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Intrinsic Value is all-important and is the only logical way to evaluate the relative attractiveness of investments and businesses.
Good morning, everyone. I'm Kelsey Duffey, Vice President of Investor Relations at Walker & Dunlop, and I would like to welcome you to Walker & Dunlop's First Quarter 2021 Earnings Conference Call and Webcast.
Hosting the call today is Willy Walker, Walker & Dunlop Chairman and CEO. He is joined by Steve Theobald, Chief Financial Officer. Today's call is being recorded, and a replay will be available via webcast under the Investor Relations section of our website. [Operator Instructions] 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 Steve will touch on during the call. Please also note that we will reference the non-GAAP financial metric adjusted EBITDA during the course of this call. Please refer to the earnings release posted on our website for a reconciliation of this non-GAAP financial metric. 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. 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. 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 turn the call over to Willy.
Thank you, Kelsey, and good morning, everyone. We started off 2021 with strong first quarter financial performance, with the combination of our people, brand and technology continuing to differentiate us in the marketplace, enhance our competitive positioning and drive terrific financial performance. First quarter revenues of $224 million generated diluted earnings per share of $1.79, up 20% over Q1 2020 on total transaction volume of $9 billion. This is a very strong start to the year that appears to be accelerating by the day. We laid out our 5-year strategic growth plan in December of last year with one of the objectives being to move from the #5 multifamily lender in the United States to #1. To do this, we plan to build a small loan lending business that rivaled JPMorgan Chases and a multifamily property sales business that rivaled CBREs, 2 firms ahead of us in the 2019 league tables. Yet due to the use of technology, growth of our brand and truly fantastic execution by our team, we vaulted to the #1 position as the largest provider of capital to the multifamily industry in 2020. My father gave me a T-shirt when I was in college that read, "Unless you are the lead dog, the scenery never changes." Well, the scenery can now change, and we will use our market leadership position to win more clients, continue investing in technology and benefit from the fantastic branding that this accomplishment establishes. Our vision to be the premier commercial real estate finance company in the United States was established in 2010 when Walker & Dunlop lent $2.7 billion on commercial properties, or 7% of the $37 billion that Wells Fargo lent that year as the largest lender in the country. And over the last decade, due to hiring great people, investing in technology and building our brand by executing for our clients each and every day, we moved up to the #4 spot in the league tables after lending $24.7 billion on commercial real estate in 2020, #4, right behind KeyBank, Wells Fargo and JPMorgan Chase. And while that accomplishment by our team is amazing, what is even more exciting is how we are positioned to grow going forward. The use of technology and financial services in commercial real estate expands every day and will continue to accelerate over the coming decades. Walker & Dunlop's use of technology in 2020 allowed us to vault to the top of the league tables by making our bankers and brokers more insightful to their clients, more efficient in the business they processed and more productive. We are a company of only 1,000 people, with the very real opportunity to grow to 3,000 to 5,000 people by investing in technology and entering new markets. Our largest competitors have tens of thousands, and in some instances hundreds of thousands, of employees, and will constantly be challenged over the coming years with how technology is going to disintermediate their existing employee base and businesses. Our technology investments will continue to focus on actionable technology that enhances the capabilities of our people as we grow Walker & Dunlop and expand into new markets.
The fact that we ended 2020 with 1,000 employees and over $1 billion in revenues allowed us to maintain our metric of over $1 million of revenue per employee. As this slide shows, revenue per employee of over $1 million places Walker & Dunlop in line with Visa and just behind the global tech giants Facebook, Google and Apple. We believe that over the coming years, as we continue to implement more technology and expand our brand, that our revenue per employee can move closer and closer to the tech giants. The numbers behind our brand strategy are stunning. The Walker Webcast and related digital marketing strategies have averaged nearly 50,000 views each week in 2021. And just yesterday, we hit 1 million total views of the Walker Webcast since we started it in March of last year. The quality of the guests that we bring on the webcast and their insights provide every banker and broker at Walker & Dunlop with client touchpoints and market insights every week. This has not only expanded the W&D brand dramatically but generated new business. Just last week, we closed on a $37 million financing for a new client who listened to the Walker Webcast, sent an e-mail to our general mailbox, was introduced to a banking team and got a terrific loan on their office building and paid us a $250,000 fee in the process. This transaction, brought to us through the combination of digital marketing, branding, technology and flawless execution by our team, is part of the 27% of our total transaction volume in Q1 coming from new clients to Walker & Dunlop. That is up from 23% for all of 2020. The other technology proof point we introduced in 2020, new loans to our servicing portfolio, increased to 79% in Q1 of 2020, up from 66% for all of 2020. So rather than simply refinancing the loans in Walker & Dunlop's sizable $110 billion servicing portfolio, almost 80% of the loans we refinanced in Q1 were new loans to Walker & Dunlop, generating financing fees and adding mortgage servicing rights to our loan portfolio.
