Adam JacksonMay 10, 2023
The company's first-quarter results were in line with their revenue guidance.
real estate Archives - Green Market Report
Adam JacksonMay 10, 2023
Debra BorchardtMay 9, 2023
Chicago Atlantic Real Estate Finance, Inc. (NASDAQ: REFI) announced its results for the first quarter ending March 31, 2023. The commercial real estate company reported net interest income increased slightly by1% to approximately $14.9 million. The company attributed the increase to approximately $1 million of interest income from prepayment fees and acceleration of original issue discounts, the increase in the prime rate from 7.50% to 8.00%, and improved yield terms on facilities amended and/or restructured during the quarter. These increases were said too be partially offset by the impact of timing of early principal repayments.
Chicago Atlantic recorded net income of approximately $10.7 million, or $0.60 per weighted average diluted common share. This was a sequential increase of 46.3%. Total expenses were roughly $4.1 million before provision for current expected credit losses, representing a sequential decrease of 18.0%; primarily attributable to a $1.2 million decrease in net management and incentive fees.
“The better-than-anticipated results reflect the benefit of four principal paydowns during the quarter and the timing of our redeployment of the proceeds,” said John Mazarakis, Executive Chairman. “We are entering what we believe will be a period of favorable demand for capital from a proven lending platform such as ours. With our fortress balance sheet, we have purposefully reined in our originations to continue to focus on higher yielding investments and funding vertically integrated operators with the strongest credit profile.”
The company had distributable earnings of approximately $11.1 million, or $0.62 per weighted average diluted common share, representing a sequential increase of 10.6%. The company reaffirmed its outlook that was issued in March. Back then Chicago Atlantic said it expected to maintain a dividend payout ratio of approximately 90% to 100% on a full year basis. The regular quarterly common dividend is expected to be a minimum of $0.47 per weighted average diluted share.
Tony Cappell, Chief Executive Officer, added, “Our portfolio has continued to perform well with the percentage of floating rate loans increasing to 88%, the weighted average yield to maturity remaining above 19% and our loan to values well below the rest of the lenders in the industry. The balance sheet is under levered, and we have over $50 million of liquidity available to selectively fund the best operators in the cannabis industry.”
During the first quarter, Chicago Atlantic said it had total gross originations of $34.1 million, of which $33.3 million and $0.8 million were funded to new borrowers and an existing borrower, respectively. New originations were offset by principal repayments of $59.2 million, of which $57.8 million was attributable to unscheduled early repayments and sales.
The company reported no defaults upon senior securities. As of March 31, 2023, total loan commitments of approximately $328.1 million ($313.9 million funded, $14.2 million in future fundings) across 24 portfolio companies.
Adam JacksonApril 27, 2023
States with mature markets saw the largest shift.
Debra BorchardtOctober 3, 2022
It seems MedMen’s (OTC: MMNFF) recent pushback against Thor Equities is having a rippling effect across the real estate market. Last week, Green Market Report published a story about MedMen’s legal efforts with regard to the rental payments for a property in Chicago. MedMen had signed a lease on a property with Thor Equities, but then quit paying the rent. Thor Equities says MedMen owes them almost $1 million. The complaint notes that there isn’t any disagreement over the lease and the rent not being paid. MedMen would prefer not to have to pay the money that is owed.
The issue that is irritating some cannabis industry insiders is that MedMen doesn’t want Thor Equities to move the case from the New York Federal court where it was originally filed to a California state court. MedMen wants the case to stay in New York and is arguing that the lease contract isn’t enforceable because cannabis is federally illegal. Real estate companies were already leery of renting to cannabis businesses and this argument is another reason to stay away.
Kristin Jordan, the founder of Park Jordan is a commercial real estate broker and lawyer in New York and consults with cannabis companies. The first applicants for New York are called the Justice applicants because they, or their family members, have previously been arrested and convicted of an applicable cannabis offense. She said, “I recently spoke with a prominent NYC broker and was informed that his clients have received upwards of 12 LOI’s (letters of intent) from CBRE, the firm tapped by the Dormitory Authority of the State of New York to secure sites for the Justice applicants. He said the landlords do not understand the program and are not interested in this at all.” DASNY (Dormitory Authority of the State of New York) is the agency chosen to oversee the financing of the build-out construction of the retail sites.
