Manhattan MT Land Refinance

George says: "These two successful cannabis growers own the property right next door. They hope to eventually build self-storage units and RV storage units on the property."

Blackburne & Sons is pleased to present this First Trust Deed secured by 4.16-acres of raw land, located in Manhattan, Gallatin County, Montana.

The purpose of this loan is to paydown the First Mortgage on the property by $355,500. The mortgage balance currently is $567,858, and matured at the end of May, 2024. The lien holder will execute a subordination agreement at the closing for the remaining balance of roughly $227,000. Any shortfall will be covered out of pocket by the borrowers. The terms of the 2nd mortgage will be 10% interest, amortized over 5 years, with a 1 year term and monthly payments of $3,763.

The subject is located in Gallatin County, which is now Montana's second-largest county. Gallatin County has the state's busiest airport, Bozeman Yellowstone International Airport, and is one of the fastest growing counties in Montana. Bozeman, the county seat, is home to Montana State University and is becoming a technology hub for out-of-state tech companies. In addition to a strong job market, the area offers outdoor recreation that includes fly fishing on the Gallatin, Madison, Jefferson, Missouri, and Yellowstone Rivers. The area also has Bridger Bowl, Moonlight Basin, and Big Sky Ski Resorts. Bozeman is the airport of choice for most passengers seeking to visit Yellowstone National Park.

Gallatin County is located in the U.S. state of Montana. With its county seat in Bozeman, it is the second-most populous county in Montana, with a population of 118,960 in the 2020 Census. The county's prominent geographical features are the Bridger Mountains in the north, and the Gallatin Mountains and Gallatin River in the south, named by Meriwether Lewis in 1805 for Albert Gallatin, the United States Treasury Secretary who formulated the Lewis and Clark Expedition. At the southern end of the county, West Yellowstone's entrance into Yellowstone National Park accounts for around half of all park visitors. Big Sky Resort, one of the largest ski resorts in the United States, lies in Gallatin and neighboring Madison counties, midway between Bozeman and West Yellowstone.

According to the United States Census Bureau, the county has a total area of 2,632 square miles, of which 2,603 square miles is land and 29 square miles (1.1%) is water. The county attained its present boundaries in 1978, when the former Yellowstone National Park (part) county-equivalent was dissolved and apportioned between Gallatin County and Park County. Gallatin County received 99.155 square miles of land area and 0.119 square miles of water area, whereas Park County received 146.229 square miles of land area and 0.608 square miles of water area. The geographies transferred are known now as Census Tract 14 in Gallatin County, and as Census Tract 6 in Park County.

The subject is located in Logan, Montana. Logan is an unincorporated community in Gallatin County. The small community had a population of 72 as of the 2020 census. There is no post office, so the Logan properties have a Manhattan address. Logan is accessed off Interstate 90, exit 283. The property is located toward the western edge of Gallatin County. Logan is approximately 26 miles west of Bozeman, 60 miles east of Butte, 167 miles west of Billings, and 178 miles east of Missoula.

Manhattan is a town in Gallatin County, Montana, United States. The population was 2,086 at the 2020 census. It is part of the 'Bozeman Metropolitan Statistical Area'. In 1865, the town was called Hamilton. This changed in 1883 when they named it Moreland after the Moreland Irrigation Canal. Eventually it was changed to Manhattan after a malting company in the rise of the barley empire. According to the United States Census Bureau, the town has a total area of 1.93 square miles, all land. The Gallatin River is east and north of town. The Bridger Mountains are to the north and the Gallatin Mountains are to the south.

In 2021, the median property value Manhattan, MT was $346,400, with a home ownership rate was 71.2%, and the median household income was $57,045. The economy of Manhattan, MT employs 1,040 people. The largest industries in Manhattan, MT are Educational Services (132 people), Construction (130 people), and Manufacturing (114 people), and the highest paying industries are Manufacturing ($90,208), Construction ($85,363), and Professional, Scientific, & Technical Services ($70,530).

The subject is located at the end of 1st and 2nd Streets, both dead-end roads. Access to the property is provided by Interstate 90, Exit 283. 1st and 2nd Streets are one-block gravel roads approximately 475 feet long. First Street and Second Street are accessed via a paved Frontage Rd.

The subject property consists of a 4.16-acre site that rectangular in shape generally level. The subject is located approximately 0.5 miles from Interstate 90, Exit 283. The site is served by public electricity. The owner has installed a 1600-amp service for future development. The site is served by public electricity. Currently, properties in the area are served by private septic systems. The site is served by a private well and natural gas.

Since purchasing the property in 2022 for $700,000, the borrowers have enhanced the site by putting roughly $100,000 into it. Phase three power was brought onto the site, and two electrical boxes allow for additional construction and expansion. Our borrower also owns the adjacent 4.64-acre parcel and recently constructed a 9,600SF warehouse for commercial use.

Since they bought the property, the Logan Montana Water and Sewer District has formed allowing them to further utilize the acreage with no need for drain fields, therefore maximizing occupancy for this acreage. This property is currently un-zoned with no covenants.

The guarantors plan to eventually build 1,000-2,000SF multi-use storage units on the lot. Because there is no zoning, these units can be used from everything to recreational vehicle storage to light commercial and office use. This area is conveniently located from highway 90 and close to not only Bozeman, but many of Southwestern Montana’s lakes, rivers and recreational locations. Using a 25% coverage rule, they plan to get 50,000SF of rentable space.

BORROWER SUMMARY

Our guarantors are two single men who hold title through a Limited Liability Company (real estate holding company) of which they are each 50% members. They will both be providing a personal guarantee on our loan. We have been doing business with these guarantors since 2021, and this will be our third loan to them. They have paid off one loan and have one loan remaining on our books. In December 2022 ,we made a loan on a property located next to the subject, which is being used as a cannabis grow operation. The guarantors have been late a few times between the two loans, but have always paid their late charges and are currently in good standing.

The entity that holds title self-reported a net worth of $2,130,488 and currently holds title to three properties total, all of which are financed by Blackburne & Sons. This LLC reported net income of $2,309 in 2022 and ($2,820) in 2021. This entity filed an extension for 2023 taxes. A 2023 & 2024 P&L will be provided in the due diligence package for review.

The first guarantor works as a Cannabis business owner and is the managing member of the borrowing entity. He self-reported a net worth of $2,250,445 and has a mid-credit score of 785. He reported an adjusted gross income of $822,478 in 2022 and $322,405 in 2021. He filed an extension for 2023 taxes.

The second guarantor also works as a Cannabis business owner. He self-reported a net worth of $2,257,843 and has a mid-credit score of 640. He shows an adjusted gross income of $880,096 in 2022 and $322,560 in 2021. He also filed an extension for 2023 taxes.

VALUATION SUMMARY

We hired a General Certified appraiser who gave this property an (AS-IS) Appraised Value of $790,000.

At a 12.0% yield to the investors and a 45.0% 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.

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.
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