Real Estate Archives - Green Market Report

Kaitlin DomangueKaitlin DomangueJanuary 25, 2020
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2min4000

Innovative Industrial Properties, Inc. (NYSE:IIPR) has placed approximately 2,000,000 shares of common stock for public offering, representing roughly 22% of the shares outstanding.

The company’s plan for the revenue of the sale is to invest in specialized real estate assets. The assets are intended for cultivation and processing facilities for corporate use and in alignment with the company’s investment strategy.

The company placed the public offering of 2.967M common shares at $73.25/share. Gross proceeds will equate to $217.4M. Underwriters are expected to be offered a 30-day option to purchase up to an additional 300,000 shares of its common stock.

According to MarketWatch, since the announcement of the public offering, the REIT’s stock has dropped 4.5% in premarket trading, pricing 7.8% Thursday’s close of $79.45.

Key players in the offering include BTIG, LLC as sole-book running manager, BTIG, LLC is acting as sole book-running manager for the offering; Compass Point Research & Trading, LLC and Ladenburg Thalmann & Co. Inc., a subsidiary of Ladenburg Thalmann Financial Services Inc. as co-lead managers, and Roth Capital Partners as a co-manager.

Innovative Industrial Properties, Inc. is an internally managed real estate investment trust. It is focused on the acquisition, ownership and management of specialized industrial properties leased to licensed medical-use cannabis facilities.


StaffStaffJanuary 16, 2020
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4min7980

Caliva has officially announced the opening of its new cannabis retail concept store, DELI,  in Bellflower, CA, officially marking the brand’s expansion into the Los Angeles area. The new DELI store location also allows for deliveries within a 10-mile radius around Bellflower and enables Caliva to reach over 2.7MM customers in greater Los Angeles.

Designed to cater to cannabis connoisseurs, DELI offers an experience, not just a transaction. The store resembles a traditional deli, with a friendly vibe designed to evoke the nostalgia of great customer service in a trusted neighborhood environment. Upon arrival, customers take a number and are seated at the deli counter, where budtenders talk through their freshest product assortment. 

“Our mission at Caliva is to provide ubiquitous access to plant-based solutions for happiness, health and healing. Expanding into the Los Angeles market, both with a physical retail location and a same day delivery service, has been a priority for us. We are thrilled about our opening of our innovative omni-channel DELI experience,” said Dennis O’Malley, CEO of Caliva.

 As one of the largest flower companies by revenue in California, as reported by BDS Analytics, Caliva’s DELI retail store will provide the same quality flower consumers have come to know and love, but at neighborhood-friendly prices and purchase bulk options. The DELI retail store will also offer a full range of DELI by Caliva branded products, including pre-rolls and flower at affordable prices for consumers looking for consistency and convenience. DELI will be open Sunday through Thursday 9 am to 9 pm as well as Friday & Saturday from 9 am to 10 pm. The DELI store is located at 9535 Artesia Blvd. Bellflower, California US 90706. 

“The DELI store concept is all about catering to the well-versed cannabis consumer who knows what they like. Customers learn about daily deals and fresh new items that are added regularly to the assortment. In keeping with this mindset, DELI provides a unique shopping experience allowing customers to come in and browse their favorite products at leisure, knowing when they walk out the door, they receive superior service and have have quality products from one of the best cannabis retailers,” said Elizabeth Cooksey, SVP of retail at Caliva.

 


StaffStaffJanuary 8, 2020
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5min12580

A new Ontario-based limited partnership created to buy cannabis-based real estate businesses called Subversive Real Estate Acquisition REIT closed on its initial public offering by raising $200 million. Making this the largest post-market correction equity capital raise to date. Subversive REIT also began trading its Class A Restricted Voting Units on the NEO Exchange as NEO:SVX.UN.

While most cannabis companies have been struggling as money quickly dried up, this raise was done in less than two weeks. Particularly notable was that it was done in December when most people were focused on the holidays.  The company said that the initial tranche of capital will potentially be allocated to only a portion of Subversive REIT LP’s broader pipeline of high-quality real estate assets. Particularly those in need of non-dilutive growth capital to fund high-ROI investment opportunities like expansion into new geographical markets.

The Subversive REIT brings together three cannabis industry-leading investment companies, including Subversive Capital, an investment firm with a diverse portfolio and which raised $575 million in 2019 for a cannabis special-purpose acquisition company (SPAC) called the Subversive Capital Acquisition Corp. (NEO: SVC.A.U), The Inception Companies,  a private opportunistic investment firm based in Beverly Hills and London and Canaccord Genuity. Inception REIT’s management team launched a private, independent platform in 2018 providing real estate capital solutions to leading operators in the U.S. cannabis industry, is managing the SPAC.

