IIP deal
11% annual base rent
Total investment of 43.5mil
11% of 43.5mil is 4,785,000 per year, or roughly 400,000 per month.
The term of the initial lease is 10 years. With an initial extension under the same terms possible for 18 months.
So what’s IIP getting out of it?
1. 4,785,000(10) = 47,850,000USD or a 4,350,000 profit from the initial 10 year investment.
2. immediate 18 month extension on lease under same terms after the first 10 year agreement. A 7,177,500USD profit. Or total 11,527,500USD return on investment after 11.5 years, should Trulieve decide to extend agreement.
3. Two options to extend by 5 years after the first 10 years, and after electing the first extension above. (Not sure if under the same terms). Should Trulieve decide to elect.
4. Should Trulieve decide to lease the Massachusetts facility under the same terms, for the entirety of the agreement as it stands... which would be a total of 21.5 years. Would equal to a total return on investment of 59,377,500USD.
The case for Trulieve
1. Non-dilutive immediate funding for 126,000sqft cultivation and processing facility. Allowing speedy entry into new market, executing in a shareholder friendly manner.
2. Competitive 11% annual rate secured for at least 11.5 years. With the option to extend agreement for another 10 years after.
3. Trulieve recently conducted a raise, pocketing 68 Million USD. The raise included warrants, exercisable at 13.00USD. Once Exercised, would add only 1,740,000 shares. Another shareholder friendly move with very minimal dilution.
4. Agreement allows Trulieve to utilize the 68 Million recently raised for other purposes. Such as Dispensary buildout in Massachusetts, Florida Dispensary expansion or Jefferson County Florida 750,000sqft cultivation expansion, as well as other acquisition activity.
5. After initial 10 year agreement at 11%. One has to assume changes in banking legislation will have occurred. One can assume Trulieve will be operating in a much larger fashion, with a much larger cash position. Should federal and banking laws change, and Trulieve has cheaper rates available by large institutions... one can also assume a sort of re-purchase of the facility, or a large reduction on the 11% annual rent. Using the above figures on total return on investment IIP would get, we can draw a picture as to what a re-purchase would cost Trulieve.
6. Let’s not forget Trulieve holds 3 Medical and 3 Recreational licenses in Massachusetts.
Some thoughts regarding 2020.
* Trulieve developing 24,000sqft cultivation capacity in Florida right now. Which they estimate will provide an additional 2,860kg. Refer to July investors deck.
Say 72,000sqft is used for cultivation. Using the same above figures would equal 8,580kg. Or 8,580,000 grams per year.
Average flower per gram is around 14 bucks in Florida I believe. So let’s go cheap and say 12 per gram for flower in Massachusetts.
8,580,000(12) = 102,960,000 per year worth of product. Assume they sell 60% of their total year output.
60%= 61,776,000 USD in their pockets, say 35% is net profit, that would equal 21,621,000 per year.
These numbers are conservative... using speculative flower prices... not even including concentrates. So the above numbers I expect will be much higher. But using them, you can draw a sort of picture as to why this is a good deal for not only Trulieve, but also its long term shareholders.
