Brooklyn NY Mixed-Use

George Says: "This is an unusually attractive hard money loan. The property is quite handsome and desirable. Brooklyn is an up-and-coming area. Broker’s Professional Opinions (BPO’s) normally come in at 65% of the appraised value because no broker wants to stick his neck out for a lousy $350. Here the BPO came in higher than the appraisal! Lastly, we know why the borrower is coming to us. Our borrower was hit by a cement truck and couldn’t work for months. This deal makes perfect sense. I normally urge you to avoid large loans and loans with high interest rates. On this particular deal, ignore those warnings. Go ahead and take BIG chunks of this 12% deal."

Blackburne & Sons is pleased to present this First Mortgage secured by a 2,640 SF two-story, two-unit, Mixed-Use building on a 0.04-acre parcel, located in Brooklyn, New York.

The purpose of this refinance is pay off the current mortgage holder in the amount of approximately $975,000, get this property out of foreclosure, and to pay off a couple of small liens. The borrower will have to come to closing with approximately $10,000 to $15,000 cash. More information on the foreclosure is in the borrower summary section below.

Brooklyn is a borough of New York City located at the westernmost end of Long Island in the State of New York. Formerly an independent city, the borough is coextensive with Kings County, one of twelve original counties established under English rule in 1683 in what was then the Province of New York. As of the 2020 United States census, the population stood at 2,736,074, making it the most populous of the five boroughs of New York City, and the most populous county in the state.

Brooklyn, at 37,339.9 inhabitants per square mile, is the second most densely populated county in the U.S. after Manhattan (New York County), as of 2022. Had Brooklyn remained an independent city, it would now be the fourth most populous American city after the rest of New York City, Los Angeles, and Chicago.

In 2023, the median property value in Brooklyn (District 10), NY was $1.03M, with a home ownership rate of 40.4%, and the median household income was $87,077. The economy of Brooklyn (District 10), NY employs 57.8k people. The largest industries are Elementary & secondary schools (5,076 people), Restaurants & Food Services (4,247 people), and General medical and surgical hospitals, and specialty (except psychiatric and substance abuse) hospitals (3,243 people), and the highest paying industries are Internet publishing, broadcasting & web search portals ($207,791), Health & personal care, except drug, stores ($162,669), and Scientific research & development services ($160,209). The largest universities in NYC-Brooklyn Community District 10--Bay Ridge & Dyker Heights PUMA, NY are Brittany Beauty Academy (132 degrees awarded in 2023).

The subject property is located in the neighborhood known as Bay Ridge, within an area referred to as Community District #10. This district lies within the southwesterly portion of the Borough of Brooklyn, and is bounded by the Upper New York Bay to the west, the Lower New York Bay to the south, Bay 8th Street and 14th Avenue to the east, the Bay Ridge railroad yards and Long Island Rail Road tracks to the north.

The area is primarily improved with various types of residential properties, including low- and high-rise apartment buildings and single-family homes, as well as commercial structures and retail establishments. Many of these apartment buildings have been converted to cooperative and condominium ownership.

The subject property is located on the south side of 74th Street, between 4th Avenue and 5th Avenue, in the community of Bay Ridge, Borough of Brooklyn, Kings County, City and State of New York. The subject property is identified on the New York City tax maps as Block 5930, Lot 11. It consists of a slightly irregular but predominately rectangular-shaped, midblock parcel, containing 1,527± square feet (0.04± acres) of R5B residentially zoned land and is located within the Special Bay Ridge District (BR), as designated by the City of New York.

The site is currently improved with a two-story, plus walk-out lower-level, walk-up, mixed-use building, containing 2,640± square feet of gross building area (GBA), originally constructed circa 1899. The property is zoned R5B Residential within the Special Bay Ridge District (City of New York).

The subject improvements contain two (2) units in total consisting of: one (1) walk-out lower-level medical office unit, containing 880± square feet of GBA, and one (1) first-floor and second-floor, four-bedroom, 1 and 1/2 bathroom apartment unit. At the time of the appraisal inspection, the subject was 100% owner-occupied and in average to good condition.

Our borrower currently lives in the upper level apartment unit and uses the lower level unit for his Podiatry practice. It should be noted that the property's current use is legal non-conforming.

Our borrower is a limited liability company that is owned solely by our guarantor. The guarantor is an unmarried man who works as a Medical Doctor. He self-reports a net worth of $1,389,029 and has a mid-credit score of 535. He will be providing a personal guarantee on our loan, and his medical practice (Corporation) will be providing a corporate guarantee on our loan.

The guarantor (as an individual) currently pays the LLC $5,900 in rent for the residential unit that he resides in, and is reported on a Schedule E of his personal tax returns. The borrower has filed an extension for 2024. His personal tax returns for 2023 report $119,215 in adjusted gross income, and $127,844 in adjusted gross income for 2022.

The borrower’s Podiatry Medical Practice does business through a Corporation and has filed an extension for 2024. The Corporation pays $3,500 in rents to the real estate holding LLC for the lower-level commercial unit. A 2024 P&L was provided which shows net income of $11,588. However, this is the net income after paying $79,300 in rents to his LLC. His 2023 Corporation tax returns report $4,603 in net income after paying $35,650 in rent to the LLC. In 2022, the Corporation reports net income of $28,608, after paying $103,242 in rents.

On April 12, 2022, the Doctor was severely injured after being struck by a cement truck out in front of his property, resulting in an extended hospitalization (3 months) and temporary disruption to his medical practice. During this time, his mortgage was sold, without prior notice, to the current mortgage holder, who immediately declared a default and increased the interest rate to 24%. Despite these challenges, the doctor entered into a six-month forbearance agreement and made a $45,000 good-faith payment, followed by four additional $6,000 monthly payments, totaling $69,000 toward the outstanding balance, demonstrating his continued commitment and ability to meet financial obligations under pressure. A Notice of Lis Pendens was filed on July 31, 2024 and was the result of the sale of the mortgage note. This lender is giving the borrower time for the refinance before actually foreclosing.

A personal injury settlement is currently in process, with an expected net recovery of $750,000 to $1,500,000, projected to close within the next 6 to 12 months. The doctor has committed to applying 100% of the settlement proceeds towards our loan balance. Any remaining balance will be refinanced through a conventional commercial lender.

Per the broker, from an underwriting perspective, the doctor remains a strong borrower. His pre-accident credit profile was excellent, and the current hardship is clearly tied to an isolated medical event. This loan presents a practical and well-supported solution to stabilize the property and transition back into conventional financing once the settlement is finalized.

We hired a local MAI appraiser who valued the property at $1,600,000 (AS-IS).

This appraiser previously appraised this property in October of 2024 for $1,550,000. We used the same appraiser but had them prepare a whole new report. The subject property is 100% owner-occupied. Therefore, the appraiser has estimated the “as is” market value of the fee simple estate of the subject property, herein. Lease-up costs were not deducted in their analysis, as the subject is currently occupied by the owner and will reportedly remain as such.

We also hired a local broker who performed a drive-by opinion of value (BPO) on the property whom gave us a value of $1,975,000.

At a 12.0% yield to investors and a 65.0% 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. 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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