Thackerville Industrial

George III says "One of the risks of this loan is the property location. The property is located in a very small town, many miles from civilization. Sooner or later, the pot business is going to be overbuilt, and many players will be forced into bankruptcy. We might be left with a decent industrial building but few potential new tenants."

"On the other hand, the building is located close to a major highway between states. I asked Justine if we had ever foreclosed on any of our cannabis related loans. She replied that no, we had not, and that we might not have even had a late charge on one. Please note, past performance does not guaranty of future performance. These cannabis businesses seem to throw off a lot of cash. This deal is a speculation, but in my opinion, it is not an insane speculation."

Blackburne & Sons is pleased to present this purchase money first mortgage secured by 16,080SF, industrial property on a 3.94 acre parcel. Our borrowers are purchasing the subject property for $1,610,000 and the borrower will be putting down $563,500 plus closing costs.

Thackerville is located in Love County, Oklahoma. Per the 2020 census, the population of Love County was 10,128 and it's county seat is Marietta. It is located on the southern portion of Oklahoma along the Texas border, and is considered part of the "Texoma" region. According to the appraiser, the population of the county is stable. It is home to Winstar World Casino (operated by the Chickasaw Nation) and is the county's largest private employer. Since the county's inception, agriculture and ranching have been leading employers, but in recent years the arts/entertainment and recreation industries have seen growth. Data-Usa states that the economy of Love County employs over 4,000 people, with the largest industries being Arts, Entertainment, & Recreation (608 people), Health Care & Social Assistance (410 people), and Manufacturing (382 people), and the highest paying industries are Manufacturing ($50,926), Public Administration ($45,954), and Utilities ($40,625).

The town of Thackerville is located in the southern central portion of Love County. The population is 400 people per the 2020 census. Thackerville is 10 miles south of Marietta (county seat) and 58 miles northwest of Plano, TX. The town sits along Interstate 35 and US Route 77. Air transportation is provided by Gainesville Municipal Airport, which is 15 miles southwest. The economy of Thackerville relies on retail services and small office properties. In addition, the town benefits from the presence of the aforementioned Winstar World Casino. Per Data-Usa, the economy of Thackerville employs 138 people, with the largest industries being Arts, Entertainment, & Recreation (33 people), Retail Trade (22 people), and Construction (17 people), and the highest paying industries are Manufacturing ($43,125), Arts, Entertainment, & Recreation ($42,768), and Construction ($41,250).

Built in 2022, the appraiser states the subject property is a 16,080SF industrial property, on a single, 3.94 acre parcel. It should be noted that since the appraisal, an additional 3,000SF building was completed, bringing the total squarefootage to 19,080SF. The property consists of 3 buildings, both of which are single story, and has 44 parking spaces. The retail building is 4,000SF and the warehouse space is 12,080SF. The basic construction is steel and masonry, with concrete slab foundation, EIFS (Exterior Insulation Finishing Systems) exterior walls and metal roofing. The building costs were estimated at $2.7M. Since 2021, the borrower has put over $1.4M in rehab to the property. These improvements include over $860,000 for the greenhouse complex, $125,000 towards the 3,000SF indoor cultivation facility, $250,000 towards the retail property and $183,000 towards the environmental control system.

At the time of the appraisal, the appraiser noted about $500,000 in remaining work to be completed. The work still to be completed included completion of a 3,000SF building for indoor cultivation,landscaping, perimeter walls and fencing, additional electrical and hvac in greenhouses, additional finish-out in dispensary such as turf flooring in showroom, all high end wallpaper and lighting, custom cabinetry and shelving, etc., ADT security for the entire complex, WiFi, tv’s and furniture and artwork, etc. It should be noted, we are not holding back funds for this completion.

Per the borrower, since the appraisal in August, nearly all of the work has been completed. We had one of the brokers who performed a BPO go back to the property a second time and confirm that the 3,000SF structure has been completed. Since 2021, the borrower has put over $1.4M in rehab to the property. These improvements include over $860,000 for the greenhouse complex, $125,000 towards the 3,000SF indoor cultivation facility, $250,000 towards the retail property and $183,000 towards the environmental control system.

The subject is currently outside of any zoning jurisdictions. Per the appraiser, the property has a strategic location near notable economic hubs, and convenient connections to well-traveled transportation networks. The property is 1 mile of both US Route 77 and Interstate 35. The property location is approximately 83 miles north of Dallas, Texas and 124 miles south of Oklahoma City. The property is surrounded by vacant land on all 4-sides. The property has 44 parking spaces (including handicap parking). Per one of the BPO's, the property's exterior appearance is excellent and is located on a hard corner with visibility from I-35 and two county roads.

Our borrowers will be purchasing the property for $1,610,000, and a down payment of $563,500 plus closing costs. Holding title to the property will be an Oklahoma Limited Liability Company (LLC) that will serve as a holding entity only. This entity is owned by all 3 guarantors, and will not be directly involved in any cannabis operations. The LLC will be leasing the property to two different tenants.

The first tenant will be leasing 1,920SF of the retail space, and will be an entity controlled by the seller. This lease will expire on September 2, 2026, and per the terms of the lease, the tenant shall not pay any rent.

The second tenant will be the borrower's cannabis related business and will be occupying the remaining portion of the property. No formal lease between the two borrower controlled entities has been created as of the time of this bulletin. Per the terms of the purchase agreement, this second entity will take ownership of the seller's cannabis license. This tenant will not be part of our loan.

There are three guarantors for this loan. Guarantor #1 is a single man, and works as a general contractor. He has a mid-credit score of 702, a reported net worth of $1,529,000. His 2021 1040s are on extension, but in 2020 his reported gross income was $24,568. In 2019, his reported gross income was $117,363. His business (which is not part of this loan) reported $197,836 in net income for 2021.

Guarantors #2 & #3 are husband and wife. He works as a CFO for a purchasing co-op for independent convenient stores and she works as a pharmacist. They reported a net worth of $3,570,500 and have mid-credit scores of 737 and 740. They reported gross income of $838,819 in 2021 and $585,760 in 2020. It should be noted all three guarantors plan to continue their current jobs.

We engaged a local certified general appraiser who provided four values for this property, one as an industrial property $1,110,000 "as-is" and $1,610,000 "after repair", and the other as a cannabis property $4,280,000 "as-is" and $4,780,000 "after repair". It is important to note, there is no guarantee that the investors would be able to sell this property as a cannabis property in the event of foreclosure. Given the dramatic difference in value between standard industrial and cannabis, this is a crucial component to consider before investing. We also engaged two local broker who performed an opinion of values, and valued this property at $3,100,000 and $4,743,600.

At an 10.0% yield to the investors and a 94.28% LTV (as-is, industrial), and 65.0% LTV (after repair, industrial), a 24.12% LTV (as-is, cannabis) and 22.12% (after repair, cannabis) this appears to be a reasonable investment. Investing in any first mortgage 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. 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.

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 Justine Smith
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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