Innovative Industrial Properties, Inc. (NYSE: IIPR) is making available $30 million for additional expansion of their cannabis cultivation and processing facilities at the Green Leaf Medical property in Saxton, Pennsylvania. The company’s lease was amended to reflect the new investment as well as an adjustment to the base rent to take into account the additional available funding and extended the term of the lease agreement. Assuming full payment of the additional funding, IIP’s total investment in the property will be $43.0 million.
“We are thrilled to expand our real estate partnership once again with Green Leaf, providing them the capital for this key expansion at their mission-critical facility in Saxton,” said Paul Smithers, President and Chief Executive Officer of IIP. “Green Leaf has always taken a thoughtful, long-term view toward expansion, and this second phase is expected to dramatically increase production capacity at the Saxton facility, with an eye toward meeting demand in one of the strongest medical cannabis markets in the United States.”
Green Leaf, which is known for its brand gLeaf, operates medical cannabis cultivation, extraction and retail operations in four contiguous states in the mid-Atlantic region, including Maryland, Pennsylvania, Ohio and Virginia, with pending vertical applications in New Jersey and West Virginia. According to Green Leaf, the company has raised approximately $27 million from the sale of equity to build its multi-state operation and has generated positive EBITDA since 2018.
In April of this year, Green Leaf announced a new debt financing transaction with Chicago Atlantic Group, raising $10 million to fund the acquisition of additional dispensaries in Virginia and Pennsylvania. Green Leaf has one of 25 medical cannabis cultivation/processor licenses issued by the state of Pennsylvania.
“We appreciate the continued strong support of IIP as our long-term real estate capital partner, and look forward to expanding capacity at our Saxton facility, which provides the enhanced infrastructure elements that are key to growing the highest quality, consistent cannabis products for our patients,” said Philip Goldberg, Chief Executive Officer of Green Leaf.
Innovative Acquired Property in 2019
IIP bought the property in a sale-leaseback transaction with Green Leaf in May of last year, which comprises two buildings totaling approximately 266,000 square feet of industrial space. Green Leaf previously redeveloped approximately 103,000 square feet of the industrial space for medical-use cannabis cultivation and processing, and this funding is expected to include the build-out of the remaining 163,000 square feet of industrial space.
IIP also owns and leases to Green Leaf an 82,000 square foot medical-use cannabis cultivation, processing, and dispensing facility in Richmond, Virginia, which the company acquired earlier this year.
With first sales in 2018, the Pennsylvania medical cannabis market has grown significantly with sales hitting $524 million. The Pennsylvania Department of Health’s report dated May 15, 2020, noted that over 300,000 patient certifications have been issued by approved practitioners since the program began.
Similar to other states, Pennsylvania has expanded its program over time, adding several new medical conditions eligible for treatment with medical cannabis, including, among others, anxiety disorders and Tourette Syndrome. In addition, according to an April 2020 study by Harper Polling, over 60% of Pennsylvanians support legalizing adult-use cannabis in the state, with strong levels of support throughout the political spectrum. Multiple bills to legalize adult-use cannabis are pending in Pennsylvania’s legislature.