Williams Road Commercial

George III says, "I love this loan. To appreciate it, please find the video link to a fly-over of this stunning property. Be sure to wear a bib. You will drool, Haha! This is admittedly a large loan with a very high yield. These are definite risk factors. That being said, we have made three large winery loans to the same borrower over the years. He paid these loans very well. Our borrower is a proven businessman, and his properties are always gorgeous.

Blackburne & Sons is pleased to present this first trust deed secured by 12 acres of planted vineyards, a 5-acre lake, an unfinished guest cottage, and prospective tasting room/restaurant/winery located on 61.16 acres of land located in Suisun Valley, Solano County, California.

The borrower will be using our loan to pay off a $1,000,000 first trust deed. The rest of the proceeds will be used to finish the tasting room, restaurant and guest cottage in the spring, along with other projects the borrower is working on. The borrower will be using $750,000 to complete the tasting room and $750,000 to replenish business reserve. See the borrower’s use of funds letter in the due diligence package.

We will be holding back 12 months of payments ($387,000) in a trust account and will be sure all payments are made with these funds for the first 12 months.

This is a repeat borrower of Blackburne & Sons. We have made three prior loans for him. He has always had an excellent payment history, with only three late payments in total.

Solano County is a county located in the US State of California. As of the 2020 census, the population was 453,491. The county seat is Fairfield. Solano County comprises the Vallejo–Fairfield, CA Metropolitan Statistical Area, which is also included in the San Jose-San Francisco-Oakland, CA Combined Statistical Area. Solano County is the northeastern county in the nine-county San-Francisco Bay Area region. A portion of the South Campus at the University of California, Davis is in Solano County. Travis Air Force Base is located just east of Fairfield.

Solano County was one of the original counties of California, created in 1850 at the time of statehood. At the request of General Mariano Guadeloupe Vallejo, the county was named for Chief Solano of the Suisun people, a Native American tribe of the region and Vallejo's close ally. Chief Solano at one time led the tribes between the Petaluma River and the Sacramento River. The chief was also called Sem-Yeto, which signifies "brave or fierce hand." The Chief was given the Spanish name Francisco Solano during baptism at the Catholic Mission, and is named after the Spanish Franciscan missionary, Father Francisco Solano. "Solano" is a common surname in the north of Spain, especially in Navarra, Zaragoza and La Rioja.

The subject property is located in Suisun Valley AVA area of Solano County, located just east of the Napa Valley wine region in the Coast Range. It was established as a wine appellation on December 27, 1982, making it among the first AVAs of California (eighteenth overall), Napa Valley being the first.

Suisun Valley is a region in the California Coast Ranges that is bordered on the east side by the Blue Ridge of the Vaca Mountains, and on the west side by the Howell Mountains, which are also called the St. George Range. The valley is located almost entirely in Solano County with a northern terminus near the county line with Napa County, and a southern terminus at Suisun Bay in the estuary where the Sacramento River enters the San Francisco Bay.

Elevations on the valley floor range from 100 to 200 feet above sea level, rising steeply to 1,122 feet at Okell Hill on the north side, and to 2,162 feet on the west side at Twin Sisters, a twin summit that is the high point of the Howell Mountains, as well as a prominent landmark in the valley. Blue Ridge on the east side of the valley exceeds 2,000 feet elevation for much of its length.

The property located on 5400 Williams Road; Solano County (Suisun Valley) was appraised. The subject property is one parcel improved with a vineyard and a prospective winery, tasting room and/or restaurant building which is nearing completion of construction. The property comprises approximately 61.16 acres with an area of 12+ acres improved with a vineyard and up to 20 more acres which are prepared for vineyards. Out of the 12 acres of producing grapes, there are 9 acres of Cabernet Sauvignon, 2 acres of Merlot, and 1 acre of Cabernet Franc planted.

