Commercial Loans Blog

Commercial Loans and Fire Insurance

Posted by George Blackburne on Thu, May 28, 2015

FireI was recently assisting an elderly woman with a new commercial loan when I made a troubling discovery.  She owned a prime piece of commercial real estate, a retail store building leased out to a tenant, on one of the most affluent commercial strips in America.  A commercial strip is a major thoroughfare through a town or city that is lined with businesses - typically retail stores, strip centers (known as mini-malls in Southern California), restaurants, and gas stations.

This particular retail store building was a row commercial building.  A row commercial building is a commercial building in an area so built up as to have a zero lot line with its neighboring buildings.  In other words, it's sort of like a townhouse.  Its left and right walls are built right on its property lines, butted directly against the neighboring buildings.  There is no way for even a cat to walk between the buildings.  Row commercial buildings are most commonly found in large cities, like San Francisco or Chicago.

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So, anyway, this lady investor owns this row commercial building - easily worth $1.3 million - but she only had the property insured for a measly $290,000.  So I asked her, "Darlene, why do you only have $290,000 in fire insurance?"  She replied, "Well, most of the value of the property is the underlying land.  This is a prime-prime area.  Although the building may be worth $1.3 million, the land alone is worth $700,000.  The building itself is only worth $600,000."

I therefore proceeded to explain the danger of being under-insured.  When a property owner under-insures his property (insures it for less than its replacement cost), he is deemed to be partially self-insuring.  He is deemed to be partially taking on the risk of loss from a fire.

Let's assume that the property suffers a $100,000 fire loss.  The insurance company is NOT going to cover the entire $100,000 loss, even though the insured had $290,000 in fire insurance.  Instead, the insurance company is going to claim that the owner was partially self-insuring.  Therefore the owner must suffer a proportional loss.

Here is how the numbers would work.  The owner had $290,000 in fire insurance.  The replacement cost of the building was $600,000.  Therefore only 48% of the property was insured ($290,000/$600,000).  The fire insurance company would only pay for 48% of the $100,000 fire loss or $48,000.  Yikes!

Guys, do you remember when I told you that the next three years were going to be the most profitable three years of your whole career in commercial mortgage brokerage?  Well, slow season (every April and May) is now over.  Get your tail to work.  There is big-big money to be made in commercial real estate finance (CREF).  My commercial mortgage portal - - just had its best month since 2006.  Got a commercial loan lead?  Be sure to get it entered into C-Loans!  Our commercial lenders are hungry!


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HUGE LESSON:  One of things I have learned over the years is that commercial lenders are very foregiving of flaws in a commercial real estate loan application, if they are in the mood to lend.  If they are not in the mood, they can always find a reason to turn down a commercial loan.  The secret is therefore to find a commercial lender in the mood to lend, but to do that, you may have to present your commercial loan deal to scores of banks.  You therefore need to know thousands of commercial lenders.


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The veteran commercial mortgage broker submits 100% of his commercial loan packages to Blackburne & Sons, even if the deal appears too good for us.  The reason why is because we will issue, within 24 to 48 hours, at no cost, a Loan Approval Letter that you can use to show bankers.  "Hey Mr. Banker, I have an offer from Blackburne & Sons, but I'll bet that you can beat these rates, right?"  Think back to your bachelor days.  When you already had a decent-looking girl on your arm, all the girls in town were checking you out; but when your arm was empty, it felt like you had the word, "Loser", written in florescent letters across your forehead.  So use us!  Let us be your back-up lender.  It costs you nothing, and if the borrower starts to panic, you can always accept our deal.


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My oldest son, George IV, just developed the most awesome commecial loan calculator.


Commercial Loan Size Calculator


How would like a free copy of my advanced course on Intermediate Commercial Real Estate Finance or a copy of my classic 9-hour course, How To Broker Commercial Loans?  Just forward a link to your banker, and if he joins C-Loans, we'll give you the training course of your choice immediately for free, plus $250 every time this banker closes a commercial loan for a C-Loans user.


