The Sale-Leaseback Transaction Emerges in Cannabis
As capital availability has dried up cannabis companies have looked for alternatives to generate growth capital.
Several larger, vertically integrated operators have looked to their balance sheets to free up assets, in particular the real estate underlying their cultivation, processing and manufacturing businesses. The emergence of the “Sale-Leaseback” transaction in cannabis has arrived.
A sale-leaseback traditionally involves a company selling the real estate it owns and subsequently leasing it back from the investor/buyer, thereby freeing up capital. This transaction provides several key advantages:
- Can return the full value of the real estate asset's capital back to the company, vs. traditional financing which may only bring a percentage of the asset's value
- Provides off balance sheet financing
- Shrinks liabilities on the balance sheet
- Can provide much less dilutive financing and lower cost of capital