How I Underwrote a $20M Cannabis Facility in South Africa

I underwrote a $20M cannabis facility in South Africa.

The valuation report undercuts the pitch by 30x.

- 20 Ha farm near Paarl, Western Cape
- Municipal valuation $650K USD
- Off-take pricing $1.10g-1.79/g
- 43–47% target IRR

This is a regular vegetable and crop farm that's also being pitched as a cannabis growing and export business. The land is supposed to be the safety net, but it's not worth much.

To fund deals like this, I ask 4 questions:

1) What stage of risk are we in?

- Unconfirmed licensing and EU certification status
- There is no export license in the data room
- There is no hard offtake contract available yet
- Independent land valuation for agriculture only

This isn't pre-revenue the way a development deal is. It's a business claiming operating traction, but the paperwork trail doesn't quite match the claims.

2) What makes the location work?

- Real farmland with water rights & infrastructure
- Market description is good for the land-use
- Western Cape is a real medical cannabis hub
- The cannabis industry is government-backed

3) How is the downside protected?

A $20M facility needs collateral that actually covers $20M. The independent valuation puts the land and infrastructure at roughly $650K, which is a 30x gap.

There's essentially no hard collateral and no proven cash flow to lend against at this size. This isn't really a land-secured lending deal at all; it's closer to early-stage venture/growth capital for an unproven business, dressed in real-estate-backed language.

4) Can we control the exit?

There is no defined exit. Repayment depends on future cash flow projections, and there's no signed off-take agreement to underwrite those projections.

My verdict:

- Weak fit for private credit
- Weak fit for family offices
- Weak fit for institutions

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