Power REIT has completed the acquisition of a 4.32-acre land parcel (“Tamarack 7”) for $150,000 located in southern Colorado through a wholly-owned subsidiary (“PropCo”) which plans to construct a greenhouse for the cultivation of medical cannabis. Tamarack 7 is adjacent to several other properties that Power REIT currently owns in a Crowley County, Colorado and is approved for cannabis cultivation.
Concurrent with the closing on this acquisition, PropCo entered into a “triple-net” lease that requires its tenant (“Fifth Ace”) to pay all property-related expenses including maintenance, insurance and taxes. The lease has a term of 20 years and provides two 5-year renewal options for the tenant and has financial guarantees from affiliates of the tenant. The lease requires Fifth Ace to maintain a medical marijuana license and to operate in accordance with all Colorado and municipal regulations while prohibiting retail sales of its products from the property.
As part of this transaction, Power REIT has agreed to fund the immediate construction of an 18,000 square foot greenhouse and processing facility for approximately $1.22 million. Accordingly, Power REIT’s total capital commitment is approximately $1.37 million. The lease is structured to provide straight-line annual rent of approximately $262,000 which represents an unleveraged FFO yield of approximately 19% on the invested capital.
David Lesser, Power REIT’s Chairman and CEO, commented, “This transaction is the latest example of our growth model to create a portfolio of Controlled Environment Agriculture (“CEA”) properties. Southern Colorado is an ideal greenhouse cultivation environment. We believe we are providing a compelling real estate solution that enables our tenant to move forward with their vision of growing high-quality cannabis in a greenhouse using an innovative aeroponics growing system. This growing method is intended to produce higher yields at lower costs than traditional growing methods.”