Although real estate is one of the most valuable assets for any cannabis cultivation company, there are not many companies focused on this opportunity. The nature of the real estate industry is cash intensive and this serves as a barrier to entry for many.
CROP Infrastructure Corp. (CSE:CROP) (OTC:CRXPF) is a company capitalizing on this emerging opportunity and is in the middle of a major expansion. Although the cannabis infrastructure company has significantly advanced its story, it is trading at attractive levels and presents an interesting and diverse opportunity for cannabis investors.
California: An Emerging Opportunity for CROP
Last month, Crop announced a membership purchase agreement with Humboldt Holdings and agreed to advance up to $2-million for land and equipment purchased, and the development of a 30,000-square-foot greenhouse project intended for lease and brand licensing by Humboldt to licensed cannabis tenant growers.
In return, CROP will receive a 30% ownership interest in Humboldt. This was a significant investment and marked the company’s entrance into the California cannabis market. This is a strategic acquisition as it provides attractive leverage to what is expected to be the world’s largest marijuana market.
The property has an existing 10,000-square-foot cannabis greenhouse and has a permit for the development of an additional 20,000 square feet of canopy. Humboldt intends to lease the property and license its brand to tenants. Humboldt plans to start building out additional greenhouses consisting of 20,000 square feet of canopy throughout 2018.
The Hempire Company has a 10,000 sq. ft. medical marijuana cultivation license, a 20,000 sq. ft. RRR license, and is negotiating a tenancy agreement with Humboldt. The Hempire Company has already commenced cultivation in good faith and we view the signing of an agreement as a positive potential catalyst for CROP.
This initiative will be a major value driver for CROP as the acquisition combined with the licensed tenant grower will produce substantial cashflow. The Humboldt facility is in the middle of an expansion that will take the greenhouse facility to 30,000 square feet of canopy with CROP’s greenhouse design which will be funded by cashflow from the existing operation
CROP Proves to be an Execution Story
CROP’s entrance into the California market is significant and shows that it can execute on its previously announced expansion plans. The current opportunity in Washington state is significant and provides several potential catalysts for CROP. Earlier this year, the company issued a positive update on The Dozen and we believe it will complete its proposed expansion there as well.
The construction at The Dozen has been organized into several phases and the second phase is expected to commence shortly. Phase 2 will bring another 22,000 square feet of canopy online and will increase annual tenant production capacity to approximately 24,000 pounds of cannabis product
With this amount of high-quality cannabis for sale, the Washington state market will prove to be a major value driver to CROP. The company is well positioned to capitalize on the high demand for premium marijuana in Washington state and we are keeping an eye on this growth initiative.
A Stock that Investors Need to Watch
Last month, CROP strengthened its balance sheet and oversubscribed the previously announced $4 million CAD non-brokered private placement and is using the proceeds to increase the size of its land/infrastructure portfolio. Strong retail backing and the strategic use of the raised proceeds give us confidence in the future of this promising young company.
The cannabis real-estate company is focused on strengthening its management team as well as its asset portfolio. Last month, David Weinkauf was appointed to the Executive Advisory Board and is an excellent strategic addition. His extensive real-estate development experience will be beneficial as CROP continues to aggressively focus on expanding its portfolio of operations and capitalizing on a global opportunity.
CROP represents an undervalued opportunity and we think the market significantly under appreciates the company’s accomplishments so early on. We recommend keeping a close eye on CROP as there is no doubt the company has a large appetite for market share and the ability to follow through. If you look at cannabis companies in the US and Canada with similar assets it becomes clear that CROP is undervalued on a comparable asset basis. Keep a close eye on this company moving forward as we see serious potential here.