Stratford CT Retail Refinance

George says: “This small loan is being made based primarily on the equity in this Connecticut property. I would not be surprised if there were a few late payments over the course of the loan; but it is understandable how a business could fall behind on its payments during Covid. The good news is that the loan-to-value ratio is 45%, which is much lower than our typical deal."

Blackburne & Sons is pleased to present this First Mortgage secured by 2, single story, retail buildings, totaling 9,650SF on a 0.82-acre parcel, located in Stratford, Fairfield County, Connecticut.

The purpose of this $630,000 loan is to pay off the current first on the property in the amount of $495,000 and property taxes. Our loan will also include a 6-month payment reserve in the amount of $40,635.00.

COUNTY INFORMATION

Fairfield County is the most populous county in the southwestern corner of the U.S. state of Connecticut. It was the fastest-growing county in the state from 2010 to 2020. As of the 2020 census, the county's population was 957,419, representing 26.6% of Connecticut's overall population. The closest to the center of the New York metropolitan area, the county contains four of the state's top 7 largest cities—Bridgeport (1st), Stamford (2nd), Norwalk (6th), and Danbury (7th)—whose combined population of 433,368 is nearly half the county's total population. Fairfield County's Gold Coast helped rank it sixth in the U.S. in per-capita personal income by the Bureau of Economic Analysis in 2005, contributing substantially to Connecticut being one of the most affluent states in the U.S. Other communities are more densely populated and economically diverse than the affluent areas for which the county is better known.

According to the United States Census Bureau, the county has a total area of 837 square miles, of which 625 square miles is land and 212 square miles (25.3%) is water. The terrain of the county trends from flat near the coast to hilly and higher near its northern extremity. The highest elevation is 1,290 feet (390 m) above sea level along the New York state line south of Branch Hill in the Town of Sherman; the lowest point is sea level itself. The Taconic Mountains and the Berkshire Mountains ranges of the Appalachian Mountains run through Fairfield County. The Taconics begin roughly in Ridgefield and the Berkshires begin roughly in Northern Trumbull, both running north to Litchfield County and beyond.

CITY INFORMATION

Stratford is a town in Fairfield County, Connecticut, United States. It is situated on Long Island Sound at the mouth of the Housatonic River. The town is part of the Greater Bridgeport Planning Region, and the Bridgeport–Stamford–Norwalk Metropolitan Statistical Area. It was settled by Puritans in 1639. The population was 52,355 as of the 2020 census. It is bordered on the west by Bridgeport, to the north by Trumbull and Shelton, and on the east by Milford (across the Housatonic River). Stratford has a historical legacy in aviation, the military, and theater. The town contains five islands, all in the Housatonic River. These are Carting Island, Long Island, Peacock Island, and Pope's Flat north of Interstate 95, as well as Goose Island. None of these islands are habitable because of their low elevations. A sixth island known as Brinsmade Island washed away prior to 1964.

Located in the north end of Stratford, this 250-acre (1.0 km2) site is primarily a mixed deciduous forest, with some wetlands and ponds. Named for President Franklin D. Roosevelt, it was set aside in the 1930s, when much of the infrastructure was created as a Works Progress Administration project. The forest includes campsites with cooking pits, picnic tables, and walking trails. Stratford is the location of two Superfund sites designated by the United States Environmental Protection Agency. These include a variety of locations related to asbestos dumping and disposal by Raymark Industries, whose manufacturing was previously headquartered in Stratford, and the former Stratford Army Engine Plant. The Raymark site is on the EPA's National Priorities List. Stratford Army Engine Plant is not on the National Priorities list, but is being cleaned up by the US Army.

The largest universities in Stratford, CT are American Institute of Healthcare & Technology (35 degrees awarded in 2021) and Stratford School for Aviation Maintenance Technicians (16 degrees).

