Little Green Pharma signs $7.8 million sale and leaseback deal for WA production facility
Little Green Pharma (ASX: LGP) has announced a Little Green Pharma facility sale transaction involving its production facility in South-West Western Australia. The medicinal cannabis company has signed an agreement to sell the site for $7.8 million to Lauana Pty Ltd ATF Lauana Trust, whilst simultaneously securing a leaseback arrangement that allows continued operation of the facility.
The transaction encompasses land, buildings, and certain cultivation-related equipment at the site, which comprises a ~1.3 tonne per annum GACP indoor cultivation facility and GMP-compliant production facility. Under the leaseback arrangement, LGP will maintain operational control of the site through a head lease running approximately ~3.5 years, through to 29 August 2029.
The company has stated it proposes to use the sale proceeds to fund opportunities in Australia and expansion into growth markets in Europe. Settlement is targeted for mid-March 2026 for conditions precedent, with final settlement to occur 28 days thereafter.
Strategic Capital Deployment
The company proposes to use the sale proceeds to fund opportunities in Australia and expansion into growth markets in Europe, whilst continuing to operate the Site under a head lease.
What is a sale and leaseback and why do companies use them?
A sale and leaseback transaction involves a company selling a property it owns to a buyer, then immediately leasing it back as a tenant. The seller receives an upfront cash injection whilst continuing to use the facility as if operational continuity remained unchanged.
This capital management strategy is common amongst asset-intensive businesses seeking to redeploy capital into growth initiatives rather than having funds locked in property ownership. For LGP, the structure provides immediate access to $7.8 million in working capital without diluting shareholders through an equity raise, whilst maintaining access to critical cultivation and production infrastructure.
The trade-off is converting ownership equity into a recurring lease expense, but the benefit is immediate liquidity for strategic deployment. For companies prioritising expansion over asset ownership, this approach unlocks value from the balance sheet without operational disruption.
Transaction details and conditions precedent
The contract is structured on standard REIWA 2022 conditions, with key commercial terms outlined in the announcement. The sale assets include land, buildings, and certain cultivation-related equipment, covering the production facility described as a ~1.3 tonne per annum GACP indoor cultivation facility and GMP-compliant production facility.
| Item | Detail |
|---|---|
| Sale Price | $7.8 million |
| Buyer | Lauana Pty Ltd ATF Lauana Trust ACN 657 531 112 |
| Lease Term | Through to 29 August 2029 |
| Settlement Target | Mid-March 2026 (conditions precedent), +28 days |
The transaction remains subject to several conditions precedent that must be satisfied before settlement proceeds. The announcement explicitly states that if all conditions precedent are not satisfied or waived, the contract may be terminated and the sale may not proceed.
The conditions precedent include:
- Buyer due diligence
- Buyer financing
- Agreement of head lease through to 29 August 2029, including provision for make-good and maintenance and replacement of capital items
- Amendment to current lease with LGP’s cultivation subcontractor and buyer entry into option with LGP’s cultivation contractor for further five-year lease following head lease
- Grant of council approvals over site works
The parties are working together to satisfy these various conditions precedent, with mid-March 2026 targeted for completion of this phase. Investors should note the conditional nature of this transaction, with the April 2026 settlement timeline representing the next material milestone.
How LGP plans to deploy the capital
According to the company’s stated strategy, the Little Green Pharma facility sale proceeds will fund opportunities in Australia and expansion into growth markets in Europe. This aligns with LGP’s existing international footprint, with operations spanning three production facilities across Denmark and Australia.
The company describes itself as operating the largest facility in Europe and maintains distribution across over 12 export markets via a network of wholesalers, pharmacies, clinics, and GPs. The announcement notes LGP is positioned as one of the top three suppliers in Australia, the largest supplier into France, and a significant supplier into Germany and the UK.
The $7.8 million in proceeds provides optionality for management to pursue organic growth or opportunistic acquisitions without tapping equity markets. For a company already positioned across multiple European markets, the capital injection could accelerate market penetration or support infrastructure development in territories where regulatory frameworks are evolving.
LGP generates revenue through both the sale of medicinal cannabis products and its domestic Health House distribution business, allowing it to capture value across the supply chain. The capital raised through this transaction may support expansion of either vertical, depending on where management identifies the most attractive risk-adjusted returns.
What this means for LGP shareholders
The Little Green Pharma facility sale represents a capital recycling strategy designed to fund growth whilst maintaining operational continuity. By converting property ownership into working capital, the company has secured $7.8 million in proceeds without diluting existing shareholders through an equity raise.
The ~3.5-year leaseback arrangement provides runway for LGP to either transition production capacity to alternative facilities or renegotiate arrangements closer to the 29 August 2029 expiry date. This timeframe gives management flexibility to assess operational requirements as the European and Australian markets mature.
Investors should monitor for settlement confirmation in April 2026 as the next material update. The conditional nature of the transaction, particularly the buyer financing and council approval requirements, means the deal is not yet complete.
Key investor takeaways:
- $7.8 million in proceeds targeted for growth investment in Australian opportunities and European market expansion
- Operational continuity maintained via ~3.5-year leaseback through to 29 August 2029
- Settlement conditional on buyer due diligence, buyer financing, council approvals, and lease amendments
- Target completion: April 2026 (conditions precedent by mid-March, settlement 28 days thereafter)
For shareholders, this transaction signals management prioritising capital efficiency and international expansion over property ownership. The non-dilutive nature of the capital raise, combined with retained operational access to the facility, positions LGP to pursue growth initiatives whilst maintaining production capacity across its existing portfolio of over 12 export markets.
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