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Courtesy of Benzinga. All rights reserved.
Newport Beach-based Pelorus Equity Group announced Tuesday it will convert its existing debt fund into a private mortgage Real Estate Investment Trust (REIT). The firm’s REIT status will kick in tomorrow, April 1, 2020.
According to Pelorus executives, the move is aimed at maximizing growth opportunities for the company to expand its cannabis loan portfolio nationwide – in medically licensed states. Investors in the company will also optimize their tax benefits paid through dividends in the coming quarters, management said.
A Bigger Offering
In addition to changing its model, Pelorus has increased its Pelorus Fund’s offering size from $100 million to $250 million in light of recent cannabis lending market demand.
The firm also said it will transition from quarterly to monthly distributions to streamline operations.
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“Despite overall market volatility in this unprecedented period in time, the cannabis industry has demonstrated its underlying stamina and we are confident in our ability to attract future investor interest with our diversified portfolio and ventures. Adding a Mortgage REIT will allow Pelorus to increase efficiency and returns as we continue our growth in the cannabis market,” Dan Leimel, CEO of Pelorus Equity, said in an exclusive conversation.
Other Big Guys In The Game
Pelorus joins other big players in the cannabis REIT space, like NYSE-traded Innovative Industrial Properties (IIPR), and Treehouse Real Estate Investment Trust, which completed a $45.5 million raise only a couple weeks ago.
But perhaps the most interesting new entrant in the REIT space this year has been Subversive Real Estate Acquisition REIT LP, which managed to raise $225 million in less than two weeks back in January, during a period where cannabis capital markets were not precisely thriving.
When I asked Richard Acosta, Subversive REIT’s director and CEO, how he’d been able to raise so much money in so little time, amid such poor market conditions, Acosta explained that, at the time, the cannabis industry was at an inflection point: “public and private investors are re-calibrating risk/reward while underlying industry fundamentals remain robust. We bring to the market a hard asset-based investment strategy focused on providing investment capital and liquidity to leading cannabis operators.”
And, assembling a strong team, and counting on the support of The Inception Companies and Canaccord as co-sponsors of the SPAC did not hurt either, he added.
For context, Subversive Capital sponsored one of the largest SPAC IPOs in cannabis and in Canadian history, at $575 million, in July 2019. The Inception Companies has over 15 cannabis portfolio investments, including Inception REIT, which launched in 2018 to provide real estate capital solutions to the U.S. cannabis industry.
By means of conclusion, Acosta shared some advice for others looking to raise capital in cannabis: “focus on the fundamentals of business. I believe that cannabis investors are looking for execution and results against right-sized unit economics, positive cash flow and focused expansion strategies.”