MedMen Enterprises Inc (MMEN)

[IndustryParticipant]

I'd be curious if anyone is able to explain and justify a $26MM per location (and license) price paid for sparsely designed and under performing dispensaries in markets to hold additional licensing opportunities through application, for rented storefronts and leased cultivation sites, with I believe the cumulative (multi state) monthly lease payments totaling about $10MM+ annually. (Cultivation only, and probably not all). The majority are not operational.

New York facilities lease agreement:
The Company acquired PharmaCann’s New York facility for $30 million in the sale-leaseback transaction. Concurrent with the closing, the Company and PharmaCann entered into a lease for an initial term of 15 years, with two five-year lease extension options. The lease provides for an initial base rent of $319,580 per month, subject to annual increases of the greater of 4% or 75% of the consumer price index. The lease also provides for a property management fee payable to the Company equal to 1.5% of the then-current base rent throughout the term, and supplemental base rent for the first five years of the term at a rate of $105,477 per month. Together, the annualized initial base rent, property management fee and supplemental base rent equate to approximately 17.2% of the purchase price of the New York facility.

Massachusetts lease agreement:
the Company entered into a long-term, triple-net lease agreement with the PharmaCann subsidiary, which intends to operate the property upon completion of development as a medical-use cannabis cultivation and processing facility in accordance with Massachusetts medical-use cannabis regulations. The initial term of the lease is 15.25 years, with two options to extend the term for two additional five-year periods. The lease provides for an initial annualized aggregate base rent of $2,682,500, payable monthly, which is equal to 14.5% of the sum of the purchase price of the property and the Construction Funding, subject to an initial six month base rent abatement. The aggregate base rent is subject to 3.25% annual increases during the term of the lease, and the PharmaCann subsidiary is also responsible for paying the Company a property management fee equal to 1.5% of the then-current base rent. The PharmaCann subsidiary's obligations under the lease are guaranteed by all affiliates operating in the cannabis industry, including any entity formed during the term of the lease.

One of their $26MM dispensaries in a leased storefront.

When all is said and done, premium "A list" prices were paid for a distressed company with very little real estate, which is, at best, "B list".

Truly the greatest "sucker deal" to date in the industry.