Class Number: 2018-01
Initial Capital: $2,310,000
Purchase Price: $2,100,000
Appraised Value: $2,100,000
Minimum Participation : $50,000
Call For Availability Of Smaller Participation

Type of Investment : Cash Flow Property
Anticipated Holding Period: 5 years

Important Links:

Private Placement Memorandum
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Suitability Requirements
Audited Financial Statement for B&S
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PROPERTY

Project: 9TH STREET APARTMENT BUILDING
Property Address: 515 9th Street, Sacramento, CA 95814
Description: The subject property consists of a 5,700SF 6-unit apartment building on a 3,200SF parcel, located in Sacramento, CA.

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9TH STREET APARTMENT BUILDING

George says, “Do you know what real wealth is? It’s owning highly-desirable, commercial real estate free and clear. Don’t tell me, Mr. Speculator, about all of the equity you have in your office building. You still have a mortgage on that property, so you’re counting your money while you’re sitting at the table."

Real wealth is being able to smile when the stock market and real estate are crashing. Yeah, you may have to lower your rents a little, but because your property is soooo desirable, you will still be able to rent it. In a deflationary crash, like the Great Recession, your rent might be somewhat reduced, but the purchasing power of that rent will likely increase a little bit too. On the other hand, if inflation explodes, so will your rents. The value of your building is likely, in the event of high inflation, to appreciate even faster than inflation because prime-prime real estate is such a desirable hedge.

Blackburne & Sons is extremely proud to offer this all-cash purchase of a small apartment building in downtown Sacramento. Each of these six units is large, has recently been renovated and is gorgeous. These are top-of-the-food-chain rental units. A good argument can be made that small apartment buildings are the most desirable income properties on earth. Why? (1) People always need a place to live. (2) Real estate is a good hedge against inflation. (3) Small apartment buildings are the first step in The Apartment Game, where an investor buys a small apartment building, waits five years, raises the rents, sells it, and then trades up to a larger apartment building. Repeat four times and then retire very, very comfortably.

Folks, I am convinced that a little bit of hyper-inflation is about to break out. I am so convinced that not just inflation, but actual hyper-inflation, is about to break out that my mind is tingling. It’s very uncomfortable feeling, and I feel like I am racing against time. Soon word of hyper-inflation will leak out, and the sellers of prime real estate will disappear. I have felt these tingling - a fire burning under me urging me to immediate action - only three times before. Once was in late 2006, when I was finishing up my book about the coming wave of deflation. The second was in 2009, when I started putting together syndicates to buy farm land. The last was in 2014, when we started buying industrial buildings. Each of these instincts proved correct and nicely profitable for our investors.

The reason why a little bit of hyper-inflation is coming is because (1) the country is close to full employment; (2) consumer confidence is very strong; (3) business confidence is very strong; (4) over $1 trillion in the tax cuts will go into effect over the next few years; (5) Congress is poised to pour gasoline on the fire by spending hundreds of billions of dollars more on infrastructure; (6) and there is a growing attitude that deficits don’t matter anymore. Yikes. Please read point six again. In a world of fiat money, this last point is extremely dangerous.

This is the first pre-hyper-inflation syndicate that we have formed. The investors in our first farm deal made the biggest profit. The investors in our first industrial building purchase are poised to earn the biggest profit. (We can’t afford to buy any more industrial buildings because pot growers have bid prices up into the stratosphere.) I predict that the investors in this apartment building purchase will make the most profit of any of our hyper-inflation syndicates. Don’t walk - run to invest in this deal.

Here is a term that you have not seen for decades: Widows and orphans. This all-cash purchase of a prime apartment building is even a suitable investment for widows and orphans, as long as they are genuinely accredited investors. Sorry, folks, you must be an accredited investor."

