Planet X Tobacco & Gifts

THE LOAN OFFERED HEREBY IS A CANNABIS LOAN THAT WILL BE SECURED BY A PROPERTY UTILIZED TO GROW, MANUFACTURE, PROCESS, DISTRIBUTE OR DISPENSE CANNABIS OR CANNABIS RELATED PRODUCTS. THIS LOAN INVOLVES SIGNIFICANT ADDITIONAL RISKS NOT ATTRIBUTABLE TO LOANS UNRELATED TO THE CANNABIS INDUSTRY AND SUCH LOANS ARE NOT SUITABLE FOR ALL INVESTORS. POTENTIAL PURCHASERS OF FRACTIONAL INTERESTS IN THIS LOAN MUST REVIEW AND UNDERSTAND THE INFORMATION SET FORTH IN THE OFFERING CIRCULAR ENTITLED "ADDITIONAL RISKS AND CONSIDERATIONS OF CANNABIS RELATED LOANS" PRIOR TO INVESTING. PURCHASERS OF INTERESTS IN THIS LOAN SHOULD ALSO CONSULT THEIR OWN LEGAL COUNSEL AND INVESTMENT ADVISORS WITH RESPECT TO THESE RISKS TO DETERMINE IF AN INVESTMENT IN THIS LOAN IS APPROPRIATE FOR THEIR PARTICULAR RISK TOLERANCE PROFILE AND FINANCIAL SITUATION.

Angela says: “The borrower is refinancing a SBA loan to expand his current business into cannabis, and thus the need for this rate/term refinance. As part of this refinance, the borrower will be bringing approximately $10,000 cash to closing to pay in full the SBA first and to cover closing costs. In addition, the guarantor/principal of borrower reports annual income for the last two years above $300,000 and has a 700+ credit score. This is also a multi-tenant property, in which the 2nd floor of the subject property is leased to a third-party for $2,500/month. At 10% yield and a 62.4% LTV, we present to investors another reasonable private-money first trust deed to add to your portfolio”.

Blackburne & Sons is pleased to present this first trust deed secured by a 7,206SF two-story commercial building on a 0.30 acre parcel located in Anchorage, Alaska.

The borrower is refinancing a $708,000 SBA loan with no cash out in order to get the property ready to add a Cannabis retail division to his business/property. SBA will not allow this, thus the reason for our loan. The borrower will need to bring approximately $10,000 cash to closing to cover closing costs.

Anchorage is Alaska’s largest city with approximately 40% of the total population. The subject is located in the Municipality of Anchorage, which is situated within Southcentral Region. Both natural and man-made environmental forces influence real property values. Alaska has a total land area of 586,048 square miles, and is one-fifth the size of the entire commercial United States. Alaska has size distinct regions, each with its own economic profile. Anchorage falls within the Southcentral region of Alaska. The Municipality of Anchorage contains approximately 2,000 square miles, although almost all of the population lives on a 93-square mile peninsula known as the Anchorage Bowl. Average temperatures in Anchorage during the winter months range from 6 to 20 degrees and 50 to 70 degrees during the summer months.

Recreational use of cannabis was legalized in Alaska in 2015, and quite interesting to read that the use of marijuana and cannabis has been something that has been a part of the state of Alaska long before it was officially legal to do so.

SUBJECT PROPERTY DETAILS

Built in 1974, the subject consists of an existing two-story, concrete block, commercial building. The total gross building area is 7,206SF, with a rentable area of 7,082SF, split between the first and second floor. The subject sits on two contiguous, rectangular lots totaling 0.30 acres, and has reportedly very good exposure and access along the south side of Northern Lights Boulevard and North Star Street in Midtown, Anchorage. The overall parcel is generally level and offers all public utilities.

The borrower purchased this property in January 2019 for $1,200,000, with outstanding balance on the SBA first of $708,000. The subject property has two tenants; the first floor is occupied by the borrower’s tobacco and gifts business, where he has plans to open a cannabis retail division after this loan closes. Licensing cannot be initiated as he cannot have a SBA loan when he submits his application. This will be submitted once this loan closes and the SBA is paid in full. There is a lease in place between the borrower/owner (holding entity) and the tenant for the first floor; the monthly lease amount is $7,509 and has been paid directly to the SBA each month, per the borrower. The lease terms are NNN, so all expenses are paid by the tenant. The second floor is leased to a church tenant for $2,500 per month, on a month-to-month lease. This church tenant does plan on staying in the property once the cannabis division is started. Total scheduled monthly rental income is $10,009, with NNN expenses to be paid by tenants.

The borrower for this loan is a limited liability company (LLC), formed solely to hold the subject property and is comprised of one separated man, whom will provide a personal guarantee. A separate limited liability company operates the current business out of the subject property. Given both of the LLCs are single-member LLCs, all income and expenses of the holding entity and operating entity are being reported on the personal guarantor’s personal tax returns.

As for the guarantor, he has a credit-mid score of 808 and reports a net worth of $1,324,680. His 2019 personal tax return reports a total income of $469,996 and $402,888 in 2018. A 2020 profit & loss statement on the operating entity is reporting $533,532 of net income for the year.

NOTE: The borrower does not have a license to operate/dispense cannabis. After the SBA is paid in full, the application will be filed but there is not guarantees of approval being provided in this offering. However, even without the cannabis component, the borrower/guarantor appear to debt-service this obligation.

We hired a local MAI appraiser to value this property which provided an AS-IS value of $1,250,000. A local broker was also engaged who performed a drive-by opinion of value and valued this property at $1,008,840 to $1,116,930.

At a 10.0% yield to the investors and a 62.4% LTV (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.

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 George Blackburne, IV
555 University Ave., Suite 150, Sacramento, CA 95825
Telephone: (916) 338-3232 * Fax: (916) 338-2328
Real Estate Broker -- California Bureau 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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