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This famous 9-hour course teaches you marketing, underwriting, packaging, placement, and fee collection.


Nine-Hour Video Training Course  How to Broker Commercial Loans


You can now place business loans, not secured by real estate, using C-Loans.


Business Loans Not Secured By   Real Estate - Unsecured or Secured  

Topics: Fire Insurance

Commercial Loans and Rising Interest Rates For the Next 30 Years

Posted by George Blackburne on Wed, May 27, 2015

Rising_RatesI have good news and interesting news.  First the good news.  Eighteen months ago I predicted that the next seven to ten years would be the most wonderful economic time in the history of the United States.  I still confidently stand by that prediction. Keep wearing your shades because the future remains fabulously bright.

"But George, the GDP is slowing.  Consumer confidence is slipping."

As they say in the gangster movies, "Forget about it." Remember, the U.S. economy lost thousands and thousands of oil extraction jobs when the Saudis flooded the market with oil. Nevertheless, the U.S. economy continues to grow.  It's funny, but just when the country needed some good news to jump-start the economy, shale oil came along.  Now that we no longer need the "push", it's okay for shale oil development to slow down a bit.  Makes me wonder whether some secret cabal of intellectuals knew that it had this card (shale oil) to play and chose the perfect time to play it.  Naw. What's that old saying? "Three people can keep a secret ... if two of them are dead."


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Now for the interesting news:  I think it's possible that interest rates have just made a historical direction change.  I am not talking about some minor fluctuation.  I am talking about a direction change as important as when the prime rate first started to decline from 21.5% in 1982.  Interest rates would continue to decline for the next 33 years!

We have all been waiting for Janet Yellen and the Fed to finally start to raise interest rates.  This week the market beat her to the punch.

If you will think back to my earlier blog posts, you will recall my astonishment and awe when I announced that the interest rate on certain government bonds in Switzerland, Germany, and Sweden had actually gone negative!  Bond investors were so nervous about the future that they would forgo all interest payments and even pay certain European countries a tiny fee to hold their money for five years.

This month that strange, strange situation changed dramatically.  Interest rates on the most gilt-edged European bonds suddenly jumped from negative to sharply positive.  Is this bad news?  Absolutely not!  It's just one more sign that much is wonderful in the world.


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How can it possibly be good news that interest rates are destined to trend slowly, but steadily, upwards for the next 33 years?  Answer:  Because it means that disinflation has finally come to an end.

In 1981, Fed Chairman Paul Volker finally broke the back of inflation.  Since 1981, the annual rate of inflation has slowly but steadily trended lower.  We still had plenty of inflation in 1985, but the annual rate of inflation was lower than in 1980.  Inflation was lower in 1990 than in 1985, and so on.  This is called disinflation - when a country still suffers from inflation, but the annual inflation rate is trending lower.

"But wait, George, tell me again why it's a good thing that inflation has just returned and that the rate of inflation will actually be picking up speed over time?  That sounds like horrible news to me."

We were all taught in school that inflation occurs when the Federal Reserve injects liquidity into the banking system (by buying securities from the banks).  As the Great Recession taught us, this is not always true.  Bank liquidity only produces inflation if the banks are confident enough to lend and borrowers are confident enough to borrow.

The return of inflation is therefore a very positive sign for both the U.S. and Europe.  If inflation is picking up, it means that business owners are finally feeling confident enough to start borrowing to modernize and expand their businesses.  Hooray!  By the way, my commercial mortgage portal just had its best month in seven years - further evidence that borrowers are feeling confident enough to borrow.  C-Loans closed a ton of deals - including a $5.2MM deal and an $8.3MM deal.


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Interest rates in Europe just spiked, despite the best efforts of the European Central Bank, because many of the bigger countries in Europe are picking up economic momentum.  Shockingly, both France and Spain - once considered zombie economies - just posted big GDP gains.

