Power REIT Expands Presence in Colorado Cannabis Cultivation
Through a subsidiary, it acquired a 10-acre property in Crowley County that includes the construction of a 12,000 square foot greenhouse and 12,880 square feet of support buildings and infrastructure.
(NYSEAMERICAN: PW) acquired a 10-acre property in Crowley County, Colorado, through its wholly owned subsidiary (PropCo).
The company said the property will include the construction of a 12,000 square foot greenhouse and 12,880 square feet (square feet) of support buildings and infrastructure that Power REIT will fund for a total capital commitment of approximately $ 2.9 million.
Power REIT said it has strategically located greenhouse investments in southern Colorado with more than 83 acres comprising 383,328 square feet of environmentally controlled agricultural facilities (CEA) in the form of greenhouses. This entire portfolio is currently leased to operators licensed for the cultivation of regulated cannabis on properties.
READ: Power REIT acquires Oklahoma greenhouse facility and property for $ 2.65 million
Along with the acquisition, Power REIT said PropCo has entered into a 20-year “triple net” lease with JKL2 Inc, which will operate the property as a cannabis cultivation facility.
The lease requires JKL2 to pay all expenses related to the property, including maintenance, insurance and taxes. After the initial 20-year term, the lease provides for two five-year renewal options and includes personal guarantees from the owners of JKL2. Additionally, JKL2 will retain a medical marijuana license and operate in accordance with all Colorado and city regulations. The lease also prohibits the retail sale of cannabis on the property.
After an initial period of deferred rent to allow for construction, the company said the lease stipulates rent payments that provide PropCo with a full return on its invested capital over the next 36 months and provide a return of around 13%. thereafter increasing at a rate of 3% per annum. The lease provides for a straight-line annual rent of approximately $ 546,000, which represents a non-leveraged FFO (Operating Fund) return of approximately 18.8% on invested capital.
“This transaction is done with an established trader and provides additional portfolio risk diversification,” Power REIT CEO David Lesser said in a statement. “We continue to deploy capital at what we believe to be attractive risk-adjusted returns that benefit from the favorable economic and regulatory environments for growing cannabis in Crowley County, Colorado.”
Meanwhile, Power REIT said it announced deals that deploy around $ 19.5 million in capital from its recently closed rights offering to multiple deals. The Colorado deal leaves around $ 17 million to deploy.
Power REIT’s current annual core FFO run rate is approximately $ 8.25 million and the company added that it estimates an annual core FFO forward run rate per share of 3. $ 26.
“We continue to invest at very attractive returns compared to traditional commercial real estate asset classes,” Lesser said.
“We also believe that we can continue to grow through acquisitions using non-dilutive capital. Given our small size, these transactions generate significant growth in Core FFO per share. Additionally, Power REIT is currently trading at a relatively low multiple and as such Power REIT represents both a value game and a growth game that is difficult to find in today’s investment climate.
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