Q4 2023 Walker & Dunlop Inc Earnings Call

Presentation

Operator

Good day and welcome to the Q4 2023 Walker & Dunlop, Inc. earnings call. Today's conference is being recorded. At this time, I would like to turn the conference over to Kelsey Duffey, Senior Vice President of Investor Relations. Please go ahead.

Thank you, Taren and good morning, everyone. Thank you for joining Walker & Dunlop's Fourth Quarter and Full Year 2023 earnings call. I have with me this morning are 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. The 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 meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements describe our current expectations and actual results may differ materially for 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. 2023 was a challenging year for the commercial real estate industry and the fourth quarter started out with the same headwinds that we saw throughout the year. But the lower than expected CPI print in November drove a 100 basis point rally in rates and the deals in our pipeline held together for the first time all year, resulting in $9.3 billion of total transaction volume in the quarter.
This was still down 17% from Q4 of '22, but up sequentially from the third quarter and our highest quarterly volume of the year. A nice way to end the year.
As you can see on slide 3, our Q4 financial performance was solid across the board, including total revenues of $274 million down just 3% from Q4 of '22 and diluted earnings per share of $0.93. EPS was off more than other metrics, largely due to two transaction related adjustments unique to Q4 of last year. Adjusted core EPS, which strips out a good deal of non-cash revenues and expenses, was up 1% from the same period last year.
Finally, reflecting the strength of the W&D business model, adjusted EBITDA grew each quarter throughout the year from $68 million in Q1 to $88 million in Q4, down only 5% from Q4 of '22. Q4 results were a nice uptick after a very challenging 2023 when full year total transaction volume was down 48% to $33 billion yet due to our underlying business model, significant cost management and the exceptional W&D team, full year adjusted EBITDA was $300 million, down only 8% from 2022.
We are hopeful that we have effectively weathered the great tightening. And then as rates stabilize and potentially head down that we are extremely well positioned to benefit from the market's eventual recovery.
The market's belief that the Fed is done tightening and will start to ease in 2024 is welcome news and very constructive for the commercial real estate industry, that there are clearly questions around when and by how much the Fed will ease from. The answer to those questions will have a dramatic impact on the market. We are currently seeing a slow start to the year as investors and developers tried to incorporate rate cuts or not into their business planning.
As shown on this slide, we started 2023 with a 3.88% tenure, which moved up to 5% over the subsequent three quarters only to rally back down to 3.88% in Q4. That type of rate volatility makes it exceedingly difficult for buyers and sellers of commercial real estate to establish pricing, determine their cost of capital and compute an IRR on the sale or acquisition of an asset.
If the Fed begins easing in Q2 and continues to ease, we would expect a nice uptick in transaction volume this year and also an improvement in the credit landscape. Our multifamily property sales team closed $2.9 billion of sales in the fourth quarter, bringing our full year volume to $8.8 billion, down 55% from 2022, slightly less than the broader market decline of 61%. As a result, we increased market share from 6.7% in 2022 to 7.4% in 2023.
Net brokerage volume declined 34% in Q4 to $2.9 billion and was down 55% for the full year to $11.7 billion. Our [GSE] volumes and market share remained strong once again, finishing the year as Fannie Mae's largest US lender for the fifth consecutive year at $6.6 billion and Freddie Mac's third largest partner at $4.6 billion of loan deliveries.
Our focus on affordable housing and small balance lending added significant loan volume to our GSE totals. Our research arms Ellman provided W&D with stable subscription revenues as their research continues to be known as some of the very best covering the housing industry.
We also expanded gentlemen's investment banking capabilities into the commercial market in 2023. And in the fourth quarter, the investment banking team closed three transactions, albeit all in the single-family sector that boosted revenues and expanded the W&D brand significantly.
I mentioned our small balance lending groups importance to our GSE volumes and thanks to the team and technology, we have invested in that business. We ended 2023 as the third largest small balance lender with Fannie Mae and the fourth-largest with Freddie Mac, expanding market share nicely with both. And our other tech-enabled business applies grew faster than the market last year, ending the year with 11% market share, up from 6% in 2022.
I'll now turn the call over to Greg to review our quarter and full year financial results in more detail. Greg?

