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,” said Ken Villazor, President and Chief Executive Officer of Flower One. “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.”
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.
Statements in this press release that are not statements of historical or current fact constitute “forward-looking information” within the meaning of Canadian securities laws and “forward-looking statements” within the meaning of United States securities laws (collectively, “forward-looking statements”). Such forward-looking statements involve known and unknown risks, uncertainties, and other unknown factors that could cause the actual results of the Company to be materially different from historical results or from any future actual results expressed or implied by such forward-looking statements. In addition to statements which explicitly describe such risks and uncertainties, readers are urged to consider statements labeled with the terms “believes,” “belief,” “expects,” “intends,” “anticipates,” “potential,” “should,” “may,” “will,” “plans,” “continue” or other similar expressions to be uncertain and forward-looking.
Forward-looking statements may include, without limitation, statements relating to the Company’s ability to close the transactions contemplated under the Loan Agreement or the Sale-Leaseback Option; the Nevada market; the Company’s leadership as a cannabis cultivator, producer, innovator and full-service brand fulfillment partner; the Company’s ability to offer consistent, reliable and scalable fulfilment to a growing number of industry-leading brand partners; and the production of a wide range of products for the nation’s top-performing brands.
The Company is indirectly involved in the manufacture, possession, use, sale and distribution of cannabis in the recreational and medicinal cannabis marketplaces in the United States through its subsidiary Cana Nevada Corp. Local state laws where Cana Nevada Corp. operates permit such activities; however, these activities are currently illegal under United States federal law. Additional information regarding this and other risks and uncertainties relating to the Company’s business are contained under the heading “Risk Factors” in the Company’s Annual Information Form dated June 23, 2020 (the “Annual Information Form”) filed on its issuer profile on SEDAR at www.sedar.com.
The forward-looking statements contained in this press release are expressly qualified in their entirety by this cautionary statement, the “Cautionary Statement regarding Forward-Looking Information” section contained in the Annual Information Form. All forward-looking statements in this press release are made as of the date of this press release. The forward-looking statements contained herein are also subject generally to assumptions and risks and uncertainties that are described from time to time in the Company’s public securities filings with the Canadian securities commissions, including the Company’s Annual Information Form.
Although Flower One has attempted to identify important factors that could cause actual results, performance or achievements to differ materially from those contained in the forward-looking statements, there can be other factors that cause results, performance or achievements not to be as anticipated, estimated or intended, including, but not limited to: dependence on obtaining regulatory approvals; investing in target companies or projects that are engaged in activities currently considered illegal under United States federal law; changes in laws; limited operating history; reliance on management; requirements for additional financing; competition; hindering market growth and state adoption due to inconsistent public opinion and perception of the medical-use and adult-use marijuana industry and; regulatory or political change.
Accordingly, readers should not place undue reliance on forward-looking statements. The forward-looking statements in this news release are made as of the date of this release. Flower One Holdings disclaims and does not undertake any intention or obligation to update or revise any such forward-looking statements, whether as a result of new information, future events or otherwise, except as required by applicable law.
NEITHER THE CANADIAN SECURITIES EXCHANGE NOR THEIR REGULATIONS SERVICES PROVIDER HAVE REVIEWED OR ACCEPT RESPONSIBILITY FOR THE ADEQUACY OR ACCURACY OF THIS RELEASE.