Thor Equities was successful in the courts in California against High Times which took over a lease contract when it acquired a license from Harvest Health. The court ruled that the back rent had to be paid and that the contract was enforceable. High Times owes $5 million in back rent.
If MedMen is successful in its argument in New York, it would easily scare away most landlords if they think a cannabis tenant could just walk away or that they would get in trouble for renting to a company that is operating in a federally illegal industry. So far, the judge in the case has been critical of Thor Equities and has made the company reword its complaints. That has put the real estate community on edge. What if the case stays in New York & what if Medmen wins? What landlord would ever sign a contract with a cannabis company if the courts won’t enforce the contract?
In the early days of the cannabis industry, most companies raised money to outright buy the properties they wanted to occupy. Banks wouldn’t lend for a mortgage and landlords didn’t want to rent to them, so they paid cash. Cannabis businesses often ended up in depressed areas of real estate because prices were more affordable. As more states legalized cannabis, landlords had begun to gain some comfort with renting.
If cannabis companies have to go back to the days of buying properties, it could further dampen efforts in new markets like New York. Commercial real estate is incredibly expensive even in the most undesirable neighborhoods.
Adam JacksonAugust 17, 2022
Lev, a commercial real estate (CRE) financing platform, said it completed more than $40 million in cannabis CRE loans across five different sponsors, with an additional $50 million in the pipeline.
The news comes as cannabis are increasingly struggling to find funds to back their ventures amid a tightening environment – stymied by a lack of federal banking regulation.
“We’ve worked hard to build our relationships with federal banks at Lev, and it’s paying off,” Lev CEO Yaakov Zar said in a news release. “The cannabis CRE market is notoriously tricky – different states have different regulations and closing a deal can be complicated.”
The company said that it “works with serious investors to navigate complex hurdles at the federal and state levels to close cannabis deals two times faster than traditional methods.”
A portion of the deal locations include Sacramento, California; Denver; Tempe, Arizona; and Lakeville, Massachusetts, including a loan of $16.8 million for the Massachusetts property.
Lev said it also aided in the closing of one national portfolio with properties in Arizona, California and Missouri, with proceeds of $15 million. Property types included cultivation facilities, commercial dispensaries or mixed-use retail property using nonrecourse loans for funding.
Bryan McLaren, CEO of Zoned Properties, the real estate development firm that closed a debt financing deal on its Tempe property, said that “By working with Lev, we were able to close quickly and secure an initial debt facility of up to $4.5 million. Lev was able to help us secure deal terms above and beyond the vast majority of cannabis deal structures we’ve seen over the past decade.”
In addition to a speedy loan close, Lev said it has managed to offer optimal pricing and the lowest interest rates, as low as 4.5%.
Companies also often need help navigating the complex regulations as the national landscape for cannabis legalization continues to shift rapidly.
Adam JacksonAugust 10, 2022
Cannabis REIT NewLake Capital Partners, Inc. (OCTQX: NLCP) posted positive results on Wednesday as it continues to inject capital into the cannabis real estate landscape. The real estate trust released results for the second quarter ending June 30, 2022.
NewLake met expectations as it delivered total revenues of approximately $10.5 million during the period, a 59% gain from $6.7 million for the same quarter last year — eking out past Yahoo Finance Average analyst estimate for revenues of $10.2 million.
“We continue to be pleased with our AFFO growth, which has allowed us to increase our dividend for the fifth consecutive quarter,” newly-minted CEO Anthony Coniglio said. “While our pipeline is as robust as we have seen in our company history, we remain disciplined in our underwriting approach and focus on quality over quantity.”
NewLake posted net income of $3.8 million for the quarter at $0.18 per diluted share, versus $2.7 million in the previous year’s second quarter. The company also posted an AFFO of $8.7 million, or $0.41 cents a share, versus $4.8 million in the same quarter last year.
