Funding Real Estate and Infrastructure in the Cannabis Sector
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CROP Infrastructure Corp. (CSE:CROP, OTC:CRXPF) is a publicly traded Canadian corporation enabling licensed cannabis producers to achieve sector growth by providing capital for the acquisition of land, real estate, branding and infrastructure for their operations. Sensing increasing potential in the US cannabis market, CROP Infrastructure is an early mover with operations in a variety of states—Washington, California and Nevada, particularly—and has also entered Italy and Jamaica.
CROP’s business model is aimed at addressing issues in the cannabis industry, including the fact that financial institutions are not yet willing or able to fund companies in the sector and that, as a result, growers lack the capital to effectively establish and grow their operations. As regulations in legalized cannabis jurisdictions do not preclude organizations from funding real estate or equipment for the sector, CROP Infrastructure is entering a niche position in which it can provide capital to licensed producers without the need of being producers themselves.
CROP Infrastructure began rolling out its business model in Washington State and is in the process of constructing a 43,680-square-foot cannabis production facility. This is in partnership with three brands that will continue to develop as they partner with the company: Evolution, Tiffany and Trikom. Once the 43,680 square-foot canopy is complete and in full-scale production, CROP Infrastructure anticipates the facility will have tenant production potential of 2,000 pounds per month.
CROP Infrastructure has signed a LOI with Naturally Splendid Enterprises Ltd. (TSXV:NSP;Frankfurt:50N;OYC:NSPDF) for the development and manufacturing of CROP Infrastructure hemp brands Hempire and Tiffany. Naturally Splendid is tasked with creating a variety of retail products which will then be distributed through CROP Infrastructure’s distribution network.
The company has also entered into a membership purchase agreement with Humboldt Holdings LLC., under which CROP Infrastructure invested $2 million in land, equipment and the development of 20,000 square feet of canopy in California, which has been added onto the existing 10,000-square-foot greenhouse on the property. The entire 30,000 square-feet is now operational and the first harvest has been completed. CROP Infrastructure currently has a 49 percent stake in Humboldt Holdings and retains the option to gain an additional 20 percent for $1 million.
In California, CROP also has its Emerald Heights retail operations, which are made up of two retail outlets supplied by Emerald Heights, Hempire, Trikom, Tiffany CBD and Evolution Cannabis brands.
CROP Infrastructure has continued to expand its presence into Nevada significantly where it has a 1,010 acre project in Nye County and a 1,865 acre project in Esmeralda County. 240 acres of the Nye County project are being harvested now and sales will begin in Q4 2018.
Additionally, CROP Infrastructure formed a joint venture agreement with Xhemplar to develop a 522,000-square-foot project in northeastern Italy. The joint venture expects to produce 44,000 pounds of low THC and high-CBD cannabis light per year. The companies have also leased an 87,120 square-foot greenhouse facility in Italy where work has already begun upgrading the security systems.
CROP Infrastructure also secured a joint venture agreement in Westmoreland Parish, home to some of the most fertile land in Jamaica. CROP Infrastructure is currently looking for a suitable tenant for the property.
- Funding a real estate and infrastructure investment portfolio within the cannabis space
- Investments paid back through leasing, licensing, branding, and management fees
- Plans to deploy model across North America in legal jurisdictions
- International opportunities in Italy and Jamaica
- Development and manufacturing agreement in place with Naturally Splendid.
- 15 brands of cannabis/hemp that they can offer consumers
- 2 dispensary applications in San Bernardino and West Hollywood
- 2 dispensary applications in Italy
- First 240 acre Nevada harvest underway in Nye county
- Toll Processing deal signed
- Offtake agreement for Nevada 2019 signed
- Harvesting is complete at Humboldt county project
The CROP Infrastructure Business Model
CROP Infrastructure funds the build of income-producing real estate for the recreational cannabis production sector. To this effect, the company invests in the development of the land, the build of any facilities, and the deployment of specialized structural features like greenhouses, fertilizer storage and irrigation equipment and more. The property is then leased to licensed producers or processors and revenue is generated for CROP through management, leasing, licensing, and branding fees, whereby CROP Infrastructure receives a 60 percent preferential payback through these fees. Once the investment is paid back, the company retains a 30 percent interest in the property and infrastructure through the same fees indefinitely.
