Walker & Dunlop, Inc. ( WD Quick Quote WD - Free Report) has struck a $696-million deal to acquire tax credit syndicators and affordable housing developers, Alliant Capital, Ltd. and its affiliates, Alliant Strategic Investments and ADC Communities.
Alliant is a privately-held alternative investment manager that focuses on the affordable housing sector through low-income housing tax credit ("LIHTC") syndication, community preservation fund management and joint-venture development.
Being the sixth largest LIHTC syndicator in the country, the buyout will aid Walker & Dunlop to leverage Alliant’s market-leading position.
Management noted that the buyout will make “Walker & Dunlop a market leader in affordable housing — lending, sales, and tax credit syndication. With Fannie Mae, Freddie Mac and HUD all focused on affordable housing and more and more Americans seeking affordable rental housing, the combination of Alliant and Walker & Dunlop is a home run.”
Per the terms of the purchase agreement, Walker & Dunlop will acquire Alliant for an enterprise value of $696 million. Of this, Walker & Dunlop will shell out $351 million of cash through a combination of corporate cash on hand and proceeds from the expected term debt refinancing.
It will fund $90 million through common stock, with the number of shares to be determined at the time of the transaction closing. Also, it will offer participating interest in future cash flows over the next four years for $100 million of earn-out.
The company will assume Alliant's securitized debt facility, which had $155 million of the outstanding balance as of July end and carries a 4.75% interest rate.
The transaction is anticipated to close in fourth-quarter 2021, subject to certain regulatory approvals and nods of Alliant's investors and lender partners.
The buyout will complement Walker & Dunlop's foothold in the affordable debt-financing space by augmenting the same with Alliant's scaled affordable housing portfolio and offer significant financing and sales scope.
The acquisition will be immediately accretive to key financial metrics and offer notable financial synergies. It is expected to increase 2022 revenues by $90-$100 million, diluted earnings per share of 45-60 cents, and adjusted EBITDA of $60 million.
It will increase Walker & Dunlop's asset under management (AUM) to $16 million from $2 billion, facilitating the company to exceed its 2025 financial goal of $10 billion. The acquisition will also enable the company to achieve other 2025 financial targets of revenue growth to $2 billion and $60 billion of targeted affordable housing origination volume.
Significant asset-management fees generated from higher AUM balance will drive long-term, predictable and stable cash flows.
Given the highly fragmented LIHTC market, the buyout will likely enable Walker & Dunlop to grow Alliant’s market share and capitalize on the industry fundamentals.
In the past year, shares of Walker & Dunlop have jumped 83.5% against the
industry’s decline of 24.7%.
Image Source: Zacks Investment Research
Currently, Walker & Dunlop carries a Zacks Rank #5 (Strong Sell).
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