This investment is secured by a 1,985 S/F, two-story retail building on an 11,700 SF parcel in Pensacola, Florida.

The city has an estimated population of 56,255 people. The Pensacola metropolitan area, comprising of the Escambia and Santa Rosa counties, has a population of 439,877. Pensacola is a sea port on Pensacola Bay, which connects to the Gulf of Mexico. The first and largest United States Navy airbase is located southwest of Pensacola and is home to the Blue Angels flight demonstration team and the National Museum of Naval Aviation. The main campus of the University of West Florida is situated north of the city.

Pensacola is nicknamed "The City of Five Flags" due to the five governments that have flown flags over it during its history: the flags of Spain, France, Great Britain, the Confederate States of America, and the United States. Other nicknames include "World's Whitest Beaches".

The subject property was built in 1908, and is located in a high traffic area in the popular Historic East Hill area of Pensacola along the east side of North Ninth Avenue, approximately 40 feet south of De Soto Street, and approximately 3/4 mile northeast of the Central Business District in downtown Pensacola. The neighborhood is described as a mixed-use area of established single-family residential and commercial properties. Over the past 5 years, this neighborhood has shown strong signs of development as well as some redevelopment.

In the immediate subject location, many older residential dwellings have been renovated into offices, however several older single-family dwellings remain along North Ninth Avenue and along surrounding routes. South of the subject, a new downtown residential subdivision called “Aragon Court” is currently under development, with many new homes having been completed in the recent years. Much of the area in this neighborhood along the main arterial roadways is heavily developed and built-out, especially along North Ninth Avenue.

The subject building has 1,554 square feet of ground floor retail space, and 431 square feet of second floor space which contains two business offices and storage. The interior is partitioned on the first floor into five display rooms, a dressing room, a kitchen/break area, and a large glass display window. There is also a covered front porch, 2 wood decks, and a handicap accessible concrete ramp. The subject also has a large 30x40 gravel parking lot to the back of the building and the property appears to be very well maintained. This building is currently being used as a ladies dress shop and bridal boutique.

Our borrower out a new roof on the building in 2002 and completed upgrades to the second floor space in 2004 at a cost of $24,000.Our borrower, a single woman, has owned this property since 1999. Her closely held corporation operates the business and leases the property for $1,950 per month on a triple net basis. The company showed a net income of $56,315 & $40,253 in 2005 & 2006 respectively after adding back rental and interest expense, officer compensation, and non cash depreciation. An internal profit & loss statement for 2007 was provided showing a net income of $128,939. The reason the net income was so much higher in 2007 was due to the fact that in 2005, hurricane Dennis and Katrina hit Florida resulting in an economic downfall and a loss in revenue. In 2006, she went through a nasty divorce which took her mind off of her business and marketing efforts. In 2007, she started a new website, http://www.mdelegance.com and joined efashioncentral which linked her to all the major fashion web sites. Within 3 months, she saw a major upswing in activity and sales. The peak of her year was Mardi Gras and prom gowns in which she saw a large influx of sales. In August and September of 2007 she had an 8 week high impact sale which resulted in $103,000 in revenue. Her net worth is approximately $696,000 and her mid credit score is 553.

We ordered an appraisal and the current value is $345,000. We often seek independent real estate brokers to corroborate appraisals, and in this case the two separate evaluations came in with $341,000 and $425,000. The three comparable sales that were listed sold for $173 to $203 per S/F. The appraiser valued the subject property at $174 per S/F. Businesses along North Ninth Avenue within the immediate vicinity of the subject include: McDonalds, Carquest, Walgreens, Subway, Krispy Kreme, Fabric Zoo, Amoco Gas Station, and more.

At an 11% yield and a 63.8% LTV, this loan appears to be a reasonable 5-year investment. Every first mortgage investment involves substantial risk, so be sure to read the Risk Factors section of the Offering Circular before investing. A substantial and prolonged decline in real estate values is possible.