Anatomy of an Actium Loan: High Annualized Return in Wasatch County, Utah

Situation

A borrower sought financing secured by approximately 56 acres of land near Highway 40 in Wasatch County, Utah. He sought a sum of $1,120,000 for a very short time period: six weeks.

Due Diligence

Appraisals valued the land at $6,282,000, giving the loan an 18% LTV. This value did not include the water rights, which were also pledged and had additional value. Because the borrower only wanted the capital for a total of six weeks, we agreed to charge a 1% origination fee and 10% interest.

Decision

Although this is a lower than characteristic rate structure for Actium, we knew that given the short timeframe it would result in a higher annualized yield than our typical loans. In addition, there would be the opportunity for additional fees if the borrower needed to extend. When the loan was repaid a few weeks later, it yielded an annualized return in excess of 16.5% for our funds.