Oklahoma City Retail

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 says: "Cannabis has been legalized in so many states that is has become mainstream. Looking at this deal as just a normal commercial loan, I love the deal because it is small, and the value of the property has recently been established by a purchase price."

Blackburne & Sons is pleased to present this First Mortgage secured by 1,448SF retail building on a 6,098SF lot located in Oklahoma City, Oklahoma County, Oklahoma.

The proceeds of this loan will go towards consolidating investor debt and to making additional improvements to the subject property.

Oklahoma County is located in the central part of the state of Oklahoma. As of the 2020 census, the population of the county was 792,668, making it the most populous county in Oklahoma. Between 2019 and 2020 the population of Oklahoma County grew from 787,216 to 792,668, a 0.693% increase and its median household income grew from $54,520 to $55,519, a 1.83% increase. In 2020, the median property value in the county was $157,000, and the homeownership rate was 59.5%.

According to the U.S. Census Bureau, the county has a total area of 718 square miles, of which 709 square miles is land and 9.6 square miles is water. The largest universities in Oklahoma County are University of Central Oklahoma, Oklahoma City Community College, and University of Oklahoma-Health Science Center.

CITY INFORMATION

Oklahoma City, is the capital and largest city in the state of Oklahoma. The city is the county seat of Oklahoma County and the 8th largest city in the Southern United States. In 2020, the city had a population of 649,821 people. The Oklahoma City metropolitan area had a population of 1,396,445. The city limits extend somewhat into Canadian, Cleveland, and Pottawatomie counties, though much of those areas outside the core Oklahoma County area are suburban tracts or protected rural zones.

The economy of Oklahoma City, employs 377,000 people. The largest industries in the city are Health Care & Social Assistance (52,098 people), Retail Trade (44,403 people), and Accommodation & Food Services (31,452 people). The highest paying industries are Mining, Quarrying, and Oil & Gas Extraction ($83,649), Agriculture, Forestry, Fishing & Hunting, & Mining ($70,882), and Utilities ($67,017). The city once was just a regional power center of government and energy exploration, has since diversified to include the sectors of information technology, services, health services, and administration. The city is headquarters to two Fortune 500 companies: Chesapeake Energy and Devon Energy. As well as being home to Love’s Travel Stops and County Stores, which is ranked thirteenth on Forbes’ list of private companies.

Oklahoma City is home to several professional sports teams, including the Oklahoma City Thunder of the NBA. OKC Thunder has called Oklahoma City home since 2008-09 season, when the owner Clay Bennett relocated the franchise from Seattle, Washington. The Thunder play home games at the Paycom Center in downtown Oklahoma City. Other professional sports clubs in the city include the Oklahoma City Dodgers, the Triple-A affiliate of the Los Angeles Dodgers, the Oklahoma City Energy FC of the United Soccer League, and the Crusaders of the Oklahoma Rugby Football Club of USA Rugby.

The neighborhood is primarily developed with a mix of multifamily buildings and single-family houses. Retail properties are located along the high traffic roads on the outer perimeter of the neighborhood. The area was developed in the 1960’s with the median year built being 1961 and the current median single family house price is $174,000.

Per the appraiser, the competitive market area for the subject property extends beyond the immediate neighborhood boundaries and into the greater Oklahoma City metropolitan area. The local area market is projected to see an increase in all demographics including population, households, and median income. The vacancy rate is relatively low. Market rents are forecasted to increase over the next few years. The sakes volume and price per unit is also projected to increase during that time. Overall, the local area market has a positive outlook for the foreseeable future.

The borrower purchased the subject property in January 2022 for $180,000 cash. The property is currently free and clear of any liens. It is currently being used as an owner-occupied Cannabis Dispensary, and opened for business in September 2022.

The borrower has already put extensive rehab into the property since purchase. There will be a copy of the cap ex/rehab budget located in the due diligence package. There are some other items he wants to complete and to reimburse himself $50,000 for money he just spent on HVAC and other renovations with the proceeds of this loan.

Built in 1948, the property is a 1,488 SF retail building located on a 6,098 SF parcel. The site is generally level and at street grade. The drainage appears adequate, the soil and subsoil conditions support the existing structure. The site is primarily accessed by a public roadway. Public utilities are available at the site, including gas, water, and electricity. There are no external nuisances, hazards, or detrimental influences noted. The site is in FEMA flood hazard Zone X. The site has typical utility easements that are common to the area. Overall, the site offers all the necessary elements to support the existing improvement.

The borrower’s cannabis license expired in June 2023, however he did submit for renewal prior to the expiration date. The state of Oklahoma is very backlogged and therefore hasn’t given him the updated license yet. However we do have an email confirmation dated June 6, 2023 that they received his application. We also have a screenshot from the State of Oklahoma Department of Health stating that as long as a renewal application and fees are submitted before the license is 30 days past due, the application will be processed without penalty and certification will remain in good standing. Both of these items will be included in the due diligence package.

BORROWER SUMMARY

Our borrower is a single man and will hold title through a newly formed LLC. He will also provide a personal guarantee on our loan. He is a Cardiovascular Technician as well as a real estate professor and earned $95,000 in W2 income in 2022. He owns a rental property in Rosedale, New York that had a $20,249 loss, which resulted in his adjusted gross income being $43,621. However, that property had $24,947 in depreciation write offs.

Our guarantor reports a net worth of $842,661 and has a mid-credit score of 689. In 2022, his personal tax returns reported adjusted gross income of $43,621 and in 2021 he reported $52,424 in adjusted gross income.

The borrower provided the 2022 business tax return for the cannabis entity (October-December 2022). This tax return reports a loss of $112,548, however if you add back depreciation and rent, the property had a net loss of $14,373.

VALUATION SUMMARY

We engaged a local MAI appraiser who provided an (AS-IS) value of $200,000. We also engaged a local broker who performed an opinion of value. They valued this property at $180,000.

At a 11.0% yield to investors and a 60.0% LTV, 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 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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