Atlanta-based real estate investment company UC Asset Limited Partnership announced an all-share deal to acquire an Oklahoma cannabis cultivation property, invest in the property and lease it to its current operator.
The 10,000-square-foot property is operated by Oklahoma medical marijuana cultivator Fire Ranch Farm, according to a news release.
“This will be our first cannabis property, and it is our one and only selection after screening numerous opportunities in the past 15 months,” UC Asset founder Larry Wu said in a statement.
UC Asset said it will invest $1 million in the property to add another 5,000 square feet of cultivation space.
“UC Asset expects to receive monthly rents representing a 14.4% cash on cash annual return,” according to the release.
“The lease is locked for 3 years, and monthly rent will increase by 5% every 24 months after the first 3 years.”
UC Asset will pay for the deal by issuing 2.5 million preferred shares to the property’s current owner, who was not identified.
The company currently has roughly 5.5 million shares outstanding.
Each preferred share can be converted to one common share at an unspecified future time, but the holder of the preferred shares will not receive any dividends from UC Asset unless the shares are converted.
“This additional dividend obligation raises the concern (of) whether the conversion of said preferred shares will dilute the interests of existing shareholders,” UC Asset noted.
However, the company added that if any preferred shares are converted to common shares, monthly rent on the property will be increased for additional income.
UC Asset announced in January 2022 its plan to acquire an Oklahoma cannabis property, saying it sought to follow a business model similar to cannabis real estate investment trust Power REIT.
Shares of UC Asset trade as UCASU on the OTCQB exchange, aka The Venture Market.