Rainbow Realty Group (RRG) serves as the sub-manager to MJ REIT. RRG, founded in 2018, is a specialty finance company focused exclusively on investing in real estate opportunities within the U.S. cannabis industry. Rainbow Realty Group and its affiliates have been in the real estate industry for over 60 years and currently manage two public non-cannabis focused REITs. In total, they, along with their affiliates, manage more than $2.5 billion.

We primarily focus on two types of properties, industrial (cultivation/processing) and retail (dispensaries).

Deals are sourced from a vast network of relationships in the market, including from brokers, other lenders, lawyers, accountants, company consultants, repeat borrowers and marketing events/conferences. We often receive insight on off-market deals given our brand reputation in the market.

Importantly, in each transaction, we use an alternative use valuation methodology. In other words, we assume cannabis goes away and we need to replace the current tenant with a non-cannabis tenant. What could we lease or sell that building for to a non-cannabis business. We don’t provide the borrower with the increase in value associated with the cannabis property classification.

In general, we focus on LTVs of around 70%-75% using an alternative use valuation. If you include the cannabis bump in valuation our LTVs tend to drop to around 35%.

Since launching in 2022, the Fund has not had any defaults.

Each deal is originated with the flexibility to provide the borrower a creative financing solution. The senior mortgages generally range between two- to four-years in maturity.

Generally, our loans are repaid in one of four ways:

1. The property is sold, allowing the borrower to repay the mortgage upon sale.
2. The borrower refinances with another lender and our loan is repaid.
3. The borrower receives an equity investment from another investor, allowing the loan to be repaid.
4. The borrower, through free cash flow, pays off the loan.

As of August 2024, the Fund has exposure to 26 properties across five states. This provides diversification from both a geography and holdings standpoint. We will evaluate deals in any one of the state legal jurisdictions.

The goal of the fund is to provide access to this area of the real estate market to the broader investing unaversive, so our minimum is only $25,000.

We pay our distributions to investors monthly by the 15th of the following month. Any distributions reinvested in additional shares, qualify for 1% discount, allowing investors to generate additional return.

The Fund is valued each month and a new net asset value is calculated. For any equity positions (sale-leaseback transactions), the position is valued independently by a third party on an annual basis. For debt positions, the value is held at cost, unless there is an impairment, at which time the position will be revalued.

No, we currently have no leverage in the Fund and our distributions are fully covered by net investment income.

MJ REIT has an asset management fee of 1.5% and an incentive fee of 15%, subject to a 7% hurdle.

MJ REIT allows for monthly redemptions, however any shares tendered within the first 12-months of investing, exit at 95% of the net asset value. Thereafter, shares are redeemed at 100% of net asset value.

No, any distributions paid during the year will be reported on a 1099-DIV. This provides investors with the ease of tax filing.

Yes, the fund is only open to accredited investors. An investor is considered accredited if he/she meets one of the following:

• An individual with gross income exceeding $200,000 in each of the two most recent years or joint income with a spouse or partner exceeding $300,000 for those years and a reasonable expectation of the same income level in the current year.
• A person whose individual net worth, or joint net worth with that person’s spouse or partner, exceeds $1,000,000, excluding the person’s primary residence.
• Holds in good standing a Series 7, 65 or 82 with FINRA.

The strategy is designed to finance commercial real estate through either debt (senior mortgages) or equity (sale-leasebacks). As a result, investors don’t receive a deprecation benefit, however, because the fund is taxed as a REIT, distributions qualify for a 20% reduction on federal taxes.

MJ REIT was launched in August 2022, with our first full month of performance in September of that year. As of August 1, 2024, the annualized since inception return was 11.29%, net of fees.

There are a few other firms in the market servicing the cannabis space, however most have focused on providing equity capital directly to the operator. Given the nature of cannabis, banks have been reluctant to enter the space, allowing MJ REIT to fill the void.