thing I love to look at is that we pull this from the Mortgage Bankers Association. So this isn't our data. But I will also tell you, I've been in this industry for almost a quarter century. And I have yet to be presented with by either my team or the Mortgage Bankers Association, a slide that goes down here. It's always up and to the right. Somehow or another, the future always looks nice. And it obviously doesn't always go that way because back in right here where they were projecting it to continue to go to the right, we fell off quite dramatically.

The one thing to keep in mind on this chart is that this is all based off of maturity volume -- maturity schedules. So it sits there and says, okay, you did a huge amount of debt in 2020 and 2021, right, $1.5 billion between those 2 years -- $1.5 trillion, excuse me, not $1.5 billion, $1.5 trillion. And you sit there and you say, okay, most of it was 10-year paper, project out 10 years and you go 2029 and 2030, you got to redo all that paper. A lot will be redone in between. But you know from a maturity standpoint, these 2 years are going to be significant years given the amount of volume that went on in these 2 years. The thing to keep in mind that is very different is the following. In 2020, just on our agency volume at Walker & Dunlop, we did $20 billion of lending with Fannie Mae and Freddie Mac.

And in 2020 at W&D, we did not do a single 5-year loan, not one, 0. Out of $20 billion in 2020, we did not do a single 5-year loan. It was all 10-year paper, some 7-year paper and some longer than that. But the great majority of it was 10-year. So all that $20 billion that we did in 2020 is set to refi in 2030. Now go to 2025. Last year, of our $16.8 billion of lending with the agencies, 63% was 5-year paper. 63% was 5-year paper. So what you're getting here is you've got all of these maturities in 2020 and 2021 as well as all the maturities in 2024 and 2025 that are all going to pile up right here because the market has shifted.

Now why did the market shift? A lot of people look at where cap rates are right now, and I'll show you a slide in a second as it relates to buyer sentiment, seller sentiment and builder sentiment. But they look at cap rates right now and they say, I don't want to sell at this elevated cap rate. And so because they don't want to sell at this elevated cap rate, they say, let's just kind of refi the asset, but I don't want to put 10-year financing on it because if I decide to sell it in year 3, I've got a lot of yield maintenance that's left in the mortgage that I have on the property. So I want to go shorter. Let's go 5.

And so first of all, it's prepayment flexibility why they've gone 5 and the other thing is just the steepness of the yield curve. 5-year borrowing has been significantly cheaper than 10-year borrowing. And a lot of the deals that need to get redone in '25 and '26 were bought back, maybe they were bought in '21 or '22 with a 3- or 5-year instrument on them. And that cost of financing has made it that the performance of the asset is such that they need every dollar they can possibly get. And so as a result, they're going shorter at a cheaper cost of capital than going longer at a higher cost of capital. And so that has made a very interesting dynamic in the market; a, that everyone is borrowing short; and b, you're going to get this big pile up in 2030 and potentially 2031, depending on what volumes are in '26 of 5-year and 10-year paper that all needs to get redone at the same time.

One of the things we're talking to a lot of our customers about is you may not want to have a refi coming up in this window, and you might want to try and push out if you possibly can and not have it come up for refinancing at the exact same time.

So here's the buy-build sentiment slide. For one second, take a look here. Remember where we were in '21 and '22 when I was talking about that volume spike, okay? This should remind you of one thing. Markets are made by buyers and sellers, but if nobody wants to sell, you really don't have a market, okay? Everyone back here was a seller. All the dark blue is the sales. Everyone was a seller. It's like, I love that cap rate. Let's go. Let's sell it, okay? And you could see the buyer sentiment is the light blue, which was -- a lot of people you say, are you a seller or a buyer? It was like, no, I'm more of a seller today than I'm a buyer, but obviously, there are plenty of buyers to buy.

And as you can see, the build sentiment moved from Q3 '21 and pretty much went straight down until right here in what is that Q3 of '24. So everyone was -- I'm a buyer or a seller, but I'm not a builder. And now all of a sudden, you can see the build sentiment coming back out, okay? The interesting thing, look at how much is in light blue. So there are all these buyers out there. They're like, I want to buy, I want to buy, I want to buy, but there are no sellers. At the end of Q4 of last year, only 4% of survey respondents were actually sellers. And I have also -- we bought 18 companies at Walker & Dunlop, and I've always said that companies are sold, they're not bought.

If we want to go buy a company and wildly overpay for it, we can go buy a company. But if you want to actually go make a good deal, you're going to find a willing seller who wants to sell their company to Walker & Dunlop and become part of Walker & Dunlop. That's how good M&A is done.

And so similarly, in the property markets, you can see here, right now, we are in a buyer's -- it's not a buyer's market because there are too many buyers who want to buy. It's actually a seller's market, but sellers right now don't want to sell.

One of the reasons why we are getting -- let me go back real quick here. One of the reasons you've got this amount of volume in the sales market is because of this slide. So this is capital flows. So capital called, capital distributed and 5-year rolling net distributions cumulative. And as you can see on the 5 years, net distributions cumulative, we are way, way negative. So what ended up happening is that LPs who have invested in commercial real estate private equity funds have sat there and they've said, look, you called all this capital back here, the light blue is all capital calls and you haven't redistributed any of that capital back to me.

So you want to go raise private equity Fund VI, private equity Fund VII, you need to return capital to me before I'm going to give you another dollar for your next fund. And so that is what's driving. If you look at this buyer-seller sentiment, nobody really wants to sell, yet you go back here and you say, but the sales market is actually reasonably active. That's because investors want their money back. And it's that sort of forced transaction volume that's going on in the market today that is really driving volume. It's not because they're saying, I love that cap rate and want to sell into the market. It's because they need to return capital to their LPs. And until they do that, they're not going to get capital for their next fund.

You can see here, this slide is pretty interesting as it relates to private credit versus commercial real estate. So you can see the light blue is non-traded REITs. The dark blue is non-traded business development corporations. Most of that is private credit funds. And you can see here that it was all commercial real estate in 2020. In 2021, BDCs or private credit started to come out, but it was still predominantly commercial real estate and then boom. From '22, it was all commercial real estate, that falls off a cliff and then BDCs or private credit start to grow. The real question now is what happens with the redemption queues in private credit? And does that end up flowing back into commercial real estate private equity. That's right now, I would say to you that commercial real estate, private equity will benefit from the rotation out of private credit funds.

And this just shows you here the redemption queues that are there and what I was just talking about. You can see that the redemption queues on the non-traded REITs have come down significantly, and you can see the redemption queues on the non-traded BDCs going up quite significantly.

This slide, you've all seen it, heard it. An effective or a functioning market is when you've got average starts and your average completions relatively close to each other. That's one of the reasons, quite honestly, why you're back here with very consistent sales volume is because you've got supplies and deliveries -- construction starts and deliveries all kind of paired up. But obviously, the pandemic kind of turned everything on its head. You get back to that quarter where everyone is like, wow, I got to get into this market.

I'm going to go make an investment. And boom, we got lots of shovels going in the ground and starts start to spike and you're still with a delivery number that's normalized and then all of a sudden deliveries, all these construction starts turn into deliveries. And what everyone sees in this slide, obviously, is that because you had starts come down significantly, you're seeing deliveries come down with the starts. So that is going to create what should be an undersupplied market.

But what we've seen is that you're looking at this slide, and this is your multifamily demand slide, okay? And -- what everyone was looking at was, okay, starts have gone down, deliveries will go down. And if you were looking at that back in here, you're like demand, which is this coin bar, demand is just going to keep on going up. So demand keeps going up, supply and starts go down, and it's a great market and we can start to push rents, except as you can see on this for the last 3 quarters, demand has fallen off and demand has fallen off significantly. And one of the big questions there is why has demand fallen off when the price of multifamily housing is so much cheaper than single-family housing. So that's not the market losing in the competitive battle with single-family. Let me just show you really quickly on single-family versus multifamily. So -- and I'll come back to that other slide.

So this darker line is what the cost of homeownership is on principal and interest on a mortgage payment. The bar charts are the median price of a single-family home in America, okay? And the blue is the average cost of renting in America, okay? So you go back to 2019, 2020, and you were much better off, much better off buying a single-family house right here for an average price back then of $280,000. Much better off buying your $280,000 home, putting a mortgage on it and your principal and interest. We're down here at less than $1,200 a month. And the average rent in the United States back then was $1,400 a month. You were $200 in the black on a monthly basis for having your single-family home and paying your P&I on your mortgage, then you were renting.

And then all of a sudden, as you can see, because of the pandemic, the cost of single-family homes started to skyrocket. And that's this bar chart going all the way up where you move from the average median price being at $270,000 all the way up to what was at $430,000 over that period of time. Well, to buy that $430,000 home and pay principal and interest on your mortgage, as you can see on this line, it's skyrocketed. And you went upside down on your cost of homeownership versus the cost of renting.

And look, the cost of renting went up significantly from '21 to '23, but then it basically plateaued since then. But the important thing about this is to think about it from a structural standpoint that right now, it is significantly cheaper to rent than it is to own a home. And until mortgage rates come down and this bar chart continues to fall down, and no one is wishing that we lose value in single-family homes in America. But until the values continue to come down and the cost of borrowing continues to come down, it's still going to remain much, much cheaper to rent than to own a home.

So if that's the case, multifamily is holding up really well against single-family. People aren't like saying, "Oh, it's cheaper for me to own a single-family home than to rent. So then what is it that's making that chart as it relates to demand come down? And the only thing that you can come back to really is immigration and the fact that the border has been closed, that there isn't a huge amount of illegals coming in and that legal immigration numbers have not gone up. And so I think this slide is a very important one to keep in mind as it relates to household formation, demand drivers for multifamily as well as single-family. And until the government does something as it relates to increasing the amount of legal immigration in the United States, that demand side of the equation is going to be questionable.

Let's dive into a couple of specific markets, and then I'm going to open it up for Q&A in a sec. So before we started, I was asked about sort of what markets are hot and what markets are not and the oversupplied markets.

So if you look at this slide and you look at these MSAs -- this is the top 10 markets right now. And you sort of said, I see here all of the Sunbelt, job growth, companies relocating from California to Texas. You would sit there and say, okay, that would mean that San Francisco isn't a place that I want to be. It happens to be at the very, very top of the list. San Jose is a place I don't want to be -- happens to be #2 on the list. Look at the cities here that are doing really, really well right now.

And oh, by the way, look at the trailing 5-year population growth, negative 4.5%, negative 1.2%, negative 0.9%. Who's the winner on this list? We've got a whopping 2.8% growth in Cincinnati, Ohio over the last 5 years. Not exactly boom from a population growth standpoint, okay? But none of these markets had any real new supply into them over that 5-year period, so they don't really need the new population to come in to get the type of rent growth that they've been able to get. So these right now are the darling markets that while 2% rent growth doesn't sound that great in comparison to this list, it looks really good.

So now look at all these markets. These are all your oversupplied markets. These are all the markets that all those shovels back in that previous one of starts into the deliveries. This is where they all went, okay? And as you can see here, I mean, look at the population growth in all of these. So at this one, our winner here was 2.8%. Look at these population growth numbers, almost all of them in double digits. It's where the jobs are, it's where the people are moving, except for the fact that they've all been wildly oversupplied. And so you might sit there and say, well, I like the long-term growth of Austin, Texas. No doubt, I think you've got to like the long-term growth opportunities for Austin, Texas, except for the fact that in real estate, when you have oversupply to the degree that Austin, Texas has had, you're going to have negative 7.7% trailing 12 rent, it's not rent growth, it's negative rent over the last year. Denver, Colorado, # 2, negative 7.4%.

Two really, really hard markets to be an owner in today. Do they both have Austin more than Denver? Do they both have really, really good fundamentals to them? Without a doubt. Has Austin turned into a really affordable market almost overnight, 100%, single-family and multifamily.

Austin, if you were -- if I was starting Walker & Dunlop today and I had to pick a city to move to, Austin has so many things going for it, including it's super affordable today. Super affordable. So if you say, start today and go forward, Austin is a great market, except for the fact that you're probably going to have to feed that asset if you went and bought one for a period of time because we're still trying to absorb all the oversupply that was in that market.

So one of the big things that Peter Linneman, who comes on the webcast on a quarterly basis and I constantly debate is Peter is very much prone towards Cleveland, Ohio and Cincinnati, Ohio, sort of kind of boring Midwestern markets and anyone who I just offended by calling Cincinnati and Cleveland a boring market, excuse me. But it's kind of steady Eddie. You're never going to get this big surge in supply. And as a result of it, if you buy well, put low leverage on it, it's going to turn into a really good investment for you.

These markets are the ones that -- there's a lot of, what I call, grass and glass there. People are like, man, I can go into Austin and I can buy it and I'm going to sell it at like a 3.2% cap rate at some point. And by the way, I got a lot of clients who were investors in Austin, either built or bought back in 2013 and sold in 2018 or '19 at a 3.2% cap rate and made just enormous returns on multiples on their money. So a lot of these markets, you can make a lot of money. But right now, as it relates to do you want to be an owner in them. I was just in Phoenix 2 weeks ago.

Phoenix is still way oversupplied. The one other thing about Phoenix, the building of the new Taiwan semiconductor plant there, fascinating to see the amount of work and the kind of ecosystem that's going on in Phoenix right now around that investment. And it's obviously not just that they're going to build a chip manufacturer there. It's all the ancillary services that need to be built out there. I met with a gentleman who is working with Taiwan Semiconductor as it relates to all the other kind of services that they need, the plants and how the plants feed products into the actual chip manufacturer, but then the multifamily and the retail and the office and everything that needs to be around that huge investment of tens of billions of dollars. It's really quite something and will be a great growth driver for the Phoenix market over the next couple of years.

So in summary, before we go to Q&A, a couple of things on noise. You hear a lot about $200 a barrel. We're not going to $200 oil on a barrel. Trump won't let it happen, period. The President will stop the conflict before we even get close to that. So there's a lot of fearmongering about that, that isn't going to happen.

Runaway inflation? One of the big things to keep in mind is that one of the main reasons that the inflation print has stayed as high as it is, is because of owner's equivalent rent and because of multifamily rent growth that for whatever reason the CPI continues to get a false read off of. But owner equivalent rent is 25% of the CPI and nobody's ever paid owner equivalent rent ever. You don't -- I own 3 homes, and I don't pay rent to anyone. I pay a mortgage, but that owner equivalent rent of what would you rent your house to someone else for today, no one's ever paid it. It's a completely made-up number.

So if you call me today and say, what would you rent your house in Denver, Colorado for, I'll come up with some number. And I'm going to kind of triangulate off of some number I heard down the street. They'll tell me, last month, you said it was x, this month, is it up or is it down? And I'll give you my gut reaction of I should charge more, I should charge less. That's the way they go about determining owner's equivalent rent and it's 25%, 23% of the CPI. Makes no sense.

So in the CPI number that has stayed elevated is an elevated owner equivalent rent number that shouldn't be there. I'd be interested to see whether Kevin Warsh when he comes into the Fed thinks about doing something to adjust it. It's one of the reasons why so many economists don't focus on the CPI, but focus on the PCE because the PCE has a lower weighting on housing than the CPI. But the bottom line on all this stuff is I told you about oil and the impact of oil. Oil stays high for a very long period of time, it will have an impact on the CPI, but I don't think we're going to have runaway inflation as many people are fearmongering.

Higher interest rates. I don't predict interest rates, okay? But what I would say is the following. You have a new Fed Chair who is coming in, and there's no doubt that he has heard the President clearly that he wants to get the cost of borrowing down. The second thing on all that stuff is you are either going to have Kevin Warsh being successful at lowering rates or you'll have a sell-off in the equity markets that should have people move to safety in treasuries. The interesting thing since Iran is that you actually didn't see that happen.

Typically, when there's an international conflict like Iran, people flee into -- they jump into safety and you would have seen yields on the 10-year go down. That didn't happen this time, which is a little concerning. And at the same time, if you do get a significant sell-off in the equity markets, there's no doubt that you're going to get the 10-year going down.

Debts of the blue states and blue cities, I just showed you numbers on why they're not dead and probably aren't going away. There's lots of talk about all this great migration to the lower tax, high-growth states. But from a real estate standpoint, those states are still struggling. And then transaction volumes remain muted. I showed you, there might be a narrative out there that says transaction volumes are muted, but at least in multifamily on the sales side, it's sort of back to the normal.

On the Signal, CRE capital flows will drive transaction volumes up and cap rates down, okay? I showed you that rotation of capital from LPs. That is going to continue. That doesn't stop. The capital hasn't gone back to them. They'll continue to ask for their capital and fund managers who want to raise their next fund are going to have to recycle that capital. That recycling of capital means that they're putting it into assets as they sell them and refinance them. More capital flows mean cap rates come down.

You then go from a, "I don't want to sell market to I'm ready to sell market," and transaction volumes come. That's the way it will happen.

Multifamily significantly more affordable than single-family. That's there. That's structural right now. That doesn't change quickly. Prices of single-family have to come down materially and the cost of borrowing has to come down materially for that to change. So for quite some time, multi continues to win over single.

Sunbelt will continue to attract jobs and families. No doubt about that. You saw the job growth numbers that I put up there. They are the long-term winners right now, unless Blue states can figure out how they can get their tax policies in place to retain and attract new investment.

Population growth problem without increased legal immigration. That is a really important one. And by the way, the administration can work on that. They can say we only brought in 700,000 legal immigrants last year. Let's bring that up to 1 million. Let's bring that up to 1.2 million and start processing more legal immigrants to the United States. And then the final rates will come down due to cuts or the sell-off in the equities. Pretty -- again, I don't try and predict where rates are going to go. I get asked about it all the time. I'm smart enough to leave that to economists and not myself. But you just think from a signal standpoint, there'll be plenty of noise in there. But from a long-term outlook standpoint, we should be in pretty good shape where rates should come down either from a sell-off in equities or that Kevin Warsh is effective as the Fed chair in bringing down the short end of the curve and the long end should follow at some point.

That is it for my prepared remarks. I am up for any and all questions. So let's dive in.