The property is in an area of agricultural uses and lies within the Suisun Valley American Viticulture Area. It is an idyllic setting featuring many vineyard properties ranging in size from 10 acres to well over 40 acres. There are also wineries and tasting rooms throughout the neighborhood and a hub of tourist commercial uses (Mankas Corners) is nearby. Wineries include Suisun Valley, Mangels Vineyards, Wooden Valley, Tolenas, Blue Victorian, and others. Mankas Corners is also owned by our borrower.

The property is zoned ASV-20 and a number of uses such as winery, vineyards, hotel, and restaurant can be approved for the site (hotel/restaurant require a use permit). The property is proposed by the owners for a 50-unit resort (no plans yet completed) and the proposed tasting room / restaurant structure is being constructed on the mid-slopes of the property. It is expected that approvals for a hotel project will be required before a restaurant use can be opened, but a tasting room can be approved without a hotel. As it is currently, the structure is a shell which can be a residence or commercial use (winery/tasting room). The property is appraised "as is" with development options open. At this time the borrower has not yet been approved for a winery use permit.

The primary structural improvement on the property is a nearly completed potential restaurant, tasting room. It is a wood frame structure and its effective age is new, although it is a re-constructed building. The building comprises approximately 2,350 SF on the ground floor and it is to have a mezzanine of over 1,200 SF; Gross: 3,550 SF. The building has a concrete slab floor, wood exterior, metal roof, high quality commercial doors and windows. It is currently a raw shell which will be finished. Its estimated percentage complete is 50%, as it needs all interior finishes, cabinets, flooring, and site work, including paving of the parking area and landscaping.

The property improvements are fitting to the long-term plan for the property, even as a wine tasting or events room. There are good views from the building and its architectural design is good.

Per appraiser, the subject is improved with a paved roadway and driveway access, water and septic systems. The subject septic system is not complete due to rainfall. It is elaborate and engineered for 50 cabins and other commercial uses (potential). The remaining cost to complete the system is $250,000 and the system will far exceed those of the comparable sales. Overall, no adjustment is made for this item. The roadway to the winery site area is of very good quality and it is a lengthy roadway which was costly to develop.

Per the borrower, the current infrastructure that has been added to this property includes: a commercial water well system, commercial 800 Amp underground power service, 1 ½ mile commercial paved roadway, $750,000 irrigation system, tasting room and restaurant (50% complete), 12 acres of producing grapes, 5 acre lake among 10 acres of concert/entertainment/ event venue, 20 additional acres plant able, rough plumbing for irrigation complete, previously planted crops of wheat, alfalfa and clover.

The borrower is a married man and holds title to this property through a family trust. He is the sole trustee, and will be signing on behalf of the trust. He is an entrepreneur and an industrial contractor and will provide a personal guarantee. He currently owns 4 wineries and has 25+ years of industry experience. His main business Vezer Industrial Professionals is a major industrial contractor, with turnkey project capabilities (engineering, procurement, and construction), where most of the business is shutdown/turnaround assignments and maintenance of large industrial plants and facilities.

He has a mid-credit score of 678 and reports a net worth of $77,983,113. His wife is a housewife, and will only provide a personal guarantee on this loan. She has a mid-credit score of 704.

Their 2021 personal tax return reports $638,490 in adjusted gross income, however in 2020 reported $30,071 in adjusted gross income. I was told that this was due to the effects of Covid 19 and taking advantage of various write offs and one time mark downs and losses.

In 2021, the borrower’s industrial contracting business (VIP) had net income of $1,049,591, and in 2020 had net income of $523,006.

We hired a local MAI appraiser who valued this property (AS-IS) Appraised value of $12,000,000 and a Liquidation Value of $9,000,000. A local broker was also engaged who performed a drive-by opinion of value (BPO) who values this property at $3,525,000. This report was based on vacant land only.

*It is important to note that the appraiser and borrower have a prior business relationship. Our office used this appraiser on a previous loan for this borrower. Last year the borrower contacted the appraiser directly to appraise the subject property.

At an 11.0% yield to the investors and a 25.0% LTV (AS-IS) Appraised Value, and 33.0% LTV Liquidation 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 Tommy 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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