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420 Real Estate, LLC

Real Estate Investment in the Hemp Industry
INVEST

54dd02hh

Time left to invest

min$10k

max$1070k

funding goal 

Reg CF

exemption used 

$2,500,000

pre money valuation 

$500.00

min investment 

$2,000

amount committed 

3

investors 


Security Type
Convertible Note
15% Interest
10% Conversion Discount

Pitch

Who are we

  

Hemp is a type of cannabis plant that does not contain the psychoactive ingredient that produces the “high” associated with the plant and can be used in producing construction materials, rope and plastics.  Hemp also contains the cannabinoid CBD, which is widely held to have health benefits.

420 Real Estate LLC, is a diversified investment vehicle that acquires and leases specialized real estate assessing the hemp industry. Our senior management team has significant experience in all aspects of the real estate industry, including acquisitions, dispositions, leasing, development, management, and finance.

 

 

Farm Act of 2018

The Hemp Farming Act of 2018 was a proposed law to remove hemp (defined as cannabis with less than 0.3% THC) from Schedule I controlled substances and making it an ordinary agricultural commodity. Its provisions were incorporated in the 2018 United States farm bill that became law on December 20, 2018.

We build tangible value through hard assets (equipment) and real estate.  The low-risk participation in a billion-dollar sector, and the retention and valuation growth of a hard asset that can be quickly and easily repositioned if needed. We are high growth, low risk, and legislation immune.  

 

 

Hemp Growth in the US

Hemp’s remarkable growth is drawing the attention of a diverse group of investors, entrepreneurs, and policymakers. Many new entrants to the hemp industry have no familiarity with cannabis; others are longtime marijuana operators looking for new opportunities. All are facing dramatic headwinds as hemp processing struggles to keep up with investor and consumer enthusiasm for the plant.  

We plan to take advantage of this market opportunity by purchasing the facilities of state-licensed growers with a focus on properties that we believe also have the potential for long-term appreciation in value. We believe that our sale-leaseback solutions offer an attractive alternative to licensed cultivators who lack access to traditional financing alternatives.  Though land improvements we may increase the lease rate, or subdivide the farm to bring in more tenants, thus increasing to total passive revenue.

 

 

Problem

 

GROWERS REDUCED PROFIT MARGINS

As more growers enter the cannabis market, the cost per pound of product decreases, which forces reduced profit margins for growers. Growers need to solve for reducing their production costs while increasing their crop yields and cycles to obtain higher profit margins. Considering the inherent costs [rent, electricity, environmental controls, equipment needed and its maintenance costs, expertise needed to operate complex equipment and the costs of standby failure prevention equipment like generators, backup grow lights, computers, industrial fans, humidity control and much more] to achieve this solution, growers are seeking rural farms with less overhead and technology dependency and risk.  

 

RISKS OF PLANT TOUCHING COMPANIES

Plant touching companies face a high degree of risk as cannabis remains federally illegal. While many states have legalized the growth and use of cannabis, plant touching companies must adhere to strict guidelines to meet compliance requirements. Beyond state compliance and being inherently riskier, these companies also face issues unique to them such as banking, financing, funding and being unable to avail themselves of federal protections, such as bankruptcy should their businesses fail.  

 

Solution

 

420 Real Estate solves the problems faced by growers while remaining immune to changes in legislation by focusing on the underlying real estate asset and being non-plant touching. We have followed the tried and true model of land banking, land leases, and land asset appreciation. We are able to benefit from the high lease rates of a licensed cannabis farm, the premium location in coastal California, and the valuation increase by doing property improvements that increase the farm's lease rate, but also the property value as a growth farm that can accommodate multiple high value crops, making it a high yield facility.

 

In this manner, we have multiple layers of security, as well as multiple layers of value creation.

 

Our Company has entered into a contingent acquisition of farms and facilities licensed for cannabis operations ideally suited to address the concerns of growers. One particular farm has 293,000 square feet under canopy with room for expansion.  Not only can it produce more based on total square feet, but it can produce for less.

 

Furthermore, at any point, a grower can increase crop yield by implementing a completely closed grow facility in the same location, potentially a 2 story or vertical closed farm in a small unused part of the lot if demand required it. 

  

As an open space farm with greenhouses, we are ready to reposition the farm for an alternate high-value crop, through the improvements that favor cannabis, we also add transferable value to another tenant who is not a cannabis grower, and if legislation doesn't change and the demand for cannabis grow spaces continues to increase, we can subdivide the farm and through technology improvements have both greenhouse facilities, as well as high yield, closed space facilities. 

 

We have a long-term lease with a very profitable and stable tenant, thus we create a passive revenue stream. 

 

Though land improvements we may increase the lease rate, or subdivide the farm to bring in more tenants, thus increasing to total passive revenue.

