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Curaleaf Enters Into a $28 Million Sale-Leaseback Deal

By Eric Volkman – Aug 26, 2019 at 6:36PM

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The company unloads six properties to a specialty real estate company.

In another sign that the marijuana industry is expanding rapidly, cannabis stock Curaleaf Holdings (CURLF -0.36%) has entered into a sale-leaseback contract with a specialty real estate company. The deal is for roughly $28.3 million in total considerations.

A sale-leaseback is a real estate transaction in which one entity sells its property to a counterparty, but continues to occupy it under a lease. 

Marijuana plant in a growing facility

Image source: Getty Images

Curaleaf's counterparty in this deal is a recently founded company called Freehold Properties, which describes itself as being "focused on specialized agricultural, industrial, and cannabis properties."

Although Freehold is not publicly traded, it is paying around $2.8 million of its own stock as a small part of the deal. It will pay the rest in cash.

The arrangement covers six Curaleaf properies, two of which are in the company's home state, Massachusetts. Another two are in New Jersey, and the rest are in Florida. One property in Massachusetts and one in New Jersey are cultivation and production facilities; the rest are dispensaries.

Curaleaf will rent all of them under triple net leases -- common commercial arrangements in which a lessee is responsible for property taxes, maintenance, and insurance in addition to rent.

Curaleaf said it will use the proceeds of the sale-leaseback to continue to widen its business in the domestic market. Also, the company said in its press release announcing the deal that it "intends to access further real estate capital to finance additional operational facilities and certain current expansionary construction projects." It did not provide further details about these ambitions.

The company touted the deal as a fresh source of capital, which has at times been hard to come by for the still-immature cannabis industry. The sale-leaseback with Freehold "provides an additional stream of liquidity for us with an attractive cost of financing previously not available in our industry," Curaleaf said, although it did not specify the financing cost. 

The company is not shy about spending its money. Its latest big asset purchase came in July, when it signed an $875 million deal to buy GR Companies. Doing business as Grassroots, it operates a network of dispensaries and holds a clutch of dispensary licenses throughout the U.S.

At the moment, Curaleaf has in its real estate portfolio 48 dispensaries, in addition to 12 processing and 13 cultivation properties. These various facilities are in a total of 12 states.

Eric Volkman has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

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