The amount of capital targeting commercial real estate investments continues to fuel the acquisitions market. According to Preqin, commercial real estate focused funds began 2021 with a record $324 billion of dry powder. A robust investment in acquisition market, combined with a wave of loan maturities, will drive healthy transaction volumes over the coming years. With banks, life insurance companies and debt funds coming back into the market and $105 billion of capital for Fannie and Freddie left to lend in 2021, we expect the financing markets to be very active over the remainder of the year. And as you can see on this slide, over $320 billion of multifamily loans mature over the next 5 years. And since our technology can tell us exactly who holds those loans, there is a massive opportunity for us to capture significant refinancing volume in 2021 and beyond.
Let me turn the call over to Steve now to run through our Q1 financial performance, and then I'll come back to talk about the terrific accomplishments we made in Q1 towards our long-term strategic growth objectives. Steve?
Thank you, Willy, and good morning, everyone. We ended 2021 with momentum from the unique combination of our people, brand and technology, and that momentum contributed to both strong financial results and good progress towards achievement of our Drive to 25 long-term strategic objectives in the quarter.
For the first quarter, we generated diluted earnings per share of $1.79, up 20% year-over-year on $224 million of total revenues. Earnings in the quarter included the positive benefit of reducing our allowance for credit risk by $11.3 million, which added $0.25 to EPS. Q1 personnel expense as a percentage of total revenues was 43%, which is elevated compared to a typical first quarter due to our recent investments in people as we continue to scale our business and support our future growth. During the quarter, we grew our team of bankers and brokers to 214 from 205 at the start of the year, further increasing both our geographic reach with hires in Ohio, California, Texas and Maryland and our investment sales product capabilities with the acquisition of student housing brokerage FourPoint. Even with the increase in compensation expense, operating margin was 33%, inclusive of the reserve release and 28% without, within our typical range of 28% to 30% as non-personnel expenses continue to grow at a slower rate. We manage the operating margin very closely and are confident that it will remain within our expected range over the course of the year. Return on equity was 19% in the quarter, consistent with last year and within our expected range of 18% to 20%.
Total transaction volume of $9 billion was down 20% from the first quarter of 2020 as anticipated, given that we originated the largest portfolio in our company's history a $2.1 billion Fannie Mae transaction last Q1. Notably, we saw strong debt brokerage volumes of $4.3 billion in the quarter, up 8% from last year's very strong volumes, indicative of an active market for commercial real estate financing that is attracting significant amounts of capital as we continue to progress towards a post-COVID environment. 72% of our debt brokerage volumes were multifamily compared to 94% in the year-ago quarter, reflecting a pickup in lending on other asset classes.
The mix of our $7.6 billion of debt financing volume in Q1 '21 was skewed more heavily towards debt brokerage originations as compared to the first quarter of last year, primarily due to the large portfolio that I just mentioned. Our HUD volumes at $622 million were up 75% from Q1 '20, continuing the strong performance off of 2020's record year. In addition, our interim lending program was very active in the quarter, with $178 million of multifamily bridge loans originated through our JV with Blackstone and on our own balance sheet.
The GSEs had a relatively slow start to the year as they carried over a lot of deliveries from 2020 into 2021. Our market share with Fannie and Freddie remained above 11%, and we expect that our overall volumes will pick up over the next 3 quarters as the GSEs manage their deal flow to ensure that they use all of their remaining $105 billion of lending capacity for the year. We also expect broker debt volumes for the remainder of the year to rebound strongly from last year's COVID-impacted markets as life insurance companies, banks and debt funds are all very competitive capital providers in the market today. Investment sales volume of $1.4 billion was down 19% from last year's first quarter. However, the pipeline of deals entering Q2 is extremely robust, and we expect significant growth in investment sales volumes over the remainder of the year as our recruiting efforts continue to build out both the geographic and product capabilities of the team. The increase in investment sales activity will also contribute to additional debt financing opportunities over the next 3 quarters.
