Our Approach
RRG does not invest directly in cannabis equities. RRG is a real estate financier who works with cannabis tenants and borrowers in the U.S. Rainbow underwrites retail and industrial real estate based on its non-cannabis value. Rainbow will purchase or mortgage real property, depending on the operator’s needs. When reviewing potential deals, our analysts focus on LOCATION, BUSINESS, PRICE & TEAM.
Fundamentals
Patience
RRG has been operating in the real estate industry since 1962 and in the cannabis industry since 2018. The organization is extremely selective when deploying capital. RRG has flourished during the last 3 years - the most challenging times that the cannabis industry has faced - due to its careful underwriting standards. Our team has reviewed thousands of opportunities, but we have closed on less than 30 transactions. Simply put, RRG is the tortoise in the race.
Diligence
When reviewing any potential deal, our team conducts rigorous diligence to best quantify the risk and opportunity. We consult local real estate brokers who know the market, and we speak to cannabis industry insiders that know the counterparty. Our real estate valuations are based on market non-cannabis rents for traditional retail and industrial users in the given location. RRG does not finance ground up construction. This standard diligence and underwriting practice has kept RRG safe. RRG has recorded 0 losses on 57 properties financed since inception.
Selectivity
RRG has taken a very conservative approach to the industry. 95% of opportunities we review do not make it passed step one, which is the real estate evaluation. Once we are satisfied that the real estate bid/ask is market non-cannabis for the area, we will then dissect the counterparty’s business model to ensure we believe in the plan and viability of the counterparty. Once satisfied with the real estate and the counterparty, our investment team will formally present to our investment committee, which has over 210 years of combined real estate experience.
Flexibility
RRG purchases real property and RRG mortgages real property. The dual offering allows RRG to work with potential borrowers and tenants to craft a deal that works. Sometimes cannabis companies don’t know what they want or need. RRG’s flexibility is a huge advantage, in an industry where the demand for capital far exceeds the capital available.
Sale- Leasebacks
Senior Mortgage
- 9-13% capitalization rates based on purchase price
- Term: 10-15 years, multiple 5 or 10 year extension options available
- Absolute NNN leases
- Tenant improvement allowances available in certain instances
- Retain ownership interest in your property or finance a purchase option in your lease
- Up to 75% LTV Available (based on non-cannabis Value)
- 10-15% interest rate. Interest only available.
- 2-4 year loans with extension and prepayment flexibility
Case Study - Repaid Loan
In October 2023, Fund I was refinanced out of a loan it made in June 2021.
Counterparty
Location
Type
Cannabis grower, cultivator, & distributer
Detroit, Michigan
Loan
$10,500,000
Loan Size
27 Months
Hold Period
1.34x
Equity Multiple
14.53%
Actual Unlevered Deal XIRR
Case Study - Completed Sale
In early 2022, Fund I completed a sale of 5 assets it purchased in 2019.
Counterparty
Location
Type
Cannabis Cultivation and Dispensaries
Denver, Colorado
Sale-Leaseback
$3,400,000
Acquisition Price
3.2 Years
Hold Period
$4,750.000
Sale Price
33%
Actual Unlevered Deal IRR
Contact Us
500 Park Ave, Floor 10
New York, NY 10022
investors@rainbowrg.com
jack@rainbowrg.com
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