Clarkston Commercial Building

Angela says, “Are you an investor who prefers a deal supported by strong credit and income? If so, this may be the deal for you to consider, given that the personal guarantors have both, i.e. each have credit in the 700's and four of the five guarantors report taxable income over $1MM. This loan is also a rate and term refinance, with no cash-out. In fact, the borrower will be required to come to closing with over $40,000 of cash. While some banks and other lenders shy away from businesses/tenants who operate adult novelty stores and/or smoke shops (as the tenant of this property operates), Blackburne & Sons has had positive experiences with these type of tenants/borrowers in terms of repayment over the years (no guarantees implied).”

Blackburne & Sons is pleased to present this new first security deed, secured by a 4,028SF retail building on a 0.543 acre parcel, located in Clarkston, Georgia.

The purpose of this first security deed is to refinance the existing loan that matured in December of 2019. Our borrowers will be required to come to closing with an estimated $46,577 cash, to bridge the gap between this new loan and the payoff of the existing loan.

Dekalb County is located in Central Northern Georgia. The county is crossed by the South River and numerous creeks, including Nancy Creek, Snapfinger Creek and two forks of Peachtree Creek, which eventually flow to the Gulf of Mexico. Stone Mountain lies near the eastern border of the county. Soapstone Ridge, parallel to the southern border, was heavily quarried between 1400 and 100 B.C. and objects made from soapstone have been found as far away as the Great Lakes. As of 2017, the population in DeKalb County was 753,253 people.

The City of Clarkston has a total area of 1.1 square miles and often referred to as the most diverse square miles in America. Located on the Eastern Continental Divide, the economy of Clarkston employs 5,620 people. The largest industries in Clarkston are manufacturing, retail trade and accommodation & food services, with the highest paying industries being finance, insurance, real estate, rental and leasing and information.

Located at the southeast corner of Montreal Road and Sams Road, the subject property's surrounding area consists primarily of residential and commercial uses. Located directly north of the subject is Northlake Veterinary Surgery, directly west is Parc 1000 apartment complex, and directly south is a U-Haul storage center and a retail strip center.

The subject consists of a retail building containing approximately 4,028 square fee, with approximately 25 marked parking spaces and one curb cut along the southwest side of Montreal Road. The subject site has good road visibility at the southeast corner of Montreal Road and Sam’s Road. Currently, the property is 100% leased to Innovative Visuals, LLC, for the operation of Inserection Adult Fantasy Store and Smoke Shop. The lease commenced on August 2015 for a one-year term, with four 1-year options and one, 5-year option to renew. The lease is in it's fourth option period with a rental rate of $5,150 per month. According to the owner, the tenant will exercise the final option to renew for an additional five years, starting on August 1, 2020 and ending July 31, 2025.

The purpose of this refinance is to pay off a matured note in the amount of $355,000. Borrowers will be responsible for bringing the balance at closing, estimated to be about $46,577, including closing costs.

Title to this property is held through a Georgia Corporation. This loan will be personally guaranteed by two husband and wife couples, and an unmarried individual (five individuals in total). The Corporation is a real estate holding entity and generated taxable income of ($144,505) in 2018 and ($32,786) in 2017, after adding back depreciation. The corporation reported a net worth of $1,530,000.

The first married couple includes the borrowing entity's president and his wife. They reported an adjusted gross income of $1,021,376 in 2018 and $825,682 in 2017, and have mid-credit scores of 728 and 709, respectively, with a reported net worth of $1,982,913.

The second married couple are business owners, with a reported adjusted gross income of $1,757,170 in 2018 and $2,314,163 in 2017. These guarantors have mid-credit scores of 767 and 760, respectively. and a reported net worth of $10,947,601.

The fifth borrower is an unmarried man that is in the real estate industry. He reported an adjusted gross income of ($494,849) in 2018 and $287,729 in 2017. This guarantor has a mid-credit score of 715 and a reported net worth of $11,359,712.

A local, MAI appraiser was engaged who provided two values for this property; one value came in at $510,000 AS-IS based on leased-fee, and the other came in at $460,000 AS-IS, based on fee simple valuation. A local commercial broker was also engaged to complete a drive-by opinion of value of the subject property, which provided a value of $401,500.

At an 8.0% yield to the investors, a 65.0% LTV (Leased Fee) and a 72.0% LTV (Fee Simple), this appears to be a reasonable investment. Investing in any first security deed involves substantial risk, so be sure to read the Risk Factors section of the Offering Circular carefully before investing. A large and prolonged decline in real estate values is possible. 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 Department 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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