UC Asset LP has acquired a cannabis property valued at $3 million, which includes 1,550 square feet of office space and 16,500 square feet of cannabis cultivation space. UC Asset previously owned 50% of the property and has just acquired the other 50% for $1.5 million. An independent licensed appraiser recently valued the property at a replacement cost of $3.4 million, which excludes all the equipment for cannabis cultivation.
None of the $1.5 million consideration for this deal was paid in cash at closing. Instead, UC Asset issued preferred shares with a face value of $1.0 million to the seller, traded $250,000 in equity, and secured $250,000 in financing with assistance from a third party.
"With the exception of $250,000 in financing, the remaining $1.25 million is de facto an investment by the seller in our company," says Larry Wu, founder of UC Asset. "Since the seller is also a major owner of the current tenant, this can be interpreted as that our tenant has become a strategic investor in UC Asset."
As part of the deal, the current tenant entered into a five-year double-net lease with UC Asset, increasing the monthly rent from $12,000 to $13,000 immediately, and further to $16,000 at the beginning of next year.
"This deal is part of our strategic plan to expand our investment in cannabis properties," says Wu, founder of UC Asset. "Among our portfolio properties, cannabis properties currently yield the highest return on equity (ROE) and have most promising potential for appreciation in the coming years, especially if a change in federal regulations will allow commercial banks to provide mortgage loans to cannabis property owners."
For more information:
UC Asset LP
www.ucasset.com