Placing A Big Bet In Nevada: Toronto Company's $15M Partnership Expands Cannabis Real Estate

Toronto-based Nova Net Lease REIT NNLRF, a real estate investment trust (REIT) focused on delivering financing solutions to quality U.S. cannabis operators, has expanded its portfolio by initiating a joint venture with a Nevada real estate investor group.

This venture incorporates two properties valued at approximately $15.7 million, signifying a significant stride in Nova’s foray into the cannabis real estate domain.

Joint Venture Overview And Acquisition Details

The acquisition involves two facilities in Nevada, spanning 98,500 square feet, procured for around $15.7 million. Structured as a limited partnership, Nova secures a 15% LP interest as the general partner, with its partner receiving approximately $8.9 million in limited partnership units, exchangeable for REIT units on a 1:1 basis.

Deep Roots Harvest Inc., a vertically integrated cannabis operator in Nevada since 2015, will be the tenant for these properties. Notably, the venture partnership owns a majority equity interest in Deep Roots, aligning strategic interests in the flourishing cannabis sector.

The Nevada properties encompass diverse functionalities. One, located in West Wendover serves as Deep Roots’ headquarters, housing cultivation, manufacturing and dispensary operations. The second in Mesquite hosts a standalone retail building dedicated solely to dispensary operations.

Financing for this acquisition combines a mortgage loan against the properties (approximately US$5.6 million), funding from the REIT’s existing property, and the venture partnership units.

Nova’s portfolio now spans three properties across two states, totaling around 170,000 square feet. The move is expected to immediately enhance the REIT’s funds from operations and adjusted funds from operations.

Management’s View

“We are delighted to bring on Deep Roots as a tenant and their investors as partners as we look to build scale and momentum for Nova,” said Tyson Macdonald, CEO of Nova. “Deep Roots has built a strong single-state business in the cannabis industry, delivering almost 10 years of consistently profitable operations, making them the ideal tenant for Nova.”

Keith Capurro, one of the principal investors of the partnership and CEO of Deep Roots agreed. “After a thorough process of examining how to best maximize the value of our real estate holdings, we believe that Nova’s strategy for growth presents the best opportunity for tax-efficient long-term growth.”