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NatWest Group Plc beat earnings estimates in the first quarter as lending and deposits increased amid signs of improving customer confidence.
Singapore home prices grew at a slower pace last quarter and rents fell, as the city-state’s property boom began to lose steam.
Hong Kong home prices rose for the first time in almost a year in March as the city’s removal of property curbs revived sales.
Greater China’s property market crisis and the challenges it poses for lenders will be on full display on Monday, when embattled developer China Vanke Co. and the region’s biggest banks report earnings.
China’s overseas investment is heading for an eight-year high as its dominant firms build more factories abroad, a shift that could soften criticism of Beijing’s export drive.
Oct 18, 2020
Bloomberg News
,(Bloomberg) -- This month, cannabis will get another publicly traded real estate investment trust -- a sign of how the industry is growing up.
Subversive Real Estate’s merger with Inception REIT is part of a $183 million transaction to turn the special purpose investment vehicle into a real estate investment trust, giving it tax benefits and readying it to acquire more properties. The transaction, expected to close at the end of this month, will make it the second publicly traded cannabis REIT, following Innovative Industrial Properties.
The deal bodes well for both cash-starved cannabis companies and investors who want an in to the fast-growing industry -- but are skittish about the perceived taint of marijuana. It lets cannabis companies that can’t get bank loans sell real estate and lease it back, giving them a shot of cash that can be used to improve their products. Investors, meanwhile, get a new “cannabis adjacent” asset to invest in.
“We unlock capital for operators,” Subversive Chief Executive Officer Richard Acosta said. Amid the pandemic, cannabis firms are more focused on efficiency, he said, and his company aims to help them achieve that by taking “hard assets off the balance sheets.” They can then use the cash to produce more or ramp up production.
One company, Flower One Holdings, got a $39 million, seven-year term loan at 10.5% in exchange for Subversive’s option to buy a 455,000 square-foot cannabis cultivation and production facility in North Las Vegas, Nevada.
These sale-leaseback deals are gaining traction. Major multi-state operator Curaleaf Holdings Inc. just sold a Florida property, and will offload another in the fourth quarter. Jushi, Columbia Care and Cresco Labs have also recently done sale-leasebacks.
“I always thought that consumer-goods companies didn’t need to own real estate,” Curaleaf Chairman Boris Jordan said in a phone interview. “And we’re not a real estate company. Our business is manufacturing branded cannabis.”
A recent E&Y survey found that, as a result of Covid-19, 78% of executives at large companies across industries expect to divest assets within the next two years.
And as the performance of one cannabis REIT shows, there’s plenty of interest in cannabis companies’ real estate. Unlike other commercial real estate like restaurants and hotels, battered by Covid-19, cannabis properties may have better prospects since dispensaries have stayed open in lockdowns, and the industry will need to expand if new states legalize.
Now, it just remains to be seen -- in the flip-side world of cannabis -- how these financial instruments distribute risk. That’s because most real estate is viewed as a hard asset that generally increases in value, although the global pandemic has created some disruption this year in property values. But with cannabis, legal issues are a wild card.
If marijuana becomes federally legal, companies might no longer need to grow their products in the same states they sell them. This would mean that cultivation plots and processing facilities in multiple states could suddenly become redundant.
Subversive, Acosta said, has taken this into account by buying only the properties that it sees as the most attractive, or those with potential alternative uses.
Flower One’s facility in Nevada, for example, is the largest in the state, he said. “It is a future-proof asset in our view.”
QUOTE OF THE WEEK
“The minute someone is able to synthesize and stabilize cannabinoids at a reasonable cost, the pharmaceutical companies will come in and say ‘We want this.’ But on the consumer side, particularly for nutraceutical and recreational products, we don’t think people will want synthetic products. Would you want a wine with synthetic grapes, or a beer with synthetic hops? We think organic cannabis is the way to go,” said Boris Jordan, in an Oct. 12 interview with Bloomberg News.
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