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Cannabis Summary for July 2, 2020

2020-07-02 19:18 ET - Market Summary

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by Stockwatch Business Reporter

The S&P/TSX Cannabis Index gained 0.93 point to 143.58 Thursday, while the Canadian Securities Exchange Composite Index gained 1.87 points to 384.98. Charles Bachtell's Illinois-based Cresco Labs Inc. (CL) gained 10 cents to $5.70 on 258,400 shares after announcing that it has signed yet another sale-and-leaseback deal with Innovative Industrial Properties Inc. The deal is for Cresco Labs' Fall River, Mass., property, which includes a growing and processing facility, as well as a dispensary. In all, it includes 118,000 square feet of industrial space, about the size of two football fields.

The deal was for $29-million, $21-million of which will be used for improvements to the facility. Presumably, Cresco Labs will receive the other $8-million in cash. The company's CEO, Charles Bachtell, suggests the sale-and-leaseback deals have allowed Cresco to continue its expansion in Massachusetts, Michigan and Ohio.

The deals are an alternative to a loan. The company selling and leasing back the facilities (in this case Cresco) gets cash immediately, but it has to make lease payments as long as it continues to use the facilities. Today's agreement is a triple-net-lease deal. That means Cresco has agreed to pay all real estate taxes, building insurance and maintenance, in addition to normal fees associated with lease agreements such as rent and utilities. (As mentioned above, Cresco gets $21-million for facility improvements. Cresco will be on the hook for any additional maintenance or renovations.)

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