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Power REIT expands cannabis greenhouse cultivation footprint in Colorado

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Power REIT (NYSEAMERICAN:PW) has 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 space and 12,880 square feet (sq ft) of support buildings and infrastructure that Power REIT will fund for a total capital commitment of about $2.9 million.

Power REIT said it has strategically located greenhouse investments across southern Colorado with over 83 acres comprising 383,328 sq ft of Controlled Environmental Agricultural (CEA) facilities in the form of greenhouses. This entire portfolio is currently leased to operators who are licensed for the cultivation of regulated cannabis at the properties.

READ: Power REIT acquires Oklahoma greenhouse cultivation facility and property for $2.65M

Concurrent with the acquisition, Power REIT said PropCo 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 property-related expenses including maintenance, insurance, and taxes. After the initial 20-year term, the lease provides two, five-year renewal options and has personal guarantees from the owners of JKL2. Also, JKL2 will maintain a medical marijuana license and will operate in accordance with all Colorado and municipal regulations. The lease also prohibits the retail sale of cannabis at the property.

After an initial deferred rent period to allow for construction, the company said the lease stipulates rental payments that provide PropCo with a full return of its invested capital over the next 36 months and provides an approximate 13% yield increasing thereafter at a rate of 3% per annum. The lease provides straight-line annual rent of approximately $546,000, representing an unleveraged Core FFO (funds from operations) yield of about 18.8% on the invested capital.

“This transaction is with an established operator and provides additional diversification of portfolio risk,” said Power REIT CEO David Lesser in a statement. “We continue to deploy capital at what we believe are attractive risk adjusted returns that benefit from the favorable economic and regulatory environments for cannabis cultivation in Crowley County Colorado.”

Deploying capital

Meanwhile, Power REIT said it has now announced transactions that deploy approximately $19.5 million of capital from its recently closed rights offering across several transactions. The Colorado transaction leaves about $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 a forward annualized Core FFO per share run rate of $3.26. 

“We continue to invest at very attractive yields relative to traditional commercial real estate asset classes,” Lesser said.

“We also believe we can continue our growth through acquisitions using non-dilutive capital. Given our small size, these transactions generate significant growth in Core FFO per share. In addition, Power REIT currently trades at a relatively low multiple and as such, Power REIT represents both a value play and a growth play which is hard to find in the current investment climate.”

Contact the author: [email protected]

Follow him on Twitter @PatrickMGraham

Story by ProactiveInvestors


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