Multi-Million Dollar Real Estate Deal Slashes Debt For Toronto Cannabis Maker

Heritage Cannabis Holdings Corp. CANN HERTF has entered into binding agreements to sell its real estate properties in Ontario and British Columbia to BJK Developments Ltd. for a net purchase price of $9,714,475 and lease the Ontario and BC Property back from the purchaser.

The Details

Under the sale-leaseback transaction, Heritage has entered into ten-year lease agreements with the purchaser for each Health Canada-licensed Ontario Property and BC Property, the Toronto-based company said.

Heritage will continue to operate its best-in-class manufacturing and processing capabilities for its domestic and international business segments.

The lease terms include a 12-month free rent period, representing roughly $1.4 million of savings during the period, which commences at closing, and the company also retains an option to repurchase the Ontario Property and BC Property for two years from the purchaser.

The purchase price will be used to set off the amount owing by the company to its lender, BJK Holdings Ltd., a related entity of the purchaser, reducing the company’s remaining term debt by roughly 64% to $5,256,379.

See also: Heritage Cannabis Reports $8.79M Q3 2023 Revenue, Showing Strong YoY Growth

The remaining term financing, as amended within a third amending agreement, has been extended through to Jan. 31, 2025. Additionally, the company said it retains its revolving line of credit of up to $5 million with BJK, which has also been extended until the same date.

In connection with the third amending agreement, Heritage has agreed to amend existing warrant certificates held by BJK dated Oct. 8, 2021, which entitled BJK to subscribe for and purchase up to 10 million common shares in the capital of Heritage at an exercise price of $0.25 per common share, and dated Sept. 29, 2022, which entitled BJK to subscribe for and purchase up to 50 million common shares in the capital of Heritage at $0.10 per common share.

Why It Matters

David Schwede, CEO of Heritage, said the deal allows Heritage to ramp up its business nationally and globally.

“We are thrilled to have secured this agreement with BJK as it reduces the Company’s debt materially and positions Heritage within a model that compounds our ability to continue growing our revenues in Canada, the United States and other international marketplaces,” Schwede explained. “The transaction extends Heritage’s remaining long-term debt at a very attractive, industry-leading interest rate and allows our team to continue to focus on executing transactions which will further increase our revenues, expand distribution of our product offerings (including in additional US marketplaces), and continue to delight our customers with new and high-quality product formats while the industry matures and consolidates further.”

Now read: Heritage Cannabis Q2 FY23 Revenue Declines 1.5% YoY, Here Is What You Need To Know

Photo: Beniznga edit of images by Towfiqu barbhuiya and Matthew Brodeur on Unsplash

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