Michael Camus, MIT, MS. Thanks again for coming out today. You're a native Washingtonian. You've long been a proponent of the city, and it's created a real estate market. You recently had Meyer Baer on the webcast, and she's communicated her and her team are all in on D.C. to bring business and investment back to D.C. But there's obviously been some hesitancy from investors in reentering the D.C. real estate market. And I'm curious if you're still bullish on D.C. And what do you think needs to happen to make those investors more comfortable to reenter?

So a couple of things on that. The big story of 2025 that has not been covered widely, but that Peter Linneman has underscored not only in our last conversation, but in the Linneman letter, is that the federal government shed almost 250,000 jobs last year. Almost 10% of the federal workforce was shed in 2025. And Peter's comment is that like the Trump administration hasn't jumped up and down and said, look, we actually did what we said we were going to do as far as thinning things out.

Elon Musk came into town to do his go stuff and left town and everyone sort of said that was an effort that we're not going to follow up on. But that shedding of federal workers is a very, very significant economic driver for the greater D.C. area. If you think about it, theoretically, those people will then go find jobs in the private sector, which if you're a libertarian as my friend, Peter Linneman is, you're like, that's great. They're going to go into productive jobs rather than just redistribution jobs. Those are Peter's words, not mine. But that does put pressure on the D.C. employment market.

The other thing that when Doge came in, one of the big concerns I had was all of the consulting firms that sort of, if you will, feed off of the federal government apparatus from a defense contracting standpoint, from a process engineering standpoint, the likes of Booz Hamilton -- Booz Allen and other big consulting firms. They were very much sort of under target for redo or elimination of their contracts from what I have seen. That sort of came and went pretty quickly with Doge. So that they are still doing as much business. And then the other piece to it is you got to remember, we're going to print a, what, $2 trillion deficit in 2026, $2 trillion. So the bottom line is the federal government is still spending money hand over fist.

So it's sort of a tale of two cities, if you will, in the sense that you actually had 250,000 job cuts out of the federal workforce, which is big downward pressure, yet you have a federal budget that's running a $2 trillion deficit and is spending money on everything over and over and over.

So the question there is what does all that mean for the D.C. area? D.C. is struggling, and they have a new mayoral race coming up and Mural is stepping down from her role and we'll see who the new mayor is. Northern Virginia is doing extremely well and suburban Maryland is also struggling in a very big way. And Governor Wes Moore of Maryland has a big challenge in front of him as it relates to getting that state in a position where it can attract jobs and attract companies.

Well, that was an amazing presentation. I am thinking about the recent regulation on private equity ownership of single-family homes, and I'm curious what your thoughts on how that affects the rent versus own that.

So the legislation that went from the Senate to the House has in it a provision on build for rent that requires anyone who builds a build-for-rent community to sell the community in 7 years. That's really bad legislation. In a bill that is designed to try and increase the amount of supply of housing in America, they put in there a paragraph that does exactly the opposite. And the build-for-rent market has been frozen since that -- since the Senate passed that legislation.

And by the way, they passed it 91-8, one person didn't vote, 91-8. They haven't passed anything in the Senate, 91-8 in a long time. When you have Senator Tim Scott from South Carolina and Senator Elizabeth Warren from Massachusetts, both fighting for the same legislation, you know something sort of gone wrong, to be honest with you. I mean, honestly, they should be on different sides of most issues, and this one they both jumped in on. And unfortunately, that paragraph on BFR is going to set the build-for-rent industry back a lot.

Senator Warren is very specific in saying it only applies to those who own over 350 homes, okay? And that is only 70 basis points of homeowners in the United States, okay? So she's pretty careful with her numbers here.

She's like it's only impacting 70 basis points of single-family homeowners, except those 70 basis points are the only people who have the capital to build new homes. Everyone else is just a single-family homeowner. It's those companies that actually build-for-rent that create the build-for-rent supply that then feeds into the single-family rental market.

So this 7-year provision is a real problem. I got something last night that there's actually some real progress going on and a number of Congress men and women have signed on to basically say this provision needs to be changed. And I actually also heard that the speaker of the House understands the problem and has asked the Chairman of the House Financial Services Committee, French Hill, to focus in on this and potentially change it in the House legislation.

So we will get that law passed as it relates to the other provisions in it. And the President and his executive orders to try and create more supply and bring down the cost of housing in America. But that one provision on BFR have to sell after 7 years, hopefully gets pulled out in the actual legislation. But for right now, there is not a big institutional investor that will put $1 into a BFR community right now given the potential regulatory risk around it.

Thank you for coming here. And so I just want to ask about rates and inflation. A couple of things you didn't really spend a lot of time talking about was the national debt, the demographic trends and trade, all of which, in my view, are highly inflationary and changed dramatically over the last 5 years. Wondering if you could sort of -- and that's a very large question, but if you could sort of comment on those within the context of your -- what you had said before.

So sure. And I'll give a big disclaimer before I say anything on it. I am not an economist. I'm not a trained economist. But I will tell you from having done now almost 6 years of quarterly Walker webcast with Peter Linneman, who is one of the truly great economists of our time. I do feel like I've gotten a PhD in reading the Linneman letter on a quarterly basis and being able to go to Peter with lots of questions.

And so I will say everything I'm about to say is 100% from Peter Linneman, okay? So this is not my thinking. This is all out of Linneman.

Linneman has spoken extensively about the fact that he doesn't think that the national debt is a big issue. And I don't want to dive into Peter's reasoning, although one thing that I would say is just he goes to our overall national net worth, what this country is worth, how much GDP we are developing and growing. And he basically says, if you're adding $3 trillion to $5 trillion a year of net wealth to the United States, you can easily afford to be printing $2 trillion of deficits on an annual basis.

So as long as you keep that GDP growth going and we're creating $3 trillion to $5 trillion of additional net wealth in the United States every year, you can run $2 trillion deficit and it's not going to catch up with you. The one thing that you know very well on that one is that's as long as we remain the reserve currency. And if we lose that position, we're in real trouble.

The issue with it is go back and think about this. China is now squawking about that they want to create the reserve currency. And there obviously was some thought that Bitcoin and other crypto currencies were going to be a better store of value than the U.S. dollar as the reserve currency. The euro had every opportunity to become a real competitor to the U.S. dollar, except for the fact that they never got the U.K. into it and they never got Switzerland into it, 2 of the larger economies from a financial services standpoint. And because of that, it's never really had the chance to be a real competitor to the dollar as it relates to a reserve currency.

And then think about how long the euro has been out there and how long they've been trying to make a run of making the euro be any kind of competitor to the dollar. We're talking about things that take decades, quarter centuries, half centuries to get developed. And so yes, right now, there's a lot of talk about the debt is too high, lots of our allies are -- there was a big narrative last year that actually is another one on Noise versus Signal.

There was a lot of talk last year about all of our allies dumping their treasury holdings because they wanted to kind of give the finger to the United States. It didn't happen. You look at treasury holdings of foreign countries, they're going to go for yield and safety. They can sit there and listen to politicians and say, we don't like this, we don't like that. They're going out -- they have a fiduciary responsibility to get for their investors what they need to. They weren't dumping treasuries.

So I would just say, as long as we remain the reserve currency of the world, unfortunately, we continue to -- we can continue to be propagate spenders and not treating tax dollars the way that they ought to be. The one other thing that I would throw out there is this kind of blue state, red state and tax policies has a huge impact on sort of decades worth of growth and where companies are going. I happen to live in the state of Colorado. Colorado is 4.4% income tax, which is actually quite low relative to other states that have income taxes.

There's a ballot initiative in Colorado right now to try and overturn the taxpayers' bill of rights that holds that at 4.4%. And I've been talking extensively with legislators about how damaging that would be to Colorado. And if they were to take it from 4.4% to they've been talking about 8% to 9% if they were able to overturn it.

And one of the things I've been advocating is, why don't you all think about going to zero? And every time I say that, they're like, what do you mean? Like we can't go to 0. We've got a $1 billion deficit this year. And I said, well, the bottom line here is think about the type of growth you would get of companies moving from California to Colorado if you dropped it from 4.4% to 0. And what that would do to your overall fiscal position. The thing that Colorado has that many other states like New York or California don't have is that because California and New York get about 50%, if not more, of their income from income taxes, they can't do away with it. They can't go to 0.

Colorado only gets 20% of its income from its income tax. So there are lots of ways to make up for that $9 billion of income tax that they bring in, property taxes, fees, other things that you could put there.

The bottom line that I'm trying to put out there is that until state governments and local governments understand that they are constantly competing for residents, Zoom in the pandemic changed everything. You used to not -- like I moved from Washington, D.C. where Walker & Dunlop is based to Denver, Colorado in 2019, pre-pandemic, okay? It was a huge decision. It was like we got 250 people in headquarters. I'm going to be leaving going out to Denver, Colorado. I'm going to be back here every 2 weeks. And that was my plan to constantly commute back to the D.C. area because that's where my team was, my senior executive team was, our headquarters work. And even though we have 45 offices across the country, it was like, I got to get back to headquarters.

Boom. Pandemic happens. My senior management team goes all over the country. We learn how to do Zoom calls. And it literally today does not matter where I am and where my executive team is. Every company in the country has that dynamic today, everyone. So you don't have to be somewhere. Jamie Dimon talks about the fact that from when he joined JPMorgan Chase to today, they've gone from 45,000 jobs in New York to 35,000 jobs. And in the process, they've gone from 5,000 jobs in Texas to 30,000 jobs in Texas.

It's like Maram Dani can tap on the camera and be like, "Haha, we're going after you Ken Griffin and just watch all that money move away." And so one of the things that I'm trying to get in Colorado and to focus on is don't go raise the income tax, raise property taxes because the property in Vail and the property in Aspen isn't going anywhere. You can't move it.

That billionaire who owns their $50 million home in Aspen, they may not like the fact that their property taxes go up a little bit, but they're not going to Jackson Hole. So I think governments need to shift on what they're taxing and how they're taxing it to try and keep the revenues in the state because if they're just going that we're going to chase some billionaire out of California, they're going to move to Florida or Texas tomorrow, and it's at almost no switching cost. So that's a big issue, I think, from overall growth in the coming decades and what, quite honestly, blue states and blue cities need to do to retain and attract jobs and people.

Thanks, Willy, for a really informative discussion there. I'm Tanner Miks. I'm an incoming student class of 27. My question, it's a little bit more of a niche market, but the senior housing that I brought up before we started today.

Demographic shifting wise, we're seeing probably a doubling of that market over the next 10, 15, 20 years. And the market itself is already undersupplied estimate somewhere in the neighborhood of 500,000 units.

My question to you is from your vantage point, how should sophisticated capital be positioning itself today in order to meet that demand? And what type of challenges are there still to be overcome when it comes to meeting the scale that we need to meet, maybe capital structure and then also like operationally, how can we improve our efficiency to make it affordable and beneficial to investors?

So I'll ask you a question. What do you think the percentage -- you keep the microphone for a second because I can ask you this question. What's your handicap us having another pandemic within the next 10 years?

Very unlikely.

And another pandemic in the next 20 years?

Still unlikely, I would say.

And when you say unlikely, 5% chance, 50% chance, 49%, less than 50%?

As far as pandemics go, if you take a 200-year vintage on it, it happened twice-ish, so maybe 1%.

Okay. The reason I ask that is that if I ask you the same question about the great financial crisis right after the great financial crisis, I think you would handicap the chance of a great financial crisis similarly to what you just did on the pandemic, okay?

So great financial crisis is over, generally speaking, in 2010, okay? And I was certain that the CMBS market, commercial mortgage-backed securities market would go back to sort of the silly math that created the great financial crisis, that liquidity come back, a lot of the bankers have moved from one bank to the next bank and they would get back to the same lending habits that they had.

And until today, 16 years later, CMBS hasn't gotten back to the same practices that caused the great financial crisis. Those memories last for a long period of time, okay? Even though the chance that we were going to have another great financial crisis due to overleverage on CMBS and you can either go CMBS or the mortgage -- single-family mortgage market as the drivers of the great financial crisi's.

I would say to you that the reason I'm trying to bring this up is because the pandemic, I think, materially changed people's views of seniors housing. The amount of death that happened inside of seniors housing communities was something that scared people of my age who had parents who might be in seniors housing to their bones, okay?

And so there has been a big move for people to say sort of anything but. And yet at the same time, the demographics behind it are unbelievable. You just sit there and look at the numbers, you're like this asset class is going to be full and it's going to crank for years and years. So I would say to you, you look at the math and you say, yes, you should go build there, and it's going to be a great asset class to own in and it's going to be full. But I go back to the GFC and CMBS and the long memories that stayed in place after that.

And I sit there and say, it might take longer than you think to get people to go back into that type of living. And -- there are some great companies that are making a lot of money right now. And my friend, Deb Cafaro, runs one of the largest publicly traded seniors housing REITs out there, and they've got a great business. But that asset class had huge losses in 2021 and 2022, huge. And those memories are still there from a lending standpoint.

Fannie Mae and Freddie Mac, the only real losses they had in '21 and '22 were in their seniors housing portfolios. And so people underwrite more conservatively. And they look at that risk with a little bit, am I going wrong there? Or am I staying short? And I think that will impact seniors housing for the next couple of years.

Yes. I think we have time for 1 or 2 more.

My name is Ryan Oman. I'm MIT MSRED. You spoke about private credit. I understand the SaaS spook because of the AI and vibe coding age. Why do you think investors are spooked by real estate private credit? And why also -- one thing you mentioned in the presentation, you said that fleeing from private credit might go into private equity. What...

Commercial real estate private equity. Yielding private. So one of the big issues there is yield. So one of the reasons why the private credit market is attracted so much out of the retail distribution network is because there are a lot of retirees who want that coupon that comes off of their investment in private credit. As they get concerned about private credit. They're like, maybe I'm going to pull that back and reallocate it somewhere else. They can't go to just a normal private equity vehicle because private equity vehicles don't have a current return, whereas commercial real estate private vehicles, particularly credit vehicles, have a current return.

And so it's something that an RIA can sit there and say, okay, we're going to pull you out of that private credit fund, we're going to put you into that real estate fund. So that's the reason I believe that it competes quite well in any reallocation of dollars because people need yield. And the one other piece to it is there's $7 trillion of capital right now, $7 trillion sitting in money market funds, okay?

If Warsh comes in and starts to cut the short end of the curve, people will rotate out of money market funds. By the way, they will not go from $7 trillion to 0. Back when the Fed funds rate was at 0 in 2012 and 2013, there was still $3 trillion of money that sat in money market funds. So don't think it goes to 0. There's a certain amount of capital that will always sit in those money market funds.

But you could see $7 trillion go to $5 trillion and where is $2 trillion of capital go? By the way, we used to talk about billions being real money. Now it's trillions, okay? So where is $2 trillion go? That's real money, okay? And so if you take $2 trillion out of money market funds because the short end of the curve gets lower and you get any kind of rotation out of the private credit funds, I think net-net, that's probably beneficial for commercial real estate because it's a yielding hard asset.

The final piece I'd say on that is, look, who knows where AI goes? Who knows whether these SaaS companies get just obliterated by AI or whether they actually live for another day, that's way above my pay grade. But in commercial real estate, you have yielding assets. They're hard assets. And so in a world that has a lot of shifting and moving parts to it, people got to live somewhere. So multifamily hangs in there pretty tough, okay? People don't actually need a place to work. People -- bricks and mortar, retail, okay? What percentage of U.S. retail sales today goes online versus through bricks and mortar? I'm going to ask you directly. What percentage is online versus through bricks and mortar?

Not familiar with that retail -- held up pretty well.

Yes. But let's swag it. What percentage is online, what percentage is through bricks and mortar?

[indiscernible]

You're going to say 40% online and 60% through bricks and mortar. Other way around, 60% online and 40% bricks and mortar. 16% online, 84% bricks and mortar, 84% bricks and mortar, 16%. It got to a high of 20% during the pandemic and has come back down to 16%.

So your impression is 100% where most people are. Everything is Amazon and everything is UPS and FedEx. That's what you think. So retail is actually still a very important part to the retail channel is bricks and mortar. So retail is a good place.

Hospitality, if AI puts all of us on the beach, we can all make huge amounts of money on our investment in OpenAI, and we can just put our feet up on the table and go do something else. High-end hospitality does really well in that scenario, okay. The hotel I'm staying in here in Boston for work probably doesn't do that well, okay? But high-end hospitality, let me go to the beach, that's going to do really, really well, okay?

And then data centers, the one thing on data centers, I asked Linneman this a year and 4 months ago in our conversation in Philadelphia. I said, so if you had to pick one asset class that you would invest in, and obviously, location is important and all that stuff, but just one asset class that you invest in right now, what would it be? And Peter looks at me and he goes, well, if I wanted to stay rich, it would be multifamily.

So I said to him, "Okay, well, then if multifamily is the one that you would stay rich in, what would you get rich in?" And he goes, office. I was like, interesting. He goes, yes, there's some really great office deals. If you've heard that from Peter and you invested in San Francisco office, you've made a huge amount of money, huge amount of money, okay?

And so I said, okay, you said, stay rich and get rich, how about get poor? And he goes data centers, okay?

Now Jeff Lau was just on CNBC yesterday morning, and he was talking about this $36 billion data center that related his building for Oracle, who's going to lease it out to OpenAI. There are a couple of things to keep in mind there.

First of all, the JPMorgan headquarters that they built in Manhattan, that they talk about it costing $3 billion, it's more like it cost them $5 billion. But that's like the most expensive office building ever built in the United States of America, okay? $3 billion to $5 billion.

Jeff, was talking about a $34 billion investment in a data center. This is orders of magnitude bigger than anything we've ever seen, okay? One of the other interesting things that he said yesterday was that they went through the 144A market to raise capital for it rather than going to the bank market. Super interesting.

Basically, this market has gotten so damn big that banks don't have the ability to even syndicate out the loans on there. They've had to go to the securitized markets and 144A registration to go raise the capital on it.

And then the final thing that I have thought for quite some time is if data centers are fundamental to the future of companies like Amazon and Microsoft, why are they doing it all off balance sheet?

