SAN DIEGO–(BUSINESS WIRE)–PRESS RELEASE–Innovative Industrial Properties, Inc. (IIP), a real estate company on the New York Stock Exchange (NYSE: IIPR) focused on the regulated U.S. cannabis industry, has announced that it closed on the acquisitions of two properties in Joliet and Kankakee, Ill., which comprise approximately 90,000 square feet of industrial space in the aggregate.
The purchase prices for the properties were $32.8 million in total (excluding transaction costs). Concurrent with the closing of the purchases, IIP entered into a long-term, triple-net lease agreement for each property with a wholly owned subsidiary of Cresco Labs Inc., which intends to continue to operate the properties as regulated cannabis cultivation and processing facilities. Cresco is expected to complete additional tenant improvements for the properties, for which IIP has agreed to provide reimbursement of up to approximately $13.8 million. Assuming full reimbursement for the tenant improvements, IIP’s total investment in the two properties will be approximately $46.6 million.
As a 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 very pleased to introduce Cresco to our premier tenant roster,” said Paul Smithers, president and chief executive officer of Innovative Industrial Properties, Inc. “Cresco has created a tremendously valuable footprint in the cannabis industry throughout their states of operation. We look forward to our long-term real estate partnership, and continuing to support them in their strategic growth for many years to come.”
Founded in 2013, Cresco is one of the largest vertically-integrated cannabis companies in the United States, with licensed operations in Arizona, California, Illinois, Ohio, Pennsylvania, Nevada, Michigan, Maryland and New York, and pending transactions in Florida, Utah and Massachusetts. With its pending acquisitions, Cresco has 23 licensed cannabis production facilities, 66 retail cannabis licenses and 34 operational cannabis dispensaries. Employing a consumer-packaged goods (CPG) approach to cannabis, Cresco’s house of brands is designed to meet the needs of all consumer segments and includes some of the most recognized and trusted national brands including Cresco, Remedi and Mindy’s, a line of edibles created by James Beard Award-winning chef Mindy Segal. Sunnyside*, Cresco’s national dispensary brand, is a wellness-focused retailer designed to build trust, education and convenience for both existing and new cannabis consumers. Cresco is well-positioned for the Illinois recreational market, having recently received the first adult-use cannabis dispensary and cultivation approvals in Illinois, which includes the properties in Joliet and Kankakee.
“We look forward to beginning our long-term real estate partnership with IIP, and working closely with them to address our future real estate capital needs as we continue to execute on our strategic initiatives,” said Joe Caltabiano, president and co-founder of Cresco. “With the continued expansion of Illinois’ medical-use cannabis program and the introduction of the regulated adult-use cannabis program next year, we are very well-positioned, with state-of-the-art cultivation and processing facilities and support from IIP to continue to enhance productive capacity of these facilities, to play a key role in the continued strong growth of the Illinois regulated cannabis industry.”
As of Oct. 22, 2019, IIP owned 34 properties located in Arizona, California, Colorado, Illinois, Maryland, Massachusetts, Michigan, Minnesota, New York, Nevada, Ohio and Pennsylvania, totaling approximately 2.5 million rentable square feet (including approximately 832,000 rentable square feet under development/redevelopment), which were 100-percent leased with a weighted-average remaining lease term of approximately 15.8 years. As of Oct. 22, 2019, IIP had invested approximately $354.6 million in the aggregate (excluding transaction costs) and had committed an additional approximately $133.0 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 13.9 percent for these 34 properties, calculated as (a) the sum of the current base rents, supplemental rent (with respect to the lease with a tenant at one of IIP’s New York properties) and property management fees (after the expiration of applicable base rent abatement or deferral periods), 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 $133.0 million). These statistics do not include up to $40.0 million that may be funded in the future pursuant to IIP’s lease with a tenant at one of IIP’s Massachusetts properties, the additional $4.0 million which may be requested by a tenant at one of IIP’s Pennsylvania properties or $2.0 million that may be funded in the future pursuant to IIP’s lease with a tenant at one of IIP’s Massachusetts properties, as the tenants at those properties may not elect to have IIP disburse those funds to them and pay IIP the corresponding base rent on those funds.
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