The company said that net income and FFO were impacted by one-time severance costs of $1.6 million in connection with certain executive separation agreements. Such agreements were contemplated as part of the succession plan at the time of the company merger in March last year, it said.
NewLake posted a FFO of $6.5 million or $0.31 per basic and $0.30 per diluted share. The company said it had cash and cash equivalents of $49.6 million. Around $12.2 million was committed to funding tenant improvements.
The company also paid a quarterly dividend of $0.35 per common share on July 15 to stockholders — versus two cents per common share in the prior quarter — equal to an annualized dividend of $1.40 per share.
Rental income for the second quarter increased by $2.9 million from the prior year to total $9.6 million. The increase in rental revenue was due to the acquisition of several properties — around 23 — over the past two years, in addition to $20,000 from raising rent.
In April, NewLake said it signed a $34 million aggregate three-part commitment for a cultivation property in Missouri consisting of $7.3 million to purchase a 40,000 square foot cultivation facility, a commitment to fund additional $5.2 million to finish construction, $16.5 million to expand the facility by purchasing an adjacent parcel of land and fund construction and an interest-only four-year $5 million loan that can be drawn over the next year.
Once fully built, the combined property will be a state-of-the-art 105,000 square foot cultivation facility.
NewLake also entered into a revolving credit facility in May with a $30.0 million initial commitment, which was expanded to $90.0 million in July, maturing in May, 2027 with a fixed interest rate of 5.65% for the first three years and a floating rate thereafter.
“Subsequent to the quarter, we successfully increased our credit facility from $30 million to $90 million, which will allow us to continue investing in high quality assets,” said Coniglio. “We believe our ability to consistently evaluate high quality transactions with the best operators in the space and have access to capital from banking partners that believe in our ability to execute is a testament to our team, model and disciplined approach.”
Last month, NewLake said it had acquired two properties from a leading publicly-traded U.S. multi-state cannabis operator (MSO) for $28 million and amended its existing lease with another leading publicly-traded U.S. MSO to fund an already completed expansion.
The two properties NewLake acquired include an approximately 38,000 square-foot operational cultivation facility in Pennsylvania for $14.5 million and an approximately 56,500 square-foot operational cultivation facility in Nevada, a new market for NewLake, for $13.6 million.
NewLake’s stock was trading at $17.48 in pre-trading Thursday morning, a slight uptick from $16.75 in the previous day.
Adam JacksonAugust 4, 2022
Innovative Industrial Properties, Inc. (NYSE: IIPR) posted positive results as it continues to inject capital into the cannabis real estate landscape. The real estate trust released results for the second quarter ending June 30, 2022.
The company saw $70.5 million in total revenue this quarter, a 44% gain from $48.9 million for the same quarter last year. The increase was mostly due to the acquisition and leasing of new properties, additional improvement allowances and construction funding at existing properties resulting in adjustments to base rent as well as contractual rental escalations at certain properties.
Last quarter, the company missed expectations as it delivered total revenues of approximately $64.5 million during the period — missing Yahoo Finance Average analyst estimate for revenues of $67 million.
IIP posted net income of $39.9 million for the quarter at $1.42 per diluted share. The company also posted an AFFO of $60.1 million. IIP paid a quarterly dividend of $1.75 per common share on July 15 to stockholders — a 25% increase from last year’s second quarter dividend — equal to an annualized dividend of $7 per share.
The company made four property acquisitions in Arizona, Maryland, Massachusetts and Texas while also executing five lease amendments to provide reimbursement for additional improvements at properties in Illinois, Michigan, New York and Pennsylvania.
On the balance sheet, the company posted 12% debt to total gross assets with approximately $2.5 billion in total gross assets. This represents a total annual fixed cash interest obligation of around $16.7 million with no debt maturing until 2026.
The company said it collected 99% of rent and property management fees over the first two quarters this year.
IIP now owns 110 properties located across the country, representing approximately 8.6 million rentable square feet including 2.2 million under development. The average remaining lease term is around 16 years. The company invested around $2.1 billion across its portfolio and committed an additional $209.6 million to fund draws by certain tenants and sellers related to construction and improvement at company properties. That does not include an $18.5 million loan commitment to a developer for construction of a regulated cannabis cultivation and processing facility in California.
