Innovative Industrial Properties Archives - Green Market Report

StaffOctober 18, 2021
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Innovative Industrial Properties, Inc. (IIP)(NYSE: IIPR) has purchased a 201,000 square foot industrial property in Desert Hot Springs, California from Gold Flora, LLC for $51 million. Gold Flora will then lease the building and is expected to complete additional improvements for the property, for which Innovative Industrial has agreed to provide reimbursement of up to $9.0 million. Assuming full reimbursement for the improvements, IIP said its total investment in the property is expected to be $60.0 million.

“We are excited to welcome Laurie and the Gold Flora team as our newest tenant partner,” said Paul Smithers, President and Chief Executive Officer of IIP. “Gold Flora has established a strong reputation and presence in the largest regulated cannabis market in the world, California, and we look forward to supporting them as a long-term real estate capital partner for many years to come, as they continue to expand the breadth of their operations and reach throughout the state.”

Gold Flora was founded in 2017 and is a vertically integrated operator in California, including cultivation, manufacturing, distribution and retail. The company’s team includes Chief Executive Officer Laurie Holcomb, Chief Operations Officer Greg Gamet, Chief Financial Officer Chris Martin and Chief Cultivation Officer Phillip Hague. Earlier this year, Gold Flora announced a strategic partnership with Stately Brands, including the establishment of an advisory board to Gold Flora and financing to further expand Gold Flora’s retail operations, brands, and distribution network.

“Teaming with IIP on this transaction strategically unlocks capital for us as we focus on our continued growth in California, and we look forward to working with the IIP team for many years to come as our go-to real estate capital provider,” said Laurie Holcomb, Chief Executive Officer of Gold Flora. “In a few short years, I am proud of what our team at Gold Flora has accomplished, with our best-in-class line of products and strategic relationships that I believe will continue to distinguish us in the California marketplace, as we look to expand our footprint and distribution throughout the state.”

As of October 18, IIP now owns 76 properties located in Arizona, California, Colorado, Florida, Illinois, Maryland, Massachusetts, Michigan, Minnesota, Missouri, Nevada, New Jersey, New York, North Dakota, Ohio, Pennsylvania, Texas, Virginia and Washington, representing a total of approximately 7.5 million rentable square feet (including approximately 2.8 million rentable square feet under development/redevelopment), which were 100% leased with a weighted-average remaining lease term of approximately 16.7 years. In addition to that, IIP said it has committed approximately $1.9 billion across its portfolio, including capital invested to date (excluding transaction costs) and additional capital commitments to fund future construction and tenant improvements at IIP’s properties.


StaffSeptember 28, 2021
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Goodness Growth Holdings, Inc.  (CSE: GDNS)(OTCQX: GDNSF) closed on a sale/leaseback deal with Innovative Industrial Properties, Inc. (IIP) (NYSE: IIPR) in New York. Goodness Growth reported that it sold IIP approximately 92.3 acres of land for $1.2 million. The site is next to Goodness Growth’s existing cannabis cultivation and processing facility in Johnstown, New York, which was formerly the site of a juvenile detention center. IIP said it plans to provide a tenant improvement reimbursement to Goodness Growth of roughly $55 million for the construction of a new 324,000 square foot cannabis cultivation, processing, and research and development facility.

“We are looking forward to beginning construction on this state-of-the-art facility in New York, which will immediately become the flagship cultivation and processing facility in our Company’s portfolio,” said Goodness Growth Chairman and Chief Executive Officer, Kyle Kingsley, M.D. “This facility will produce the highest-quality indoor flower we’ve ever produced and help prepare our business for the massive spike in demand expected when New York’s adult-use cannabis program goes online next year. This facility will also support the expansion of our retail network in New York as we look to open up to four new dispensaries next year, which would bring our total number of stores in New York to eight.”

