Charleston WV Commercial Building

George says: "This looks like a nice little deal. Clearly, our borrowers have a lot of skin in the game, and they will be occupying this building with their company. Therefore, the leasing risk is less. The wise investor will fill his portfolio with lots of small pieces of loans like this."

Blackburne & Sons is pleased to present this First Trust Deed secured by a 5,764SF commercial building on 0.06 acres, located in Charleston, West Virginia.

The proceeds of this loan will go toward paying off the current first on the property in the amount of $293,178 and $60,000 will be used for a partner buyout. The remaining funds will go towards closing costs.

Kanawha County is located in the state of West Virginia. As of the 2020 census, the population was 180,745, making it West Virginia's most populous county. The county seat is Charleston, which is also the state capital. Kanawha County is part of the Charleston, WV Metropolitan Statistical Area. According to the United States Census Bureau, the county has a total area of 911 square miles, of which 902 square miles is land and 9.3 square miles (1.0%) is water. It is the fourth-largest county in West Virginia by area. Major highways in this county include Interstate 64, Interstate 77, Interstate 79 and U.S. Route 60.

According to the 2010 U.S. Census, there are approximately 5,481 private sector businesses within Kanawha County. There are 89,768 people who are currently employed who live in the county. Th county is home to the Charleston Dirty Birds Baseball team and the West Virginia United - Soccer club. Adjacent counties include Adjacent counties Roane County (north), Nicholas & Fayette County (east), Boone County (south) and Putnam County (west).

Charleston is the capital and most populous city of the U.S. state of West Virginia. Located at the confluence of the Elk and Kanawha rivers, the city had a population of 48,864 at the 2020 census and an estimated population of 48,018 in 2021. The Charleston metropolitan area had 210,605 residents in 2020. Early industries important to Charleston included salt and the first natural gas well.[10] Later, coal became central to economic prosperity in the city and the surrounding area. Today, trade, utilities, government, medicine, and education play central roles in the city's economy. Charleston is the home of the annual 15-mile (24 km) Charleston Distance Run. Yeager Airport and the University of Charleston are in the city. West Virginia State University is in the local area as well as West Virginia University and Marshall University satellite campuses.

In 2020, the median income in Charleston was $49,769 and the median property value was $156,900 with a homeownership rate was 60.6%. The largest universities in Charleston, WV are University of Charleston (985 degrees awarded in 2021), Ross Medical Education Center-Charleston (75 degrees), and Garnet Career Center (64 degrees). The economy of Charleston, WV employs 21.7k people. The largest industries in Charleston, WV are Health Care & Social Assistance (4,087 people), Retail Trade (2,410 people), and Accommodation & Food Services (2,288 people), and the highest paying industries are Mining, Quarrying, & Oil & Gas Extraction ($106,179), Agriculture, Forestry, Fishing & Hunting, & Mining ($105,909), and Utilities ($85,313).

The subject property is located along the south side of Capitol Street, within the heart of downtown Charleston, roughly two blocks south of City Hall, and is situated within a historic district of downtown Charleston. The site consists of a single parcel with a rectangular shape and a total size of 0.06 acres. It has level topography, all public utilities available, and is not located within a floodplain.

The property is improved with a two-story, 5,764SF office building, plus a finished mezzanine, that was originally constructed in 1900. The property has received various updates over the years. The improvements are of masonry steel and wood frame, Class C/D construction with limestone façade and brick exterior, along with a flat rubber membrane roof. The property is also equipped with an unfinished basement and it is noted that the gross size of the improvement excludes the unfinished basement space.

The interior finish of the improvements generally consists of vinyl plank flooring throughout, along with drywall and exposed brick walls, drywall and decorative plastic tile ceilings with LED lighting. In 2020, the current owner completely gutted and renovated the improvements at a reported cost of approximately $350,000. The renovations mainly included replacing all mechanicals, new roof and modern interior finishes throughout, as well as finishing out the first-floor mezzanine space.

Our borrower purchased this property in 2018 and did a full renovation. The property is currently occupied by our borrower’s insurance company. His brother also uses a small portion of this property for his law office. However, there are no formal leases between them.

During our due diligence period, we discovered roughly $185,000 in tax liens attached to the property. According to the borrower, these liens were incorrectly placed onto the property. He has provided the appropriate releases from the City of Charleston's Office of the City Collector, and will be removed from title before closing.

Our borrowers are a married couple who will hold title through a newly formed LLC. Title is currently held in the name of an LLC of which our guarantor is 50% owner of. Once the partner buyout is completed at closing, title will be transferred into a separate entity of which our guarantor is 100% owner/member.

Both husband and wife will both provide a personal guarantee on our loan. The insurance company entity operates its business out of the subject property and files its tax returns separately. This entity will also provide a corporate guarantee on our loan. It reported net income of $188,064 in 2022 and ($9,826) in 2021.

Our guarantors self-report a net worth of $3,171.559.08 and have mid-credit scores of 669 and 696. The husband works as a business owner of an insurance company and his wife is homemaker. On their personal tax returns for 2021, they reported adjusted gross income of $58,871, and in 2020 reported $19,833 in adjusted gross income. The borrower has been trying to file his 2022 personal tax return, but his accountant has terminal lung cancer and has been in the hospital. He is trying to get everything transferred over to a new accountant an has filed an extension for 2022 taxes.

We engaged a local MAI appraiser who provided avalue of $780,000 (AS-IS). It should be noted that we could not order a BPO due to state regulations.

At a 10.0% yield to investors and a 50.64% 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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