“The cannabis market is just too big to ignore.”
Denver-based Two Rivers Water & Farming Co. typically can reel in $4,000 to $5,000 for every acre of corn, cabbage and pumpkins it plants. ¶ But Two Rivers is aiming for far higher cash yields by leasing land to cannabis growers.
Publicly traded Two Rivers, which last year logged $2.4 million in revenue by converting acreage to high-yield fruits and vegetables from feed crops, has spun off a subsidiary, GrowCo Inc., that is building huge greenhouses to lease to licensed recreational marijuana growers at about $1 million an acre.
GrowCo’s first greenhouse is underway in rural Pueblo County, a new haven for cannabis-and hemp-grow operations. And by this month or September, what is now a colossal stretch of pitched metal could be among the largest areas in the region used to grow pot.
“The cannabis market is just too big to ignore,” said GrowCo chief financial officer Wayne Harding.
Two Rivers is betting big on the marijuana business, but it’s not going all in. The company maintains a slew of water rights in the Arkansas River Basin and holds more than 1,300 acres of land.
The company has been on a buying spree the past four years, acquiring land, reservoir storage facilities and senior water rights, an increasingly precious — and, potentially, quite lucrative — commodity.
Those moves, Two Rivers officials said, were made with the short-term intention of farmland used to grow grain crops to fruit and vegetable cultivation. Two Rivers also would consider selling its water to developments and subdivisions, but likely only
those that are close to where the water rights are located, CEO John McKowen said.
For its play in the legal cannabis industry — which saw nationwide sales grow 74 percent to $2.7 billion in 2014, according to ArcView Market Research — GrowCo quartered a 160-acre plot located about 15 miles east of downtown Pueblo. There it will build a 91,000-square-foot greenhouse and a 15,000-square-foot warehouse and processing facility on each 40-acre site.
The state-of-the-art greenhouses have features such as irrigation booms; heating and cooling controls; blackout cloths; and UV-B technology to increase plant yield and create greater potency of tetrahydrocannabinol and cannabidiol, GrowCo chief operating officer Tim Beall said. The panels at the top of the roof pitches can be opened and closed to adjust for changes in weather, he added.
And if the tides were to turn for the worse in the marijuana market, the greenhouses could house traditional crops, he said.
The greenhouses cost $45 per square foot to build, and GrowCo is leasing the facilities for $20 per square foot on a triple net basis. Suncanna LLC, an entity run by experienced cannabis and traditional agriculture growers, inked the lease for the first greenhouse.
Harding declined to identify the backers of Suncanna, but organization documents filed with the Colorado secretary of state show he and McKowen as the registered agents and Two Rivers’ corporate headquarters as the mailing address.
GrowCo, which also launched a business development and administrative services arm to help growers, filed the incorporation documents on behalf of the lessee, McKowen said.
Raising just under $5 million from an equity sale to fund the first greenhouse, GrowCo is nearing completion of the funding for the second.
“We ordered the second greenhouse,” Harding said. “No moss under our stone.”
GrowCo has plenty of company in the Pueblo region.
Pueblo County has taken an open-arms approach to cultivators of marijuana and hemp as well as manufacturers of cannabis-infused products.
“Pueblo has been a hotbed recently,” said Kimberly Ebinger, executive director of the Southern Colorado Growers Association, which was formed earlier this year.
Now, the cannabis trade organization counts between 15 and 20 member companies betting on the optimal — almost always warm and sunny — growing conditions in the region.
“A lot of people are going down there,” she said. “It’s always been an agricultural/farming community. It’s just changing crops.”
Pueblo County Commissioner Sal Pace sees cannabis as an economic-development opportunity for a region that weathered a sustained recession and has not experienced the booms that Denver and other northern Front Range cities are experiencing now.
“We have cheap land, available water. We have a workforce with a lot of folks who are available to work immediately and want to work,” Pace said.
Seeking an alternative to metro Denver warehouses — which have been in short supply and also have been eating energy — grow operations have taken notice and moved south.
Pueblo County has 3 million square feet of marijuana-cultivation operations, Pace said. Another 2 million to 3 million square feet of greenhouse space for licensed cannabis growers is in the planning stages, said Jason Thomas of Aurora-based Avalon Realty Advisors, a marijuana industryfocused real estate firm.
Pot-related businesses retrofitting existing properties and building new facilities accounted for more than 35 percent of the county’s construction dollars last year, Pace said.
As of mid-July, the county had issued 63 licenses for medical and recreational cannabis and infused products, as well as hemp cultivation, Pace said. Several of those licenses are tied to multiple facilities and don’t indicate whether a site is operating, he said.
“The goal was not to make Pueblo the storefront of marijuana, and, in fact, that’s more controversial,” he said, referencing the city’s moratorium on recreational retail sales. “The goal is to create jobs, sustainable jobs that will sustain even after federal decriminalization and give us a leg up both in cultivation and infused products.”