Real estate markets are cyclical.

Periods of market stress can create challenges for borrowers, lenders, and investors. But historically, some of the strongest opportunities in real estate credit have appeared when traditional capital providers become more cautious.

During an Ivy Capital webinar, CEO Jeff Guberman spoke with Jerry Dunn, CEO of A10 Capital, about building a commercial real estate lending platform during uncertain market conditions, identifying underserved opportunities, managing distressed assets, and creating a lending business designed to operate through cycles.

Jerry discussed how A10 Capital was founded in 2007 before the Global Financial Crisis, how the company prepared for a challenging lending environment, and why the firm built its servicing and workout capabilities before aggressively expanding loan originations.

The discussion highlighted a key principle:

Successful real estate lenders are not only built for strong markets. They are built for difficult markets.

Jerry explained that A10’s strategy was based on three core ideas:

• Build businesses during periods of market disruption
• Focus on asset classes that are misunderstood or underserved
• Partner with experienced operators who understand the underlying assets

What Is Commercial Real Estate Lending During Market Distress?

Commercial real estate lending involves providing financing secured by income-producing properties such as multifamily, office, industrial, retail, and other commercial assets.

During normal market conditions, many borrowers have access to multiple financing options.

However, during periods of distress:

• Banks may reduce lending activity
• Credit standards may tighten
• Property valuations may decline
• Borrowers may need specialized solutions
• Traditional lenders may exit certain segments

This creates opportunities for lenders who have:

• Strong underwriting capabilities
• Experience managing troubled loans
• Access to capital
• Knowledge of specific property types
• Operational expertise

Commercial Real Estate Lending Strategy at a Glance

1. Why Some Lending Businesses Start During Market Downturns

Many businesses avoid entering markets when conditions become uncertain.

Jerry Dunn explained that A10 Capital followed a different approach.

The company was founded in 2007, shortly before the Global Financial Crisis, after Jerry and his partners identified problems developing in commercial real estate lending.

At the time, aggressive lending practices had expanded throughout the market, creating concerns about credit quality and risk.

Rather than viewing market disruption only as a threat, the team saw a potential opportunity.

Their approach was based on a belief that:

Market dislocations can create opportunities for lenders with the right expertise and capital.

Successful distressed lenders often enter markets when:

• Competition decreases
• Banks reduce exposure
• Borrowers need flexible solutions
• Asset pricing resets

2. The Three Principles Behind A10 Capital’s Business Model

Jerry described a repeatable framework used across multiple specialty finance businesses.

Principle 1: Start During Periods of Distress

Market downturns often create situations where traditional lenders become less active.

This can create opportunities for specialized lenders that understand risk.

Examples include:

• Financial crises
• Credit contractions
• Real estate valuation declines
• Liquidity shortages

Principle 2: Find Underserved Asset Classes

A lender does not need to compete everywhere.

Instead, successful specialty lenders often focus on areas where:

• Banks have limited expertise
• Borrowers need specialized knowledge
• The asset class requires operational understanding

Understanding the borrower’s business model becomes a competitive advantage.

Principle 3: Partner With Experienced Operators

Jerry emphasized the importance of bringing operating knowledge into lending.

A lender that understands the underlying asset can make better decisions than one relying only on financial models.

Real estate lending requires understanding:

• Property operations
• Market conditions
• Tenant demand
• Renovation requirements
• Exit strategies

3. Why A10 Capital Built Workout Capabilities First

One of the most important lessons from A10’s early years was the decision to build servicing and workout capabilities before scaling loan originations.

Instead of only focusing on making new loans, the company focused on:

• Loan servicing
• Asset management
• Distressed debt management
• Workout expertise

Jerry explained that this approach allowed the company to handle challenging situations when the market deteriorated.

A lender’s job does not end when a loan closes.

The real test often comes when:

• Property performance declines
• Borrowers face challenges
• Markets shift
• Business plans change

4. How Distressed Debt Creates Real Estate Opportunities

During the financial crisis period, A10 created an opportunity fund focused on distressed debt.

The strategy involved purchasing loans from financial institutions at discounted prices and working through the underlying assets.

Distressed debt investing requires understanding:

• Loan documentation
• Property value
• Borrower circumstances
• Workout options
• Foreclosure processes
• Asset repositioning opportunities

The opportunity is not simply buying discounted debt.

The opportunity comes from having the expertise to manage what happens after acquisition.

5. Why Underwriting Matters More During Market Stress

In strong markets, rising values can hide mistakes.

In difficult markets, underwriting discipline becomes critical.

Strong lenders analyze:

• Borrower strength
• Property cash flow
• Market demand
• Debt service coverage
• Exit assumptions
• Asset condition
• Replacement cost

A lender should ask:

• What happens if rents decline?
• What happens if refinancing becomes difficult?
• What happens if the property requires additional capital?
• What is the downside scenario?

