Nagel Street Industrial

George says: "This is a traditional hard money loan, a deal based primarily on the equity in the property. The deal also enjoys borrowers with a huge income, excellent credit, and a net worth that is more than TWENTY times our loan amount. If 70% of your trust deed portfolio is full of tiny commercial loans, I wouldn't blame you if you took $25,000 to $40,000 in this high-yield deal. This is a quite handsome property."

Blackburne & Sons is pleased to present this First Mortgage secured by a 17,788SF industrial building on 1.54-acres, located in Warren, Maycomb County, Michigan.

The purpose of this refinance is to cover business expenses such as warehouse equipment and moving costs so that the borrower can open a 2nd location for his tobacco and merchandise business in the subject property. There are also property taxes owed on the subject property for 2023 and 2024 in the amount of approximately $31,000 that will be paid in full at closing.

Macomb County is a county on the eastern shore of the U.S. state of Michigan. It is part of the Detroit metropolitan area, bordering Detroit to the north and containing many of its northern suburbs. Its seat of government is Mt. Clemens, and its largest community is Warren. As of the 2020 census, the county had a population of 881,217, making it the third-most populous county in the state, behind neighboring Wayne and Oakland. Macomb County contains 27 cities, townships and villages, including three of the ten most-populous municipalities in Michigan. Most of this population is concentrated south of Hall Road (M-59), one of the county's main thoroughfares.

According to the U.S. Census Bureau, the county has a total area of 571 square miles, of which 479 square miles is land and 92 square miles (16%) is water. The county's southeastern border with Canada is located across Lake St. Clair. Lake St. Clair borders the county on the east. Macomb County is mostly considered a part of Southeast Michigan. However, the far northern parts of the county, including Richmond and Armada, are often considered to be part of Michigan's Thumb region. The county comprises mostly rural/agricultural communities to the north and a mix of suburban and urban areas to the south.

CITY INFORMATION

Warren is a city in Macomb County in the U.S. state of Michigan. An inner-ring suburb of Detroit, Warren borders Detroit to the north, roughly 13 miles north of downtown Detroit. The population was 139,387 at the 2020 census, making Warren the largest community in Macomb County, the third-largest city in Michigan, and Detroit's largest suburb. The city is home to a wide variety of businesses, including the General Motors Technical Center, the United States Army Detroit Arsenal, home of the United States Army TACOM Life Cycle Management Command and the Tank Automotive Research, Development and Engineering Center (TARDEC), and the headquarters of Asset Acceptance.

In 2023, the median property value in Warren, MI was $181,900, with a homeownership rate of 71.0% and the median household income was $63,741. The economy of Chico, CA employs 52.6k people. The economy of Warren, MI employs 65.8k people. The largest industries in Warren, MI are Manufacturing (14,079 people), Health Care & Social Assistance (9,379 people), and Retail Trade (7,707 people), and the highest paying industries are Management of Companies & Enterprises ($95,417), Public Administration ($70,399), and Professional, Scientific, & Technical Services ($68,100). The largest universities in Warren, MI are Macomb Community College (2,609 degrees awarded in 2022).

The subject property consists of a 1.54-acre site that is irregular in shape and generally level in topography. The subject is located in a densely developed industrial node which is home to several major automotive manufacturing plants and the GM Tech Center. It is served by the SMART Public bus system, with numerous stops located within close proximity.

The site is improved with 17,788 SF industrial building. It is a single story, class C construction industrial building. The improvements were originally built in 1957 and just currently went through renovation for conversion into a tobacco retail facility. The office space comprises +/- 10% of the building area. The warehouse space contains 15’ clear heights and there are no overhead doors or loading docks. The warehouse space was recently subdivided to accommodate 10 flower rooms, 2 drying rooms, a mother/clone room, and a trimming room.

The final exterior work was just recently completed as of this week. It included labor to install new siding to the property. The landscaping recently finished included grading the property and installing sod. The costs to complete the warehouse exterior was $6,000 for labor to install the siding, $5,000 for the Sod and $7,000 in grading work and final touch-up to finalize the building exterior. Total cost was $18,000 to complete the exterior renovations.

The site is equipped with 46 parking spaces, a poured concrete foundation, masonry exterior walls and a flat roof with a sealed membrane. Typical utilities and municipal services available to site and are located in close proximity, including water sewer, natural gas, electricity, telephone and cable TV and internet.

The borrower purchased the subject property for $1,300,000 in 2020. At that time, it was only 13,188 SF. Since the 2020 acquisition, the borrower has been doing extensive rehab, in the amount of $3MM. This included extensive HVAC and ductwork, drywalling, concrete laying, etc. The interior work is complete, and the exterior work is almost complete. A sworn contractor's statement will be provided in the due diligence folder.

A Phase I Environmental Report was ordered by our borrower in 2021. We provided the Phase I report to our environmental company to review, and they came back with a moderate risk rating. A copy of the Phase I report and Enviroscreen will be provided in the due diligence folder.

The borrower currently owns and operates a wholesale business that sells general tobacco merchandise such as hookah, glass water pipes, and vapes. He is using the subject property as his second location for this business. It is important to note the borrower’s initial plan for the subject property was to open up a cannabis grow operation. However, those plans have been put on hold due to stringent licensing requirements.

BORROWER SUMMARY

Our borrower is a real estate holding company that does not report any income. This LLC is owned entirely by our personal guarantors, who are husband and wife. They will both provide a personal guarantee on our loan.

The guarantors work as a business owner and a homemaker. Together, they self-reported a net worth of $24,083,639 and have mid-credit scores of 736 and 721. Their tax returns show an adjusted gross income of $580,752 in 2023 and $1,473,367 in 2022. They have not yet filed their 2024 tax returns.

The entity that operates the tobacco business on the subject property shows a net business income of $978,396 for 2023 and $547,125 for 2022. They have not filed their 2024 tax returns yet. We were provided a 2024 profit & loss statement showing a net income of $660,986.

We hired a MAI appraiser who valued this property at $1,250,000 (AS-IS). We also hired a broker who performed a drive-by opinion of value (BPO) and valued this property at $1,150,000.

At a 12.0% yield to investors and a 60.0% LTV (AS-IS) appraised value and 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.

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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