(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