Power REIT has acquired a 10-acre property in Crowley County, Colorado. The Property will include the construction of a 12,000 square foot greenhouse space and 12,880 square feet of support buildings and infrastructure that will be funded by Power REIT for a total capital commitment of approximately $2.9 million.
Concurrent with the acquisition, the company entered into a 20-year “triple-net” lease with JKL2, 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. As mandated by the Lease, JKL2 will maintain a medical cannabis 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 Lease stipulates rental payments that provide the company with a full return of its invested capital over the next 36 months, and thereafter, provides an approximately 13% yield increasing thereafter at a rate of 3% per annum. The Lease, as structured, provides straight-line annual rent of approximately $546,000, representing an unleveraged Core FFO yield of approximately 18.8% on the invested capital.
David Lesser, Power REIT’s Chairman and CEO, commented, “This transaction is with an established operator and provides additional diversification of portfolio risk. 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.”
“We are extremely excited to have the backing of Power REIT to get this project off the ground. stated Jill Lamoureux, Co-Founder and Chief Compliance Officer of WHT LBL and partner of JKL2 Inc. We believe this facility can quickly become a large-scale producer of high-quality cannabis and compete aggressively in the very active and growing Colorado market. Having been in the cannabis space for some time, it is no secret that financing has been one of the most challenging obstacles for growing cannabis companies. We are very excited to be working with Power REIT and would not be in the position to launch JKL2 without their support. They have been responsive to our needs, understand the industry, easy to work with, and ultimately, provided fair and equitable deal terms that allow for rapid, responsible growth."