Cannabis Commercial Real Estate Is Complicated; Pelorus Equity Group Is Changing That
The size of the global cannabis market continues to gain momentum, according to Fortune Business Insights’ Cannabis / Marihuana Market, 2019-2026 report released in early June. According to the report, the cannabis market was valued at $ 10.60 billion in 2018. Fast forward to 2026, and the market is projected to be $ 97.35 billion, which has an average annual growth rate (CAGR) of 32.92% over the forecast period.
With recreational cannabis use now legal in 17 states and the District of Columbia, and east coast states like New York, New Jersey and Virginia transitioning from pure medical to adult use, the burgeoning sector is seeing record numbers. high demand for cannabis-enabled properties.
However, federal laws have made it difficult for business and property owners who operate in the space to fund expansion and improvement projects. To make matters worse, growing cannabis assets can cost millions and involve highly specialized designs like laboratories and cold stores for products. Even if the owner and operator secure the financing, the closing process can be lengthy. For fast-moving entrepreneurs, these challenges and the need for faster funding options have often resulted in operational delays that cost cannabis owners and operators millions in lost sales or increased rents.
Southern California-based Pelorus Equity Group, a pioneer in cannabis credit, aims to transform the landscape of cannabis commercial real estate. The company, which has been providing value-added commercial real estate loans in the cannabis space for 5 years, is committed to easing these burdens on owners and operators while attracting a new class of investors eager to enter the marketplace.
Pelorus CEO Dan Leimel told Benzinga that his company has seen a significant increase in the number of cannabis operators and property owners looking for leaner ways to finance their new construction and improvement projects, along with a noticeable influx of mainstream investors entering Commercial real estate is getting into cannabis space.
The story goes on
Last December, Pelorus signed a $ 13.3 million home loan agreement with Acreage Holdings, Inc. (CSE: ACRG.AU, ACRG.BU), (OTCQX: ACRHF, ACRDF). Pelorus’ financing loan at 16% annual interest over 18 months has helped the company fully expand its existing 80,000 square foot cultivation and processing facility in the rapidly growing cannabis market in Illinois. Just 6 months after signing the deal, Acreage grew operations in the Prairie State by more than 76% as market demand for the state soared.
Pelorus also offers the benefit of equity-like return through its fund, a cannabis-focused real estate investment trust (REIT), and will earn an interest yield of 16% over an 18-month loan period from Acreage.
Pelorus’ credit model is to finance the construction and remodeling of highly specialized real estate. Real estate owners and cannabis companies like Acreage are willing to pay a premium to fund Pelorus, but so far it has been a win-win for both investors and entrepreneurs.
Leimel continues: “Because we process drawing permits more quickly, we save building owners a lot of time during the construction phase. Due to the shorter term of the financing despite the significantly higher interest rate, our total financing costs are usually lower. “This enables property owners to generate income earlier at similar or lower financing costs.”
Pelorus has completed 52 loan transactions and provided $ 181 million to cannabis companies and real estate owners. With the goal of creating more credit demand across North America, the company views this credit investment as a calculated move to capitalize on the rapidly growing cannabis market.
Pelorus President Rob Sechrist said, “Our digital platforms allow us to understand the supply dynamics of cannabis-related real estate across the county. We know their location, the type and size of the properties – details that are essential for an accurate risk and value assessment. You can get a really precise overview of the situation in no time at all, you can calculate with confidence and act quickly. For cannabis companies with millions at stake and limited options, it’s all about who can get them the right funding the fastest. We know we are. “
The unique aspect of Pelorus’ credit model is that the company is specifically focused on the cannabis industry, with the main goal of stabilizing cash flow for its customers. Pelorus’ main strategy is to move the equity component to the real estate side of the business, add value to customer facilities, and enable lending through this model.
“We were able to approve construction drawings in an average of 1 to 3 days, and 1 contract can cover funding for the entire project,” added Sechrist. “We offer access to industry expertise and a deep network, and even though our lending rates are high, our overall lending costs are typically lower and our faster draws mean that both owners and operators can generate revenue faster.”
Pelorus also seized a tremendous growth opportunity during the COVID-19 pandemic as cannabis facilities were seen as essential while other property classes were hit hard. Aside from the fact that its cannabis plants and operations are largely recession-proof, Pelorus believes it is well positioned to continue its current growth model.
More information about the Pelorus Fund and the Pelorus Equity Group can be found at www.PelorusEquityGroup.com.
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