Acquisition Represents IIP’s Second Investment in California, Expanding Footprint to 18 Properties in 11 States
CALIFORNIA: Innovative Industrial Properties, Inc., the first and only real estate company on the New York Stock Exchange (NYSE: IIPR) focused on the regulated U.S. cannabis industry, announced today that it closed on the acquisition of a five-property portfolio in southern California, which comprises approximately 102,000 square feet of industrial space. This acquisition marks IIP’s second investment in California, following on IIP’s acquisition in Sacramento earlier this year.
The purchase price for the southern California portfolio was approximately $27.1 million in the aggregate (excluding transaction costs). Concurrent with the closing of the purchase, IIP entered into a long-term, triple-net lease at each property with a licensed operator, which intends to continue to operate the properties as licensed cannabis cultivation, manufacturing, processing and distribution facilities in accordance with California regulations.
As the pioneering real estate investment trust (REIT) for the medical-use cannabis industry, IIP partners with experienced medical-use cannabis operators and serves as a source of capital by acquiring and leasing back their real estate assets, in addition to offering other creative real estate-based capital solutions.
“We are excited to forge this new tenant relationship with one of the preeminent licensed operators in southern California,” said Paul Smithers, President and Chief Executive Officer of IIP. “This operator is a true innovator in the industry, developing a strong brand that is recognized for its consistent high quality, and we are thrilled to team with them as their long-term real estate partner. The California regulated cannabis market is poised for explosive growth in the coming years, as the regulated program continues to roll out and a focus is made on transitioning illicit sales to the regulated marketplace.”
The operator is licensed for cannabis cultivation, nursery, manufacturing, processing, delivery and distribution. With its advanced growing techniques, state-of-the-art facilities and research and development for the creation of new proprietary genetics, the tenant has developed a distinguishing brand in the southern California market, including botanicals, concentrates and accessories.
As of April 16, 2019, IIP owned 18 properties located in Arizona, California, Colorado, Illinois, Maryland, Massachusetts, Michigan, Minnesota, New York, Ohio and Pennsylvania, totaling approximately 1,230,000 rentable square feet (including approximately 159,000 rentable square feet under development/redevelopment), which were 100% leased with a weighted-average remaining lease term of approximately 14.9 years. As of April 16, 2019, IIP had invested approximately $191.3 million in the aggregate (excluding transaction costs) and had committed an additional approximately $34.7 million to reimburse certain tenants and sellers for completion of construction and tenant improvements at IIP’s properties. IIP’s average current yield on invested capital is approximately 14.9% for these 18 properties, calculated as (a) the sum of the current base rents, supplemental rent (with respect to the lease with PharmaCann LLC at one of IIP’s New York properties) and property management fees, divided by (b) IIP’s aggregate investment in these properties (excluding transaction costs and including aggregate potential development/redevelopment funding and tenant reimbursements of approximately $34.7 million).