Transatlantic Real Estate, LLC: Real Estate Investment In Cannabis


Video Link: http://player.vimeo.com/video/291275636  

Who are we

Transatlantic Real Estate LLC is a real estate company that specializes in the acquisition and leasing of properties that support the cannabis industry. We focus on benefiting from the exponential growth in the cannabis sector while remaining non plant touching.

We build tangible value through hard assets (equipment) and real estate. In this way, we get the best of both worlds. The low-risk participation in a billion dollar sector, and the retention and valuation growth of a hard asset that can be quickly and easily repositioned if needed. We are high growth, low risk and legislation immune.  Come grow with us!

The Problem –

GROWERS REDUCED PROFIT MARGINS

As more growers enter the California cannabis market, the cost per pound of product decreases, which forces reduced profit margins for growers.  Growers need to solve for reducing their production costs while increasing their crop yields and cycles to obtain higher profit margins.  Considering the inherent costs [rent, electricity, environmental controls, equipment needed and its maintenance costs, expertise needed to operate complex equipment and the costs of standby failure prevention equipment like generators, backup grow lights, computers, industrial fans, humidity control and much more] to achieve this solution, growers are seeking rural farms with less overhead and technology dependency and risk. 

RISKS OF PLANT TOUCHING COMPANIES

Plant touching companies face a high degree of risk as cannabis remains federally illegal.  While California has legalized the growth and use of cannabis, plant touching companies must adhere to strict guidelines to meet compliance requirements.  Beyond state compliance and being inherently riskier, these companies also face issues unique to them such as banking, financing, funding and being unable to avail themselves of federal protections, such as bankruptcy should their businesses fail.

The Solution –

Transatlantic Real Estate solves the problems faced by growers while remaining immune to changes in legislation by focusing on the underlying real estate asset and being non-plant touching.  We have followed the tried and true model of land banking, land leases, and land asset appreciation.  We are able to benefit from the high lease rates of a licensed cannabis farm, the premium location in coastal California, and the valuation increase by doing property improvements that increase the farm’s lease rate, but also the property value as a growth farm that can accommodate multiple high value crops, making it a high yield facility.

In this manner, we have multiple layers of security, as well as multiple layers of value creation.

Our Company has entered into a contingent acquisition of a 9+ acre farm licensed for cannabis operations in Santa Barbara, California, ideally suited to address the concerns of California growers.  Our farm has 293,000 square feet under canopy with room for expansion.  Not only can it produce more based on total square feet, but it can produce for less as sun is free especially in California, and classic greenhouse environmental mechanisms work extremely well.

Furthermore, at any point, a grower can increase crop yield by implementing a completely closed grow facility in the same location, potentially a 2 story or vertical closed farm in a small unused part of the lot if demand required it.  In fact, we have entered into agreement with GreenGro Technologies (OTC: GRNH), a world-class provider of green technology with expertise in an indoor and outdoor agricultural science system focused on building multi-level cannabis growth operations, to become an additional long-term tenant.

As an open space farm with greenhouses, we are ready to reposition the farm for an alternate high-value crop, through the improvements that favor cannabis, we also add transferable value to another tenant who is not a cannabis grower, and if legislation doesn’t change and the demand for cannabis grow spaces continues to increase, we can subdivide the farm and through technology improvements have both greenhouse facilities as well as high yield closed space facilities. 

We have a long-term lease with a very profitable and stable tenant, thus we create a passive revenue stream.

Though land improvements we may increase the lease rate, or subdivide the farm to bring in more tenants, thus increasing to total passive revenue.

Achievement & Traction

We have an ownership interest in a premium property in coastal southern California near Santa Barbara.

We have a cannabis grow licensing attached to the property and have a stable prosperous tenant under contract in a long term lease. 

We have obtained a valuation from a cannabis real estate expert based on an extensive analysis of the land, location, comparables, market rate on leases, and many other factors that show a significant value on the property as a cannabis grow farm under a hold and lease business model.

We have researched and identified the highest value improvements to our land that promote land appreciation, tenant commitment to long-term contracts, higher lease rates, and is easy to reposition the property without waste based on investment during the improvement phase.

We are also actively sourcing and evaluating new investment opportunities to acquire a portfolio of cannabis farms to operate under the same non-plant touching, hold and lease model.

Finally, we have engaged with several groups to discuss and be advised as the best way to position our company for a near term exit in the 5 year mark. We are contemplating and discussing with advisors, the second round for continued growth, a move to an IPO or mini IPO, or an equity sale to a public company.

The Market –

The Industrial Real Estate Sub-Market

The industrial real estate sub-market currently is performing quite well with vacancies in most, if not all, markets at historical lows due to many factors, including the move away from retail locations to local distribution locations for online retailers.  The evolution of retail shopping is driving industrial real estate demand. Green Street Advisors estimates the increase in e-commerce has led to a 20% annual increase in industrial real estate demand, equating to 30-40 million square feet of space. Green Street estimates 1 million square feet of additional industrial space is required for every $1 billion in online sales. Same day delivery, transportation expenses and access to a strong labor pool are creating the need for e-commerce tenants to increase the quality of their locations.

