Anatomy of an Actium Loan: Two Former Restaurants

We were asked to make a loan secured by two restaurants whose leases had expired. Because this property had entrances from two high traffic streets, a national restaurant chain had expressed interest and issued a letter of intent for a lease. We did not feel comfortable valuing the property off a letter of intent as it was not binding. So we considered what the buildings would lease for in their current state, which would likely be more of a “mom and pop” user or a small local chain. Using these values we lent 66% of the collateral value. This loan had a one-year maturity. We received a 1% origination fee and an interest rate of 10%.