💰Cannabis Financings (10.23.19-10.29.19)
Acreage Holdings/GreenAcreage. 1906. Zenabis. TGOD. HEXO. Village Farms. Bespoke Financial. ZolTrain. IIPR - Cresco & Trulieve
Acreage Holdings and GreenAcreage Real Estate Corp., an Acreage-affiliated REIT, closed a series of sale-and-leaseback transactions for the sale of certain properties and facilities from Acreage Holdings to GreenAcreage for an aggregate of ~$18M to Acreage Holdings and ~$23M overall including payments to a third-party seller. The locations include facilities in Massachusetts, Florida and Pennsylvania. Acreage Holdings and GreenAcreage expect to close on additional facilities in Illinois and Connecticut within the next thirty days.
1906, which sells Drops, i.e. THC/CBD in pill form raised $18M. The round was led by Navy Capital and included a range of institutions, high net worth individuals and existing investors. 1906 will use the investment to fund the company’s launch in the additional states of Illinois, Massachusetts, and Michigan.
Insiders of Zenabis (Canadian licensed producer) have committed to acquire 30% of the Common Shares available under the Rights Offering for a total of $6.2M. The remaining Common Shares are available for all other shareholders.
Twitter users had a negative opinion regarding the stock, accusing Zenabis insiders of shorting the stock while covering themselves with the rights offering. Earlier in the week, Zenabis issued an update on its operations. Andrew Grieve, CEO of Zenabis, said, “We continued to see strong cultivation results in September, with output exceeding our forecast of 1,731 kg by 21.8%. Our Performance Ratio decreased month over month as a result of the significant number of harvests from newly licensed rooms in the month (five of the 10 harvests).” It all sounded very positive, then the Company came out a few days later to say that it was experiencing delays in packaging ramp up 🤔.
The CEO also recently passed on taking a salary to achieve alignment with shareholders.
❌Green Organic Dutchman tried to sell its unfinished new pot facility for $94.2M in a leaseback deal — and there were no takers
The Ontario-based company has invested $107M in the facility and its equipment. Under the terms of the offering, the licensed producer was willing to pay a little more than $10M per year in rent over an initial lease term of 15 years and would be subject to annual rent increases of two per cent. TGOD is one of several licensed producers struggling for liquidity in a dried-up marketplace.
“Cannabis companies tend to think it is worth what they put into the facility and from a real estate valuation standpoint it is not at all,” he said.
Because the cannabis industry is still in its infancy and it’s difficult to say which companies will still be operating in 15 years, any kind of long-term deal could come with risks for prospective buyers.
Even sale-leaseback deals in the industry are getting hit as RE investors now have to do more diligence around whether the Company signing up for 10-year leases will still be around or if any other tenants will come in after them & pay 50-100%+ above market rents (...nope)
💰HEXO - $70M private placement of convertible debentures led by Directors, CEO, and long-term shareholders; reschedules FY 2019 earnings call
$70M principal amount of 8.0% unsecured convertible debentures. The Company has also announced that in light of the financing and additional time required to finalize its year end filings, the Company has rescheduled the release of its fourth quarter and full year ended July 31, 2019 financial results. The debt has a one-year anti-dilution feature in this arrangement, meaning that the financing does not dilute current shareowners’ ownership of the Company in the short term.
Beginning on the date which is one year from issuance, the Company may force the conversion of all of the principal amount of the then outstanding Debentures at the Conversion Price on not less than 30 days’ notice should the daily volume weighted average trading price of the common shares of the Company be greater than $7.50 for any 15 consecutive trading days. Upon any repayment of the principal amount of the Debentures, the Company shall have the right to satisfy the repayment of the principal amount, together with all accrued and unpaid interest thereon, through the conversion of such amounts into common shares of the Company at the Conversion Price.
Completed bought deal offering of 3,059,000 common shares at a price of $9.40 per Offered Share for aggregate gross proceeds to the Company of $28,754,600. The Offering was conducted by a syndicate of underwriters co-led by Beacon Securities Limited, as sole bookrunner, and GMP Securities. The Offering included 399,000 Offered Shares issued pursuant to a full exercise of the Underwriters' over-allotment option.
Bespoke Financial was launched in 2018 by co-founders Benjamin Dusastre, Pablo Borquez-Schwarzbeck and George Mancheril. Borquez-Schwarzbeck and Dusastre are also the co-founders of ProducePay, a fintech platform focused on produce farmers across North and South America. Founded in 2014, ProducePay has financed $2+ billion in perishable commodities to date, operates in 13 countries, processes thousands of transactions monthly and has raised over $200M in funding from some of the largest and most prominent investors in the world.
The $7M raise, led by Casa Verde with participation from Greenhouse Capital Partners, and Outbound Ventures among others, will be used to both enhance Bespoke's existing online platform where borrowers can request funds on a real-time basis and to expand Bespoke's team and marketing efforts. While currently focused on the California cannabis market, the company has plans to quickly expand into other legal US jurisdictions.
Akerna (NASDAQ: KERN), a cannabis compliance technology company, has made a strategic investment in ZolTrain, a mobile training platform. The investment puts cannabis brand training in the palm of the budtender’s hand and provides information at the point of sale through MJ Platform, the tracking and compliance technology solution used by Akerna customers.
🏭Innovative Industrial Properties (IIPR) acquires Illinois Properties and enters into Long-Term leases with Cresco Labs
Closed on the acquisitions of two properties in Joliet and Kankakee, Illinois, which comprise approximately 90,000 square feet of industrial space in the aggregate. The purchase prices for the properties were $32.8M in total (excluding transaction costs). Concurrent with the closing of the purchases, IIP entered into a long-term, triple-net lease agreement for each property with a wholly owned subsidiary of Cresco Labs Inc. (Cresco), which intends to continue to operate the properties as regulated cannabis cultivation and processing facilities. Cresco is expected to complete additional tenant improvements for the properties, for which IIP has agreed to provide reimbursement of up to ~$13.8M. Assuming full reimbursement for the tenant improvements, IIP’s total investment in the two properties will be ~$46.6M.
🏭Cannabis REIT IIPR expands Trulieve Relationship with $17M Florida Sale and Leaseback
IIPR acquired a property in Quincy, Florida, which comprises five buildings totaling approximately 120,000 square feet of industrial space, from Trulieve. Concurrent with the closing of the purchase, IIP entered into a triple-net lease agreement with a subsidiary of Trulieve, for continued operation as a licensed medical cannabis cultivation facility. The purchase price for the Florida property was $17M (excluding transaction costs). The initial lease term is ten years, with two options to extend the term of the lease for five years each. The initial annualized base rent is equal to 11% of the purchase price for the property. Earlier this year, IIP executed a sale-leaseback transaction with Trulieve for a 150,000 square foot industrial facility in Holyoke, Massachusetts for an initial purchase price of $3.5M (excluding transaction costs), pursuant to which Trulieve is expected to complete tenant improvements for the building, for which IIP has agreed to provide reimbursement of up to $40.0M.