A Toronto-based company is set to become the first cannabis operation to transition to the real estate investment trust (REIT) model.

At the start of October, Subversive Real Estate Acquisition REIT LP (NEO:SVX.U,OTC Pink:SBVRF) announced to the market a qualifying transaction that will allow it to finish the process of becoming a special purpose acquisition company (SPAC).

SPACs have seen a rise in popularity in recent years — especially in the cannabis industry — but REIT LP is the first known cannabis SPAC to pursue a REIT operational model.


Cannabis - Will The Fortune 500 Join The Party?

Our Exclusive FREE Report Contains Information You NEED To Know About Cannabis Stock Investing!

A REIT is a company that operates a network of real estate assets that generate income based on their rent and production. For REIT LP, this means it will ultimately get a portion of the gains generated by the companies using the real estate locations in its portfolio.

REIT LP completed its public listing on the NEO Exchange back in January after raising US$225 million as part of its public debut.

Richard Acosta, CEO of REIT LP, told the Investing News Network (INN) he wants his REIT to focus squarely on assets located in areas with recreational cannabis markets and dense urban factors.

The executive explained his firm can afford to target recreational markets in the US without the risk of facing off against exchange regulators. With the NEO, REIT LP has found an exchange that allows its SPAC vehicle to list and lets it pursue the fractured US market.

In a SPAC, a company raises capital from an investor pool with the promise that it will find an acquisition target; the target is acquired via a qualifying transaction and the company’s operations then begin.

REIT LP’s qualifying transaction amounts to US$182.8 million in property acquisitions throughout the US cannabis market. If it goes through, the company will begin operating as a REIT with 15 properties in California, Florida, Nevada, Arizona, Maryland, Michigan, Ohio, Pennsylvania and Washington.

Following the acquisitions, the company will have a new breakdown for its real estate asset markers. According to REIT LP, 81.2 percent of its portfolio will then consist of industrial locations, with 11 percent being retail and 7.8 percent being a combination of the two.

“We spend a lot of time reminding ourselves that we are real estate investors before we have anything to do with cannabis,” Acosta said.

He explained the company may find assets that elevate value from a pure cannabis perspective, but REIT LP can’t adhere to these metrics exclusively. One of the guiding principles for Acosta and the company is to not overpay for assets as a way to deliver shareholder value.

The NEO-listed company isn’t the first to employ the REIT model with the cannabis industry in mind, but that group isn’t too big at the moment. In 2019, INN spoke with Innovative Industrial Properties (IIP) (NYSE:IIPR) CEO Paul Smithers about his own REIT.

“We’re strictly a real estate company and I think there’s a certain group of investors that like that. It’s a little more stability than a company that is perhaps growing,” Smithers said at the time.


Cannabis - Will The Fortune 500 Join The Party?

Our Exclusive FREE Report Contains Information You NEED To Know About Cannabis Stock Investing!

IIP only seeks real estate assets to be used for the medical cannabis industry in the US, whereas REIT LP plans to heavily target recreational assets.

When INN spoke to IIP, there were rumors of cannabis operators toying with the idea of implementing REITs based on their own extensive networks of cannabis real estate assets across the country. To date, no real businesses have come forward with such plans.

SPAC momentum continues in cannabis space

When asked what is behind the SPAC craze of 2020, Acosta told INN he believes more and more people are looking at the investment vehicle as an “efficient pathway to go public.”

Acosta explained that the SPAC model is exciting for new industries like cannabis because of the investment pitch made to potential shareholders.

As mentioned, in a SPAC a company raises money from investors, then finds an acquisition target and finally completes a qualifying transaction to start operating. The transaction must be completed within very specific parameters determined by the company, otherwise the capital goes back to the investors.

“You’re identifying a target, you’re taking it back to the market and you’re trying to excite a new shareholder base, right? Typically of other institutions and retail investors. The more dynamic and interesting story, the better,” Acosta said.

Recently, a fellow cannabis SPAC CEO told INN that the novel SPAC model offers investors a free look of sorts into a market — a desirable proposition in an emerging industry such as cannabis.

Investor takeaway

Acosta is keeping a close eye on the results of the upcoming presidential election in the US, as are most cannabis industry participants with even a passing interest in the US market.

He told INN the result of this election has the potential to “open the floodgates for the industry.”

When asked about his feelings on the result of the election, Acosta explained that whatever the outcome of the race is, the country is likely set to see its market geography expand thanks to state ballots on the legalization of cannabis for medical or recreational use.

This sentiment goes along with the notion that the cannabis business in the US is an unstoppable effort that will only grow in numbers from here on out. The difference-maker will be how much attention the industry gets from federal lawmakers and how that may impact regulation changes.

