CHICAGO – Cresco Labs (CSE:CL) (OTCQX:CRLBF) (“Cresco Labs” or the “Company”), one of the largest vertically integrated multistate cannabis operators in the United States, today announced the signing of a binding agreement for the sale-and-leaseback of two properties in Ohio and Michigan, for total additional non-dilutive funding of approximately $38 million. The Company also announced the mutual termination of the Equity Purchase Agreement pursuant to which a subsidiary of Cresco Labs would have acquired the ownership interests or assets of VidaCann Ltd. and/or affiliated entities (“VidaCann”) (the “Transaction”) The Transaction was originally announced on March 18, 2019.
“We recognize that responsibly allocating our shareholders’ capital is fundamental to long-term success. While it sometimes means making tough decisions, we are committed to executing on a superior capital agenda, responsibly accelerating the top and bottom-line, executing thoughtful and accretive M&A transactions, and generating efficiencies as we scale,” said Cresco Labs CEO and Co-founder Charlie Bachtell. “With the flexibility to continue to leverage non-dilutive funding options like sale-lease-back agreements, we are well-positioned to continue executing on our strategy to build the most important, enduring company in U.S. cannabis.”
Mr. Bachtell continued, “With these two announcements, we have effectively strengthened our balance sheet to the tune of nearly $158 millioni between new non-dilutive funding and the elimination of a significant near-term cash outlay earmarked for the Transaction. The team and operations at VidaCann are phenomenal, but with a focus on managing our cost of capital, and insuring the most efficient and highest return on invested capital, the ability to deploy resources to other, existing, Cresco markets that are widely considered some of the top markets in the US, like Illinois, Pennsylvania, California and Nevada, has to take priority. On Jan. 1st, our home state of Illinois will migrate from a $250M medical program to an estimated $2B -$4B adult-use market at maturity – we currently have the leading market share and, as the only company with three cultivation/manufacturing licenses, we have an unmatched opportunity to materially increase our market lead. In light of the Illinois opportunity, growth of the Pennsylvania market with similar opportunities to increase our already leading market presence through additional expansion, as well as near-term opportunities in California, through Origin House, we believe it’s in the best interest of our shareholders to re-allocate resources to these existing higher return opportunities with a view to looking for a more capital efficient way to enter the Florida market over the longer term.”
The Company has signed binding agreements to sell its Yellow Springs, Ohio and Marshall, Michigan properties to Innovative Industrial Properties, Inc. (“IIP”) for approximately $38 million in total, which amount includes funding for additional tenant improvements at both properties. Concurrent with the closing of the sale, Cresco Labs will enter into long-term, triple-net lease agreements with IIP and will continue to operate each property as a licensed cannabis cultivation and processing facility. The two properties represent approximately 166,500 square feet of industrial space in aggregate. The sales of the properties are expected to close within the next 30 days, with closings subject to IIP’s completion of diligence and satisfaction of customary closing conditions.
The Company will discuss both of these announcements during its scheduled third quarter earnings call on Tuesday, November 26th at 6 p.m. EST.
About Cresco Labs
Cresco Labs is one of the largest vertically-integrated multi-state cannabis operators in the United States. Cresco is built to become the most important company in the cannabis industry by combining the most strategic geographic footprint with one of the leading distribution platforms in North America. Employing a consumer-packaged goods (“CPG”) approach to cannabis, Cresco’s house of brands is designed to meet the needs of all consumer segments and includes some of the most recognized and trusted national brands including Cresco, Remedi and Mindy’s, a line of edibles created by James Beard Award-winning chef Mindy Segal. Sunnyside*, Cresco’s national dispensary brand, is a wellness-focused retailer designed to build trust, education and convenience for both existing and new cannabis consumers. Recognizing that the cannabis industry is poised to become one of the leading job creators in the country, Cresco has launched the industry’s first national comprehensive Social Equity and Educational Development (SEED) initiative designed to ensure that all members of society have the skills, knowledge and opportunity to work in and own businesses in the cannabis industry.