The recent Quarterly Report reveals the details of the Wildfire Cannabis lease. CGRA collects a HUGE amount in lease payments once the tenant improvements are done on the Chewelah property.
There are now THREE other companies leasing from $CGRA owned property.
The QR says the lease is for 21,400 sq. ft. + 7000 sq. ft. (optional) = 28,400 sq. ft. x $46.77 sq ft annually ($24+$21.03+$1.5+$0.24) = $1.2M annually in lease income to CGRA. Wow.
But there is more to it than that. You can't grow 30,000 sq ft of MJ canopy (as permitted under the state licensing for a Tier-3 Producer) in 28,400 sq ft. One would need 50,000 sq ft of space to do this grow, (per my subscription to HIGH TIMES magazine), as there has to be room to work around the plants, plus room for processing the final product. So Wildfire will most likely need more space (alluded to in earlier CGRA statements) and that would push the annual lease payments to CGRA up to $2.3M (50,000 sq ft x $46.77). Again, this lease payment is WAY WAY above market, where rent for this type of industrial space comes in around $6.00 per sq foot annually (Loopnet.com). For bringing the Capital to the table for completing the tenant improvements, which costs about $1M for an indoor grow (per my local pot farmers and confirming CGRA's earlier statements) of 30K sq feet, CGRA gets a very large piece of the pie for its efforts.
There looks to be around 100,000 sq ft of buildings on the Chewelah site, (Google Earth and Stevens County Assessor Records), more than enough for at least one cannabis grow, and lots of open ground for expansion to add others. So it is possible to plot a course for CGRA's revenue growth over the next 24+ months, where they could have $4-6 million in annual revenue from multiple cannabis leasing operations, with little expense needed to support this long term passive activity (property leasing).
It takes money to make money... first leverage the assets to get capital, then invest a 20% of the capital into an activity that generates a huge cash flow. There appears to be a little flexibility in the how the bond money can be distributed. CGRA has suggested what they MIGHT do with money, but it is unlikely that they will plow all of it into pumping oil, potentially at a loss. The oil is worth more in the ground right now, then selling at such low prices. So, it is possible that the BOND money, when it becomes available, maybe, will not entirely go into oilfield development? Putting $1M of the $5+M that comes in from the bond into cannabis (as tenant improvements) could return over 100% in the first year or two, and then ever year thereafter – that's better than any black gold deal for return on capital, especially now that oil seems set to go lower. Would the bond holders have a problem with that?
Another question that has to be asked - might there be other money that CGRA may have sourced for cannabis that has not been brought to shareholder attention yet. They are not legally compelled to notify until the next quarterlies. Isn't interesting that they are NOT talking their book right now, at all, but when they do, could one not anticipate what they might be announcing, and what that means for the share price?
Yes, a pending WA MJ Tier-3 license goes from pending to active once plants are in the ground - so maybe that might be the next announcement from CGRA?
If any of the above were to happen, and it has not yet - CGRA could easily reach, over the next year or two, a market value of multiples of the annual cash flow received from just it's leasing activities. That could calculate out to $15-$30 million in market cap.
From the Quarterly Report:
On May 14, 2015, the Company executed a commercial lease with Wildfire Cannabis Company, LLC whereby the
Company would lease to Wildfire one of their warehouse spaces under a turnkey lease to include:
21,400 sq ft (building)+ 8,000 sq ft (fenced secure area) + 13,200 sq ft (44 parking slots), plus an option for up to 7,000 additional building square footage.
Lease rates are $24.00 per rentable square foot, with annual CPI adjustments, plus $21.03 per rentable square foot in Tenant Improvements, plus $1.50 per square foot fenced secure outdoor entry, plus $0.24 per square foot parking. The lease commences and is contingent upon the completion of the tenant improvement build out by the Company. As of this filing, the Company has not yet secured financing for the build out
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