Just because inflation is destined to rise, you should NOT rush out and buy gold.  Everyone thinks that gold is a hedge against inflation.  Uh, not so much.  Gold is actually a hedge against deflation.  (Shocking, huh?).  The reason why is that during times of deflation, the biggest fear is that companies or countries issuing the bonds will default.  Investors suddenly want to own something that cannot default.  Gold is a hard asset that cannot default.


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This is one more reason why interest rates on gilt-edged bonds from rock-solid European countries suddenly spiked this month.  Why be content with a negative yield when the world clearly is NOT coming to an end?

Once again, here is my earth-shattering prediction:  Both inflation and interest rates have just made a historic turn.  Both will trend upwards for the next 20 to 30 years.  Time will tell whether my crystal ball is right.


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If you click on the link below, you will be taken to a web page that you can forward to your banks.  If they sign up as lenders with C-Loans, we'll immediately give you a free training course, plus $250 every time they close a loan for C-Loans, Inc.


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Topics: Rising Rates

Commercial Loan Calculator

Posted by George Blackburne IV on Mon, May 18, 2015

First off, let me introduce myself.  I am George Blackburne, IV, the younger, better looking of the "George's".  What would you guess the number one Google search term regarding commercial finance is?  Commercial Loans?  Commercial Mortgage Rates?  I was absolutely shocked to discover that the number one search term in the commercial loan genre was "commercial loan calculator". 

I did a little research and tried to find a decent commercial loan calculator online. What I found was pretty disappointing.  A vast majority of the calculators online were simple amortization calculators that you can find on any residential lending site.  If you were lucky, you might find a site that mentioned Debt Service Coverage Ratios (DSCR) or LTV but nothing that put all the pieces together.

So, I whipped up a quick calculator that puts all of the pieces together for you. This calculator slices and dices, cuts and cubes, it pulverizes.  This thing is so advanced that after you enter in a few values, it pops out your projected mortgage payment, LTV, DSCR and Debt Yield.  In addition, it shows you the max LTV, DSCR and Debt Yield a lender will allow.

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But wait, there’s more!

This thing will give you side by side comparisons of your LTV, DSCR and Debt Yield (if over $5,000,000)  to what a lender will allow for LTV, DSCR and Debt Yield!

Lastly, this will compare your loan scenario to the lender’s requirements/limits and will automatically calculate the max loan amount you can get.  Period.  End of story. 

Play with the numbers, and I think you will see how easy it is to use.   

Commercial Loan Size Calculator


Topics: Commercial Loan Calculator

Commercial Loans and SBA Loans To Buy a Business

Posted by George Blackburne on Thu, May 14, 2015

Business_AcquistionI received the following email this week that I found extremely interesting and informative:


Dear George,

Please save the date: Tuesday, May 19th, Exchange Bank and Upton Financial Group are hosting an exciting seminar for business owners and their advisors titled, “Utilizing SBA Financing Strategies for Business Acquisitions”

Possibly you and your clients might benefit from discovering some of the lesser-known ins and outs of using and structuring SBA financing to fund an ownership transfer to a family member · a sale to employees · selling to an outside buyer · or to fund a growth acquisition.  With one U.S. business owner turning 65 every minute, knowing how to use this source of capital, which can go up to $5 million dollars, to fund a business transition can be THE key to a successful transaction.

Upton Financial Group is honored to participate in this insightful presentation along with Exchange Bank, a locally recognized SBA lender for business acquisitions and transfers. Please see the invitation below for more detailed information regarding topics to be discussed. Please let me know if you can attend, I would enjoy seeing you there.


David Ryan
Founder and President
Upton Financial Group, Inc.
131-A Stony Circle
Santa Rosa, CA
Direct: (707) 523-9651


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Wow.  Think about this.  You can now earn loan fees on SBA loans - not just to finance the purchase of commercial real estate, but now also to acquire a business!

