How We Think About Risk: A Framework for Underwriting in Uncertain Markets

Our CRE underwriting framework comes down to four questions: is the location sound, can the sponsor execute the plan, can we structure around the risk, and can we live with the downside? When a deal answers all four well, we close, including when conventional lenders have passed. Uncertainty doesn’t change the questions. It raises the standard for the answers.

How Do Private Lenders Evaluate Real Estate Deals?

Banks and agencies generally underwrite to a template: minimum occupancy, maximum leverage, full recourse, a standard debt service coverage ratio. A deal that fits the template moves forward. A deal that doesn’t gets declined, often before anyone has looked closely at the asset.

As a private lender with discretionary capital, we can underwrite the specific deal instead. That doesn’t mean lower standards. It means the standards are applied to the real facts of the property, the market, and the sponsor, and every loan is reviewed and recommended through our investment committee. The framework below is how we do that work.

Why Does Uncertainty Change How We Underwrite?

Uncertainty in 2026 is mostly about timing and refinancing, not about whether real estate has value. According to the MBA, $875 billion, or 17%, of the $5.0 trillion in outstanding commercial mortgages is scheduled to mature in 2026. Many of those borrowers hold good assets and need a lender who can look past a stale loan-to-value test or a lease-up that is still in progress.

At the same time, rate volatility, construction cost swings, and uneven demand across property types and submarkets mean that averages tell you very little. A national headline on office or multifamily says almost nothing about one building on one corner. In an uncertain market, we get more specific, not more cautious across the board.

That’s also why we separate what we know from what we’re assuming. Rent growth, exit cap rates, and lease-up timing are assumptions. Submarket supply, the sponsor’s history, and the physical condition of the asset are facts we can check. The more of a deal’s value rests on facts, the less it depends on the market cooperating, and that’s the kind of deal we can underwrite in any environment.

Question 1: Is the Location Sound?

Location is the one variable the sponsor can’t change after closing, so we start there. We look at submarket demand, rent and absorption trends, new supply, and what creditworthy tenants or renters in that specific area are actually doing. We care less about the occupancy number at origination than about whether the demand drivers behind it are real.

A building at 55% occupancy in a submarket with genuine demand and limited new supply is a better risk than one at 80% in a corridor where tenants aren’t renewing.

The same logic applies to multifamily, where we look at the competing pipeline at the submarket level, as we covered in What Makes a Multifamily Deal Work in 2026?.

Question 2: Can the Sponsor Execute This Plan?

We look for a specific plan and a sponsor with a record of delivering it. That means a defined scope, a real budget, a named contractor or operator, and a team that has done something similar before. A generic value-add thesis doesn’t give us much to underwrite. A detailed, budgeted plan from a team that has executed under real conditions does.

We also look at the sponsor’s balance sheet and liquidity. Projects rarely go exactly to plan, and we want to know the sponsor can absorb a cost overrun or a slower lease-up without the loan being the only thing holding the deal together. As a developer as well as a lender, we know what that looks like from the inside.

Question 3: Can We Structure Around the Risk?

This is where private capital earns its place. Once we understand where the risk sits, we can often build the loan to address it: interest and renovation reserves funded at closing, extension options tied to leasing or completion milestones, non-recourse terms for the right sponsor, and a loan size that reflects the business plan rather than a standard leverage cap.

The goal isn’t to eliminate risk. It is to make sure that each risk is identified, priced, and matched with a mitigant, and that the structure fits the project’s actual timeline instead of forcing the project into a standard loan box.

Question 4: Can We Live With the Downside?

Every deal gets a downside case. If the lease-up takes a year longer, if costs run over, if the exit market is softer than expected, where does the loan stand? We look at our basis in the asset, the sponsor’s equity position, the strength of the collateral, and the realistic ways the loan gets repaid.

We also test the exit. A loan that depends on a single refinance outcome carries more risk than one with several realistic paths to repayment, such as a sale, a refinance into permanent financing, or a stabilized hold. We want to see that the sponsor has thought through more than one way out, and that the timeline leaves room if the first option takes longer than planned.

If the answer to that question is only acceptable when everything goes right, we pass. If the loan remains well protected when several assumptions miss, that’s a deal we can close with confidence, even in a market where others are standing still.

What Does This Framework Look Like in Practice?

Our Uptown Tower loan in Dallas is a good example. Bradford Companies acquired the 12-story office building in 2025 when it was approximately 54% leased. By that point, conventional lenders had largely stepped back from office acquisitions regardless of submarket or sponsor. A template would have declined it.

We underwrote the actual deal. The Knox-Henderson submarket has held up with limited new supply. Bradford came with a defined, budgeted renovation plan and a record of executing. And we could structure a $30.8 million non-recourse first-lien acquisition bridge loan that covered both the purchase and renovation reserves in a single instrument. Each of the four questions had a clear answer.

That is the pattern behind most of our closings, whether the asset is office, multifamily, or hospitality. You can read more about how we approach office lending in Dallas-Fort Worth.

What Gives Us Comfort to Close When Others Won’t?

Sometimes the answer is that we also say no. Passing on a deal that fails one of the four questions is part of the framework, not a departure from it. Sponsors tend to respect a clear answer with reasons attached more than a slow maybe, and it keeps our capital available for the deals that fit.

Mostly it’s that we’ve done the work the template skips. We know the submarket, we’ve reviewed the plan line by line, we understand the sponsor, and we’ve built a structure that holds up if things don’t go perfectly. Comfort comes from specifics, not from the market being easy.

It’s also why we try to be direct with sponsors early. If a deal doesn’t fit, we say so quickly and explain why. If it does, we can typically close in 60 to 90 days from application and deposit remittance, on loans from $20 million to $200 million.

Who Should Be Talking to Us?

Sponsors who tend to work well with us share a few traits:

• They have a specific asset in a market they know well and can explain why it works.
• They have a defined, budgeted plan and the track record to execute it.
• They need structure a bank can’t offer, such as non-recourse terms, reserves, or flexible extensions.
• They want a lender who will engage with the details of the deal, not just the checklist.

Have a deal that doesn’t fit a conventional credit box? Our team is actively deploying capital. Explore our loan programs, or contact us to start a conversation.