Distinctive Job interview with Advanced Flower Capital Founder and CEO Leonard Tannenbaum
AFC Gamma, Innovative Flower Capital’s home finance loan REIT, is having a distinctive strategy to lending in the hashish room. As an alternative of sale-leasebacks, this platform is combining the underwriting of dollars move lending and the enterprise benefit of companies with the authentic estate benefit of its debtors, in accordance to CEO Leonard Tannenbaum. He spoke with New Hashish Ventures about AFC Gamma’s expense tactic, highlighted deals built hence far and the option for major achievement tales in 2021. The audio of the complete discussion is readily available at the finish of this penned summary.
Credit rating and True Estate Skills
Tannenbaum has 20 many years of working experience in underwriting bargains, running community and non-public credit history-targeted corporations, including Fifth Avenue Administration. Right after promoting his firm, he turned lively in a selection of family members office message boards. He was originally disenchanted by the cannabis industry, viewing the Canadian-stated shares and some of the sale-leaseback offers becoming carried out. But, he commenced to develop into thrilled as hashish firms improved and began to develop a far better market.
Immediately after investing as a household office, he saw the have to have to build an origination platform. Operating with his wife Robyn Tannenbaum and using his previous contacts has led to the formation of the Superior Flower Funds system. Via this system, Tannenbaum has looked at far more than $3 billion in bargains. Now, AFC Gamma is one of the premier house loan REITs lending in the hashish area, in accordance to Tannenbaum.
Tannenbaum brings his funds movement lending encounter to the table, though Robyn Tannenbaum brings her capabilities acquired at CIT Group, the place she was a health care investment decision banker. But, as they grew their staff, they needed to incorporate authentic estate expertise. Superior Flower Money added Jacob Levin and Jonathan Kalikow, both of those of whom deliver in-depth actual estate working experience.
So much, the REIT has eight borrowers, and it has created nine investments. AFC Gamma has raised $80 million in equity and has a $40 million credit rating line. It has dedicated to a little above $100 million in specials, and its pipeline is full, according to Tannenbaum.
Sophisticated Flower Capital’s largest financial commitment hence far has been in privately held MSO Nature’s Medications. It has delivered the enterprise with a $42 million secured credit facility. The enterprise has also invested in a CuraLeaf transaction and in One Plant, operated by publicly traded Bluma Wellness, in Florida.
Family members offices, both medium-sized and bigger, make up the bulk of the Superior Flower Funds investor base. Lately, it has also captivated some establishments, in accordance to Tannenbaum.
Vetting and Structuring Investments
AFC Gamma has a demanding vetting system for all potential investments. As a person of the only institutional loan providers in the room, borrowers want the stamp of approval that comes with a credible husband or wife like Highly developed Flower Funds, according to Tannenbaum.
The REIT seems at a selection of distinctive aspects when thinking about prospective investments. Is the administration workforce robust? What states does the business run in? Is the organization very well-positioned for growth and dollars move?
Bank loan framework is dependable, generally with a floating fascination amount all over 12 p.c with a 1 percent ground. All administrative service fees go again to the REIT traders, in accordance to Tannenbaum. The desire price is also dependent on the stage of chance. The Innovative Flower Money staff considers no matter whether a possible borrower is solitary-condition or multi-condition, cash stream optimistic or not.
Eventually, the REIT desires to get the job done with thriving debtors and facilitate their money flow-positive progress.
Tannenbaum is holding an eye on states that have the probability of transitioning from healthcare to adult-use. He pointed to how the Michigan market place had explosive progress following building that improve. States like Arizona, Pennsylvania and Florida could have a identical upcoming if and when they roll out adult-use programs. State-of-the-art Flower Money intently follows state dynamics to understand the boundaries to entry, source dynamics and the legislative natural environment. Thus far, it has not invested in California, which is a very difficult atmosphere, in accordance to Tannenbaum.
When the COVID-19 pandemic has certainly been a obstacle, the hashish field has mainly been effective. It has been deemed an critical company in most states and demand continues to be significant. This is an indicator that the industry is likely to grow to be significantly greater, in accordance to Tannenbaum.
When it arrives to the competition, Tannenbaum hopes to take a cooperative technique. Advanced Flower Cash does not do sale-leasebacks. If a borrower is intrigued in that sort offer, it will refer the offer to a different REIT.
Although AFC Gamma is just one of the much larger mortgage loan REITs in the space, there are a selection of other small to medium-dimension players with which it will do the job. Tannenbaum hopes to choose a lot more of a club strategy, functioning with rivals to twin underwrite and form a lending team that serves the cannabis business.
The initial a few months following the shut of a deal are the most demanding, in accordance to Tannenbaum. Anything at all that can go incorrect, no matter if connected to covenants or reporting, will normally come about in that period of time in his experience.
AFC Gamma has taken some calculated risks that have compensated off. For illustration, the REIT invested in 1 Plant in Florida. The hashish business experienced just one cultivation facility and was pre-design on another, which represented a bigger chunk of their profits stream. The Advanced Flower Cash team realized there was a possibility for delays, but they wager on the company’s workforce. Just after a couple of months, building was done and Just one Plant is manufacturing significant, large-good quality harvests.
Superior Flower Capital has been lending in the place for somewhere around a 12 months and a fifty percent. Tannenbaum expects to see some of its bigger achievements stories unfold in 2021.
Issues and Adjustments in the Investment Landscape
Tannenbaum sees the hashish market as a tough natural environment for traders, specially when contemplating anything other than the most important chances. Companies like Curaleaf and Trulieve are apparent winners with dominant positions, according to Tannenbaum. When seeking at options on a lesser stage, he sees it turning into much more tough for buyers to pick out the winners.
The Sophisticated Flower Money workforce is heading from 13 crew customers to 20 team customers for this very explanation. It can take a considerable total of knowledge to understand every single state’s dynamics and modifying laws. Sophisticated Flower Capital invests a important total of time into examining the facts it gathers to make the suitable investment decision conclusions. For illustration, the group examined 15 distinctive organizations in Michigan and selected two as borrowers.
The biggest adjust Tannenbaum sees in the quick long term is the election. No matter of the winner, he expects to see constructive motion in the hashish field. Innovative Flower Money is making ready for those inevitable improvements, no matter what they may possibly be, to proceed supporting its borrowers and the increasing marketplace.
To master extra, visit the Highly developed Flower Money internet site. Listen to the whole job interview: