Colfax Highway Gas Station

Blackburne & Sons is pleased to present this First Trust Deed secured by a 1,000SF gas station & auto repair shop on a 0.41-acre lot, located in Grass Valley, Nevada County, California.

The proceeds of this loan will be used to pay off a matured note of $264,000 and to use $66,000 for property improvements and upgrades to the gas station and convenience store, and closing costs.

Nevada County is located in the state of California, in the Sierra Nevada. As of the 2020 census, its population was 102,241. The county seat is Nevada City. The county comprises the Truckee-Grass Valley micropolitan statistical area, which is also included in the Sacramento-Roseville combined statistical area, part of the Mother Lode Country. Nevada County is home to the Empire Mine State Historic Park, which is the site of one of the oldest, deepest, and richest gold mines in California. The park is in Grass Valley at 10791 East Empire Street. In operation for more than 100 years, the mine extracted 5.8 million ounces of gold before it closed in 1956.

According to the U.S. Census Bureau, the county has a total area of 974 square miles, of 16 square miles (1.6%) are covered by water. The county is drained by Middle and South Yuba Rivers. The western part of the county is defined by the course of several rivers and the irregular boundaries of adjoining counties. When the county was created, the founders wanted to include access to the transcontinental railroad, so a rectangular section was added that includes the railroad town of Truckee.

Grass Valley is a city in Nevada County, California, United States. As of the 2010 United States Census, its population was 12,860. Grass Valley, which was originally known as Boston Ravine and later named Centerville, dates from the California Gold Rush, as does nearby Nevada City. Gold was discovered at Gold Hill in October 1850 and population grew around the mine. Grass Valley has the Empire Mine and North Star Mine, two of California's richest mines. The Grass Valley K-Mart store was one of the nation's few remaining still open and the last one in California. It closed in 2021.

The median property value in Grass Valley is $343,300 with a home ownership rate of 38.5%, and the median household income was $42,477. The economy of Grass Valley, CA employs 5.62k people. The largest industries in Grass Valley, CA are Health Care & Social Assistance (1,376 people), Retail Trade (846 people), and Other Services, Except Public Administration (479 people), and the highest paying industries are Public Administration ($58,999), Utilities ($56,898), and Educational Services ($51,579).

The subject property consists of a rectangular parcel having a gross area of approximately 0.41- acres. It is a corner lot that is generally level in topography and has average frontage. The subject is commonly known as Shamrock Gas Station, Convenience Store and Vehicle Service Station. The property was originally constructed in 1966 and renovated in 1998.

The site is improved with a 112SF convenience store and an 888SF vehicle service station, resulting in a total building area of 1,000 square feet. The fueling area includes 1 island, each with twin dispensers, which are covered by a 324SF canopy. The convenience store is a single-story building with structural steel with masonry and concrete encasement framing and a concrete slab foundation.

The exterior walls are steel and the roof is flat with a sealed membrane surface. The subject’s steel constructed vehicle service station was constructed in 1966. It is also a single-story building with a steel structural frame with masonry and concrete encasement. It is equipped with two drive-through bays for vehicles, a small customer waiting area, and office area with security cameras.

Both improvements are 100% leased. The service station is leased for $3,000 per month until 2024, when the rent will then become $3,500 per month. The convenience store is leased for $3,800 per month, for a total of $6,800 per month in rental income currently, converting to $7,300 per month 05/01/2024. It should also be noted that at the time of origination, there were open violations for small construction projects that were done to the property without the proper permits. Since that time, the borrower has remedied all of these small violations.

It is important to note, we ordered and the guarantor paid for a Phase I ($2,070) and a Phase II ($6,975) on the subject property for total cost of $9,045. The Phase II came back with “No further action recommended, and if the property is to be redeveloped in the future, additional investigation may be warranted”. Both reports will be provided in the due diligence package.

Our borrower is a married man who holds title to the property through a Limited Liability Company. The wife will not be on our loan or on title, and lives in another country.

The borrower originally purchased the property in 2021 for $375,000 under Black Lion LLC, a business in which he owned 50/50 with a partner. In June 2022, our guarantor took 100% ownership under the new LLC. His business partner with Black Lion did not put up any funds when the property was purchased in 2021, or during the time the station was owned by Black Lion. Rather than paying our guarantor, the partner opted to give up his 50% share of the business, and transferred ownership to 174 LLC, the business solely owned by our guarantor. Since owning the property, our guarantor estimates he has put in roughly $150k of overall upgrades.

The original entity (owned with the partner) reported net income of $163,541 in 2021. Our borrowing entity reported net income of $185,714 in 2022. Up until July 2022, the convenience store and gas station was owner occupied and operated. In July 2022, a tenant came in and started running the gas station and convenience store. The guarantor reportedly gets 30% of the profits, but there is nothing in writing as to this. Just a verbal handshake.

On the guarantor’s personal tax returns, he reported net income of $90,686 in 2021 and $97,040 in 2022. He has a mid-credit score of 524 and a self-reported net worth of $893,964. The guarantor’s low credit score is due to identity theft that occurred a few years back, and co-signing on a vehicle that was stolen. A letter of explanation will be in the due diligence package.

We engaged a local MAI appraiser who valued this property at $725,000. We also engaged a local broker who performed an opinion of value and they gave a value of $937,000.

At an 10.0% yield to investors and a 50.5% LTV (Appraised Value) this appears to be a reasonable investment. Investing in any first trust 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.
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 Tom Blackburne
555 University Ave., Suite 150, Sacramento, CA 95825
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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