Just a question. If it's fundamental to their business in 10 years and 20 years, why are they putting it off balance sheet rather than actually owning it? And so there's no doubt we're going to have oversupply in data centers. There's just no doubt Look at that slide that I had as it relates to everyone is like, let's go buy multifamily.

Well, we got to put a shovel in the ground and go build it. We're going to get oversupplied. The question is what's the -- what are the repercussions of the oversupply? And how does that then filter out into the valuations of the hyperscalers, the valuations of the Oracles of this world and the valuations of companies like related that are actually building the data centers. And it does seem a little bit like everyone is getting really careful on how they're structuring these things because there's kind of a sense that at some point, everyone grabs and you want to have the proper structure that makes it. So when everyone grabs, you're not left out in the cold.

All right. Willy,thank you again for being here. I'm [indiscernible], MIT Real estate Student. You touched a little bit on immigration, and I had a question about how that relates to the construction labor supply market. immigrant workers are like 1/3 of it, and it goes up to anywhere to like 2/3 for certain trades like drywallers and more skewed also towards single-family home construction. So I guess to what degree is that -- are new starts impacted by current immigration policy and constrained supply of workers that can do new construction?

I'm going to surprise you, zero, zero. It's unbelievable. I have asked that question at almost every single meeting I've had with either a merchant builder on the multifamily side or a single-family homebuilder, and I know lots of the CEOs, the big single-family builders. It is not only not impacted as it relates to the supply of labor, but the cost of the labor has actually come down. So you're seeing deflationary forces from a labor input on construction, which is complete counter narrative to what you would think it would be. And so it has not impacted access to or the cost of construction labor One Iota.

And that's an anecdotal comment in the sense that I haven't looked at some actual study that says we've gone and studied everyone in the industry. That's for me meeting with the very big merchant builders, the very big single-family development companies and just saying, "How is it going?" And to a person, they also hasn't impacted us a bit. So it's a very interesting back to Noise and Signal. The noise is that you're not going to get people showing up in the job site, you're not going to be able to get labor. Cost of labor is going to go up, hasn't impacted at One Iota.

So thank you all for taking the time. It's been a real pleasure. Thank you.

Good morning, everyone. Thank you for joining us at our 2026 Investor Day for Walker & Dunlop. Before we begin, I'm just going to note that today's presentation includes references to non-GAAP financial measures. A reconciliation of these can be found in the appendix to our presentation that's available on our website, www.walkerdunlop.com.

Also, we will make certain forward-looking statements during this presentation. These statements reflect our current expectations and are subject to risks and uncertainties that could cause actual results to material differ -- materially differ. More detailed information about risk factors can be found in our annual and quarterly reports filed with the SEC.

And I'm going to kick it off with a short video.

[Presentation]

Good morning, everyone. Thank you to those of you who are joining us here in New York, and welcome to everyone who's watching this on the live stream. It is wonderful to have all of you here.

There are many familiar faces in the room, people who have been investors in Walker & Dunlop for a very long period of time, a number of people, including my friend, Mike, who is -- who I met with on our IPO roadshow, Mike, back in 2010. And some analysts like Jade, who've covered Walker & Dunlop for a very long period of time and many others who've had a long track record of understanding what this company is, what it's made up of and where we're going.

I'm really excited today because many people here from me on a very consistent basis, and they'll also hear from Greg on our earnings call and in investor meetings. But today, we have our full management team here to talk through the component parts of the Journey to 30 and where this company is going to go over the next 5 years.

So I want to dive in a little bit on the Journey to 30. As you can see below, to be the very best commercial real estate capital markets company in the world. When we went public back in 2010, the concept that I would even be able to say that with seriousness today was nothing more than a fantasy in a dream. We were a small cap agency lender with big ambitions and at the same time, not a tremendous amount of capabilities to achieving something like that.

Today, we have the people. We have the market positioning we have the brand and we have clients to be able to achieve just that. But as you think back to where we were in 2010, one [ I ] will show in my presentation and throughout the day, is, a, the people of Walker & Dunlop and what makes this team so special. The other thing you will note is you could actually see me in this picture. This is the last time you'll be able to see me sitting up front because all it does is get bigger and bigger, and I become sort of where is Waldo varied inside of a big crowd of people.

But it shows the growth and the dynamic of Walker & Dunlop as we've grown, as we have gain market share, as we have built out our capabilities, both across the United States as well as now in Europe. If you think about that 2010 picture and what we did when we went public, we set out a 5-year highly ambitious strategic plan at that time to gain scale.

And as you can see in this slide from that period of time from 2010 to 2015 as it relates to transaction volumes, total revenues and the total [ rig ] portfolio, we gain scale. We did a major acquisition of CW Capital in 2012, which moved us way up in the league tables of Fannie Mae and Freddie Mac, as well as with HUD. But during that period of time of gaining that scale, we were still pretty much viewed as an agency lender. And one of the things that happened during that period of time is that was the recovery from the great financial crisis.

During that period of time, our services firms, real estate services firms such as CBRE, JLL, HFF, who back then was a publicly traded company as an independent, had this great run in the capital markets because after the GFC and everything had taken a 3- to 4-year pause as credit work through the system, we all of a sudden saw commercial real estate start to have a bid again. We started to see transaction volumes [ taking ] during that period of time, all of our competitor firms did exceptionally well as it relates to revenue growth, earnings growth.

And we did very well during that period of time. But because the GSEs were in conservatorship and people didn't know about where they were going, because we were focused just on agency and many investors sat there and said, how much more share can Walker & Dunlop get, there was -- we continue to trade at a relatively low multiple as our peer companies just sort of zoomed and I look back to then and I sort of see a lot of parallels to where we are today.

I look back to then after the 3 years of the GFC and then coming out of it and the increase in transaction volumes and the capital that came to the commercial real estate sector. And I think very much after the great tightening, and where we have been for the last 3 years that we are right now at the beginning of a new cycle for Walker & Dunlop and a new cycle for the commercial real estate industry.

Once we've built that scale, you can see how much the team had grown between 2010 and 2015, we set ourselves out on establishing the Vision 2020, which was to basically double everything. And in this period of time, we decided to diversify the company. We got into the investment sales space. We really started to invest in the deck brokerage space. And we started to do a lot of things to try and build off of that moat that we have built around our agency lending business. And that motes around our agency lending business also was fantastic because it was in multifamily, which is obviously the largest commercial real estate asset class.

And so to be able to use that competitive positioning and start to move out from there was, A, very exciting, B, gave us real market presence and, C, made achievement of these goals at least at that time, I mean, when I put out there to our team in 2015 that we would take a $48 billion servicing portfolio and turn it into a $100 billion servicing portfolio. Many people in the room sort of said, how do we get that done? But as you can see, over that period of time, we did just that. And we took transaction volumes up on a CAGR of 18% during that period of time.

We took total revenues up by a similar CAGR and we took the servicing portfolio from $50 billion to $107 billion over that period of time. One of the things that's important to keep in mind as it relates to the 10 to 15 and 15 to 20 5-year bold, highly ambitious business plans was that on both of them, we basically landed it right on the line. And it kind of shocked me to the degree of putting these bold, highly ambitious plans out there.

The team didn't build a servicing portfolio of $120 million or $130 billion, it also didn't build a servicing portfolio [ to ] it came in right at where we wanted to go. And most of the metrics, what it said to me was, you put bold, highly ambitious plans out there. You put a great team to them and people will work tirelessly to achieve those goals. Then we come up with the Drive '25. And in 2020, in the midst of the pandemic, as our agency volumes were flying as interest rates were very low, we had bold, highly ambitious plans for the next 5 years.

We didn't know what was going to happen during the pandemic as it relates to not being able to visit properties to do property inspections and some of the things that we've been dealing with today as it relates to changes in underwriting policies and procedures of just not being able to actually go visit an actual property. We also didn't know that we were going to get through the pandemic through the big run off and then also have a fall off in volumes of over 50% as it relates to transaction volumes.

And we also, to be blunt about it, from going public in 2010, had a great 10-year ride with no down cycle. Commercial real estate and particularly multifamily, it had a decade of sort of unprecedented growth, unprecedented value creation. And so we built a bold, highly ambitious plan that didn't take into account what we have seen for the last 3 years.

And as investors know, we did not achieve the [ do ] not -- but we did grow. You can see transaction volumes continue to grow even with that huge step down in volumes. You can see that total revenues grew slightly over that period of time by 3%. Servicing portfolio growing from $107 billion to $144 billion. One of the things that I just mentioned was the step down in transaction volumes from 2021 to 2023, as interest rates, the light blue went up dramatically. You can see where we look -- where we sit in 2025 as it relates to overall transaction volumes, that's a very healthy market.

So I think it's important we talk about the step down to [ 42 ]8, but the [ $6.34 ] last year was a very active and very healthy market on sort of any look back as it relates to 2015 to 2020 when [ the ] extraordinary growth in the company. One of the things that our business model allows us to do, is generate a huge amount of EBITDA even as those volumes came down. That's due to the strength of the servicing portfolio and the consistent revenue streams that come off the servicing portfolio.

And as you can see here, adjusted EBITDA has been in that range and held up extremely strong. The light blue on the top there is an adjustment of had we not taken the Q4 charges in Q4 for the loan buybacks and the write-downs adjusted EBITDA would have been at [ $318 ] million on the year. One of the reasons why EPS has been hit so much is our mortgage servicing rights. So you saw in that previous slide how much volumes came down. This slide is a very important one because it shows you our GSE origination volumes in the light blue bars where we went from over $20 billion in 2020 [ down ] to a low of around $12.5 billion. You can see us building back off of that.

But the dark blue line in there is our mortgage servicing [ revenues ]. And as you can see on the right-hand side of the y-axis, you can see where mortgage servicing rights went from $350 million in 2020 on that high volume of business down to about $180 million in 2025 on what is a pretty good volume of business. Why is that? It is due to servicing fee compression, and it is due to term contraction. It's due to -- in 2020, Walker & Dunlop did not originate a single 5-year loan. All of our agency origination in 2020 was either 10-year paper or 7-year paper. 3-year paper, no 5-year paper.

In 2025, 63% of our agency originations were 5-year paper. Why? A couple of reasons. The first is the spread between the 10-year treasury and the 5-year treasury. A lot of borrowers who had done financing in 2017, 2020, have a coupon rate on their actual property today that is significantly lower than the refinancing rate. And so as they looked at the refinancing rate and the step up in cost of capital, they sat there and said, "I want the cheapest rate I can possibly get." They go for 5 years.

The issue that they have to now understand is the delta between borrowing 5 years, 10 years in the coupon rate, not in the spread on treasuries is actually much tighter because 10-year spreads are [ than ] 5-year spreads right now. And as a result of that, even though there's about a 50 basis point difference between a 5-year treasury and a 10-year treasury, last I checked, there was only 11 basis points entered borrowing Fannie Mae, Freddie Mac, fixed rate for 10 years versus 5 years.

And so we see a lot of borrowers now realizing that you can go longer without paying a significant amount more for that capital. The other reason many are going shorter is that they have wanted to sell a property in 2023, 2024, 2025, and the cap rate environment, the value wasn't there. So they -- we're sitting there looking at it and saying, "I don't really want to sell it at this cap rate. Let's refinance the property, but what we want to do is sell it in 2 or 3 years, let's not put a 10-year loan on that has a lot of prepayment penalties on it if we pay it off or sell it. Let's just put a shorter duration loan. We see those two things changing right now.

Borrowers hopefully going longer and we're selling longer duration, and the other is many of those people who just wanted that sort of bridge loan to be able to sell are now saying, "Hey, maybe I load up and hold on to it for a little bit longer. The final piece is servicing fees. Servicing fees are very rate dependent and volatility dependent. As rates bang around, it's very difficult to price in.

We've had consistent rates for pretty much the back half of 2025 into the beginning of 2026. And when we have stability in rates, we can price servicing fees in. The other thing is in a rising interest rate environment, borrowers are extremely focused on every single [ basis ] that made fees and as fees get impressed as we get in a more normalized environment, spreads can widen on both GPs as well as SPs. So those are things to watch over the next year or two.

One thing that Greg will reiterate in his numbers as it relates to 2026, we are expecting mortgage servicing right margins to stay consistent between '25 and '26, even though we, as a team, are very focused on it to see if we can get some lift there. During that period of time, we have continued to invest in our capital markets growth. And my colleagues who run our Capital Markets business will talk in a moment about how we're going to market, what our client segmentation looks like and things of that nature.

But one of the things to keep in mind is from 2020 to 2025, even though we didn't hit the drive to '25 goals, we continue to invest in people and capabilities. So you can see AKS there, that's our New York infusional Capital Markets team. It has been an incredible add to Walker & Dunlop. You can see FourPoint, which got us into the student housing investment sales business. You can see Avalon, where we been doing land sales for the past 3 to 4 years. Alliant Capital, which is the cornerstone of our affordable business today, and Sherry will talk about that in a moment. And then we continued to hire and retain talent.

One of the things on the [ section ] of talent is average origination volume per banker broker. And as you can see here, go back to 2020 when we hit our all-time high as it relates to agency origination of $209 million per banker or broker, picking up at $313 million in 2021 and then kind of coming crashing down during '23 when volumes were down, we maintained the team and as a result of lower volumes and maintaining the team, you're going to get a much lower average origination volume per banker broker. You can see that moving back up, and the goal for 2026 is $300 million per banker broker.

How do you do that? It's not easy. But what we're doing is we are using a number of our research services, a ton of technology as it relates to finding our clients as well as just, quite honestly, blocking and tackling from a management standpoint. And Chris and Don and Ali and Cheryl will talk to you about how we're actually doing that and how we've segmented our origination sales force into an institutional group into a middle market group and into a private client group to properly identify our client base, feed them research, feed them opportunities and then do more business with them.

Along those lines, we made a big investment in 2021 in GeoPhy which was a machine learning company long before AI became all in anything everyone could talk about. And we have had GeoPhy inside of Walker & Dunlop has done a fantastic job of really getting us on the front foot as it relates to machine learning and artificial intelligence. And Megan will talk about what we are doing today as a company to use technology to make our bankers and brokers more insightful and more capable to their clients.

We bought Zelman. Ivy is going to talk to you in a second about where the state of the housing market is could not be more pleased to have both Ivy and her team at Walker & Dunlop, the research they are writing and the insights they are providing to our team and to our clients differentiates us every single day. And so while the research business on a stand-alone basis has been a really good business for us, and Ivy and our team have continued to grow that as a stand-alone company.

It's really research and insights that they're providing to our bankers and brokers that make them more relevant to their clients, which allow us to grow the broader platform. And then finally apprised, it's our valuation business. We've built that from scratch and the appraisals give us the ability and all the data that comes from that to feed into Zelman using GeoPhy technology, again, to make our bankers and brokers more insightful and more capable of their clients.

What's all that play into as it relates to our leadership position in multifamily. I harbored back to 2010 and I remember distinctly going to visit with Mike up in Boston and sit there. And at that time, we were the eighth largest Fannie Mae DUS lender. And everyone was like, well, how do you compete with all these big behemoths who are much, much bigger than you have bigger brands than you have a more potent sales force. Well, the goal was to become the largest Fannie Mae DUS lender in the country, and we have been that for the last 7 years.

Last 7 years, we've been the #1 Fannie Mae DUS lender in the country. The idea was to be the #1 Freddie Mac Optigo lender. We were #3 last year. and we are nipping at the heels of Berkadia who has now stepped in as the #1 Freddie Mac Optigo lender in the country. And JLL had an extremely good year and jumped into the #2 slot. And you can see, as it relates to us on overall GSE, we're #2 behind Berkadia by a couple of hundred million dollars very, very tight race for us to be the largest agency lender in the country. This business, and Don will talk about this, has a huge moat around it. You need a license. There are only 25 of them.

So first of all, you got to have a license to be in here. Second of all, there have been competitor after competitor that have stepped into this space. who when I'll be sitting there talking to Jade Ramani about the competitive dynamic, I'll never forget a number of years ago, Jade, one of our competitor firms to be nameless and this was putting a big emphasis in trying to move up the league tables with Fannie Mae and Freddie Mac, and Jade said to me, look at they've got investment sales. They've got the team, they've got the capital. I mean, are you fearful of them? And I said, "Jade, we've had a lot of people step into this space and compete with us. I'm not in any way trying to sound arrogant, but it's hard to build scale. It is hard to get the bankers and brokers onto your platform. And once they're on your platform, the clients trust them, they trust us. It's more of a -- really more of an asset management, money management business than it is a trading business."

And so big firms like Goldman Sachs, like Ares, like Guggenheim Partners who come into the agency space and have exited the agency space because I think they view it as a trading business, and it is not a trading business. It is a wealth management business. It's once you have the confidence of the client, they stick with you for a very long period of time. And so these league tables and the leaders at the league tables are very, very difficult to displace.

We have been extremely fortunate to move these league tables. And one of the things that is so important for us is keeping our team together and then continuing to feed them with the research and the insights and the technology to continue to make them extremely not only capable but to differentiate them in the eyes of the client.

So here's a graph that shows -- and this is -- there's no -- this is just us sitting around trying to plot us versus our competitor firms and who we compete with on a day-to-day basis. And the strategy for the next 5 years is to move up the Y-axis and not out the x-axis. So one of the things that many investors have seen is that CBRE who is an incredible firm and is in the upper really, really strong service, really, really strong capital markets.

It's very clear from what CBRE is saying in their earnings call that they want to move out the X-axis more into owner occupier services and less up the Y-axis into capital markets. We hear it from the people. You see it from their investment of capital. And to summarize it, to some degree, my read on it is they'd rather work for Amazon and Google than for related in Blackstone. Doesn't mean that they're not a big competitor against related and Blackstone today, but where they're putting capital and attention, they're moving out on the axis and not up the Y-axis.

We see that as a huge opportunity for Walker & Dunlop to continue to move up the Y-axis. It's where we compete, it's where we have the client base and where we have the people to be able to continue to differentiate ourselves. You can see the three firms to our upper right are really the three terms that we go head-to-head with every single day. Other firms on here are big competitors of ours. I've already mentioned Berkadia right there. Eastdil Secured up into the left, fantastic capital markets business. none of the underlying servicing revenues that Walker & Dunlop has to be able to weather the types of sort of downturns that we've had for the last 3 years.

