MJBizMag February 2023 - 42

Tilt Holdings entered a sale-leaseback agreement
on its property in Taunton, Massachusetts.
Courtesy photo
Return on Investment
For plant-touching companies, most lending options tied to property
By Kate Lavin
W
hen it comes to borrowing
money as a marijuana
company, most roads lead
to real estate.
" The industry has challenges
accessing capital markets that other
industries do not, " Travis Goad,
managing partner at Pelorus Equity
Group, said of plant-touching
marijuana companies.
" In a fully developed market, there's
real estate as one lending source and
then there are pure corporate loans as
another lending source. In this space,
the vast majority of financing is tied
to your real estate, " added Goad,
whose firm is a cannabis-focused
real estate lender.
Applications for cannabis business
licenses often require proof of real
estate, leaving precious little capital
for successful applicants to get their
companies up and running.
For marijuana businesses that own
property, there are three main ways to
42 February 2023 | MJBizMagazine
borrow, according to Goad, who runs
Pelorus' New York office:
* Real estate lending: These loans require
borrowers to contribute 25%40%
in equity. The other 60%-75% of
the facility's cost is returned to the
borrower in the form of a mortgage,
which can be used for construction
and other business purposes.
* Sale-leaseback agreements:
Some finance companies offering
sale-leaseback agreements will
purchase a property for 100% of
a site's cost to complete, though
financing costs are typically higher
than with traditional real estate
lending.
* Business-development company:
Lenders in this category might
offer up to 180% of a property's
value. However, the higher
proceeds come with stringent
corporate covenants, higher costs
and often require giving up board
seats or other control to the lender.
Lenders are looking for hard assets to
back their loans, and few options exist
for no-asset lending in the cannabis
industry.
SHOPPING AROUND
Dana Arvidson, chief operating officer
of Boston-based Tilt Holdings, said that
when his company started looking for
options to raise funds, the executive
team met with the " main providers in
the market. "
Tilt, which provides cannabis
technology and hardware as well as
cultivation and manufacturing, let
the lenders know that its executives
were meeting with other groups, the
process was competitive and they were
looking for the " most attractive rates
and terms possible. "
Tilt ultimately chose Innovative
Industrial Properties (IIPR), a San
Diego-based real estate investment
trust, to fund a $40 million
sale-leaseback agreement on a

MJBizMag February 2023

Table of Contents for the Digital Edition of MJBizMag February 2023

MJBizMag February 2023 - 1
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