William Ross and Jeffrey Weidell are presidents of NorthMarq Capital, a large mortgage banking firm headquartered in Bloomington, Minnesota, with 34 offices around the U.S., an annual volume of $12.5 billion and a loan servicing portfolio of more than $43 billion for 50 institutional investors.
Ross has been associated with the mortgage banking business in Dallas since 1976 and joined NorthMarq in 2009. In 1989, he was a founding principal of Keystone Mortgage, which in 2001 was sold to Capmark Finance (formerly GMAC Commercial Mortgage). At Capmark Finance, he was the executive vice president responsible for managing Capmark’s nationwide mortgage banking network. Weidell joined NorthMarq in 2000 from Trowbridge, Kieselhorst & Co. after that firm was acquired by NorthMarq. He was named managing director of the San Francisco office and later appointed to the NorthMarq Executive Committee. In 2012, he was promoted to president.
Development: How did you both become presidents, and is this an unusual leadership structure in the mortgage banking world?
Weidell: It is an unusual relationship, but our CEO, Ed Padilla, decided to eliminate the “co-” in front of the titles. He wanted to be sure we would work together and that the title would indicate that we are focused on the same things.
Development: Do you make decisions jointly or do you each have different, nonoverlapping responsibilities?
Ross: Jeff handles the offices that are on the West Coast and in the middle part of the country. I handle all offices from Texas to Florida and up the East Coast. We talk almost every day about the issues we are facing and we have similar ideas on how the firm should be managed.
Development: As presidents, what are your core areas of focus?
Ross: Jeff and I spend a good part of our time looking at the strategic, long-term goals of the company and executing them. We are focused on making sure that we have the right people employed at the company.
Weidell: Our core area of focus is making sure our 30-plus production offices are running properly. We assist them with staffing, with lender resources and any centralized functions to help them do the production.
Development: What qualities do you each look for when hiring staff?
Weidell: Two things jump to mind for me: we need people of the utmost integrity because they are expected to operate independently and make the right decisions. What comes along with that is having a self-starting nature. We do not have a strong line of authority: We want people on their own while doing the right things.
Ross: A couple of years ago, NorthMarq Capital had a speaker in Dallas who told us that when he hired people, he wanted to hire “SPDs.” We all looked at each other and wondered: what’s an SPD? He told us that SPD stands for “smart, poor and a desire to be wealthy.” We want the kind of people who are motivated and who want to do well for themselves and in turn do well for the company. We are decentralized and we put a lot of trust in our managing directors at our 34 offices. Our biggest goal is to get individuals in our offices who are trustworthy, intelligent and have a competitive winning spirit.
Development: Apart from the data your own firm produces, what economic or market indicators do you track on a regular basis?
Ross: We look at economic reports from the Mortgage Bankers Association and National Multifamily Housing Council as well as Reis. In fact, Reis’s chief economist, Victor Calanog, speaks at our conference annually.
Weidell: We are rate driven, so we are tracking rates and directions of rates all the time, as well as spreads. Clearly, lower rates are better for our business. We are also heavily into the multifamily business, so we track the health of the multifamily markets in great detail.
Development: How concerned are you about the cap rate compression and frothy pricing that has surpassed 2006-2008 levels?
Weidell: We would all be concerned with cap rate compression if real estate were unique in this aspect, but it is not. All investment markets are pretty frothy at this point. For the current market, we see it as an indication of a fair amount of capital needing to be invested and real estate is a decent asset class in which to invest, so prices are driven up. To the extent that the overall economy corrects, real estate will correct. I think we are just part of that; we are not leading the way toward our own problems.
Ross: I certainly have some concern about cap rate compression, but in our sister company, AmeriSphere, which handles Fannie Mae and FHA [Federal Housing Administration] executions, we are being very careful about how we look at the exit strategy on the loans we are writing. However, when you are putting a 10-year loan in place at 4 percent, everyone feels pretty good about how that property will perform over the next 10 years.
Development: Is a correction on the horizon?
Weidell: We don’t see a correction over the next 18 months. We all know that real estate is a cyclical business and there is a correction out there somewhere. The market will not go on forever. However, for the immediate horizon, we see healthy economic growth where there is construction that is driven by demand. Consequently, things look good for the industry for the foreseeable future.
Ross: The Federal Reserve seems to be indicating an increase in interest rates sometime in 2015, but I think it will be fairly gradual. I don’t think we will see a 300 basis-point jump overnight. As many people know, there is a large oncoming wave of maturities in the CMBS [commercial mortgage-backed securities] world. It starts in 2015 and accelerates in 2016 and 2017. For firms like us, it will be a tremendous opportunity, but if interest rates increase rapidly, it could certainly impact everyone’s ability to refinance these loans.
Development: How has the industry changed during your careers?
Weidell: We used to be generalists in the finance business. In the past, let’s say you worked in the San Francisco or Dallas area, you were expected to know your market and cover it for investors across different property types and different structures. To a large degree, given the information flow that is available today, we have become much more specialized. People in the business will specialize in multifamily, multifamily equity, industrial, industrial debt. That is a significant change.
Ross: It used to be what I call a “cottage industry.” Each city had four or five firms that handled a majority of the long-term, nonrecourse commercial financings. You did not have large, national players that went across multiple states. The business is now dominated by seven or eight mortgage companies that have expanded their footprints coast to coast. That is the biggest change that I have seen.
Development: What are the most valuable lessons you have learned in your real estate career?
Weidell: The most valuable lessons are that you need a long-term view and you need to surround yourself with good people. The surviving companies all have these characteristics. There are no shortcuts in our business. Shortcuts are shortsighted and flameout. Everyone who jumped into the CMBS business in 2007 and picked up a bunch of money and did bad deals was out looking for a job two years later. Learning the right way from the right people has lasting value.
Ross: The most valuable lesson I have learned is that it is critical to mentor the young people in your organization. When I first came into the business, I had a mentor who I followed around for two or three years. We want to make sure that we have great young, highly motivated people who will take our place and continue the tradition of doing things the right way.