Goodness Growth and IIP isad they will partner on the development of the project and will amend the terms of their existing lease agreement to incorporate the new facility. The initial annualized base rent will be 10.5% of the tenant improvement budget plus the purchase price, for a term of twenty years. The lease amendment contains a rent escalation clause that is triggered in the event that Goodness Growth doesn’t satisfy certain strategic benchmarks, which would increase the rent by 1.5%.

Goodness Growth is one of ten licensed operators in New York’s medical cannabis program. It was previously known as Vireo Health, but the company changed its name this past summer.  It currently operates four dispensaries in QueensWhite PlainsAlbany and Binghamton under the Vireo Health name, as well as its home delivery business which serves the New York City metro area. The company said it plans to rebrand all its dispensaries in New York to its Green Goods national dispensary brand after the onset of the adult-use program next year.

Goodness Growth also forecasts that it expects to generate total revenue in the range of $140 to $180 million in its fiscal year 2022 and that it expects to generate adjusted EBITDA in the range of $35 to $55 million in the fiscal year 2022.


Debra BorchardtSeptember 20, 2021
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Innovative Industrial Properties, Inc. (IIP) (NYSE: IIPR) paid $1.35 million for a property in Missouri and entered into a long-term lease with CPC of Missouri – Smithville, LLC (CPC), a subsidiary of Calyx Peak, Inc. (Calyx). CPC is expected to construct approximately 83,000 square feet of industrial space at the property, for which IIP has agreed to provide reimbursement of up to $26.72 million. IIP’s total investment in the property is expected to be $28.25 million. CPC said it intends to operate the property upon completion of construction as a licensed cannabis cultivation and processing facility.

“We are excited to announce this new long-term real estate partnership with Calyx, expanding our footprint into Missouri as our 19th state,” said Paul Smithers, President and Chief Executive Officer of IIP. “Calyx has developed a strong reputation for quality, award-winning cannabis products in California, and we look forward to working closely with the Calyx team in coming months on the development of this new state-of-the-art facility in Missouri, as Calyx expands its operational platform to meet the tremendous growth in demand from patients throughout the state.”

Calyx currently operates a 235,000 square foot cannabis cultivation facility in California, and expects to begin construction on a dispensary location in southern California in the near future. Calyx also has a Tier 3 cultivation license and a provisional adult-use dispensary license in Massachusetts, and expects to open a dispensary in the West Plaza neighborhood of Kansas City, Missouri later this year. Founded in 2016, Calyx is headquartered in Massachusetts and plans to be vertically integrated in three states by the end of 2022.

“We are thrilled to enter into this long-term real estate partnership with IIP for the development of this new facility in Missouri,” said Erin Carachilo, CEO of Calyx, and Lee Hoffman of CPC. “While less than one year since the launch of Missouri’s medical cannabis program, we have witnessed a tremendous rate of adoption by patients and growth in sales throughout the state, and look forward to completing the development of this facility, which will be designed with next-generation systems in a highly controlled environment that will enable us to bring our premium, diversified genetics at scale to Missouri patients.”

Missouri began legal medical cannabis sales in October of 2020, and regulated medical-use sales have grown rapidly since then, with total sales in August 2021 alone of approximately $22 million, according to the Missouri Department of Health and Senior Services. As of August 31, 2021, there were over 177,000 patient applications and 5,800 caregiver applications in the state. Missouri’s regulations provide for numerous qualifying medical conditions for treatment with cannabis, including, among others, cancer, epilepsy, PTSD, HIV/AIDS, terminal illness, Alzheimer’s and any chronic medical condition normally treated with prescription medication that can lead to dependence. In addition, petitions for Missouri voters to approve the adoption of an adult-use cannabis program are targeting the November 2022 ballot.

