Contaminated property in Santa Clarita, California

Saturday, May 25, 2019
Borrower   A developer specializing in the remediation of environmentally contaminated properties.
Loan   A one-year, interest only loan of $22.3 million at 11%
Collateral   A first lien on the 996 acres of property in Santa Clarita, which had previously been used by an ordnance manufacturer.
Guarantors   The loan is backed by an insurance policy issues by an insurance company rated A+ Superior by Best which will pay off the loan if the borrower defaults and if there is a pollution event (which they acknowledged already existed). This policy enabled us to charge the unusually low interest rate.
Purpose   The borrower needed the cash in order to close on the purchase of the property.
Exit strategy   The borrower expected to be able to clean up and sell certain parts of the property within the first year, and expected to pay off the loan with these proceeds.
Outcome   One year's interest was paid in advance. On maturity of the loan the insurance company (after a short hesitation, and firing their underwriter) paid us $22.3 million.
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