It’s a fact now, Cannabis prohibition is coming to an end, and you have to know there is literally heap loads of money to make from all of this… Heap loads! Canada has already set a date for legal recreational marijuana, and Trump is starting to pave the way for the U.S.A.
– The dominoes are starting to fall, so make no mistake, this is happening!
With capital in hand, expertise, and crucial infrastructure, it’s the owners and operators of the best cannabis real estate that stand to grow the most. For this reason, take a look at: CROP Infrastructure Corp. (OTC: CRXPF / CSE: CROP), a junior cannabis real estate and infrastructure company, providing solutions for leasing to licensed producers and processors in the cannabis sector.
With the explosion of new markets across North America in the legal cannabis space, new growers and brands are running into hurdles—namely access to suitable real estate, capital, and expertise.
This isn’t so much a problem for the multi-billion-dollar corporations who continue to throw their weight. While plans for facilities topping a million square feet continue to pop up, not every new cannabis brand can afford nor engineer a state-of-the-art facility on their own.
Back in 2014, the LA Times estimated the total number of marijuana strains to be around 779. The popular marijuana encyclopedia app Leafly.com listed more than 2,300 unique strains. Given the level of innovation in the cannabis sector, it’s safe to estimate that these numbers have grown considerably.
But with only a handful of multi-billion-dollar cannabis corporations with the means to increase their growing capacities, and a consumer base eager to dabble in a wide variety of products, something needs to give.
Enter the concept of combining the worlds of cannabis and real estate. It was bound to happen, with the growth of cannabis reaching communities across North America.
CROP Infrastructure Corp. (OTC: CRXPF / CSE: CROP) is doing just that. Focused on real estate, and asset-backed, this company owns, operates, and/or finances opportunities through real estate, management fees, branding and licensing in the cannabis sector. By investing in these income-producing properties, agricultural equipment, and many other aspects of the cannabis business, CROP Infrastructure Corp. (OTC: CRXPF / CSE: CROP) can service the explosive cannabis industry—Players both large and small.
There is a growing need for cannabis real estate, whether it be financing, engineering, operating expertise etc. The appeal of turnkey state-of-the-art infrastructure and equipment, as well as safe and secure investment is no doubt going to be a popular package for cannabis brands popping up across the continent.
State by State, Markets are OPENING UP — Revenues Projected for BIG GAINS
With the entire country of Canada on deck for legalization, and the first year of legalization in major markets such as California underway, the true potential for cannabis is beginning to take shape. In the United States in 2018, there are 30 states (along with the District of Columbia) that currently have laws that broadly legalize marijuana.
Many of the target markets are by no means small. Washington has 7.8 million, Colorado has 5.5 million, California has a whopping 39.2 million, and Canada will be opening up another 36.29 million people. On deck are states such as Michigan, which will have a measure on their ballots in November, which is currently polling at about 60% in favour of adult-use legalization. Other states that look to be close to a form of legalization are Utah, Missouri, Rhode Island, Connecticut, and Delaware.
However, not all jurisdictions are equal, as they all bring different rules, regulations, tax codes, and real estate hoops to jump through. Some communities want cannabis dollars to come, while others don’t.
When looking at the advantages of each market, businesses need to have a dual focus, both on marketing their products, and only the changing jurisdictions within which they operate. In many ways, the old adage of “location, location, location” is apt once again.
CROP is bringing a unique strategy to the cannabis sector, by merging their cannabis cultivation and branding expertise, with their real estate expertise. Instead of focusing solely on growing cannabis, CROP is facilitating other growers, by building state-of-the-art infrastructure, and leasing it out to tenants who they lend to at a favorable rate to the lender. As tenants grow and market their wares, and pay off the principal loaned to them, CROP maintains an ongoing interest, moving from an initial 60% until debt repayment is complete, and 30% ongoing indefinitely after.
In a very clever way, CROP has managed to mitigate much of the market risk, by straddling the line between cannabis grower and real estate developer. By merging cannabis business growth, with the steady income of the REIT-like model, CROP may have found the magic formula.
A REIT-Like Model is RESILIENT
Real estate investment trusts are supposed to be interest sensitive. They’re supposed to do poorly if rates rise. However, that’s just not ending up being the case.