Remember what Dave said.  You can get an SBA loan today, up to $5MM, to fund an ownership transfer to a family member, a sale to employees, a sale to an outside buyer, or a growth acquisition (buying out a competitor).

I sense there is a lot of money to be made taking advantage of this little-known SBA loan program.




We paid our first broker this week on a closing where he brought us a bank and convinced them to join C-Loans.  He made $500 (under an older program).  Now you get a free training program immediately and $250 per closing.


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This is the best time in my 40 years in the business to be a commercial mortgage broker.  There is a tidal wave of balloon payments coming due.  If only you knew what on earth you were doing.


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My private money commercial mortgage company is starving for deals.


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Got a deal that is much too perfect for private money?


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Now for my weekly intelligence test.  Would you trade the contents of one banker's business card for a free directory of 2,000 commercial real estate lenders.  Hmmmm.  C'mon, Bubba, 2,000 for one?


Free Directory of 750+  Commercial Real Estate Lenders


You can now place business loans - not secured by real estate - with C-Loans.


Business Loans Not Secured By   Real Estate - Unsecured or Secured  


Topics: SBA Loans Business Acquisitions

Commercial Loans and the Importance of Speed

Posted by George Blackburne on Thu, May 7, 2015

Screaming_bossThe sales lesson that is today's blog subject applies to salesmen in just about any industry - be it commercial loan brokerage, commercial-investment property sales, or even car sales.  It sounds obvious - a salesman should call his leads quickly before a competing salesman reaches the customer first.  Duh.  As they say in the GEICO commercials, "Everyone knows that."

You would think so, but I just got off the phone with one of my loan officers, and I absolutely had to scream at him.  I gave him a world-class sales lead last night around 6:00 p.m., and when I spoke to him today around 4:30 p.m., he still hadn't call the lead.  Are you flippin' kidding me?!  I screamed so hard that my voice is now gone.  I mumble like the Godfather.  I'm  sitting here drinking wine at 5:00 p.m., just to calm my nerves and to keep from stroking out.  A salesman needs to call his leads quickly, before a competing salesman reaches the customer first.  Duh.  Everyone knows that.


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Over the past 15 years I have invested around $1.5 million in our wildly successful commercial mortgage portal,  You have all heard me boast about the success of the site - over 1,000 commercial loan closings totaling over $1 billion.  What you don't know is that C-Loans has never paid one red cent for advertising.  We get all of our commercial loan applications from organic seaches - not from the paid advertisements that you see above and along side the search results. provides great content because at the time I was writing all of those articles to train my sons, I truly thought I was about to keel over from heart disease.  (Recently I got wonderful news on that front.) 




But it costs tons of money to run C-Loans.  Just to maintain the site costs me around $15,000 per month - not counting the improvements that we are constantly adding to the site.  Since the crash of 2008, last year was the first year we exceeded break-even.  Why would I be willing to lose $50,000 to $100,000 per year on a business for six straight years?  Because my hard money shop makes a ton of dough from the leads generated by C-Loans.

Wait a minute.  Blackburne & Sons is certainly one of the cheaper commercial private money lenders, but no private money commercial lender can compete with a bank.  And there are 450 to 500 different banks and credit unions participating on C-Loans.  How can Blackburne & Sons compete against these banks for commercial loans?

Now we have reached the point of today's blog article.  Success on C-Loans is all about being the first lender or broker to reach the borrower.  After that, the borrower stops returning phone calls.  (Please re-read those last two sentences.)  This is arguably the most important lesson we have to teach our participating banks.  It's all about calling commercial loan leads quickly.

My loan officers (except for the learning-disabled loan officer described above) have all learned to call their C-Loans leads quickly - immediately - even if they have a million distractions on their desk.  As a result, we have been consistently out-selling the sleepy, salaried loan officers at the bank.