Subversive REIT said it looks to provide capital to top cannabis operators via real estate sale-leasebacks transactions across retail and industrial assets. Richard Acosta, founder and CEO of Inception REIT, as well as founder and CEO of IA REIT Advisors (external manager of Inception REIT), will be heading Subversive REIT as director and CEO.

Selling Assets

Numerous cannabis companies have begun selling their real estate assets as a way to generate cash. The leaseback model has worked as a way to maintain their business location while monetizing a valuable asset. Most cannabis companies found that in the early days of the industry, banks were unwilling to lend money for mortgages and most were forced to buy buildings. Landlords were also unwilling to rent their buildings to cannabis companies and this added to the challenge of finding a place to do business.

Several companies like MedMen (OTC: MMNFF)and Acreage Holdings (ACRG.U)created separate real estate companies that would buy the buildings and then set up the lease arrangements. Innovative Industrial Properties (NYSE: IIPR) was the first REIT to identify this opportunity within the cannabis industry and has been handsomely rewarded for being first to market.

 

 


Kaitlin DomangueKaitlin DomangueNovember 7, 2019
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3min5450

California-based cannabis REIT Innovative Industrial Properties (IIP) (NYSE:IIPR) shares shot up over 10% in trading on Thursday after reporting solid results for their 2019 third-quarter after the market closed on Wednesday. The stock was lately trading at $80.02, well above its 52-week low of $42.10. 

In Q3 of 2019, IIP’s earnings per share were $0.55, a significant increase from their EPS of $0.21 2018’s Q3. Wall Street was looking for an EPS of $0.47, so the company greatly exceeded expectations. IIP’s 2019 Q3 AFFO per share was $0.86, creating growth of 126% from $0.38 in 2018’s Q3. Their AFFO for the quarter was $9.5 million. 

The company reported a net income of $6.2 million in Q3 in 2019, a noteworthy increase from their $1.5 million in 2018’s third quarter, with an operating income of $6.8 million. IIP also paid a quarterly dividend of $0.78 per share on October 15, 2019, which was a 30% increase from IIP’s second-quarter 2019 dividend and an approximately 123% increase over the third quarter 2018’s dividend.

Innovative Industrial Properties’ net rental revenue for Q3 of 2019 was $11.2 million, a 201% change from their report of net rental revenue of $3.7 million for 2018’s Q3. Wall Street expected $10.7 million for this year’s third quarter. The company’s continual revenue growth can be attributed to the acquisition of new properties.

During the quarter, IIP acquired 10 properties. Five are located in California, and one in Arizona, Massachusetts, Nevada, Michigan, and Pennsylvania. Their Massachusetts property is leased to a subsidiary of Trulieve Cannabis, the leading medical cannabis company in Florida. Each property is fully leased to a tenant through a triple-net, long term lease. 

Analysts are modeling for an EPS of $0.57 on revenue of $13.1 million, representing a 138% growth for their EPS, and growth of 174% for their revenue in the fourth quarter. IIP has been able to capitalize on the tightening of financial markets for cannabis companies. These businesses are turning to real estate assets in order to access capital. 

According to the company statement, as of November 6, 2019, IIP owned 41 properties located in Arizona, California, Colorado, Florida, Illinois, Maryland, Massachusetts, Michigan, Minnesota, New York, Nevada, Ohio and Pennsylvania, totaling approximately 2.8 million rentable square feet (including approximately 903,000 rentable square feet under development/redevelopment), which were 100% leased with a weighted-average remaining lease term of approximately 15.5 years.


Debra BorchardtDebra BorchardtSeptember 27, 2019
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5min8250

Cannabis REIT company Innovative Industrial Properties Inc. (NYSE: IIPR) picked up another cannabis facility this week. Illinois-based Cresco Labs Inc. (CSE: CL) (OTCQX: CRLBF) signed a binding agreement to sell its Joliet and Kankakee, Illinois properties to Innovative Industrial Properties (IIPR) for roughly $46.3 million, which includes funding for additional tenant improvements at the Kankakee property.

This follows an announcement earlier this month that IIPR closed on the final parcel of a four property portfolio in southern California with the company Vertical. A long-term, triple-net lease was signed for each property with Medical Investor Holdings who is known as Vertical, for continued operations as licensed cannabis cultivation, extraction, manufacturing, and distribution facility.