6. How Real Estate Credit Platforms Scale

Jerry explained that scaling a lending business requires more than finding borrowers.

A lender needs:

• Equity capital
• Efficient financing structures
• Strong operations
• Risk management systems
• Experienced teams

A10 expanded its platform by improving its access to capital and creating a more efficient balance sheet structure.

This allowed the company to compete more effectively and expand lending capacity.

7. The Role of Securitization in Real Estate Lending

Securitization is a financial structure that allows lenders to access capital markets by packaging loans into securities.

For lenders, this can create:

• Lower cost of capital
• Greater lending capacity
• More efficient financing

However, securitization requires:

• Strong underwriting
• Consistent loan performance
• Institutional processes
• Investor confidence

8. What Investors Should Understand About Real Estate Debt Funds

Real estate debt funds have become an important source of financing as traditional lenders adjust their strategies.

Investors evaluating debt strategies should understand:

The Lending Strategy

Questions to ask:

• What property types does the fund finance?
• What markets does it target?
• What borrower profiles does it serve?

Risk Management

Questions to ask:

• How does the manager underwrite loans?
• How are troubled assets handled?
• Does the team have workout experience?

Track Record

Questions to ask:

• How many loans has the manager completed?
• How has the portfolio performed through cycles?
• Has the team managed distressed situations?

9. Why Relationships Matter in Commercial Real Estate Lending

Jerry highlighted that relationships are a major part of long-term business success.

Real estate lending is not only about capital.

It requires:

• Trust between borrowers and lenders
• Understanding operating partners
• Long-term relationships
• Communication during difficult periods

The strongest lending relationships are often tested when conditions become challenging.

10. What Happens When Loans Underperform?

A successful lender needs a process for handling problems.

Possible responses may include:

• Restructuring loan terms
• Working with borrowers
• Improving property operations
• Extending timelines
• Taking control of assets when necessary

The goal is not simply enforcement.

The goal is maximizing recovery while protecting capital.

Commercial Real Estate Lending Due-Diligence Checklist

Before evaluating a lender, investors should consider:

Lending Platform

• How long has the lender operated?
• Has the team managed multiple market cycles?
• Does the lender originate and service loans internally?

Underwriting

• What property types does the lender understand?
• How are loans evaluated?
• What downside scenarios are considered?

Distressed Experience

• Has the team managed troubled loans?
• Does the platform have workout capabilities?
• How are borrower challenges handled?

Capital Structure

• How does the lender finance loans?
• Does it rely on stable capital sources?
• Can it continue lending during market stress?

Team Experience

• Does leadership have operating experience?
• Has the team worked through previous downturns?
• Are decisions made internally?

Frequently Asked Questions

What is distressed real estate debt?

Distressed real estate debt refers to loans or credit positions where borrowers, lenders, or properties face financial challenges. These situations may create opportunities for experienced investors and lenders.

Why do lenders focus on market downturns?

Downturns can create opportunities because competition decreases, asset pricing resets, and borrowers may need specialized financing solutions.

What makes a commercial real estate lender successful?

Successful lenders typically combine disciplined underwriting, market expertise, strong capital relationships, and the ability to manage difficult situations.

Why is workout experience important for lenders?

Workout experience helps lenders manage loans when properties or borrowers experience challenges.

What is a real estate debt fund?

A real estate debt fund is an investment vehicle that provides financing secured by real estate assets.

How are debt funds different from banks?

Debt funds often have more flexibility in lending structures and may focus on opportunities where traditional banks have reduced activity.

What should investors look for in a real estate credit manager?

Investors should evaluate track record, underwriting process, risk management, market experience, and the team’s ability to operate through different cycles.

The Best Real Estate Lenders Are Built for Every Market Cycle

Market uncertainty creates challenges, but it can also create opportunities for experienced operators.

The lessons from A10 Capital’s journey highlight several important principles:

• Market disruption can create opportunities
• Specialized expertise matters
• Relationships matter
• Risk management matters
• Strong platforms are built before they are tested

Real estate lending is not simply about providing capital.

It is about understanding assets, borrowers, markets, and what happens when conditions change.

For investors evaluating real estate credit opportunities, the most important question is not only:

“How much capital can a lender deploy?”

It is:

“How prepared is the lender when the market does not go according to plan?”

Watch the full Ivy Capital conversation with Jeff Guberman and Jerry Dunn of A10 Capital to learn more about commercial real estate lending, distressed debt strategies, and building businesses through market cycles.

Want to hear the full conversation?

Watch Ivy Capital CEO Jeff Guberman’s conversation with A10 Capital CEO Jerry Dunn for a deeper look at distressed real estate debt, lending through market cycles, and the lessons behind building A10 Capital. 

https://youtu.be/Bx2NRXRcG7k?si=ktjszWwFSH-hJZAG

This article is for educational purposes only. It does not constitute investment, financial, legal, or lending advice. Readers should consult qualified professionals before making investment decisions.