The reality is that sales leads seldom come in when its convenient.  Leads come in when your kid is sick or just when you are about to take your beautiful girlfriend out for drinks.  Leads usually come in at the most inconvenient time.  The successful loan officer fields his lead calls immediately, even if it is extremely inconvenient.

Once a borrower has sent you a loan package - or once the buyer has signed a contract to buy the commercial-investment property - or once the car buyer has signed a contract to buy the car - he's not going anywhere.  Sure, you want to give the customer great customer service, but ultimately most of us are on commission.  Each of us needs to close sales, and the first salesman to reach a customer usually makes the sale.  So when a lead comes in, drop everything and work the stinkin' lead!  This way your Sales Manager doesn't stroke out, and you get to eat next month.  (I've just finished my third glass of wine, and I am mellowing.  I have decided to simply shoot my loan officer, rather than roast him slowly over a spit.  Sixteen hours to call a great lead?  Hmmm.  Maybe just a couple of hours over a spit first...)


Everybody always looks at me as this great commercial real estate finance (CREF) guru, but it took me 35 long years to learn this business.  Remember, there were no nine-hour training courses in commercial real estate finance when I first started in this business.  Anyway, I still learn several new concepts about commercial loan brokerage almost every week.

I subscribe to an absolutely wonderful bi-monthly email publication called FinFacts by George Smith Partners.  As advanced in the industry as I am, these guys make me feel like a rookie.  These guys close the really large commercial loans.  (Don't be greedy-stupid.  Take a modest but numerically large referral fee!)

The folks at George Smith Partners are both life company correspondents (anybody out there remember 'ole George telling them that the real money in the commercial mortgage business is in loan servicing fees?) and commercial mortgage bankers for the really large commercial loans.

Anyway, in one of their newsletters this month, they used the term, "on-book capital providers".  So I asked my buddy, Bryan Shaffer of George Smith Partners, "What is an "on-book capital provider?  Is it the same as as a portfolio lender?"  

Bryan kindly responded:  "Yes. Using their own balance sheet. So, the same as a portfolio lender. Maybe a balance sheet lender may in the future sell the loan, but at least for now they are holding on their balance sheet. I only point this out because it not uncommon for balance sheet lenders to use docs that allow them to sell their loans into a pool in the future. Also today, several CMBS lenders use their balance sheets to do bridge loans that they hope to convert to a perm CMBS when it is ready."

Thanks, Bryan!


I spent $50,000+ (in early-1980's dollars) on my Bachelor's Degree in Business and another $25,000 (in mid-1980's dollars) on my MBA.  I would do it again, but what really made me dough was learning commercial real estate finance (CREF).  Would you invest a lousy $549 and nine hours of your life to learn one of the most hoity-toity of all professions?  Only the rich own commercial properties.


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Idiot-rookie commercial mortgage brokers think that it's all about finding the cheapest rate and the best commecial loan terms for their commercial mortgage borrowers.  The old veterans - who close most of the big commercial loans - understand that the borrower, most of all, needs money.  At Blackburne & Sons, we will issue a Loan Approval Letter (often within 36 hours) for free!  The rates offered by most banks sound fabulous, but they turn down most deals.  Suddenly the timely offer from Blackburne & Sons looks awfully attractive.  This is how the old veterans got to be old veterans.  They first get a Loan Approval Letter  from Blackburne & Sons, and then they approached nearby banks saying, "These private money guys want to make me a commercial loan, but you can beat these these stinky 'ole terms, right?"  It's human nature.  Everybody wants to make you a commercial loan when another lender has made you a serious offer.


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Got a deal that clearly needs to be closed by a bank, conduit, or life company?


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Here's my intelligence test.  Would you trade the contact information of one loan commercial real esate loan officer working for the seventh largest bank in Iowa for a list of 2,000 bankers across the U.S. making commercial real estate loans?  Hmmm.  Tough decision.  (Guys, the only reason I make this grossly-favorable offer is because 95% of all commercial mortgage brokers - not my trainees - will move on to another industry within two years.  If you have decent smarts, this will probably be the single best business deal you will make in your lifetime.)


