Welcome to FinTech TV.
Pelloris Capital Group is making a map bet on the cannabis industry after years in lending and cannabis real estate, the firm is shifting from debt to ownership with a new billion dollar EB growth fund.
Well, joining me here at the New York Stock Exchange is Rob C.
Price, president at Polaris Capital Group.
Rob, welcome back.
Thank you so much for joining me.
It is you, Amy.
Thanks for having me.
Well, for viewers out there who don't know the difference between limited and unlimited states, could you break this down please?
Sure.
In the state regulatory license system, some states have limited licenses where they have a just a number that they're going to issue for that particular state, and other states don't have any amount of licenses that they're going to limit.
But ironically they are still limited by by the location because the real estate has to be so far away from a school, a church, or other types of profits.
And of course your experience at Pelorus.
Tell me how you're utilizing what you learned as a lender into what you're focusing on now.
Yeah, so as a lender and being the first lender in the space, We've issued loans and seen what borrowers were successful, what borrowers were unsuccessful, and been watching the market, and we ultimately developed a data project to be tracking that information that not only are borrowers but other borrowers or other industry metrics as well.
And we utilize that information to continue to refine our underwriting and understand where the markets are going.
Each one of these states is a different scenario.
It's its own market, and each one, as it's coming online is going through a maturation process and to a fully stabilized market.
So we've been watching these markets, and they all kind of take off like a rocket, and then they, you know, kind of shake out and then it gets to where things kind of stabilize.
And so we've been watching that happen.
We've learned what is working in certain markets that are ahead of other ones coming online.
And some, some borrowers were very successful and some failed.
And on the ones that failed, we learned what was, what didn't work for those implemented that into our underwriting process and some of those borrowers that we unfortunately had to foreclose on, we then took those those properties and the businesses and stabilized those, turned those around, and we launched our new fund.
And we're here at the final quarter of 2025 for so for viewers out there who don't know what the landscape looks like at the moment and what to expect moving forward beyond in 2026, give us a better understanding.
Well, I think that the market is continuing to mature in each of these states.
I think that the new administration looks like they're favorable on the outlook of cannabis.
I think that Trump has messaged that he would approve legislation if it was to come his way.
And we're, we're hopeful that rescheduling will be approved by the DEA in the in the near term.
I think no later than the midterms of next year, but hopefully sooner than that if we can get, you know, they can fit it into the news cycle somewhere in that in that time frame, which would be a massive uplift to the market.
If we get rescheduling, we get to illuminate something called the IRS has called 280E, which basically is taxing on gross profits.
And if we get 280E, they don't, it's on net profits, and that would be a massive uplift to all 25,000 businesses in the cannabis sector to help everybody out and would make the the multiples on these companies go up as well.
Yeah, and Rob, you and I work here at the New York Stock Exchange, and we think about cycles for businesses as well as valuation.
So how do you and your colleagues actually go about the process of deciding whether a company is worth saving?
Yeah, well, you know, when we're a lender, it's, it's, it's on their own.
We're trying to give them best practices of what we've learned, what's working for other people if we see that they're starting to fall behind.
Maybe on their financials first, but they're still current on their payments.
We show them these are the things that have worked with other borrowers.
They've put in LED lighting.
They've automated their trimming machines and things like that.
If they are unsuccessful, unfortunately we would then have to enforce our remedies, and then we will then take that business and stand it up with the best practices that we've we've learned.
And what we are looking for is watching the market and the general trends in each of these states, adjusting for what's happening in the state that we're in, and then taking that information and maximizing that particular business.
Yeah, and I'm sure that data points are key here when you're talking about restructuring or turnaround.
So give us an idea of what goes into there.
Yeah, well, there is because cannabis is federally illegal, there is no bankruptcies that can be filed, so we have to go through state receiverships on each of these.
And when we go through the state receivership, we got not only the real estate, but we get the company, the brands, the licenses, and all the equipment and everything that goes along with that.
And we have to have that business to stabilize our real estate.
We only lend off of the cost basis of the real estate, but we cross collateralize the company as well.
And so when we've got those, those companies, then we can stabilize our own real estate.
The most significant one we're working on right now is we're just about to bring Statehouse, a California vertically integrated operator out of receivership this next month in December, and it's the largest turnaround that's been that's been done in the state of California.
And Ralph, finally, before I let you go, since you mentioned this company, how do you go about identifying the right acquisition target?
So we are monitoring every single receivership across the country right now and we're using our market data that we have from our own data project and we're looking at who are the lenders with that project and we're looking at what assets that we have, what's the market in that particular state, and if it's an asset that makes sense to join our ecosystem for our new growth fund that we've launched.
Then we'll start to contact those creditors and then we will say can they even own the assets?
Are they even able to hold these assets?
And even if they are, do they have the ability to turn it around?
We do.
So we built our growth fund.
To be able to do the turnaround for asset managers and creditors in the space.
And so we contact them and we will then execute on that strategy if it's complementary.
And so we use our own proprietary data to identify if that's if that's something we want to go after.
Well, Rob, great having you back here at the New York Stock Exchange.
Thanks for stopping by and thank you so much for sharing all of your and great.
Thank you.
