Cannabis REIT AFC Gamma files to go public on the Nasdaq (‘AFCG,’ IIPR)
AFC Gamma Inc., a commercial mortgage cannabis REIT, has filed an S-11 to go public on the NASDAQ to raise up to $115 million in an IPO. Upon successfully listing, the company would be the second non-plant touching cannabis REIT publicly traded on a U.S. stock exchange – Innovative Industrial Properties (IIPR) debuted on the NYSE in December 2016.
Over the summer, AFC Gamma raised over $80 million in equity from more than 20 family offices. Additionally, AFC Gamma has a credit line of up to $40 million, providing the REIT with approximately $120 million of capacity to lend to cannabis operators. As of December 26, 2020, the company has originated and funded $135 million in loans. The company has funded approximately $92.5 million in loans with commitments for an additional $19.8 million – in their filing, AFC Gamma noted that it has roughly $485.2 million of potential loans actively under review in their pipeline. The company's loans are primarily secured by real property and certain personal property, including licenses, equipment, and other assets.
While the preliminary prospectus did not name the companies they’re partnered with, AFC Gamma has previously announced transactions with publicly traded companies like Curaleaf (CURLF) and Bluma Wellness (BMWLF).
IIPR is a Hedgeye Cannabis Best Idea LONG. Our thesis has been based on its unique and exclusive 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. Their exclusive U.S. listing on the NYSE has been a moat; the introduction of AFC Gamma to the Nasdaq would make for its first legitimate competitor since going public.
As of December 14, 2020, IIPR owned 64 properties across 16 states, totaling approximately 5.2 million rentable square feet (incl. ~2.0 million rentable sq. ft. under development/redevelopment), which were 99.3% leased (based on sq. ft.) with a weighted-average remaining lease term of approximately 16.5 years. IIPR has invested ~$972.4 million in the aggregate (excl. transaction costs) and had committed an additional ~$298.1 million to reimburse certain tenants and sellers to complete construction and tenant improvements at IIPR’s properties.
In September, we presented our long thesis on IIPR.
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Tel Aviv Stock Exchange to launch TA-Cannabis Index in February
The Tel-Aviv Stock Exchange (TASE: TASE) announced the launch of a new index that will comprise shares of companies included the Cannabis Subsector, under the Biomed Sector.
The Israeli medical cannabis industry has evolved in recent years and, while not yet mature, has gained rapport in the capital market. Accordingly, on November 1, 2020, TASE launched a new dedicated Cannabis Subsector. The Cannabis Subsector includes companies that are primarily engaged in the fields of research, cultivation, sale, or production and marketing of medical cannabis products. The index has a relatively low market cap of 1.7 billion shekels ($529 million).
Cresco Labs opens the tenth dispensary in Illinois, becomes the first operator to hit the state cap (CRLBF)
CRLBF is a Hedgeye Cannabis Best Idea LONG.
Cresco Labs opened its tenth dispensary in Naperville, Illinois, becoming the first cannabis operator to hit the state's license cap. Sunnyside Naperville will employ nearly 40 people in the nearly 8,400 square foot dispensary featuring 12 points of sale. Adult-use customers can browse live inventory, place online orders through Sunnyside.shop, and pickup orders in-store.
CEO Charles Bachtell commented, “Our retail platform continues to outperform because we put such a premium on finding the right location for our stores, and Naperville is another example of opening a new location in the heart of one of the city’s most vibrant retail spaces—on the same block as Costco, Whole Foods and Starbucks. We are normalizing the cannabis shopping experience.”
In Illinois, the state’s November sales of adult-use cannabis surpassed $75 million for a second straight month in a row. While it was a sequential decline of -0.1% MoM, November’s adult-use sales represent YTD sales of $582.2 million and suggest $902.4 million in annualized revenues. As of Q3 2020, Cresco had 215,000 square feet of cultivation; it has 630,000 square feet of potential canopy space, the largest of any Illinois operator. At present, there are approximately 72 adult-use dispensaries across the entire state. Lawsuits against the state’s botched licensing process for social equity applicants have delayed the disbursement of an additional 75 recreational licenses. While Cresco’s does have a strong retail presence in a burgeoning market, more critical is the continued rollout of recreational stores in the state to drive the company’s leading wholesale revenues.
