According to Fortune Business Insights’ Cannabis / Marijuana Market 2019-2026, published earlier this June, the global cannabis market continues to grow. According to the report, the cannabis market was valued at $ 10.60 billion in 2018. Fast forward to 2026 and the market is expected to be $ 97.35 billion, showing a compound annual growth rate (CAGR) of 32.92% over the forecast period.
With the recreational use of cannabis currently legal in 17 states and the District of Columbia, as well as states on the east coast such as New York, New Jersey, and Virginia, the transition from a medical-only market consumption goals for adults, the still developing sector is experiencing record: high demand for real estate, ready to use cannabis.
However, for business and property owners working in space, federal laws make it difficult to obtain funding for expansion and improvement projects. Complicating matters is that a ramp up of cannabis assets can cost millions and involve highly specialized projects such as laboratories and food cold rooms. Even when owners and operators provide funding, the closure process can be lengthy. For entrepreneurs in a rapidly changing space, these challenges and the need for faster financing options have often resulted in operational delays costing cannabis owners and operators millions of lost sales or higher rents.
Pelorus Equity Group of Southern California, a pioneer in cannabis lending, aims to change the landscape of commercial cannabis real estate. The firm, which has provided additional commercial real estate loans in the hemp business for the past 5 years, has set itself the task of easing that burden on owners and operators while it attracts a new class of investors looking to get into the market.
Pelorus CEO Dan Leimel told Benzinga that his firm has seen significant growth in the number of cannabis operators and property owners looking for smarter ways to finance their new construction and beautification projects, along with a notable influx of major investors entering commercial real estate. place in cannabis.
Last December, Pelorus signed a $ 13.3 million deal with Acreage Holdings, Inc. (CSE: ACRG.AU, ACRG.BU), (OTCQX: ACRHF, ACRDF) for construction loans. An 18-month loan at 16% per annum from Pelorus helped the company fully build its existing 80,000 square foot growing and processing plant in the fast-growing Illinois cannabis market. Just 6 months after signing the deal, Acreage was able to grow its Prairie business by more than 76% at a time when the state’s market demand was growing.
Pelorus, through its fund, a cannabis-focused real estate investment fund (REIT), also offers a near-return on equity advantage and will receive a 16% interest rate from Acreage over an 18-month loan period.
The Pelorus loan model is to finance the construction and conversion of highly specialized real estate. Property owners and cannabis companies like Acreage are willing to pay a premium to fund Pelorus, but for now it’s a win-win for both investors and entrepreneurs.
Leimel continued: “Because we process approvals faster, we save property owners a significant amount of time during construction. By providing financing for a shorter period, even if the interest rate is significantly higher, our total financing cost is generally lower. … This allows property owners to start earning income faster at a similar or lower financing cost. ”
Pelorus has already completed 52 loan deals and has channeled $ 181 million to cannabis companies and property owners. With the aim of creating more demand for loans in North America, the company sees this loan investment as a deliberate move to strengthen the fast-growing cannabis market.
Pelorus President Rob Sehrist said: “Our digital platforms enable us to understand the dynamics of the supply of cannabis-related property in the area. We know their location, property type and size – the details that are needed to accurately assess risk and value. You can get a really accurate picture of the situation in an instant, you can confidently assess the price and act quickly. For cannabis companies, millions and limited opportunities are at stake, it’s all about who can get the right funding as quickly as possible. … “
A unique aspect of the Pelorus lending model is that the company places particular emphasis on the cannabis industry with the primary goal of stabilizing cash flow for its customers. Pelorus’s main strategy is to move the equity component to the real estate sector, increase the value of client capacity and lend under this model.
“We were able to approve construction drawings in 1-3 days on average, and one agreement can cover the financing of the entire project,” added Sehrist. “We provide access to industry expertise and an extensive network, and even though our loan rates are high, the overall cost of lending is generally lower, and our faster payouts mean that both owners and operators can profit faster.”
Pelorus also seized huge growth opportunities during the COVID-19 pandemic as cannabis businesses were deemed necessary while other classes of real estate were severely affected. In addition to keeping cannabis factories and cannabis operations largely safe from the recession, Pelorus believes it is well positioned to continue with its current growth model.
For more information on Pelorus Fund and Pelorus Equity Group visit www.PelorusEquityGroup.com…
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