Thank you, Willy, and good morning everyone. This was your percentage of the market conditions that depressed commercial real estate investment and transaction activity. However, the sharp decline in long-term rates during the fourth quarter and the positive sentiment that all of us at November remarks led to increased transaction activity that drove improved performance in our capital market segment. When coupled with the continued strength of our servicing and asset management segment, we delivered our strongest quarterly results for 2023.
I will spend a little time on our quarterly segment performance before recapping our annual consolidated financial performance and finish with our current outlook for 2024.
Beginning with our Capital Markets segment on slide 6, this segment delivered the strongest quarterly financial results of the year due to the sequential uptick in total transaction volume. Total revenues were $129 million, down 5% year-over-year, but up 10% from the third quarter of 2023.
Revenues benefited from a stronger gain on sale margin compared to the same quarter last year due to the mix of transaction activity that was weighted more heavily towards agency financing volume this quarter. Personnel expense for the segment declined 17% year-over-year due to a decline in variable compensation.
Our Capital Markets segment benefits from a high proportion of performance based compensation and in periods of lower transaction activity and associated revenues, we recognized lower variable compensation costs.
This is reflected in adjusted EBITDA, which improved to a loss of only $2 million this quarter compared to a $16 million loss in Q3 '23, but down from positive adjusted EBITDA of $6 million in the fourth quarter last year.
Servicing and Asset Management or SAM produced revenues of $140 million this quarter, as shown on slide 7, driven by our $131 billion servicing portfolio and $17 billion of assets under management, revenues this quarter were down $7 million compared to the same quarter last year.
Typically, the Q4 is the strongest quarter of revenues for Walker & Dunlop affordable equity, formerly online due to the gains realized from the disposition of maturing tax strategies and macroeconomic challenges cause the dispositions to slow meaningfully at the end of this year compared to the last two years. And as a result investment management revenues were down quarter over quarter.
These deals remain in our portfolio, and we expect to dispose of the assets when market conditions become more favorable. Our global equity team did have its most successful year of equity originations in its history though, syndicating $688 million of new equity during 2023.
Our servicing activities, including recurring servicing fees and related placement fees generated Q4 revenues of $121 million, up 18% year-over-year, offsetting the majority of the decline from investment management fees, but operating margin for the segment was still down 4 percentage points to 30%, while adjusted EBITDA declined 3%, $111 million.
Before I discuss our consolidated annual performance. I want to touch on credit, which continues to hold up well, as shown on Slide 8. We ended the year with three defaulted loans in our at-risk portfolio. Totaling $27 million or just 5 basis points.
We are currently estimating losses of [$3 million] on the defaulted loans, which compares to our overall risk sharing allowance of $32 million at year end, leaving sufficient reserves to cover any other potential defaults that may materialize during the cycle.
In addition to the defaulted loans, last quarter, we reported that Fannie Mae requested be repurchase of [$13 million] loan, and we expect to complete that repurchase in the first quarter. We do not expect to incur any loss on the loan and our asset management team is working with the borrower to resolve the outstanding issues that led to the repurchase.
We also carefully monitor loans that are more than 60 days delinquent. And as of January 2024, we had only seven such loans compared to three last year. The remainder of our average portfolio is performing very well as illustrated by the credit fundamentals on this slide.
The weighted average debt service coverage ratio of the at-risk portfolio remains over 2 times. The underwritten loan to value is just over 60% and only $3.4 billion of average loans are maturing over the next two years.
As it relates specifically to the maturing loans, the weighted average debt service coverage ratio of those loans is also over 2 times and only 12% are floating rate loans. In short, we have maintained a consistent, disciplined approach to credit for over 30 years as a lender, and we continue to feel good about the broad credit fundamentals our at-risk portfolio, given where we are in the cycle.
