After setting up a multifamily lending company and quickly ramping it up to a $1 billion origination volume in the first year, what do you do to maintain the pace? Grace Huebscher, who in 2009 started Beech Street Capital in Bethesda, Md. after a long stint with Fannie Mae, decided that it would be best to bring in a partner to diversify the company’s offerings. The resulting sale of the company, in 2013, to Capital One Financial Corp, a New York Stock Exchange-listed financial company based in McLean, Va., has taken the company, and Huebscher, now president of what has become the multifamily finance group of Capital One Bank, to the next level.
At the end of 2012, Beech Street, whose focus was on the agency lending niche, had originated about $4 billion in loans and serviced a portfolio worth approximately $10 billion. Multifamily industry insiders are impressed that Huebscher made more progress in the DUS lending area in a shorter period of time than most. According to Jeffery Hayward, Washington, D.C.-based Fannie Mae’s head of multifamily, “Judging by the end result, which is the company became large enough for a big bank to buy, she did an incredible job in taking something from an idea and making it a reality. That has to be the result of her leadership skills, her persistence.”
And under the Capital One umbrella, there is further scope for growth. Leveraging the synergies generated by the merger, Huebscher is looking to tap into additional opportunities. The combined business had already generated additional activity of more than $1.2 billion for Capital One by the fall of 2015.
One Plus One Equals Three
The merger came about as Huebscher decided that tapping into an existing relationship with Capital One, the company’s warehouse lender, and its commercial real estate lending team, led by Rick Lyon, made sense to grow Beech Street. According to Huebscher, “There was a tremendous cultural fit between the two organizations. They needed an agency platform and we needed a balance sheet partner. So it was a good match.”
Thanks to the merger, the Capital One unit now has an expanded client base and geographic reach, in California for instance, and is looking to selectively expand into additional markets. In one 2015 deal, for example, Capital One Multifamily provided a balance sheet loan of about $35 million for the construction of a 92-unit San Francisco apartment building. The unit has also been able to expand its reach in the affordable housing and community investment agency business, as well as in the health care financing business.
This has come about as Capital One’s tax credit business now has an agency outlet, and the group’s FHA health care business can offer balance sheet lending as well. The recent acquisition of GE’s health care financing unit also provides
growth opportunities for the group. Also, the company has been approved in 2015 as a lender for Freddie Mac’s small-balance loan program. The program offers mortgages of up to $5 million on properties with at least five units. The Capital One group was also on the list of top Fannie Mae DUS lenders for 2014.
Grace Under Pressure
Huebscher sees her long-term relationship strategy as a key to her business success. For instance, she explained how when one of Beech Street’s clients was looking to refinance a credit facility in 2010, she advised them to use an extension option on the facility, which was the best course for the private property owner. This has brought in additional business over the years when the same client had other needs. The impetus for Beech Street Capital came about as two clients
Huebscher worked with at Fannie Mae—Alan Fishman of Independence Bank and Ralph Herzka of Meridian Capital—approached her to help them tap into the opportunity they saw to generate business off a Fannie Mae DUS license owned by Independence Bank.
While many others saw the credit crisis and the ensuing turmoil as a time to play it safe, Huebscher seized the opportunity to tap into a large talent base of people reassessing their careers. And it seems her entrepreneurial instinct has paid off.
Doug Bibby, president of the Washington, D.C.-based National Multifamily Housing Council, who hired Huebscher at Fannie Mae during his time there, says Huebscher’s high energy level, interpersonal skills, intelligence and expertise are a part of her success. According to Bibby, “She has decided that she’s going to be successful in this business, but she’s also got a family. She knows how to balance it. But at the end of the day, she is a no-nonsense businesswoman. She is focused on getting the job done and treating people fairly and with dignity.”
A Mortgage Banker’s Outlook
Huebscher doesn’t see any movement on the GSE reform front in 2016, and expects that Fannie Mae and Freddie Mac will continue to be significant industry players. While she is watching for any signs of excess, she doesn’t expect these to surface for another couple of years. With U.S. multifamily remaining a draw for global investors, she expects 2016 to be a very healthy year for the industry, with activity similar to 2015 levels.