Walker Webcast: In-House Experts Delve into the Debt, Equity and Sales Markets

For the first time since launching the Walker Webcast series in the spring of 2020, Walker & Dunlop CEO Willy Walker employed the format that has been used by other industry companies on webinars: a panel of in-house experts.  

His three panelists—Ivy Zelman, CEO of Walker & Dunlop-owned Zelman & Associates and EVP of research & securities; Kris Mikkelsen, EVP, investment sales; and Aaron Appel, senior managing director, capital markets—each brought market-leading insights that sparked disagreement and spirited debate at more than one point during the hour-plus conversation. 

Walker’s opening question, for instance, drew a different response from each of the panelists. Asked to identify which if any asset classes were mispriced, to sum up expectations of 2022 in a single word and to state the best investment opportunity if one had $100 million to spend, Zelman had qualms about the build-for-rent subcategory of single-family rentals. She said the watchword for 2022 will be “moderation,” and favored an investment program of fix-and-flip for aging building stock, especially in the Northeast and Midwest. 

From Mikkelsen’s perspective, “I think everything is very efficiently priced.” He did express some reservations about the kinds of cap rates that value-add deals have seen lately, though. His outlook for 2022 is ‘bullish,” and he would put $100 million to work on as much low-density development as possible. 

Although Appel wouldn’t characterize multifamily and industrial as overpriced, he did raise questions about some investors’ expectations for yield and rent growth. In particular, he pointed to rent growth projections in lower-quality apartment properties, where renters’ income levels tend to be lower. 

“There’s a limit to what you can charge these people,” said Appel. His summation of 2022 was “more of the same,” and he’d put that hypothetical $100 million into Bitcoin. 

Between that opening question and the concluding one that called upon each panelist to identify the best opportunity at present, Walker also put questions to each of his team’s experts individually. He asked Appel about debt funds, for instance, wondering whether their ubiquity in the market suggested “CMBS 3.0.”  

Appel didn’t see a parallel to the loose underwriting that characterized many CMBS 1.0 deals prior to the global financial crisis. ‘All of these groups have their own proprietary capital” and will hold risk on, say, the bottom $60 million of a $200-million deal. 

While Zelman concurred with Mikkelsen’s observation that all markets are local when it comes to the dynamics of income growth and household formation—a circumstance that especially favors markets in the Sunbelt—she expressed concern about some of the macro trends she’s seeing.

Even as the single-family market got a boost from job relocations at the height of the pandemic, this year those relocations are down significantly, she said. Accordingly, she wondered whether remote work will now become a hindrance to single-family turnover. 

On-demand replays of the Nov. 17 webcast are available by clicking here and through Walker & Dunlop’s Driven by Insight podcast series.