But the strategy over the next 3 years -- 5 years, excuse me, and that my colleagues will talk to is moving up the Y axis, and not necessarily out the X axis. What's that look like? It looks like growing our origination volume up to $80 billion a year. It looks at taking our property sales volume up to $35 billion a year. It's taking our revenues from about $1.2 billion to $1.4 billion, up over $2 billion.

And you can see on EPS, adjusted EBITDA and adjusted core EPS some pretty both exciting as well as bold goals as it relates to growth in all three of those metrics. How do we do it? We do it -- by putting our clients at the center of everything that we do. And I have run this company for long enough and thought about all sorts of things about how our team is super important. Our technology is super important. Our processes are super important.

All of them are incredibly important. But unless we are focused on what our clients need, all those things don't matter. We've got to keep the client at the center of everything we do. You can see around that, my colleagues in the Capital Markets group will talk about all the light blue of the various services that we're bringing to our clients on a day-to-day basis.

Steve Theobald, who's going to come in a moment and talk about our operations as COO of the company. We'll talk about all the other services that play into supporting those go-to-market teams of valuation investment management, research and servicing and then again, we'll talk about WD Suite, the technology that wraps everything we do at Walker & Dunlop, make our bankers and brokers more insightful and more capable to our clients.

So let's look at our client base for a moment. This is segmenting client base into the big guys on the upper left, if you will, in both the global alternative asset managers as well as the traditional asset managers then more of the sector-specific middle market players and then over on the right one, the regional players, more on the private client side.

Obviously, there are people in the middle who are sector-specific who have the size and sale of some of the big, big, big private equity firms. And there are also people at the regional level or the local level who have the size and scale of some of the sector-specific middle market players. But generally speaking, these are the companies that we go to market to try and cover and as the capital markets leadership, we'll talk to you in a moment, one of the things that is very important right now is a real focus on each one of these client segments and figuring out what it is they need for us. what kind of research do they need from us, what kind of insight do they need from us to be able to continue to grow our wallet share with each one of them back to growing our average origination per banker broker from $260 million up to $300 million in 2026.

The thing we are very focused on is the continued consolidation of capital into the big alternative asset managers. You can just look at this slide. It's just Carlyle Blackstone Areas in KKR from 2019 to 2025, going from $23 billion to $555 billion of AUM in real estate alone. So this back slide A lot of those sector-specific investors, many of them right now are sitting there saying, they're typically using $1 billion fund, maybe $1.5 billion fund. That used to be a major player in this space. Today, with the upper left, players raising $8 billion, $12 billion, $20 billion in a fund. The middle group is trying to figure out, can I continue to operate and compete as a middle market player.

And when I say middle market player, it shocks me -- you would call middle market. And I've talked to the CEOs of pretty much each one of those. Some of them are not in any way considered middle market, but many of them are sitting there saying, is this a strategy viable going forward. And one of the things we're seeing is a number of those either becoming part of one of the larger alternative asset managers or getting institutional capital from the lower left to redo their GP structure to be able to have more capital to be able to grow and aggregate assets.

So this is a very significant trend and how in those major alternative asset managers is very, very important. What do they need from us? How do we dwell into them? And how do we add connectivity with them. All of this only gets done because of that team. That's the team in Las Vegas just back in December when we had our all company meeting. We invest every single year to bring our team together. Because at the end of the day, it is that team, it's the personal relationships that we have amongst one another that really does differentiate this company.

It is an incredible honor for me in this company's 88th year to run the company that my grandfather started that my father ran throughout his entire career and that I have the honor to run today.

I hear a lot of question marks as it relates time now, 58 years old. And how long will they around for whether you like it or don't like around for a long time. I have an Instagram account that is titled, Live2120 and that means that if I am going to try and live [indiscernible], I haven't even turned the corner on a golf course and gotten to the temp hole because I'm only 58 years old. But I've heard from investors, hey, it's a good and the bad.

Willie has had a great track record. He's got a very significant brand in the industry. How long is the around for? If he were to leave who knows I just love to and most importantly, I love the team with which I work. And I also don't play a lot of golf and don't plan a lot of golf.

And so as a result of that, this 5-year plan, another 10-year plan, I'm all about it and I'm extremely excited about where this company sits today and what we have in front of us for the next commercial real estate cycle as well as for our next 5-year highly ambitious business plan.

So as I said to start, what I'm really excited about today is for you to hear from my colleagues. This is an exceptional team of executives. I think one of the things that I am super proud of is, over time, we've had a lot of people come to Walker & Dunlop, and most of them have stayed at Walker & Dunlop. But we also had people come and retire. Howard Smith, our long-time President, retired 2 years ago. And this company has continued to move forward. I miss Howard every day. I love Howard. He was an incredible person to have as a partner and as President of this company, but this company has a management team today that is as good as it's ever been.

David Levy was our Chief Credit Officer. David Levy is an exceptional Chief Credit Officer. David Levy, also retired 2 years ago. We have managed the retirement of Howard and the retirement of David with a number of executives who we hear from today, who have stepped up, taken on leadership roles, expanded leadership roles and are driving this company forward. And so I'm very, very excited for all of you to hear from this team of exceptional professionals.

I'm now going to turn it over to Ivy Zelman, who I said previously, it's just that -- it's a true joy to have Ivy with us at Walker & Dunlop. Her insights as an individual and her team's insights really differentiate our bankers and brokers every single day. I got a text 2 weeks ago from a huge client of ours. Who just wrote me out of the blue and said, "God, I just love Ivy's research. He said it makes my life so much easier and allows my team to find assets and find markets so much quicker than we ever have."

That's the differentiator that's going to get that client coming back to us for the next refinancing for the next acquisition. And so with that, let me turn it over to Ivy Zelman. Ivy.

Good morning, everybody. Nice to be here. It's my first WD Investor Day. So excited to be here. I want to provide you an overview of what's happening in our housing market. And hopefully, we'll have some brighter days ahead.

Let's start with the -- I think on the policy update, we took that out. I think we have the wrong slides Kelcy. But I'll wing it, don't worry about it. I hope they are the ones that have the right section for multifamily. Can we change them out? Do you want me to send you the deck I have? Should take -- go out of this?

Okay. So what I want to talk about is what everybody is talking about is how stretched affordability is. So when you're seeing this graph, what I want you to think about is what a nonsupervisory employee would think about, which is the monthly payment as a percent of their gross income that monthly payment would also include property taxes, homeowners insurance and mortgage insurance. And you can see depicted in the gray or brown bar that it improved slightly in from the stretch levels that we were in '24.

But still, from a historical perspective, it's very elevated. In fact, it's as high as it instance the early '80s when mortgage rates were in the high teens. But we do expect improvement really dependent upon predominantly wage growth exceeding overall home prices as well as mortgage rates coming down, although only slightly. What the lack of affordability has done is kept housing really in the doldrums.

And what you're looking at is the total number of existing home closings as a percent of households. And we like to look at it that way because you can actually see that we're running at about 3.4% of households are turning over. And you can see that, that is actually pretty consistent with prior trust in previous recessions. So we're really at recessionary levels. But in my 30 years of analyzing the industry, it's the first time that we've ever had recessionary transactions, but yet home prices have still been increasing nationally.

Now home prices have decelerated, and we do expect that to continue. But we're looking -- price is really the lever. We need people to capitulate to get off their aspirational asking price, lower their home values or lower their asking prices happening. Predominantly in the Sunbelt and we'll get to that a little bit later. But we do expect that, that will result in modest improvement in existing home transactions. What we're seeing is spreads, mortgage rates have been coming down they've been helped by spread compression.

So the 30-year mortgage rate is actually priced off the 10-year yield. So when you think about the spread, the 10-year to the 30-year fixed mortgage rate that as high as over 300 basis points. And now it's down to $192 that's helped reduce mortgage rates and mortgage rates are covering right about 6% today. We actually ticked slightly lower. We were like 5.9% something, [ 99 ]. But we are seeing that the mortgage rates have moved kind of slightly again because the 10-year yield is now was 412. So we watch the tenure very closely.

And what really mortgage rates have had the challenge is a stuck factor. So when we go back during COVID, and there was free money and mortgage rates -- or close to it a lot of people wanted space, they wanted more distance, and that resulted in the boom we had in housing, but actually, it locked a lot of people in. So 2 years ago, over 90% of homeowners were locked in below the 5% level.

Now we're at [ 72 ] or a set that a stay roughly where they are today, by the end of [ 29% ]. So people are like, why would I move? I don't want to give up that rate. So that's keeping the overall demand depressed but people do have to move. I mean my colleague just had a second child a year ago, leaving a townhouse in Chicago, moving out to the burbs. Life moves on. We call it the 3 Ds. Death, Divorce Default, but the last discretion is the one we've been missing and people are starting to recognize that their lives have to move on. So we're more optimistic that we'll see a slow improvement, but I'd say it's slow brine. We're not looking for any gangbuster change in the market.

Here, we look at inventory. Similarly, we want to look at existing inventory and new inventory divided by households. Just to give you a spectrum, you can look at it historically that we, although have ticked higher, we're still at very depressed levels. which has enabled home prices naturally to continue to move higher, although we have tail of two geographies. We have Sunbelt that is generally under pressure, that got overbuilt by both the single-family developers and the multifamily developers.

And we're now dealing with getting all that inventory either sold or leased up, but we're also seeing in the existing market that the inventories are low enough that, for example, the Midwest and the Northeast are still seeing appreciation because demand is so much stronger than supply.

I just want to show you one graph to do pick that. If we look at the left on this correlation, if you look at pre-COVID, inventories in Hartford, Connecticut are down 80% and compared to where they were in '19. And then you can see that home prices are still up almost 8%, if I'm reading that chart right. comparatively, if you look at Austin, Texas, inventories are up, call it, 50% since 2019. And you can see that home prices are actually down. So that's the divergence that we have in the market. Again, it's really simple.

We need to absorb all the inventory that we have in the market, and that's happening as housing starts have slowed, we're seeing some very strong lease-ups, although modestly lower in the multifamily market, I'll get to that later. But we are looking for existing home closings to increase in '26, roughly 5% and then stronger in 2027 slightly but, again pretty -- when you look at it back to that housing turnover trial I showed you earlier.

Moving into the new home market -- sorry, existing home prices, '26, we're looking at flat and then a slight improvement in '27. Looking at the new home market. The new home market, we do proprietary surveys, really across the whole Ecostone, starting with mortgage as well as real estate brokers, homebuilders multifamily operators, shore building products, everything that goes into the ecosystem. And for our February homebuilding survey we just published due to easy comparisons, February year-over-year was up roughly 10%. I'd say that this is not anything to get too excited about, but it's really based almost entirely on community count growth.

So I'd say the organic orders are about flat. When we look at what's happening, though, is that the absorptions are actually pretty healthy. If you think about retail same-store sales, think about homebuilders, how many homes can they sell per community. And roughly something in that 4% range is pretty healthy, but it's really coming with incentives, substantial incentives. So the incentives right now are running at very, very high levels.

And this is a proprietary survey 0 to 100, 0, no incentive is 100, the most incentives you can have and across our housing market, we can see that incentives are still up predominantly mortgage rate buydowns. So builders are buying mortgage rates down to as low as 399% more in the range of $499.

Looking at the material costs, they've been the good guy and material costs have remained very benign, and that's really because builders are suffering. So they're pushing back to their vendors, and that's been a good guy. These are the wrong slide, Kelcy, but that's okay. Home prices, we are seeing down net of incentives. So when you look at that negative 5%, that negative 5% that I just showed you was inclusive of incentives.

Let's move to we're on the single-family side -- probably in the midst of changing. Here's our housing start forecast. Let me go back a moment, sorry. So when you go back to the single family, we're going to get into my next section is single-family rental. The single-family rental market has been also, I'd say, challenged with inventories, both from build for rent, as well as existing single-family rental products have been more prevalent again in the Sunbelt where we're seeing leases that are under pressure.

Okay. So I'll just keep talking and then I'll show you the chart when we get there. So when you think about the single-family rental market, it accounts for total shelter around 11%. The multifamily market accounts for 23% and you'll just tell me because I'm not getting there. But the 23% of multifamily, 22%, 11% single-family rental that has been gaining share, and we expect that, that will continue to gain share as a result of the very stretched affordability. The challenge in single-family rental, I think, has been more really due to the oversupply of the new construction built for-rent market, and that is putting pressure on lease rates. But we are seeing that -- so really, the single-family rental market has been gaining traction as consumers are really inclined to have more flexibility.

Maybe the sentiment towards homeownership has been depressed and people are realizing maybe I don't need to be homeowner because it's not a great asset class. I might not get a good return. Maybe I'd rather invest in crypto or in just equities. But young people today are disenchanted with, I think, ownership. And we think, therefore, that we're going to see share gains, both in multifamily and single-family rental.

Right now, single-family rental monthly payments are about 30% lower than if you were to buy a home today. So it's a very favorable comparison. And when you look at the single-family rental market, rent levels are coming well below trend lines. We have a new move-in rent growth that is here we go. We're finally here. So as I showed you, this is what I just was depicting about -- we're about 30% plus better off on a single-family rental than we are in a owned home.

When you look at the affordability, though, when we look at the rent for single-family home compared to income it's elevated. You could see by the income line, the blue line, but it's definitely been coming down, again, more favorable than ownership. Rent rates are under pressure, and we expect that to continue, but there's still positive new move-in or negative, and we have renewals that are increasing.

But recognizing that, that's been the early signs from the public REITs that have just been either on webcast, various competitor conferences have indicated they've seen some green shoots. Demand is definitely there. They're still dealing with more concessions, and that's going to continue.

So sort out all that, let's get into the multifamily now. In multifamily, I'd say the good news, the blue line depicted at the top there, the 3.8% growth that you see in households that are renters, while it has decelerated it's growing faster than the owner level of households that's growing at about 3%. So that's sort of going in line with what I was suggesting that we think that the rental market take share from the new home market or the existing market as well. We've seen continued pressure on rents. The lines that you see there, new move-in rent has been negative, and renewal growth has been actually fairly I think surprisingly strong -- a total considering the challenges in the market. And we do expect that rent growth will continue to be pressured this year. The challenges, just looking at the rent growth is doing better. You could see that Class A is outperforming both B and C. And C is really like someone asking, I think it was a colleague in the room, where would you be putting your money today is workforce housing the way to go.

And I think that we would all agree in our key economy that, that Class C tenant is the most stretched and the most difficult scenario would be to try to push rents on them. And we're seeing most of the deportation and risks associated with the immigration policy for the Class C product. Now this chart tries to quartile where we are in supply. Supply is the big challenge today, absorbing that slide. So you can see in the top quartile, the 4.5 years we have, that's based on absorptions over the last, call it, from 2012 to 2019. So we tried to look at pre-COVID. What absorption look like.

I'm back at the quartiles, I want to show you that. Okay. So when you look at the 42% that's in the top quartile, the supply, both the top quartile and the upper quartile, those -- that's the Sunbelt. So that's the majority of where the supply needs to be absorbed. Comparatively down at the bottom where you see actual rent growth is the 1.4 years, is that sort of a supply balance.

I think that it depends on the absorption that you're using. If you use the last 5 years of absorptions, we'd have less supply. So I don't think the last 5 years are likely be indicative of what's a true trend line. So I'm more comfortable using pre-COVID absorptions. But again, you can use your own sensitivities. But the challenge in the market, not a problem with demand. The problem is with all the supply that we need to absorb.

Here, you could just see from a rent-to-income ratio, we have been seeing improvement in rent to income for multifamily. So we are seeing declines and the blue line is nonsupervisory versus all employees. Get more favorable. The actual numbers make -- it's much more compelling, $833 difference in the monthly rent versus buying a home. So I think of the monthly payment. So very compelling to be a renter today, which is a homeowner.

The blue dot you see depicted is the amount of lease-ups that happened in '25, significant amount of lease-ups as compared to prior periods, but you can see the impact it had on rent growth. So the brown bar is a picking rent growth. So that lease-up activity, we think, will continue in '26. The hope is that, that will be front half weighted with less lease pressure in the second half. We're more dubious and things that will go into '27 with still challenging lease growth.

But what I want you to see here is a lot on this chart, but focusing on the blue -- light blue line because that's absorptions. Absorptions are our demand. So absorptions are being impacted because unemployment has been under pressure, we have to be thinking about what's going to happen with the backdrop of the -- that's where the question mark will lie. If we have absorption. And by the way, based on our multifamily contacts, we're seeing some green shoots in multifamily as well right now.

And I think the public reaches around -- and everyone were indicating they're seeing some signs of strong demand, but still concessions still significant supply and especially again in the Sunbelt. Here's our rent growth forecast. And you could see here that rent growth in '26, we're looking for improvement, but not yet back to trend line and then continued improvement in '27.

And here, we have our forecast for starts, completions and backlog. As you can see, the start growth is kind of getting back to really more a trend line. We could debate if that start -- I think to some of my colleagues in the room, Chris Mike, seems like nobody is starting anything. So it doesn't make -- it doesn't pencil, but we are seeing starts and we can debate that, but that is really the big question mark, and backlogs coming down is a very favorable thing.

Just looking at the transaction market, and Chris, I'm sure we'll talk more about this. It's been challenging, but you can see depicted there that 17% growth that we saw really through last year has been favorable, and cap rates have been pretty stable at 5.51, making it more attractive for sellers. I think here, you could see that both the indices from our survey or NAND and supply indices are both moving in the right direction. So more are listening and more are buying. And that's helpful to the transaction market for WD to capitalize on.

Here we just show you the acquisition market. Financing has actually been moved steadily higher both for development, equity as well as debt. And I think that will help the trend of continued expansion in transactions. That's it. I had one more, I think. No. I think I'm done. I'm over. There was one or two more slides that I just wanted to say that the transaction market is, in fact, seeing more activity. And what we're hearing from our multifamily developer operators and those in the market is that there is an appetite.

And it's not uncertainty from the economy backdrop is weighing on people, but I'd say there's more optimism recently when our colleagues were out of multifamily, ULI just feels like people want to transact and that's something that we watch and sentiment is very important. So sorry for all the confusion on the slides, and I hope you found that helpful.

