Colorado has been a canary in the coal mine for signaling
developing trends in the cannabis industry since the state approved
recreational consumption back in 2012. The latest trend to crop up on
investor’s radar, a shortage of indoor space to grow the more than 19 tons of
pot sold last year, was recently highlighted by the Wall Street Journal in an
article that breaks down how the state is seeing a commercial real-estate
crunch due to the rapid proliferation of indoor grow operations and
distribution facilities. According to brokerage firm Cresa Partners, such
operators collectively took up one third of all leased warehouse space over the
last 18 months in Colorado, as the number of active grow licenses for retail
consumption has nearly doubled, coming in at just under 400.
With $700 million in sales for medical and recreational
combined last year, and a new monthly record of some $50.1 million in June for
recreational sales alone, Colorado’s thriving cannabis market shows no signs of
slowing down, adding further fuel to the fire of tightening supply in warehouse
space that is available for lease. Moreover, this same trend could go viral in
coming years as more and more states move to pass similar laws, with state
legislatures spurred on by juicy tax revenue figures. In Colorado, school-bound
tax revenues from the marijuana industry hit $16.6 million for the first six
months of 2015, a 24.8 percent increase over the amount earmarked for schools
that was taken in during all of last year.
Little surprise then that states like Oregon have rapidly
moved to pass similar decriminalization, with a law recently signed by the
Governor allowing dispensaries that are already selling medical marijuana to
begin dispensing recreational as well, a full three months ahead of the
initially scheduled date. With retail projections of around $200 million for
its first year and an accompanying tax take in the neighborhood of $20 million,
according to Arcview Market Research, Oregon could quickly see the same kind of
scramble for indoor grow space that Colorado is now experiencing. Also, with
eleven more states currently on the road to passing recreational legalization,
such as California and Nevada, the demand for indoor grow space and the
requisite cultivation technologies that go along with it, spell a bright future
for companies such as Cherubim Interests, Inc. (OTC: CHIT).
Cherubim Interests has acquired an exclusive worldwide
license to portable and scalable controlled environment agriculture technology,
and the company is now leveraging its capacity as an alternative construction
and real estate development company to build and deploy facilities for the
booming medical and recreational cannabis market. Leaning heavily on
wholly-owned subsidiary BudCube Cultivation Systems USA, Cherubim Interests
will seek to gain an increasingly dominant hand in the cultivation game, as the
same trend that has been firmly established in Colorado goes nationwide, amid
the continued rush by states to pass legalization measures in pursuit of hefty
tax revenues.
With lease rates currently around $17 per square foot in
Denver, or roughly four times the average rate for industrial space elsewhere
in the country, and no signs of Colorado’s marijuana industry slowing down, this
is a shrewd play for development-stage Cherubim. The low hanging fruit of the
cannabis sector is only the beginning for CHIT as well, given that its model
for controlled environment cultivation is perfect for addressing other
agricultural demands, such as the growing desire among consumers in established
markets for organic produce, and increasing food shortages worldwide, driven by
mounting environmental factors that have led to extreme drought conditions in
numerous regions.
BudCube Cultivation Systems USA offers an extremely
lightweight and flexible grow model for rapidly implementing cultivation
anywhere in the country where cannabis cultivation is made legal. The immediate
advantages of such a scalable, modular, and completely portable solution to commercial
operators on the supply end of the marijuana business are unmistakable. The
total cost of implementing such a solution is highly preferable to established
construction and cultivation methodologies, and the speed at which such an
approach can be implemented will continue to be seen as a key advantage for
operators looking to seize first-mover advantage as new markets open up in
other states.
Of course, controlled environment agriculture is just one
focus area for CHIT, as the company is also pursuing alternative construction
and broader real estate development goals via its recently announced hybrid
business model. In addition to plant cultivation facilities, the company will
pursue acquisition/development of single, multi-family and commercial rental
properties.
By leasing secured square footage in the controlled
environment agriculture space, on both the micro (traditional multi-tenant) and
macro (single tenant) scale to individuals or corporations in need, via an
approach that is similar to mini-storage companies, Cherubim Interests aims to
get significant mileage out of combining its proprietary grow tech with real
estate development and property management oversight.
For more information, visit www.cherubiminterests.com or
www.budcube.com
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