Center Street Mixed-Use

Blackburne & Sons is pleased to present this purchase money First Mortgage secured by a 4,228SF mixed-use property consisting of 1 commercial unit, 1 apartment unit and 11 single occupancy rooms on a 0.18-acre parcel, located in Manchester, Hartford County, Connecticut.

The borrower is purchasing the subject property for $240,000 and will be putting approximately $101,000 cash down, including closing costs.

COUNTY INFORMATION

Hartford County is located in north-central Connecticut and is 735 square miles in size. Hartford County contains the city of Hartford, which is the state capital of Connecticut and the county's most populous city. Hartford County is included in the Hartford-East Hartford-Middletown metropolitan statistical area. Its population density is 1,211 persons per square mile. The estimated 2021 population of 890,056 represents little to no change from the 2010 census of 894,014. Being that it is the capital, the level population trend in Hartford County is similar to that of the State of Connecticut. In Connecticut, there is no county-level executive or legislative government; the counties determine probate, civil and criminal court boundaries, but little else. Each city or town is responsible for local services such as schools, snow removal, sewers, fire department and police departments. In Connecticut, cities and towns may agree to jointly provide services or establish a regional school system.

The county is home to the Mark Twain House & Museum. The 1874 mansion contains thousands of artifacts, including the desk at which Twain wrote his best-known works. The Harriet Beecher Stowe Center includes the author’s Victorian house and many period furnishings, plus a garden. The broad collection of the Wadsworth Atheneum Museum of Art includes Renaissance and impressionist works.

CITY INFORMATION

The subject resides in the Town of Manchester. Manchester is a town in Hartford County, Connecticut. As of the 2010 census, the town had a total population of 58,241. The urban center of the town is the Manchester census-designated place, with a population of 30,577 at the 2010 census. The town is named after Manchester, in England.Adjacent communities include South Windsor to the north, Bolton to the east, Glastonbury to the south, and East Hartford to the west. The median household income in Manchester is $62,622 and the median property value is 165,900, with a homeownership rate of 53.5%. The economy of Manchester, CT employs 15.9k people. The largest industries in Manchester, CT are Health Care & Social Assistance (2,707 people), Retail Trade (2,035 people), and Educational Services (1,516 people), and the highest paying industries are Utilities ($84,107), Public Administration ($73,048), and Manufacturing ($62,069).

The Currier Museum of Art features works by major American and European artists. It also operates the Frank Lloyd Wright–designed Zimmerman House. In an old fabric mill, the Millyard Museum traces how the nearby Amoskeag Falls shaped the city and its textile industry. Trails in sprawling Derryfield Park lead to the 19th-century Weston Observatory.

SUBJECT PROPERTY DETAILS

The subject, originally constructed in 1920, is an existing three-story mixed-use residential/commercial property, containing one apartment unit, 12 single room occupancy (SRO) units and 1,074SF of retail space. The SRO units share 3 full bathrooms and 1 kitchen and the apartment unit has one kitchen and one bathroom. The apartments are 69% leased and the retail space is 100% leased as of the effective date of appraisal. The property also contains detached three-bay garage that is leased. The improvements are contained on a single, corner parcel with a reported site area of 0.18 acre. The building is trapezoidal in shape and generally level in topography. It is equipped with a stone foundation, wooden structural framing and exterior vinyl siding.

Most of the current tenants are on weekly rentals and some are on monthly rentals. Weekly rental rates average from $60-$130 per week, and monthly rental rates range from $450-$563 per month. There are currently 5 vacant units. The garage bays are rented for $75 and $100 per month. There is one vacant garage unit. The bottom retail unit is leased to a barber shop for $450 per month.

The seller provided P&L’s for the subject property that report $17,280 in net income for 2019, $16,195 in net income for 2020, and a year-to-date profit & loss statement for 2021 (through August) that shows net income of $9,995.

BORROWER SUMMARY

Our borrowers are husband and wife and will hold title to the property personally. They report a net worth of $657,580 and have mid credit scores of 730 and 704. In 2020, they reported $490,371 in adjusted gross income, and in 2019 reported adjusted gross income of $438,967.

The borrowers work in homecare with mental health clients who have conservators that manage their money. Unfortunatley, most of the borrower's clients don’t have section 8 or city housing, so our borrower intends to offer rooms in shared apartments for these clients. The borrower has worked in homecare for over 20 years and has relationships with mental health services, conservators, shelters in Hartford, East Hartford and Manchester.

Prior to the purchase of this property, the borrower has lined up clients to fill the vacancies in these rooms for $550 per month. Another client was approved for section 8 for the 1 bedroom apartment for up to $1,000 per month. The borrower’s plan is to analyze the current tenants and replace where appropriate. He plans on turning this into long-term housing rather than weekly housing.

VALUATION SUMMARY

We hired a local MAI appraiser who valued this property with an (AS-IS) appraised value of $250,000. A local broker was also engaged who performed a drive-by opinion of value (BPO) who suggested a list price of $259,900.

At an 8.0% yield to the investors and a 62.0% LTV (AS-IS) Appraised Value and 64.6% LTV (Purchase Price), 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 George Blackburne, IV
555 University Ave., Suite 150, Sacramento, CA 95825
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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