Thank you, Ivy. Insightful as always, and you clearly know your stuff. Slides or no slides. So thank you very much. Good morning, everyone. Thank you for being here with us today. I'm Steve Theobald, I'm the Chief Operating Officer at Walker & Dunlop.

I've been with the company for 13 years. And some of you may remember the first 9.5, I was the CFO. So I've been in the COO role for about 3.5 years now. I have responsibility for our valuation business, research and investment banking on management and servicing businesses and then also asset management, GSE underwriting, technology and marketing. So my job with my colleagues is to make sure that we're bringing the weight of the W&D platform to all of our client interactions and that we're doing that in a manner that's consistent and has exceptional execution.

Willy debuted this slide already, but I had to kind of linger on this a little bit. As he stated, we put our clients at the center of everything. My colleagues are going to talk about the light blue pie pieces around the center. One thing I would observe is in the 13 years I've been here, we've added many of these capabilities. So when I started in 2013, we were not in investment sales. We did not have investment bank capabilities we really weren't doing anything on the equity side, and we didn't have tax credit equity.

So most of those were missing from our service offerings back in 2013. We also were not in investment management or research or valuation. So think about all the things, the pieces here that we've added in the last 13 years as a company, all with our clients in mind, all focused on capital markets. And the way to think about this, with your institutional middle market, private client, you come to us for your capital markets needs which is represented mostly by the light blue pieces.

Around that are the businesses, many of which I lead that are supporting and complementary to those capital markets services. So whether it's investment management, which provides us another cattle source for transactions with our clients, research, which Ivy leads and Will already mentioned, an anecdote where we have clients are benefiting directly from that servicing where our business comes to, and that is the -- at the end of the day, if you do a 10-year loan, you have a 10-year relationship with that client.

And that is super valuable in terms of how we approach that and how we think about that. And then on the valuation side, we're in commercial real estate, everything revolves around what's it worth. What's the value. And so we have that as an offering that complements our overall capital markets business. And then wrapped around all of that is technology. So WD Suite is the digital experience that we've created that enables us to interact with our clients through technology, and Megan is going to talk a lot more about that in her presentation.

But that wraps all of the services that we provide to our clients today. Why is this important? As Willie said, we're moving up the y-axis. We're not moving out the x-axis from a services standpoint. Everything revolves around capital markets. Servicing, as you know, provides the cash flow and the fuel for growth of the company always has, and it's only gotten stronger and we'll continue to do so. So as an investor, why do you care? Why is this important?

So first of all, it allows us to take greater wallet share with our clients. We have -- our clients love us. They love doing business with us. They are very loyal. The more services that we can provide to them. the better off we are, the more revenue we can generate as a company.

We get recurring revenue. I mentioned servicing, right? We do a loan, we do a Fannie loan, Freddie loan, HUD loan, it goes into our servicing portfolio. We generate revenue off of that. We generate a sticky relationship. We generate investment management opportunities through our structure, which then also provides long-term recurring revenues. We sell research, which is also a long-term revenue stream for the company. So diversifying revenue stream away from purely transaction-oriented to long-term sustainable streams of revenue for the company. Improved risk and control.

So all the data we're gathering, all the information in our servicing portfolio, all of the market intelligence that we're gathering on a daily basis and bring to bear in terms of managing credit. And one thing I do want to pause here and talk about is on the credit side, Jim Schroeder, who's going to talk about debt operations and servicing later. We got the GSE credit function about 2 years ago.

As a CPA as the former CFO of the company, I bring a very process and control oriented approach to how I manage things. Jim brings the operational background of servicing and we're bringing that expertise and experience to our GSE underwriting practices. As the largest GSE lender in the country, we were not immune to fraud that occurred post pandemic. We're working through those issues. We have an excellent track record from a credit standpoint, which you'll see later as well. If you take the frog that happened away our credit is still exceptional. However, we've still done a lot to bolster the processes and the underwriting approach that we've taken to credit, and we think we've gotten ourselves to a good spot at this point in time.

And then finally, scale. We have parts of our business that are at scale, other parts that are getting to scale. At in-scale add margin. We have businesses that we've been investing in that are supporting our overall capital markets business as those scale margin will improve. And so from an investment perspective, all these things are driving towards increased profitability and margin.

So how does that work on a day-to-day basis? Think about the life cycle of a deal. So the -- on the early engagement front, our research is arming both our clients and our bankers and brokers with the data to support an investment in this market, a divestment in that market. We're providing that information to allow us to enable our business better.

On the valuation side, as I said, what's the property worth. So -- is it improving market deteriorating market, all those things come into the early engagement side. WD Suite, which I mentioned earlier, one of the interesting elements of that is a tenant credit tenant credit profile, where we have the aggregate credit score of the tenants in that particular property. So you can see the trends over time. You can see how that credit profile compares to the entire neighborhood, which is super insightful and valuable to folks who are looking to invest in a particular market or in any particular asset.

So that's one of the proprietary pieces of data that we are actually providing our clients are today. So all that goes into the advice on where to invest, how to invest. Then in sitting with our clients, do they buy, sell, hold, recapitalize, do they build we're arming our bankers and brokers with the advice to provide to their clients. And then from that comes the actual execution.

So the deal management, whether you want an agency loan whether you want to tap into our proprietary capital sources through our investment management arm, whether you want to broker it off to CMBS or a bank, we have the full spectrum of capabilities there to execute on. We underwrite those loans that go into our servicing portfolio, and that creates the virtuous loop of transaction into servicing cash flow, cash flow invested back into the business.

And then all of this is supported by our technology organization. So bringing the data together, bringing the workflows, client intelligence and all of that comes together to help us execute better. So I think it's always helpful to provide some examples like when we talk about this, what do we really mean? So I'll give you a couple of quick anecdotes that show what we're talking about in terms of bringing all these services together.

So a quick one here. We sold two assets in Georgia. We also did the Freddie Mac financing for the buyer of those two assets and our appraisal team did the appraisals for those two loans. So that was one transaction, three separate fees, all from being able to provide all of those capabilities.

Next one, I think this is an interesting one. There's a lot of noise going on and change potentially coming to the SFR space. We have the sole adviser role with resi built to sell their homebuilding unit. And the buyer of that was Invitation Homes, who is in the single-family rental space. and wanted to be more vertical, which in hindsight may be a good move for them. So very strategic transition in terms of matching the buyer with the seller and getting great execution for client.

This was also sourced by a combination of Chris [ Nicholson ] and our capital markets, institutional advisory practice and our investment banking group here in New York. So again, a joint effort in terms of getting best execution for our clients. So I wanted to pause for a second. I think it was Mark Twain said, history doesn't repeat, but it often rhymes.

When I joined the company in 2013, it was right after the FHFA put the caps on the agency multifamily business. So we went through a period 2013, most of you around them will remember, '13, '14, a little bit into '15 of very challenging transaction markets. We took some actions to reduce our cost structure back then. And then things turned and we reeled off, I don't know, 5 or 6 straight years of $1 of EPS growth every single year like clockwork.

So we've got some very anxious goals here. And as I pointed out in the first slide, our capabilities as a company are so much better today than they were back in 2013 when I joined that I have a significant amount of optimism here in terms of our ability to actually achieve these goals over the next 5 years and we have the team to do that.

As Willie mentioned, we've had some changes over the course of my time here at the company, but we have a leadership group that is incredibly strong, incredibly team-oriented and incredibly focused on achieving these goals. And I feel wildly optimistic about our chances of achieving this. So with that, I'm going to turn it over to my colleagues in Capital Markets.

Good morning, everybody. Willie referenced his age earlier. Willie, maybe you should start just referencing your whoop age versus your actual age. If anybody has a whoop, they get that one. So my name is Chris Mikkelsen.

I came to W&D in April of 2015. It was part of W&D's entrance into the multifamily investment sales business. It's been a massive effort, and it's taken the help of a lot of people, but we've taken that business from a regional boutique to a national powerhouse. And we'll talk more about the momentum there in a minute.

But before we go there, I want to pause and I want to sort of reemphasize something that Steve just mentioned. And it's probably something that Willie candidly can't do on his own. You all would probably discount it given the position that he's in. But Walker & Dunlop's position in the marketplace, our brand, our relevance with our clients, the capabilities of our platform, the technological infrastructure, it has all been utterly transformed in the 11 years that I've been with W&D.

And from a personal standpoint, I think it's important for me to communicate that to you all. I spent a tremendous amount of time in the market in front of clients and also on the recruiting trail. And on the client side, we have significant depth and diversity. The largest -- from the largest global asset managers to the individual local owner operator.

In 2025, we transacted with over 400 buyers and sellers. We represented over 800 borrowers, and we sourced capital from 275 distinct capital sources. That reach is tremendous. I think about how my recruiting conversations, I spent a ton of time on the recruiting trail. I think about how my recruiting conversations have changed over time from spending years with candidates, convincing them about what we were building, building trust and the relationships to earn their trust, so they would be willing to come over to today where in the case of our most recent recruiting ad, an investment sales professional in Seattle, we literally get a telephone call in the fourth quarter, and he says, I've been watching everything that you all have done all across the country, and I want to come to Walker & Dunlop.

I want to lead the charge for you in the Pacific Northwest. That is really a transformation that has taken over 11 years, but is here today. So we have a lot to cover about where we're going from a capital markets platform. But I want to anchor the conversation right here. First, this business has transformed itself over the past decade. Second, we are equipped with a full set of capabilities to engage with our clients like we never have before. Third, we have a tremendous amount of momentum.

We're going to talk about that and quantify that. And with these capabilities, with our momentum and with our focus on industry-leading talent, we're going to run down these very audacious goals that we've set forth in our Journey to 30. So we've seen this slide a couple of times. Steve covered some of the multiple touch points we have within the individual client. But this is -- when I think about the capabilities that we have today, this is a slide that I think about. debt, equity finance, investment sales, research, investment banking, valuation services, we can provide proprietary capital.

We have the ability to engage with the client and provide solutions irrespective of their need. It enables our bankers and brokers to move from merely an intermediary to a true advisory role, and that is a differentiator within the market. All of these services and products are supported by our scaled servicing and asset management business. So the result of all this is a very powerful platform dynamic. The more we serve our clients across multiple needs, the more transaction flow moves through the platform.

That flow increases, our advisers benefit from better insight into client behavior, their preferences, market execution, making them more effective, our advisers more effective with every transaction and every deal. Over time, the combination of client breadth, life cycle engagement and better insight creates a durable competitive advantage. It's the investment that we made in GeoPhy and Megan will talk through that a little bit more that allows the knowledge to really compound across our firm. And what does it result in? It results in a Net Promoter Score of 82.

The capabilities and quality of the execution is really resonating with our clients. This number is obviously well in excess of the industry average. So we talk about the role of capital markets, what we're really talking about is increasing the relevance of WD with our clients. We're using all these channels we discussed on the earlier slide to capture more of their business.

The increased transaction activity, particularly on the banking, equity and sales front leads to more debt capture, which leads to more servicing income. That's the revenue, that's the recurring revenue that stabilizes the platform and adds additional capabilities for us to reinvest in the business. In my first few years at Walker & Dunlop, it was all about trying to sell as many assets as we could and staple the financing to those assets to feed the servicing business. That over the last couple of years and really since the acquisition of GFI has changed a little bit.

Megan and her team, they're building a technological infrastructure that's really fueled by W&D Suite, where the density of that transaction data and the ease to access that information will make our salespeople and is making our salespeople wildly more effective in front of clients and across the market. Remember, every deal creates underwriting data, market intelligence, client preferences, market comps, all that feeds our production team, it feeds our credit intelligence, future pricing decisions, recapture timing as we think about the retention book.

So we go back to this slide that both Willie and Steve have mentioned. As Willie said, it's not really -- it's not a scientific slide, but it does lay out the competitive landscape in regards to their focus across cap markets and commercial real estate services. As we think about our plan to move further up the Y-axis, from the capital markets perspective, I think it's really simple. We believe that the most talented professionals within the real estate capital markets want to be a part of a firm that's focused on the real estate capital markets.

We're seeing that in the market real time. I mentioned earlier the time that I spent on the recruiting trail. We see talent migrating out of these global real estate services organizations Back to capital to firms where capital markets is really the core function. If you've seen the capital markets function of the global real estate services organizations, I think it's very fair to say somewhat deemphasizing that part of their business over the last couple of years, it's been to the benefit of folks like W&D who remain focused almost singularly on the real estate capital markets. So when you think about who we're competing with, you look at the names below the x-axis and whether it's Colliers, Northmark, Marcus & Millichap, we don't really see them very much. We see them maybe in a specific market here or there, but it's not consistent.

We're competing most consistently with the names on the top right-hand side of the list, and we'll look at the momentum we have relative to them in the multifamily space in a minute, and Ali will speak to the growth opportunities that we have as our capabilities move beyond multifamily. So one of our great strengths as a firm is the diversity of our client base. Willie walked through this slide a little bit earlier. I'm going to unpack it in a little bit more detail.

First, you have the global alternative asset managers and traditional asset manager set. These are clients that are conducting business across all asset classes. They're doing it across credit and equity, and many of them are doing it globally. 10 years ago, when I came to W&D, this group, particularly the group on the top left, the alt managers were operating almost exclusively with opportunistic vehicles.

And steadily over time, they've raised capital across the risk spectrum, arming themselves in some of these instances are aligning themselves with captive insurance capital to provide longer duration core and core plus capital, and they've also really focused on the private wealth channels to continue to aggregate capital. These names will continue to control more capital. Willie walked through some of the slides of their progress over the course of the last few years.

We've known that, and we've been organizing our coverage accordingly for the last 10 years. When I think back to when I came to W&D and the challenges that I had as a salesperson knocking on the door of the Blackstones or the Starwoods of the world and recognizing the hill that we would need to climb to be able to earn their business. We're now included in these conversations. We're competing for and winning these mandates. We're steadily increasing our relevance with these groups by doing more things in more places.

And as evidenced by our early capital markets engagements that you've seen in our London office and across EMEA, where we're transacting with some of the names on this list, Growth in that segment will be another very -- growth in this segment will be a very important component part of our Journey to 30. Willie talked about our sector-specific investors, and he covered it, but this is largely a multifamily conversation.

Many of these groups have grown into vertically integrated fund managers. They've got asset and property management arms, but for all intents and purposes, they're singularly focused on the housing space. So the way that we've organized our capital markets platform with professionals that are also singularly focused in housing is enabling us to continue to be more relevant and gain more share with this client base. The third group, these are our sort of regional owner, developer and managers. This is a group that most of these clients are playing across all the asset classes. They're doing it at a local or regional level.

This is why we have offices in 50 markets across the country with boots on the ground in market expertise in every single one of those offices. Ali is going to walk through a few case studies of how we are extending debt and equity solutions across product types to help these clients grow. It's a fragmented market where our scale and organization will benefit us, particularly as we add additional subject matter expertise across sectors. So the takeaway from this slide is very simple, and it's one word, it's momentum.

Outside, if you look at the top four names on this list, this is multifamily investment sales year-over-year. All top -- all the top four grew significantly from '24 to '25, but Walker & Dunlop at a 42% increase led the industry. Outside of the top 4, every other significant player took a step back. I'm hugely encouraged by this slide for a number of reasons. Walker & Dunlop wasn't on this list 11 years ago for beginners. That's when we came over to build this business. But we moved past Marcus & Millichap, Berkadia, Eastdil, Cushman & Wakefield, all household names in this space in '25.

We've retained many of our key team members and already added in 2026, one of the few markets where we previously had no presence. I mentioned the Pac Northwest. I think about one of my early Sun Valley summer conferences, we had the author of -- good to great, Jim Collins come and speak, and he talked about team building and he talked about the importance of the big seats on the bus. When I look across our landscape in the capital markets platform that we've built, the head of our hospitality practice, the head of our Digital Infrastructure practice, the head of the team that we have covering the large alternative asset managers, the head of our EMEA debt capital markets platform.

They're all in a similar peer group. They all are very established in the market. They all have a tremendous amount of runway in front of them. There are five real ingredients to a highly performing team: trust, communication, commitment, accountability and a focus on results. But the first and most important is trust. And that's something that is unique at W&D.

Our producers have trust in one another and trust in the leadership to go to market as a team, not as a collection of individuals. We can do that very easily, much more easily, I should say, given our size. We talk a lot about our big company capabilities, but our small company touch and feel. That's an important feature, and it's another thing that makes our capital markets platform distinct.

So with all that as a backdrop, here's where we're going. And Willie showed the slide, but it's $115 billion of total transaction volume. That's across sales, equity, debt on our conventional and affordable platforms, $1.1 billion in revenue, which is more than the total revenue that was generated across the business in '25. This is a bold and audacious goal and on its surface is someone who is going to be accountable for executing the plan. It was pretty daunting at first. It was Don and Ali and I as we sat down and we thought about this goal, we started breaking it down into component parts and understand -- as we really start to think about -- understand our current market position, the opportunities for growth, it started to feel more and more in reach.

It was still bold, but as Willie and Steve have said in their opening remarks, we have a history of setting bold plans and running them down. So we really have three component parts within the capital markets of our Journey to 30. And sort of the how as to how we're going to bridge this gap and how we're going to grow to our transaction revenue goals. So the way that I think about the three legs of the stool, first and foremost, is the size of the market.

We're coming off several years of subdued activity within the transaction markets and capital markets activity in general. Ivy showed and Willie showed some of those slides earlier. You can find various forecasts about where that's headed over the course of the next few years, and we'll cover some of those later this morning. But the takeaway here is our existing position in the market puts us in a position to just naturally benefit from increased capital markets activity. So the market is going to get bigger.

But second and probably more importantly, is market share. And market share, when I think about market share and sort of the core foundation multifamily part of our business. We'll continue to build the momentum that we have that we showed on the earlier slide.

We still have plenty of room to grow. And as we steadily increase and aggregate market share across debt, equity and property sales as the sales and financing markets reaccelerate, you can make very reasonable assumptions about the amount of revenue generation that comes with every single point of market share. And if you make conservative assumptions about the sales of the size of the sales and finance markets in multifamily, you can back into a number pretty quickly that 1 point of market share generates somewhere around $40 million of revenue.