Turning back to our consolidated financial results, full year total transaction volume of $33 billion was down 48% year over year. Our scaled servicing and asset management platform contributed significantly to our revenues, which totaled $1.1 billion, down only 16% of 2022.
Diluted earnings per share continues to be impacted by lower transaction activity. It was $3.18 per share for the full year, down 50% from 2022, however deliver the durable recurring cash flows generated by the servicing and asset management segment, reported adjusted EBITDA and adjusted for EPS. 2023 adjusted EBITDA of $300 million was down 8% year-over-year, while adjusted core EPS totaled $4.68 per share, down 16%.
Finally, operating margin was 13% and return on equity was 6% compared to 21% and 13% respectively in 2022. We have a fantastic business model to generate strong cash flow, and we ended the year with $329 million of cash on hand.
And our gas position only decreases in the first quarter as we pay company bonuses, repurchase shares connected to employee stock vesting events and settle our tax liabilities. This year, we will also pay another earnout installment to alliance that they have now achieved 47% of the aggregate earn-outs and remain on pace to achieve the [dollar amounts] over the next few years.
Given the stability of our cash earnings yesterday, our Board approved a quarterly dividend of $0.65 per share, a 3% increase and authorized a $75 million share repurchase program. This is our sixth annual dividend increase since we initiated the dividend in February 2018 at $0.25 per share and represents a cumulative increase of 160% over the last six years.
Our 2023 cash generation is a testament to the strength and durability of our business model in a downturn, giving us confidence to increase the dividend yet again, while still retaining capital to support the business.
Over the past year, we struck a cautious tone with respect to the market, we actively managed our business to withstand the sharp decline in transaction activity by cutting personnel and G&A costs, refinancing and upsizing our term loan and preserving capital.
And while we exited 2023 in a strong financial position, we remain cautious entering 2024. For starters, Q1 is going to be slower than last year from an earnings perspective, slightly in the range of $0.40 to $0.60 per diluted share. As transaction activity is off to a slow start and we will not repeat the $11 million net benefit for credit losses resulting from the annual update to our CECL methodology, nor will we replicate the $7.5 million investment banking transaction we closed in Q1 last year.
As it relates to our full year outlook, Fannie Mae and Freddie Mac has stated they expect their 2024 lending volumes to be similar to 2023. That will be a disappointing outcome given the potential for stable and maybe even declining interest rates this year. So we cannot disregard the view of our two largest markets finally, there are many macroeconomic drivers that we do not control, including interest rates, political elections, inflation that will undoubtedly impact our business this year. Those are the challenges, but there are opportunities.
There are over [$450 billion] of multi-family loans maturing over the next two years. We are leveraging our data and technology to understand those deals meet with those customers and win their business. We added 17 bankers and brokers to our platform in 2023 through our recruiting efforts, giving us a clear opportunity to gain market share this year.
There are over [$0.5 million] multifamily units under construction that are being delivered in 2024. And our team will assist many of those developers with selling or recapitalizing their assets last year was also challenging for Lightech dispositions, but we are focused on reviewing opportunities with our developers in evaluating ways to May 2024 a better year for our client funds.
We generate strong cash flow from operations and have a solid capital base that will allow us to invest in our business and raise capital to meet the market demand. Just as we did when we announced the first close of our new debt fund in February, it raised $150 million of capital. And when lever will allow us to fund $0.5 billion of [resistance]. We have a terrific team that has performed over the long term, and that team is focused on the opportunities that will help us return to growth in 2024.
As a result, as shown on slide 12, our full year guidance is for diluted earnings per share. Adjusted EBITDA and adjusted core EPS to increase in the mid-single digits to [low teens] this year. While the challenges of 2023 are not in the rearview mirror, we move into 2024 with the business model and the people, brand and technology to continue exceeding our clients' expectations, executing on our long-term strategy and generating extremely strong cash flows to set our business up for long-term success.
Thank you for your time this morning. I will now turn the call back over to Willy.

