Toronto-based cannabis-focused real estate investment trust Nova Net Lease REIT (CSE:NNL) (OTCQB:NNLRF) announced Friday that it has entered into a unit purchase agreement with Bluebird Real Estate Holdings, LLC, an affiliate of DRN Holdings LLC.

Details

Under the deal, Bluebird agreed to acquire all of the class A units of Nova Net Lease Operating LLC from Verdant Growth Properties Corp., a wholly-owned subsidiary of the REIT.

The class A units represent all, or substantially all of the REIT’s assets. Bluebird is purchasing the class A units for total gross proceeds of $3.71 million or $0.50 per unit.

After providing for liabilities, unpaid transaction costs, and administrative costs, the REIT expects to distribute its net assets to the holders of its outstanding units then terminate the REIT subject to its declaration of trust.

Liquidating distribution and net of costs to terminate the REIT are estimated to be between $0.40 and $0.43 per REIT unit.

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Background

The REIT’s initial investment thesis, based on favorable capitalization rates and public valuations in the cannabis real estate market, has changed due to market shifts and lack of access to capital that led to the decision.

The transaction offered unitholders a premium of approximately 344%-378% to the closing price on Nov. 14, 2024, and 456%-498% to the 30-day VWAP.

In addition, CEO Tyson Macdonald has been replaced by CFO Stacy Riffe who will oversee the transaction and wind down the REIT in conjunction with the signing of the unit purchase agreement.

Nearly a year ago, Nova expanded its portfolio by initiating a joint venture with a Nevada real estate investor group. The venture incorporated two properties valued at approximately $15.7 million.

In August, Nova reported its financial results for the three months ended June 30, 2024. In the filing, the Toronto-headquartered business disclosed total revenues of $392,665, a slight increase from $388,656 in the same period in 2023.

What's Next

The unit purchase transaction is expected to be completed in Jan. 2025, while the liquidating distribution and termination of the REIT will be completed within 30-60 days of such date.

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NNLRF Price Action

Nova Net's shares traded 312.50% higher at $0.33 per share after the market close on Friday.