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You can now place business loans - loans NOT secured by commercial real estate - using C-Loans.  The super-nice thing about business loans is that they can close within twelve days, not four months!


Business Loans Not Secured By   Real Estate - Unsecured or Secured   

Commercial Loans and the Definition of a Gateway City

Posted by George Blackburne on Sun, May 3, 2015

Gateway_CityWhat is a gateway city?  The term is all the rage in commercial real estate lending.  The largest banks only want to make commercial loans in these gateway cities.

If you look up the definition of "gateway city" on the internet, you'll get the following definition:  "Airport or seaport that serves as the entry point to a country by being the primary arrival and departure point." Under this definition, only Los Angeles, San Francisco, Miami, and New York qualify.  Clearly there is more to the term than that.  Commercial lenders are not limiting their commercial loans to just these four cities.

I've heard of other definitions of "gateway cities".  It's the cities with football teams.  Hellooooo?  Oakland, St. Louis, and Baltimore all have football teams.  If you were a commercial real estate investor, would you really want to own commercial property in one of these high-crime, high-drug-use cities?  In fairness, as to cities, the Most Improved Player Award would go to Oakland, California.  Rents in Oakland are rising sharply, as San Francisco Peninsula rents rise towards the stratosphere.




I have one more topic to consider as we develop a more realistic definition of "gateway city".  In Janaury of 2010 George Friedman published his landmark book, The Next 100 Years.  I consider it one of the most important books that I have ever read.

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In his book, The Next 100 Years, Friedman advances the proposition that new industries are created when young men and women from Industry A meet for lunch, dinner, or drinks with young men and women from Industry B.  A young executive from Industry A happens to mention over drinks that, "Did you know that our company just figured out how to toggle a widget into the on and off position at the molecular level?"  Then the young executive from Industry B says, "Oh my goodness!  Do you realize that with that molecular switch we could do XYZ?  Would you be interested in forming a spin-off?"

Obviously the more people in a city, the more likely that such an important discovery will be made.  The more top-level universities in that city, the more likely that two well-educated young executives will hook up.  Bottom line:  Big cities full of educated young people are where new industries are most likely to be created.

Therefore, from the point of view of a commercial real estate lender, a gateway city is a large city, containing a number of first-tier universities, where young, ambitious executives are not afraid of getting shot.  These are the cities where new industries are most likely to be created and where new workers are most likely to be hired.

All it takes is for you to run across just one bank or credit union making commercial real estate loans.  You can then parlay that contact information into a databank of over 2,000 bankers making commercial real estate loans.


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A tidal wave of commercial loans are coming due in 2015, 2016, and 2017.  The next two-and-a-half years will be the most profitable years in history for most commercial mortgage brokers.  Would you invest a lousy $549 to actually know what on earth you're doing?  Do you even know what a mezzanine loan really is?


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The idiot, young commercial mortgage broker thinks its all about finding cheapest the cheapest commercial mortgage loan for his borrower.  The old veteran understands that his client needs money.  Sure, all else being equal, the borrower would prefer a cheaper rate; but ultimately his client needs money.  Helloooo?   The client needs money.  Therefore the old veteran will always submit this commercial loan to Blackburne & Sons.  The wonderful folks there will issue a Loan Approval Letter for free.  Then, if the bank leaves the borrower standing at the altar looking stupid, the broker can always say, "Maybe we should take the offer from Blackburne & Sons.  There is no prepayment penalty."


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Okay, I'll admit it.  The lovely young actress who stars in Cinderella probably doesn't want to kiss stinky old George.  Any banker in town will take her to the ball.  Fabulous movie!!  I've seen it twice now, once with my lovely bride and granddaughter and once with my daughter.  Got a bankable deal that is waaay too good for stinky old Blackburne & Sons?


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Topics: Gateway City