Acreage Holdings Opens the Door to REIT Play

A US multi-state operator (MSO) is moving forward with an arm’s length sale of assets to a cannabis real estate investment trust (REIT) firm.

On Monday (May 13), Acreage Holdings (CSE:ACRG.U, OTCQX:ACRGF) confirmed its plan to sell cannabis-related real estate assets to GreenAcreage Real Estate (GARE); they will then be leased back to Acreage.

The REIT firm is managed by GreenAcreage Management, a business operation in which Acreage holds a 20 percent interest.

According to the initial deal between the two firms, GARE is set to buy mutually agreed upon properties.

“Acreage would also grant GARE a right of first offer to assume Acreage’s position as a purchaser of a pipeline of properties over the next three years,” GARE informed shareholders.

The operations of GARE and its parent company will still be independent from Acreage’s team.

Shares of Acreage dipped in Monday’s trading session by 6.72 percent to finish with a price of C$18.75.

Acreage’s moves have been thrust into the spotlight thanks to a recent blockbuster acquisition agreement with Canadian cannabis firm Canopy Growth (NYSE:CGC,TSX:WEED).

In April, the duo confirmed a US$3.4 billion deal granting Canopy Growth the right to buy Acreage at a time when cannabis is federally legal in the US.

Canopy will not dictate the decision making done by Acreage until the time the acquisition closes.

However, the synergy between the two can’t be dismissed. Bruce Linton, co-CEO of Canopy, told Bloomberg his company is considering options to monetize its asset portfolio.

“It could be anything from a bond to a mortgage to an REIT,” he told the news outlet in February. “I’d like to use that money to build in five more countries rather than look at it and go, ‘Yep, that’s all ours, we own it.”’

In a more established way, MedMen Enterprises (CSE:MMEN,OTCQX:MMNFF) announced its strategy and involvement surrounding a new REIT company called Treehouse Real Estate Investment Trust.

MedMen elected to participate in the launch of Treehouse, which will manage the MSO’s real estate assets in the US. Treehouse is getting a three year right of first offer for other MedMen-owned facilities and development projects.

Cannabis REIT executive breaks down real estate play

In a wide-ranging April interview with the Investing News Network Paul Smithers, CEO of Innovative Industrial Properties (NYSE:IIPR), said his company enjoyed a period of exclusivity for cannabis-related REIT play exposure, but that this is about to change.

“We definitely expect some competition, but to date, the only real challenge we see for some of our programs is still the private equity money that some growers will go to,” Smithers said at the time.

His firm is focused on signing property lease deals for medical cannabis facilities in the US.

The executive explained that the company does not seek ownership stakes in the firms it leases to as a way to maintain its New York Stock Exchange listing.

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Securities Disclosure: I, Bryan Mc Govern, hold no direct investment interest in any company mentioned in this article.

Editorial Disclosure: Acreage Holdings is a client of the Investing News Network. This article is not paid-for content.