New REIT to Give Wary Investors an Entry Point: Cannabis Weekly, , on October 18, 2020 at 2:00 pm

Financial News
By
On October 18, 2020
In Financial News
Tags:

(Bloomberg) — This month, cannabis will get another publicly traded real estate investment trust — a sign of how the industry is growing up.Subversive Real Estate’s merger with Inception REIT is part of a $183 million transaction to turn the special purpose investment vehicle into a real estate investment trust, giving it tax benefits and readying it to acquire more properties. The transaction, expected to close at the end of this month, will make it the second publicly traded cannabis REIT, following Innovative Industrial Properties.The deal bodes well for both cash-starved cannabis companies and investors who want an in to the fast-growing industry — but are skittish about the perceived taint of marijuana. It lets cannabis companies that can’t get bank loans sell real estate and lease it back, giving them a shot of cash that can be used to improve their products. Investors, meanwhile, get a new “cannabis adjacent” asset to invest in.“We unlock capital for operators,” Subversive Chief Executive Officer Richard Acosta said. Amid the pandemic, cannabis firms are more focused on efficiency, he said, and his company aims to help them achieve that by taking “hard assets off the balance sheets.” They can then use the cash to produce more or ramp up production.One company, Flower One Holdings, got a $39 million, seven-year term loan at 10.5% in exchange for Subversive’s option to buy a 455,000 square-foot cannabis cultivation and production facility in North Las Vegas, Nevada.These sale-leaseback deals are gaining traction. Major multi-state operator Curaleaf Holdings Inc. just sold a Florida property, and will offload another in the fourth quarter. Jushi, Columbia Care and Cresco Labs have also recently done sale-leasebacks.“I always thought that consumer-goods companies didn’t need to own real estate,” Curaleaf Chairman Boris Jordan said in a phone interview. “And we’re not a real estate company. Our business is manufacturing branded cannabis.”A recent E&Y survey found that, as a result of Covid-19, 78% of executives at large companies across industries expect to divest assets within the next two years.And as the performance of one cannabis REIT shows, there’s plenty of interest in cannabis companies’ real estate. Unlike other commercial real estate like restaurants and hotels, battered by Covid-19, cannabis properties may have better prospects since dispensaries have stayed open in lockdowns, and the industry will need to expand if new states legalize.Now, it just remains to be seen — in the flip-side world of cannabis — how these financial instruments distribute risk. That’s because most real estate is viewed as a hard asset that generally increases in value, although the global pandemic has created some disruption this year in property values. But with cannabis, legal issues are a wild card.If marijuana becomes federally legal, companies might no longer need to grow their products in the same states they sell them. This would mean that cultivation plots and processing facilities in multiple states could suddenly become redundant.Subversive, Acosta said, has taken this into account by buying only the properties that it sees as the most attractive, or those with potential alternative uses.Flower One’s facility in Nevada, for example, is the largest in the state, he said. “It is a future-proof asset in our view.”QUOTE OF THE WEEK“The minute someone is able to synthesize and stabilize cannabinoids at a reasonable cost, the pharmaceutical companies will come in and say ‘We want this.’ But on the consumer side, particularly for nutraceutical and recreational products, we don’t think people will want synthetic products. Would you want a wine with synthetic grapes, or a beer with synthetic hops? We think organic cannabis is the way to go,” said Boris Jordan, in an Oct. 12 interview with Bloomberg News.NUMBER OF THE WEEK$30 billion: The estimated property value of U.S. cannabis real estate by 2030, according to Subversive Real Estate.WHAT YOU NEED TO KNOWA new law signed this past week would let Virginians caught with marijuana pay $25 instead of going to court.Illinois just tallied more than $100 million in tax revenue since January when it legalized adult use.Aphria’s disappointing earnings report on Oct. 15 sent Canadian pot stocks lower.EVENTS THIS WEEKMONDAY 10/20HortiCann Light + Tech, a virtual conference through Oct. 21Cannabis Sustainability Symposium in BostonTUESDAY 10/21Cannabiziac Webinar: International Trends in Cannabis Commodities and TourismFor more articles like this, please visit us at bloomberg.comSubscribe now to stay ahead with the most trusted business news source.©2020 Bloomberg L.P.,

