The Blue Danube Restaurant & Bar

George says: "When a bank looks at a commercial loan, it will insist that the borrower’s net worth be at least as large as the loan amount. The Net-Worth-to-Loan-Size ratio must be at least 1.0. Suppose, for example, the loan size is $200,000 - but the borrower’s net worth is only $100,000. That loan would be a turndown. Now let’s take a look at this $400,000 commercial loan. Our borrower’s net worth is $4,715,000. This means our ratio is a whopping 11.7. Our borrower also has a 715 credit score. Sweet. Nice deal.

"The property is located within three minutes of Ohio State. My oldest son went to Ohio State, and he did confess to me that they do a little drinking. "

Blackburne & Sons is pleased to present this First Mortgage secured by a 2,535SF restaurant & bar on a 0.06-acre parcel, located in Columbus, Franklin County, Ohio.

The purpose of this $400,000 loan is to pay off the existing mortgage in the amount of approximately $280,000 and cover closing costs. The remaining funds will be used to purchase inventory for the restaurant in preparation for opening its doors on January 1, 2025.

Franklin County is a county in the U.S. state of Ohio. As of the 2020 census, the population was 1,323,807, making it the most populous county in Ohio. Most of its land area is taken up by its county seat, Columbus, the state capital and most populous city in Ohio. The county was established on April 30, 1803, less than two months after Ohio became a state, and was named after Benjamin Franklin. Originally, Franklin County extended north to Lake Erie before it was subdivided into smaller counties. Franklin County is the central county of the Columbus, Ohio Metropolitan Statistical Area. The county, particularly Columbus, has been a centerpiece for presidential and congressional politics, most notably the 2000 presidential election, the 2004 presidential election, and the 2006 midterm elections. Franklin County is home to one of the largest universities in the United States, Ohio State University, which has about 60,000 students on its main Columbus campus.

In 2022, the median property value in Franklin County, OH was $243,100, with a home ownership rate of 53.5%, and the median household income was $71,070. The economy of Franklin County, OH employs 695,000 people. The largest industries in Franklin County, OH are Health Care & Social Assistance (107,122 people), Retail Trade (80,236 people), and Educational Services (65,460 people), and the highest paying industries are Utilities ($95,569), Mining, Quarrying, & Oil & Gas Extraction ($86,842), and Management of Companies & Enterprises ($75,536). The largest universities in Franklin County, OH are Ohio State University-Main Campus (16,872 degrees awarded in 2022), Columbus State Community College (4,820 degrees), and Franklin University (1,832 degrees).

Columbus is the capital and most populous city of the U.S. state of Ohio. With a 2020 census population of 905,748, it is the 14th-most populous city in the U.S., the second-most populous city in the Midwest (after Chicago), and the third-most populous U.S. state capital (after Phoenix, Arizona and Austin, Texas). Columbus is the county seat of Franklin County; it also extends into Delaware and Fairfield counties. It is the core city of the Columbus metropolitan area, which encompasses ten counties in central Ohio. It had a population of 2.139 million in 2020, making it the largest metropolitan area entirely in Ohio and 32nd-largest metro area in the U.S.

Since 2010, Columbus has been growing in population and economy; from 2010 to 2017, the city added 164,000 jobs, which ranked second in the United States. Columbus and its metro area have experienced growth in the high-tech manufacturing sector, with Intel announcing plans to construct a $20 billion factory and Honda expanding its presence along with LG Energy Solutions with a $4.4 billion battery manufactory facility in Fayette County.

The confluence of the Scioto and Olentangy rivers is just northwest of Downtown Columbus. Several smaller tributaries course through the Columbus metropolitan area, including Alum Creek, Big Walnut Creek and Darby Creek. Columbus is considered to have relatively flat topography thanks to a large glacier that covered most of Ohio during the Wisconsin Ice Age. However, there are sizable differences in elevation through the area, with the high point of Franklin County being 1,132 ft. above sea level near New Albany, and the low point being 670 ft. where the Scioto River leaves the county near Lockbourne.

The city has a total area of 223.11 square miles, of which 217.17 square miles is land and 5.94 square miles is water. Columbus currently has the largest land area of any Ohio city; this is due to Jim Rhodes's tactic to annex suburbs while serving as mayor. As surrounding communities grew or were constructed, they came to require access to waterlines, which was under the sole control of the municipal water system. Rhodes told these communities that if they wanted water, they would have to submit to assimilation into Columbus.