In fact, REITs were up 3.1% for the year as of the beginning of June. Whereas their fellow interest-sensitive cousins, such as utilities, were down 10.8% so far in 2018. But REITs, they just keep chugging, having so far even outperformed the S&P/TSX Composite in Canada.
It’s not just contained to Canada, either. Recently J.P. Morgan Asset Management launched its US REIT ETF based on the MSCI US REIT Index, dubbed “BBRE”.
“BBRE is a pure play on the REIT market and provides choice to investors who are seeking core real estate index exposure,” said Joanna Gallegos, U.S. head of ETFs at J.P. Morgan Asset Management in the correlating press relase. “Additionally, for allocators, REITs can provide diversification benefits to traditional equity and fixed income portfolios.”
Thanks to a strong economy, and increased need for industrial space, industrial-based REITs are in high demand. While some of the bigger players are consistently expanding their portfolios of warehouses, there is a sharp demand rising from the cannabis sector—greenhouse space.
One look at Maryland-based Innovative Industrial Properties (NYSE: IIPR), shows a healthy growth curve for the concept of a cannabis REIT. Having just reported profit and its first official dividend, IIPR has doubled in value over the last year. That’s also because revenues grew over 100% compared to the previous year as well—That’s serious growth.
However, IIPR is now far past the junior stage, where investors tend to make the highest gains.
While CROP is not an REIT (in that it doesn’t pay dividends yet), it shares many similarities in that it’s real-estate focused, and asset backed. The company focuses on a well-selected array of revenue streams beyond lease payments from tenants, including management fees, branding and licensing.
With 12 greenhouse facilities already leased out to capacity, CROP is primed for a steady stream of revenue in 2018. The company already has a footprint in Washington and California, and is aggressively expanding into other regions such as Colorado, Nevada, Oregon, and will even be doing business in Italy selling THC- and CBD-infused health products, powered by CROP’s tenants’ medicinal ingredients.
But the bulk of CROP’s business is centred around its facilities, and its current portfolio of over 43,640 square feet of canopy greenhouse space in development. With its popular packages that have enticed multiple tenants, the company already has plans secured for an aggressive expansion in 2018.
Cannabis and Real Estate Income Trusts are major growth areas with few combined in play, but the field of comparables includes some major names.
FEATURE COMPANY: FOR COMPARISON
Crop Infrastructure Corp. invests in, constructs, owns, and leases greenhouse facilities to provide real estate solutions for lease to licensed cannabis producers and processors in California and Washington, the United States. Its portfolio consists of 44,000 square feet of canopy. Crop Infrastructure Corp. was incorporated in 2011 and is headquartered in Vancouver, Canada.
Cannabis and REIT Comparables: CROP is Where the Crossover Resides
These stocks represent some of the leading players in the cannabis and real estate sectors, all of which have made major advancements including breaking into new markets, and earning steady incomes. Not all are combinations of cannabis and real estate, as some are more related to industrial or commercial real estate, while others are more focused on their cannabis businesses, however, the comparisons are apt, as they each pertain to specialized markets like that which CROP Infrastructure is targeting.
Innovative Industrial Properties, Inc.
Market Cap: $237.373 million
Innovative Industrial Properties is a Maryland-based REIT corporation focused on the acquisition, ownership and management of specialized industrial properties leased to experienced, state-licensed operators for their regulated medical-use cannabis facilities. Earlier this year, the company reported a profit, and declared a dividend, after declaring itself an REIT at year-end 2017.
Canopy Growth Corporation
NYSE: CGC, TSX: WEED
Market Cap: $6.204 billion
Canopy Growth is a leader in the cannabis space, with considerable sway, and known for its ability to acquire assets and build massive greenhouses. Through its subsidiaries, Canopy produces and sells medical marijuana products in Canada, including dried, oil, and softgels. Canopy Growth works collaboratively with Canopy Rivers, an investment and operating platform structured to pursue opportunities in the emerging global cannabis sector, including licensed producers, late-stage applicants, pharmaceutical formulators, branded developers and distributors, and technology and media platforms.
