Power REIT (NYSEAMERICAN:PW) announced Friday it had acquired an additional 2.2 acres in Colorado for greenhouse cannabis cultivation.
The specialized real estate investment trust said the land parcel in Crowley County offers a “very favorable” business setting and growing environment for sustainable greenhouse cultivation.
Power REIT also agreed to fund around $2.1 million to acquire land and construct nearly 24,500 square feet of greenhouse and processing space for its new tenant, Gas Station LLC.
WATCH: Power REIT focusing on expanding its real estate portfolio of controlled environment agriculture
As part of the deal for the additional acreage, which was signed through a Power REIT subsidiary, the company entered into a 20-year “triple-net” lease with Gas Station, which will operate the cultivation facility.
Under the terms of the lease, Gas Station will be responsible for all property-related expenses. Once the initial 20-year term expires, the least provides two, five-year renewal options and has a personal guarantee from the owners of Gas Station, according to Power REIT.
Gas Station will hold a medical marijuana license and operate under all applicable Colorado regulations. The lease also prohibits retail sales of its products from the property.
Power REIT told investors that the rental payment will provide its subsidiary with a full return on its invested capital over the next three years and thereafter at an around 13.3% yield, which will increase at a rate of 3% per year after that.
The current least also provides straight-line annual rent of around $301,000 – an unleveraged FFO yield of around 19% on the invested capital, according to Power REIT.
Sustainable property investments
“We continue to deploy capital on a highly accretive basis that supports our investment thesis of investing in sustainable property investments,” Power REIT CEO David Lesser said in a statement Friday.
“Southern Colorado continues to represent a compelling opportunity for our investment strategy in cannabis cultivation facilities. We believe that each additional acquisition diversifies our tenant concentration and further improves our focused strategy within this vibrant market that provides significant runway for growth.”
Lesser told shareholders that the company has generated “dramatic growth” since July 2019 after embarking on new business plan focusing on Controlled Environment Agriculture properties.
“Power REIT’s relatively small size combined with the attractive investment yields that we are generating through CEA property acquisitions, positions us for continued outpaced growth,” Lesser added. “We believe Power REIT represents an attractive investment proposition based on our relatively low trading multiple than REIT peers with a clear growth trajectory.”
Shares of New York State-based Power REIT were trading around $37.23 a share in New York on Friday afternoon.
Contact Angela at angela@proactiveinvestors.com
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