New Cannabis Real Estate Investment Fund Targeting A 13.1% Annual Return

The latest offering on CrowdStreet’s real estate investment platform (see more real estate investment opportunities) is for a fund providing capital to cannabis operators through sale-leaseback acquisitions and first mortgage loans secured by existing real property.

Rainbow Cannabis Fund II is the sponsor’s second cannabis-focused fund. The first fund raised $47 million in capital, which was entirely deployed as of the second quarter of 2021 across 16 properties.

The new fund is seeking to raise between $10 million and $25 million and has already targeted properties including dispensaries, cultivation, distribution and processing centers Each property also has non-cannabis capabilities, providing risk mitigation and flexibility on the type of tenant.

Investment Highlights: While an investment in a cannabis-related fund may sound like a high-risk investment, the fund anticipates hitting its target internal rate of return (IRR) without using leverage and taking on the risk associated with debt obligations.

The fund is also lending at 60-80% of non-cannabis property value, which excludes the value of the specific capital improvements tailored towards cannabis operations. This provides a significant amount of equity as protection in case of default.

• Minimum investment: $35,000
• Target IRR: 13.1%
• Target equity multiple: 1.53x
• Target average cash yield: 7% - 10%
• Target investment period: 4 - 8 years

View offering details on CrowdStreet

Deal Sponsor: The Rainbow Cannabis Fund II is being sponsored by Rainbow Realty Group, a real estate investment firm focused on the U.S. cannabis industry.

Rainbow Realty’s management team has also been the largest investor in, as well as board members, officers and managers of One Liberty Properties, Inc. OLP and BRT Apartments Corp BRT.
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Photo: Richard T on Unsplash