 

Achievement & Traction
  • We have researched and identified the highest value improvements to opportunities that promote land appreciation, tenant commitment to long-term contracts, higher lease rates, and is easy to reposition the property without waste based on investment during the improvement phase. 

 

  • We have engaged with several groups to discuss and be advised as the best way to position our company for a near term exit in the 5-year mark. We are contemplating and discussing with advisors, the second round for continued growth, a move to an IPO or mini IPO, or an equity sale to a public company. 
Market

The industrial real estate sub-market currently is performing quite well with vacancies in most, if not all, markets at historical lows due to many factors, including the move away from retail locations to local distribution locations for online retailers. The evolution of retail shopping is driving industrial real estate demand. Green Street Advisors estimates the increase in e-commerce has led to a 20% annual increase in industrial real estate demand, equating to 30-40 million square feet of space. Green Street estimates 1 million square feet of additional industrial space is required for every $1 billion in online sales. Same day delivery, transportation expenses and access to a strong labor pool are creating the need for e-commerce tenants to increase the quality of their locations.

 

Leasing or owning industrial properties well outside of urban markets to take advantage of lower costs no longer work in an environment in which same day delivery is expected by customers. Demand from e-commerce distribution is putting pressure on other non-traditional users of industrial space creating a great backdrop for owners of the industrial real estate.

 

According to Collier’s International, the U.S. industrial vacancy rate declined for the 22nd consecutive quarter in the first quarter of 2016, declining 10 basis points to 6.3% and down 70 basis points from the first quarter of 2015.

 

Almost 64 million square feet of the industrial real estate was absorbed in the first quarter of 2016, an increase of 9.6% year over year. Due to the lower vacancy rate, asking rates increased for the 18th consecutive quarter, according to Colliers.

 

This supply/demand dynamic creates a significant opportunity for owners of industrial facilities, particularly those focused on niche categories, as options are limited for tenants requiring specialized buildings. We intend to purchase specialized industrial properties that are mission critical to the medical-use hemp industry.

 

 

 

 

Competition

In California, competition has been mainly in Northern California, Humbolt County and larger re-zoned agricultural areas north of Marin County. Southern California has seen an increase in cannabis grow license applications, yet many are focused on central and urban sites. On the coast, we have seen limited competition due to the high cost of real estate, and the use of said real estate for luxury and commercial use vs agricultural. Our location is ideal in that it was an old agricultural site with freeway access and niched in a small pocket very close to the coast.

 

These large multi acre lots are not easy to find. As there is still a risk of inter-state transportation, we do not feel other state growing facilities are competitors.

 

We are primarily competing against the established large operations in Northern California, and the expensive to setup and operate urban reconversions as seen in Los Angeles / Ventura Counties.

 

Furthermore, we see a competition with the growing urban locations reduced by the barrier to entry. It's difficult to find a large enough urban commercial location that can be zoned for hemp growth operations, the facility has to be retrofitted to meet higher electrical standards at a huge cost, environmental controls and other needed infrastructure to support the growth operation are extremely expensive and expected by a leasing client as existent or to be included in tenant improvements (sunken cost). The operating cost to the tenant is much higher, and hemp operations are penalized with high energy peak rates that diminish profits. 

 

Our open space, greenhouses have a  reduced operating cost to the tenant, as through our improvements we will build higher value into the property and the usability which means higher lease rates.  A tenant can afford these higher lease rates as they are still lower when the urban operation costs are factored in.

 

 

Business Model

Our business model has 2 core components: 

 1.- Lease the asset through a long-term lease contract.  This is a very stable and predictable revenue stream as there is marginal overhead, and through our property improvement and potential inclusion of clean energy multiple tax deductions available that will mitigate the reduction or EBITA and increase net profits.

 

 2.- Asset appreciation. Very traditional hold strategy. We have a premium coastal California farm with easy freeway access, private commercial area, and extremely near the coast.  Over time as we improve the property, the lease value goes up, and the ability for the farm to be repositioned to alternative crops is consolidated. That way even in the event of a change of legislation we can position the farm as ready and viable for other high yields / high-value crops like hemp or niche culinary, which fetch similar or even higher prices than hemp. 

 

Our long-term strategy is to look at additional farm acquisitions and build a portfolio of high-value assets and potentially position the company for a buy-out from a public company.

 

As previously stated, 420 Real Estate is a real estate focused non plant touching business. We own, improve, manage, and lease real estate approved, licensed, and zoned for cannabis growth at a premium.  Yet, we directly benefit from the exponential growth of the hemp sector.

