Pueblo CO Industrial Refinance

George says: "This is a traditional hard money loan. When our borrowers banded together to buy this property, the intent was to continue an existing cannabis grow facility (a place where they grow pot). The license transfer blew up. Lawsuits were filed. Blood was spilt. This hard money loan, based on the equity in this property, solves many of the disputes. As far as hard money, pure equity loans go, this looks like a very reasonable one. Eleven percent on a deal that is 27% loan-to-value is not a bad place to be with the next great recession knocking on the door.”

“I don’t trust the BPO (Broker’s Professional Opinion). Real estate brokers, when hired for a lousy $500 to render an opinion of value, normally discount that opinion by 35% to cover their butts. You should discount the appraised value by 35%; but even if you do, this pure equity loan still looks like a very good deal."

Blackburne & Sons is pleased to present this First Trust Deed secured by a 4,800SF light industrial / office / flex building, with a greenhouse totaling 9,884SF, on 1-acre, located in Pueblo West, Pueblo County, Colorado.

The purpose of this loan is to cover greenhouse repairs of roughly $80,000, paying off the former sellers for $65,000, working capital and to cover closing costs. It should be noted that we will be holding back $64,500 in a payment reserve, equaling 24 months of payments.

Pueblo County is a county located in the U.S. state of Colorado. As of the 2020 census, the population was 168,162. The county seat is Pueblo. The county was named for the historic city of Pueblo which took its name from the Spanish language word meaning "town" or "village". Pueblo County comprises the Pueblo, CO Metropolitan Statistical Area. According to the U.S. Census Bureau, the county has a total area of 2,398 square miles, of which 2,386 square miles is land and 12 square miles (0.5%) is water.

The county is home to San Isabel National Forest and Greenhorn Mountain Wilderness. Its major highways include Interstate 25, U.S. Highway 50 and U.S. Highway 85.

CITY INFORMATION

Pueblo West is a census-designated place (CDP) in and governed by Pueblo County, Colorado, United States. The CDP is part of the Pueblo, CO Metropolitan Statistical Area. The population of the Pueblo West CDP was 33,086 according to the United States Census 2020. The Pueblo West Metropolitan District provides services. The Pueblo post office (Zip Code 81007) serves Pueblo West postal addresses. Pueblo West is approximately 49 square miles in size and is located along the southern edge of the state's major growth corridor. Situated on Highway 50, roughly 7 miles west of the City of Pueblo and 38 miles east of Cañon City, Pueblo West is bisected by U.S. Route 50, and its northeastern border is adjacent to Interstate 25. Lake Pueblo State Park is situated along the southern boundary of Pueblo West, and the remainder of the community is mostly landlocked by ranch land, conservation easements, and private property.

In 2023, the median property value in Pueblo West, CO was $371,600, with a home ownership rate of 86.9% and the median household income was $95,419. The economy of Pueblo West, CO employs 15.8k people. The largest industries in Pueblo West, CO are Health Care & Social Assistance (2,409 people), Retail Trade (1,867 people), and Educational Services (1,642 people), and the highest paying industries are Utilities ($124,948), Professional, Scientific, & Technical Services ($96,071), and Finance & Insurance ($94,773).

SUBJECT PROPERTY DETAILS

The subject consists of a 1.0-acre parcel that is rectangular in size and generally level in topography. It is located in a I-2 – Light Industrial zoned land with frontage along Laser Drive in the Pueblo West market. The subject is located in Pueblo West, just a short distance north of U.S. Highway 50. The neighborhood consists a smaller municipality located to the west of the City of Pueblo in an unincorporated area of the county. The Pueblo West area is bisected by U.S. Highway 50 and has seen the bulk of residential growth for the greater county over the past 15-years.

The parcel is improved with a stucco/stone light industrial/office flex building totaling 4,800SF. The building was originally constructed in 1988, and then renovated over the recent past to facilitate the use as a cannabis grow facility. It should be noted that the property is currently vacant, and no cannabis sales/production are occurring at the property. The improvements are equipped with a reinforced concrete slab foundation, wood framing and a pitched asphalt shingle roof. The building comprised of roughly 67% office space, with the remaining areas consisting of garage/storage space. An extensive fenced exterior storage exists in the south and west portions of the site.

The west portion of the site is improved with a straight wall/hoop style greenhouse building which includes roughly 9,884SF. That appraiser notes that this structure was damaged in a wind event and is missing portions of the roof and wall panels. The proceeds of this loan will be going towards these repairs to bring the building back to full functionality. The borrower has estimated this will cost between $50,000 and $80,000. It should be noted that property is currently vacant and the appraiser did not complete an income approach on their report.

BORROWER SUMMARY

Our borrower is limited liability company, of which our guarantors are 66.66% owners. The LLC is a real estate holding entity that reported a net business income of $13,260 in 2023 and ($134,859) in 2022. There is a 3rd member of the LLC, but he will not be guaranteeing our loan, and has signed a corporate resolution giving the other two members the authority to sign for our loan.

Guarantor #1 is a married man who works as the CEO for an investment company. He self-reported a net worth of $5,204,067 and has a mid-credit score of 696. His tax returns show and adjusted gross income of ($176,570) in 2024 and ($146,611) in 2023. He will be providing a personal guarantee on this loan, however, his wife will not.

Guarantor #2 is also single man who works as the managing director for a wealth advisement company. He self-reported a net worth of $3,216,511 and has a mid-credit score of 819. His tax returns show and adjusted gross income of $20 in 2023 and $1,787,271 in 2022. He will also be providing a personal guarantee on this loan.

Historically, the subject property has been for cannabis cultivation. The borrower purchased the property in 2021 for $1,375,000, with the intent of continuing the cannabis operation. As part of the 2021 purchase, the borrowers were to acquire the cannabis licensing from the sellers. However, there was an issue with the transfer of the cannabis license(s), so the two sides went into litigation. The result is that the property is not an active cannabis operation, and is vacant. The current plan for this property is to make the aforementioned greenhouse repairs, and then will list the property for sale. It should be noted that there is a second mortgage on this property, between the borrowing entity and the guarantors personally. This mortgage will subordinate to our loan.

We hired an MAI appraiser who valued this property at $930,000 (AS-IS). We also hired a local broker who performed a drive-by opinion of value (BPO) and valued this property at $922,572.

At a 11.0% yield to investors and a 26.9% 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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