SUBJECT PROPERTY DETAILS

The subject property is located in the University District Planning area, which lies approximately 2 miles directly north of downtown Columbus. The area’s 1,857-acres are generally bound by Glen Echo Ravine to the north, the CSX and Norfolk Southern railroad corridors to the east, 5th Avenue to the south, and the Olentangy River to the west.

The subject site is a .06-acres parcel that is rectangular in shape and slightly down sloping in topography. Because the building footprint covers almost all of the subject site, there is no on-site parking. However, the subject has an easement, along with the property across the street, that grants non-exclusive use of 14 parking spaces located nearby. This provides access to 14 parking spaces on a first-come first-service basis to patrons of the Blue Danube. The easement agreement also provides dumpster access, a right of first refusal, and a conditional option to purchase.

The site is improved with a 2,535SF one-story restaurant building with a 414SF basement. It is equipped with all utilities. The property includes a bar, booths and room for tables. The ground floor level includes a commercial kitchen, restrooms and various service alcoves. A 61 SF walk-in cooler is attached to the rear of the building. (This area is excluded from the reported ground floor area.) The basement includes an additional walk-in cooler, hot water tank, and furnace.

The building was originally constructed in 1930 with substantial renovations just completed in the amount roughly $200,000. The repairs include: new HVAC, new hot water tank, new roof, new water filtration system, recently installed restrooms and server alcoves, and a new electric circuit box. The property was also just given a fresh coat of exterior paint. The building is in generally good condition with these substantial repairs recently made. The building is 94 years old, but the effective age is approximately 10 years old, with 35 years of physical life remaining.

Interior improvements include a 20-seat bar, 11 booths, and room for tables and chairs providing a total seating capacity of 105 plus room for 15 employees and kitchen staff. There is a newly installed men’s restroom with one stall and one urinal, and a new single stall unisex, handicap accessible restroom. There are two server alcoves. At the rear of the building is a full-service commercial kitchen. A walk-in cooler accessible from the kitchen is attached to the rear of the building.

The borrower is a single man who holds title to the property through a limited liability company, of which he is the sole member and owner. He will be providing a personal guarantee on our loan. This entity is a real estate holding entity and does not report any income.

Our guarantor works as an Dentist and owns his own practice. The corporation which runs the dental practice will be providing a corporate guarantee on our loan and reported net business income of $33,620 in 2023 and $114,853 in 2022. He will continue running his Dentist practice when the restaurant opens.

Our guarantor self-reported a net worth of $4,715,122 and has a mid-credit score of 714. He shows a personal adjusted gross income of $165,704 in 2023 and $225,831 in 2022.

He purchased the subject property in 2021 for $300,000 and has put roughly $200,000 into the property improvements thus far. With our loan, the borrower will payoff the existing mortgage used to purchase the property, cover closing costs and continue purchasing inventory for the subject in anticipation for its January 1, 2025 grand opening. The borrower has hired a restaurant manager with 35 years of experience to run the day to day operations, while he continues his work as a dentist

We hired an MAI appraiser who valued this property with an (AS-IS) value of $670,000 (AS-IS).

We hired a local broker who performed a drive-by opinion of value (BPO) and valued this property at $472,000.

At an 11.0% yield to investors and a 59.7% LTV (AS-IS) 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.

ACCREDITATION STANDARDS

Please note this offering is a SEC Regulation D filing and will be done through a Private Placement Memorandum. In order to invest, you must be an accredited investor. Generally speaking, an accredited investor is an individual:

(a) whose individual income exceeds $200,000 in each of the past two years, with reasonable expectation of reaching the same going forward OR
(b) whose joint income with spouse exceeds $300,000 in each of the past two years OR
(c) your NET WORTH exceeds $1,000,000 (exclusive of your primary residence) OR

If you plan on investing through an entity, the entity can qualify if ANY of the following are met:

(a) all equity owners must be accredited OR
(b) any trust with more than $5,000,000 in assets OR
(c) ERISA with either $5,000,000 in assets OR a bank, insurance company, or registered investment advisor as it's trustee OR
(d) any self directed ERISA with an accredited investor(s) making the business decisions OR
(e) an IRA owned by an accredited investor

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.
Return to C-Loans Home Page | Return to Blackburne & Sons Home Page
Copyright © 2022 Blackburne & Sons Realty Capital Corporation. All rights reserved. (800) 606-3232