 

The Hemp Industry

One of the goals of the 2014 Farm Bill was to generate and protect research into hemp. The 2018 Farm Bill continues this effort. Section 7605 re-extends the protections for hemp research and the conditions under which such research can and should be conducted. Further, section 7501 of the Farm Bill extends hemp research by including hemp under the Critical Agricultural Materials Act. This provision recognizes the importance, diversity, and opportunity of the plant and the products that can be derived from it, but also recognizes an important point: there is a still a lot to learn about hemp and its products from commercial and market perspectives. Yes, farmers—legal and illegal—already know a lot about this plant, but more can and should be done to make sure that hemp as an agricultural commodity remains stable.

 

 

Team

Willard L. Jackson, Jr.

 

 A native of Denton, TX, Willard L. Jackson, Jr., is an innovative, seasoned entrepreneur with a strong track record of superior operational success. Mr. Jackson currently serves as Vice Chairman of the Board of CVG Group, LLC., of which he is also a Co-Founder. CVG is a private investment group, which counts among its portfolio companies Ebony Media Operations and Starline Luxury Coaches, of which Mr. Jackson is the Vice Chairman.


Mr. Jackson has a stellar, 20-year record of providing highly-experienced executive leadership, resolving complex business challenges, as founder, owner and CEO of MetroplexCore Industries--a provider of environmental site assessment, project management, and tank cleaning services to the oil and gas industry.


Willard also currently serves as Chairman of the Board and Chief Executive Officer for Offisol--a management consulting and staff augmentation company. Additionally, Willard has skillfully overseen projects for a number of Fortune 100 clients, including Chevron USA, ExxonMobil, Shell, and Conoco Philips.


A graduate of the University of St. Thomas with a Bachelor's Degree in Business Administration, some of Mr. Jackson's major accomplishments include but are not limited to: 2002 Presidential Appointee to the Federal Home Loan Bank Board of Directors, where he served until 2008; and 1995 Texas Gubernatorial Appointee to the Board of Regents of Texas Southern University, serving as Chairman from 1997 to 2003.

 

Use of Funds

 

 

High demand real estate licensed for hemp cultivators.

 

Updates


Q&A


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Tony Roebuck
Tony Roebuck - Investor6 days ago
where do i mail the check

Documents

Offering Statement View Download
Reviewed Fiancials View Download

Other Disclosures

Read the Form C filed with the SEC for other important disclosures, like financial statements, Directors, Officers, shareholders with more than 20% of voting rights, and more.
Use of Proceeds
The allocation of the use of proceeds among the categories of anticipated expenditures represents management’s best estimates based on the current status of the Company’s proposed operations, plans, investment objectives, capital requirements, and financial conditions. Future events, including changes in economic or competitive conditions of our business plan or the completion of less than the total Offering, may cause the Company to modify the above-described allocation of proceeds. The Company’s use of proceeds may vary significantly in the event any of the Company’s assumptions prove inaccurate. We will retain broad discretion in the allocation of the net proceeds from this Offering, reserve the right to change the allocation of net proceeds from the Offering as unanticipated events or opportunities arise and could utilize the proceeds in ways that do not necessarily improve our results of operations or enhance the value of our Common Stock. Additionally, the Company may from time to time need to raise more capital to address future needs that we may not have anticipated as of the date of this Offering Circular.
Special Note Regarding Forward-Looking Statements
This offering contains forward-looking statements within the meaning of the federal securities laws. We caution investors that any forward-looking statements presented in this offering, or which management may make orally or in writing from time to time, are based on the Company’s beliefs and assumptions made by, and information currently available to, the Company. When used, the words “anticipate,” “believe,” “expect,” “intend,” “may,” “might,” “plan,” “estimate,” “project,” “should,” “will,” “would,” “result” and similar expressions, which do not relate solely to historical matters, are intended to identify forward-looking statements. Such statements are subject to risks, uncertainties and assumptions and are not guarantees of future performance, which may be affected by known and unknown risks, trends, uncertainties and factors that are beyond the Company’s control. Should one or more of these risks or uncertainties materialize, or should underlying assumptions prove incorrect, actual results may vary materially from those anticipated, estimated or projected. While forward-looking statements reflect the Company’s good faith belief when made, they are not guarantees of future performance. The Company expressly disclaims any responsibility to update forward-looking statements, whether as a result of new information, future events or otherwise, except as required by law.

Moreover, we operate in a very competitive and rapidly changing environment, and new risks emerge from time to time. It is not possible to predict all risks, nor can we assess the impact of all factors on our business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statements we may make. In light of these risks, uncertainties and assumptions, the forward-looking events and circumstances discussed in this offering may not occur, and actual results could differ materially and adversely from those anticipated or implied in the forward-looking statements. We undertake no obligation to revise or publically release the results of any revision to these forward-looking statements, except as required by law. Given these risks and uncertainties, prospective investors are cautioned not to place undue reliance on such forward-looking statements.
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