The Latest Cannabis SPAC Is A REIT

Subversive Real Estate Acquisition REIT LP (NEO: SVX.U) (NEO: SVX.RT.U) (OTCBB: SBVRF) has become the latest cannabis SPAC (special purpose acquisition corp.) to begin trading. The company just announced it has entered into binding agreements to acquire real properties in the amount of approximately $97.4 million and originate or acquire $85.4 million of first-lien mortgages. the company’s goal is to become a leading real estate capital provider for prominent cannabis operators that own or are seeking industrial and retail real estate in high growth markets in the United States. Subversive is the first instance of a SPAC vehicle converting into a public REIT.

“We are thrilled to announce our Qualifying Transaction that delivers on what this experienced cannabis real estate team set out to create, which is a diverse initial portfolio consisting of high quality, mission-critical industrial and retail assets operated by leading U.S. cannabis operators”, stated Michael Auerbach, Executive Chairman of the REIT LP and Founder of Subversive Capital, the REIT LP’s lead sponsor. “Subversive REIT LP’s platform combines disciplined real estate underwriting with deep operator and industry knowledge to meet the needs of the high growth cannabis industry.”

Subversive joins Innovative Industrial Properties (NYSE:IIPR) as one of only two publicly traded cannabis REITs. At the closing of the qualifying transaction will have $182M in portfolio assets with 15 properties of cannabis retail, industrial cultivation, greenhouse cultivation, and manufacturing assets across 8 states. The company said it expects to have two additional properties to close in 2020 for a total of $200 million in assets in 17 properties across 9 states with a 1.6M sq. ft. footprint. It is targeting an eight percent distribution yield.

The REIT LP also announced a private placement of subscription receipts. On Closing, the Subscription Receipts shall convert into $40 million aggregate principal amount of 6% senior secured convertible debentures at a price of (a) US$1,000 per Debenture and 137,500 limited partnership units of the REIT LP (“Debenture Units”) or (b) US$950 per Debenture, as specified by the holder (each, as applicable, the “Offering Price”). The REIT LP has also granted Canaccord Genuity Corp. and Compass Point Research & Trading, LLC a 30-day non-transferable option to purchase Subscription Receipts convertible into up to an additional $25 million Debentures and up to an additional 125,000 Debenture Units.

Mr. Auerbach continued, “With a robust pipeline including asset purchase options, we are very pleased to be entering the public market via our SPAC transaction, which should allow us greater access to capital to continue to grow our business and deploy capital into a capital-starved industry.  We believe that our strong portfolio and platform positions the REIT LP to provide an attractive level of distributions as well as a substantial growth opportunity over time.”

“The cannabis industry continues to grow at an incredible rate, COVID-19 notwithstanding, driving demand for well-located cannabis industrial and retail assets,” said the REIT LP’s CEO Richard Acosta. “Our compelling thesis regarding the value of strategic cannabis real estate assets was validated by our ability to raise and deploy capital with some of the strongest and most well-known operators in the space. We are excited to be providing much-needed growth capital to operators across the supply chain, while providing investors an exciting investment opportunity that combines meaningful growth and income potential as the second publicly traded cannabis REIT.”

The Portfolio:

  • California – 8 assets across Los AngelesNorth HollywoodDesert Hot SpringsCoachellaGreenfield, and San Francisco (total of 432,000 square feet) (including the two additional assets expected to be acquired following the Closing)
  • Florida – two assets across Alachua and Jacksonville (total of 296,000 square feet)
  • Nevada – one asset in North Las Vegas (455,000 square feet)
  • Arizona – one asset in Mesa (9,000 square feet)
  • Maryland – one asset in LuthervilleTimonium (6,000 square feet)
  • Michigan – one asset in Lansing (65,000 square feet)
  • Ohio – one asset in Columbus (7,000 square feet)
  • Pennsylvania – one asset in Johnstown (3,000 square feet)
  • Washington – one asset in Tacoma (319,000 square feet)

 

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