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Walker & Dunlop, Inc. (WD): Fortress Investment Group Reports Selling Shares in Underwritten Offering

Fortress Investment Group‘s hedge fund managed by Michael Novogratz has cut its position in Walker & Dunlop, Inc. (NYSE:WD), a new filing with the Securities and Exchange Commission showed. Fortress has sold a total of 2.30 million shares of the company in several transactions at a price of $15.30 per unit. Following the sale, the investor still holds around 8.25 million shares, which represent 25% of the company’s outstanding common stock.

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Fortress Investment Group was launched in 1998 as a private equity firm, but later expanded and now it includes several hedge funds and real estate-related investments and debt securities, with one of the hedge funds being managed by a former Goldman Sachs partner Michael Novogratz. Mr. Novogratz’s fund manages a diversified equity portfolio worth over $8 billion, which is focused on the financial sector. It has been holding shares of Walker & Dunlop, Inc. (NYSE:WD) since September 2012, when it initiated a position with more than 16.42 million shares, equal to 47% of the company; the stock of the company gained around 20% since then and Fortress reduced its exposure to the company by around a half.

In the latest transactions, Forthress sold 2.30 million shares under the terms of an underwritten offering, including over-allotment options that have been used in full. However, Walker & Dunlop, Inc. (NYSE:WD) has not received any proceeds from the offering, since the offering included only shares held by Fortress Investment Group and its affiliates.

Walker & Dunlop, Inc. (NYSE:WD) is a small cap retail & mortgage bank that conducts its operations through Walker & Dunlop, LLC, which is a provider of commercial real estate financial services in the US, with a focus on multifamily lending. For the third quarter of 2013, the company reported a 33% annual increase in revenues to $98.1 million, while its earnings per share went up by around 88% to $0.47. At the beginning of November, Walker and Dunlop completed the acquisition of Johnson Capital’s loan origination and servicing platform. Johnson is a former large mortgage banking correspondent of Walker & Dunlop.

Chuck Royce‘s Royce & Associates and Israel Englander‘s Millennium Management are two other investors that own shares of Walker & Dunlop, Inc. (NYSE:WD). In the latest round of 13F filings, Royce reported holding 782,100 shares, up by 8% on the quarter, and Millennium disclosed ownership of 298,800 shares, an increase of 840% over the quarter.

To sum up, even though Fortress has cut its stake in Walker & Dunlop, Inc. (NYSE:WD) by selling shares in the offering, it still owns a significant position in the company. The stock still represents an investment worth exploring, since it trails a P/E of around 11.30, which is lower than the industry average of 16.20, while analysts are optimistic expecting the stock to beat the market and have set a consensus price target of $18.00 per share.

Disclosure: none

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