Canopy Growth and Acreage Holdings plan the launch of THC beverages in the U.S. next summer (CGC, ACRGF, STZ)
Canopy Growth Corporation and Acreage Holdings announced that following the implementation of their amended arrangement, Acreage has developed a plan to market Canopy Growth’s beverage portfolio in the United States. Acreage anticipates launching Canopy Growth’s sessionable THC beverage formulations in summer 2021, starting with legal adult-use markets in Illinois and California. The company will sell the products in its own dispensaries, currently at 27 operational locations nationwide, and plans on utilizing Canopy-backer Constellation Brands to widen its distribution.
“We have had an incredibly successful introduction into the Canadian cannabis-infused beverage industry with over 1.7 million cans of our THC-infused RTD beverages, like Tweed’s Houndstooth & Soda and Bakerstreet & Ginger sold to date,” shared Canopy Growth CEO, David Klein. “We introduced a new product category to cannabis consumers that we knew had the potential to disrupt one of the most mature industries, and since launching in Canada, Canopy Growth now owns 5 of the top 6 SKUs in the beverage category with a 74% market share. We are excited for Canopy’s beverages to be introduced to the U.S. market and know from recent BDS Analytics reports that the United States represents a market that achieved roughly $60M in beverage sales in 2019.”
Ayr Strategies to enter Ohio and deepen presence in Pennsylvania (AYRSF)
Upon completion of transactions totaling $39 million, Ayr Strategies will have entered its fourth state, with operations in Massachusetts, Nevada, Pennsylvania, and Ohio, and deepened its presence in Pennsylvania.
In Ohio, Ayr has made the first steps towards establishing a vertically integrated operation, signing a definitive purchase agreement for an operational processing facility, and has an agreed non-binding term sheet regarding exclusive management rights over a level 1 cultivation license (the largest canopy license in the state). The cultivation facility of approximately 58,000 square feet is under construction, and the approximately 9,000 square foot processing facility is fully operational. Consideration for the two transactions totals $18.2 million, including $10.2 million of cash and $8.0 million in convertible seller notes. Ayr has the flexibility to expand further canopy subject to the approval of the Ohio Department of Commerce.
In Pennsylvania, Ayr has signed a definitive purchase agreement to add to its portfolio a leading grower-processor. The 38,400 square feet cultivation and extraction facility is approved as operational and has the capacity to expand to 74,000 square feet. The total consideration of $20.8 million includes $16.7 million of cash, $2.1 million in stock, and $2.0 million in seller notes.
With these properties, Ayr’s portfolio will include seven operating retail locations, nine other retail licenses, and a total of 160,000 square feet of cultivation capacity with the potential to have more than 460,000 square feet.
IIPR expands partnership with Green Thumb in Ohio (IIPR, GTBIF)
Innovative Industrial Properties announced that it has entered into an amendment of a lease with a subsidiary of Green Thumb Industries Inc. in Toledo, Ohio, making available an additional $25.0 million in funding for the construction of a cannabis cultivation facility, which is in addition to the existing medical cannabis processing facility on the property. The lease amendment also adjusted the base rent under the lease to consider the additional available funding and extended the term of the lease agreement. Assuming full payment of the additional funding, IIPR’s total investment in the property will be $32.2 million.
In addition to this facility in Toledo, Ohio, IIPR owns and leases Green Thumb’s regulated cannabis cultivation and processing facilities in Oglesby, Illinois, and Danville, Pennsylvania. Assuming full reimbursement of tenant improvements under the leases, IIPR’s total investment in properties leased to Green Thumb is expected to be $121.8 million.
As of October 1, 2020, IIPR owned 63, totaling approximately 5.0 million rentable square feet (including approximately 1.9 million rentable square feet under development/redevelopment), which were 99.3% leased (based on square footage) with a weighted-average remaining lease term of approximately 16.2 years. As of October 1, 2020, IIPR had invested approximately $884.5 million in the aggregate (excluding transaction costs) and had committed an additional approximately $292.0 million to reimburse certain tenants and sellers to complete construction and tenant improvements at IIPR’s properties.
Last month, we presented our long thesis on IIPR. It stands in a unique position at the intersection of the cannabis industry and the REIT space in a rapidly changing legislative landscape, earning outsized returns in the current environment with few competitors. We cover the misunderstood risks of the stock and share our current views on the investment themes within the U.S. cannabis industry.
CLICK HERE for the replay (includes video and materials link).