Commercial Loans Blog

Commercial Loans on Politically Incorrect Properties

Posted by George Blackburne on Wed, Apr 2, 2014

Adult BooksCommercial loans on politically-charged properties are difficult to place.  Examples of politically-charged properties include X-rated bookstores, marijuana cultivation facilities, abortion clinics, gambling casinos, gentlemen's clubs, and gay nightclubs or resorts.

Most commercial banks would never make a commercial loan on such a property.  Banks are very sensitive about their image, and they just can't risk an adverse public reaction or some bad press in their local market, just to earn a little extra interest on such a commercial loan.

The issue of commercial loans on politically-charged properties reminds me a lot of the boycott on krugerrands and South African stocks during the 1970's and 1980's over the issue of apartheid.  Many large American mutual funds sold their South African stocks in protest, causing the South African stock market to remain depressed for two decades.

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The krugerrand - the one-ounce gold coin minted by South Africa - sold for a $10 to $25 discount to the American Double Eagle or the Canadian Maple Leaf, even though it contained the exact same amount of gold.  Twenty years after the repeal of apartheid, the krugerrand still sells at a small discount to the other gold coins.

Nevertheless, in the 1970's and 1980's many mutual funds chose to ignore the public stigma of South African stocks.  If a South African stock was fundamentally sound and a good value, they would still buy the stock.  A social agenda was not allowed to interfere with a sound investment decision.

At Blackburne & Sons, we do not have the luxury of advancing some social agenda.  Our first loyalty has to be to the safety of our investor's money.  When your rates are 4% to 5% higher than most commercial banks, good commercial loans are hard enough to find as it is.  We simply have to jump all over any good commercial loan that will accept our higher interest rates.

My own private money commercial mortgage company will therefore happily make commercial loans on politically-charged properties, such as gentlemen's clubs and adult bookstores.  In fact, we have financed about 15 gentlemen's clubs over the years, and these commercial loans have paid well.  My view is that an investor can always count on the sun rising and on heterosexual males enjoying the shapely figure of an attractive woman.  We just closed a commercial loan this month on a restaurant with topless waitresses.  I was shocked - shocked I tell you - to observe that this business had been making good money for over 30 years.

Legalized marijuana is a new phenomenon.  Therefore we have yet to make a commercial loan on a marijuana cultivation facility, but we would definitely consider such a commercial loan.  Commercial loans on gay bars, nightclubs, or resorts?  Well, is it making good money?  If so, we would definitely consider making a commercial loan on such a property.

Bottom line:

  1. Certain commercial properties are politically-charged, and it is difficult to place a commercial loan on such properties.
  2. Examples of politically-charged properties include X-rated bookstores, marijuana cultivation facilities, gentlemen's clubs, abortion clinics, gambling casinos, gay bars, gay nightclubs and gay resorts.
  3. Conduits do not make commercial loans on politically-charged properties.
  4. Commercial banks don't not make commercial loans on politically-charged properties.
  5. Would a credit union make such a commercial loan?  I dunno.  It's worth a few calls.
  6. Hard money commercial lenders, like Blackburne & Sons, finance most politically-charged properties.
 
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Topics: politically-charged properties