The Inception Cos., a private investment firm with significant operating and investing experience across the regulated US cannabis industry, based in Los Angeles, recently revealed the launch of Inception REIT. I-REIT is a first-of-its-kind platform providing real estate debt and equity capital to medicinal and adult-use cannabis businesses, while delivering investors an attractive investment opportunity in one of the nation’s fastest-growing industries.
Due to current federal law, cannabis-related businesses have limited access to traditional financing sources. As a result, even the most established state-licensed businesses raise capital for real estate uses by selling equity, or via short-term hard money loans, according to a prepared release. These financing challenges, combined with the complexity of zoning and land use regulations, have created significant leasing and trading premiums for the limited supply of eligible real estate assets.
“As the first eight-figure investor in MedMen and a capital partner in leading cannabis businesses including Juul/Pax, Dosist, BDS Analytics, and The Pharm (Sunday Goods), we have been fortunate to be at the forefront of this dynamic industry,” said Omar Mangalji, co-founder of Inception. “Even though 92% of states already have cannabis access laws, institutional capital is still not widely available. We couldn’t be more thrilled to introduce a dedicated platform for what most people don’t realize is a real estate intensive industry,” Mangalji added.
I-REIT will leverage Inception’s hands-on experience navigating the industry’s unique operational challenges and regulatory hurdles, as well as the firm’s broad industry network and proprietary deal flow. I-REIT will focus exclusively on real estate-based financing opportunities with established cannabis businesses that have been granted the requisite state and local operating licenses and permits. Transaction structures will include sale-leasebacks, senior debt originations, and select capital improvement financings. Real estate asset types will include specialized commercial and industrial buildings in markets with the most developed cannabis regulations, starting with California.
“As cannabis continues to evolve as a natural plant-based medicine and adult-use consumer product, I-REIT is positioned to be the industry’s go-to real estate capital partner through bespoke debt and equity financings for cultivation, manufacturing, distribution, and retail assets,” said Brent Cox, co-founder of Inception. “We look forward to expanding our investment activities with the creation of and investment in I-REIT, which will allow operators to streamline their capital structures, remain asset-light, and bolster higher ROI operating activities,” Cox added.
I-REIT’s investment goals are to deliver:
- A yield-oriented investment strategy, producing attractive asset-based returns;
- Diversification across equity and debt investments, asset types, and geographies; and
- Recurring dividend income in a tax-advantaged REIT structure.
Richard Acosta, I-REIT’s CEO, commented, “I-REIT has the distinct opportunity to shape the real estate capital markets at a time that the cannabis industry’s momentum is undeniable. I-REIT will greatly benefit from Inception’s robust deal pipeline and informational edge in identifying strategically located assets, helping us drive value for both operators and our investors.” Highlighting I-REIT’s investment strategy, Acosta, most recently CFO of SBE (SLS Hotels) and formerly a Director at global real estate private equity firm Colony Capital, further stated: “We are applying a value-oriented approach to real estate investing and institutional underwriting practices to a capital-starved industry.”
I-REIT has secured commitments from several prominent real estate investors and executives, and intends to raise up to $50 million from institutional and individual accredited investors during its initial offering.