Oklahoma’s cannabis market just got a new player as New York-based Power REIT announced that it has acquired a 9.35-acre property in Craig County, Oklahoma through a wholly owned subsidiary. The property is located in the northeast corner of Oklahoma which offers a favorable growing climate for greenhouse cultivation.
As part of the transaction, Power REIT has agreed to fund the renovation of approximately 40,000 square feet of greenhouse space, 3,000 square feet of office space and 100,000 square feet of fully fenced outdoor growing area with 20,000+ square feet of hoop structures. Power REIT’s total capital commitment for the project including the property acquisition cost is approximately $2.65 million.
Concurrent with the acquisition, the wholly owned subsidiary entered into a 20-year “triple-net” lease with Vinita Cannabis LLC, which will operate the property as a cannabis cultivation facility. The lease requires Vinita Cannabis to pay all property related expenses including maintenance, insurance and taxes. After the initial 20-year term, the lease provides for two 5-year renewal options and has a personal guarantee from an owner of Vinita Cannabis. As mandated by the lease, Vinita Cannabis will maintain a medical marijuana license and will operate in accordance with all Oklahoma and municipal regulations. The lease also prohibits the retail sale of cannabis at the property.
After an initial deferred rent period to allow for renovations, the lease stipulates rental payments that provide the wholly owned subsidiary with a full return of its invested capital over the next three years, and thereafter, provides an approximately 13% yield increasing thereafter at a rate of 3% per annum. As structured, the lease provides straight-line annual rent of approximately $503,000, representing an unleveraged Core FFO yield of approximately 19% on the invested capital.
“We are expanding our nationwide footprint and diversifying portfolio risk with this acquisition in Oklahoma,” said David Lesser, Power REIT’s Chairman and CEO. “Our debut in this state positions us to participate in what has been coined the “wild-wild-west” and benefit from the opportunities inherent with the Oklahoma cannabis market rapid expansion. This cultivation facility is already operational and will be upgraded to provide operational improvements. There is also ample expansion opportunity that will allow our tenant to capitalize on the increasing demand for cannabis products in Oklahoma.”
Vinita Cannabis is led by Jared Schrader, an experienced cannabis cultivation operator with a solid track record. Schrader recently grew revenue at a Colorado cannabis cultivation facility from annual revenue of $150,000 to weekly revenue of over $150,000 (i.e. > $8 million annually) over the span of two years. Simultaneous with Power REIT’s acquisition of the property, Millennium Investment and Acquisition Company Inc. provided startup capital to Vinita Cannabis whereby Millennium is a majority owner of Vinita Cannabis. David Lesser, Power REIT’s Chairman and CEO is also Chairman and CEO of Millennium.
Power REIT is a specialized real-estate investment trust (REIT) focused on sustainable real estate with attractive risk adjusted returns. It is currently diversified into three industries: controlled environment agriculture (greenhouses); solar farmland; and transportation. Power REIT is in the process of expanding its real estate portfolio of greenhouse properties for food and cannabis cultivation.