So there's sort of two ways to look at it. If we're trying to pick a number, you're trying to add $200 million of revenue to the business and just in multifamily over the course of the next 5 years, that's a pretty daunting goal to sit down with your sales teams and say, "Hey, let's go find all of this extra revenue. But if you sit down with sales teams and say, "Hey, we need everybody to go out. And every year, we need to find one more point of market share. It sort of reframes the work that we have ahead of us.

And in my mind, with the platform that we've built and the momentum we have, the talent that we have, we can go get that. So it's increasing market share in our core multifamily business. And the third leg of the stool is diversification. We're investing in subject matter expertise to expand product coverage as well as opening new geographies. Ali is going to cover some specific examples on how that's playing out in real time.

We'll continue to do more things with more people in more places. Diversification in emerging businesses will mature over time and ultimately become sort of that third component part of achieving our 2030 transaction and revenue goals. So I hope that sets a little bit of a stage for where we are today and where we're trying to go in capital markets.

Don is going to come up and talk a little bit more specifically about the multifamily business.

I'm Don King, Co-Head of our Capital Markets division. Today, you've heard from both Willie and Chris, two exceptional sales leaders who focus most of their days externally meeting with our clients. I have a different role. I'm focused mostly internally, making sure that this complex business is operating smoothly and is continuing to scale.

Today, I'm going to talk about multifamily, the core of the Walker & Dunlop Capital Markets platform and in our view, our most defensible franchise. I'm often asked a simple question. What happens to the GSEs?

I have operated GSE lending platforms both before and after conservatorship under both Republican and Democratic administrations. Throughout decades of policy debate, one thing has remained clear. The GSEs continue to serve as the primary liquidity engine for multifamily finance. While Walker & Dunlop has diversified meaningfully, multifamily remains the core of our capital markets platform and our most defensible business. It generates our strongest margins. It produces recurring revenue, and it is protected by structural advantages that are difficult to replicate.

This is not simply our largest segment. It is our moat. Our multifamily moat is structural, not cyclical. When we talk about defensibility in multifamily, we're referring to our position inside the GSE and HUD ecosystem. That advantage rests on 4 structural pillars. First, regulatory barriers to entry. Fannie Mae, Freddie Mac and HUD operate delegated regulated systems.

Approvals are earned over decades, delegated underwriting authority is limited and the servicing and compliance infrastructure required to participate are significant. This is not an open brokerage market. It is a regulated capital channel. Second, structural cost of capital advantage. The GSEs and HUD consistently provide the lowest cost, longest duration capital in multifamily. In periods of volatility, their relative advantage widens. When banks pull back, liquidity migrates towards certainty and scale, and we are one of the largest participants in that ecosystem.

Third, scaled market leadership. We are #1 in Fannie for 7 consecutive years, #3 in Freddie Mac, #2 in GSE overall and #2 construction lender with HUD. Scale drives influence, information flow and execution certainty. Every transaction expands our data advantage, underwriting history, sponsor performance, asset level insight, which improves pricing precision, speeds execution and ultimately increases our win rates. This is a self-reinforcing system.

And finally, the recurring revenue flywheel. Origination feeds servicing, servicing generates stable recurring income, servicing drives recapture. Multifamily borrowers refinance repeatedly. Affordable housing requires ongoing capital formation. Bridge to perm creates multiyear relationships. This is not episodic revenue. It is durable recurring economics laid on to a needs-based asset class. While our leadership in the GSEs ecosystem is a core advantage, our multifamily platform extends far beyond those channels.

In 2025, we originated $11 billion of non-agency multifamily loans with 138 unique lending partners, including banks, insurance companies, debt funds and CMBS lenders. Those relationships give our clients access to the full spectrum of capital solutions, and they allow us to remain active across cycles of capital as capital availability shifts. Our 2025 total multifamily market share was 10.6%.

In 2022, it was 7.6% in a much larger market. So while the market shrank, our share grew. That's the momentum Chris discussed earlier. The breadth of that capital network is another structural advantage for our platform. The market backdrop supports growth. The MBA projects total CRE originations of $805 billion in 2025, and that number moves up to $840 billion in 2030 based on our forecast. Multifamily historically represents about half of that, roughly $400 billion in 2026.

That makes multifamily the largest and most liquid asset class in commercial real estate finance. The fundamentals are clear. The U.S. remains structurally undersupplied in housing. And as you just heard from Ivy, the cost of homeownership is prohibitive for many Americans. Rental demand is durable. Affordability remains a national priority. If we simply maintain our roughly 10% overall market share, our volumes expand about $40 billion in 2026.

Our plan is not to maintain market share, but to grow it. Every 100 basis point increase in market share adds another $4 billion of volume. On the GSE side alone, projected capacity is approximately $176 billion. Maintaining our 2025 GSE market share of 11.2% implies roughly $20 billion of volume. Our plan is to grow GSE market share as well. Every 100 basis points in GSE market share adds another $1.7 billion. The markets will grow, and we will inherently grow with it. But we plan to grow market share, and I will talk to our path to gaining market share momentarily.

We do not need heroic assumptions. Market growth plus disciplined execution drives meaningful expansion. While maintaining market share drives growth, we are not standing still. We have been incredibly successful hiring the very best bankers and brokers to our platform to build up the brand in the market that we have today. We plan to increase our bankers and brokers by about 20% over the next 5 years, expanding in key growth markets.

We are increasing investment sales volume and improving tie rates between debt and sales, bringing the full weight of the platform to our clients. We are investing in technology to increase producer productivity, automating underwriting workflows and accelerating quote generation, allowing our bankers to originate more volume per producer. And we are seeing large portfolios transactions begin to reemerge, transactions that favor scaled platforms. This is disciplined expansion built on structural advantage, not expansion in search of one.

Multifamily remains the foundation of our capital markets platform, combining structural advantage, recurring revenue and durable housing demand. But growth in this sector is not just about volume. It's about meeting housing needs across the spectrum, including affordable and workforce housing, where capital formation is critical. The affordable segment is strategically important to the country and to our growth.

With that, I'll turn it over to Sheri to discuss our positioning in affordable.

Good morning. I'm Sheri Thompson. I'm the Head of Affordable Housing at Walker & Dunlop. I spent my career in agency lending, having positions as a Chief Credit Officer, a Chief Operating Officer and Head of Originations. This is actually my second time at Walker & Dunlop.

As Willie talked about people coming and going, I'm actually full circled. I started my career very early as an underwriter for Willie [ Dad ]. And I returned a little over 7 years ago to run our HUD platform. At that time, I also helped to architect our affordable strategy. And what we've built is products and services to meet today's market. So I now lead and manage our affordable and our HUD teams.

For us, affordable housing is a niche business. It's really an integrated platform of affordable experts that sits within our capital markets team and delivers both capital and advisory services. It was intentionally built to execute across the entire capital stack in the affordable space. 7 years ago, when I came back, we had agency debt, but that really wasn't enough. We didn't have other products and services.

And as Willie talked about putting our clients in the center, we listened to their needs and saw the market moving. They were looking for partners who could solve their entire capital stack. So we purchased Alliant Capital, which is now called Walker & Dunlop Affordable Equity, which was really to jump-start our comprehensive platform. And we did that strategically because LIHTC equity drives permanent executions.

And from there, we've built out our property sales and our bridge lending capabilities. As you've heard a few other people talk about, affordable housing is really complex by nature, which is an important driver of why we're actually in this business. There's layered capital structures with regulatory constraints, with compliance time lines and public policy mandates.

And execution requires expertise in every part of the business. We have professionals and have built a platform that delivers that to the market. So you heard Don and Ivy talk about the housing shortage in the United States, which is real and serious. Affordable housing demand is not cyclical. It's structural.

And as Don said, it's a national priority, and the government is highly focused on solutions. So right now, what we're seeing in the market is the government coming up with solutions such as expanding the GSE affordable housing goals, increasing GSE LIHTC equity allocations and greater emphasis at HUD on affordable housing solutions. In addition, we're seeing institutional investors' interest rise in this area.

And as Chris talked about, when he talked about client segmentation, we have penetration into those clients, and we're ready to serve them in their affordable needs. We already are in some cases. Don talked about the moat that we have in multifamily. And affordable housing is really a unique part of that moat. The complexity, capital needs and scale make it a distinct ecosystem and one where we get opportunities to engage with our clients on all parts of their business. That drives new and recurring revenues.

The regulatory intensity and capital complexity are really meaningful barriers to entry here. So we've built a coordinated system, one where transaction revenue activates multiple parts of the platform and really protects our moat. It's how we scale and how we plan to double our volumes in this space over the next 5 years, contributing meaningfully to our capital markets growth.

So this slide really highlights the sequence of an affordable transaction and our focus on our clients' needs throughout the life cycle of a deal. There are really very few platforms that have actually all six of these components. Most people didn't have the time, the money or the energy to really create the moat that we have here. And each phase that we have in this creates incremental engagement opportunities where a single asset can drive revenues across multiple products over time.

The result of that is a greater wallet share, stronger retention and expanded recurring revenues. So how are we going to scale? We've really got three ways in the affordable housing that we're focused our priorities on, expanding our bridge lending, expanding our property sales and scaling our equity and dispositions. Bridge lending fills a critical gap in the market, and it provides speed and certainty of executions for our clients.

And it allows those clients to execute through complex affordable subsidy timing and regulatory approval. It really creates sticky clients and drives downstream permanent debt and property sales opportunities. So in January of this year, we launched an affordable bridge product with our partners at [ Pretium ] to meet that need in the market and expect to drive meaningful permanent debt and sales opportunities in the future.

In addition, we're currently working on a seniors housing bridge product to similarly support our HUD producers and our property sales teams to drive seniors permanent volume, sales and revenue. And Don outlined that sales drives financing. Our affordable property sales also strengthens debt capture rates, portfolio visibility, early recapture insights and broader advisory engagements.

And as we expand that capacity, we're going to increase our visibility into our clients' portfolios, which gives us a lot more integrated execution opportunities because when debt, sales and equity are aligned, we get higher win rates and greater market share. LIHTC Equity delivers revenue across both our capital markets and our SAM segments.

It's why it's so valuable to us. Because every time we make an equity investment, we get transactional revenues upfront in syndication fees and permanent debt. And then during the life cycle of that investment, we get recurring revenues in the way of asset management fees, fund reimbursables and servicing revenues on the permanent debt that we placed in the beginning. With over 107 funds and over $6.7 billion in equity currently deployed, that's a lot of meaningful revenue that comes in annually.

And then as those deals mature, we get subsequent revenue or another bite at the apple because we get to look at refinancing, [ resyndications ] or sales. We have over 600 assets in the WAE portfolio currently, many of which are approaching the end of their life cycle where we can actually trade them. That will drive more property sales and more refinances in the coming years. So the point really here is the LIHTC business provides built-in deal flow. And as we scale it from about $450 million to over $1 billion annually, we'll go after every deal at every stage of the life cycle, growing both our capital markets and our SAM revenues. So the affordable housing has incredible tailwinds right now.

Now is the right time. We've got the right team, and we spent the past few years building it to be ready for this moment. There's a national focus on affordable housing. The components parts we've built has made our platform exceedingly well equipped to manage today's complexities. And with both capital markets and SAM revenues, we're not only a growth engine, but we're a stability engine. So this is actually my favorite slide, maybe a little bit because it's my last one, but mostly because the platform, what it's showing is that we also deliver measurable social impact in this platform.

Our 2030 objective translates into over 3 million families that will gain access to safe, quality, affordable housing, which is impact that's tied to our scale.

Thank you. I'm going to turn it over to Ali to talk about our broader debt brokerage platform.

Good morning. My name is Alison Williams, and I run our debt brokerage business within our capital markets leadership team. I joined Walker & Dunlop in 2014 as a debt originator, where I focused on both multifamily and non-multifamily debt originations in our Capital Markets group. I transitioned to leadership in 2021, where I continue to use my sales expertise, underwriting and disciplined execution to help drive our teams towards ambitious goals year after year. As you heard Don and Sherry discuss, we will scale our multifamily and affordable debt and sales platform, which remains our most durable engine and generates significant recurring revenue. But today, I'm going to talk about the other half of the opportunity, which is non-multifamily.

Let's start with the size of the market. As you can see in the slide, the MBA is forecasting that the 2026 total debt originations is going to be $805 billion. 50% of that is multifamily. The other half, $400 billion is non-multifamily. Today, our market share is only 2%, which shows that we have a massive opportunity to scale and grow within non-multifamily sector.

Our goal is to increase our market share by 2030 to 6%, which, based on the forecast, will create an additional $12 billion of volume. Let's talk about where we've been and where we are today. So if you look at the slide, you can see in 2020, our non-multifamily sales was $3.7 billion, and we grew that 68% to $6.2 billion in 2025. The growth we saw in non-multifamily from '24 to '25 was 29%. And the interesting thing about this is that we grew over the 5-year period by actually with actually reducing our debt brokerage team by 24%. Why this is important is it shows that we were able to basically retain and recruit new talent.

We had some, obviously, those individuals retire and leave the platform, but we were able to increase our volume per banker and broker, which is a staple and a priority for our firm. I'm going to talk now about the three priorities for growth. First, we will deepen our client coverage in private client, middle market and large asset managers by expanding our reach and expertise in growth markets. Second, we will scale our EMEA platform to increase our relevance with global and large asset managers who are expanding their footprint globally. And third, we will expand into sector-specific asset classes where we see the highest growth potential, such as hospitality, data centers and industrial and logistics.

Let's double-click on each of these initiatives. First, we plan to deepen our client coverage in core markets by continuing to recruit and retain top talent in both debt and sales with sector expertise. We will use our regional footprint, which Chris mentioned, is about 50 offices across the U.S. to provide sector and market expertise. We will grow our institutional practice to focus on larger and more complex transactions, and we will increase our use of technology to make our bankers and brokers more insightful and increase win rates, excuse me, and productivity.

As I spoke about earlier, we saw a 68% growth from 2020 to 2025. Much of that growth came from a strategic initiative to increase our relevance with large asset managers. Two great examples of this include the recent $407 million office financing, as well as the largest office to multifamily conversion loan ever done in U.S. history for $867 million. Both of those assets are located here in Manhattan.

The opportunity here is pretty simple. Hire and retain great talent, deepen client relationships and grow market share. The second key initiative is scaling our EMEA platform. The European commercial real estate market is over $550 billion in annual transactions. We entered Europe in 2025 with a clear objective to scale our relevance and market share with large global asset managers that currently transact with us in the U.S. We will continue to add top talent in both debt and property sales with sector expertise to increase our connectivity with the largest clients that have both capital needs and capital to deploy both internationally and here in the U.S.

We have already seen success in Europe with several notable transactions, including the recent EUR 118 million office building we just closed in Belgium. This is one of many transactions illustrating that our expansion into Europe has allowed us to increase our reach and frequency of transactions with existing clients. Third, diversification. Our third priority is diversifying into sector-specific asset classes where we see strong demand and the ability to tie debt in sales.

Our immediate areas of focus include hospitality, data centers, industrial and logistics. The hospitality market is around $70 billion in total annual transactions. Hospitality is a highly transactional market, making it a strong fit for our integrated debt and sales platform. Since adding a dedicated hospitality practice to our platform in late 2024, we have seen more than $2.5 billion in financing opportunities, including the recent win here shown for the National Edition Hotel.

Previously, our clients who invested heavily in both multifamily and hospitality would look to us to refinance their multifamily deals, but they would go to a competitor to refinance their hospitality transaction. Now that we have sector expertise, we are seeing more opportunities from our existing clients. A great example of this is the recent $225 million restructuring and extension for the Santa Monica proper.

For years, we've closed multifamily transactions for Ralberurry, but this was the first hospitality assignment for this repeat client. We are also expanding into digital infrastructure, including data centers, one of the fastest-growing segments of the market. In 2025, there was more than $60 billion of debt, equity and sales transactions, and it's forecasted to almost double by 2030. Transaction activity in these sectors is heavily weighted towards debt and structured finance, which aligns well with our platform.

Our sector specialists work hand-in-hand with our existing capital markets teams, showcasing the weight of the broader platform. Across all of these sectors, we are expanding selectively where we already have client adjacency, capital relationships and cross-sell opportunities. This is not a stand-alone build-out. This is a platform expansion. Alongside these growth initiatives, we will continue to invest heavily in technology and WD Suite platform, which Megan will speak to shortly.

AI and data will absolutely change parts of our industry. But many of our core businesses, including GSE and HUD lending as well as the complex capital and equity restructuring and our institutional advisory practice remain deeply relationship and expertise driven. Technology will not replace those relationships. Instead, it will enhance our platform by delivering better data and insights, greater transparency, faster execution and improved productivity.

Our goal is to create a seamless and end-to-end client experience while enabling our teams to work more efficiently. And by investing early, we can increase productivity without risking disruption risk. Stepping back, I want to discuss all the points that we've talked about today, which really points to the same conclusion. We've seen a significant opportunity to grow our capital markets platform. We will do that by adding 110 bankers and brokers across multifamily and non-multifamily debt and property sales in key markets.

We will remain true to our core by investing in the best-in-class talent with sector expertise. We will increase our market share in both GSE and brokered executions within our core multifamily and affordable businesses. And we will expand into non-multifamily sectors across the U.S. and Europe, deepening our client relationships and expanding our reach and market share. And we will invest in technology to improve productivity and win rates, providing better insights and data to our teams and to our clients.

Together, these initiatives position us to achieve our journey to 30 targets, $115 billion in annual commercial real estate transactions and $1.1 billion in revenues. We spent a long time talking about growth today, but growth does not end when a deal closes. In many ways, that's where the long-term value begins. Our servicing platform connects origination, recurring revenue, credit discipline and long-term client relationships.

With that, I'll turn it over to Jim, who will discuss servicing and credit.

Good morning. My name is Jim Schroeder. I run debt operations at Walker & Dunlop. I joined W&D back in 2012 with the CW acquisition, spent my entire career in this space, managed large CRE debt portfolios through good times and bad through the SNL crisis, GFC, COVID and now the post-COVID tightening cycle bring a deep background in operations, trading, servicing and asset management to my current role overseeing the debt operations platform.