Thank you, Greg. As you just heard, our solid Q4 financial performance was thanks to the rally in the debt markets and the prospect of rate cuts in 2024. And while those two macro shifts drove top and bottom line performance, in Q4. They do not explain why our balance sheet is so strong, why our credit book remains healthy and why our brand and team are so exceptional performance on those metrics takes years of consistent investment performance.
Our balance sheet and cash position are so strong because we have built a wonderful business model over decades that supplies us with durable revenues and earnings. And we have continuously invested in businesses like Development and Alliance that have broadened our client offering and diversified our revenue and earnings away from our core debt financing sales businesses.
Our credit book is healthy because we have taken the conservative thorough underwriting perspective throughout both bullish and bearish markets. 92% of our at-risk portfolio is fixed rate loans. We have no exposure to CLOs. And we have no credit risk on commercial real estate asset classes outside of multifamily.
And our brand and team are so strong because we are continually innovating and investing in them both. We take a long-term view of our business, and this long-term view has not only benefited our company and financial performance, but also our investor returns as you can see on slide 13, over the past one, five and 10 years, Walker & Dunlop has generated total shareholder returns greater than any of our direct competitors and the commercial real estate services, specialty finance and real estate technology space.
Note that we are cherry picking here. These are global firms and domestic firms, services firms and specialty finance firms, lenders and technology companies, and we aren't selecting a convenient time period. W & D's outperformance is over the short, medium and long term, thanks to establishing bold, highly ambitious business plans, focusing our exceptional team on achieving those goals and then executing.
We grow faster than the competition through cycles due to a business model that allows us to invest when others pull back we have scale and brand in the multifamily market that is a competitive advantage every day.
And we have avoided making investments and taking balance sheet risk in the office, retail and hospitality sectors, long-term outlook, bold, highly ambitious business plans, never stop investing in people and technology and be mindful that it is often equally as important what you didn't do, what you did do that is what has made W&D such an exceptional company to invest in and will continue to generate shareholder returns going forward.
The market run-up over the last few months reflected widespread views that the Fed tightening is over and that is easing is near. And while we believe 2024 will be a better financing and sales environment that 2023. It is way too early to predict when market conditions return to normal.
Just two weeks ago, we saw New York Community Bank dramatically increase their commercial real estate loan loss reserves and cut their dividend. Similarly, the publicly traded multifamily rates saw average rent decline of 3.4% in Q4.
And while W&D's credit outlook is very solid and [3.4%] negative rent growth in no way impairs any loan in our portfolio. These market data points clearly reflect a market in transition, not stabilized.
Therefore, as Greg just outlined, our outlook for 2024 is optimistic yet cautious. As we demonstrated in 2023 when our financing and sales volume fell by almost 50% of the business model, active management and exceptional team to generate solid results as an $300 million in adjusted EBITDA on the year, only 8% below 2022 in challenging markets.
As we stated throughout 2023, we remain focused on our current five-year growth plan. The Drive to '25, including growing our debt and property sales volumes, scaling our servicing and asset management businesses and scaling our newer businesses of small balance lending, appraisals and investment banking.
Through 2022, we were on path to achieve the financial targets of the Drive to 25, including $2 billion of total revenues and $13 of diluted earnings per share. But the market conditions set us, of course, in 2023. And as we sit here today in a market that still has numerous headwinds, generating $13 of EPS in 2025 is going to be extremely challenging.
We know we have the people, brand and technology to achieve $13 a share of earnings in a robust market, which is very exciting. We also have a long history of making significant strategic acquisitions, [18] in total that have accelerated our growth, such as when we acquired CW Capital in 2012, doubling the size of W&D and fully achieving our first five year highly ambitious business plan.
What is fundamental for investors to understand is that the business strategy underpinning the Drive to '25 is the right long-term strategy for W&D and that our team will continue to focus on achieving our ambitious goals with or without a strong macro environment.
I'd like to finish this call with a couple of points on people and culture our President, Howard Smith, who retired at the end of the year. I want to once again thank Howard for all of his contributions to W&D and for being such an outstanding executive steward of our culture and partner to me over the past 20 years.
Second, I want to reiterate my excitement about our current management team. We are blessed to have a wildly talented group of executives at W&D who love both what they do and the people they work with every day.
Third, we've been fortunate to recruit some exceptional banking and brokerage talent to W&D over the past year from some of our largest and most formidable competitors. And their perspective on being part of W&D is super exciting.
One broker who joined W&D at the beginning of the year, wrote a bunch quote. It's abundantly clear that the velocity intentionality level of energy and spirit of growth at W&D is remarkable and unique in the industry. We joined the best platform and are thrilled about our new home, on quote.
As I reflect back on 2023, I'm deeply thankful for all the hard work and results. Our team achieved Walker & Dunlop is blessed to be a great company in the most dynamic commercial real estate market on earth. We have the team brand and technology to continue delighting our clients, beating the competition and growing, and we plan to do just that in 2024.
Thank you all for joining us this morning. And I will now ask Karen to open the line for any questions.

