Mankas Corner Mixed Use II

George says, " Wow. Keeping in mind that all first mortgage investments involve substantial risk, this is a VERY attractive first mortgage investment. The property is located in the wine country of California. Perhaps not quite as wonderful as Napa and Sonoma Counties, Solano County still produces some very nice wines. The property itself is prime, pristine, and very desirable. Okay, its drop-dead gorgeous. The property generates a surprising amount of net income. Our borrower has a very large net worth. He pays taxes on a ton of income. Lastly, he is a proven borrower with us. Is this the best deal we have ever offered? Folks, it is a bona fide contender."

Blackburne & Sons is pleased to present this first trust deed secured by a renovated historic landmark property. It is a good quality, 9,750 SF multi-building, mixed-use complex on 0.85 acre corner lot located in Fairfield, California.

The City of Fairfield is in central Solano County, along Interstate 80 between the City of Vallejo to the southwest and the City of Vacaville to the northeast. It is approximately 45 miles from San Francisco to the southwest and 40 miles from Sacramento to the northeast. Travis Air Force base, just three miles east of Fairfield’s central business district, plays a large part in the local economy. The base, which employs more than 14,000 people, facilitates more cargo and passenger traffic through its airport than any other military air terminal in the United States.

Solano County is located in the North Bay region of the San Francisco Bay Area. It borders Contra Costa County to the south and is efficiently linked to the economic centers of San Francisco and Oakland along Interstate 80 and Concord, Walnut Creek and Pleasanton/San Ramon along Interstate 680. The population of Solano County is approximately 413,344 as of the 2010 census. Its rate of growth has been the highest within the past five years in comparison to other Bay Area counties. Future expansion of the county will likely include job growth within industrial and business parks developed in the county.

The subject property is a single parcel and consists of a mixed-use complex with a high-end restaurant, wine tasting building, wine barrel storage room, two residential Air BnB apartment cottages, one residential apartment and outdoor entertainment and wedding venue. The grounds are improved with extensive landscaping, patios, and decking. The facility is located at the junction of Mankas Corner and Clayton Roads, about 3.25 miles northwest of the junction of Abernathy Road and Interstate 80, in the northeastern portion of the Suisun Valley wine appellation. The character of the area is rural, with an emphasis on vineyards and wineries.

According to the borrower, this property was originally built in 1853. This property was a small overnight stage coach stop and pony express station with a mercantile and livery stable and small saloon. When the borrower purchased this property in 2006, he invested nearly $2,400,000 converting the backyard into a wedding and concert facility with lush gardens. He also remodeled the apartments to high end vacation type rentals and added a stone barrel storage building for wine storage and ambiance. The station master’s home was converted into a tasting room. The stage coach overnight stop and saloon were converted into an upscale steakhouse.

Approximately 50% of the property’s 9,750SF of building area is leased as a steakhouse restaurant (5,196SF). The two apartments are rented through Air BnB, for a total of 1,207SF and the owner’s businesses occupy the remaining space, which includes the 1,565SF wine tasting room, the wedding/event center and the 782SF barrel storage room. The total net annual rental income for the subject property was reported as $272,040 for 2017, and was $288,704 in 2018; all leases are NNN.

Our borrower is a married man, however his wife will not be personally guaranteeing this loan. He is an engineer by profession but is an entrepreneur who owns several businesses and real estate, including a winery called “The Blue Victorian”. All income from his businesses and real estate flows through his personal tax returns. In 2016, he reported $899,031 in taxable income and $1,972,516 for 2017. His 2018 tax returns are not yet filed. The borrower holds title to the subject property through an LLC and a Family Trust, but tax returns and financials are not available for these entities. In 2016, the borrower hired an appraiser to value all of his businesses and real estate; that combined value was $20,200,000, not including the construction business. He has a mid-credit score of 701 and a stated net worth of $41,075,000.

As a repeat borrower of Blackburne & Sons dating back to 2012, this will be the third loan for this borrower. The previous two loans have been paid in full and paid consistently, with only one late payment due to an accounting oversight. This borrower has always been a delight to work with and is very involved with the loan process.

The purpose of this loan is to pull cash-out to replenish liquidity for future business investments, as well for vineyard/land development and operating expenses. He also plans to invest in his construction business.

We engaged a local MAI appraiser who gave us an “AS-IS” value of $4,000,000. We also engaged a local broker who performed an opinion of value and valued this property at $2,350,000 (market value) and $4,800,000 (income approach).

This local realtor who completed the opinion of value observed some favorable characteristics which included attractive rustic-style architecture enhanced by artisan iron work throughout the property, pristine landscaping and custom hardscape. He also noted this property is excellently maintained and believes this location will never be at a loss for attracting similar users, given all the necessary permits and impact fees have been paid for this use. In addition to the classic rustic appeal of the architecture which lends itself to the ambiance of the restaurant and winery venues, outdoor dining areas provide additional seating and entertainment venues, which are highly desirable commodities for these establishments.

At a 50.0% LTV and a 9.0% yield, this appears to be a reasonable investment. Investing in any First Trust Deed involves substantial risk. A large and prolonged decline in real estate values is possible. Be sure to read the Risk Factors section of the Offering Circular carefully before investing. Foreclosed commercial properties almost always need to be renovated before they can be leased or sold, so be sure to maintain some liquidity.

You should spread your mortgage investment portfolio out among lots of different deals. If you have $300,000 to invest, you should invest $10,000 to $20,000 in 15 to 20 different fractionalized first trust deeds. For example, if the deal is a $300,000 first trust deed on an office building in Boise, with a $15,000 investment you would own 5% of the loan. By spreading your money out into a bunch of different deals, you are achieving the diversity of a fund without the failed fund sponsor problem. If you are extremely wealthy, you could double (or even triple) my suggested investment amounts, but be careful about pouring too much money into a single deal. We once had a whole building fall into an old coal mine. Ouch.
Be wise and resist investing in any first trust deed yielding more than 9%. I would personally never invest in a first trust deed with a double-digit yield. The payments slowly grind the borrowers into the dust.
Blackburne’s Law theorizes that a portfolio of 8% and 9% first trust deeds will outperform a portfolio of 11% and 12% first trust deeds over a seven-year term. Only our wisest (and eventually the happiest) investors listen to me.
You can also buy some of our smaller deals in their entirety, but I only recommend this if you are richer than Crassus.
It is very easy to lose money in hard money first mortgages, so fight-fight-fight against the temptation to invest in high-yield deals. As Nancy Reagan used to say, “Just say no.” But if you choose 7% to 9% first mortgages, I predict that you will be very, very pleased.

Blackburne & Sons Realty Capital Corporation--For more information, contact Angela Vannucci
4811 Chippendale Drive, Suite 101, Sacramento, CA 95841
Telephone: (916) 338-3232 * Fax: (916) 338-2328
Real Estate Broker -- California Bureau of Real Estate -- License Number 829677 -- NMLS Number 103430
Publicly advertised to California residents only under California Department of Business Oversight business plan permit.
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