Exhibit A -- Specifics of the Loan

Non-California Residents
Must Purchase the Entire Loan

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Loan Number: N2726
Loan Amount: $700,000
Minimum Investment: $10,000
Call for availability of smaller participations
Type: First Mortgage
Yield: 12.0%*

Important Links:
How to Invest in This Loan
Suitability Requirements
Offering Circular
Loan Servicing Agreement
Audited Financial Statement for B & S
Inventory of Available Loans
To Be Added to Our Investor Email List


PROPERTY

Project: East Michigan Commercial
Property Address
: 19157 East Michigan Ave., Marshall, MI 49068
Description:
The subject property consists of a 22,060SF industrial warehouse on a +20-acre site located in Marshall, Calhoun County, Michigan

For an aerial view of this property...Click Here!

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TERMS

Term of Investment
36 months
Current Interest Rate
12.0%*
Repayment Schedule
30 Year Amortization
Monthly Payment
$7,130.39*
Purchase Price of the Note
$700,000
Current Balance on the Note
$700,000
Maturity Date
36 months
Balloon Pymt. after 36 months app.
$702,455.16
Late Charge Amount
$823.87**
Prepayment Penalty
None

*Net of servicing
**To be shared equally with B&S


EQUITY ANALYSIS

Appraised Value - (Hypothetical) - December 28, 2022
$2,000,000
Protective Equity (Hypothetical)
$1,300,000
Loan-to-value - Appraisal (Hypothetical)
35.0%


OPERATING STATEMENT

INCOME
Rental Income
$617,680
Recoveries
$165,761
Effective Gross Income:
$783,441
   
EXPENSES
.
Insurance
$2,868
Maintenance
$17,648
Management
$23,503
Real Estate Taxes
$119,536
Reserves for Replacement
$2,206
Total Expenses
$165,761
 
NET OPERATING INCOME
$617,680
Note: Pro forma based on appraiser's estimates

BORROWERS

Name(s)
LLC
Net Worth
$1,800,000
Occupation
Real Estate Holding Company
Percent of Ownership
100%

Name(s)
Individuals
Net Worth
$1,744,976
Occupation
CEO
2021 Income
$1,199,130
2020 Income
$325,304

Name(s)
Individuals
Net Worth
$1,228,180
Occupation
CEO
2021 Income
$1,149,129
2020 Income
$149,482

Name(s)
Individuals
Net Worth
$1,870,000
Occupation
CEO
2021 Income
$559,302
2020 Income
$500,425

Name(s)
Individuals
Net Worth
$181,992
Occupation
Retired
2021 Income
$161,843
2020 Income
$54,616

Earn a $250 Referral Fee 
Refer accredited trust deed investors
for our mailing list.


To invest, call Tom Blackburne
at 1-800-606-3232 or CLICK HERE.


EAST MICHIGAN COMMERCIAL

George says, “Folks, we have raised the rate so high - now 12% net - and we have lowered the loan-to-value ratio so low - now just 35.0% - that the risk-return ratio should finally be irresistible.   Eventually, the production and sale of pot will become overbuilt, and there will be a shakeout; but right now it is very hard for new entrants to the cannabis business to get financing.  Remember, banks can’t make pot deals, and hard money investors have a limit to how much money they will sink into cannabis projects.   This is a significant barrier to entrance."

"You guys also know that I hate high-yield deals because loans with high interest rates have high payments, which eventually will grind the borrower into the dust.  Successful cannabis properties (no guarantees here, folks), however, can easily handle a 2% higher rate.  Lastly, the cannabis business should be somewhat recession-resistant.  If I knew for sure that a recession was coming (I am far from convinced), I think I would feel far safer investing in a cannabis loan, as opposed to a restaurant loan or a motel loan."

Blackburne & Sons is pleased to present this first mortgage secured by a 22,060SF industrial greenhouse facility on a +20-acre parcel located in Marshall, Calhoun County, Michigan.

The proceeds of this loan will be used to pay off a land contract of $200,000, build two additional greenhouse, and purchase equipment.

COUNTY INFORMATION

Calhoun County is located in the southern portion of Michigan. In 2020, the county had a population of 134,000 people with a median age of 40.1 and a median household income of $50,219.  Between 2019 and 2020 the population of Calhoun County, MI declined from 134,212 to 133,943, a 0.2% decrease and its median household income grew from $48,607 to $50,219, a 3.32% increase.

The county was established on October 19, 1829, and named after John C. Calhoun, who was at the time Vice President under Andrew Jackson, making it one of Michigan’s Cabinet counties.  The county government was first organized on March 6, 1833.  Calhoun County comprises the Battle Creek Metropolitan Statistical Area and is included in the Kalamazoo-Battle Creek-Portage Combined Statistical Area.  According to the U.S. Census Bureau, the county has a total area of 718 square miles, of which 706 square miles is land and 12 square is water. 

The largest universities in Calhoun County are Kellogg Community College (860 degrees awarded in 2020), Albion College (346 degrees), and Ross Medical Education Center Battle Creek (17 degrees). 

CITY INFORMATION

The city of Marshall is the county seat of Calhoun County.  Per Data USA, in 2020 Marshall had a population of 6,950 people with a median age of 46.6 and a median household income of $58,175.  Between 2019 and 2020 the population of Marshall declined from 6,998 to 6,947, a -0.729% decrease and its median household income grew from $50,969 to $58,175, a 14.1% increase.  The economy of Marshall employs 3,180 people.  The largest industries in Marshall are Health Care & Social Assistance (598 people), Manufacturing (594 people), and Educational Services (455 people.  The highest paying industries are Professional, Scientific, & Technical Services ($74,412), Professional, Scientific, & Management & Administrative & Waste Management Services ($72,574), and Transportation & Warehousing, & Utilities ($58,359). 