Q1 adjusted EBITDA of $61 million is down slightly from Q1 of last year, but is the highest quarter of EBITDA since the start of the pandemic, as we are seeing the benefit of the strong mortgage servicing rights that we booked during 2020 translate into cash servicing fees, which were up 19% in the quarter. As you can see on this slide, the servicing portfolio ended the quarter at $110 billion with a weighted average servicing fee of 24.3 basis points, up 1 full basis point from the first quarter of last year, which is huge given the overall size of the book and the fact that we have added over $15 billion of net new loans to the portfolio in the last 12 months.
With 85% of the portfolio's future servicing fees being prepayment protected, the portfolio will continue to fuel meaningful, stable cash servicing fees, approaching $275 million on an annual basis. Additionally, this should be the last quarter of significant year-over-year declines in escrow interest as short-term rates, which drive the pricing of our escrow deposits, collapsed at the end of first quarter of 2020 due to the pandemic. During the quarter, we lowered the loss forecast used to determine the allowance for risk sharing obligations. As I mentioned earlier, this resulted in an $11.3 million recapture of provision for credit losses in Q1 of 2021 compared to an expense of $23.6 million in the first quarter of 2020 when the pandemic was declared. One year later, we have very few loans in forbearance and our portfolio has had no loans defaults related to the pandemic, reflecting the resiliency of multifamily and the quality of our underwriting and servicing teams, who have done an expert job of managing our credit risk both before and during the pandemic. Further evidence of the strong performance of our portfolio is that the debt service coverage ratio of the $50 billion of loans we have risk on remained above 2x at the end of 2020, consistent with the end of 2019. While unemployment rates are still relatively elevated at 6%, this is a significant improvement from the high of 14.7% that we saw in April of 2020, reflecting the return of jobs across the economy. The most recent stimulus bill, combined with an anticipated full reopening of the economy by the fall, and forecasted strong economic growth over the next year gives us confidence that the fantastic credit metrics we are seeing in the portfolio today will persist into the future. We feel that the current level of the allowance at $64.6 million is sufficient to cover any future losses that could arise in the portfolio over its expected remaining life. We ended the quarter with over $277 million of cash on our balance sheet and another $62 million funding loans held for sale, bringing our total cash available to $339 million. We are currently exploring a number of strategic acquisition opportunities that are in line with our Drive to 25 objectives, investing in revenue-generating technology initiatives and continuing to bring on banking and brokerage talent, all of which is supported by our strong cash position today. Yesterday, we announced the acquisition of 75% of Zelman & Associates, the leading housing-focused research firm in the country. The transaction is expected to close sometime in the third quarter pending regulatory approval. We expect the Zelman platform to contribute between $0.15 and $0.20 in earnings per share in its first year.
While our focus remains reinvesting our capital back into the business through acquisitions like Zelman, our strong financial position and the steady cash generation of our business enables us also to return a portion of our capital to shareholders. Yesterday, our Board of directors approved a quarterly dividend of $0.50 cents per share, payable to shareholders of record as of May 20.
A quarter ago, we laid out ambitious goals for double-digit growth in earnings per share and adjusted EBITDA for 2021. The strong start to the year in terms of our financial performance, credit quality and cash position and our expectations for the market opportunity ahead give us confidence that we will achieve both of those goals.
Thank you for your time today, and I'll now turn the call back over to Willy.