Question and Answer Session

Operator

Thank you. (Operator Instructions)
Jade Rahmani, KBW.

Thank you very much. I appreciate the balanced commentary about the outlook. I think that's the prudent thing to do. Wanted to ask about credit, how it's holding up. I think, Greg, in your remarks, you did cite seven loans delinquent as of January 2024. How are you all feeling about the outlook? And have you looked at the portfolio strategy buying by 2021 to 2022 vintages and focusing on geographies with excess supply.

So yes, they I think, look for the government and then I know, Greg. Oh, yes, no, just to get there, but I think that, as I said in my remarks, and as we've said for the last few quarters, our credit is holding up well. I think seven delinquent loans in our at-risk book is on a book of close to [3,000] loans. So we're feeling really good about how our borrowers are performing and how they're capitalized and how their assets are doing.
And we are looking at different markets, but most of the ones we have are going to be longer term longer duration. So the '21 to '23 vintage that you cited there is really going to be a massive maturing in 5 to 10 years. So that's much farther out than the deals where we're looking at that are maturing in the next two years that are likely are our focus just given where the macro is right now.
And so again, I'd just reiterate what we said on the call and what we've been saying, which is we've got a real cash-flowing assets with over 2 times debt service coverage ratio, low going-in LTVs and limited maturities over the next two years. And I think that that has us feeling good about where we're positioned at this point in the cycle.

Not only jump in, came to say 92% fixed rate. So many of the problems that people are seeing right now on floating rate debt were on our at-risk portfolio, 92% are fixed rate and is, as Greg just said, the '21 and '22 vintages are all longer-term fixed rate loans. And then we only have -- what was it, $3.2 billion of loan maturities in the portfolio in '24 and '25.
So we don't even have significant refi risk in the portfolio on a fixed rate loan that was done at 3% and needs to be redone at 6.5%. So generally speaking, feeling extremely good. But as you well know, from covering the broader industry, the multifamily industry has credit concerns to it today and particularly deals that were advanced in '21 and '22 with floating rate debt on them. And we are very fortunate to not have done a lot of that.

Okay. And then in terms of the CECL reserve, I know you have to factor in your current expectations and the period of loss look-back is probably two decades a period during which those you know, very strong multifamily credit performance for lots of different reasons.
But then when you look at prior periods in the 80s and early 90s, clearly there was a lot of pressure there. So is it reasonable to expect a general uptick in CECL reserves in the coming quarters in 2023, there were a lot of releases that took place.
Yes, yes.

I think, I would say I look back at the last 10 years, which included even during the GFC.I actually look at it over our entire history and these lots are our losses on defaulted loans total in that 30-year period, $15 million. So we've had an excellent track record of credit, and that includes some of the cycles that you're talking about included the GSCs included what happened post COVID.
And I think ultimately our CECL reserve today, it's greater than that by 2x. So we feel like we've got adequate reserves given history, we're absolutely going to continue to monitor and monitor the market and the fundamentals. One of the reasons I gave a guidance for Q1 was that we are going to have a release of reserves like we've had the last two or three years.
And we're expecting to at least maintain that level of reserves on a forward look basis and we'll continue to take a forward. Look, as you said right now, I think our forward-look reserves for the next year or two are 6 or 7 times our average historical loss rate.
So look, we'll keep an eye on that for sure. But right now, I don't see anything more than normal growth, absent some change in the credit fundamentals that we just went through your willing I just talked through.

Thank you very much.

Operator

Kyle Joseph, Jefferies.

A good morning, like Greg. Thanks for taking my questions. First one probably for Greg, just wanted to kind of get a little bit more on guidance from what from your commentary. It sounds like you guys are baking in kind of flattish agency volumes. So just wanted to get a sense for the incremental growth there in '24. Is that a function of servicing or is that kind of other channels of origination open opening up more so than agency.

Yes, I think Calgary, the area. Thanks for joining us this morning. I think couple of things. One is I mentioned, we added 17 bankers and brokers last year. So even even as the market was shifting on us, we were still bringing on talent and making sure that we were bolstering our bankers and brokers. So we think we have an opportunity to gain share even in a flat environment.
I think importantly, there's a lot of deliveries coming online in 2024. And there's going to be an opportunity for our investment sales team to get involved in some of those deals for merchant builders and help them capitalize those assets and I think there's likely to be more capital markets transactions this year than in prior years.
So while Fannie and Freddie may not be as active, there, certainly market data, the MBA is projecting the market to increase to $350 billion up from a multifamily perspective in '24. So there's going to be transactions to likely brokered or capital markets.
Obviously, we have a very talented team as well. So we'll capture our share. And I think there's many different ways for us to which are take the diversified platform we have and deliver those results to generate that growth even if Fannie and Freddie are flat year-on-year.

Yes. Got it. Very helpful.

If I can just add one other quick thing, which is, as Greg said, I want to reiterate one thing that Greg said in his in his commentary, it is ridiculous, that Fannie and Freddie are signaling to the market that their volumes are going to be flat between 2023 and 2024.
They are in the market to provide countercyclical capital. Their role is to provide countercyclical capital to the market and their capital is needed in this market. So while we are reflecting to everyone on this call, what we are hearing from Fannie Mae and Freddie Mac as it relates to their outlook for 2024. And as Greg said, we can't do anything about that outlook other than work with them.
I just want to underscore the point that as Fannie's largest partner and Freddie Mac's third largest partner, seeing the opportunity in the market to meet refinancing needs in a year where refinancing is up dramatically in the multifamily market as it relates to demand, there is no reason that Fannie and Freddie volumes should be the same in 2024 as they were in 2023.