Marshall is best known for its cross-section of 19th and 20th century architecture.  The city has been referred to by the keeper of the National Register of Historic Places as a “virtual textbook of 19th Century American architecture.”  Its historic center is the Marshall Historic District, one of the nation’s largest architecturally significant National Historic Landmark Districts.  The Landmark has over 850 buildings, including the world-famous Honolulu House. Marshall is part of the Battle Creek, Michigan Metropolitan Statistical Area. The city of Marshall has five major highways. I-94, an east-west route connecting Battle Creek and Kalamazoo on the west and Jackson and Detroit on the east.

According to the United States Census Bureau, the city has a total area of 6.40 square miles, of which 6.28 square miles is land and 0.12 square miles is water. Brooks Field is a non-towered General Aviation airfield owned and operated by the city of Marshall.

Marengo Township is a civil township of Calhoun County. The city of Marshall has incorporated land from the western edge of the township. Marengo Township has opted in and permits both Medical and Adult Use marijuana businesses to operate in the township. For the Adult Use market, the township will authorize up to 90 Class C grow permits, (9) processor permits, (1) safety compliance facility permits, and (1) secure transporter permit. The township does NOT permit retailers (dispensaries) to operate in the township. Generally, the neighborhood supports the use of the subject property as a cultivation facility.

SUBJECT PROPERTY DETAILS

The borrowers purchased the subject as land in May 2021 for $600,000. They put $400,000 cash down and did a land contract with the seller for $200,000. Per the borrowers, they have spent approximately $5,800,000 in construction, equipment, etc. on this property since the purchase. The business became operational in December 2021, and started grown cannabis on site in April 2022. A 2022 P&L was provided that shows $513,362.62 in gross income and $66,043 in net income.

The subject property is a 22,060SF industrial warehouse segmented into two sections which are the head house and the greenhouse on a 20-acre parcel.  The head house includes, office space, a break room, (3) flower rooms, (1) vegetation room, (1) clone room, a dry/trim room, and a mechanical room.  The flowering rooms have Anden dehumidifiers, Loriflux LED grow lights, automated irrigation and typically 16ft ceiling height.  The demising walls are anti-microbial wall panels.  The head house also contains the Reserve Osmosis water system, (1) grade level overhead door, restrooms, the security system controls, switchgear and mechanicals.  Ground mounted Samsung HVAC units align the northern wall of the Headhouse. 

The greenhouse section has good quality ridged insulated exterior walls resulting in the ability for year-round operations.  The greenhouse section has four demised growing bays (identified as greenhouse 1, 2, 3, and 4).  Each bay has a pitched roof section which is 23ft at the apex.  Greenhouse bays 1 and 2 are fully built out and operational.  They have Dehuking dehumidifiers, heaters, fans, automated irrigation and Loriflux grow lights.  Greenhouse bays 3 and 4 require additional finish out.  The remaining work includes the installation of electrical, HVAC, grow lights, and tables. 

BORROWER SUMMARY

The borrowers hold title through an LLC, which is the real estate holding company.  There are four members of the LLC, all of which are providing personal guarantees, as well as their wives. This entity reports a net worth of $1,800,000.

Guarantors #1 are husband and wife. The husband is an experienced business executive that manages and operates four gas stations and convenience stores.  They report a net worth of $1,744,976.  Their mid-credit scores are 757 and 795.  Their personal tax returns for 2021 reported an adjusted gross income of $1,199,130 and in 2020 they reported $325,304 in adjusted gross income. 

Guarantors #2 are husband and wife.  They report a net worth of $1,228,180.  He runs the cannabis business as well as owns a shopping center. Their mid-credit scores are 680 and 761.  Their personal tax returns for 2021 reported $1,149,129 in adjusted gross income and in 2020 they reported an adjusted gross income of $149,482. 

Guarantors #3 are husband and wife.  They report a net worth of $1,870,000.  Their mid-credit scores are 611 and 735.  Their personal tax returns for 2021 reported $559,302 in adjusted gross income and in 2020 they reported $500,425 in adjusted gross income.  This borrower owns a vending machine business and reported net income of $779,220 in 2021.

Guarantors #4 are a retired husband and wife.  They report a net worth of $181,992 and have a credit score of 738.  Their personal tax return for 2021 reported $161,843 in adjusted gross income and in 2020 they reported an adjusted gross income of $54,616. 

VALUATION SUMMARY

We hired a local MAI appraiser who valued this property (Hypothetical Condition without cannabis entitlements) at $2,000,000.

Two local brokers were also engaged who performed a drive-by opinion of value (BPO). The first broker originally provided a value of $696,000. Once questioned they changed their value to $760,800 and eventually to $2,424,000.  Due to the large dramatic shifts in valuation, we engaged a second broker for a BPO. The second BPO valued the property at $1,990,000.

At an 12.0% yield to the investors and a 35.0% LTV (Hypothetical) 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.

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.

George’s Advice For Successful First Mortgage Investing

  1. 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.

  2. 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.

  3. 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.

  4. You can also buy some of our smaller deals in their entirety, but I only recommend this if you are richer than Crassus.

  5. 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. 

  6. 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.

Earn a $250 Referral Fee 
Refer accredited trust deed investors
for our mailing list.


To invest, call Tom Blackburne
at 1-800-606-3232 or CLICK HERE.


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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