 


StaffAugust 4, 2021
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After the market closed on Tuesday, cannabis REIT Innovative Industrial Properties, Inc. (NYSE: IIPR)said that it closed on the acquisition of a property in Illinois, and entered into a long-term lease with a subsidiary of 4Front Ventures Corp. (CSE: FFNT) (OTCQX: FFNTF). The purchase price for the property was $6.5 million (excluding transaction costs). 4Front is expected to construct approximately 250,000 square feet of industrial space at the property, for which IIP has agreed to provide reimbursement of up to $43.75 million. Assuming full reimbursement for the construction, IIP’s total investment in the property is expected to be $50.25 million (excluding transaction costs). 4Front intends to operate the property upon completion of construction as a licensed cannabis cultivation and processing facility.

“We are excited to expand our partnership with IIP as the Illinois marketplace continues its record-breaking sales streak,” said Leo Gontmakher, Chief Executive Officer of 4Front. “This next-generation cultivation and manufacturing facility will not only allow us to best meet the state’s robust market demand, but it will also broaden the reach of our innovative, low-cost cultivation and manufacturing methodologies.”

Illinois, the eleventh state to legalize cannabis for adult-use, commenced adult-use cannabis sales at the beginning of last year. In this first year of adult-use sales, Illinois’ regulated cannabis sales were over $1.0 billion in 2020, including $669 million in adult-use sales and over $366 million in medical-use sales. In June 2021 alone, reflecting the continued strong and growing demand, Illinois adult-use cannabis dispensaries generated over $115 million in sales (excluding medical cannabis sales), according to the Illinois Department of Financial and Professional Regulation. For the first time, in the first quarter of 2021, Illinois’ tax revenues from regulated cannabis sales surpassed tax revenues from liquor sales. IIP owns seven regulated cannabis cultivation and processing facilities in Illinois, representing a total expected investment of approximately $254.9 million, which includes commitments by IIP to fund future tenant improvements and construction at certain properties.

“We are thrilled to expand our long-term real estate partnership with 4Front with this new ground-up development project in Illinois,” said Paul Smithers, President and Chief Executive Officer of IIP. “We look forward to working closely with the 4Front team in the coming months on the development of this state-of-the-art facility, which we expect will provide 4Front with tremendous, cost-effective scalability and a highly controlled environment for production of the quality products that 4Front is known for.”


StaffJuly 7, 2021
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Following the close of the market on Tuesday, cannabis REIT (Real Estate Investment Trust) Innovative Industrial Properties, Inc. (IIP) (NYSE: IIPR) posted its operating, investment, and capital markets activity from April 1, 2021, through today. The company’s first quarter ended in March, but since that time IIP has been very active.

IIP said that from April 1, 2021, through Tuesday, it has made four acquisitions for properties located in Massachusetts, Michigan, and Pennsylvania, and executed three lease amendments to provide additional tenant improvements at properties located in Florida and Pennsylvania. In these transactions, IIP said it established new tenant relationships with Sozo Companies, Inc. and Temescal Wellness of Massachusetts, LLC, while expanding existing relationships with Green Peak Industries LLC (Skymint), Harvest Health & Recreation Inc., Jushi Holdings Inc., and Parallel.

In addition, on June 25, 2021, IIP said it closed on a construction loan with a developer for the construction of a regulated cannabis cultivation and processing facility in California. IIP said it is expected to lend up to $18.5 million to the developer for the construction of an approximately 102,000 square foot building. Following completion of development of the property, IIP said it has an option to purchase the property and may execute a negotiated lease with an affiliate of the developer or with another third party if IIP determines to exercise its purchase option.

Capital Markets Activity

On May 25, 2021, IIP issued a $300 million aggregate principal amount of unsecured senior notes. The sale of the notes generated net proceeds of approximately $293 million, after deducting the initial purchaser’s discounts and commissions and offering expenses. The notes bear interest at 5.50% per annum, payable semi-annually in arrears on May 15 and November 15 of each year, until the maturity date of May 25, 2026. IIP said it intends to use the net proceeds from the offering to invest in specialized industrial real estate assets that support the regulated cannabis industry that is consistent with its investment strategy, and for general corporate purposes.

