Bordeaux Village Condominiums II

Angela says,"Along with a 36.8% LTV and a six-month payment reserve, this offering is also supported by the borrower’s seasoned payment history. What does this mean here? This borrower has been a client of Blackburne & Sons since 2011 and has a consistent payment record with our office. If you have invested with us over the last few years you may even already have invested in one of the loans serviced by our firm, and enjoyed a steady stream from his timely payments over the years. While past performance is no guarantee of future performance (probably have heard that before), a borrower who has been a consistent pay for almost 10 years is a plus when considering if this offering would be a good addition to your portfolio."

Blackburne & Sons is pleased to present this first mortgage, secured by 24 residential condos located in Tampa, Florida.

The proceeds of this $700,000 loan will pay in full a recently matured Note in the amount of $480,000 currently serviced by Blackburne & Sons and to provide cash-out to purchase additional investment properties. To assist with debt-service during COVID-19, this loan does includes a six (6) month payment reserve.

The City of Tampa is the county seat of Hillsborough County and is located on the West Coast of Tampa Bay, near the Gulf of Mexico. Hillsborough County is the most populous county in the area and home to the largest city in Florida, the City of Tampa. Historically, the economy has been tourist and retirement oriented in the coastal counties, and manufacturing and commercially oriented. To some extent, this is still true today; however, Pinellas County has begun to attract a larger share of new businesses, particularly in the high tech industries.

Even with the recent commercial growth of Pinellas County, Tampa remains the major economic hub of the area. The current population of the MSA is estimated at 3,080,077 (2018).

The subject property is located in the University Area, which is considered the surrounding tare of the main campus for the University of South Florida (USF). In addition to the USF Campus, the property is in close proximity to numerous hospitals, including the James A. Haley Veterans Hospital, Moffit Cancer Center, Shriner’s Hospital for Children and Florida Hospital Tampa Bay Division. The Tampa central business district is located within a 20 minute drive of the subject.

The neighborhood is approximately 95% developed and the improved properties are generally adequately maintained. The improvements in the subject neighborhood contain a mixture of commercial, industrial and residential development.

This loan will be secured by 24 residential condo units; all are two bedroom, two bathroom units that contain 879SF of living area. Built in 1984, all units share the same floor plan with each unit having either a patio or balcony, and an outside storage closet. Our borrower purchased all 24 units in October 2014 for $715,000 through a short sale, and put $277,000 cash down at the time of purchase. Since 2014, approximately $150,000 of upgrades and repairs have been completed, with only three units still needing minor updates.

Per the appraiser, the improvements are of average quality construction and have been maintained in average condition for their age and location. Updates to the units over the past 3 years include new flooring, interior paint, fixtures, mirrors, appliances and cabinetry.

The average rent at the time of purchase were $650 per month, but after renovations, the borrower was able to increase the average monthly rent to between $900 and $1,050. The leased condos are all on month-to-month leases, and borrower states he does not have any written leases in his files. A local management company has been handling the leasing and management of these units since purchase, but the borrower is currently interviewing a new management company to replace the existing. Presently the units are generating a gross monthly income of $15,663, for the 16 of the 24 units; the other 8 units are currently vacant.

The Bordeaux Village community, where these 24-condos are located, includes six (6), two-story buildings and two (2), one-story buildings for a total of 75 residential condominium units and a clubhouse area, which includes a fenced pool and small laundry area. All of the 24-residential condos secured by this loan are located throughout the two-story buildings. There is a condo association that manages the common area. The monthly HOA fees are reported to be $295 per month.

This borrower is a repeat client of Blackburne & Sons, and has been doing business with our firm since 2011. To date, this borrower has had a total of eight (8) loans originated through our office, for a total of $2,390,328. All but one loan remains with Blackburne & Sons. This borrower has never had any late or missed payments on the subject for the entire three year term of this Note.

The principal of the borrowing entity is a Canadian resident. In addition to being an avid real estate investor, he is a Dental Surgeon and owns a dental hygiene/general practice in Canada. He owns several real estate properties throughout the United States, reports a combined net worth (personal / business / real estate) of $13,963,940, and has a credit score of 613. Personal tax return reports $179,713 in total income for 2018, and $175,128 in 2017. The 2019 tax returns have not yet been filed and copies of his dental practice tax returns were not made available to our office.

The subject property has reported losses for the past two years. The borrower indicates this is due to renovating the subject units and low vacancy during that time. The borrower files the subject property income on a U.S. LLC tax return under a Schedule E. The 2018 return is showing a loss of $153,103 and a loss of $126,532 in 2017, after adding back depreciation for each.

A local, MAI appraiser was engaged who valued the subject property at $1,900,000 AS-IS. We also engaged a local commercial broker who drove by the subject property and performed an AS-IS opinion of value of $1,513,157.

At an 8.0% yield to the investors and a 36.8% LTV (based on appraised value), this appears to be a reasonable investment. Investing in any first mortgages 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.
During the S&L Crisis, commercial real estate fell by 45%. Within three years, values reached new highs. During the Dot-Com Meltdown, commercial real estate fell by 45%. Within three years, values reached new highs. During the Great Recession, commercial real estate fell by 45%. Within three years, values reached new highs. Some time in the next decade, we will have another opportunity to snatch up prime commercial real estate at a huge discount. You will be terrified, but when Blackburne and Sons invites you to join a syndicate to buy a nice commercial property at a 35% discount off its prior high, just remember that the best time to invest is when blood is running in the streets. Why not when real estate has fallen by 45%? You’ll never catch the very bottom because historically the bounces off the bottom happen much too fast. Bounce-soar. You will be terrified, but just remember that the best time to invest is when blood is running in the streets.

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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