Volume 1, Issue 1 Newsletter Date:  August 10, 2017


You are receiving this letter because you are either an existing client of Blackburne & Sons Realty Capital Corporation (since 1980) or you once applied for a commercial real estate loan of $1 million or more using C-Loans.com or CommercialMortgage.com. C-Loans, Inc. is our sister company.

Today we are going to talk about a North Korean artillery attack on Seoul, South Korea and about core assets. Removal instructions are below.

Joke Du Jour

Over breakfast one morning, a woman said to her husband, "I bet you don't know what day this is." "Of course I do," he indignantly answered. "How could you think I would forget?" Whereupon he left for the office.

At 10:00 a.m. the doorbell rang, and when the woman opened the door, she was handed a box containing a dozen long-stemmed red roses. At 1:00 p.m., a foil wrapped, two-pound box of her favorite chocolates arrived. Later, a boutique delivered a designer dress.

The woman couldn't wait for her husband to come home. "First the flowers, then the chocolate, and then the dress!" she exclaimed. "I've never had a more wonderful Arbor Day in all my life!"

Sure, We Laugh Now, But At The Time...

North Korean Attack And Core Assets

Right now North Korea has thousands of conventional artillery pieces parked close enough to the DMZ to reach Seoul, the capitol of South Korea. North Korea actually shelled Seoul a few years ago. Now imagine the following scenario:

The U.S. begins stopping and searching North Korean ships - perhaps in fear that inter-continental ballistic missiles are being shipped to Iran. In retaliation, North Korea initiates a continuous artillery barrage on Seoul. No immediate end is in sight. Then it is discovered that Russia is secretly shipping supplies and munitions to Kim Jong-un. Not an entirely implausible scenario, is it?

What do you think would happen to your paper financial assets, like your stocks and bonds? Ouch! But the really super-rich wouldn't really care that much. They have much of their wealth invested in core assets. "The financial markets are crumbling... Eh, so what? I'll be okay."

Smart Phone Joke

"North Korea has announced that it's developing its own smart phone. Unfortunately, the phones are so smart, they've already escaped to South Korea." -- Conan O'Brien

And They Accuse Us Of Cowboy Diplomacy

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What Is A Core Asset?

Investopedia defines a core asset as an essential, important or valuable property of a business without which a company cannot carry on with its profit-making activities. (In plain English, a widget company without its widget-making machine is in deep trouble.) A business would dissolve without its core assets, and companies that sell off core assets are usually liquidating and on the verge of bankruptcy.

In the context of super-wealthy real estate investors and their commercial real estate, I would argue that the term has a slightly different meaning. When the super-wealthy speak of their core real estate assets, they are usually speaking about their multifamily, office, retail and industrial properties. These four major commercial property types are known in commercial real estate finance as the four basic food groups.

A super-wealthy investor's core real estate assets are typically owned debt-free, or they are under-leveraged. By under-leveraged, I mean that any existing mortgage is often less than 45% loan-to-value.

Lastly, core assets are usually very attractive properties in their class. For example, if the the core asset is an office building, it will usually be one of the most attractive and best-located office buildings in town. The critical thing about a core asset is that the property is so desirable that it will usually remain leased - even in a bad recession.

401(k) Joke

"A new report says that 60% of teenagers don't have even a basic knowledge of finances. Although in fairness, I'm 38, and I just found out this year that a 401(k) is NOT a type of marathon." -- Jimmy Fallon

Oops. I Thought My Cat Enjoyed Chasing My Red Laser Pointer

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Why We're Preaching About Core Assets

Even if you are an extremely wealthy investor, buying the most attractive and most desirable office building in your city for all cash is pretty scary. You will be left with a dangerous concentration of your wealth into a single asset. What happens, for example, if Pillsbury moves its flour plant out of town?

You know commercial real estate, however, and you really like commercial real estate. You want a substantial portion of your net worth invested in commercial real estate, but you need some diversity.