And today, I have a specific focus on credit, credit operations, compliance and leveraging technology in all of these areas. The servicing portfolio is a vital component of Walker & Dunlop's business model and our ability to achieve our Journey to 30 goals. I'm going to spend some time this morning talking about the portfolio's cash generation and margins, strategic value to our business, strong credit fundamentals and how we're using data and technology and servicing.

Our $144 billion portfolio kicks off a ton of cash, as you can see from the servicing-related revenues that have grown steadily over the last 5 years. Roughly 70% of the servicing revenue comes from servicing fees with the remaining 30% coming from escrow income and prepayment penalty income. The cash generated from the portfolio dampens cyclicality in our transaction business and allows us to make all the investments that you've heard about today.

Scaling the servicing platform and growing the portfolio increases our recurring revenue, improves visibility into future refinancing opportunities and enhances the data advantage that powers our capital markets platform. Servicing platform has a highly attractive and stable margin profile with continued opportunities for scalability. Even though the margins in this business are already extremely high, AI and technology are going to make us more efficient over the next 5 years. We will continue to improve the way we service loans and the way we capture data as we scale the platform.

As we move toward a $200 billion portfolio, our goal is to automate lower-level repetitive tasks and focus our team on high-impact, high-value tasks to meet the demands of the scaled portfolio of that size and to continue providing best-in-class service to our clients. Our cost per loan will decline as we scale and as we further embed technology into our business. Our retained servicing model is a massive advantage and an opportunity for us. Most non-agency lenders like REITs, debt funds and CMBS shops don't operate this way. We retain 100% of the loans we originate for Fannie Mae, Freddie Mac and HUD.

In a market where pricing isn't a significant differentiator, exceptional execution during underwriting, closing and servicing matters, and it makes a difference for our borrowers. Our customer satisfaction and Net Promoter Scores show that we are delivering for our clients and meeting or exceeding their expectations. We're in front of borrowers and engaging with them monthly for the life of their loan. We have real-time insights into the operations of the properties, leading to additional transaction opportunities well before maturity.

This gives us incredibly valuable data and insights that flow into other areas of our business that you've heard about this morning. And you'll hear from Megan shortly about how all of that data is being digested and utilized as part of our technology strategy. We continue to grow our servicing portfolio largely because our capital markets team is skilled at winning deals from our competitors.

In 2025, 72% of the GSE refinancings that we originated were refinanced out of other lenders' portfolios. We've consistently increased this over the past 4 years, growing it from 62% to 72%. This gives us a fantastic opportunity to differentiate W&D from our competitors with the exceptional execution and service that we provide. This turns new clients into repeat clients. 52% of our portfolio will mature over the next 5 years. Every maturity will result in a recapitalization, a refinance or a sale.

Our recapture rate out of the portfolio was 34% in 2025. A significant number of the deals that we lost were sales by competitor firms, which makes it more difficult to retain the servicing on the debt. Our capital markets team, as you've heard today, is very focused on capturing those in the future as they bring the full weight of the platform to our clients. Our current recapture rate of 34% will generate $23 billion of transaction volume over the next 5 years.

If we grow that rate to 50%, that translates into an additional $11 billion. At 70%, an additional $13 billion on top of that gets us to $47 billion of transaction activity just from maturities in our existing book. So how will we move from 34% to 50% to a 70% recapture rate?

Three ways. Focusing on transparency of data and arming our capital markets team with the property and client insights that help them win the business. Secondly, staying in front of our customers on every transaction, leveraging the weight of the platform to meet the clients' needs, whatever that need may be. And third, ensuring that we have a scaled national investment sales team to capture all of the sales transactions.

Steve mentioned this earlier, the industry experienced an unprecedented wave of fraud post-COVID that surfaced in our portfolio and others over the past 18 to 24 months. Like others in our space, we were impacted by these schemes and have had to deal with loan repurchases and the losses associated with them. Outside of these isolated incidents, our credit performance has been exceptional, and we expect that, that will continue.

As you can see on the slide here, over the past 10 years, our net write-offs as a percentage of our at-risk portfolio has never been above 1 basis point. GSE underwriting requirements and our internal protocols have both been strengthened with a focus on the specific gaps that fraud schemes between 2021 and 2024 attempted to exploit. We've also expanded our internal oversight capabilities. We doubled the size of our debt operations compliance team to provide continuous testing and review of underwriting and closing processes.

At the same time, we established a dedicated operations group, led by a senior credit professional to manage the operational infrastructure that supports our underwriting and closing teams. This allows our teams to focus entirely on credit analysis and execution for our clients while operational controls and process integrity are managed centrally. Technology plays an increasingly important role in strengthening these controls.

Our operations teams now benefit from the investments that we've made in our data infrastructure. It allows the team to analyze underwriting and servicing data at scale across the portfolio. We're also leveraging proprietary AI tools to parse and structure financial statements, making it easier for our teams to evaluate borrower information consistently and to identify anomalies.

In addition, we use generative AI tools through ChatGPT Enterprise and have developed custom GPTs that support specific debt operations workflows. WD Suite servicing provides a secure and structured digital channel for borrower documentation and data. Instead of receiving information through fragmented e-mail chains, documents and data now enter our system in a consistent format, creating a scalable and ongoing monitoring or a scalable foundation for ongoing monitoring and fraud detection.

Through WD Suite, we've created a digital experience that allows our clients to interact with us more efficiently, access loan information and manage servicing requests in one place. For our internal teams, it improves operational efficiency, strengthens compliance, reduces manual processes across the servicing life cycle. Just as importantly, it creates a direct digital channel between us and our clients. More and more borrowers are choosing to interact with us through WD Suite, where we can provide tools and services they simply would not have if their loans sat in another lender's portfolio. The broader vision for WD Suite and how it will reshape how we operate across the firm is what Megan is going to walk you through next.

Good morning, everyone. My name is Megan Strachan. I'm Chief Information Officer with Walker & Dunlop. And I joined the firm via the acquisition of GeoPhy that was Europe's leading AI scale-up at the time back in 2022. And I've spent much of my career building data and software products.

And long before generative AI became a top headline, I was building predictive machine learning solutions for commercial real estate. And so that is the experience I'm now applying to Walker & Dunlop's Capital Markets platform. So today, I'm excited to share with you all in a bit more depth what our technology vision is for 2030.

But first, I want to speak a bit about how we think about technology at Walker & Dunlop. So we don't treat technology as a sort of stand-alone shiny object that's separate from our core strategy. It's very much both how we operate the business more effectively every single day, but it's also our quiet long-term strategic advantage, especially as AI raises the bar for insight, compliance and client experience.

Now many of us may have experienced this, but in many companies, technology can oversell and sometimes doesn't always do what it promises and becomes far too visible sort of maze of point solutions, if you will. And each of those add their own friction. We very much view our job as technologists within Walker & Dunlop as not there to create yet more tools. We are there to create time for our employees, for our clients, time for strategy, not searching for value, not verification.

And we very much view that time as a competitive advantage. So if that time is the advantage and that friction is the enemy, how do we move from friction to flow? Well, the answer to that, and you've heard a little bit about this so far today, is WD Suite. And our vision for 2030 is really quite simple, one interconnected platform for any deal type, any client and every employee. WD Suite is very much our unified capital markets operating system. It brings together both client workflows and employee workflows into one intuitive experience. This helps us to better identify opportunities, deepen client relationships, win more predictably and execute more efficiently across all deal workflows.

Now before we dive deep into that life cycle and that technology, I think it's important to explain why Walker & Dunlop, in particular, is uniquely positioned in our peer set to go and successfully execute on this technology vision. Walker & Dunlop did not outsource its technology strategy and technology team. It was very intentional in how we built a mature technology organization inside of the firm. These professionals in technology understand when to build, when to buy and how to bring that all together seamlessly into one platform like WD Suite.

Our product and engineering teams work side by side with our producers, our underwriters and servicing professionals every single day. They deeply understand the business. They understand their workflows and they understand Walker & Dunlop's clients. And that capability was only built because of the acquisitions that the business has made to date. So let's dive into WD Suite at a bit more of a granular level, starting at the beginning of this life cycle with WD Suite Research.

So we launched this in 2025, and it is quickly becoming the digital front door to the business. We have seen over 3,000 users signing up for the technology, hundreds of clients engaging actively every single month, real clients telling us that they've improved their deal workflows by leveraging the data and insights within this platform. WD Suite Research is giving our clients clarity, and it's also influencing deals. We've seen over $165 million in successful deals that have been influenced by this technology.

It's giving our clients clarity about opportunities, hyperlocal intelligence, automated valuation and as Steve mentioned, tenant credit level insights. But this is not just a data tool. This is very much a growth engine as we look to 2030, a digital client acquisition channel. This is -- there's an early signal of this that we've seen in just its first year of launch, which is if we look at the 2,800-plus client firms that have signed up for the technology so far, they are -- about 90% of those are new to Walker & Dunlop. So that tells us we're starting to expand that top of funnel through this digital channel.

Moving into WD Suite financing. This is where those opportunities become real deals. Now historically, that work has been spread across inboxes and spreadsheets, but WD Suite financing is going to bring that into one connected workflow. In Q1 of this year, so shortly, we're about to launch this experience for the first time to our production teams.

And there's a simple reason we're starting with the production teams, and that is because we view data quality as really being won or lost at the top of that funnel. So if you're collecting data from borrowers or other sources from multiple channels, multiple times over and over, you're only going to see inconsistencies flow downstream. So that solves for that. WD Suite financing will also be expanded shortly after into our underwriting and closing teams and additionally outside of the debt financing workflows.

Now obviously, this will drive efficiencies for us, but it's also going to strengthen our risk posture. So as Jim already described in detail, we have made investments to strengthen our business protocols around how we detect fraud. But we know that Evolve can evolve over time. And so we need to be building that into our operating system from the outset. And that's what WD Suite really strengthens. It allows us to capture that information in a structured way and flow that downstream. This allows us to then layer AI on top of that and spot unusual anomalies or risks much earlier and much more easily.

WD Suite servicing, we launched this back in 2023. So this has already been improving and differentiating our client experience and is already starting to drive some real efficiency gains for our servicing teams. Adoption of this technology has been very strong. We have over 6,000 users that rely on this platform today, and it is reducing friction for them. It is strengthening compliance for us, and it's also allowing us to eliminate many of our legacy paper-based and e-mail-driven processes. It's not just an efficiency play, though. What you need to understand here is that this embeds us deeper into our clients' capital life cycles, closer to where those financing decisions are beginning.

And as we further layer AI into this experience, we're going to shift from not just effectively and efficiently responding to our borrowers' needs and asks, but actually proactively predicting those and anticipating them. So this is just going to help us deepen that client relationship, as Jim mentioned. So one platform does not mean one generic client experience. WD Suite has the flexibility to allow us to meet our clients where they are. But to understand how that interface with our client might evolve in the future, we need to talk about AI. We all know AI is dominating the headlines, and many markets are really pricing that in as though it's going to immediately collapse the economics of knowledge work. And commercial real estate has not been immune to that narrative either, but we view it as far more nuanced. AI and commercial real estate, we believe, will really unfold over 2 curves that will unfold at a different rate.

So the first curve is really about speeding up the model we know. So how can we drive efficiencies via AI and automation. And today, we're seeing that, right? So we're adopting AI within Walker & Dunlop. It's starting to meaningfully change how we run our existing workflows. But if we just focus on efficiency alone, that is shortsighted because there is a second curve to this. The second curve is about preparing for the model that's coming. So not AI replacing brokers, but AI reshaping the value chain, reshaping where those capital decisions begin.

Today, our biggest threat is a competitor beating us to a client, but tomorrow, that risk may look quite different. As our clients increasingly adopt AI systems and AI agents to potentially compare, search, evaluate financing options, capital decisions, we need to ensure that we are showing up in front of that system, in front of that agent in that comparison set. But I do think it's important to temper a lot of what we're seeing in the media, I think, misses the distinction between AI capability and how that diffuses into an established industry. AI is advancing extremely quickly. But when it comes to commercial real estate, there's some characteristics to consider. We have an industry where it's a market buy that's really defined by its heterogeneity. It has a low tolerance for error and ultimately strict requirements, sorry, around accountability. Those characteristics will slow the rate at which AI will change our industry. And we very much view that as a time horizon that is short enough to matter but long enough to prepare. And that is why our strategy for technology is not just about bolting on AI solutions to our existing workflows, but it's much more about deploying this operating system where we can really reimagine those workflows with AI from the start.

And that brings us to the intelligent core for data and AI compound, which really sits behind and powers this WD Suite experience that you see. We know that historically, in commercial real estate, every deal is essentially starting from scratch. Information and data lives and dies in documents, e-mails and individuals memory. WD Suite changes that because as deals flow through this platform, we are structuring that data, making it accessible, making it reusable. And in addition to that, we're creating this data flywheel, whereby every single interaction with the system improves our data. And ultimately, the firms that are able to capture this data flywheel and benefit from that, learn faster and adapt their business faster than their peers are the ones that will win. And that is our long-term strategic advantage with WD Suite.

Thank you, everyone. I will now hand over to Greg.

So those of you that know the agenda, I'm assuming you're excited to see me for 1 of 2 reasons. One, you're like me and you love numbers and capital. So congratulations. Your wait is over or you're hungry, and you're not over yet. You got about 30 more minutes.

So I've met many of you, but for those of you that don't know me yet, Greg Florkowski, I'm the CFO of Walker & Dunlop. I joined the company back during the IPO in 2010. At that time, we were 150 people, about $10 billion of transaction volume. And I became the Head of Business Development in 2018 and then from there, the CFO in 2022, right at the start of the great tightening. So my timing was impeccable.

Over the last 15 years, though, I've had the privilege of being a part of every one of our growth strategies that you've heard about from Willie through this group today. I led a direct role in helping shape the drive to '25. Unfortunately, we did not meet those financial targets. The great tightening disrupted transaction activity a bit more than we expected. Yet over the last 5 years, as you've heard throughout today, we meaningfully diversified and grew the business and strengthened the platform. We grew through organic hiring, but we also used M&A as an accelerant. And we structured that M&A responsibly with discipline. We used performance-based earn-outs that protected shareholder capital.

And today, those obligations are behind us. And those acquisitions, as you heard throughout our prepared remarks this morning, are an integrated part of the platform. Most importantly, though, the platform that we built is intact. In many cases, it's scaled and where it's not, it's positioned to grow. So before I turn to that future, I do want to take you through and level set on where we stand today as I think that, that's an important part and sets the foundation for the future.

So as this graph shows, the lead up to the great tightening demonstrated cyclical growth and the power of this platform during that cycle. We delivered peak transaction volumes in 2021, and the great tightening really demonstrated the durability of our business model. From 2021 to 2023, our transaction volumes, which are the bars, fell about 60% from peak to trough. Yet the total revenues, which are the line actually grew or held steady and only fell about 19% during that same period. So that's the power of pairing a capital markets platform with the contractual durable revenue of our servicing and asset management or SAM platform. Here, you can see the shift in the mix of revenue from peak to trough. At its peak, our capital markets platform was driving over 70% of our revenues.

Today, it's around 50%. As commercial real estate volumes continue to recover from here and we execute on the journey to a 30 growth plan that you heard outline throughout the morning, we expect that our capital markets revenues will become a larger portion of our overall revenue. But because our SAM platform is significantly more scaled, we do not expect that 70-30 split in the future. So how did the cycle translate into earnings and cash? As you can see here, as transaction volumes fell and remained down, our GAAP earnings were under pressure for a few reasons. First, there was reduced noncash MSR revenue that Willie spoke about due to duration and S fee compression. There was higher noncash amortization and depreciation, elevated interest due to higher short-term rates and elevated loan purchase -- repurchase costs over the previous 2 years really drove '24 and '25. But our cash generation remained very strong.

The pressure on GAAP earnings doesn't translate to EBITDA proportionately as it's largely driven by MSRs, interest and amortization and depreciation I just mentioned. So our servicing portfolio continues to grow and it stands at $144 billion today. As I've said, though, those revenues from that servicing portfolio are contractual and durable. And that cash generation allowed us to return nearly $0.5 billion to shareholders over the last 5 years and while simultaneously investing in the business for its long-term growth.

So the step down in EPS during the downturn was significant, and it reflected -- let me just finish here. So it reflected that slowdown in total transaction activity. But what didn't happen was you saw that profitability hold up and that cash generation remain durable. That's the stability that positions us really to grow from where we are today. So despite that market disruption, we have been investing in the platform. consistently. The investments we made between 2020 and 2025 in capital markets businesses, affordable housing, research, investment banking, technology, they're all now embedded in the platform, and they form the foundation of the journey to 30.

Although we didn't achieve the ambitious growth targets of the Drive to '25, I'm proud of how we navigated that cycle. We managed through a downturn in our core businesses. We took decisive action when we needed to, all while positioning ourselves for sustained growth here as the market begins recovery. Let's talk about the future and the journey to 30. So my remarks today should accomplish a few things. First, connect you to what you've heard this morning to our financial model; second, reset our scorecard for the next 5 years; and finally, establish a clear capital allocation framework that will drive shareholder return over the next 5 years.

So here's what you heard. I think it's pretty simple, summarized 3 hours in a few lines here. Research and valuation drive insight. Insights drive transactions. Our transactions feed our servicing portfolio. The servicing feeds -- deepens client relationships, further feeds insights and transactions and WD Suite connects it all. That's the power of the platform. You'll hear a lot about that over the next 5 years. So these are the targets. You've seen these a few times, so I won't stay too long or linger too long on this slide, but these goals reflect the current market conditions and profitability drivers of the business. They also reflect our commitment to organic top line growth and shareholder return. So let me step you through the top line. We'll achieve growth across the capital markets platform in a few ways. let me hold on one second. First, the capital markets platform. We'll see expansion in the market, right? Just generally, you heard Chris and Don and Ali and Sherry just talk about the market normalization. The market should expand 30% to 40% in terms of total debt and investment sales transaction activity from today through 2030. That will add about $200 million to $250 million of revenue, just that natural growth in the market.