Leasing or owning industrial properties well outside of urban markets to take advantage of lower costs no longer work in an environment in which same day delivery is expected by customers. Demand from e-commerce distribution is putting pressure on other non-traditional users of industrial space creating a great backdrop for owners of the industrial real estate.

According to Collier’s International, the U.S. industrial vacancy rate declined for the 22nd consecutive quarter in the first quarter of 2016, declining 10 basis points to 6.3% and down 70 basis points from the first quarter of 2015.

Almost 64 million square feet of the industrial real estate was absorbed in the first quarter of 2016, an increase of 9.6% year over year. Due to the lower vacancy rate, asking rates increased for the 18th consecutive quarter, according to Colliers.

This supply/demand dynamic creates a significant opportunity for owners of industrial facilities, particularly those focused on niche categories, as options are limited for tenants requiring specialized buildings. We intend to purchase specialized industrial properties that are mission critical to the medical-use cannabis industry.

The Competition –

In California, competition has been mainly in Northern California, Humbolt County and larger re-zoned agricultural areas north of Marin County.  Southern California has seen an increase in cannabis grow license applications, yet many are focused on central and urban sites.  On the coast, we have seen limited competition due to the high cost of real estate, and the use of said real estate for luxury and commercial use vs agricultural.  Our location is ideal in that it was an old agricultural site with freeway access and niched in a small pocket very close to the coast.

These large multi acre lots are not easy to find.  As there is still a risk of inter-state transportation, we do not feel other state growing facilities are competitors.

We are primarily competing against the established large operations in Northern California, and the expensive to setup and operate urban reconversions as seen in Los Angeles / Ventura Counties.

Furthermore, we see competition with the growing urban locations reduced by the barrier to entry. It’s difficult to  find a large enough urban commercial location that can be zoned for cannabis growth operations, the facility has to be retrofited to meet higher electrical standards at a huge cost, environmental controls and other needed infrastructure to support the growth operation are extremely expensive and expected by a leasing client as existent of to be included in tenant improvements (sunken cost). The operating cost to the tenant is much higher, and cannabis operations are penalized with high energy peak rates that diminish profits.

Our open space, green houses have a  reduced operating cost to the tenant, as through our improvements we will build higher value into the property and the usability which means higher lease rates.  A tenant can afford these higher lease rates as they are still lower when the urban operation costs are factored in.

The Business Model –

Our business model has 2 core components: 

1. Lease the asset through a long-term lease contract.  This is a very stable and predictable revenue stream as there is marginal overhead, and through our property improvement and potential inclusion of clean energy multiple tax deductions available that will mitigate the reduction or EBITA and increase net profits.

2. Asset appreciation. Very traditional hold strategy. We have a premium coastal California farm with easy freeway access, private commercial area, and extremely near the coast. This by itself will increase significantly over time.

The asset valuation is calculated and increases in 2 ways.

  • Land = Coastal California land in the Santa Barbara County. 
  • Farm = Cannabis zoned and licensed farm in a highly desirable area, the lease rate per square foot will increase faster.

Over time as we improve the property, the lease value goes up, and the ability for the farm to be repositioned to alternative crops is consolidated. That way even in the event of a change of legislation we can position the farm as ready and viable for other high yields / high-value crops like hemp or niche culinary, which fetch similar or even higher prices than cannabis. 

Our long-term strategy is to look at additional farm acquisitions and build a portfolio of high-value assets and potentially position the company for a buy-out from a public company.

We want to be clear, we are a real estate focused non plant touching business. We own, improve, manage, and lease real estate approved, licensed, and zoned for cannabis growth at a premium.  Yet, we directly benefit from the exponential growth of the cannabis sector, especially beneficial to us is the medical cannabis sector.

The Regulated Medical-Use Cannabis Industry

The regulated medical-use cannabis industry is a rapidly growing industry that we believe presents a unique real estate investment opportunity under current market conditions. In the United States, the development and growth of the industry has generally been driven by state law and regulation, and accordingly, the market varies on a state-by-state basis. State laws that legalize and regulate medical – use cannabis allow patients to consume cannabis for medicinal reasons with a doctor’s recommendation subject to various requirements and limitations.

As of June 2018, 31 states and the District of Columbia permit the medical use of cannabis in some fashion.

  • Significant industry growth in recent years and expected continued growth
  • A shift in public opinion regarding the legalization of cannabis, especially as it relates to the medical-use of cannabis
  • Increasing momentum toward legalization in many states, particularly for medical uses
  • The federal government’s current relaxed enforcement posture toward cannabis-related activities that are legal under state law

The Team –

Attorney Birch is supported by a team of experts in the real estate, cannabis and financial markets industry in California.  

Media Contact
Company Name: Transatlantic Real Estate LLC
Contact Person: Media Relations
Email: Send Email
Country: United States
Website: https://fundanna.com/equity/offer-summary/681-Transatlantic-Real-Estate,-LLC-Michigan-48236