Portfolio

As of July 6, 2021, IIP owns 72 properties located in Arizona, California, Colorado, Florida, Illinois, Maryland, Massachusetts, Michigan, Minnesota, Nevada, New Jersey, New York, North Dakota, Ohio, Pennsylvania, Texas, Virginia, and Washington, representing a total of approximately 6.6 million rentable square feet (including approximately 2.2 million rentable square feet under development/redevelopment), which were 100% leased with a weighted-average remaining lease term of approximately 16.7 years.

As of July 6, 2021, IIP had invested an aggregate of approximately $1.6 billion (consisting of the purchase price and development and tenant reimbursement commitments funded, but excluding transaction costs) and had committed an additional approximately $347.8 million to reimburse certain tenants and sellers for completion of construction and tenant improvements at IIP’s properties, which does not include an $18.5 million loan from IIP to a developer for construction of a regulated cannabis cultivation and processing facility in California.

 


StaffMay 6, 2021
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After the market closed on Wednesday, Innovative Industrial Properties, Inc. (IIP) (NYSE: IIPR) delivered another quarter of solid results. The real estate investment trust (REIT) reported that its total revenues increased 103% to $42.9 million for the first quarter ending March 31, 2021. This beat the yahoo Finance average analyst estimate for revenues of $42.88 for the quarter.

IIP also recorded net income of approximately $25.6 million for the quarter, or $1.05 per diluted share, and adjusted funds from operations (“AFFO”) of approximately $38.4 million, or $1.47 per diluted share (Note: AFFO per diluted share for the period includes the dilutive impact of the assumed full exchange of IIP’s $143.75 million of exchangeable senior notes for shares of common stock). This also beat the analyst estimate for $0.96. In addition, IIP paid a quarterly dividend of $1.32 per share on April 15, 2021, to common stockholders of record as of March 31, 2021, representing a 32% increase over the first quarter of 2020’s dividend and an approximately 6% increase over the fourth quarter 2020 dividend. The company also decided against hosting a conference call to discuss its first-quarter results and management made no comments in the company’s press release.

The REIT noted that the increase in its first-quarter revenue over last year was driven primarily by the acquisition and leasing of new properties, additional tenant improvement allowances and construction funding at existing properties resulting in adjustments to base rent, and contractual rental escalations at certain properties.

Portfolio of Properties

As of May 5, 2021, IIP said it owned 69 properties located in Arizona, California, Colorado, Florida, Illinois, Maryland, Massachusetts, Michigan, Minnesota, Nevada, New Jersey, New York, North Dakota, Ohio, Pennsylvania, Texas, Virginia and Washington, representing a total of approximately 6.2 million rentable square feet (including approximately 2.3 million rentable square feet under development/redevelopment), which were 100% leased with a weighted-average remaining lease term of approximately 16.7 years. As of May 5, 2021, IIP had invested approximately $1.2 billion across its portfolio and had committed an additional approximately $339.5 million to reimburse certain tenants and sellers for the completion of construction and tenant improvements at IIP’s properties.

The average price target for the stock is $217 and the shares were lately trading at $173. It looks as if the shares are selling slightly higher in early trading on Thursday.

 


Debra BorchardtApril 12, 2021
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Real estate is one of the more difficult aspects of the cannabis industry. Securing a license is tough but getting your location is even tougher. Each state has different regulations and restrictions, which combined with unique real estate markets makes finding and securing property essential. It’s an expensive endeavor and one in which traditional mortgages aren’t typically an option. 

This presentation will focus on the New England and New York area cannabis real estate markets. It will cover the following states: Maine, Vermont, New Hampshire, Connecticut, Massachusetts, New York, New Jersey, and Pennsylvania. 

Many of the states that have gone fully legal – meaning legalized both medical use and adult-use cannabis often have opt-out clauses for municipalities. This means that in some areas if a town or village decides against allowing cannabis stores or facilities in its location, that puts even more demand for locations in the municipalities that approve cannabis businesses. 