IIP’s stock was trading at $100.27 in pre-trading Thursday morning, a 3.19% gain from $97.17 in the previous day.
StaffFebruary 2, 2022
Private company Pelorus Equity Group has updated the business world with its operational results. The company is known for providing bridge commercial real estate loans for cannabis businesses and owners with cannabis-related real estate. The company’s privately-held mortgage real estate investment trust, the Pelorus Fund, ended the year with $243 million assets under management and $193 million of equity. This amounted to a 434% growth year-over-year in 2021.
“As cannabis operators and landlords with commercial real estate continued to enter the sector, we saw the need for funding to support build-outs, expansions and upgrades spike in 2021,” said Dan Leimel, CEO of Pelorus Equity Group and Manager of the Pelorus Fund. “In 2022, we expect to see a sustained need for commercial real estate funding to continue. With our ability to structure asset-based lending solutions for complex transactions, we provide our clients innovative loan programs that enable them to scale their operations, and cross numerous thresholds that most thought were unattainable. In the coming year, we plan to aggressively scale our assets under management while bringing more novel deal structures and lending solutions to some of the largest and fastest-growing cannabis companies.”
Pelorus and Pelorus Fund listed the following 2021 highlights in a statement:
-
Upsized Pelorus Fund’s offering to $1B from its previous $250M offering.
-
Pelorus Fund outperformed its original 2021 growth projections of 300% by 134%.
-
Pelorus saw 434% year-over-year growth, ending the year with $243 million AUM and $193 million of equity – more equity than any other privately held or publicly traded commercial real estate lender in the cannabis space.
-
First in the cannabis industry to secure up to a $20M line of credit with an FDIC–insured bank at 4.75% and no non-usage fees.
-
First to close a bond offering of $42,250,000 aggregate principal amount of its 7% Senior Unsecured Notes in the cannabis sector.
-
Pelorus Fund, along with its Notes, became the first privately held mREIT to receive an Investment Grade BBB+ rating from the Egan-Jones Ratings Company.
-
Pelorus Fund entered into a letter of intent (“LOI”) to complete StateHouse Holdings’ real estate financing of US$77.3M of non-dilutive real estate debt financing.
-
Entered into a $19 million construction financing loan with Item 9 Labs Corp., a vertically integrated cannabis dispensary franchisor and operator that produces premium, award-winning products.
-
Since 2016, Pelorus has originated 59 commercial real estate loan transactions and deployed $244 to cannabis-use real estate owners, comprising nearly 2 million sq. ft. in eight states across the U.S.
Kaitlin DomangueJuly 29, 2021
Smoking cigarettes indoors has been shown to reduce a home’s resale value by up to 29%, says Realtor.com. When it comes to buying a cannabis enthusiast’s home, the resale value research is less clear, though 30% of realtors say they have struggled to sell a house where cannabis was grown. A recent study conducted by the National Association of Realtors said 50% of leasing professionals found it wasn’t hard to re-lease a property after tenants smoked cannabis indoors, and the organization “does not have a position on cannabis legalization.”
Legal cannabis raises home value
There’s been a lot of chatter surrounding cannabis and the real estate market. But, what kind of impact do cannabis operations have on property value by simply just existing in the same town or city as your house? According to research by real estate data company, Clever, property values rose by $17,113 more in states where recreational cannabis is legal, compared to states where it’s illegal or just legal at the medicinal level. Not to mention, millions of dollars in tax revenue created. In 2021, average home values increase by $470 for every $1 million increase in overall tax revenue from cannabis.
Clever combined data from Zillow, the U.S. Census, and other resources to produce their report.
New businesses, tourism, and jobs all contribute to the increase
When it comes to answering the “why”, that’s a little more complex. According to Clever, there’s a variety of reasons why property values are increasing as cannabis legalization takes place. “Numerous factors determine home values, including the home’s features and condition, the area’s amenities, and local crime rates. Legalizing marijuana can impact each of these criteria in ways that are both predictable and surprising — particularly by creating fresh demand for housing, new businesses, and tourism,” says the report.
