Real Estate Archives - Green Market Report

Kaitlin DomangueKaitlin DomangueNovember 7, 2019
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3min2700

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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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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3min27330

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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3min11310

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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3min17870

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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3min13930

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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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.


Debra BorchardtDebra BorchardtDecember 13, 2018
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Harvest Health & Recreation, Inc. (CSE: HARV)  has formed a joint venture with Aina We Would (AWW), LLC for a real estate investment vehicle that plans to provide funding to purchase cannabis-related real estate assets. In addition to a Harvest subsidiary, AWW is made up of two family offices, Aina Advisors LLC and Stadlen Family Holdings, LLC.

Aina and Stadlen have both committed to fund or arrange up to $100 million to fund projects for the joint venture. The statement said that AWW plans to buy, develop and finance new construction projects, engage in land purchases, capital improvements and sale-leasebacks to Harvest and other operators in the cannabis industry.

As a part of the arrangement, Harvest will have the opportunity to get lease rates below current market providers and then source permanent financing for the properties it acquires. Harvest may also use AWW for its construction and real estate development needs.

In addition, Harvest said that it was has committed to lending AWW a minimum of up to $30 million in short-term financing to permit AWW to seek out acquisition projects. The company said that the goal of the short-term financing was so that they could move quickly on projects.  These funds will be replaced by permanent financing provided or sourced by Stadlen and Aina.

“AWW gives Harvest an excellent funding option for the development of cultivations, manufacturing facilities, and dispensaries,” said Harvest President Steve Gutterman.  “This new vehicle, combined with the approximate $290 million we raised in conjunction with our recent debt and equity financing transactions, affiliate roll-up and recently completed acquisitions leading up to and following our listing on the CSE, gives us one of the strongest balance sheets in the industry.”

Harvest owns more than 40 cannabis licenses with a domestic footprint that includes real estate, equipment and other assets in 11 states, including Arizona, Arkansas, California, Colorado, Florida, Maryland, Massachusetts, Nevada, North Dakota, Ohio and Pennsylvania.

“Real estate is the lifeblood of the cannabis economy and a huge piece of any company’s bottom line,” said Harvest Executive Chairman, Jason Vedadi. “With this partnership, AWW has been structured to turn a significant cost center into a potential profit driver and to become a potentially attractive source of financing for Harvest’s expected expansion.”


Debra BorchardtDebra BorchardtNovember 8, 2018
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Cannabis REIT Innovative Industrial Properties (NYSE: IIPR) reported that its revenue increased by 150% to $3.9 million for the third quarter ending September 2018 versus $1.6 million for the same time period last year. The company also delivered a net income of $1.5 million or $0.21 per diluted share. The adjusted funds from operations, a measure typical of REITs was $2.6 million or $0.38 per share.

According to the company statement, the increases were due to the company’s acquisition of new properties and the annual escalation of base rent for two of the leases. The statement said that “Base rent under the lease with the PharmaCann subsidiary for one of the Massachusetts properties is abated until November 30, 2018, and base rent under the lease with GPI at the Michigan property was deferred until November 2, 2018.”

IIPR is also one of the few cannabis companies that pay a dividend and this quarter was no different. It is paying out its sixth consecutive dividend of $0.35 per share. This is a 40% jump over the second quarter dividend.

After The Quarter

After the quarter ended,  the company acquired an approximately 58,000 square foot industrial property in Colorado for $11.25 million (excluding transaction costs) and entered into a long-term, triple-net lease with TGS for continued operation as a cannabis cultivation facility.

In addition to acquiring the Colorado property, IIPR 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.

Portfolio Update

As of November 7, 2018, IIPR owned 10 properties located in Arizona, Colorado, Maryland, Massachusetts, Michigan, Minnesota, New York and Pennsylvania, totaling approximately 952,000 rentable square feet (including approximately 114,000 rentable square feet under development), which were 100% leased with a weighted-average remaining lease term of approximately 14.7 years.

IIPR has invested approximately $121.5 million and has committed an additional approximately $15.9 million to reimburse certain tenants and sellers for completion of construction and tenant improvements at the properties. The average current yield on invested capital is approximately 15.4% for these ten properties.


Jack SmithJack SmithMarch 29, 2018
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3min13970

Innovative Industrial Properties Inc. (IIPR) reported fourth-quarter earnings of 7 cents a share and highlighted the steps it has taken since becoming a publicly traded company, perhaps paving the way for more small and mid-cap cannabis companies to do the same.

Innovative, which trades on the New York Stock Exchange under the ticker “IIPR,” said in a statement it earned 7 cents a share on $2.3 million in revenue. The commercial real estate company also said that adjusted funds from operations (AFFO), a widely used measure for real estate organizations, was 23 cents a share in the quarter.

During the quarter, Innovative said it acquired a medical-use cannabis cultivation and processing facility in Arizona with a subsidiary of The Pharm in a sale-leaseback deal. The total amount spent was $18 million, including $15 million for the purchase.

It also acquired two other medical-use cannabis cultivation facilities with similar transactions, signing deals with Vireo Health for facilities in New York and Minnesota. The combined cost for the two facilities was $8.4 million, including $1 million spent on tenant improvement costs.

The acquisitions bring Innovative’s property portfolio to five, spread across the country. Totaling 617,000 square feet, all of the properties are 100 percent leased. The average length left on the leases is approximately 14.7 years, the company noted in the statement.

As of the end of the year, Innovative said it had invested $68.3 million in the properties, with an additional $5 million for tenant improvements at the various properties.

The company also noted its fourth-quarter dividend was 25 cents a share, a 67 percent sequential increase. The dividend was paid on Jan. 16, 2018 to shareholders on record as of Dec. 29, 2017.

Innovative’s shares yield 3.77 percent at current levels, significantly more than the 2.77 percent yield on a 10-year U.S. Treasury bond.

San Diego-based Innovative also said that it had sold an additional 3.22 million shares in a public offering after the quarter closed, giving the company an additional $79.3 million to be used for general corporate purchases.

Innovative shares closed at $26.32 on Wednesday, up 1.9 percent. Shares of the company have fallen nearly 30 percent since the start of the year.



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