Cannabis-focused real estate investment trusts NewLake Capital Partners Inc. and GreenAcreage Real Estate Corp. are merging to create one of the largest players in the burgeoning industry.
The new company, to operate under the NewLake name, will have more than $325 million in assets and 24 properties across nine states, NewLake executives said in a phone interview. Properties include cultivation and retail sites, and tenants include major U.S. multistate operators such as Curaleaf Holdings Inc., Cresco Labs Inc., Columbia Care Inc. and Trulieve Cannabis Corp. Terms weren’t disclosed.
The REITs buy properties from cannabis companies and then lease them back, a financial boon to outfits that are shut off from mainstream funding sources like loans due to the federal illegality of marijuana.
“This deal creates a leading player in cannabis real estate to provide capital for real estate build-out,” said David Weinstein, chief executive officer at GreenAcreage, who will be CEO of the new company.
As states such as New Jersey and New York move from medical to recreational approval, the need for cultivation, processing and retail real estate will grow, said Anthony Coniglio, the current CEO of NewLake, who will be president and chief investment officer of the combined company. “The industry needs over $15 billion of real estate over the next five years.”
Cannabis REITs are performing well as they offer institutional investors a way to invest in cannabis that’s perceived as less risky than backing pot companies themselves. But the fast pace of regulatory change is bringing some uncertainty to cannabis real estate.
Marijuana remains illegal under federal law and can’t be transported across state lines, meaning companies currently need to grow, process and sell cannabis in each state where they operate. But such operations could become redundant if cannabis is taken off the national list of controlled substances. Warmer U.S. states or countries like Mexico could be more cost-efficient places to cultivate cannabis if that happens.
Coniglio said NewLake focuses on properties that will be attractive in any scenario. Also, he doesn’t see the U.S. allowing imports anytime soon, or states letting go of the benefits that have come with the current system.
“Companies have invested a lot of capital in establishing their state strongholds, and the states have worked hard to create jobs and tax revenue,” Coniglio said. “We don’t think they will watch quietly and let those things leave.”