Pelorus Fund Closes On $42 Million Note, Gets BBB+ Rating

Cannabis real estate loan company Pelorus Equity Group has announced that its Pelorus Fund, a private mortgage real estate investment trust has closed a private placement of $42,250,000 aggregate principal amount of its 7% Senior Unsecured Notes due September 30, 2026. Possibly the even bigger news is that Pelorus, along with its Notes, received a BBB+ rating from Egan-Jones Ratings Company. This puts Pelorus on par with Innovative Industrial Properties (NYSE: IIPR), which also has a BBB+ rating.

“We’ve been experiencing great success from the transactions we’ve funded in the cannabis space, and are committed to keeping that momentum going,” said Dan Leimel, CEO of Pelorus Equity Group and manager of the Pelorus Fund. “Most banks are reluctant to offer capital to cannabis-related businesses, but our team has been forming strong partnerships with industry players for years now. Not only do we differentiate ourselves by forming trusted relationships, but we also continue to bring first-of-its-kind lending solutions to market that benefit the entire cannabis ecosystem.”

Pelorus said it plans to use the money from the offering for its operations which will include a new stabilized lending program with three- to five-year amortizing loans to quality sponsorship. It will be offered to current borrowers upon construction completion, as well as to new borrowers that meet the company’s underwriting criteria.

Leimel added, “I want to commend our team for achieving this first-of-its-kind win for the cannabis sector. Our BBB+ ratings reflect a critical achievement in the current growth phase of our Company, as well as our fiscal stewardship, robust portfolio, corporate governance, and  financial strength.”

Piper Sandler & Co. acted as the placement agent for this offering. Dentons served as counsel to the Company and Morrison & Foerster LLP served as counsel to the placement agent in connection with the Notes offering.

Pelorus Loans In Action

Last month Pelorus announced that it entered into a $19 million construction-financing loan with Item 9 Labs Corp. (OTCQX: INLB). The Pelorus’ loan money will be used to finance the acquisition of 44 acres of adjacent land next to Item 9 Labs’ 19,200 sq. ft. facility in Arizona, which has been operational since 2017. The loan will also be used to finance the master site development. Construction of phase 1 consists of three additional steel buildings and two greenhouses. This initial expansion adds 9,600 sq. ft. for indoor cultivation, 9,600 sq. ft. of lab and packaging, and a 9,600 sq. ft. head house to support the addition of the two 18,000 sq. ft. greenhouses. The total expansion will consist of six more buildings – one will be for expansion of the company’s lab and support space for the finished product, and the other five will be for indoor cultivation. Once complete, the Item 9 Labs site will comprise 640,000-plus sq. ft. of cannabis operations.

The collective loan balance across Item 9 Labs’ subject properties in Arizona and Nevada provides for a principal amount of approximately $19 million at an annual interest rate of 16% over a term of 18 months. Construction is expected to be completed over the next three years and will increase Item 9 Labs’ capabilities to meet the growing consumer marketplace and wholesale demands in Arizona and Nevada. 

Pelorus moved quickly on our complex transaction and was able to help navigate multiple hurdles on the way to closing when other previous potential lenders failed to perform. With the Pelorus team by our side, supporting our growth plans, we’re in a sound position to complete our expansion and capture more market share,” said Bobby Mikkelsen, CFO of Item 9 Labs Corp.

To date, Pelorus has completed 55 commercial real-estate loan transactions and deployed $204 million to cannabis businesses and real estate owners, comprising 1,750,000 sq. ft. in eight states across the U.S. With the ability to approve construction draws in an average of one to three days, and with one agreement covering the financing of the entire project, the Pelorus Fund helps to stabilize cash flow for its clients so they can remain focused on their core business goals and objectives.

Debra Borchardt

Debra Borchardt is the CEO, Co-Founder, and Editor-In-Chief of GMR. She has covered the cannabis industry for several years at Forbes, Seeking Alpha and TheStreet. Prior to becoming a financial journalist, Debra was a Vice President at Bear Stearns where she held a Series 7 and Registered Investment Advisor license. Debra has a Masters degree in Business Journalism from New York University.


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