We often look to Colorado as a model representing cannabis’ potential in different states. Legalization brought Colorado a wave of new business, and the crime rate also dropped. Also, hotel revenue rose by $130 million in the first year after Colorado legalized, according to a study conducted by Penn State.
Key Findings
- Home values increased by $6,338 from 2017 to 2019 in states where cannabis is legal in some form, compared to states that haven’t legalized at all
- On average, home values increase by $470 for every $1 million increase in tax revenue
- Eight states reported a full year of tax revenue generated from cannabis sales in 2020, totaling $2.3. $1 billion of that being California sales alone.
- The seven states (plus D.C.) who haven’t yet sold a year’s worth of legal cannabis are predicted to collect $601 million in new annual tax revenue.
- Home values are predicted to increase by an average of $61,343 in states that have legalized recreational cannabis, but sales aren’t yet taking place.
- California has seen the biggest increase in home values, up by $128,341 since 2017, among states that have legalized at the recreational level
- Cities with more dispensaries are positively correlated with higher home values, suggesting legalization boosts jobs and economic growth.
- In cities with recreational dispensaries, home values increased by $22,090, compared to states where recreational cannabis is legal but not yet being sold in retail locations
- Property values increase by $519 with each new dispensary a city adds
According to Clever’s future predictions, home values will increase by more than $60,000 on average.
Looking at tax revenue
When it comes to tax revenue, where does it all go? Different states allocate their tax revenue towards different things, but according to a report by Urban Institute, education programs (including community colleges and pre-K schools) are the most likely to benefit.
Oregon, for example, donates 40% of its tax revenue to the state’s school fund, accumulating $180,252,103 between 2017 and 2021. Arizona recently legalized cannabis for recreational consumption, and they plan to follow suit by donating 33% of their tax revenue to the state’s community colleges.
Other states use their tax revenue for different things, like Washington, where the tax revenue goes towards a healthcare trust account to provide basic healthcare services to people without insurance. Ranked from most to least common, here’s how different states use their cannabis tax revenue:
- Education programs
- Substance abuse education and treatment programs
- Reparations for those negatively affected by the War on Drugs/criminal justice reform
- General funds
- Transfers to local governments
- Administrative costs of initiating new laws
- Public health and safety programs
- Law enforcement, crime reduction, and fire departments
- Transportation and infrastructure
- Programs for conservation
- Programs for veterans
Cannabis’ impact on local communities
This is just another piece of evidence supporting cannabis’ positive impact on local and state economies. According to Leafly, the legal cannabis industry supports 321,000 full-time jobs across the United States, adding 77,300 of those last year. Not to mention the tax revenue generated from legal cannabis sales. Criminal justice reform, education, substance abuse treatment, and local governments all benefit from the new source of revenue.
As the cannabis industry continues to grow, we see it positively affects more than just consumers.
StaffJuly 12, 2021This article by Nadja Sayej was originally published on Leverage.com and is being republished with permission.
On March 31, New York Governor Andrew Cuomo announced that the state would legalize medical and adult-use cannabis in the coming year. According to Cuomo, it’ll create over $350 million in revenue, and at least 30,000 jobs.
“This is a historic day in New York, one that rights the wrongs of the past by putting an end to harsh prison sentences,” Governor Cuomo said in a statement. “It embraces an industry that will grow the Empire State’s economy and prioritizes marginalized communities so those that have suffered the most will be the first to reap the benefits.”
New York is just one of 17 states across the country legalizing cannabis. In the coming months, marijuana plant-related businesses are going to be popping up all over the east coast, now that New York, New Jersey, Maine and Massachusetts have legalized cannabis, among other states with limited capacity (like Pennsylvania).
A cannabis real estate boom is likely to follow. The global legal cannabis industry is predicted to hit $40.6 billion in global spending by 2024, which will be a 300% increase from 2019, according to a report from Arcview Market Research & BDS Analytics.
But what exactly does this mean for commercial cannabis real estate?
