A small cannabis real estate trust is making another run at raising millions from investors, with lofty promises of returns despite a track record implying otherwise.
UC Asset LP (OTCQB: UCASU) announced plans this week to raise up to $10 million through a Regulation A offering. The Georgia-based real estate firm said it currently manages $1.6 million in cannabis property equity, primarily from its January 2023 acquisition of Fire Ranch Farm’s 10,000-square-foot cultivation facility, Green Market Report previously reported. Founder Larry Wu had called Oklahoma “the future for cannabis cultivation.”
That deal, structured entirely in UC Asset stock, came with a lease-back agreement promising 14.4% annual returns, which the company noted in its Thursday news release, “in addition to potential upside from property appreciation.” But the company’s financial performance has been observably uneven since then. After projecting profits of $0.10 to $0.15 per share in 2021, actual earnings came in at $0.03 per share by 2023.
The move follows a string of shelved plans, including a similar fundraising attempt in 2022, a promised NASDAQ uplisting, and most recently, a management stock buyback announced last September.
Wu’s latest announcement includes an unusual admission about the firm’s previous abandoned fundraising attempt: “We understand that, back then, we did not have a history of successfully managing a portfolio of cannabis property.”
However, Wu characterized current market conditions as a potential buying opportunity, suggesting cannabis property prices have “likely hit historical lows.”
The new offering proposes preferred shares carrying an 8% annual dividend – more than double the 3.94% average for U.S. equity REITs, according to S&P Global Market Intelligence. However, investors could be left with limited options to sell their holdings.
According to the news release, “The disadvantage is that UC Asset’s preferred shares will not be publicly traded. However, Wu asserts that preferred shares will be eligible to be converted into common shares after a holding period of 6 months. And UC Asset’s common shares are currently traded on OTCQB.”
UC Asset also said it may consider working with traditional investment banks to complete the offering.
The firm acknowledged its lack of experience managing cannabis real estate, but said the environment’s still ripe for rent. Read More