Thank you, Steve. Along with delivering strong financial results during Q1, we made significant progress towards our strategic objective of our 5-year growth plan, the Drive to 25. The overarching goal of the Drive to 25 is to grow revenues from $1 billion in 2020 to $2 billion in 2025 by continuing to invest in people, brand and technology in our core businesses and building 3 new businesses in small balance lending, appraisals and investment banking. As I previously mentioned, to become the largest provider of capital to the multifamily industry, we thought we needed to enter and grow dramatically our small balance lending business. Roughly half the multifamily loans originated every year are considered small balance loans. Most of the small balance lending is done by banks, where a property owner may use the bank for checking and savings accounts and ask for a small balance multifamily loan. We see this market, where local, regional and national banks are the incumbent lenders, as ripe for disintermediation using our brand, technology and people. If you enter a bank branch office and ask for a small multifamily loan, your loan officers are generalists who could just as easily provide you with a boat loan as an apartment building loan. We think our focus, and brand as the largest provider of capital to multifamily industry, can win this customer over. We have data and visibility into who owns these properties, and we are building digital marketing strategies to capture clients' attention. We are also investing in technology to drive down the cost of underwriting a small balance loan. We're acquiring a technology company that allows us to quote a small balance loan in just over a minute and also streamline the loan application, underwriting and closing process. We've also completely revamped our small loan origination team, bringing in new leadership and establishing a regional origination model that we believe will allow us to originate higher volumes of loans with fewer people. Through our multifamily appraisal business, Apprise, we have quietly built out our licensed appraisers across the country and are now capable of producing FIRREA-compliant appraisals using more technology and fewer people than any competitor in the market. A year ago, Apprise produced 55 appraisals in Q1. This year, we did 5x that volume, and we intend to continue growing that number by multiples. The use of technology in our appraisal business has broad applications in our lending and investment and sales businesses as well. The final growth area that we made significant progress on in Q1 is investment banking. As our brand has expanded and our relationships with our clients have deepened, the need for investment banking capabilities to meet all our client's needs has become more pressing. Many of our bankers and brokers serve their clients in advisory capacities today. But as part of our Drive to 25 objectives, we set a goal to formalize and expand our investment banking services. To that end, yesterday we announced the acquisition of Zelman & Associates, a wonderful boutique real estate focused research and investment banking firm. Ivy Zelman, Dennis McGill and their team have built out one of the most well-respected housing research and analytics teams in the industry. Zelman's research team covers both single family and multifamily housing. And as these 2 industries collide in the single family homes for rent market, Zelman and W&D will be perfectly positioned to provide expert coverage of these markets. Zelman's research and analytical capabilities, coupled Walker & Dunlop's vast data from our $110 billion servicing portfolio and technology investments, will provide the bankers and brokers at Walker & Dunlop with the very best insight into micro and macro markets across the country to enable their sales efforts. It is our expectation that W&D's proprietary research and market insights will make us more relevant and valuable to our clients than ever before.
Zelman is a registered broker-dealer and has a housing-focused investment banking team that has an incredible track record in the M&A, debt and equity transaction markets, including advising in the IPOs of firms such as Rocket Mortgage and Invitation Homes. The broker-dealer and investment banking capabilities inside Zelman provide a fantastic launching pad for W&D's investment banking business in the commercial real estate arena.
A couple of general comments before we finish the call and open the line for questions. Our 2020 success, expanded brand and use of technology have fundamentally changed our ability to recruit talent to Walker & Dunlop. I mentioned previously the power of the Walker Webcast in attracting new clients to W&D, and it is doing the same thing with talented bankers and brokers at competitive firms. And if you add to that equation being the largest provider of capital to the multifamily industry and fourth largest lender on commercial real estate in the United States, the opportunities for new recruits is vast. But there is one point about our brand and digital marketing that is very important to underscore. We have just begun to capitalize on what we have created. I mentioned earlier in the call how a new customer called us out of the blue after the Walker Webcast and gave us a $37 million office building financing. That is one of many examples where our brand has generated new opportunities for Walker & Dunlop. But we have had over 1 million views of the Walker Webcast, where there are thousands and thousands of potential clients whom we have never met, now interacting with our company and brand. We will figure this out, but we are just scratching the surface on how to identify and convert these new client touchpoints into new business and opportunities for growth. As we make significant strides towards the strategic and financial components of the Drive to 25, we remain focused on the environmental, social and governance elements of our 2025 goals, with significant attention being given to our diversity, equity and inclusion efforts. We recently launched a diversity initiative called CRE United in partnership with some of the largest players in the commercial real estate industry, including Fannie, Freddie, Greystar, KKR, Kayne Anderson and Pacific Life. The alliance is working to identify the obstacles that minority CRE owners and operators face and implement real changes across the industry to break down these barriers. Internally, Walker & Dunlop is also setting ambitious DE&I goals, including increasing the proportion of women and minorities among management and top company earners by 2025. As outlined in our recent proxy statement, our compensation committee will oversee our progress towards these ambitious long-term goals, which will be directly tied to executive compensation.
