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HomeWeed BeatPelorus Equity Group: Cannabis Real Estate Financing Solutions

Pelorus Equity Group: Cannabis Real Estate Financing Solutions

Investors seeking lucrative opportunities often turn to Real Estate Investment Trusts (REITs), which represent companies specializing in owning or financing income-producing real estate. One notable player in this arena is the Pelorus Fund, overseen by Pelorus Equity Group. Pelorus stands out as a private mortgage REIT, focusing on value-add commercial real estate lending within the cannabis sector. Their approach involves pre-approving budgeted improvements aimed at enhancing property value. Including ground-up construction, tenant upgrades, and entitlement work for cannabis-specific developments.

Value-add lending requires a meticulous assessment of a property’s stabilized value post-enhancements. Pelorus excels in this domain, leveraging its expertise to predict future property values amidst the complexities of the cannabis market. This strategy offers a higher rate of return compared to traditional real estate investments.

Initially targeting retail investors, Pelorus recently attained an investment-grade rating from Egan Jones, enabling a $50 million unsecured bond offering. This move expanded participation to institutional investors, bolstering the firm’s assets under management to $265 million. By issuing unsecured bonds, Pelorus optimizes its cost of capital, enabling the provision of stabilized, cost-effective loans to cannabis borrowers alongside its value-add lending portfolio.

Pelorus Innovating in REITs with Flexible Bonds and Swift Transactions

Opting for unsecured bonds provides flexibility for Pelorus, as bondholders cannot demand repayment solely based on fluctuations in real estate values. This strategic decision, coupled with a 7% coupon rate for bondholders, enhances the Fund’s equity investors’ returns. Such innovative financial structures underscore Pelorus’ unique positioning within the REIT landscape, attributed to the collective experience of its founders, Rob, Dan Leimel, and Managing Director Travis Goad.

Pelorus distinguishes itself further by expediting transaction underwriting compared to traditional lenders. Leveraging its in-depth knowledge of value-add lending and the cannabis industry. The Fund prioritizes swift funding of approved budgeted draws, ensuring project completion and sustained cash flow. Unlike many lenders unfamiliar with cannabis market nuances, Pelorus accurately assesses project values, mitigating budgetary risks and eliminating the need for additional fundraising, thus preserving business ownership stakes.

To safeguard investments and ensure efficient fund utilization, Pelorus implements stringent contractual covenants, milestone tracking, and meticulous fund disbursement protocols. In instances of project scope alterations, Pelorus collaborates with borrowers to address challenges proactively, preventing loan disruptions and potential foreclosure scenarios.

Pelorus Equity Group exemplifies adaptability within the evolving cannabis real estate landscape, pioneering unique tax structures to optimize portfolio performance. By combining industry foresight with operational agility, Pelorus continues to shape the future of commercial cannabis real estate financing.

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