Growth in the Northeast

The Northeast cannabis industry has been expanding at a blistering pace. In 2018, there were only 187 dispensaries across nine states. Fast forward to March 2021 and you see the number has jumped to 424. Of this 424, only Massachusetts and Maine have adult-use products for the sale, the rest are entirely medical marijuana. These numbers are expected to jump even higher as states like New Jersey and New York go fully legal. “It plays out in typically New England ways – Maine has been really friendly, Portland was very competitive,” said MMLG Managing Director Brian Lauvray. 

 

Dispensary/Retailers 2018-YTD 2021
State 2018 2019 2020 3/2021
CT 18 18 18 18
MA 65 98 161 206
ME 8 8 20 23
NH 4 5 5 5
NJ 6 8 13 14
NY 30 38 38 38
PA 47 76 104 110
RI 3 3 3 3
VT 6 6 7 7
Total 187 260 369 424
Copyright © 2021 by CNB Media LLC dba Cannabiz Media
Source: Cannabiz Media License Database www.cannabiz.media

Massachusetts

One area in Massachusetts that saw a dispensary boom is Great Barrington. This lovely town in the heart of the Berkshire mountains is a center for tourism. Skiing in the winter, plus hiking, biking and camping in the summer. There’s a bustling summer performance calendar as well that brings lots of baby boomers up to watch dance and theatre groups. It’s the perfect place to locate a dispensary and the town initially opened its doors. 

That sparked a flood of dispensaries and now the town, despite having no cap on stores is saying they have enough, thank you. The population has less than 7,000 people but 5 dispensaries. Springfield in the middle of the state has attracted several stores and then Boston and its surrounding suburbs has numerous dispensaries, but there are big pockets of the state where there are zero dispensaries. Mostly due to the lack of a major highway or tourist center.

Capitalizing on the Asset

Cannabis companies continue to struggle with getting big mortgages for buildings. They continue to use the capital raised in order to fund a store or facility purchase. The later, the company can sell the property to a REIT or real estate investment trust and then lease it back. Innovative Industrial Properties or IIP is a popular REIT that has done this so often, that it is the leader in the space. 

Let’s look at Massachusetts again. Almost every big player in the space has sold a property to IIP. (The investment figure is in thousands and the data is from the IIP 2020 annual report.)

 

Rentable Sq. Ft Investment
PharmaCann MA Massachusetts May 31, 2018 58,000 30,500
Holistic MA Massachusetts July 12, 2018 55,000 14,750
Trulieve MA Massachusetts July 26, 2019 150,000 43,500
Ascend MA Massachusetts April 2, 2020 199,000 33,775
Cresco MA Massachusetts June 30, 2020 118,000 8,904
4Front MA Massachusetts December 17, 2020 67,000 15,500

In 2020, IIP closed on the acquisition of a property in Massachusetts, which was approximately 118,000 square feet of industrial space in the aggregate. The purchase price for the property was approximately $7.8 million (excluding transaction costs). IIP also entered into a long-term, triple-net lease agreement for the property with a wholly owned subsidiary of Cresco Labs Inc. (Cresco), which intends to operate the property as a regulated cannabis cultivation, processing and dispensing facility upon completion of redevelopment. Cresco is expected to complete additional tenant improvements for the property, for which IIP has agreed to provide reimbursement of up to $21.0 million. Assuming full reimbursement for the tenant improvements, IIP’s total investment in the property will be approximately $28.8 million.(Data from IIP’s annual 2020 report)

Going back a couple of years in 2018, closed on the acquisition of a property located at 96 Palmer Road in Monson, Massachusetts, which comprises approximately 55,000 square feet of industrial space situated on approximately 5.4 acres. The purchase price for the property was $12.75 million. Concurrent with the closing of the purchase, the Company entered into a long-term, triple-net lease agreement with Holistic Industries, Inc. (“Holistic”), which intends to continue to operate the property as medical-use cannabis cultivation and processing facility in accordance with Massachusetts medical-use cannabis regulations. 