I have watched this wonderful company grow from one office and just over 40 employees into the national powerhouse it is today. And I must say, I've never been prouder nor more excited about all we are currently doing. We established another ambitious 5-year growth plan at the end of 2020. And in just a few months, we have made real and exciting progress towards our goals. We remain a great place to work due to the incredible people that make W&D what it is. We continue to invest in technology to enable our people to be more insightful, more efficient and more productive than the competition. And we continue to expand the brand using the Walker Webcast and the insights it provides to expand our presence and thought leadership across the industry and country. I want to thank our team for an incredible 13 months since the onset of the pandemic. Our financial results and achievements in our pursuit of the Drive to 25 speak for themselves. And thank you to all of the investors and analysts who joined us this morning. This is an incredibly exciting time for W&D, and we are thankful for your investment and interest in our company. We will now open the line for questions.
[Operator Instructions] The first question is coming from Henry Coffey at Wedbush Securities.
We'd like you to unmute.
Can you hear me now?
We can.
We can, Henry.
It does seem, reading the text of your press release and some of your comments, that you're expecting more of an acceleration in volume as we go forward. Can you give us some insights into what factors are going to drive that? And what the mix is going to look like? How much is going to be in multifamily and how much is going to be outside? Just a general overview as to what that production is likely to look like.
Henry, first of all, great to have you on the call this morning. Second, I think Steve did a really good job of laying out where the various volumes were in Q1. I think that as we look back on Q1, as you know, interest rates moved up significantly during the quarter and that interest rate movement made it so that to have interest -- the 10-year ago from 90 basis points at the beginning of the quarter to 160 basis points by the end of the quarter, had a lot of borrowers and deals moving around during the quarter. We've been very pleased to see rates sort of stabilize in this 150 to 170 range for the past month. And that in and of itself has started to accelerate deal flow.
The second thing is, as we pointed out, the agencies had a slow start to the year. They had a big carryover of business, and they, at the end of Q1, still had $105 billion of capital to lend between the two of them. And as we all know, they're going to lend every single dollar they have. And so we are set up for 3 very strong quarters between now and the end of the year, given the caps that the agencies have to lend and given our market position as Fannie's largest partner and Freddie's fourth largest partner, the second largest agency lender in the country. I would say the third thing, as Steve underscored, our investment sales, business and the pipeline there is extremely robust. We are seeing a very active market. That rate movement in Q1 slowed some deals down as buyers and sellers were trying to find pricing. Now that we've been in sort of this 150 to 170, and let's just call it a 160 10-year Treasury range for a while, transactions are starting to happen at a very accelerated pace. And then the final thing is, you've got to think about Q1 2020 to Q1 2021 as it relates to capital to overall commercial real estate. Pre-pandemic, all the capital sources were lending on multi, industrial, office, retail and hospitality. And in Q1 of 2021, you only really had capital going to multi and industrial. And so as Steve pointed out, even though we did do more non-multi in Q1 with our capital markets team in 2021 than we did in 2020, which is a huge accomplishment, as capital starts to come back to office buildings, as capital starts to come back to hospitality and as it starts to come back to retail, our capital markets team across the country will see increased flows. So all of those different things come together to say to us that things are accelerating and accelerating at a pretty dramatic rate.
When I was talking to my home building analyst, Jamie McCandless, about the Zelman -- investment acquisition, we started talking about some of Zelman's thoughts in the multifamily area. Things like taking empty stores and ultimately turning them into apartments, multifamily businesses, townhouses, et cetera. Is there -- as part of this transaction or independent of this transaction, are you seeing opportunities in the sort of single-family business that weren't there before for Walker & Dunlop and seem to be there now?
So I'd say 2 things on that. One, as we tried to articulate in the call, Henry, we see the convergence of single-family and multifamily in the built for rent and single-family rental space as something that is very exciting. We have a huge number of Walker & Dunlop multifamily clients that are focused on that space and are investing in that space. There are also lots of single-family homebuilders from the other side of the market, if you will, who are entering and in the single-family rental and built for rent space. We don't have longstanding relationships with those single-family housing developers and owner-operators, Zelman does. And so as we have Zelman's insight into both single-family as well as multifamily and in the single-family built for rent space, we believe that we will be a much more relevant source of capital for the SFR, BFR space.
To extend your question into, does Walker & Dunlop get into the single-family lending space? That is not our intention out of the gate. I watch what's going on in the single-family lending space right now and how there is, A, everybody who had a loan to be refinanced did it last year and so their refinancing volumes have come down significantly and how there is no preventive protection on those loans. There are great companies in the single-family mortgage space, great ones, but they deal with a very different market dynamic than we do. And as our slide in the presentation shows, there is a huge opportunity over the coming 5 years for us to refinance lots and lots of commercial properties and more specifically multifamily properties, given the prepayment protection that exists on almost all commercial real estate loans.
