Flower One Secures US$39 Million Term Loan Including an Option to Enter a Sale-Leaseback Purchase Agreement for its Flagship Nevada Facility
Transaction provides strategic partnership with cannabis industry real estate leader, Subversive Real Estate Acquisition REIT LP
TORONTO, Oct. 7, 2020 /CNW/ – Flower One Holdings Inc. (“Flower One” or the “Company”) (CSE: FONE) (OTCQX: FLOOF) (FSE: F11) today announced that the Company has entered into a term debt loan agreement (the “Loan Agreement”) for US$39 million with Subversive Real Estate Acquisition REIT LP (“Subversive REIT”). As part of the Loan Agreement, Flower One granted Subversive REIT a two-year option to pursue a sale-leaseback transaction (the “Sale-Leaseback Option”) to purchase Flower One’s 455,000 square-foot cannabis cultivation and production facility in North Las Vegas, Nevada for up to US$80 million, and subsequently lease it back to the Company.
Subversive REIT is positioned to be a leader in the U.S. cannabis real estate market. We are excited to have this opportunity to build a strategic partnership with such a deeply connected and highly-knowledgeable cannabis real estate partner that is poised to benefit Flower One both in the near- and long-term as we continue to enhance our operations in Nevada.
Ken Villazor, President and Chief Executive Officer of Flower One
Also commenting on the transaction, Richard Acosta, Chief Executive Officer and Director of the General Partner of Subversive REIT, said “Subversive REIT was founded with a mandate to provide real estate capital solutions to leading U.S. cannabis operators. Entering into a loan agreement and potential sale-leaseback with Flower One fulfills this mission and then some. The state of Nevada and Las Vegas specifically, are important markets for cannabis brands, and Flower One operates the dominant cannabis cultivation and production asset in the state, making this investment an ideal opportunity for Subversive REIT while supporting Flower One’s ongoing growth.”
The Loan Agreement is for a seven-year interest-only loan at a rate of 10.5% for the term of the loan. Proceeds of the loan will be used to replace an existing US$30 million term loan that would have been due in June 2021, as well as to fund general corporate purposes and other Company debt obligations. The transaction is expected to close prior to October 30, 2020 and is subject to customary closing conditions.
The Sale-Leaseback Option is structured as a sale-leaseback with a 20-year term and two 10-year extension options. The value of the transaction is expected to be between US$70 million and US$80 million based on the Company meeting certain financial performance thresholds within the two-year option period. The proceeds from the sale would first be used to repay the US$39 million term loan. If agreed upon, both parties can also choose to execute on the sale-leaseback after one year for a minimum transaction value of US$70 million.
The Sale-Leaseback Option will also require the Company to issue warrants equal to 10% of the transaction price upon executing the sale-leaseback. Each Warrant will entitle Subversive REIT to acquire one Common Share in the capital of the Company at an exercise price of 125% of the closing trading price of the Common Shares on the CSE on the trading day immediately preceding the closing of the sale-leaseback, but no less than CDN$0.61 within five years of executing the sale-leaseback, subject to adjustments in certain customary events. The Warrants will provide for customary anti-dilution adjustments to protect their economic value, including corporate actions of the Company such as share splits or consolidations, reclassifications, non-cash distributions, and business combination transactions.
No securities regulatory authority has either approved or disapproved of the contents of this press release. The Warrants have not been nor will they be registered under the United States Securities Act of 1933, as amended (the “U.S. Securities Act”) or any state securities laws. Accordingly, the securities described herein may not be offered or sold within the “United States” or to or for the account or benefit of a person in the “United States” or a “U.S. person” (as such terms are defined in Regulation S under the U.S. Securities Act) unless registered under the U.S. Securities Act and applicable state securities laws or pursuant to exemptions from the registration requirements of the U.S. Securities Act and applicable state securities laws. This news release does not constitute an offer to sell or a solicitation of an offer to buy any securities of Flower One in any jurisdiction in which such offer, solicitation, or sale would be unlawful.
About Flower One Holdings Inc.
Flower One is the largest cannabis cultivator, producer, and full-service brand fulfillment partner in the state of Nevada. By combining more than 20 years of greenhouse operational excellence with best-in-class cannabis operators, Flower One offers consistent, reliable, and scalable fulfillment to a growing number of industry-leading cannabis brands. Flower One’s flagship 400,000 square-foot greenhouse and 55,000 square-foot production facility is used for large scale cannabis cultivation, processing, and manufacturing. Flower One also operates a second facility in North Las Vegas with 25,000 square-feet of indoor cultivation and production capacity. Flower One produces a wide range of products ranging from wholesale flower, full-spectrum oils, and distillates to finished consumer packaged goods including flower, pre-rolls, concentrates, edibles, and topicals for the top-performing brands in cannabis. The Company’s common shares are traded on the Canadian Securities Exchange under the Company’s symbol “FONE”, in the United States on the OTCQX Best Market under the symbol “FLOOF” and on the Frankfurt Stock Exchange under the symbol “F11”. For more information, visit: https://flowerone.com.
