Colorado Springs Retail Purchase

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: "By hard money standards, this is about as good as it gets - very nice property, very good credit, a handsome income, and a net-worth-to-loan-size ratio of 8:1. Lastly, we know why the deal is coming to us. It will be a marijuana dispensary. There always has to be a reason. Our smartest investors will jump all over this deal in about a nanosecond."

Blackburne & Sons is pleased to present this purchase money First Trust Deed secured by a two-story 1,668SF retail building (converted residence) on a 0.08 acre parcel located in Colorado Springs, El Paso County, Colorado.

The subject is currently under contract for purchase in the amount of $549,000 with a $5,000 seller credit resulting in a net contract price of $544,000 or $326.14 per square foot. The borrower will be bringing approximately $227,000 cash to closing, including closing costs.

The borrower owns and operates a medical marijuana dispensary just outside of downtown Colorado Springs, Colorado. The business opened 7/1/2019 and is a stand-alone dispensary. The company does not have a connected grow. Colorado Springs has now legalized recreational cannabis sales and a city ordinance will require the company to move from their current location to convert to a recreational dispensary, thus the reason for this purchase.

El Paso County has a population of over 750,000, providing residents with a thriving downtown, family-friendly suburbs, and vast rural expanses. The County is home to eight municipalities, each contributing to the community’s geographic, economic, and social diversity. With mountains to the west, forest to the north, and plains to the east, you can hike, bike, kayak, and explore without ever leaving El Paso County.

Colorado Springs is the #1 most desirable and #3 best place to live in the United States according to U.S. News and World Report. Colorado Springs, at an elevation of 6,035 ft., is a city in Colorado at the eastern foot of the Rocky Mountains. It lies near glacier-carved Pikes Peak, a landmark in Pike National Forest with hiking trails and a cog railway leading to its 14,114-ft. summit. The city's Garden of the Gods Park features iconic red-sandstone formations and mountain views.

Colorado Springs is the most populous city in El Paso County, Colorado, United States, and its county seat. The population of 478,961 at the 2020 census, a 15.02% increase since 2010. Colorado Springs is the second-most populous city and most extensive city in the state of Colorado, and the 40th-most-populous city in the United States. It is the principal city of the Colorado Springs metropolitan area, which had 755,105 residents in 2020, and the second-most prominent city of the Front Range Urban Corridor. It is located in east-central Colorado on Fountain Creek, 70 miles (113 km) south of Denver.

The area surrounding the subject property is situated in the West Colorado Springs neighborhood, encompassing the historic district of Old Colorado City. This locale offers a unique blend of historic charm, artistic flair, and convenient access to both natural attractions and urban amenities. Bancroft Park, located in Old Colorado City, is a central gathering spot for the community. During the summer, locals flock to the park for outdoor concerts and weekly farmers markets. Additionally, the neighborhood's proximity to the foothills of the Rockies provides residents with easy access to hiking, biking, and nature walks, making it an ideal location for outdoor enthusiasts. Additionally most homes on West Colorado Avenue have been converted to shops incorporating hairdressing salons, restaurants, breweries, law offices etc

Located on the west side of Colorado Springs, the subject is zoned as MX (mixed-use) and is located on a corner lot. It was built in 1897 and appear to have been well maintained over the recent past including a partial renovation circa 2020. During the appraiser’s site tour, he did not observe any notable items of deferred maintenance with regard to the subject building.

The subject totals 1,668 SF and is a two-stories. The lower level appears to consist of individual rooms and large greeting area with a bathroom, laundry facilities and half kitchen. The upper level appears to have 2 bedrooms, a bathroom and kitchenette.

The exterior includes wood/vinyl siding and is highly visible from Colorado Avenue. The building includes standard interior finishes with painted sheetrock walls/ceilings and carpet/tile floors.

The property appears to be in average to good condition and has approximately 5 parking spaces at the rear for off street parking. It is in a high traffic visibility area.

The site fronts along West Colorado Avenue and is zoned MX - M (Mixed Use), which allows for a wide variety of commercial uses, similar to other properties located along that arterial in Western Colorado Springs. This is a house that was rezoned to mixed-use and was previously used as an art studio. The borrowers will use it to sell marijuana, now that they are allowed to sell within city limits.

The borrower will be holding title through a Limited Liability Company (LLC) that was formed in 2017, and is a real estate holding company. The husband is the sole member of that LLC. Both husband and wife will provide a personal guarantee on our loan. The borrowers also own and operate a Bail Bonds business and collect social security.

The borrowers report a net worth of $2,998,115 and have mid-credit scores of 767 and 721. In 2023, their personal tax returns reported adjusted gross income of $457,062, and in 2022 reported adjusted gross income of $779,667. They have filed an extension for 2024.

In 2023, the borrower’s business tax returns reported $356,222 in net income, and $614,782 in net income for 2022. They have filed an extension for 2024 but did provide a P&L showing $261,689 in net income.

We hired a local MAI appraiser who valued this property at $560,000 (AS-IS). We also hired a local broker who performed a drive-by opinion of value (BPO) and valued this property at $680,000.

At a 10.0% yield to investors and a 63.8% LTV (AS-IS) appraised value, and 65.0% LTV (Purchase Price) 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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