Did you have an offering in the single-family rental space? Not the residential business, we know that. But in the single-family rental space, the dynamics are very similar to multifamily. And I think that's the focus of my question.
That's correct. And there's a lot there to be done, both on built for rent, which right now is being financed by predominantly banks and we are working on -- working with banks as well as life insurance companies to put capital out in built for rent communities. And then also on single-family rental, those loans are ending up in securitization pools, Henry, as you know. And that's right down the middle of the plate for the bankers at Walker & Dunlop who have done large pooled securitizations in the past with firms like Deutsche Bank and Citigroup and others that are very active in that space right now.
And Henry, I'd also add to that, you had mentioned specifically conversion of other commercial real estate assets into multifamily, and I would tell you anecdotally we are seeing a number of requests on the equity side coming to our asset management platform at Walker & Dunlop Investment Partners. So we're certainly seeing hotel conversions and some office conversions happening in the multifamily space.
Our next question comes from Jade Rahmani at KBW.
Just wanted to ask about, Willy, your earlier comments regarding M&A. Do you expect to consummate large-scale M&A transactions as part of the Drive to 25 and WD's overall growth plans?
Jade, first of all, nice to have you on the call this morning. Good morning. Secondly, look, Steve pointed out that we have over $300 million of cash sitting on the balance sheet today. We have plenty of borrowing capacity as it relates to our overall debt to equity ratio at Walker & Dunlop. And it should come as no surprise to investors that given our growth and given the expansion of our brand that we have never had more inbound calls as it relates to companies wanting to be part of what we're creating and have created at Walker & Dunlop.
As I mentioned in the call, Jade, from a recruiting standpoint, I've been out on the road meeting with candidates, if you will, who are at competitor firms and I've never ever had more people make comments about how -- what we've created at Walker & Dunlop is very unique in the marketplace. The use of technology is without a doubt far, far beyond our competitor. I met with one team 2 weeks ago who has done a full diligence because they're leaving one firm and looking at us versus 3 other competitor firms. And they have dived into the technology to see who really is giving them actionable technology that allows them to grow their own origination volumes as well as their W-2's. And in that meeting, they could not have been more explicit that we are far, far ahead of the competition as it relates to the implementation of technology in this space. And so as a result of all that, we have a lot of people coming to us saying, "We'd like to be part of W&D." Our business development team has never been more active.
With that said, you know with Zelman, now we've acquired 11 firms over the past 11 years, and we've been very, very careful to acquire great companies with great leadership. We've been very, very careful to acquire companies that would fit well into the Walker & Dunlop culture. And we've been very, very careful to acquire companies that are accretive to our earnings. And so we will continue to use that lens or filter as we go to see whether all these companies that are coming to us and raising their hands saying we'd love to be part of Walker & Dunlop are real fits for us from an M&A standpoint.
One of Walker & Dunlop's differentiating factors is also its servicing portfolio given the prepayment protected nature loans and the strong cash flows it generates. Do you happen to know, generally speaking, what the company's historical retention ratio is of loans in the servicing portfolio? I know that the MSR is basically a runoff analysis and even the fair value of the MSR is also a runoff analysis. But if you were to assume something like a 50% ability to win those refinancings, it, of course, is worth a lot more than carrying value.
Yes, Jade, I'll take that one. We historically have not disclosed that, but if you look at the nature of why loans pay early. Oftentimes, it's the sale of the asset, which obviously there's -- in some cases, if we're managing the sale, we have a good shot at doing the refinancing, but otherwise those tend to be jump balls. When it comes to actual refinancing of our portfolio, our retention rate is significantly higher than on an overall basis when you exclude asset sales. But we don't disclose those specific numbers. And if you look at -- Willy's gave the stat on how many new refinances came into our book, and then you look at the net growth of the portfolio, you can intuit that there's a significant retention of our existing loans in the portfolio.
Some questions I've gotten from investors relate to the GSE multifamily origination outlook. And when we look at the deliveries that they provided, for the first quarter it totals about $35.5 billion. So when you say that they had a slow start to the year, I believe you're probably referring to the timing difference between rate lock, which is when Walker & Dunlop recognizes revenue, and deliveries, which is about, I believe, 45 to 60 days later than that. So is that really the discrepancy there?
That's it in a nutshell, Jade. If you look at their both agencies' January and February deliveries, they were quite high and that's a function of business that was rate locked in 2020 and carried over from a delivery standpoint into the first quarter.