Market Cap: $594.67 million
MariMed provides consulting services for the design, development, operation, funding, and optimization of medical cannabis cultivation, production, and dispensary facilities. In addition, it offers legal, accounting, human resources, and other corporate and administrative services. As of December 31, 2017, it developed and managed six operating cannabis facilities for clients in Delaware, Illinois, Nevada, and Maryland. They also develop and manage facilities for the cultivation, production, and dispensing of legal cannabis and cannabis-infused products under the Kalm Fusion brand name.
Cannabis Spending is on the RISE: Conservative and Bullish CAGR Estimates in Double Digits
The market has been quite bullish on cannabis for over a year, despite only a few hiccups in terms of legal interpretations. But even the conservative estimates on where cannabis spending is going are significantly into the double digits of growth.
On the conservative side, Arcview Market Research and its research partner BDS Analytics project much progress around the globe in the legal cannabis market over the next ten years. They believe spending on legal cannabis worldwide will hit $57 billion by 2027. Two thirds of spending will come from the adult-use (recreational) market, while medical marijuana will take up the remaining third.
On the more bullish side, Grand View Research pegs the legal marijuana market to reach $146.4 billion by the end of 2025, at a growth rate of 34.6% CAGR. Grand View points at the very high demand from consumers and increasing legalization happening around the globe.
In the regions that CROP currently has operations, already massive growth has been witnessed.
When cannabis was legalized in Washington State, where CROP already has two greenhouse projects, total sales have grown exponentially: $31 million in 2015, $323 million in 2016, and $696 million in 2017. Today, Washington has roughly 1,284 producers/processors, and over 436 retailers. Consumer purchases hit $2.58 billion, driving up state revenue by an additional $709.6 million.
In California, where CROP has completed its initial stages on its Humboldt Farms operation, the state had an estimated $1.5 billion in sales in 2015, $2.7 billion in 2016, and is forecast to have hit approximately $5.3 billion in 2017-18.
With groups like CROP facilitating growth among up-and-coming brands and growers, those numbers will only get higher. CROP provides tenant-growers with capital to invest in land and equipment, thereby increasing individual operators’ ability to grow the sector.
CROP’s Financing and Building a Cannabis Revolution
CROP has cleverly combined the income-generating model of the popular REITs, providing state-of-the-art properties and infrastructure to the specialty crop market, while also capitalizing on the surging cannabis market.
The long-term benefit of the real estate model is appealing. CROP secures a 60% preferential payback via lease and management fees on its greenhouse infrastructure/related equipment, until the originally loaned capital is paid back in full.
Once the investment is repaid in full, CROP’s 30% interest in the real estate and infrastructure will receive dividends indefinitely. The client benefits by getting access to capital that it not readily available, in order to purchase real estate. CROP benefits with indefinite dividends.
As the company works to optimize its operations, it projects some serious monthly revenues. Specifically through its MEGA Greenhouse Project. The MEGA Greenhouse Project will generate 25% of its volume in high-quality sugar trim and popcorn smalls, which will be used to create high-grade concentrates and edibles, which fetch higher returns. CROP projects total potential revenue once completed and executing in all greenhouses to be $3.2 million per month, per 43,680 sq ft.
The company has already formed partnerships with a series of clients already. The space in all 12 of CROP’s greenhouses (both built and unbuilt) are already spoken for
With a healthy rolodex of tenants, CROP has the ability to also facilitate marketing deals, like its recent deal with Juve Wellness’ owners, The Yield Growth. The terms of the deal allow CROP to participate in selling THC-, and CBD-infused products in Italy, using ingredients brokered from tenants in CROP’s facilities.
CROP also acquired the rights to distribute a line of hemp root oil based Juve products in the United States. In total, the deal gives CROP territory rights to 50 cannabis wellness products.
“This acquisition will be complementary to our efforts of expanding our operations into Europe,” stated Michael Yorke, CEO of CROP Infrastructure stated. “We also look forward to bringing this suite of new offerings to our tenant growers and their distribution in Washington and California and as we continue to expand into other States.”
With the Italy expansion, and the strategy to move outward from Washington and California, the company appears to have plenty of positives to look forward to.
Here’s what stands out for CRXPF / CROP.CN:
- CROP offers growers of all sizes access to secured investment capital dedicated to cannabis infrastructure investment.
- Stocked with client operators in 12 greenhouses at full capacity (approx. 1 acre) with potential to generate over $24M USD in annual sales.
