AI
Sunday, February 12, 2017 12:48:50 PM
Sales/Leasebacks are common even among private firms. IIPR's tenant -- so far its only tenant -- is Pharmacann which built this huge medical-use MJ cultivation/processing facility in NY.
Yes, the tenant will pay rent for many years but they should be able to make a fat immediate profit on the sale of the facility. In any event Pharmacann will turn a fixed asset into cash perhaps to put to more profitable use. Due to the the MJ use, Pharmacann would have a hard time borrowing on that facility in a conventional way, say a bank loan.
If I were to buy IIPR shares (most unlikely) I'd worry whether the lease payment was inflated. The seller might allow that in order to make a bigger profit on the sale, and the landlord might do that to induce the transaction.
An IIRP shareholder should wonder what that structure will be worth after the lease expires or the tenant goes belly up. What the heck is the market rate for Pharmacann's unique 128,000 sf structure? I'll guarantee that an appraiser won't find any local "comparables." No doubt it requires much heavier electric service than a conventional greenhouse. It has security features not required for growing normal crops. Legal and engineering fees must have been astronomical. Without MJ this facility isn't worth much.
I doubt anyone knows what this structure would be worth in forced sale. Few MJ investors will be asking that perfectly good question. Yale, Stanford and BRK would ask. A bank would ask. But not slobbering MJ stock players. And we know how that often works out.
Yes, the tenant will pay rent for many years but they should be able to make a fat immediate profit on the sale of the facility. In any event Pharmacann will turn a fixed asset into cash perhaps to put to more profitable use. Due to the the MJ use, Pharmacann would have a hard time borrowing on that facility in a conventional way, say a bank loan.
If I were to buy IIPR shares (most unlikely) I'd worry whether the lease payment was inflated. The seller might allow that in order to make a bigger profit on the sale, and the landlord might do that to induce the transaction.
An IIRP shareholder should wonder what that structure will be worth after the lease expires or the tenant goes belly up. What the heck is the market rate for Pharmacann's unique 128,000 sf structure? I'll guarantee that an appraiser won't find any local "comparables." No doubt it requires much heavier electric service than a conventional greenhouse. It has security features not required for growing normal crops. Legal and engineering fees must have been astronomical. Without MJ this facility isn't worth much.
I doubt anyone knows what this structure would be worth in forced sale. Few MJ investors will be asking that perfectly good question. Yale, Stanford and BRK would ask. A bank would ask. But not slobbering MJ stock players. And we know how that often works out.
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