This is becoming a typical strategy for cannabis companies. Most buy their facilities since banks don’t want to offer mortgages. Then they are able to sell those assets and quickly put some cash in the coffers. “This strategic transaction with IIP allows us to unlock our capital tied to our real estate and redeploy those proceeds into the tremendous opportunities we see ahead in the cannabis industry, in California and beyond,” said Bill Sutman, CFO of Vertical.

“We are thrilled to add Vertical and its strong management team to our tenant roster,” said Paul Smithers, President and Chief Executive Officer of IIP. “With its breadth of cannabis brands and highly experienced team, Vertical is well-positioned to capitalize on the tremendous growth of the California regulated cannabis industry in the many years to come, and we look forward to continuing to support Vertical and its long-term growth initiatives.”

Cresco Labs

Similar to the Vertical deal, Cresco Labs will enter into a long-term, triple-net lease agreement with IIP and will continue to operate each property as a licensed cannabis cultivation and processing facility. The two properties represent approximately 100,000 square feet of industrial space in aggregate. The agreement is expected to close within the next 30 days.

“This sale-and-leaseback agreement with IIP represents a non-dilutive capital solution for Cresco Labs that will support the expansion of our Illinois operations in preparation for the legalization of adult-use cannabis on January 1, 2020,” said Cresco Labs CEO and Co-founder Charlie Bachtell. “A portion of the proceeds from the sale of the two properties will be utilized to create the scale in our cultivation capacity and retail dispensary network necessary to meet the significant increase in demand projected from the legalization of adult-use cannabis and the expansion of the medical-use program in Illinois. With the Illinois cannabis market projected to reach $2 billion to $4 billion in annual sales at maturity, the expansion of our operations will position Cresco Labs to build upon our leading market share and significantly increase the revenue we generate from Illinois in the coming years.”

IIPR is one of the few cannabis stocks that has managed to keep its head above water in the cannabis sector selloff. The stock was lately trading at $95, higher than its 52-week low of $39.45. While it is lower than its year high of $139, many cannabis stocks have fallen much further.


Debra BorchardtDebra BorchardtMay 13, 2019
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3min31750

Acreage Holdings Inc. (ACRG.U) (ACRGF) announced on Monday that it was carving off its real estate assets and selling them to a REIT called GreenAcreage Real Estate Corp. or GARE. GARE will purchase the assets and then lease them back to Acreage Holdings.

The arrangement is described as “arms length” transaction, which suggests a separation of parties, yet the REIT will be managed by GreenAcreage Management LLC, which Acreage Holdings owns a 20% interest in and CEO Kevin Murphy is also invested in. GARE is also described as remaining “independent” from Acreage, yet the management company has Acreage ownership involved.

Following MedMen’s Footsteps

Not long ago, cannabis retailer MedMen pursued a similar strategy. In January, the company announced that it too was selling its real estate assets to a REIT called Treehouse Real Estate Investment Trust. That group raised $133 million and also has a right of first offer for three years. In February, MedMen sold three properties to Treehouse raising $18.4 million.

The Treehouse REIT was described as being externally managed, but it seems the two companies share several employees. The Treehouse Chief Executive Office is listed as Chris Ganan who is also the Chief Strategy Officer and a General Partner at MedMen. Treehouse’s Treasurer is Lisa Trager, who is MedMen’s general counsel. Trager resigned from MedMen last month as several top executives left the company amid a string of scandals.

The Treehouse Chief Operating Officer is Zeeshan Hyder, who is MedMen’s Chief Corporate Development Officer. Brian Kabot the CIO of Stable Road Capital is listed as a Treehouse Director. The plan is for Treehouse to go public.

GARE

GARE will need investor money prior to making the real estate purchases. Acreage Holdings is giving GARE the first offer to purchase the pipeline of properties over the next three years. The company lists the leadership team as Executive Chairman, Gordon DuGan, Vice Chairman and Founder, David Carroll, and Chief Executive Officer, Katie Barthmaier.

Canopy Growth

There was no security filing as of yet with regards to the announcement and Acreage Holdings had no further comment. It is unknown if the real estate assets were to be included in the Canopy Growth acquisition plans and whether the loss of these assets would affect the Canopy Growth shareholders. GARE has not yet responded to a request for comment.

 


StaffStaffMarch 13, 2019
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3min13260

Innovative Industrial Properties, Inc. (NYSE: IIPR) announced results for the fourth quarter and year ended December 31, 2018. IIPR generated rental revenues of approximately $4.7 million in the quarter, representing a 111% increase from the prior year’s quarter and in line with the Yahoo! Finance analyst estimate.

