UC Asset’s new $3M cannabis property acquisition includes protection for existing shareholders

Rhea-AI Summary

UC Asset LP (OTCQB: UCASU) has entered a Memorandum of Understanding (MOU) to acquire a 10,000 square foot cannabis cultivation property in Oklahoma, with a non-cash deal. The company plans to invest $1 million for an additional 5,000 square feet upon closing. The operator, Fire Ranch Farm, will pay monthly rent, yielding a projected 14.4% cash on cash annual return. The acquisition will involve issuing 2.5 million preferred shares convertible to common shares, raising concerns over potential dilution for existing shareholders. But management asserts that increased rental income may offset this. The current facility is engineered for full-cycle cannabis production.

Positive

• Projected 14.4% cash on cash annual return from rental income.
• Investment of $1 million to expand cultivation capacity by another 5,000 square feet.
• Strategic entry into the cannabis market after extensive research.

Negative

• Concerns over potential dilution of existing shareholders due to preferred share conversion.
• Preferred shares will not yield dividends unless converted, complicating cash flow for current shareholders.

Atlanta, Jan. 17, 2023 (GLOBE NEWSWIRE) -- UC Asset LP (OTCQB: UCASU) announced last week that the company 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.

Greg Bankston, managing general partner of UC Asset, confirms that the conversion terms include strong protection for exist 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,” explains Bankston.

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.

This 10,000 square foot cannabis property, according to Bankston, is built to the state-of-art standard, with computerized and automatized environment control, and has the capacity to host full cycle cannabis production from creating clones/genetics to extracting cannabinoids.  

“This will be our first cannabis property, and it is our one and only selection after screening numerous opportunities in the past 15 months,” says Larry Wu, founder of UC Asset. “Since we announced our intention to invest in cannabis property in October 2021, our team have made hundreds of phone calls to potential sellers, screened tens of opportunities, and conducted research in 5 different states, including Colorado, California and New York. That is why we are so confident in our final choice. We believe Oklahoma is the future for cannabis cultivation, and our investment in the Sooner State will lead us to great success, sooner than later,” asserts Wu. 

About UC Asset LP

UC Asset LP is a limited partnership formed for the purpose of investing in real estate with innovative strategies.  For more information about UC Asset, please visit: www.ucasset.com

Disclaimer:

This News Release contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These forward-looking statements involve known and unknown risks, uncertainties and other important factors that could cause our actual results, performance or achievements, or industry results, to differ materially from any these statements. You are cautioned not to place undue reliance on any those forward-looking statements. Except as otherwise required by the federal securities laws, we undertake no obligation to publicly update or revise any forward-looking statements after the date of this news release. None of such forward-looking statements should be regarded as a representation by us or any other person that the objectives and plans set forth in this News Release will be achieved or be executed. 

For More Information Contact: IR@UCasset.com

FAQ

What is the significance of UCASU's acquisition of the cannabis property?

The acquisition is aimed at entering the cannabis market with an initial property in Oklahoma, projected to provide significant rental income.

When does UCASU expect to complete the acquisition?

The company is working to finalize the acquisition as soon as possible, although no specific date has been announced.

What financial returns are expected from the cannabis property?

UCASU anticipates a 14.4% cash on cash annual return from rental income, with rent increasing every two years.

How will the preferred shares affect existing UCASU shareholders?

Conversion of preferred shares could dilute existing shareholders' equity, although management believes increased rental income may mitigate this.

What are the plans for the cannabis cultivation facility after acquisition?

Plans include enhancing the facility's size by 5,000 square feet to optimize cannabis production capabilities.