Power REIT (real estate investment trust) announced that it had finalized a lease amendment to fund Phase 2 improvements of its greenhouse cultivation facility in Marengo Township, Michigan. The company said that it is providing funding for additional improvements to the property on the same economic terms as the original lease.
The additional items for Phase 2 of facility improvements focus on transitioning the facility from pepper farming to cannabis cultivation. The greenhouse upgrades include air circulation fans, exhaust fans with carbon filters as well as installation of an upgraded greenhouse automation system, the release said.
Power said that the property is leased to Marengo Cannabis LLC — a wholly-owned subsidiary of Millennium Cannabis LLC. David Lesser, CEO of Power REIT (NYSE-A:PW), is also the CEO of Millennium Investment & Acquisition Company (OTC:MILC) — the parent company of Millennium Cannabis.
READ: Power REIT closes acquisition of large Michigan cannabis cultivation greenhouse in US$18.4M deal
The company reported that the improvements are currently underway for the modifications agreed upon in the original lease.
“We are very pleased with the pace of construction at the Marengo, Michigan project. The funding provided by the lease amendment will enable us to continue the construction progress and our pathway to revenue,” said Jared Schrader, president of Millennium Cannabis.
He added: “Approvals at the township level are moving along well and we have received approval from the Planning Committee and are currently working on next steps with the State of Michigan and Marengo township for the final site plan. Licensing is progressing as expected and we hope to commence cultivation of plants in early 2022.”
Power REIT (NYSE-A:PW)'s capital commitment related to the additional budget items is approximately $4.1 million which increases the straight-line annual rent by approximately $830,000, representing an approximately 20% unleveraged core funds from operation (FFO) yield.
The company said that Including the additional funding announced on November 4, its total capital commitment is approximately $25.6 million for the purchase and improvement of 556,146 square feet of greenhouse and processing space.
The 20-year “triple-net” lease is structured to provide straight-line annual rent of approximately $5,100,000, which represents an unleveraged core FFO yield of approximately 20% on Power REIT (NYSE-A:PW)’s invested capital, the release said.
“We are pleased with the progress we have made since acquiring this property which we believe will be the largest cannabis cultivation facility in Michigan,” said David Lesser, CEO of Power REIT (NYSE-A:PW).
“The Michigan market remains very strong, and we are confident that Millennium Cannabis is putting in place a plan to become a low-cost large-scale producer of cannabis-related products within the Michigan market,” he added.
For the month of September 2021, the Michigan Marijuana Regulatory Agency (MMRA) reported regulated cannabis product sales of $161.3 million (medical and adult-use) which represents 52.4% growth year over year. The price of flowers in Michigan remains strong at $3,064 (MMRA), as impressive sales growth continues with total sales for 2021 on track to reach $2 billion.
Power REIT (NYSE-A:PW), with a focus on the “Triple Bottom Line”, is a specialized real estate investment trust that owns sustainable real estate related to infrastructure assets including properties for Controlled Environment Agriculture, Renewable Energy, and Transportation.
Contact Ritika at ritika@proactiveinvestors.com