Blackburne & Sons is pleased to present this new all-cash syndication to purchase a six-unit, 5,700SF apartment building located in downtown Sacramento, California. Much like our Roseville Road flex-industrial investment, this is not a Trust Deed investment, but you will still enjoy many of the same benefits. As an investor, you will receive:

• Distributions of net rental income, quarterly
• Property management reports

The return on this investment will be generated in two ways:

• Net rental income
• Appreciation during the holding period, i.e. three to five years

As you all know, Sacramento is the capital of California; but what you might not know is that Sacramento is one of the hottest markets for apartments in the state. According to RENTCafe, an apartment listing firm, rents in Sacramento went up 8.8% in 2017; the biggest jump of any mid-sized city in the nation. The Sacramento Bee reported in January 2018 that due to an "insufficient stock of apartments", rent in the capital city has increased by 50% over the past 5 years. Did you also know that in 2017, the California Department of Finance listed Sacramento as the fastest growing city in the state? The fact is, there is a lot of demand for apartments in Sacramento, but not enough supply which is why we are very pleased to offer this syndication.

https://www.rentcafe.com/average-rent-market-trends/us/ca/sacramento/ - Rent Increase & Stock of Apartments

http://www.sacbee.com/news/local/article148080179.html - California Department of Finance

The property we are going to be syndicating, is a six-unit, 5,700SF, fully occupied apartment building right in the heart of downtown. This property is literally in the middle of it all. Just a few miles south, is the financial center of the city, and in many respects, the state. This area is home to several of the major employers, including the State of California government. In fact, this area is so close that the Sacramento County Courthouse and Sacramento City Hall are just 5 blocks from the subject property.

To the west is the famous Old Sacramento Historic District, and the brand new Golden1 Center. The Old Sacramento Historic District is a tourist area, known for its shopping, dinning and vibrant night life. The Golden1 center is the home of the Sacramento Kings NBA basketball team, and is the main venue for all the major concerts in Sacramento. According to Google Maps, the Golden1 center is a mere 13 minute walk from our property.

To the northwest is another interesting area, referred to as The Railyards. Once an eyesore, this area has experienced a massive revitalization in the past couple years. In October 2016, the city approved a massive project to turn this former train depot into a vibrant living center. The project includes thousands of SF of office and retail space, a medical campus and most exciting of all, a 19,000 seat soccer stadium for the Sacramento Republic FC. For those of you not from the area, the citizens of Sacramento are ravenous sports fans. So much so that despite being a smaller city, they have an NBA team and have been short listed for a Major League Soccer (MLS) by 2022. This property is about a 10 minute walk from the proposed stadium site.

https://railyards.com/

The property itself was built in 1916 and experienced a major rehabilitation in 2015. The building is 5,700SF and has 3 stories, with 6 one-bedroom and one bathroom units, and sits on a 3,200SF parcel. Each unit is approximately 950SF (712SF net rentable area) and the combined monthly rental income for all 6 units is $10,070. The tenants are responsible for all of the utilities except sewer, water and gas, but the tenants also pay an additional $42 per month ($252 per month for all 6 units) towards those services. The lease terms are all one year, with four set to expire in 2018. At the end of their term, the leases will roll into "month-to-month". There is a 6% late fee on any rental payment received after the 5th of each month.

At this time, there is no rent control in Sacramento, so rents can be increased.

The building has a concrete foundation, raised wood subfloors and conventional wood framing and exterior walls. The roof is a composite shingle roof. We had a roof inspection done and the inspector felt the roof is about 10 years old. The interior of the property is drywall over wood framing, linoleum floors with wood plank appearance. The property had a renovation in 1960 that included central heat and air, washer and dryer hookups for each unit, and individual water heaters. The 2015 remodel focused on the interior of the units. These renovations included an open floor plan, new flooring, countertops, appliances, light fixtures and vanities. The property does not have on site parking, however the city does provide parking passes for 1 tenant and 1 guest per unit.

