A look at GrowCo’s build-and-lease business model as it prepares to unveil the largest cannabis greenhouse facility in Colorado

By Benjamin Hoopes

The greenhouse is a whirlwind of activity, with crews on the ground cleaning and electricians perched atop ladders connecting the last of more than 40 miles of wiring. They are putting the final touches on GrowCo’s 91,000-square-foot greenhouse, which is expected to be the largest cannabis greenhouse facility in Pueblo County, Colorado.

GrowCo plans to bring its greenhouse growing technology and expertise to the cannabis industry without actually touching the plant. It will own the land and build the growing infrastructure. The facilities will cost about $45 per square foot and will be leased at about $20 per square foot on a triple net basis, according to a Denver Post story. The first tenant, Suncanna, is renting the space for $175,000 per month. Suncanna intends to grow 15 strains and make them available to small distributors for $950 per pound, including the state excise tax.

The lease includes control systems to manage supplemental lighting, motors for opening and closing the roof peaks and blackout screens, water and fertilizer pumps, cooling fans and sub-floor heating.

“All of the data like humidity, heat and light is captured automatically, which gives us the ability to fine-tune growing techniques,” chief operating officer Tim Beall said. “We can look at the history of each crop in each area, the daytime/nighttime differentials, and figure out what creates a significantly better, stronger and healthier product. You can’t figure out a better way to grow if you can’t be very precise about what you just did; the variables will become blurry. Precision and repeatability are what it’s all about.”

The company expects to complete three more 90,000-square-foot greenhouses by the end of 2016. Each greenhouse is expected to produce 15,000 pounds of cannabis annually — more than $14 million in wholesale revenue if Suncanna is able to hit its yield and price projections.

While warehouse growers tend to suffer from high energy bills and poor temperature control during the summer, greenhouses can be an energy-efficient alternative. GrowCo is able to cool its greenhouses using cooling pads.

“Cooling pads are pretty low tech and use a water-cooled pad to add moisture to the air and cool the room in a process called ‘evaporative cooling,’” Beall said. “In Colorado, because the lower natural outdoor humidity gives you room to add humidity to the air, you can cool the room up to 30 degrees below the outside temperature.”

These operational efficiencies should allow GrowCo’s tenants to produce at a lower cost per gram than competitors. GrowCo is a subsidiary of Two Rivers, a public company that focuses on farming, water rights and real estate development.

“We’re farmers,” Two Rivers chief financial officer Wayne Harding told Cannabis Financial News in June. “We have irrigated farmland in Colorado. We just happened to be at the right place at the right time now with the marijuana explosion going on.”

“Our conventional farming is shipping as much as 15 semi truckloads a day to all parts of the U.S.,” Beall said.

Two Rivers grows cabbage, pumpkins, watermelons, onions, squash, parsnips and corn.

“Corn is a rotation crop for us,” Beall said. “Next year, we will grow hemp on as much as 500 acres, to produce high-concentrate CBDs, as our rotation crop on our conventional farms.”