Got it. That's helpful. That makes sense. But yes, that's a good segue to my next question, just on Slide 11. In the maturity wall on multifamily, as you know, and given your knowledge of the market, any sort of color you can give us on the on the quality of this portfolio and whether it's floating versus fixed Class A, Class B and geographic areas? And then specifically, if there's any, I don't know the geographic areas you're looking to avoid or target as a result of this upcoming maturity ways.

So if you look at the overall maturities in 2024 per the Mortgage Bankers Association in 2023, a 24 number for total commercial real estate refinancings was somewhere in the $600 billion number, $620 billion and about $300 billion of loans that were scheduled to be refinanced in 2023 were pushed to 2024. So the 2024 total commercial real estate refinancing volume is over $900 billion now. T
hat's going to present a significant challenge to the market to find enough capital across the spectrum to meet that need for financing, particularly as we see banks pull back and CMBS had growth in 2023, you probably expect to see continued growth in CMBS.
Life Insurance companies have been very, very consistent at doing about 10% of the market's volume through cycles. Even in good times and bad times when they could actually expand out beyond 10%. And the interesting part about the 2024 [refis] is that the agencies, Fannie and Freddie have a very small amount of deal flow in their own books that is maturing in '24. And so the opportunity for us in '24 is to go out and take refinancing opportunities from the competition.
And to your specific question, Kyle, what does the loans look like? How much new equity needs to go into them to refinance them or preferred equity or recapitalization is the real question.
And I think that we've got the team, we've got the capital as it relates to both First Trust financing as well as anything above that, whether it be in a mezzanine or preferred equity position to be able to meet borrowers' needs. But there's no doubt that a lot of those deals that are coming up for maturity in '24 and fortunately not in our portfolio, but a lot of them are going to need some type of structured finance to get them refinanced out.

Really helpful color. Thanks for taking my questions.

Operator

(Operator Instructions) Steve Delaney, Citizen's JMP.

Thanks. Good morning, everyone, and great news on the dividend increase and the buyback. Willy, I was wondering on the buyback, I'm looking back into '21 you haven't repurchased any shares over that period, obviously last year. So it was sort of an uncertain environment, that's understandable. But as far as your execution, as you're talking to the Board. Should we think about the buyback as being opportunistic or programmatic, given where you sit today? Thank you.

Good morning, Steve. Always nice to have you on the call. We talked about just this issue yesterday, as you know, Steve, because you've covered us for quite some time, we have a we have a track record of being opportunistic in buying back stock.
As Greg underscored in his comments, our cash position at the end of the year is very strong. And as you just reiterated in the response to Jade's question on credit we feel very, very good as it relates to our credit provisions and our credit outlook. So with that said, the Board said we will authorize $75 million of potential share buybacks.
I would not think it will be programmatic, Steve, as we see how the year goes. I would also say to you that if we start to see the growth that we expect as rates come down and as transaction volume picks up, we could find ourselves in a more programmatic situation. But for now, the authorization, I would say is more opportunistic than programmatic.

Got it. And Greg, you gave a figure I probably didn't get these right. I know Willy commented on $13 of EPS by 2025. You mentioned $300 million, I believe of earnings for 2024. In both cases, are you referring to that the earnings or the EPS on a GAAP basis? As we I think all tried to convert to over the second half of this of last year. Just for clarity on if we're talking about GAAP or other measures.

Yes, Steve, I doubt when we gave the drive to -- Yes, we have not yet implemented adjusted core EPS. So we're trying to balance the transition from GAAP to adjusted core, but we're continuing to refer to GAAP as we give guidance, but in my remarks, I did give a similar full year guidance for adjusted EBITDA and adjusted core EPS to GAAP diluted EPS all in the mid-single digits to low teens.

Got it. And just the final thing for clarity. When you define your at-risk portfolio, I assume that your bridge book as well as your Fannie Mae loss-sharing. Is there anything else in there that I'm but I'm missing?

That's exclusively. We have $40 million of bridge loans left on our balance sheet and then the vast majority of our at-risk book is the [10 million] portfolio of nearly $60 million.

