Cresco Labs Inc. and Innovative Industrial Properties, Inc. (IIP) have closed on the acquisition of a property in Massachusetts with a leaseback agreement. The property is approximately 118,000 square feet of industrial space and the deal is valued at $7.8 million.
“Cresco is a true leader in quality, customer experience, and patient care in its core markets, and we are pleased to further expand our long-term real estate partnership with them in Massachusetts,” said Paul Smithers, President and Chief Executive Officer of IIP. “The Massachusetts regulated cannabis industry is still in its early stages, and is emerging as one of the strongest medical and adult-use cannabis markets on the East Coast. Our transaction with Cresco represents our fifth property acquisition in Massachusetts, and we are firmly committed to being a strong real estate partner to the industry here for many years to come.”
Cresco Labs has agreed to a long-term, triple-net lease agreement for the property, which it plans to operate as regulated cannabis cultivation, processing and dispensing facility upon completion of redevelopment. Cresco said it is expected to complete additional tenant improvements for the property, for which IIP has agreed to provide reimbursement of up to $21 million. Assuming full reimbursement for the tenant improvements, IIP’s total investment in the property will be approximately $28.8 million.
A String Of IIP Deals
This is the fifth in a string of deals that Cresco Labs and IIP have worked on in states like Michigan, Illinois and Ohio. Earlier this month, IIP noted that it had also entered into amendments to its leases with Cresco at one of IIP’s Michigan and one of IIP’s Ohio properties, making available an additional $17.0 million in funding for additional improvements of their cannabis cultivation and processing facilities at the properties.
“We are thrilled to partner with IIP on our fifth lease with them. They have been reliable partners and a consistent source of non-dilutive capital that has allowed us to expand our capacity and go deep in our strategic markets,” said Cresco Labs CEO and Co-founder Charlie Bachtell.
According to the statement, the lease amendments also adjusted the base rent under the leases to take into account the additional available funding. Assuming full payment of the additional funding, IIP’s total investment in the Michigan property, which comprises 115,000 square feet of industrial space, will be $32.0 million, and IIP’s total investment in the Ohio property, which comprises 50,000 square feet of industrial space, will be approximately $13.5 million.
IIP Building Cannabis Real Estate Empire
At this point, IIP now has 58 properties located in Arizona, California, Colorado, Florida, Illinois, Maryland, Massachusetts, Michigan, Minnesota, New York, Nevada, North Dakota, Ohio, Pennsylvania and Virginia, totaling approximately 4.4 million rentable square feet (including approximately 1.4 million rentable square feet under development/redevelopment). These buildings are 99.2% leased (based on square footage) with a weighted-average remaining lease term of approximately 16.2 years.
According to the company statement, IIP has invested approximately $791.3 million in the aggregate (excluding transaction costs) and had committed an additional approximately $190.8 million to reimburse certain tenants and sellers for completion of construction and tenant improvements at IIP’s properties. The company said that these statistics do not include up to approximately $7.0 million that may be funded in the future pursuant to IIP’s lease with a tenant at one of IIP’s Illinois properties, or approximately $19.7 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.
These statistics also treat IIP’s Los Angeles, California property as not leased, due to the tenant being in receivership and its ongoing default in its obligation to pay rent at that location.