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UC Asset LP UCASU entered a MOU to acquire a 10,000 square foot cannabis cultivation property in the State of Oklahoma, through a non-cash acquisition deal. Upon closing of the acquisition, UCASU will invest $1 million to build extra 5,000 square feet of cannabis cultivation facility at the same site.
After acquisition, the current operator on the property, Fire Ranch Farm, will continue to rent the property from UC Asset. UC Asset expects to receive monthly rents representing a 14.4% cash on cash annual return. The lease is locked for 3 years, and monthly rent will increase by 5% every 24 months after the first 3 years.
The non-cash acquisition will be closed through the issuance of 2.5 million preferred shares of UC Asset to the current property owner. Those preferred shares will have a fixed conversion rate of 1:1, which means that one preferred share may be converted into one common share, and one common share only, when conversion will be allowed in the future.
Holder of the preferred shares will receive no dividends from UC Asset, unless those preferred shares are converted into common shares. Meanwhile, common shareholders will continue to receive cash dividends from the company, shall the company decide to distribute any.
However, if preferred shareholder converts his holdings into common shares, he will be entitled to receive dividend. This additional dividend obligation raises the concern that whether the conversion of said preferred shares will dilute the interests of existing shareholders.
“There exists a three-party agreement, that for any preferred shares converted, the monthly rent on the property will be increased proportionally, so that the company will generate more income from the property,” stated Greg Bankston, managing general partner of UC Asset.
Bankston adds that, according to the estimate by the management, the increase of rent may outweigh the additional dividend allocated to newly converted shares.
Bankston also confirms that the company are working with concerned parties to reach definitive agreements and close the transfer of the property as soon as possible.
Sale Of Farmland
The company has closed transaction to sell one of its properties, a 72-acre farmland in the metropolitan area of Dallas, Texas, at the final price of $1.91 million. The sale is a cash deal.
UC Asset acquired the land in October 2016 for approximately $800,000. It sold the property to a local company at $1.30 million in 2020, only to buy it back one year later, in the spring of 2022, at $1.35 million. US Asset will book approximately $550,000 of gross profit from this sale.
UC Asset carries no mortgage loan or any other debt against the land. Therefore, all sales proceeds will become net proceeds to UC Asset, after deduction of small amount of fees and taxes.
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Photo: Benzinga edit with photos by geralt and lindsayfox on Pixabay
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