Walking Away From Risk: A Loan We Declined

We were asked to make a loan secured by a commercial building in Salt Lake County, Utah near a freeway exit. Because this was an area with strong traffic patterns we decided to investigate further. When we inspected the property we found it was in an area with significant vacancy. The borrower had recently signed a lease that was just about to commence and was using the income from this to support their valuation. However, because the tenant was not seasoned we did not feel it would be a good indicator of value and if they moved we could be left with an empty building in a neighborhood with many other locations for rent. We determined this loan would not provide the “margin of safety” we like for our portfolio so we passed.