We'll also continue to expand our multifamily market share. As you heard, we expect to grow that about 300 to 400 basis points over the next 5 years, and that should add an additional $150 million to $200 million of revenue. And finally, we're going to diversify the non-multifamily expertise at Walker & Dunlop through a combination of non-multifamily execution in the U.S. and our European expansion, and that will add another $100 million to $200 million of revenue. That growth in transaction activity will feed into our servicing portfolio. And given the maturity profile that you saw, we have a pretty clear path to growing the portfolio an additional 30% to 40%, which will drive further durable revenues over the next 5 years. And finally, we will expand our strategic products.

Many of those are poised to grow. They'll deliver fuel for insights and transactions into the overall capital markets platform. And that combination of servicing and strategic product growth should drive an additional $150 million to $200 million of top line revenue growth, as you can see here. But we're not just focused on the top line. We have to deliver sustainable profitability. And as you can see, our margins have been down, particularly with the elevated repurchase costs the last couple of years. So our margins will expand in a few key areas.

First, we expect repurchases to normalize closer to historical norms, and our margins will clearly benefit from that. Second, as our capital markets platform grows, we'll see margin expansion from productivity gains and greater scale. Third, our emerging businesses and strategic products are subscale today. And as these businesses mature, margins will benefit, as you heard Steve talk about. And finally, our corporate G&A does not need to grow linearly with revenue, and that creates further opportunity for margin expansion. And by 2030, our expectation is that our margins will return to between 15% and 20%. So a couple of weeks ago, we shared our guidance for 2026. I think that's a good foundation to build these long-term bottom line goals off of. So our 2026 guidance was $3.50 to $4 of diluted EPS. adjusted EBITDA of between $300 million and $325 million and adjusted core EPS of $4.50 to $5. As we mentioned on our earnings call, though, 2 weeks ago, we'll achieve that guidance, and you also heard a lot about that here today through growth in the market, share gains from our leading capital markets platform and the continued strength of our servicing portfolio and asset management revenues. And by 2030, we expect to double EPS at the low end to $8 to $10 per share. We expect to grow adjusted EBITDA to between $400 million and $500 million and grow adjusted core EPS to $8 to $10 per share.

As you've heard throughout this morning, our outlook assumes the following: normalization of global capital flows to fuel transaction volumes, continuity in the GSEs as the dominant provider of capital to the multifamily sector and our ability to continue to recruit to grow the platform. Those are the key variables that underpin the model and the journey of 30 targets. But there's a few upside levers as well. So we expect MSRs to normalize over the next few years. Our outlook is based on the current environment. So if duration and fees -- I got ahead of myself. So if duration and fees do indeed increase, we'll see an uptick in our noncash MSR revenue, and that would benefit our GAAP EPS performance.

Our outlook is also based on the business as it's executed today. So the technology pickup that you just heard or technology gains that you heard Megan just talk about -- if we can capture those, you'll see growth as well. AI is rapidly reshaping transaction flows, underwriting and client engagement. We are well positioned, and we believe we're very well positioned to capture productivity gains from that transformation, but we still expect people to close transactions.

So any productivity gains we can pick up will only improve the numbers I just walked through. And finally, accretive M&A. We have used M&A consistently over the last 15 years to deliver on our growth goals. But as we have in the past, we're likely to do that through tuck-in M&A, not large-scale M&A. So to the extent there is large-scale M&A, that would only be an accelerant, but not a necessity to our journey to 30 -- so let's talk about capital allocation.

Over the next 5 years, we're expecting to generate close to $2 billion of total EBITDA. And I think that, that helps square cash flow and cash capital allocation. There's nondiscretionary needs for our business, taxes, debt service, that will take about $400 million to $500 million of that capital. But then there's a handful of really key growth areas or key areas where we expect to use our capital. The first is shareholder return. I mentioned over the last 5 years, we paid nearly $0.5 billion. We expect to pay another $0.5 billion over the next 5 years in dividends to our shareholders. That's a core component of our shareholder return. We also think there's strong organic growth drivers. We'll invest $500 million to $600 million in expanding our capital markets platform through recruiting and tuck-in M&A and retaining our very talented salespeople. We'll also grow our strategic product presence through co-investments in capital vehicles that feed that capital markets business.

And we'll expand the WD Suite product offering as we think that drives top of funnel. And finally, I mentioned it just a moment ago, but as a growth accelerator, larger scale M&A. We'll target strong ROIs at accretive multiples, and that will only accelerate our growth drivers. We do not need additional incremental debt, though, to drive this plan. So in summary, the journey to 30 is a disciplined growth plan. It's funded by cash generation, built on durable revenue and designed to deliver strong shareholder return. We believe this combination of durability and growth positions Walker & Dunlop to create meaningful long-term value for our shareholders.

So with that, I'll turn it back over to Willie and get you all a little closer to lunch.

Great. As I said at the top, I was very much looking forward to all of you hearing from our exceptional senior leadership team. We have the opportunity from time to time to do diligence on companies that we're looking to acquire. I watch all of our competitor firms as it relates to who's taking what jobs, who's recruiting, whom from what other firms. And I have to say that to look at the depth, the experience and mostly the dedication of our senior leadership team, it is a huge honor for me to be able to lead this team -- as I listen to all of them talk about how they came to Walker & Dunlop, when they came to Walker & Dunlop.

You might have picked up a theme there that most of the team other than Megan joined Walker & Dunlop in the early teens. And Sherry even round tripped from being an analyst and underwriter for my father way back in the day and then coming back to Walker & Dunlop in a senior leadership role. It's a real privilege to have this team to work with every single day, and they are as good as they get. The journey to 30, as I said at the top, to be the very best commercial real estate capital markets company in the world. There are a couple of things that have changed there.

One of them is the broad offering as it relates to capital markets. The other is in the world. We were very much focused on the United States for the first 20 years that I was at this company. We've, if you will, broadened our horizons. And I think that's going to give us great growth opportunities over the coming years and over coming decades as we continue to expand the Walker & Dunlop brand around the globe. We talked a little bit about our competitive positioning. I would reiterate, there's not a brand on that slide that isn't a fierce competitor of ours every single day.

Chris talked about some bigger competitors, some where we show up, we know who we're kind of going up against. But the insight that Chris gave as it relates to him being out on the front lines every single day, seeing our teams go head-to-head with firms like that. I'd go back to 2010. If you told me we'd be positioned like that with the market presence and scale and brand that we have today, it was nothing but a dream back then.

Today, it's reality. It's our responsibility to grow from here, to continue to take market share, to continue to compete with those firms every day and also be ready to compete with someone who's not on that chart today. You can see a couple of names in here like Evercore and Lazard and Blue Owl. Those 5 firms wouldn't have been on that chart 5 years ago. They are all doing certain things to compete with us in certain ways. Some of them are partners, some of them are competitors. The other piece to it is in that upper left-hand quadrant as it relates to client segmentation. One day, Blackstone is a client.

The next day, they are a partner and the next day, they're a competitor. We have the responsibility to figure out every single day how we are partnering with firms, how we are competing with firms and how we are winning with firms to continue to grow this platform and staying out in front of our clients, one of the things I spend an inordinate amount of time doing is staying in front of our clients. There are probably 1 or 2 other CEOs in our industry who spend as much time with clients as I do. Many of the people from an operational standpoint would say, wish you were sitting at the desk, wish I was getting you a little bit quicker on the response to something as it relates to a major business decision. But the flip side to that is market intelligence and working with our bankers and brokers across the country to bring the full weight of this platform. And it is that client input that allows us to adapt what we're doing every single day, not only from me, but from the rest of the senior leadership team that you heard from today as well as from everybody who's out on the front lines for Walker & Dunlop every single day.

If we're not listening to that and adapting this company to those inputs, we're missing something. And we've been very lucky up until now, and it's reflected by our market leadership to have listened and adapted this firm and grown this firm in line with what our clients want from us. I've talked a lot about our people. This is a people business. And there is plenty, plenty, plenty out there today as it relates to AI and what AI is going to do in the future. All I can say is that, first of all, there is nobody who knows what AI is going to do. The best we can do is be on the front foot, be watching what it does, adapt to it and use it to the best of our abilities. I have talked a number of times about the fact that in 2000, if you were sitting around and someone was looking at Amazon, and they looked at Amazon at that time as sort of a start-up company that went public in 1996 and was flying up to the right, you'd say that's going to be a $5 trillion market cap company in 2025.

Well, you'd go long on Amazon. You also likely would short bricks-and-mortar retail real estate. You'd say it's all going to go online, and I'm going to short bricks-and-mortar retail real estate. Well, 84% of U.S. retail still flows through bricks-and-mortar, 84%. Only 16% of U.S. retail goes online. All the growth has been in online. It's 16% market share of total retail sales in the United States. But if you'd sat there and said, I'm going to jump on to that $5 trillion growth engine on Amazon, well done, but you would have missed a huge opportunity to continue to invest in bricks-and-mortar retail a quarter century later. And oh, by the way, Walmart's market cap just went over $1 trillion. So Walmart, who everyone knows was a, if you will, late adopter to the online world, is doing very, very well today in both its bricks and mortar as well as its online. We have to be watching that to figure out what we're putting into AI and what we're doing the old-fashioned way of staying close to our clients. It's all going to be dependent upon those people. You're getting sick of this slide. I'm going to jump right through it because we've focused on it potentially a little bit too much.

But I would reiterate that it is that client focus. I sat in the back listening to my colleagues. As you can imagine, I've listened to their presentations a couple of times now, so I didn't have to listen quite as intently as all of you were to all of their comments. But I was sitting there texting with clients on that client segmentation slide, circling their logo and sending it out to them saying, walking off Investor Day, we've got you front and center. That's how we make a difference. That's how when the Head of Starwood writes me back immediately and says, we got to move from the upper left to the bottom left, going from an alternative asset manager to one of the big scaled asset managers. That's how somebody who is right in the middle who I circled came back to me and said, thank you for having us square in the middle of your slide. Those types of little things build the relationships that have built this company, and they build the loyalty that we have been honored to be able to build with incredible owner-operators, investors over this company's great 88-year history.

And I would close on this team. There are plenty of other people on Walker & Dunlop's, not only senior leadership team, but throughout the organization who make this company work every single day. But one of the main reasons why we put this Investor Day on is not only to outline the strategy and show you the growth targets and have you understand exactly where we're headed and what the true north is going to be over the next 5 years, but for you to hear from this exceptional team of professionals.

And as I said previously, for me, to work with a group like this every single day is truly an honor. I will now open it up to any Q&A. I would ask the people in the room when you ask a question, just state your name and the company that you are with. We have online chat for questions as well that Kelsey will read out any of those that are coming from people who are watching the webcast live. And I will address any questions that come in. And if I need to ask one of my colleagues to go in more specifics on it, I will turn it over to them, and they will grab the microphone and participate back.

So let me open it up to any questions or comments from people local or out. Jade?

You mentioned client segmentation being a big emphasis for this year for the capital markets team. I was wondering if you could give any color on institutional, regional private client, the way you guys broke it out, what the ratios might be and where you see the biggest opportunity in the next maybe couple of years?

So I'll jump in. And Chris, if you want to dive in after me, feel free to do so. I think the -- the most important thing is that as we have grown this platform, we've added -- we've done 18 acquisitions at Walker & Dunlop. Acquiring 18 companies is not an easy thing. I think if you look back on them as it relates to the returns and success or failure, I think we're about 17 in 1, maybe 16 and 2, but we have an extremely successful track record of not only buying great companies and getting the returns out of them, but keeping the teams at Walker & Dunlop. As you acquire that many companies, how they fit into Walker & Dunlop, how the client base is segmented, what the go-to-market strategy is and how you manage all that, I can draw you on a chart how to do it, but quite honestly, how you implement it and how you actually do it every single day is quite challenging.

So if you look at our sales force database, the structure that's behind that has not been as regimented as structured as you would think. And so one of the things that we are now engaging upon is we have an institutional team based here in New York that is really focused, Jade, on those upper left-hand and lower left-hand clients. They have incredible relationships.

Yesterday, I was meeting with a very significant sovereign wealth fund, and we were talking about that team's capabilities. And one of the things that was kind of interesting was the sovereign wealth fund was saying, we kind of view you as an agency lender, and we didn't know that you do all this broad capital markets work. And Chris jumped in and talked about the 240 capital sources that we worked with in 2025, just in 2025. And their eyes opened up and they said, "Wow, we didn't know you were doing that much." and we talked about some very, very large SASB transactions that we financed and that big office to multi-conversion loan that we did, the largest ever done in the United States last year. And so that gives us great bonafidas to continue to sell into that big institutional group. That middle segment of the focused multifamily scaled private equity firms, that's been bread and butter for Walker & Dunlop.

You saw on that slide, Greystar. You saw on that slide, Bell Partners, you saw on that slide, Capital Square and others. That has been the largest, fastest-growing cohort of owners and operators of multifamily, and we have covered them both from the debt side as well as from the investment sales side and done an extremely good job of creating great relationships there. That cohort is going to continue to grow, and we need to maintain our focus on them. And then as Allison talked about, the right-hand side of those local owner operators. That's the reason you have 50 offices. You can't cover that client base from New York. You've got to have an office in Tampa, Florida. You've got to have an office in Austin, Texas to be able to cover those local owner operators. And they come to our bankers and brokers for that access to institutional capital as well as local capital to be able to finance a deal, to be able to sell a deal, to be able to get an appraisal on a deal, et cetera. And so it's that segmentation from institutional into middle market into private client that is so important as it relates to not only how we are managing the teams, how we're coordinated.

But then the other piece to it, Jade, that I think is exceedingly important is that we have had a national outlook. We have built this platform of sort of saying, let's go at the market across the country. And what we're trying to do now is, yes, institutional, you can go across the country. The middle segment, you can pretty much go across the country. But on the far right-hand side, you need to be local. You need to have local leadership, you need to have local focus. You need to have integrated teams at the local level. And that is what we're really doing now as it relates to the go-to-market strategy going forward you got anything else you want to add?

Yes. I would just say that we're organizing our sales force around the clients that we cover. And when I think back to the playbook about trying to build our investment sales business, people said, how do you do it? How are you going to do it? And it was real simple. Look, we're going to move into new geographies, and we're going to segment the market in geographies where we currently have a presence. And that's the playbook that we're running here. The reality of the left-hand names on that slide is what motivates them to make decisions and what drives sort of deal flow with them looks a lot different than what's on the right-hand side. Willie mentioned it, the group that's in the middle, those are the people that have been consumers of agency capital since the beginning of the firm.

Those are the people that we built the multifamily investment sales business around. So that organization is simply getting our predominantly GSE-focused producers and our multifamily investment sales professionals, all in one group coordinating one another to bring the weight of the platform to that client more consistently. So the way that, that shows up is our tie ratios, right? How are they working together? If you think about how suppressed the transaction market has been over the last couple of years, we've got to go to every single client with debt execution in tow, a recapitalization execution in tow and a sales execution in tow.

And we go run this sort of 90- to 120-day exercise, not knowing what the ultimate execution is going to be until we go get feedback from the market, right? And so you look at the amount of transaction activity that's gone to market and not cleared over the course of the last 2 to 3 years, roughly 50% of the multifamily investment sales offerings since 2023 have gone to the market and not cleared. That's dead revenue or that's a dead deal cost for a lot of folks. But if we can do that with those groups arm in arm with one another, if it breaks away from a sales transaction to a recap conversation to a refinancing conversation, we've got sort of the full suite of services in toast. So that's why we organized a little bit differently around that sector-specific group.

I had a question about name...

Sorry, Donostino, -- no Street Capital.

Question about the guidance. And it might just be -- it's probably a very straightforward answer around MSR amortization and depreciation. But the EPS guide -- growth guide is significantly higher than the EBITDA growth guide. So if you could help me bridge that gap? And then the second kind of adjacent question is, I appreciate the dedication to capital return. I mean, given what you think you can do and given the valuation, is it on the table to shift some of the dollars going into dividend into buyback? Or is that just -- is the dividend just sacrosan?

So I'll take the dividend question, and then I'll turn it to Greg as it relates to EBITDA. Why don't you grab the mic there, Greg, so that you can -- you're on. Okay. Great. You got to get out of the dark then come this way. So there is nothing sacrosanct about the capital strategy. I will say, as Greg underscored, the dividend has been something that we have not only established but grown every single year since we established it. We think that is a reflection of the cash-generating capabilities of the firm. And I would love to think that we can both execute on our Board-authorized buyback strategy as well as continue to grow the dividend over the coming years. And so I wouldn't see any major shift to those 2 things. Do you want to go with EBITDA versus EPS?

Yes. It is fairly straightforward, right? I think as you gain -- as we gain more multifamily market share and gain a larger proportion of the GSE's book of business, that would drive more of those noncash MSRs, and that will close the gap that exists today between our MSR revenue and our amortization and depreciation. And our modeling shows that we can only close it, but sort of get back to a positive margin there on noncash, and that's going to drive greater EPS growth than it will EBITDA growth. And then the cash, obviously, the EBITDA growth will also drive EPS growth, which is why you see disproportion -- I call it, disproportionate growth rates for the 2 metrics.

Stating the obvious that we should just expect the EPS to grow faster than the cash flow for a while, and then there should be a catch-up as you're generating the cash off of the kind of front-loaded EPS from...

Exactly as you'll start to see that sort of improvement in overall quality of earnings. That's why you also see the adjusted core EPS and GAAP EPS. metrics convert.

What do you prefer investors to focus on free cash flow, EBITDA, EPS? What do you think the best measure of the progress you're making?

So I'd say I -- for me, cash is king. Cash is the most important thing that drives the capital, that drives our ability to invest and return capital and drive long-term returns. So I think that, that's critical. That said, we've always looked at GAAP EPS because that noncash MSR revenue is fuel for the servicing portfolio, which drives the cash flow. So we want to see those metrics clearly both heading in the same direction. But I spend a lot of my time focusing on cash and capital. And I think that that's critical because that's what drives long-term returns and our ability to invest.

But we can pretty easily calculate a cash EPS number? Or is that something you publish?