IIPR recorded net income attributable to common stockholders of approximately $2.3 million for the quarter, or $0.24 per diluted share, and adjusted funds from operations (AFFO) of approximately $3.6 million, or $0.38 per diluted share. AFFO represented an increase of 344% from the prior year’s quarter.

The company paid its seventh consecutive quarterly dividend of $0.35 per share on January 15, 2019, to stockholders representing a 40% increase from the prior year’s quarter. IIPR also declared its eighth consecutive quarterly dividend of $0.45 per share, which is expected to be paid on April 15, 2019, to stockholders of record as of March 29.

In October 2018, IIP completed an underwritten public offering of 2,990,000 shares of common stock, including the exercise in full of the underwriters’ option to purchase an additional 390,000 shares, resulting in net proceeds of approximately $113.9 million.

After the quarter ended, IIPR’s operating partnership subsidiary completed a private of offering in February 2019 of $143.75 million aggregate principal amount of 3.75% exchangeable senior notes due 2024, which includes the exercise in full of the initial purchasers’ option to purchase additional Notes, resulting in estimated net proceeds of approximately $138.4 million.

The company gave the following update about its portfolio in a statement. As of March 13, 2019, IIP owned 13 properties that were 100% leased to state-licensed medical-use cannabis operators and comprising an aggregate of approximately 1,128,000 rentable square feet (including approximately 159,000 rentable square feet under development/redevelopment) in Arizona, California, Colorado, Illinois, Maryland, Massachusetts, Michigan, Minnesota, New York, Ohio and Pennsylvania, with a weighted-average remaining lease term of approximately 14.3 years.

IIPR had invested $161.2 million in the aggregate (excluding transaction costs) and had committed an additional $37.7 million to reimburse certain tenants and sellers for completion of construction and tenant improvements at IIP’s properties.  IIPR’s average current yield on invested capital was approximately 15.1% for these 13 properties, calculated as the sum of the initial base rents, supplemental rent (with respect to the lease with PharmaCann LLC at one of IIPR’s New York properties) and property management fees (after the expiration of applicable base rent abatement periods), divided by IIPR’s aggregate investment in these properties (excluding transaction costs and including the aggregate potential tenant reimbursements of $37.7 million).

 


William SumnerWilliam SumnerFebruary 12, 2019
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3min20850

Yesterday, the San Francisco-based cannabis dispensary chain, The Apothecarium, announced that they had been acquired by TerrAscend Corp. (CSE: TER) for $118.4 million in cash and stock. Including in the purchase agreement are three retail dispensaries in San Francisco; one vertically integrated cannabis operation which includes cultivation, edibles manufacturing, and a retail dispensary location; and the edibles brand Valhalla Confections.

With more than 200 employees and $45 million in combined revenue, Apothecarium made for an attractive buy to TerrAscend, which recently has been making moves to enter the U.S. market.

Last month, TerrAscend completed the acquisition of another U.S. company Grander Distribution, LLC. Grander is a producer and distributor of hemp-based wellness products that are available in more than 10,000 worldwide retail locations.

“Teaming up with a larger company means that we will be able to bring the Apothecarium dispensary experience to more people, in more cities around the country,” said Apothecarium CEO Ryan Hudson in a statement. “Our customers won’t see major changes inside our dispensaries.”

Under the agreement, TerrAscend has agreed to pay $73.7 million in cash and to grant 7.325 million proportionate voting shares in the company. All full-time employees, including budtenders, will receive shares of TerrAscend.

Additionally, Apothecarium’s CEO and leadership team are expected to remain in their current roles. The completion of this acquisition is still pending regulatory approval from both the states of California and Nevada.

“Today’s news is another major step in executing TerrAscend’s US strategy,” said TerrAscend President Matthew Johnson. “We believe The Apothecarium is the model for operational excellence and will set the tone for our US cultivation and retail expansion, and we admire their philanthropic dedication and local community engagement.  We look forward to working together with the members of the current team to bring the Apothecarium’s unique experience to more communities and improve patient access to quality cannabis products and services.”


Debra BorchardtDebra BorchardtFebruary 11, 2019
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3min15650

Green Growth Brands Inc. or GGB (OTCQB: GGBXF)  entered into an agreement to gain access to 108 prime shop locations in U.S. malls owned and operated by the Simon Property Group, Inc. (NYSE: SPG). GGB will expand its chain of CBD-infused personal care product shops under the Seventh Sense Botanical Therapy.