Don’t forget to follow us @INN_Cannabis for real-time news updates!

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

Editorial Disclosure: The Investing News Network does not guarantee the accuracy or thoroughness of the information reported in the interviews it conducts. The opinions expressed in these interviews do not reflect the opinions of the Investing News Network and do not constitute investment advice. All readers are encouraged to perform their own due diligence.


Cannabis - Will The Fortune 500 Join The Party?

Our Exclusive FREE Report Contains Information You NEED To Know About Cannabis Stock Investing!

THC-O-Acetate to be Produced Through Company’s Specialty Molecule Division

Nextleaf Solutions Ltd. (CSE: OILS) (OTCQB: OILFF) (“Nextleaf”, “OILS”, or the “Company”), an extraction company that owns one of the largest portfolios of U.S. patents for the extraction and distillation of cannabinoids, is pleased to announce the launch of a Specialty Molecules Division to focus on the development and commercialization of novel psychoactive compounds. The division is supported by the Company’s existing intellectual property (“IP”) portfolio, including the manufacturing of CBD-O-acetate and the recently announced U.S. patent for the synthesis of THC-O-acetate.

Keep reading... Show less

TransCanna Holdings Inc. (CSE: TCAN) (FSE: TH8) (the “Company”) is pleased to announce that it has completed construction of an industrial-grade distribution site and launched third party distribution services.

As part of its Phase 1 Construction project at the 196,000 square foot facility, the Company has built out 16,000 square feet of retail-ready product storage space, installed automated, assembly-line style packaging equipment for jar and pouch production, and built out a climate-controlled area that can store 30 tractor-trailer loads of cannabis and 230 pallets positions of -40 degree Fahrenheit freezers for storing live resin and live resin products. A secure loading bay and a small in-house fleet of refrigerated trucks is also in place.

Keep reading... Show less

Global Wellness Strategies Inc. (CSE: LOAN) (FSE: O3X) (OTCQB: PNNRF) (formerly Redfund Capital Corp.) (“GWS” or the “Company”) is pleased to provide the following corporate update highlights on two portfolio clients KaleidoMyco LLC and Biominerales Pharma Corp. and announces the signing of the one-stop digital marketing team of North Equities Corp.

“With the talent, skills and resources we have at Global Wellness, we are well positioned to develop leading nutraceutical product portfolio brands focused on health and well-being. As hemp-extract and psilocybin is legalized in more jurisdictions such as Oregon where we already have a strong strategic relationship, we can then easily extend our existing product range, which will already have established routes to market and brand recognition, to include myco-dosing products. KaleidoMyco products will be in stores and on a consumer digital platform in the USA shortly and is currently being consumer tested in Europe as well. Our shareholders and customers are extremely important to us and we look forward to meeting the milestones we have outlined with the help of North Equities,” said Meris Kott, CEO.

Keep reading... Show less

VINIA(R)’s ability to increase dilation of arteries and to reduce blood vessel constriction allows it to fight the human aging process

BioHarvest Sciences Inc. (CSE: BHSC) (“BioHarvest” or the “Company”) announces that its flagship VINIA® product is the only dietary supplement available in the US market which has the capability for both reducing the endothelin 1 (ET1) enzyme as well as increasing the nitric oxide (NO) molecules, in order to increase the dilation of arteries and thereby improve blood flow. The presence of ET1 constricts the blood vessel, whereas the presence of NO dilates it. As a result of its “double-action” effect (proven by the Flow Mediated Dilatation (FMD) measurements in a double-blinded Placebo-controlled clinical trial*and in an in-vitro study** whose results were both published), VINIA® is uniquely positioned to combat the aging process caused by a reduction in blood flow.

Keep reading... Show less

Combined Company Highlights:

  • Experienced management team with a well-established brand portfolio
  • A highly sought after Colorado processing license in good standing
  • Bronnor adds one of the largest GMP-compliant cannabis processing and
    manufacturing facilities in Colorado
  • Distribution network of 1,200+ dispensaries across four states
  • Four high-profile THC and CBD brands

INDVR Brands, Inc. (CSE: IDVR) (the “Company” or “INDVR Brands” or “INDVR”), a premier cannabis brand house and edibles producer, is pleased to announce that it has completed the previously announced Asset Purchase Agreement (“APA”)of substantially all assets of Nevada based Strainz, Inc. and Colorado-based Bronnor, Corp. through its wholly owned subsidiary, INDVR Brands U.S., Inc, and the addition of Hugh Hempel as President & COO with a pending appointment to the Board of Directors at its next Annual Meeting of Shareholders on July 27, 2021.

Keep reading... Show less