How Boise’s A10 Capital found its footing in commercial real estate

A10 Capital’s windows on the 11th floor of the Eighth & Main building offer a commanding view of Downtown, but the commercial real estate lender has eyes in markets all over the country.

Since opening in Boise in 2007, A10 has opened a second headquarters in Dallas and seven regional offices scattered across the nation.

Jerry Dunn, 45, was one of seven founders hailing from various corners of finance who bonded over a shared belief that banks were playing fast and loose with commercial real estate lending. They were more right than they realized, Dunn says, and were positioned to grow during the recession when banks, saddled with bad loans, pulled back on the sector.

Today, A10 offers a line of bridge and long-term loans on certain midmarket commercial real estate properties and property portfolios, as well as refinancing and other products. Last week, the company announced the launch of a fixed-rate loan product with terms up to 20 years.

Dunn says A10 has financed 25 million square feet of commercial real estate. That’s more than three times the total commercial real estate in Downtown Boise tracked by Thornton Oliver Keller. “That makes us by far the biggest middle-market lender out there,” Dunn says.

Q: A10 specializes in midmarket commercial real estate. What kinds of property are we talking about?

A: We define “midmarket” as loans of property between $1 million and $20 million. We offer a full suite of products in that loan size. These are existing buildings: office, retail, multifamily, industrial and also some self-storage and hospitality.

Q: How has the number of A10 employees grown?

A: For a number of months early on, it was just myself. Then, there were two others. Today, we’re approaching 90, about 60 in Boise. We hired two here yesterday.

Q: A10 doesn’t disclose its revenues or the value of its portfolio. What’s the best metric available to the public to give scope to the business?

A: In the last 12 months, we’ve received more than $30 billion in loan requests from qualified borrowers.

Q: What’s your background?

A: I started in New York City out of college as an investment banker. I was hired as one of the early employees at a specialty finance startup here in Boise that was getting started in the early ’90s called Commercial Lending Corp. That became successful, and after it grew, I left and started an equipment finance business with some of the original founders, called Aviation Finance Group. I was CEO of that company. We sold that business in 2004.

Q: What did you do after that?

A: I took a two-year sabbatical, then I moved to San Francisco and took a position in executive suite of Bank of the West as chief of staff for the guy running the bank. They are a Top 25 bank in the country. I did that in 2005 and 2006. It allowed me to see what was going on in the precredit crisis, the poor loan underwriting. That was a catalyst to start A10 Capital, because we saw at a very high level what was going on in commercial lending from a bank’s perspective.

Q: How did you finance the business?

A: The exact thing that created a great business opportunity for A10 — that all the banks were in the penalty box — made it equally as difficult to raise capital. We bootstrapped the business with our own capital and a family office. Once we proved out the model, we went out and raised equity capital from four institutional equity providers. The most well-known of our partners is BlackRock, which has the largest balance sheet in the world with over $4.7 trillion of management.

Q: That seems unsustainable.

A: I’m not naive enough to think we won’t have loan losses. That will happen. But having the expertise and our credit culture has been important. That track record is part of the reason we’ve been able to attract investment.

Q: Bankers often complain about increased pressure from regulators. To what extent is A10 free of that?

A: The credit crisis was a catalyst that got us off of the ground. Now, the regulatory environment has created some other tailwinds for us. Having been a banker, I can say sometimes regulatory pressure can paralyze banks from making good business decisions. It obviously slows things down and adds tremendous costs. We’re a lot faster than a bank because we don’t have the bureaucracy that comes from that. We also don’t have the added cost.

Q: How is A10 different from other commercial real estate lenders?

A: We have an in-house legal team. A lot of Wall Street lenders who do what we do outsource that work to an expensive, money-center-type lawyer that might charge $50 ,000 or $100,000 to close a loan. Our legal costs are a fraction of that, and that’s a huge competitive advantage. Also, how we’ve funded our balance sheet is unique.

Q: I bet it was harder to make commercial real estate loans before A10 had a track record. What do you remember about the company’s first loan?

A: What made it even more tricky was we were lending during the Great Recession. It was a very scary environment. Our first loan was a fully occupied Class A office building in Salt Lake City. It was a $2 million loan on a property that was worth $3.5 million, even at that time. That borrower ended up selling the property three or four years later. It turned out well.

Q: What’s A10’s largest deal?

A: Two months ago, we closed a $110 million loan on a 14-property portfolio. The borrower is a multibillion-dollar real estate investor who you would read about on the front page of The Wall Street Journal. That’s where I pinch my skin and think, “Wow. This has turned into an interesting business. That client chose A10 Capital over money center banks, Wall Street banks, regional banks.”

Q: Does A10 lend in the Treasure Valley?

A: We have done some, but most of our business is across the country. We just launched our permanent loan product. With that, we're seeing more demand because that's attractive for stabilized investors. We're working with a number of local real estate investors right now on those kinds of transactions.