Loan Number: N2409
Loan Amount: $693,000
Minimum Investment: $20,000
Call for availability of smaller participations
Type: First Trust Deed
Yield: 10.0%*

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PROPERTY

Project: SUZANNE LANE RETAIL BUILDING
Property Address: 200 Suzanne Lane Mount Vernon, WA 98273
Description: The subject property consists of a 7,700SF freestanding commercial building on 1.11 acres, located in Mount Vernon, WA.

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SUZANNE LANE RETAIL BUILDING

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, "Nothing I am about to say negates the fact that it is illegal to sell marijuana in the U.S. That being said: (1) Twenty-nine states, plus the territories of Guam and Puerto Rico, plus the District of Columbia, have some sort of statutes that legalize medicinal marijuana. (2) Eight states have now legalized marijuana for recreational use, including the States of Washington and California. (3) State taxes on marijuana amount to hundreds of millions of dollars. These states possess vast political leverage and are unlikely to give up this enormous income without a fight. (4) Tens of millions of Americans across the country enjoy marijuana recreationally, and they represent an enormous voting block. If one political party - say the Republicans - ever tried to override the will of the states and of the people on pot, they would likely suffer badly in the next election. Arguably, Federal enforcement of marijuana prohibitions is politically toxic. (5) Congress has made it clear that it does NOT want the United States Attorney General wasting Federal funds chasing down medicinal pot users. In 2014, Congress passed the Hinchey-Rohrabacher Amendment, prohibiting the U.S. Attorney General from using federal funds to target medicinal marijuana patients. That Amendment was allowed to sunset on September 30th on procedural grounds, but it shows the intent of Congress not to fight this battle. Current Federal pot prosecution guidelines are focussed on keeping organized crime out of legal marijuana distribution and on keeping pot out of the hands of minors. Every hard money deal must have flaws; otherwise the borrower would simply go to his bank and get a 4.875% loan. This borrower is a financial beast. In my mind, the risk of a hard money borrower defaulting for garden-variety reasons is far-far-far greater than the chance of a Federal crackdown that would affect this loan."

Blackburne & Sons is pleased to present this new first trust deed secured by 7,700SF industrial/retail building on 1.11 acres, located in Mount Vernon, Skagit County, Washington.

Mount Vernon is the largest city and the county seat of Skagit County, Washington, United States. The population was 34,590 at the 2016 census. It is one of two principal cities and is included in the Mount Vernon-Anacortes, Washington Metropolitan Statistical Area. Downtown Mount Vernon is known for its annual Tulip Festival Street Fair, which is part of the Skagit Valley Tulip Festival. In the spring, world famous tulip fields blanket the valley, bringing tourists to the area.

Skagit County is situated west of the Cascade Mountains in the northern part of Western Washington. According to ESRI a Geographic Information System (GIS) Company, Skagit County had a 2017 total population of 123,393, and accounted for 1.69% of the total Washington population (7,311,450). A number of Skagit County’s major manufacturing facilities have been operating in the county for a number of years and have in part stabilized the region’s economy. Two of the oldest manufacturers in the county include the oil refineries of Shell Oil and Texaco, which have been operating since the mid-1950’s. It is the center of the state’s petroleum industry, the site for truck and other vehicle testing, and home to various high-technology manufacturers, which produce oil drilling modules, aircraft parts, and electronics.

The subject property is situated on the corner of Suzanne Lane and Old Highway 99 South in the City of Mount Vernon. The neighborhood is a mix of light industrial, retail and commercial uses with supporting residential and agricultural uses located on the periphery. The commercial center of Mount Vernon is located approximately two miles north of this area. The neighborhood, as well as its infrastructure, is suburban. The streets are improved with concrete curbs and gutters, streets are paved with asphalt, and all utilities and city services are available to the neighborhood. The properties in the area generally reflect average levels of maintenance and condition, and the market appeal of the properties is average. The neighborhood is in the growth stage of its life cycle.

Built in 2013, the subject property is improved with a 7,700SF building which is reported to be adequately maintained and in good condition. The building is composed of a concrete slab foundation, steel frame wall system, steel truss roof, concrete and carpet flooring, and gypsum board interior walls. Of the space, 1,000 square feet on the ground floor was renovated into a retail use for the borrower's business. The remaining space is leased to one tenant, consisting of 5,000 square feet of warehouse space and 1,700 square feet of office space. According to the appraisal, the lease for this tenant runs until July, 2019 and produces monthly rental income of $4,635. The subject has good access and visibility given its location at the corner of a neighborhood street and a commercial thoroughfare, with close proximity to Interstate 5.

Our borrower, a married man, has a mid-credit score of 718 and a reported net worth of $24,383,278. He reported personal income of $4,685,201 in 2016, and $6,650,237 in 2015. Title is held by a single asset LLC whose income is reported under the borrower’s personal tax returns.

The borrower purchased the subject property in an off-market transaction in August 2016 for $1,035,000 and leased back 6,700 square feet of the property to the prior owner at a market lease rate. Upon acquiring the property the borrower renovated 1,000 square feet on the ground floor to use as retail space for his marijuana dispensary business.

Our borrower will be using our loan to pull cash out of his 5 commercial properties to pay his personal income taxes that were due October 15, 2017. This tax payment is estimated to be in excess of $1.9mm. The borrower made a $468,000 tax payment in October, and $243,000 from the N2406/Camano Island closing went towards the tax debt. According to the borrower, the tax payment plan consists of 4 payments. These payments are due 4/15/18, 6/15/18, 9/15/18 and 1/15/19. The proceeds from this loan will complete first and second payments.

We engaged a local MAI appraiser who valued the property “as is” at $1,100,000. We also engaged a local broker who performed an opinion of value, and valued this property at $1,350,000.

At 63.0% LTV and a 10.0% yield, this appears to be a reasonable speculation. Investing in any first mortgages involves substantial risk. A large and prolonged decline in real estate values is possible. Be sure to read the Risk Factors section of the Offering Circular carefully before investing. Foreclosed commercial properties almost always need to be renovated before they can be leased or sold, so be sure to maintain some liquidity.

SPECIAL INVESTOR LETTER FROM BIG GEORGE
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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 -- NMLS Number 103430
Publicly advertised to California residents only under California Department of Business Oversight business plan permit.
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