Our next question is coming from Steve Delaney at JMP.
And congratulations on Zelman and moreover, all you've done to position WD as a go-to employer in the space. It's exciting to see. I want to pick up on Jade's last question about the GSE volumes in the first quarter and understanding that the difference between locks and deliveries, but I do believe the caps are based on delivery volume. Freddie was fine. They're both looking nice on a year-over-year, but Freddie was fine at $14 billion, versus the average quarter limit of $17.5 billion. But Freddie obviously -- excuse me, Fannie obviously blew through it, and I assume that $10 billion in January was probably a mega loan. But Willy, I guess, I'm looking at this and I'm thinking back to the late summer and fall of 2019. We came in from, if you want to argue that it was $80 billion last year at $70 billion, I'm worried that we're going to get into a situation where we're in the last 3, 4 months of the year and we're going to run out of space on the $70 billion. So how are you thinking about that? And do you think FHFA would respond to that or going to leave the market to its own devices?
Sure, Steve. Nice to have you on this morning. The $10 billion in January for Fannie was carryover business from 2020. And so as a result of that, that mismatch that Steve just talked about is what ends up happening, is that we recognize revenue for those loans in Q4 of 2020, yet they get delivered to Fannie Mae in January 2021 and hit, if you will, their accounting in 2021. So all the numbers that you and Jade just outlined are exactly right. The issue with it is, is we got credit for them in Q4 of last year and then they take them into their cap analysis for 2021. As it relates to the outstanding amount of capital they have of $105 billion, we're super excited about that because we know that we -- well, first of all, we have seen a dramatic change in April from February and March as it relates to agency pricing on deals, dramatic because they both pulled back after having a lot of carryover. They both pulled back in February and March. They're both back in the market and very active right now. And the second thing is that there's plenty of capacity there for us between now and December 31 to do our commensurate market share, which, as Steve said, we held in Q1 at 11% on a combined basis with Fannie and Freddie. We have grown our Fannie market share up to about 15% at the end of 2020. And I have all the confidence in the world that we'll do that much Fannie Mae business, if you will, of their total $70 billion this year. But it comes at different times in the year. Clearly, it didn't come in Q1. That's fine. No big issue.
And then the final thing I'd say, Steve, is the Supreme Court should rule in the next week or 2 as it relates to the court case they heard in December, as it relates to the term of the FHFA director, it is everyone's expectation that the Supreme Court rules on FHFA like it did on CFPB. If the Supreme Court rules that way, it is very likely, from every conversation I've had, that the Biden Administration asks Director Calabria to step down and puts in a new FHFA director. And so specifically to your question about, will the FHFA director step in, will the scorecard be changed? Who knows who takes Dr. Calabria's seat when and if the Supreme Court rules the way that many expect them to rule. But I would expect that whomever steps into that seat is very much more, if you will, pro-GSE and their role in the markets than Dr. Calabria is. And while Dr. Calabria has established very reasonable scorecards for Fannie and Freddie in their multifamily lendings spaces, I would just say that with a new director, there's another bite at the apple as it relates to how much lending Fannie and Freddie can do in the multifamily space. And as you know, as one of the agency's largest capital providers and having very, very longstanding relationships with Fannie and Freddie as well as the regulator, we will be very active in talking to whomever is the new regulator of Fannie and Freddie as it relates to the need for their capital and where they're placing their capital.
But I would also add though, Steve, that irrespective of whether the caps are changed or not, as Willy pointed out, we will get our fair share and then some of the $105 billion that remains to be done. And given our footprint and capabilities as the multifamily market grows this year from last year, we have plenty of opportunity to get those loans financed by life insurance companies, banks, et cetera, through our capital markets teams. So we feel very well positioned either way.
No, that's great color guys. And Steve, on your final point about capital markets team, you guys, I think way back, maybe 5 or 6 years ago, you had -- I believe you had someone focused on CMBS conduit lending into private CMBS. I mean, I guess, eventually depending on what FHFA does, it would seem that is something you could -- a capability you could certainly add to serve your customers in a broader way beyond the agencies.
Yes. That's exactly right, Steve. We have many outlets for our borrowers. Financing on multifamily, it's not just the agencies. And we expect, as Willy mentioned and I alluded to in my remarks as well, we expect an acceleration in the amount of brokered financing that we're doing this year, certainly relative to last year, when the markets were pretty soft because of the pandemic.
