UCASU: Diversification into agriculture properties continues

By Beth Senko, CFA

OTC:UCASU

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On September 2021, UC Asset UCASU unveiled its newest strategy – investing in land and on-ground structures designated for cannabis cultivation. The Company has originally considered this strategy in 2018, but management believed lacked the resources to do so prudently. With most states moving to decriminalize/legalize cannabis for medical and/or recreational use, management believes that it is a good time to take this step. In 2016, management made a small debt investment in a medical plant grower and signed an LOI with a major hemp farmer in China with the goal of acquiring farmland in China to grow hemp and extract CBD. The recent deal converts the Company's Dallas farmland parcel to medical cultivation, in partnership with local CBD extraction company. The farmland is collateral for UC Asset's debt investment in the partnership and earns an 8% return on stable cash flow. Additional upside is possible through a debt-to-equity conversion.

The Company is finalizing terms on its first property, a four-acre medical marijuana indoor/outdoor property near Oklahoma City. The property includes outdoor cultivation space, as well as greenhouses, redesigned cultivation containers and several other outbuildings. The final price of $0.5 million is well-below the initial ask of $2.2 million, and reflects findings in UCASU's due-diligence process.

On February 1, 2022, UCASU signed an LOI for a second cannabis property in Oklahoma. The five-acre property is licensed and includes two grow houses. UCASU plans to lease the land to a grower and expects minimum gross revenue of $120k per month.

The Company is considering additional properties in Oklahoma, Michigan, Florida and Georgia. Additionally, in October 2021, the company entered into an umbrella LOI deal to invest into cannabis properties operated by company PURA Inc PURA. Under the LOI, UCASU is financing PURA's improvements to PURA's 72-acre property in Texas (which was previously owned by UCASU), as well as providing financing to PURA's partner growers to build their businesses.

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