Cannabis Real Estate Investment Fund Targets 13.1% AR

CrowdStreet's new fund invests in cannabis businesses through leaseback acquisitions and first mortgage loans. Here are the highlights.

CrowdStreet's real estate investment platform has recently introduced a fund that provides money to cannabis businesses through sale-leaseback acquisitions and first mortgage loans secured by current real property.

The sponsor's second cannabis-focused fund is Rainbow Cannabis Fund II. The first fund raised $47 million in capital and was entirely spent by the second quarter of 2021, when it invested entirely across 16 properties.

The new fund is looking to raise between $10 million and $25 million, with a primary focus on cannabis facilities, cultivation sites, distribution centers, and processing plants. Each property also has non-cannabis functions that reduce risk and give versatility in terms of tenant type.

Investment Highlights: The fund may achieve its target internal rate of return (IRR) without using leverage and taking on the danger of debt obligations, according to the publication.

The fund is also lending up to 80 percent of the value of non-cannabis real estate, which excludes the cost of any particular capital improvements dedicated to cannabis operations. This provides a significant amount of equity as insurance in the event of default.

  • Minimum investment: $35K
  • Goal IRR: 13.1%
  • Goal equity multiple: 1.53x
  • Goal average cash yield: 7% – 10%
  • Goal investment period: 4 – 8 years

The Rainbow Cannabis Fund II is sponsored by the Rainbow Realty Group, a real estate investment company that focuses on the US cannabis sector.

Rainbow Realty's management team has also been the largest investor in One Liberty Properties, Inc. (OLP) and BRT Apartments Corp., as well as board members, officers, and managers of both companies.

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