Simon is the biggest mall operator in the country with high-profile properties including Roosevelt Field in metro New York; The Galleria in Houston, TX; and Woodbury Common Premium Outlets in Central Valley, NY. While there are certainly numerous CBD shops, this is the first company to look at establishing a huge chain right off the bat.

“We are constantly on the lookout for cutting-edge new concepts, like the GGB shops,” said John Rulli, President of Simon Malls. “We are committed to adding new and dynamic retailers and uses to our shopping destinations, and the GGB shopping experience is exactly the type of innovation our customers want and expect from us. We’re excited to work on the GGB launch, and look forward to a long and deepening relationship as we build this network together.”

The first shop is expected to open in March 2019 at Castleton Square Mall in Indianapolis, Indiana. The remaining shops will be opened over the course of 2019.

“Our partnership with Simon allows GGB to launch our brands and CBD products in premier shopping destinations across the U.S.,” said Peter Horvath, CEO of GGB. “Our management team has had decades of experience working closely with developers and operating premium retail stores in their properties. We know this arrangement gives us access to the best locations, foot traffic, and consumers.”

GGB said that along with this agreement it has entered into a consulting agreement for services with Simon Canada Management Ltd. through its wholly owned subsidiary GGB Kiosks LLC.  In exchange for the services rendered GGB has issued to Simon Canada $2,232,824.42  in GGB common shares and 1,000,000 common share purchase warrants of GGB with an exercise price of $4.47.

GGB also said that it entered into an Advisory Services Agreement with J. Salter Ltd., d.b.a. Authentic Retail Concepts, Ltd., for a variety of consulting services that leverage a network of strategic relationships, including Simon Property Group. As compensation for the services under the Advisory Agreement, GGB has issued to ARC $2,232,824.42 in GGB common shares reflecting the GGB share price of USD$4.47.


Debra BorchardtDebra BorchardtFebruary 7, 2019
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5min23400

MedMen Enterprises Inc. (MMNFF) said that it has completed the sale of three properties to Treehouse Real Estate Investment Trust with a net proceed of approximately $18.4 million. The properties will then be leased back to MedMen.

“These proceeds will be deployed into more accretive growth opportunities as we operationalize our national footprint,” said Adam Bierman, MedMen’s chief executive officer, and co-founder. According to an October filing, MedMen said it expected to sell additional properties to Treehouse.

The  list of properties included in this sale are as follows:

  • One retail storefront located on Lincoln Blvd in Venice, California;
  • One retail storefront located on Robertson Blvd, the closest dispensary to Beverly Hills, California;
  • One 45,000 sq. foot cultivation and production factory located in Sparks, Nevada.

Treehouse REIT

In January, MedMen announced that Treehouse has completed its first round of capital raise at $133 million and intended to partially use the funds to purchase properties from the company. Treehouse is a collaboration between MedMen and Stable Road Capital, a Venice, California based investment firm with successful track records in real estate and cannabis. Treehouse is governed by an independent board and has a management contract with MedMen to oversee day-to-day operations until Treehouse goes public, at which point management will be
internalized.

The Treehouse REIT is described as being externally managed, but it seems the two companies share several employees. The Treehouse Chief Executive Office is listed as Chris Ganan who is also the Chief Strategy Officer and a General Partner at MedMen. Treehouse’s Treasurer is Lisa Trager, who is MedMen’s general counsel. The Treehouse Chief Operating Officer is Zeeshan Hyder, who is MedMen’s Chief Corporate Development Officer. Brian Kabot the CIO of Stable Road Capital is listed as a Treehouse Director

It is expected that Treehouse’s initial sale-leaseback transactions will occur with MedMen. The company said it intends to use the proceeds from the prospective transactions to assist in funding the buildout of its national footprint. Subsequent to the initial transactions, Treehouse will have a three-year right of the first offer on
additional MedMen-owned facilities and development projects. With the launch of Treehouse, MedMen has the opportunity to significantly reduce future capital expenditures related to its retail and cultivation licenses.

Monetizing Real Estate

It isn’t uncommon for retail companies to monetize real estate assets. For example, Macy’s (M) has been selling off its real estate assets as retail sales shifted to more online transactions. Sear’s is another iconic department store that is also selling off its real estate assets in order to pay off debt.

In the cannabis industry, many companies are unable to obtain mortgages or finding willing landlords and must buy buildings outright. These buildings then become a source of capital for the company to draw upon. Typically, the buildings are sold to the highest bidder of outside parties.



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