SUBJECT PROPERTY DETAILS

The subject property consists of an L-shaped, level at street grade, mid-block land parcel with a total land area of 0.82-acres. It is zoned CA – “Retail Commercial District” by the Town of Stratford and is located approximately one mile east of US Interstate 95 and one-half mile from west of the Housatonic River. Access to the subject is offered via a single, large curb cut on Main Street, also known as CT Route 113. The site has a total of 20 parking spaces and has access to all utilities. The site is in a flood zone “AE” which is a High-Risk Special Flood Hazard Area. The environmental company recommended a phase 1 report, which came back clean. The subject site is improved with two retail buildings and has a total gross building area of 9,650SF. We will require the borrower to obtain flood insurance.

Building 1 was constructed in 1950 with wood and masonry and contains a total net rentable area (NRA) of 3,900SF. It has a multi-tenant configuration and is occupied by an owner-occupied repair shop in the rear, a beauty salon and a restaurant. It should be noted that the 2,000SF of this building that make up the owner-occupied repair shop were not included in the NRA of the subject. This is primarily due to the condition of this unit. In the event of foreclosure, repairs will need to go into this unit. The beauty salon tenant pays $2,250 per month in rent and the lease expires in September of 2024. The restaurant tenant currently pays $2,500 per month and their lease will expire in January of 2029. The owners' repair shop pays the entity on title a total of $2,375 per month and the lease is indefinite, but it should be noted that this is not an arm's length lease.

Building 2 was constructed with masonry in 1965 and contains a total NRA of 3,750SF. It is equipped with a concrete slab foundation and wood post and beam framing. It has a single-tenant configuration and is currently occupied by a liquor store. This tenant pays a total of $3,500 per month and the lease will expire in August of 2024.

There are two other leases for various portions of the parking lot/land parcel. One of the leases rents 5,635SF of the parcel for $1,850 per month. This lease is set to expire in January of 2025. It should be noted that this lease has a typo, and the borrower will be working on getting an addendum or correction done with the tenant. The other lease is for 6,250SF of open land space. This portion is also leased for $1,850 per month and will expire in February of 2026.

The property is currently facing foreclosure and has an auction date set for February 26, 2024. Our loan will pay off this note holder and put a stop to the foreclosure. Per the borrower's letter of explanation, during COVID-19 the borrower fell behind on his payments. He paid a lump sum of $30,000 for what he thought was bringing his loan current, but those funds actually went into a suspense account. The foreclosure still pressed forward and so they reached out to us for assistance. It should be noted that, in 2018 the borrowers spent $40,000.00 on rehabbing the property, with the largest expense being a new roof for 1055 main street. Additionally, the 2nd half of the 2022 taxes are due and payable in the amount of $9,477.00. This will be paid out of th eloan proceeds.

BORROWER SUMMARY

Our guarantors are two single men, father and son, who hold title to this property via a limited liability company that is owned by them 50/50. Their family has owned this property for over 50 years. Both men will be personally guaranteeing this loan, along with a corporate guarantee by the entity that occupies the repair shop on the subject property.

The entity that holds title reported a net business income of $12,247 in 2022 and $35,628 in 2021. This entity provided a profit and loss statement showing a net business income of $36,182 through November of 2023.

The entity that will be providing a corporate guarantee reports its income through the son’s tax returns and therefore, did not provide separate tax returns. It did, however, provide a profit & loss statement showing an income of $65,577 through November of 2023.

Guarantor #1 is a single man and is the son of guarantor #2. He self-reported a net worth of $2,092,118 and has a mid-credit score of 685. Working as a business owner, he reports an adjusted gross income of $63,386 in 2022 and $34,147 in 2021.

Guarantor #2 is a single man and is guarantor #2’s father. He has a mid-credit score of 708 and is currently retired. He did not file taxes for the year 2022 due to the fact that he made less than $20,000 from Social Security Benefits only. This being stated, he only provided his 2021 tax returns which reports an adjusted gross income of $18,381.

VALUATION SUMMARY

We hired an MAI appraiser who valued this property (AS-IS) Appraised value of $1,400,000. A broker was also engaged who performed a drive-by opinion of value (BPO) who suggested a list price of $995,000.

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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