As CROP Infrastructure is centered around providing affordable solutions to its tenants, the company is also focused on working within jurisdictions that have low cost power. This allows its tenants to significantly lower the cost of production and gives them the opportunity to offer high-quality product at a lower price point while still generating significant revenue.
On top of its real estate and infrastructure offerings, CROP Infrastructure also offers financing opportunities for marketing, brand and distribution development. Aimed at helping brands achieve increased market penetration, CROP Infrastructure offers its expertise and vast network of industry experts.
Within each of the US states that have developed regulations for the lawful cultivation of cannabis, there are no provisions preventing organizations from investing in real estate holdings or equipment leaseholds specifically for the industry. As regulations are aimed at the taxation of cannabis sales and revenues—and not at mitigating growth in the industry—CROP Infrastructure has seen the opportunity for partnering with licensed producers that need support with regards to their capital.
Moving forward with the growth of the cannabis sector in North America, CROP Infrastructure plans on investing within every production-legal jurisdiction to continue providing revenue growth opportunities. To this effect, the company has started work in Washington, and will continue to expand its California and Nevada projects, while also keeping an eye on the additional states where cannabis is broadly legalized. The company will also look to complete the buildout of it’s Italy and Jamaica projects which will begin with high-CBD hemp and extraction facilities to make isolate.
Planned production and yield
A typical CROP Infrastructure facility is made of 12 greenhouses that measure 3,640 square feet each contained within one larger greenhouse. With the capacity to host 1,350 cannabis plants that develop on a 55 to 60-day cycle, this should allow for tenants to stagger production and harvest plants every other day, on a collective average rate of 30,645 grams per day (919,350 grams per month) across the entire 43,680-square-foot facility.
Crop Infrastructure’s Portfolio
In June 2018, CROP Infrastructure entered into a licensing agreement with four established cannabis brands that are currently being sold in Washington and will soon be sold in California. The brands are Hempire, Evolution Cannabis, Tiffany CBD and Trikom. CROP Infrastructure will be sub-licensing these brands to their tenant growers in Washington and California. Furthermore, CROP Infrastructure has acquired the following ten cannabis brands: Prohibition Greens, Players Greens, White Rhino Cannabis, Illuminati Cannabis, Diablo Herbs, Gator Ganja, Makavelli Cannabis, Honey Badger Buds, Choices Cannabis and Che Cannabis. CROP Infrastructure will be licensing these brands to its tenant growers as well. The company has also acquired U.S and Italian distribution rights to 55 health and wellness products from Urban Juve Provisions, a subsidiary of The Yield Growth Corp.
In July 2018, CROP Infrastructure entered into an agreement with Ocean Green Management LLC to partner on applications for retail locations with an option to purchase the commercial real estate. CROP Infrastructure will finance the purchase of the real estate after licensing has been acquired. The dispensaries will operate under the brand: Emerald Heights. These two dispensaries will compliment CROP Infrastructure’s 10,000-square-foot medical and 20,000-square-foot recreational facilities in Humboldt County, California.
Soon after, CROP Infrastructure announced that the San Bernardino dispensary has passed the first stage of the application review process.
In 2018, CROP Infrastructure entered into a loan agreement with Elite Ventures Group, LLC to purchase a Nye County agricultural property that they plan to turn into a cannabis and hemp facility through a joint venture development agreement. The 1,865-acre agricultural property is located in Central Nevada and is in a climate that is ideal for greenhouse growing. CROP Infrastructure has set aside 50 acres set for building greenhouses.
Since 2016, Nevada has allowed the cultivation and production of hemp without a processing license and that industrial hemp products that are intended for human consumption can be sold throughout the state at cannabis dispensaries. Nevada also allows for the production of hemp-based flower, seed or seed oil, fiber and CBD.
In July 2018, CROP Infrastructure entered into a membership interest agreement with Elite Ventures to acquire a 49 percent member interest in the property for US$1.3 million in cash. Additionally, CROP Infrastructure’s tenant was issued a formal hemp license that covered 240 acres of outdoor growing space and to complete planting. Once planting was done, the company’s attention turned to site preparation and planning for the development of a CBD extraction facility. CROP Infrastructure is currently harvesting the first 240 acres and expects sales to begin in Q4 2018.