- Turnkey, state-of-the-art greenhouse facilities are appealing to several growers, with brand positioning opportunities, specialized equipment, and access to approved nutrients for select licensed producers in legal growing regions.
- Over 43,640 square feet of canopy greenhouse space in development with plans secured for an aggressive expansion in 2018.
- At full capacity, all 12 greenhouses will yield approximately 24,000 lbs per year.
- Products produced through CROP’s facilities may be sold by clients’ operating license holder under new or existing brands and distribution networks.
- Offering clients additional financing opportunities to increase market penetration via enhanced marketing, brand and distributor development, utilizing advantage not being utilized by traditional financial institutions.
- By providing modern canopies and related infrastructure, CROP gives cannabis producers a competitive edge in one of the most explosive opportunities of this generation.
- CROP holds territory rights to 50 cannabis wellness products to be marketed and distributed in Italy and also in the United States.
We believe CROP Infrastructure Corp. has all the right tools, and a business strategy that best capitalizes on a rapidly growing sector, while utilizing a REIT model that secures cash flow across a steady stream of tenants. The company’s built to succeed, beginning by making its footprint in two of the leading cannabis-friendly jurisdictions in Washington and California. By offering their clients state-of-the-art infrastructure, and crucial financial backing, we believe CROP will quickly become a very big name behind the scenes of this rapidly growing sector. With a very healthy growth plan, and having already proven it can court tenants into its facilities, we see CROP as a true contender for the foreseeable future.
CROP Infrastructure Corp. looks to have a good start, and it’s early starts like this that can show everyone some solid growth going forward, specifically at this early growth stage, due to their aggressive expansion plans in 2018, and the comfort of knowing they’ve already leased out all of their available space to date.
If you want more information on CROP Infrastructure Corp.’s unique business model or just to stay on top of the company’s advances, you can join their email list at https://cropcorp.com.
American News Group
11 – https://twitter.com/intent/tweet?url=http%3A%2F%2Fwww.forbes.com%2Fsites%2Fthomaspellechia%2F2018%2F03%2F01%2Fdouble-digit-billions-puts-north-america-in-the-worldwide-cannabis-market-lead%2F&text=Spending%20on%20legal%20cannabis%20worldwide%20is%20expected%20to%20hit%20%2457%20billion%20by%202027
While all information is believed to be reliable, it is not guaranteed by us to be accurate. Individuals should assume that all information contained in our newsletter/report/commentary piece/article is not trustworthy unless verified by their own independent research. Also, because events and circumstances frequently do not occur as expected, there will likely be differences between the any predictions and actual results. Always consult a licensed investment professional before making any investment decision. Be extremely careful, investing in securities carries a high degree of risk; you may likely lose some or all of the investment.
Furthermore, it is certainly possible for errors or omissions to take place regarding the profiled company, in communications, writing and/or editing.
Nothing in this publication should be considered as personalized financial advice. We are not licensed under any securities laws to address your particular financial situation. No communication by our employees to you should be deemed as personalized financial advice. Please consult a licensed financial advisor before making any investment decision. This is a paid advertisement and is neither an offer nor recommendation to buy or sell any security. We hold no investment licenses and are thus neither licensed nor qualified to provide investment advice. The content in this report or email is not provided to any individual with a view toward their individual circumstances. American News group is a wholly-owned subsidiary of Market IQ Media Group, Inc. (“MIQ”). MIQ has been paid a fee for CROP Infrastructure Corp. advertising and digital media from the company. There may be 3rd parties who may have shares of CROP Infrastructure Corp. and may liquidate their shares which could have a negative effect on the price of the stock. This compensation constitutes a conflict of interest as to our ability to remain objective in our communication regarding the profiled company. Because of this conflict, individuals are strongly encouraged to not use this newsletter as the basis for any investment decision. The owner/operator of MIQ has purchased shares of CROP Infrastructure Corp. through a private placement and does not intend on selling any shares within 72 hours of this updated publication date (June 20, 2018) after such point we reserve the right to buy and sell shares in the open market, no further notice will be given.
By reading this communication, you agree to the terms of this disclaimer, including, but not limited to: releasing MIQ, its affiliates, assigns and successors from any and all liability, damages, and injury from the information contained in this communication. You further warrant that you are solely responsible for any financial outcome that may come from your investment decisions.