The industry consensus is that it’s tough to get a cannabis business going; whether it’s getting a license or getting a location. Though the dispensary boom is all over, it will likely flock to touristic towns like Great Barrington, MA, known as a skiing town, which now has five cannabis dispensaries in a town of 7,000.
With cannabis coming to the states of New Jersey and New York, the market is expected to grow for adult-use cannabis starting this year in NJ, and on April 1, 2022 in New York.
“There is a lot of demand and not a lot of supply,” Brian Lauray from MMLG consultants recently said. “It will come down to the operators that have the money and can tweak many levers.”
Just look at Pennsylvania, a medical-only cannabis state (it isn’t legal for non-medical, recreational adult-use). Even still, they’ve seen their medical cannabis sales grow from $40 million in January 2020 to $98 million in January 2021, according to a report from Headset. Is this a sign of the cannabis real estate boom to come for other states?
“The short answer is yes,” said Akiva Gottlieb, a commercial broker at Lev Capital in New York City. “We will see top brands fit in nicely for trendy areas in New York City, Jersey Shore and Hoboken, and be picked up quickly by hippie-type areas. Just nowhere near private schools and corporate industries.”
Gottlieb explained that the country’s cannabis experts are well aware of the market oversaturation in the west and Midwest, from California to Colorado. Cannabis businesses will likely move to, or expand in, the east coast.
“Experts predict that your common shops like 7/11 and the likes will carry some sort of medical or recreational cannabis products,” Gottlieb said.
Cannabis financing is a key step to securing a property to address the hot cannabis real estate world. Gottlieb drew a parallel between the black market to the legalization of products over time. Take the prohibition era, where the 18th amendment banned the sale of alcohol, and now in 2021, where the sale of alcoholic drinks has already turned over $254,564 million, according to a report from Statistica, and is expected to grow roughly 6% before 2025.
The cannabis industry could see the same turnover, eventually. Cannabis real estate isn’t just dispensary retail, but where the product is grown, harvested, stored, sold, and consumed, all within state lines. Commercial real estate is in demand, not only for storefronts but warehouses and other types of related land.
“Previously determined ‘safe’ and ‘secure’ asset classes, like retail and multifamily are now considered volatile,” Gottlieb said. “We have seen a major shift in large institutional investment corps who were forced to pivot their core businesses toward alternative products.”
Could it be pandemic-proof? He explained that medical-use cannabis has been deemed an essential business during the pandemic in many states.
“With the likes of Target, Walmart, Burger King, and Starbucks closed, your local dispensary has been open servicing the community and racking up their revenue,” Gottlieb said. “And to our landlords, most importantly, they are paying their rent.”
To say the industry is growing is an understatement.
“As a commercial financing advisory firm, we come across numerous transactions that include some form of a cannabis element to it,” he claimed. “Ranging from a minority tenant in a strip mall to a triple net (NNN) lease on an industrial cultivation facility, cannabis is everywhere right now.”
Real estate firms like Lev are “approaching these deals just like we would any standard commercial asset,” Gottlieb said.
The future of cannabis in commercial real estate comes down to financing.
“As the industry develops more, more states will pass the Safe Banking Acts, which means that state-authorized marijuana businesses will have easier access to banking services,” Gottlieb said.
Gottlieb predicted that, by spring of 2022, many mainstream corporate and national banks will be on board with financing, “and will allocate significant capital under their balance sheet to this particular market.”
Here’s one step forward: Many real estate firms are adding a Cannabis Real Estate Division, like Lev has, to their websites. Just look at James Capital Advisors, which recently started a new Cannabis Real Estate Division in Los Angeles. With this sort of example, many other real estate companies who specialize in commercial real estate are likely to follow.
“The industry follows the cash flow, and the cash flow is overwhelmingly available in the cannabis industry,” Gottlieb said. “Especially in debt with firms like Lev, the people need assistance financing these unique properties and the brokers of our new modern world will fill that void.”
Get the latest cannabis news delivered right to your inbox
Unpack the industry with the daily cannabis newsletter for business leaders.