In June 2018, CROP Infrastructure entered into a membership purchase agreement with Wheeler Park Properties LLC (The Park), a Washington State limited liability company. CROP Infrastructure agreed to spend up to $2.5 million on equipment and retro-fit upgrades for the greenhouse complex to earn a 30 percent interest in the property.
The state-of-the-art greenhouse is 35,000 square-feet and sits on approximately nine acres of land that has been retrofitted for fully automated hydroponics. The greenhouse accommodates five flowering bays that can yield approximately 12,000 pounds of high-quality cannabis on an annual basis and is now fully operational.
“With all of CROP’s tenants now expecting to harvest, the company’s real estate and brand portfolio should begin to provide all important regular cash flow while building equity in the IP of our brands,” said CROP Infrastructure Director and CEO Michael Yorke. “CROP will now be able to benefit from its real-estate backed, reoccurring revenue model while expanding into other favorable legal cannabis jurisdictions.”
The Dozen property is currently under construction. CROP Infrastructure is currently constructing 12 purpose-built indoor cannabis greenhouses, which once complete will encompass approximately 44,000 square-feet. Phase One, comprised of six greenhouses, of the build project is nearing completion. After each phase of building is complete, CROP Infrastructure will lease the facilities to licensed tenant growers with branded licensing and standard operating procedures. The first six greenhouses are expected to produce 12,000 pounds of cannabis per year with 25 percent of the material being produced as a by-product.
“CROP has now received the necessary water permits and can now complete construction on the company’s second Washington State facility, “The Dozen”,” said Yorke. “All five of our facilities are nearing completion or are expecting tenant harvests in Q3 and Q4 of 2018. CROP has made significant progress in a short time period developing its portfolio of purpose built real estate and branding IP.”
In May 2018, CROP Infrastructure entered into a membership purchase agreement with Humboldt Holdings LLC, a limited liability company, where CROP Infrastructure will advance $2 million to Humboldt for land and the purchase of equipment for their development of a 30,000 square-foot facility. In exchange for the funding, CROP Infrastructure received a 49 percent interest in Humboldt. The first 10,000 square feet was harvested in Q3 2018 and has been repopulated.
Soon after acquiring the property, CROP Infrastructure completed the required security upgrades and announced that their tenant has planted 20,000-square-feet of recreational cannabis.
Partnerships and Agreements
Jamaican Joint Venture
In July 2018, CROP Infrastructure entered a joint venture agreement where the company has a 49 percent interest in a 217,000 square-foot property located in the Westmoreland Parish, home to some of the most fertile land in Jamaica. The property is ideally situated for developing cannabis production and extraction facilities. Currently, CROP Infrastructure is looking for a suitable tenant licensee for the property. Jamaica has over 2.8 million residents and approximately three million visitors each year.
“CROP continues to build its global footprint by securing this strategic joint venture in Jamaica,” said Yorke. “Many countries are now introducing new licensing and legislative regimes for CBD and cannabis and are prime entry points for our growing organization. Jamaica is of particular interest as its licensing regime allows for a full suite of genetics which will give our tenant growers the advantage of being able to provide buyers with a broad variety of CBD and THC end products.”
US Distribution and Italian Territory Rights Agreement
In June 2018, CROP Infrastructure signed a definitive licensing agreement for US distribution and exclusive Italian rights to the Yield Growth Corp’s cosmetic and therapeutic products which are formulated to be infused with cannabis. With this agreement, CROP Infrastructure will be able to exclusively distribute Yield Growth’s subsidiary’s products in Italy for three years. Additionally, CROP Infrastructure is acquiring the non-exclusive right to distribute a line of the subsidiary’s hemp root oil in the US.
“This acquisition will be complimentary to our efforts of expanding our operations in to Europe,” said Yorke. “We also look forward to bringing this suite of new offerings to our tenant growers and their distribution in Washington, California and as we continue to expand in to other States.”
Italy Joint Venture
In June 2018, CROP Infrastructure entered into a joint venture agreement where CROP Infrastructure will own 30 percent under the name Xhemplar to develop a 522,000-square-foot project in Northeastern Italy. CROP Infrastructure will initially invest 500,000 euros into the project which will facilitate the planting of 435,000 square-feet, to retrofit the extraction facility and to start construction of an 87,000 square-foot greenhouse.
