Innovative Industrial Properties (IIPR) – which has been one of the better performing stocks of the cannabis sector – announced yesterday a couple more acquisitions and partnerships that could bode well for this stock.
The first announcement highlighted the closing of a sale-leaseback transaction with PharmaCann LLC (PharmaCann) for a property located in Dwight, Illinois. The property is currently developed with approximately 48,000 square feet of industrial space.
IIPR’s next announcement yesterday showcased the closing of a sale-leaseback transaction with a subsidiary of GR Companies Inc. (Grassroots) for a property located in Litchfield, Illinois. This industrial space is approximately 70,000 square feet in size.
The PharmaCann LLC purchase came in at about $18.0 million (excluding transaction costs), and true to IIPR style, the company entered into a long-term, triple-net lease agreement for the property with PharmaCann.
PharmaCann will continue to operate the property as a licensed marijuana cultivation and processing facility. PharmaCann is also supposed to complete additional tenant improvements for the property, including an 18,000 square foot expansion that should essentially double production capacity.
Innovative Industrial Properties has offered reimbursement up to $7.0 million for the property upgrades. IIPR’s total investment in the property will be $25.0 million, assuming full reimbursement for the tenant improvements.
“We have been the preferred real estate capital partner for PharmaCann since our initial acquisition and lease of PharmaCann’s New York cultivation and processing facility in 2016,” said Paul Smithers, Innovative Industrial Properties, Inc. President and CEO.
“In the past three years of our relationship, PharmaCann has made tremendous strides in executing on its business plan and has developed a tremendous reputation for the quality of its products and strength of its team of dedicated employees throughout the organization. We are excited about what the future holds for PharmaCann, and look forward to supporting them in Illinois with continued enhancements to their facility to meet the tremendous demand for medical-use cannabis and the introduction of an adult-use cannabis program next year.”
PharmaCann currently operates four medical-use marijuana dispensaries in Illinois, and plans to add four more retail store locations in 2020 in connection with Illinois’ anticipated commencement of adult-use recreational cannabis on January 1, 2020.
The Grassroots Partnership
As for the GR Companies Inc. partnership – you guessed it – IIPR also plans to enter into a long-term, triple-net lease agreement for the acquired property with Grassroots, which will continue to operate the property as a licensed marijuana cultivation and processing facility.
It’s anticipated that Grassroots will complete additional tenant improvements for the property, including a 50,000-square-foot planned expansion. Once again, Innovative is offering reimbursement for the improvements up to approximately $17.7 million. The caveat is that funding is subject to reduction in Grassroots’ option within the first nine months of the lease term.
Should IIPR fully reimburse Grassroots for the tenant improvements, the company’s total investment in the property will be approximately $28.2 million.
“Through Grassroots’ reputation for premium products and leveraging its management team’s deep expertise and proven entrepreneurship, Grassroots has emerged as one of the top companies in the regulated cannabis industry today, and we are thrilled to enter into this real estate partnership with them,” said Smithers.
Grassroots is among the top U.S. multi-state cannabis operators, with operations in Illinois, Pennsylvania, Maryland, Ohio, North Dakota, Nevada, Michigan, Oklahoma, Vermont, Connecticut and Arkansas.
Stay tuned for IIPR’s upcoming Q3 earnings report due at market close on Wednesday, November 6, 2019.
Will Innovative Industrial Properties’ () rose $0.01 (0.00%) in after-hours trading Thursday. Year-to-date, has gained 14.12%, versus a % rise in the benchmark S&P 500 index during the same period.
About the Author: Eric Bowler
Eric Bowler is an accomplished journalist providing in-depth insights for more than two decades. Over the past several years his focus has been on the marijuana industry, with a special interest in cannabis growth stocks. His daily coverage of the industry keeps him on top of the key trends with the goal of helping investors make well-informed decisions.