Got it. Willie, I know you there's 20 some of these commercial mortgage rates out there like everything in life, there's some really good and some really bad. Most of their problems are obviously officers, maybe some hotel, not so much multifamily, but I think both with the CM reach and even the commercial banks.
I think they'll be there in kind of a pullback hunker down mode on anything other than residential real estate. That is this a year or the next two years for WD to maybe step up a little bit in non-agency multifamily or single-family residential housing, given the fact that capital flows from those two industry sectors are likely to be constrained.

I would say Steve yes, but with a very significant asterisks or caveat to that statement, which is just that we've been super disciplined in the risks that we've been willing to take. And as again, I'd reiterate, you know, from watching us in various times over the past 13 years as a publicly traded company there have been lots of opportunities for us to step in and do office loans to do floating rate CLO loans.
And at every turn, we've sort of said that's just not the risk profile of W&D, and it has paid massive benefits. And believe me, I met with plenty of investors in '21 and '22, who watch what some of the CLO originators were doing and said, oh, you're missing market share. You're not growing fast enough.
And we said that's fine. That's not a risk that we want to take. We don't like the fundamentals of that business when interest rates are this low and the credit loss that you would incur by doing those loans is that high.
So I think the bottom line. As you well know, we're not going to not look at anything. We'll look at everything and we have plenty of other capital providers coming to us saying, hey, you've got the distribution network, can we give you a pool of capital to go deploy?
And depending on the risk sharing agreement, depending on how much we're getting paid for the risk, we're taking. We will obviously underwrite all of that and make decisions on what we will and won't do. But I think your general comment is exactly right. I think there will be plenty of opportunities.
But I would also reiterate to investors that you're invested in a company that takes a very conservative credit outlook. And while the opportunity may present itself, that does not necessarily mean that WD is going to do it.

Well, thank you both for the color and congrats on a solid close, a solid close to a difficult year for everyone. Thanks.

Thanks, Steve.

Thanks, Steve.

Operator

Jay McCanless, Wedbush Securities.

Good morning, everyone. Thanks for taking my questions. And Greg, could you talk to -- I think you said potentially for 1Q somewhere between $0.40 to $0.60 in earnings. Maybe talk about what would have to happen to get to the high end versus the low end of that range?

Yes. Thanks for smart, Jay. Certainly, I think ultimately, it's a matter of much transaction activities look like in the first quarter and then whether some of our other businesses, whether it be investment banking to generate some fees in the first quarter, what our dispositions or syndication activity looks like in our affordable business.
So there's a range there because we've got obviously different opportunities within the platform. And those are the big variables I'd say is transaction activity and then the likelihood of other revenue streams from other affordable or investment banking coming through.

And then maybe just for the full year and underpinning some of the full year assumptions, maybe talk about where you guys think the tenure ends up and are we going to continue to see some of this volatility we've seen? Just trying to get a sense of what your assumptions were for the full year guide regarding EPS and EBITDA?

So I'll jump in there, Greg. So Jay, couple of things. First of all, I talked about this on the Walker webcast yesterday with some of my colleagues. We were out at NMHC the National Multifamily Housing Council meeting with a number of W&D clients who are sitting on a pile of capital, pile of capital. There's so much equity capital sitting out there to be deployed.
And in one of the meetings, one of the clients had said, you know, we're not active right now because we don't like negative leverage. And my question to the individual was okay, let's let's play this out. We get a Fed funds rate cut. The Fed funds rate comes down. Do you really think the 10-year rallies much from here, if the Fed starts to cut the client sort of said, maybe a little bit, I said, great.
So do you think the cap rates are going to stay sand still when you get a rally in the short end of the curve as well as the long end of the curve. And the clients said to me know, and I said so then when do you think you're going to get yourself back to a positive leverage position?
And the client said, well, you make a good point and then the client said, so we probably ought to be taking a look at acquisition based on IRR and on replacement cost and not so much on negative leverage. And I think that we're seeing more and more people realize that if you want to deploy capital into this market, that you should probably take as an assumption that the 10-year sits somewhere in the band that it's been in for the last month and a half, which is obviously it's gotten down into the [high-3s], but just say [400 t0 425] to your specific question, where do you think the 10-year goes this year, 10-year shouldn't move that much as the short end of the curve comes down.
It really shouldn't have a big bet with one of our clients. He thinks the 10 years at [350] at the end of the year. I think it's closer to [450] at the end of the year. And as I said to him, I win both ways with you. If it's a 350, we're going to be doing a ton of business, and I'm happy to tell you my losses. And if it supported the I went to that point being there is I think that the amount of dry powder sitting on the sidelines realizes that it needs to move.
And there is a dramatic amount of refinancing volume that is needs capital this year, which is why I underscore the point that Fannie and Freddie saying they think they're going to do the same amount of volume in '24, '23 to us is a is a ridiculous statement.
And then the final piece to it is that if you do get rates coming down, it is going to provide some relief floating rate borrowers, which will make the credit outlook better, which should then stabilize the sales market and get transaction volumes coming back there, but that is not a prerequisite to overall financing volumes picking up in '24 from '23, just based on the volume of loans that need to be redone.
And so the name of the game for '24 is refinancings and going out and getting them. And as we have underscored in these comments and in our public statements, we don't have a lot of refinancings in our portfolio. So what we need to do and have done very consistently in the past is go out and refinance loans that are sitting in other people's portfolios and in one instance, fortunately with banks, some of them don't want to redo those loans. So those aren't difficult in the sense of trying to pull them away in other situations where there are other lenders who have as solid a company as Walker & Dunlop and as positive an outlook as Walker & Dunlop. There's stiff competition to win those deals away from them, and we'll be competing for them.

