First Cannabis REIT Proposed by AmeriCann

Rendering of AmeriCann Massachusetts Medical Cannabis Center (MMCC) development in Freetown, Massachusetts
Rendering of AmeriCann Massachusetts Medical Cannabis Center (MMCC) development in Freetown, Massachusetts

AmeriCann (OTC:ACAN), based in Denver, announced this morning that it intends to convert to real estate investment trust (REIT) status, which, if it occurs, would be a first for the cannabis industry. There are many companies that own cannabis cultivation facilities and/or dispensaries and lease them, allowing tenants facing challenges accessing capital to avoid significant up-front investment required, but none have structured themselves yet as a REIT.  REITs, which are governed by several different rules, provide investors with special benefits that include tax-free dividends as long as 90% or more of distributable income is paid out to shareholders.  The asset class has gained so much popularity over the past two decades that Standard & Poors (S&P) will be including it as a separate sector in its popular S&P 500 index this summer.

AmeriCann, which has projects in Massachusetts and Delaware that are under development but not yet producing income, has struggled as a public company and doesn’t appear to be particularly well-suited to pursue this strategy, which, as it indicated in the press release, is subject to “completion of related preparatory work and the obtaining of necessary third-party consents.”  In its most recent SEC quarterly filing (as of its FY16-Q1 ending 12/31/15), the company listed total equity of just $977K, while its current market cap, at $0.76 per share, is $12.64mm based on 16.63mm shares outstanding.  Most REITs trade near their equity value, so, in order for ACAN to successfully transition as a REIT, it will need to likely raise significant capital, which has been a challenge so far as a public company. Successful conversion to REIT status could aid in the company’s efforts to raise capital.

ACAN has traded between $0.30 and $1.00 for the past 17 months.

ACAN chart

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Exclusive article by Alan Brochstein, CFA
Alan Brochstein, CFA
Based in Houston, Alan leverages his experience as founder of online communities 420 Investor, the first and still largest due diligence platform focused on the publicly-traded stocks in the cannabis industry. With his extensive network in the cannabis community, Alan continues to find new ways to connect the industry and facilitate its sustainable growth. At New Cannabis Ventures, he is responsible for content development and strategic alliances. Before shifting his focus to the cannabis industry in early 2013, Alan, who began his career on Wall Street in 1986, worked as an independent research analyst following over two decades in research and portfolio management. A prolific writer, with over 650 articles published since 2007 at Seeking Alpha, where he has 70,000 followers, Alan is a frequent speaker at industry conferences and a frequent source to the media, including the NY Times, the Wall Street Journal, Fox Business, and Bloomberg TV. Contact Alan: Twitter | Facebook | LinkedIn | Email

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