New REIT to Give Wary Investors an Entry Point: Cannabis Weekly(Bloomberg) — This month, cannabis will get another publicly traded real estate investment trust — a sign of how the industry is growing up.Subversive Real Estate’s merger with Inception REIT is part of a $183 million transaction to turn the special purpose investment vehicle into a real estate investment trust, giving it tax benefits and readying it to acquire more properties. The transaction, expected to close at the end of this month, will make it the second publicly traded cannabis REIT, following Innovative Industrial Properties.The deal bodes well for both cash-starved cannabis companies and investors who want an in to the fast-growing industry — but are skittish about the perceived taint of marijuana. It lets cannabis companies that can’t get bank loans sell real estate and lease it back, giving them a shot of cash that can be used to improve their products. Investors, meanwhile, get a new “cannabis adjacent” asset to invest in.“We unlock capital for operators,” Subversive Chief Executive Officer Richard Acosta said. Amid the pandemic, cannabis firms are more focused on efficiency, he said, and his company aims to help them achieve that by taking “hard assets off the balance sheets.” They can then use the cash to produce more or ramp up production.One company, Flower One Holdings, got a $39 million, seven-year term loan at 10.5% in exchange for Subversive’s option to buy a 455,000 square-foot cannabis cultivation and production facility in North Las Vegas, Nevada.These sale-leaseback deals are gaining traction. Major multi-state operator Curaleaf Holdings Inc. just sold a Florida property, and will offload another in the fourth quarter. Jushi, Columbia Care and Cresco Labs have also recently done sale-leasebacks.“I always thought that consumer-goods companies didn’t need to own real estate,” Curaleaf Chairman Boris Jordan said in a phone interview. “And we’re not a real estate company. Our business is manufacturing branded cannabis.”A recent E&Y survey found that, as a result of Covid-19, 78% of executives at large companies across industries expect to divest assets within the next two years.And as the performance of one cannabis REIT shows, there’s plenty of interest in cannabis companies’ real estate. Unlike other commercial real estate like restaurants and hotels, battered by Covid-19, cannabis properties may have better prospects since dispensaries have stayed open in lockdowns, and the industry will need to expand if new states legalize.Now, it just remains to be seen — in the flip-side world of cannabis — how these financial instruments distribute risk. That’s because most real estate is viewed as a hard asset that generally increases in value, although the global pandemic has created some disruption this year in property values. But with cannabis, legal issues are a wild card.If marijuana becomes federally legal, companies might no longer need to grow their products in the same states they sell them. This would mean that cultivation plots and processing facilities in multiple states could suddenly become redundant.Subversive, Acosta said, has taken this into account by buying only the properties that it sees as the most attractive, or those with potential alternative uses.Flower One’s facility in Nevada, for example, is the largest in the state, he said. “It is a future-proof asset in our view.”QUOTE OF THE WEEK“The minute someone is able to synthesize and stabilize cannabinoids at a reasonable cost, the pharmaceutical companies will come in and say ‘We want this.’ But on the consumer side, particularly for nutraceutical and recreational products, we don’t think people will want synthetic products. Would you want a wine with synthetic grapes, or a beer with synthetic hops? We think organic cannabis is the way to go,” said Boris Jordan, in an Oct. 12 interview with Bloomberg News.NUMBER OF THE WEEK$30 billion: The estimated property value of U.S. cannabis real estate by 2030, according to Subversive Real Estate.WHAT YOU NEED TO KNOWA new law signed this past week would let Virginians caught with marijuana pay $25 instead of going to court.Illinois just tallied more than $100 million in tax revenue since January when it legalized adult use.Aphria’s disappointing earnings report on Oct. 15 sent Canadian pot stocks lower.EVENTS THIS WEEKMONDAY 10/20HortiCann Light + Tech, a virtual conference through Oct. 21Cannabis Sustainability Symposium in BostonTUESDAY 10/21Cannabiziac Webinar: International Trends in Cannabis Commodities and TourismFor more articles like this, please visit us at bloomberg.comSubscribe now to stay ahead with the most trusted business news source.©2020 Bloomberg L.P.

,

Instant Quote

Enter the Stock Symbol.

Select the Exchange.

Select the Type of Security.

Please enter your First Name.

Please enter your Last Name.

Please enter your phone number.

Please enter your Email Address.

Please enter or select the Total Number of Shares you own.

Please enter or select the Desired Loan Amount you are seeking.

Please select the Loan Purpose.

Please select if you are an Officer/Director.

High West Capital Partners, LLC may only offer certain information to persons who are “Accredited Investors” and/or “Qualified Clients” as those terms are defined under applicable Federal Securities Laws. In order to be an “Accredited Investor” and/or a “Qualified Client”, you must meet the criteria identified in ONE OR MORE of the following categories/paragraphs numbered 1-20 below.