I would also just -- Steve if I can, just before we move off of that, I'd just add one other thing. Our investments in databases started in multifamily sector and that's what has driven those new client acquisitions and refinancings to our portfolio. We are very focused right now on expanding those databases into broader commercial. And as we develop those databases and use the same technology to find leads, find new clients, that will also accelerate our growth in the broader capital market space as it relates to lending on office, retail, hospitality and industrial. And so I would just say that while Steve gave a great number as it relates to Q1 versus Q1 and the amount of non-multi we did in Q1 of this year, all of that focus on technology that started in multi is now moving into the broader commercial space. And that will benefit us tremendously as capital comes back to those other asset classes.
Yes. That will be an important data point for us to track going forward because I agree that's important strategically for you to add those other property types. A final quick thing. Obviously -- it's political season. Obviously, we're getting a lot of ideas thrown about tax law changes, whether they be corporate or even real estate. The implication of corporate tax change, I think, a higher rate is pretty obvious. But Willy, it seems the 1031 exemption, the tax-free exchanges, from talking to your investment sales team, how big a deal is that in terms of driving activity? And if it was to be modified or eliminated, could that freeze the market for some period of time in terms of multifamily transactions?
So Steve, I'm going to say something that won't please many commercial real estate investors and developers, and in the process of that probably a lot of our clients, but there are not that many that I think this is going to upset. But the bottom line is the 1031 exchange issue is not an issue whatsoever for Walker & Dunlop. There's a paper that was published by 2 professors at the University of Florida that looked at the total commercial real estate sales market between 2010 and 2020. It was published in September of 2020. And in that paper, they looked at every transaction across all asset classes and came back with 7% -- 7, not 70 -- 7% of total commercial real estate sales transactions between 2010 and 2020 had a 1031 exchange. So 7%. Inside of that, the average sales price of that 7% was $500,000.
So the average sales price that our investment sales team had on the properties they sold in 2020 was $46 million, $46 million. So first of all, it's a small part of the market. And second of all, it is transactions that Walker & Dunlop doesn't either broker nor finance. Now some of our competitor firms focus on those types of deals. In that exact same study, they cite Marcus & Millichap's own research saying that 23% of their investment sales volume in 2017, '18 and '19, 23% was on 1031 exchange transactions. So for a firm like M&M, they got a lot of clients who use 1031 money to swap out of assets and not pay taxes. For W&D, it is not an issue. As it relates to the capital gains rate, certainly, if you had a change in the capital gains rate that could accelerate transactions in 2021, depending on whether it is prospective or retroactive, if they decide to do retroactive and bring it back to January 1, 2021, which many people talk about 2 things there: one, difficult to implement, but both President Bush's tax change in 2001 as well as President Clinton's tax change in 1997, both were retroactive, both were passed kind of June, July timeframe and were retroactive to the beginning of the year. As everyone probably remembers, the Trump tax cuts of 2016 -- or 2017 were implemented in 2018. So they passed that legislation in December and it started on January 1, 2018. So it was prospective. Many believe that the tax changes will be prospective, not retroactive. But one of the things that we are looking at, and it sort of goes back to the point Steve made a moment ago as it relates to the breadth and capabilities at Walker & Dunlop, is if it is a change to the capital gains rate that is significant and it is retroactive, can we go raise capital that allows people to do UPREIT transactions into some type of REIT vehicle where rather than having the deal fall away because the seller doesn't want to pay the increased capital gains tax, we can have some type of fund that can buy those assets and allow for the sellers to have shares in an UPREIT transaction where they either hold them until the tax laws change again or they just don't take the bite of the higher capital gains tax today.
So we're looking, we're trying to figure things out. But at the end of the day, I would say to you that 1031 as it relates to W&D is not an issue. And as it relates to a change in the capital gains rate, that's obviously, if you will, a seller by seller or a borrower by borrower decision about whether they're going to transact or not. And if it is, if you will, a huge change in the cap gains rate and it is retroactive, we will work very hard to create vehicles that sellers can sell into in a tax-efficient manner.
At this time, there are no further questions. So I'll turn it back over to Willy for closing remarks.
I'd just reiterate, thank you everyone for joining us this morning. Great start to the year for W&D. Our growth is accelerating, which is really exciting to see. And thank you to Steve and to Kelsey and to our team for all they did to put this call together. I hope everyone has a great day.