West Medical Park Office Building

George says, “There is a reason why Blackburne & Sons is getting a chance to finance such a gorgeous property. The borrower is a “defrocked" physician who lost his license when he prescribed pain killers to his addict girlfriend. See below for more detail. He is getting his life back together and has opened a gym. I think this is a reasonable bet, and the property is very desirable. We almost never get to finance such nice properties anymore."

Blackburne & Sons is pleased to present this new first trust deed secured by a 3,228SF medical office building on a 1.467 acre parcel, located in Lexington, Davidson County, North Carolina.

Davidson County is located in North Carolina. As of the 2010 census, the population was 162,878. Its county seat is Lexington, but the largest city within is Thomasville. William Lee Davidson, a Continental Army General, was a brave leader who sought to defend Nathanael Greene’s retreat from Lord Cornwallis’s surge across North Carolina. In 1781, Davidson and his troops stood against Cornwallis at Cowan’s Ford, but the British eventually broke the defensive lines. Davidson died during the assault and in honor of this gallantry, Davidson County was named after the Patriot. Also, the county’s seat, Lexington, was named in honor of the place where in 1775 “the shot heard round the world” was fired-Lexington, Massachusetts.

Located inside the city limits of Lexington, the subject property resides in a part of the Piedmont Triad Region. The neighborhood is located on the southwest part of Lexington that consists of mixed land use, such as commercial, office, industrial, residential, and institutional, all within a few blocks from the subject. This property is located at the southwest edge of the neighborhood off Hospital Drive and Medical Park Drive. Uses near the subject property include a new Sheetz Convenient Store, High Rock Internal Medicine, Davidson Eye Associates, PA, multiple Wake Forest Baptist Health buildings, including Dialysis Services, Outpatient Center, Imaging Services, Pharmacy, Cancer Center, Family Medicine, and much more.

The site has been improved with a one-story, single occupant medical office building, containing a total of 3,228SF of gross building area. The subject property is 100% tenant occupied by Restoration Internal Medicine, which entered into the current lease agreement in December of 2016, and expires in January of 2027. The tenant has the option to renew for five additional successive, one-year terms at $10,000 per month. This tenant is currently paying $6,500 per month, with $500 per month increase per year.

Our borrower is a single man who will hold title through his corporation and will provide a personal guaranty. The 2018 corporate tax return shows a loss of $61,895 and $6,950 for 2017, after adding back depreciation. Personal tax return reports income of $766,714, and $408,733 in 2017 and 2016, respectively. He has a mid-credit score of 635, and a net worth (inclusive of personal and corporate assets/liabilities) of $2,948,107. His corporation has many functions; cleaning company, Anytime Fitness Gym, medical consultant, and building ownership.

Our borrower earned his medical degree in 1986 from the University of North Carolina, and had his own private practice from 1989-2016. He also worked at Lexington Memorial Hospital, Lexington Health Care Center, Brian Center, Regency Care, The Shannon Gray, and others. From 2009-2016, he was a speaker for the Bureau of Diabetes in Long Term Care. However, in 2016, he lost his medical license due to distributing controlled substances. The short story is that he had a fiancé that was an addict. He tried to get her help, but ended up writing her a few prescriptions, where she then fraudulently wrote herself 19 other prescriptions and was caught. His probation ends in 2020, where he does hope to get his license back. Letter of explanation is included in the full due diligence package.

The borrower recently opened an Anytime Fitness Gym (franchise). Therefore, the purpose of our loan will be used for the remainder of the buildout of the gym, pay contractors, open a second gym location, payoff an equipment lease, credit cards, and IRS taxes. The IRS tax liability is from a result of capital gain’s tax by personally selling the subject property to his corporation, i.e. borrowing entity.

We engaged a local MAI appraiser who valued this property AS-IS at $610,000. We also engaged a local broker who drove by the property, took photos and performed an opinion of value. The broker valued this property between $630,000 and $650,000.

At a 8.0% yield and 66.0% LTV(Appraised Value) this appears to be a very 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 property almost always needs to be renovated before it can be leased or sold, so be sure to maintain some liquidity.

You should spread your Trust Deed 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 Trust Deeds, 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 Trust Deeds, 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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