Lyon: Capital One’s Buy of Beech Street Capital a Strategic Move
- Aug 19, 2013
It will be a big move for Capital One Financial Corp. and not a small one at all for Beech Street Capital. Capital One has agreed to acquire the privately held national originator, underwriter and servicer of multi-family commercial real estate loans, effectively adding Fannie Mae, Freddie Mac and FHA agency lending products to its offerings in one fell swoop. As for Beech Street, which presently services an approximately $10 billion loan portfolio, Beech Street founder and CEO Grace Huebscher told Commercial Property Executive, “Beech Street wants to go to the next level and Capital One is the right partner.”
A highly active originator and servicer of Fannie Mae, Freddie Mac and FHA multifamily commercial real estate loans, four-year-old Beech Street’s age belies its success; in 2012 alone, the firm originated roughly $4 billion in loans and took the position of the sixth largest agency originator in the U.S.
The timing for the uniting of the companies, which have known each other for several years at an organizational and executive level, is right. “In the last few years, the market has been substantially driven by the agencies,” Rick Lyon, Head of Commercial Real Estate Banking, Capital One, told CPE. “Demand has been high, given interest rates, along with strong multifamily fundamentals in many markets across the country. The agencies will remain significantly active in this market, along with balance sheet lenders–we will have strength in both and will be well positioned moving forward.
While the timing may be right, in this case, the adage about timing being everything is not necessarily true. “This is not an acquisition purely about timing–this is a long term strategic move for us,” Lyon said. “Beech Street has grown to become one of the largest providers of agency multifamily financing, which continues to play an important role in the market. That, combined with the strength of Capital One’s balance sheet and range of products, will enable us to offer comprehensive solutions to multifamily buyers.”
Capital One’s acquisition of Beech Street is on track to close in the fourth quarter of 2013, at which point Capital One will join the ranks of the top five national multi-family originators in the country. However, size is not at the heart of the deal. “Our goals center on the client,” Huebscher added. “We want to be able to offer a complete set of banking services for our clients. This transaction also enhances our relevance and our market position in the sector.”