Walker & Dunlop's Mikkelsen: 65% of 120 deals since May need no repricing

Sixty-five percent of the 120 Walker & Dunlop transactions awarded since May have closed or are getting done without a price change, Kris Mikkelsen said on an Oct. 21 webcast reported by Connect CRE. Mikkelsen, the firm's executive vice president and co-head of capital markets, said the third of deals that are being repriced split evenly: "it's really 50-50 as to whether or not the deal reprices and gets done or just completely falls out." The report described multifamily deals as the ones reaching the closing line. The hour-long webcast, "CRE Market Outlook: Risks & Opportunities," also featured chairman and CEO Willy Walker and Ivy Zelman, co-founder and executive vice president of Zelman, A Walker & Dunlop Company.

Seven or eight deals expected to close in the week before the webcast were delayed, Aaron Appel, a senior managing director in capital markets, said. The holdups were over issues that normally would have been worked out, he said, and lenders were "behaving in a fickle manner around those issues on deals."

A Treasury yield hovering above 5% has affected the valuations lenders and buyers are looking at, Appel said. Credit spreads themselves have not moved much despite the rise in yields. "Depending on the lender, there could be some banks that are widening a touch, but no severe, massive, credit-spread widening," he said.

Mikkelsen's read on the market's baseline: real estate "was never meant to print venture capital-like returns." The challenge, as he described it, involves a stretch of 0% interest rates combined with equity capital that generated up to 20% returns. "Historically, that's never been what real estate is," he said. "We can't attract capital that wants an 8-10% return on equity."

Connect CRE's account framed the discussion around improving multifamily fundamentals on one side and, on the other, concern about capital commitments flowing into artificial intelligence and data-center development if expectations fall short.

For a firm that finances apartments, the 65% figure is the operative number: most awarded deals are holding their agreed price, and the fights are concentrated in the remaining third, where Mikkelsen put the completion odds at even. The delay Appel described is a reminder that the logjam is over terms rather than rate. If spreads are steady and the obstacle is negotiation over specific deal points, the volume of 2024 originations will likely turn on how quickly those points get resolved — not on where the 10-year settles.