Great. Thank you, Willy. on it with all the buzz recently about rent-regulated properties in New York City. Is there any exposure on Walker & Dunlop's balance sheet to those rent regulated entities and and or are there going to be some potential opportunities with the debt fund you recently raised to get involved in that market?

Number one, no. As it relates to our first of all, we don't have a lot of exposure to New York in our agency portfolio agencies have never been terribly competitive in that market. So as it relates to our Fannie Mae at-risk portfolio, I don't have an actual number in front of me, but I can tell you from having and having been in this company for a very long period of time, we do not have a lot anything in that I can't say anything. We have very limited exposure in our at-risk portfolio on Fannie Mae loans in New York City time as it relates to our Bridge Portfolio and quite some have none. So no rent control risk as it relates to New York City, is it a market that we'd like to dive into?
It's a good question in the affordable housing space. We actually love the affordable housing space and with operators who understand how to work in a rent-controlled market, those are great loans on more market based deals. I've got to make sure that you're lending to the proper operator who understands the market they're in. And so while there's probably opportunities, I go back to what I said to Steve previously, we're going to look at everything. If we like the risk-adjusted returns, we'll do the deal. But the investors shouldn't expect Walker now off the back of the bus on risky deals in challenging markets and just because we can do a loan.

Great. And then the last question I had, I think what I've actually about this before, really you are kind of not as positive as some people. But office conversions continues to be a topic of conversation in the general press and looks like there's some funds being committed towards that would love to get your updated thoughts on that space? And are there opportunities for Walker & Dunlop to get involved there? If you feel like if you have a more positive outlook on that now.

Look I mean, we did a deal in Q4, Jay, that was in LA. It was an office conversion and we did the takeout loan from Wells Fargo had done the actual construction conversion loan. And we did a we did an agency takeout on the property, fantastic property. It had a couple of very unique things to it. The owner had owned it since the early 1990s. So the cost basis in the building was exceedingly low.
The second is it was a small footprint. So the conversion from office to multi was very real applicable or doable given the smaller footprint. And the final piece to it is and you have the zoning to be able to do it and we love doing that and we will continue to do that on people who are as talented and successful as that borrower has been in the office to multi conversion.
I think that the reason I've been somewhat, if you will, tempered on my comments about it is just that a lot of people are saying, oh, that's the solve for all this office inventory. And I don't believe that it is there's a ton of office buildings that are impaired because of the footprint because of the location and because of the cost basis.
And so what I'm just saying is people shouldn't think that this is the panacea for creating a whole bunch of new supply in multi-family by converting these office buildings into multifamily properties. But I do see an opportunity for us to do good loans like we did in Q4 on the one that I just outlined of a takeout loan of a very good conversion and then the final thing is would we put construction debt into the actual conversion process? Sure, with the appropriate operator and with an asset that was prime for conversion, we'd find the capital and put it into that type of the deal and to help someone get that done.

Great. Very helpful, guys. Appreciate it.

Operator

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

And I thank everyone, particularly those who asked questions this morning. Thank you very much for your time and interest in W&D. Congrats again to the W&D team on a very solid Q4 and 2023, and we look forward to talking to you all after a Q1 2024, and I hope everyone has a great day.

Operator

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