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1 Small-Cap Real Estate Stock That Could Be a Multibagger

By Matthew Frankel, CFP® – Oct 16, 2021 at 6:17AM

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This company isn't exactly a household name, but its growth is certainly worth paying attention to.

Walker & Dunlop (WD 0.62%) is a commercial real estate finance company, and it isn't a familiar name to the average investor -- but maybe it should be. In this Fool Live video clip, recorded on Sept. 30, Fool.com contributor Matt Frankel, CFP, talks about Walker & Dunlop's impressive growth and future potential. 

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Matt Frankel: Walker & Dunlop is a commercial real estate finance company. They've been around since the 1930s. The current CEO is the real interesting story here, his name is Willy Walker. He is the grandson of the original co-founder. It's under his leadership where the real growth really has begun. They were a small family firm until he took over. He's the one who took the company public, they just went public in 2010. Having been founded in the '30s, that's pretty recently.

They do pretty much everything involving commercial real estate finance. They originate commercial mortgages with a specific concentration in multifamily apartment buildings. They are one of the biggest commercial mortgage servicers in the country. They service over $100 billion worth of commercial mortgage debt, which is one of the highest. They have a commercial real estate sales brokerage.

If anyone listening might want to buy an apartment building, Walker & Dunlop might be a place to check out. They're recently starting to ramp up their investment banking. I'll get into a little bit more of that in a second. Walker & Dunlop has really had explosive growth since they went public in 2010.

About five years ago, they set some goals for themselves that sounded really ambitious. I've been following this company for a while. At the time, in 2015, their revenue was less than $0.5 billion. Now it's at $1.1 billion. That surpassed their goal of a billion dollars. They had a $50 billion mortgage servicing portfolio. Now, it's over $107 billion or it ended 2020 over $107 billion. They wanted $100. They really shattered their goals and shareholders have been handsomely rewarded.

Let me just show you a quick visual aid real quick. Here's what I say whenever someone tells me that real estate is boring. This is the chart of Walker & Dunlop since its 2010 IPO against the S&P 500, 1,140% total return versus 337% for the S&P. From a boring commercial real estate finance company, that's a pretty impressive record of performance.

I think they could just be getting started. I'll show you why. I know I'm running short on my time here. They, at the end of 2020, announced their 2025 goals. These sound pretty ambitious at first. They want to grow to $60 billion in origination volume, they're at $35 right now. They want $160 billion in their servicing portfolio, they're at about $112 right now. They want to grow their property sales volume to $25 billion, that's four times the current level. Pretty ambitious growth objectives.

In that investment banking capability, they ended 2020 with $2 billion of assets under management for clients. They wanted to get to $10 billion by 2025. They've hit $16 billion already through an acquisition they just made. They've already hit that part of their 2025 goals. This is still a pretty small company, just under a $3.6 billion market cap, I think this could be a future large-cap company.

Matthew Frankel, CFP has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends Walker & Dunlop. The Motley Fool has a disclosure policy.

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