The joint venture is expecting a combined yield of 44,000 pounds of low THC and high-CBD cannabis per year. The cannabis products will be sold in international CBD markets under a white label. The processing facility will also be used to infuse CROP Infrastructure’s acquired therapeutic and cosmetic product lines. CROP Infrastructure expects its first harvest by the end of August 2018.
Naturally Splendid supply agreement
In August 2018, CROP Infrastructure signed a LOI with Naturally Splendid for the development and manufacturing of CROP Infrastructure hemp brands Hempire and Tiffany. The companies are currently testing a variety of flavors and formulations created by Naturally Splendid. Naturally Splendid is also tasked with creating a variety of retail products which will then be distributed through CROP Infrastructure’s distribution network.
Michael Yorke—CEO and Director
Michael Yorke began his career in the financial sector with the Royal Bank of Canada in 2001. He subsequently served as an active trader and value investor for the last 14 years. He went on to provide consulting services to several publicly traded companies in addition to organizing capital market events with On-Page Media. He is fluent in three languages and has traveled extensively around the globe. He has earned an International Business Diploma, Bachelor of Business Administration degree, and is currently working towards a Masters of Business Administration degree through the British Columbia Institute of Technology.
Abbey Abdiye brings extensive experience in the financial sector with both public and private companies. He is a Chartered Professional Accountant (CPA), current CFO of Tower One Wireless Corp. and other reporting issuers, where he managed the responsibility for all financial, fiscal management, regulatory compliance, and reporting aspects of corporate operations. He also provides strategic guidance and direction in capital structuring and is engaged with innovative financing programs that leverage sales and development opportunities.
Ms. Jensen is a Senior Capital Markets Strategist with Stockhouse.com, Canada’s leading financial community and a global hub for affluent investors, with over one million unique monthly visitors. Ms. Jensen also acts as an Independent Director for two other TSX Venture Exchange listed companies, Durango Resources Corp. and BTU Metals Corp. Ms. Jensen has over 18 years of experience working in the capital markets within sales and marketing roles, as an independent director and also part of audit committees. She has worked with hundreds of public companies across North America in various sectors over the last two decades.
Christine Mah brings 10 years direct experience working with reporting companies assisting with corporate management, systems integration, accounting procedures and administrative services. Her experience includes assisting companies within industry sectors such as communications, technology, and consumer goods. She offers relevant governance expertise from her audit committee experience and hands-on participation in the yearly audits of company’s such as Evolving Gold Corp. She is an experienced professional with a Marketing Diploma from the British Columbia Institute of Technology.
David Weinkauf—Executive Advisor
Throughout Mr. Weinkauf’s real-estate career he led and was involved in approximately $3.0 Billion in transactions while developing around 3,000 acres of real estate. Mr. Weinkauf was recognized as Calgary’s top 40 under 40 in 2004 and was nominated for Canada’s top 40 under 40 in 2006 after graduating from the University of Calgary in 1993, with a Bachelor of Commerce Degree focused on Marketing and Finance. David’s volunteer work has been extensive including sitting as a member of the board of directors of Children’s wish foundation of Alberta and the NWT and sitting on as the President of the advisory committee to Calgary Economic Development.
Greg Douglas—Executive Advisor
Mr. Douglas formally entered the Cannabis space in 2015 when he joined the Bureau of Standards (Jamaica) as Management Information Systems (MIS) Manager. Subsequently served as Project Coordinator for a proposed Medical Cannabis (Ganja) Track and Trace Pilot Project. This led to exposure to compliance mechanisms used in Colorado, touring state facilities which increased his understanding and appreciation of the industry while building relationships with Colorado’s compliance agency, along with local businesses. From April to November 2017 Greg was seconded to the Cannabis Licensing Authority (CLA) as their CEO. While there he became a part of local history by issuing the first commercial licenses. He was part of the CLA team that visited Canada meeting with both Canadian Government entities and officials. He resumed his duties at the Bureau of Standards in January 2018 and works on the creation of standards within the cannabis industry in Jamaica.
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