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Rob Sechrist is the President of Pelorus Equity Group and Co-Manager of the Pelorus Fund (a cannabis-use CRE mortgage REIT). Since the formation of Pelorus in 2010, he has raised more than $300M in secured real estate transactions. Today Pelorus funds millions a month primarily using the Pelorus Fund or syndications with family offices and other various debt and equity partnerships. The company announced that it grew 434% Y/Y (vs. target of 300% Y/Y) in 2021. The Company ended 2021 with $243M Assets Under Management (AUM) and $193M of equity.

Notes:

Fundraising. By September 2018, Pelorus had raised $25M and deployed into 13 Cannabis real estate projects throughout California. The first $100M Pelorus raised was primarily from retail investors (they have 1,000+ investors) who were individuals writing checks up to $1M. Once they had three years of audited track record and $100M AUM, they pivoted over to family offices, institutional investors and pension funds. Rob has been a mainstay at conferences like Benzinga Cannabis Capital Conference (where I saw him this past October), CannaVest, and The Cannabis Private Investment.

$77.3M Debt Financing for StateHouse Roll Up Financing. The first tranche of the $77.3M debt financing was announced yesterday. Pelorus has funded a total of $45.4M pursuant to the first tranche of the Roll Up Financing, funded through three separate loans to Harborside, Loudpack and Urbn Leaf. Harborside has received ~$15.5M, Loudpack has received ~$16.4M, and Urbn Leaf has received ~$13.5M of the aggregate funds advanced under the first tranche. From its share of the proceeds of the Roll Up Financing, Harborside repaid the $12.0M outstanding under its senior secured revolving credit facility. The closing of the second tranche of the Roll Up Financing, for expected proceeds of $31.9M, will occur at a time of the Company's choosing following the closing of the Company's proposed acquisitions of Loudpack and Urbn Leaf, and will be available for StateHouse's growth initiatives. Proceeds from the first tranche of the Roll Up Financing will be used to retire certain existing loans, to fund closing costs and interest reserves, and to provide additional working capital to the three companies. Proceeds from the second tranche will be used primarily for working capital purposes and for growth capital of StateHouse.

$50M Senior Unsecured Notes due 2026. The Company didn’t need capital when they they closed on the Bond back in September. It was more so done to see if they could do it. Having such a small bond offering eliminates a lot of the smaller players (6% concentrate limit). They didn’t have a lead investor come in to drive book around and because of this, they have some of the least restrictive covenants.

Differentiation. Construction draws are cumbersome, so a lender like Pelorus can help borrowers get their facilities up and running much quicker, often saving 20-40%. Rob used the $12M, 16% annual interest loan over 18 months to Acreage (December 2020) as an example of where the borrower was able to save money by getting their 80,000 sq ft Illinois cultivation and processing facility up much sooner. Because Pelorus process draw approvals quicker, they are able to save property owners considerable time during the construction period. By delivering financing over a shorter period, even though the interest rate is significantly higher, their total cost of financing is typically lower. This enables property owners to start generating revenues sooner for a similar or lower cost of financing.

👋 The Highly Objective Podcast is hosted by Dai Truong, who leads Cannabis Investment Banking at Arlington Capital Advisors.. Third-party information presented here and links to third-party content are for informational purposes only and are not intended as a recommendation, offer or solicitation for the purchase or sale of any financial instrument, security or investment.  The information provided is not warranted as to completeness or accuracy and is subject to change without notice. Linking to third-party sites in no way implies an endorsement or affiliation of any kind between Arlington Capital Advisors, LLC, or its affiliates and any third party.  The information in this blog constitutes my own opinions (and any opinions posted by guest bloggers from time to time) and it should not be regarded as a description of services provided by Arlington Capital Advisors, LLC or any affiliate.