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Innovative Industrial Boosts Pennsylvania Base on Asset Buyout

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Innovative Industrial Properties IIPR has announced closing of an acquisition of a Danville, PA-based property in its latest move to enhance the company’s portfolio as well as bank on the healthy market fundamentals. With this, the company’s footprint expands to more than 2.9 million square feet across 13 states.

As part of the sale-lease back transaction, the real estate investment trust (REIT), which is focused on cannabis-centered real estate portfolio, has entered into a long-term lease with Green Thumb Industries Inc. (GTI). While the purchase price for the property is $20.3 million (excluding transaction costs), Innovative Industrial Properties has committed to provide reimbursement of up to $19.3 million, as GTI is likely to make some improvements to the property aimed at significantly boosting production capacity.

The legalization of marijuana’s medical use in several states as well as allowing adult consumption in some states has opened up opportunities for the cannabis industry. Therefore, with more states in the United States giving cannabis the green light, Innovative Industrial Properties has incentive to partner with experienced medical-use cannabis operators, and serve as a source of capital by acquiring and leasing back their real estate assets.

In 2018, medical-use cannabis dispensaries in Pennsylvania made their first sales. Moreover, as of August 2019, more than 180,000 patients were registered for the state’s medical cannabis program. The Department of Health (DOH) expanded the patient access to the program over time, including giving nod to anxiety disorders and Tourette syndrome to the list of medical conditions of the program that becomes eligible for treatment with medical cannabis.

Therefore, the company’s partnership with GTI seems a strategic fit, as it is a national cannabis consumer packaged goods company, and owner of Rise™ and Essence retail stores. The company has 13 manufacturing facilities, licenses for 96 retail locations and operations across 12 U.S. markets.

Innovative Industrial Properties currently sports a Zacks Rank #1 (Strong Buy). In the year-to-date period, shares of the company have outperformed the industry. While the stock has surged 76.4%, the industry has gained 20.4% during this period.

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