Not All REIT's are Created Equal

Challenges are often a result of the financing structure itself.

Finding capital in the U.S. cannabis industry isn’t easy. Most insiders will agree on that point. And even some niche financiers – such as real estate investment trusts (REITs) – have pulled back slightly over the past year, according to industry data from Cannabiz Media.

But not all of them, one such firm told Green Market Report last week.

Pelorus Equity Group – one of four REITs to close a deal in the last quarter of 2022 – said it’s not facing any headwinds of the type reported by Industrial Innovative Properties (IIP) (NYSE: IIPR), which said it is facing problems collecting tenant payments from multiple cannabis companies that appear to all be struggling financially.

Pelorus has a different lending model, said President Rob Sechrist, which is more risk-averse than equity REITs such as IIP.

“We have protective equity from the borrower and short-term leases. The borrower can pay us off at any time as the market evolves. It’s that simple,” Sechrist said. “A mortgage REIT should not have any downside or downslope, because you’re only issuing the loans at face value, and the loans are paid off at face value. So it’s different than an equity REIT.”

Sechrist said he’s become frustrated with a narrative in certain circles that oversimplifies the performance of both REITs and the wider cannabis industry, and that both Pelorus – and various sectors within the larger marijuana trade – are doing just fine from a business perspective.

“What you only hear about is a small universe of retail investors that are invested in the shares or equity of publicly traded stocks. They have no clue if the underlying business is doing bad or good,” Sechrist said. “Most of the businesses in the entire country are not public. There’s only a few that are publicly traded, and they’re big behemoths, and they went wide to get market share, and didn’t think about profitability, and now they’re running out of cash.”

There’s simply not enough historical data with which to judge the performance of the cannabis industry as a whole, let alone the real estate sector within it or many of the operational companies, he said. With that in mind, Pelorus built its own enormous data set, he said, and is busily executing on financing deals.

“We’ve issued $540 million in transactions, for 73 transactions with 38 payoffs,” Sechrist said. “Our target yield is 12-15% net IIR, and we’ve achieved that every single year we’ve been in operation, and … we just successfully achieved it again” in 2022.

John Schroyer


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The Green Market Report focuses on the financial news of the rapidly growing cannabis industry. Our target approach filters out the daily noise and does a deep dive into the financial, business and economic side of the cannabis industry. Our team is cultivating the industry’s critical news into one source and providing open source insights and data analysis


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