The subject property was originally constructed in 1916, when motor vehicles were uncommon. Therefore there is no onsite parking. The City grants six resident parking permits and six guest parking permits, and these permits run with the property. The property is legal, because it conformed with the building codes of 1916. It is known as being "grandfathered in.” The property, however is non-conforming because of the lack of on-site parking - just like almost every other multifamily project in this large Historical District. Keeping in mind that this building has stood since 1916, it is theoretically possible that the building could be more than 50% destroyed in a fire. In such a case, we would need to obtain a Conditional Use Permit in from the Zoning Administrator. This would require an approval from the Preservation Director, who would likely require us to make the new building look like the other buildings in this Historical District. In communications with the building department, we get the distinct impression that buildings of our type are in favor with the City.

Blackburne & Sons has entered into a purchase contract for $2,100,000. We ordered an appraisal which valued the property at our purchase price of $2,100,000. Due to the state of the Sacramento apartment market, Blackburne & Sons anticipates that the property will continue to appreciate in value.

There are material risks involved in purchasing this small apartment building, such as: taxes, vacancies, earthquakes, and environmental/economic factors, but these are risk factors that should always be considered during a real estate investment. By purchasing this property with all cash, investors do not have to worry about a mortgage payment. Without a mortgage, the risk of losing the property in foreclosure, assuming we keep the real estate taxes current, becomes almost nonexistent. This is the real value that Blackburne & Sons is adding here - to allow nervous investors to protect themselves against a sudden and a large increase in inflation. American banks certainly have the cash, with over $2.5 trillion in excess reserves sitting at the Federal Reserve.

Blackburne & Sons has recently entered into contract to sell the Roseville Road flex-industrial syndication. Should this purchase go through, we anticipate the investors will have earned an annualized yield of over 11.0% for the approximately 32 month hold period. With the current state of the Sacramento apartment market, we truly believe this is the right time to buy. The market conditions are in our favor, and if you have confidence in us, we encourage you to invest in this property. 

FOOTNOTES:

1. The property information contained in this Property Investment Bulletin is being provided in connection with an offering of membership interest units ("Units") by Equity Preservation Fund, LLC (the "Company") in the membership class designated above (the "Company Class").  Potential investors will purchase membership interests in the Company Class which will, in turn, hold title to the Investment Property.  Units are offered only to verified accredited investors pursuant to the Company's Private Placement Memorandum ("Memorandum").  Potential investors should read the Memorandum and all of the exhibits thereto in their entirety prior to investing.

2. Pro-forma financial information and other information provided in this Property Investment Bulletin contains forward-looking statements within the meaning of federal securities law.  Words such as “may,” “will,” “expect,” “anticipate,” “believe,” “estimate,” “continue,” “predict,” or other similar words, identify forward-looking statements. Forward-looking statements include statements regarding the Manager’s intent, belief or current expectation about, among other things, trends affecting the economy and the market in which the property is located.  Although the Manager believes that the expectations reflected in these forward-looking statements are based on reasonable assumptions, forward-looking statements are not guarantees of future performance and involve risks and uncertainties. Actual results may differ materially from those predicted in the forward-looking statements as a result of various factors, including those set forth in the “Risk Factors” section of this Memorandum. If any of the events described in “Risk Factors” occur, they could have an adverse effect on the Fund’s business, financial condition and results of operations. When considering forward-looking statements, prospective investors should keep these Risk Factors in mind as well as the other cautionary statements in this Memorandum.  Prospective investors should not place undue reliance on any forward-looking statement. 

Blackburne & Sons Realty Capital Corporation--For more information, contact Angela Vannucci
4811 Chippendale Drive, Suite 101, Sacramento, CA 95841
Telephone: (916) 338-3232 * Fax: (916) 338-2328
Real Estate Broker -- California Bureau of Real Estate -- License Number 829677
Offering issued with reliance upon exemption provided under section 4(a)(2) of the Securities Act of 1933
and Rule 506(c) of Regulation D.
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