Would a REIT work? The problem with REIT's is that they use leverage to spice up their returns. You're not looking to take some serious risk in order to to earn a 2% higher yield. You just want some assets about which you don't have to worry, even in a severe recession.

Ring Joke

An older, white-haired man walked into a jewelry store one Friday evening with a beautiful young gal at his side. He told the jeweler he was looking for a special ring for his girlfriend. The jeweler looked through his stock and brought out a $5,000 ring and showed it to him. The old man said, "I don't think you understand, I want something very special."

At that statement, the jeweler went to his special stock and brought another ring over. "Here's a stunning ring at only $40,000," the jeweler said. The young lady's eyes sparkled and her whole body trembled with excitement. The old man seeing this said, "We'll take it."

The jeweler asked how payment would be made and the old man stated, by check. "I know you need to make sure my check is good, so I'll write it now, and you can call the bank Monday to verify the funds. I'll pick the ring up Monday afternoon," he said. Monday morning, a very irritated jeweler phoned the old man. "There's no money in that account." "I know," said the old man, "but can you imagine the weekend I just had?"

What's Up, Doc?

Finally We Come To The Point

Now we're finally getting to it. Blackburne & Sons is very bullish on modern, multi-tenant industrial buildings located close to the central business districts of successful cities. For various reasons, outsourcing of manufacturing has seen its high-water-mark, and there has been very little new construction of industrial space for ten years. Last year we successfully syndicated a nice all-cash purchase of an industrial building in Sacramento, and we are currently looking for another one.

The reason you should invest with us in this upcoming deal is because the building will be particularly desirable and because the deal will be for all cash. On your own, you may not be able to buy one of the nicest commercial or industrial buildings in town, but with you investing alongside 40 or so other investors, each investing between $10,000 to $200,000 - suddenly you can afford to own the building free and clear.

In the process, you truly own a core asset - an investment about which you need worry very little if Russia were to march in and seize Lithuania.

Interested? Please call or email Angela Vannucci at 800-606-3232, and she'll add your name to a list of investors to contact when we've found just the right property. If you decide to email her, just write "Core Assets" in the Subject Line and include your name and phone number in the body.

Final Funny

A fellow and his wife in Muskogee, Oklahoma, where the people are all patriots, were blessed with the birth of twins, two identical girls. These twins were born on the 4th of July, and the father, being patriotic, said to his wife, "We will name them Liberty and Justice, after the Pledge of Allegiance."

His wife said, "Are you nuts? You can't have girls going through life with names like Liberty and Justice. We're going to name them regular girl's names like Mary or Jane."

Well, the argument went on for about a month, when a compromise was reached. They would each name one of the girls. The man chose Liberty and the wife picked Elizabeth. As the girls grew, they were so identical, they kept pulling tricks on people who couldn't tell them apart.

Finally, when they were about 18, a young man took interest in them. He would take one or the other out on a date, but he was never sure which one he was with. He decided he would marry one of them, or both if he could get away with it, but he wasn't sure which one he would marry - if he could only have one. He went to the girls' father and explained his quandary. "I love your daughters, and I want to marry one of them, but I can't tell them apart. I will therefore leave it up to you. Give me Liberty or give me Beth."

Find The Perfect Commercial Lender

I have been in the commercial mortgage business, at the same firm that I founded, for 37 years now. The one thing that I have learned is that institutional commercial lenders are very, very fickle. One moment they love self storage loans, and the next moment, usually after suffering a loss, they wouldn't touch a self storage loan with a 12-foot pole. You simply can't rely on them.

Therefore, 17 years ago, I created C-Loans.com on the principle that a borrower should only have to fill out one, very short application, which could then be shown to hundreds of different lenders. Our current count of participating commercial lenders is 750. Electronically we could then quickly ask, "Who is hungry to make a commercial loan today?" Since then we have closed over 1,000 different commercial loans. And C-Loans.com is free.

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4811 Chippendale Drive, Suite 101, Sacramento, CA 95841 telephone: (916) 338-3232 * Fax: (916) 338-2328
Real Estate Broker -- California Department of Real Estate -- License Number 01330173

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