Debra Borchardt
Cannabis debt typically has been given low ratings, if receiving a rating at all. This week, cannabis commercial real estate lender Pelorus Capital Group announced that $50 million in aggregate principal amount of 7% senior secured notes due Sept. 26, 2026 issued by its private mortgage real estate investment trust subsidiary, the Pelorus Fund REIT, received an A rating by Egan-Jones Rating Company – the highest rating issued to date in the cannabis industry.
“We are proud to achieve a cannabis-industry first by achieving an A-flat rating,” said Dan Leimel, CEO of Pelorus Capital Group (previously Pelorus Equity Group) and the manager of the Pelorus Fund. “We believe this two-step rating increase reflects our financial health and our significant growth, while securing the notes provides more flexibility as the Pelorus Fund continues to grow and gain market share.
“Against a backdrop of challenging market conditions, particularly within the cannabis sector, we believe we are now even better positioned to grow our deal pipeline, strengthen our business and offer attractive lending solutions to cannabis businesses across the country,” he added.
The Pelorus Fund issued the notes, which were previously unsecured, in 2021 and received a BBB+ rating from Egan-Jones. At the time, this was the first notes issued by a privately held mortgage REIT to receive what was then the highest credit rating achieved by an issuer operating within the cannabis sector.
When this rating was issued in 2021, Pelorus Fund had approximately $130 million in assets under management, which has nearly tripled to approximately $376 million currently.
Recently, the Pelorus Fund completed a transaction to secure the notes, which when combined with the strength of the balance sheet, successful track record, and investment income growth year-over-year resulted in Egan-Jones upgrading the BBB+ rating to an A rating. An Egan-Jones A rating is defined as having a high level of creditworthiness with low sensitivity to evolving credit conditions.
