Cannabis Mortgage REIT Pelorus Fund Raises $42.2M Via Senior Unsecured Notes, First To Receive BBB+ Rating

Pelorus Equity Group’s Pelorus Fund, a private mortgage real estate investment trust raised $42.25 million through a 7% senior unsecured notes private placement due September 30, 2026.

The pioneer in cannabis lending, reported Wednesday that Pelorus Fund closed the offering, which is expected to be the first in a series it intends to issue.

The company, based in Newport Beach, California, said it plans to utilize proceeds to be the best-in-class real estate lending solution for cannabis owners and operators across their companies' life cycles, including a lending program with three- to five-year amortizing loans to quality sponsorship, and be offered to current borrowers upon construction completion, in addition to new borrowers that meet its underwriting criteria.

"We've been experiencing great success from the transactions we've funded in the cannabis space and are committed to keeping that momentum going," said Dan Leimel, CEO of Pelorus Equity Group and manager of the Pelorus Fund.

In August, the Pelorus Fund entered into a $19 million construction-financing loan with Item 9 Labs Corp., a cannabis dispensary franchisor. The loan will be used to fund the acquisition of 44 acres of adjacent land next to Item 9 Labs' 19,200 square-foot facility in Arizona, which has been operational since 2017.

Leimel recently told Benzinga that Pelorus' loan model is designed to support the construction and conversion of highly specialized properties.

"Because we process draw approvals quicker, we save property owners considerable time during the construction period. By delivering financing over a shorter period, even though the interest rate is significantly higher, our total cost of financing is typically lower. This enables property owners to start generating revenues sooner for a similar or lower cost of financing," Leimel continued.

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First Cannabis-Focused Privately Held Mortgage REIT to Get BBB+ Rating

Concurrently, the company announced that Pelorus Fund and its Notes obtained a BBB+ rating from Egan-Jones Ratings Company.

Leimel called the move a "first-of-its-kind win for the cannabis sector."

"Our BBB+ ratings reflect a critical achievement in the current growth phase of our company, as well as our fiscal stewardship, robust portfolio, corporate governance, and financial strength," Leimel added.

Piper Sandler & Co. served as the placement agent for this offering. Dentons acted as counsel to Pelorus and Morrison & Foerster LLP served as counsel to the placement agent in relation to the offering.

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