Cannabis Firm TGOD Tried to Sell Major Ontario Facility for $94.2M in Leaseback Deal

Article by Victor Ferreira, Financial Post

Cannabis firm TGOD tried to sell major Ontario facility for $94.2M in leaseback deal According to a memorandum advertising the property's sale, TGOD was asking for $94.2 million for its 165,879-square-foot facility in Ancaster, Ontario The Green Organic Dutchman Holdings Ltd. is one of several licensed producers struggling for liquidity in a dried-up marketplace.Luisa Gonzalez/Reuters Victor Ferreira

Cannabis producer The Green Organic Dutchman Holdings Ltd. says it has taken its Ancaster, Ont., greenhouse off the market after attempting to sell the facility through a leaseback arrangement earlier this month.

According to an offering memorandum advertising the property’s sale, which the Post obtained this week, TGOD was asking for $94.2 million for its 165,879-square-foot facility. Construction has yet to be completed, but the memorandum said TGOD had invested $107 million in the facility and its equipment. Under the terms of the offering, the licensed producer was willing to pay a little more than $10 million per year in rent over an initial lease term of 15 years and would be subject to annual rent increases of two per cent.

TGOD spokesperson Sebastien Bouchard said the Mississauga, Ont.-based company had previously disclosed in an Oct. 9 press release that it had been engaged in discussions for “ordinary course commercial bank facilities and equipment leasing.” TGOD received offers for the facility, Bouchard said, but was unable to come to an agreement with prospective buyers.

“Based on current market conditions, we didn’t get the offer on the terms and within the timeframe we needed so we had to disclose we’re reviewing alternative options,” said Bouchard, who explained that the company was looking to bridge financing and that the Ancaster facility was off the market.

While Bouchard said that TGOD had not been interested in selling the property since Oct. 8, it remained listed on the website of Stream Capital Partners, a net lease and sale leaseback advisory firm based in Chicago, through Thursday afternoon.

The listing, which suggested the property was still for sale, was taken down after the Post inquired about its online presence. Neither Stream Capital Partners nor TGOD appeared to realize that it was still online.

The memorandum was intended for the eyes of prospective investors in the property. TGOD mentioned that it was looking into “equipment leasing” multiple times this year but did not appear to specifically indicate that its entire Ancaster facility was on the market.

TGOD is one of several licensed producers struggling for liquidity in a dried-up marketplace.

In the memorandum, TGOD is described as a “well-financed company with robust market cap,” but its stock price has declined significantly after touching a 52-week high of $5.81 in March. On Thursday the shares closed at $1.15 in Toronto.

On Oct. 18, the company said it was looking to raise between $70 million and $80 million to implement a new strategic construction and operating plan that would see it slash its 2020 target capacity from 147,500 kg to between 20,000 and 22,000 kg. The raise would also allow the company to become profitable in the second quarter of 2020, it said.

Daniel Sax, the CEO of Sensi Properties, a cannabis real estate investment company, said it didn’t surprise him to see TGOD try to sell its Ancaster facility. In late August, Hamilton-based Beleave Inc. announced it signed a letter of intent to leaseback its London, Ont., facility in a deal that would net the company $7 million.

Read the full article here.

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