Everything You Need To Know About Obtaining Capital for Cannabis Business

MORTGAGES & SALE-LEASEBACKS

Alta Real Estate acquires downstream real estate properties at fair market values based on recent market comps and third-party appraisals. The fund avoids paying any cannabis premiums on these assets and leases the properties to licensed, creditworthy cannabis operators. The fund’s standard collateral packages consist of:

• [3] months’ security deposit;

• [12] months’ estimated NNN expenses;

• Personal and/or corporate guarantees; and,

• Other collateral to be determined on a case by case basis.

Alta’s GP must execute these transactions with the following general restrictions:

• For each acquisition, Alta must own at least [51]% of the asset and have at least a [3]-year lease agreement yielding a minimum [8]% annual cap rate.

• No single acquisition can represent more than [40]% of the fund’s capital.

FOR ASSET-BACKED CREDIT FACILITIES

Alta Real Estate provides capital for a cannabis business through senior secured asset-backed term loans, to licensed cannabis companies across the USA. Cannabis business loan proceeds must be used for growth initiatives like construction, working capital, and debt refinancing. The cannabis real estate funding’s standard collateral packages consist of:

• A maximum LTV of [70]%;

• [3] months’ Debt Service Reserve Account;

• Personal and/or corporate guarantees; and,

• Other collateral to be determined on a case by case basis.

Alta’s GP must execute transactions with the following general restrictions:

• Loan term must be under [10] years;

• No single loan can represent more than [40]% of the fund’s capital.

Alta Real Estate targets [12]%+ unlevered, annual cash-on-cash returns with [3]% annual increases. Our model includes additional potential upside from i) mortgaging portfolio assets and using the proceeds to pay dividends to our investors, and ii) selling portfolio assets back to the tenant or to a third party at a premium. Our base case financial model generates an IRR of +[20]%.

No, Alta evaluates transactions in all states where cannabis has been legalized for medical or adult use. Our primary target markets include cities with friendly regulators, high commercial property values, and states where the cannabis economy is burgeoning, which provides additional confidence in the strength of our borrowers’ and tenants’ businesses. You can talk to our experts and apply for cannabis real estate loans.

Since 2017.

The GP’s contribution currently equals +[13]% of the fund’s total capital. The GP has an obligation to contribute at least [3]% of all investor capital commitments into the fund.

No. All payments are made to Alta via wire transfers or certified checks.

Upon federal legalization, we do expect cap rates to compress to market rates; however, legalization would also provide the opportunity to mortgage our portfolio assets, which would transform our unlevered returns into levered returns. We could use the mortgage proceeds to pay dividends to investors or stretch our equity by investing in new properties and credit facilities.

The minimum investment amount is US $250,000.

Alta Real Estate investors pay an annual management fee of [1.6]% which is split into:

• 0.8% fixed management fee over committed capital, and

• 0.8% management fee over invested capital

After the investors receive a [20]% preferred pre-tax return (including repayment of all management fees), there is a carried interest waterfall structure which is split between the LP and GP depending on the total investment yield.

The fund operates on a capital-call basis, so investors don’t send committments until the GP is ready to close on a transaction. This means investors start generating returns immediately once an acquisition or a loan is closed and payments begin.

Investors receive distributions from each transaction on a semi-annual basis, paid every April and every October.

The General Partner makes all investment decisions. The investment thesis is written in the Limited Partnership agreement and its Supplement as well as the Subscription Agreement, which all investors agree to upon confirmation of their capital commitments.

Alta Real Estate has closed [11] transactions, having invested over $[23,000,000] total.

Due to our extreme discipline and rigorous diligence process, we will only pursue the best investment opportunities with the most creditworthy operators.

No, Alta evaluates transactions in all states where cannabis has been legalized for medical or adult use. Our primary target markets include cities with friendly regulators, high commercial property values and states where the cannabis economy is burgeoning, which provides additional confidence in the strength of our borrowers’ and tenants’ businesses.

We use recent, local, non-cannabis sale comps in addition to third-party appraisals for property valuations. All of our assets must be well-priced and avoid green zone premiums to ensure adequate downside protection for investors.

A green zone is the area within a municipal boundary that has been designated to allow for commercial cannabis businesses to operate. Green zones tend to be limited in size and the properties within those zones are often subject to additional zoning restrictions, like a minimum distance “buffer” from a school or park, making the best properties within a green zone more valuable to cannabis operators. Alta avoids paying a green zone premium by evaluating the value of the property as if it were not inside a cannabis green zone. If the fund needs to sell or lease the property to a non-cannabis operator in the future, there would be no significant value loss on the asset.

Typically, between 1 and 6 months.

Our legal team has structured the funds to ensure that the fund does not participate in plant touching enterprises. Alta Real Estate will acquire real estate assets and lease them to licensed cannabis operators, but will have no ownership interest or control in the plant touching business. As always, we recommend you seek counsel regarding all legal and tax concerns prior to investing.