High West Capital Partners, LLC cannot provide you with any information regarding its Loan Programs or Investment Products unless you meet one or more of the following criteria. Furthermore, Foreign nationals who may be exempt from qualifying as a U.S. Accredited Investor are still required to meet the established criteria, in accordance with High West Capital Partners, LLC’s internal lending policies. High West Capital Partners, LLC will not provide information or lend to any individual and/or entity that does not meet one or more of the following criteria:

1) Individual with Net Worth in excess of $1.0 million. A natural person (not an entity) whose net worth, or joint net worth with his or her spouse, at the time of purchase exceeds $1,000,000 USD. (In calculating net worth, you may include your equity in personal property and real estate, including your principal residence, cash, short-term investments, stock and securities. Your inclusion of equity in personal property and real estate should be based on the fair market value of such property less debt secured by such property.)

2) Individual with $200,000 individual Annual Income. A natural person (not an entity) who had individual income of more than $200,000 in each of the preceding two calendar years, and has a reasonable expectation of reaching the same income level in the current year.

3) Individual with $300,000 Joint Annual Income. A natural person (not an entity) who had joint income with his or her spouse in excess of $300,000 in each of the preceding two calendar years, and has a reasonable expectation of reaching the same income level in the current year.

4) Corporations or Partnerships. A corporation, partnership, or similar entity that has in excess of $5 million of assets and was not formed for the specific purpose of acquiring an interest in the Corporation or Partnership.

5) Revocable Trust. A trust that is revocable by its grantors and each of whose grantors is an Accredited Investor as defined in one or more of the other categories/paragraphs numbered herein.

6) Irrevocable Trust. A trust (other than an ERISA plan) that (a)is not revocable by its grantors, (b) has in excess of $5 million of assets, (c) was not formed for the specific purpose of acquiring an interest, and (d) is directed by a person who has such knowledge and experience in financial and business matters that such person is capable of evaluating the merits and risks of an investment in the Trust.

7) IRA or Similar Benefit Plan. An IRA, Keogh or similar benefit plan that covers only a single natural person who is an Accredited Investor, as defined in one or more of the other categories/paragraphs numbered herein.

8) Participant-Directed Employee Benefit Plan Account. A participant-directed employee benefit plan investing at the direction of, and for the account of, a participant who is an Accredited Investor, as that term is defined in one or more of the other categories/paragraphs numbered herein.

9) Other ERISA Plan. An employee benefit plan within the meaning of Title I of the ERISA Act other than a participant-directed plan with total assets in excess of $5 million or for which investment decisions (including the decision to purchase an interest) are made by a bank, registered investment adviser, savings and loan association, or insurance company.

10) Government Benefit Plan. A plan established and maintained by a state, municipality, or any agency of a state or municipality, for the benefit of its employees, with total assets in excess of $5 million.

11) Non-Profit Entity. An organization described in Section 501(c)(3) of the Internal Revenue Code, as amended, with total assets in excess of $5 million (including endowment, annuity and life income funds), as shown by the organization’s most recent audited financial statements.

12) A bank, as defined in Section 3(a)(2) of the Securities Act (whether acting for its own account or in a fiduciary capacity).

13) A savings and loan association or similar institution, as defined in Section 3(a)(5)(A) of the Securities Act (whether acting for its own account or in a fiduciary capacity).

14) A broker-dealer registered under the Exchange Act.

15) An insurance company, as defined in Section 2(13) of the Securities Act.

16) A “business development company,” as defined in Section 2(a)(48) of the Investment Company Act.

17) A small business investment company licensed under Section 301 (c) or (d) of the Small Business Investment Act of 1958.

18) A “private business development company” as defined in Section 202(a)(22) of the Advisers Act.

19) Executive Officer or Director. A natural person who is an executive officer, director or general partner of the Partnership or the General Partner, and is an Accredited Investor as that term is defined in one or more of the categories/paragraphs numbered herein.

20) Entity Owned Entirely By Accredited Investors. A corporation, partnership, private investment company or similar entity each of whose equity owners is a natural person who is an Accredited Investor, as that term is defined in one or more of the categories/paragraphs numbered herein.

Please read the notice above and check the box below to continue.

Singapore

168 Robinson Road,
Capital Tower, Singapore 068912
+65 3105 1295

Taiwan

5th Floor, No. 1-8, Section 5, Zhongxiao East Road, Taipei

Hong Kong

R91, 3rd Floor,
Eton Tower, 8 Hysan Ave.
Causeway Bay, Hong Kong
+852 3002 4462

Australia

44 Martin Place, Sydney 2000 Australia
+02 8319 3232

Indonesia

Millennium Centennial Center, 38th Floor, Jl. Jend. Sudirman Kav. 25
Jakarta 12920, Indonesia

Market Coverage