US Highway 192 Land

Angela says, “For those investors who are fond of land as collateral for your first trust deed/mortgage investments, here is a 40% LTV and 10% yield offering to consider. This first mortgage will be secured by 2.60 acres of undeveloped land in the area of Disney World, in Clermont, Florida. Given that the land is not generating any income, this loan will include a personal and corporate guaranty, in which the personal guarantors have 700+ credit and reporting an average of $501,321 taxable income over the last two years. Every trust deed/mortgage involves substantial risk, so always be sure to review all information and documents provided; however, this 40% LTV land offering should be considered if you are comfortable with those risks.”

Blackburne & Sons is pleased to present this first mortgage secured by 2.60 acres of undeveloped land located in Clermont, Florida.

The property is currently owned free and clear, so this is an all cash-out deal where the cash-out will be used to purchase additional franchises for the borrower’s vacation rental business, and closing costs for this loan. This loan will not only have a personal guarantee but a corporate guarantee. More on this below.

CITY & COUNTY INFORMATION

The City of Clermont is located in Polk County, Florida, which is about 22 miles west of Orlando and 22 miles southeast of Leesburg; population in 2010 was reported to be 28,742. The city is residential in character and its economy is centered in retail trade, lodging, and tourism-oriented restaurants and bars. It is located in the Orlando–Kissimmee–Sanford Metropolitan Statistical Area. More about Clermont found here: Clermont, Florida.

Polk County is positioned at the center of the state, along the Interstate 4 corridor, 25 miles east of Tampa and 35 miles west of Orlando. The Polk County area is considered to be well positioned between two major metropolitan areas including Tampa and Orlando. Overall area is reported to have excellent accessibility by both interstate systems and major state highways. The general area is supported by large corporate developments which take advantage of the location and employment base provided by the surrounding communities. The long-term outlook for Polk County is for continued growth as development expands eastward from the Tampa Bay area and westward from the Orlando metropolitan market.

SUBJECT PROPERTY DETAILS

The subject property consists of 2.60 acres of undeveloped land, located approximately 5 miles from Walt Disney World. The borrower purchased approximately 5 acres of land in 2001 for $1,600,000, then sold half of the acreage to ALDI Supermarkets for $2,225,000 in April 2019. Later that fall, ALDI constructed their 23,000SF grocery store which is open and operating presently.

This land is located in the northeastern corner of Polk County, just west of the city limits of Kissimmee. On the west side of Town Center Boulevard, south of U.S. Highway 192, the subject’s neighborhood is considered as the West Irlo Bronson Memorial Highway (U.S. Highway 192) corridor from U.S. Highway 27 to the Osceola/Polk County Line.

Many of the neighboring commercial properties cater to tourism, and have a dense concentration of short-term residential development, including time-share and condominium developments, with supporting commercial development along the highways including hotels, motels, and retail stores. Examples of these include Publix Supermarket, Summer Bay Orlando Resort, Quality Inn Clermont, ALDI Supermarket, Wal-Mart Supercenter, Lowe’s Home Improvement, Bank of America, McDonald’s, Landings at Four Corners Resort, and Holiday Inn Club Vacations Orlando. Vacation rental properties extend to the east of the subject neighborhood. Examples of these developments include Bahama Bay by Wyndham Vacation Rentals, Paradise Palms Resort Vacation Rentals, Windsor at Westside Vacation Homes, and Caribe Cove Resort, which are all located just east of the subject on Westside Boulevard. Additionally, just north and east of the subject are the Westgate Vacation Villas, Formosa Gardens Villas Limited, Disney World Rental Homes, Emerald Island Resort Villas, and the Villas of Island Club Condos.

The overall subject neighborhood is about 50% built-up, with a good portion of the undeveloped commercial land located at the intersection of U.S. Highway 192 and U.S. Highway 27. At this time, the borrower does not have plans to develop the subject land.

BORROWER SUMMARY

The borrower for this loan is a Florida Corporation (“Borrowing Entity”), which is a real estate holding company that only holds title to this parcel of land. Repayment of this loan will be guaranteed by the principals of the Borrowing Entity, which consist of a husband and wife (“Personal Guarantors”). A corporate guaranty will also be provided by another Florida Corporation (“Corporate Guarantor”) that is also owned by the Personal Guarantors.

Borrowing Entity reported a taxable loss of ($5,287) in 2019 and income of $3,015 in 2018.

Personal Guarantors consist of a husband and wife, where the husband is a real estate professional and in the franchise business, and the wife is a homemaker. The nature of their business is unique, so please be sure to read the letter of explanation on his business in the due diligence (provided upon request). Guarantors report a combined net worth of $12,639,554, which consists of business and real estate holdings. Mid-credit scores are 732 and 755, respectively. Personal tax returns report adjusted gross income of $417,188 for 2019, and $585,454 for 2018.

The Corporate Guarantor reported $89,539 in taxable income for 2019, and $1,958 in net income for 2018. Value of this business is included in the Personal Guarantors net worth (see above).

VALUATION SUMMARY

A local MAI appraiser was engaged who valued this property at $890,000. A local broker was also engaged who performed an opinion of value, providing a value of $700,000. The borrower also hired a local realtor to perform an opinion of value, which provided a value of $910,000.

At a 10.0% yield to the investors and a 40.0% LTV (Appraised Value), this appears to be a reasonable investment. Investing in any first mortgage 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. 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.
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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