Newcomers – New Jersey & New York

Massachusetts looks like an old-timer compared to the soon-to-be fully legal states of New Jersey & New York. Both markets are expected to be sizable and both are only legal for medical marijuana at this time. Both have recently decided to legalize adult-use cannabis and New Jersey could begin sales in 2021, while New York will begin sales on April 1 2022. Both states are also famous for expensive real estate. 

Any new entrant to the market is best served by hiring a consultant that knows the ins and outs of navigating the red tape that comes with cannabis. The competition for licenses will be fierce. Brian Lauray from MMLG consultants said, “New York & New Jersey will be a battle royale from an application standpoint. Borough commissioners and aldermen and who you know.” Plus, both states allow municipalities to opt out of the cannabis industry. “In New Jersey, a few desirable municipalities have indicated they are open for business – like Jersey City,” said Lauvray. “It’s a really interesting market – everyone wants in. But there is a lot of demand and not a lot of supply. It will come down to the operators that have the money and can tweak many levers” 

IIP has also been busy in the New York market buying properties despite the relatively small size of the number of stores and facilities. New York is a limited license state that only gave 10 operators the opportunity to be in the industry. That will change with full legalization, but those 10 operators have all struggled with the medical-only nature of the state. It had a very restricted list of conditions in order to get the license and sales have been dismal versus the amount of money invested. So it was no surprise to see some companies selling off real estate to IIP in order to get some cash in the kitty.  

IIP said in a securities filing that in December 2019, one of its properties in New York accounted for 6% of our net real estate held for investment. In December 2020, the company said it amended its lease and entered into a development agreement with PharmaCann at one of our New York properties, making available $31.0 million in construction funding at the property. “Assuming full payment of the construction funding, our total investment in the property will be $61.0 million. As of December 31, 2020, we incurred approximately $70,000 of the construction costs, of which none was funded.”

 

Rentable Sq. Ft Investment
Curaleaf NJ   New Jersey July 13, 2020 111,000 18,940
Columbia Care NJ Portfolio   New Jersey July 16, 2020 54,000 13,033
PharmaCann NY   New York December 19, 2016 127,000 30,000
Vireo NY   New York October 23, 2017 40,000 6,717

 
In New Jersey, the Columbia Care parcel is actually two properties and IIP said that Columbia Care was expected to redevelop one of the properties and IIP would reimburse them $1.6 million. Curaleaf was redeveloping its building with a reimbursement of up to $29.5. IIP said  $20 million was spent on redevelopment costs and IIP funded $13.4 million of that. Both New Jersey and New York give cannabis companies the best of both worlds. Each state has urban dense population locations and then long-term agricultural areas. In upstate New York, much of this agricultural land is economically depressed as well and welcomes large-scale grow facilities despite the smell and light pollution. 

Pennsylvania

Pennsylvania is a medical-only state at this time, although there seems to be incredible pressure on the state to go fully legal as its neighbors New York and New Jersey. In the last 12 months, Pennsylvania medical cannabis sales totaled $910 million. Medical cannabis sales have grown steadily in the past 13 months, starting at $40M in January 2020 and ending at close to $98M in January 2021. The state’s stores have grown from 47 in 2018 to 110 in 2021 for just a medical market. The size of the spaces is growing as well. While Canadian companies may have overbuilt facilities, Pennsylvania operators are clamoring for more. In December Ayr Strategies closed on the purchase of CannTech PA for $57 million. This acquisition included a 143,000 sq. ft. cultivation and processing facility on 13 acres.

 

Rentable Sq. Ft Investment
Jushi PA Pennsylvania April 6, 2018 89,000 13,381
Maitri PA Pennsylvania April 24, 2019 51,000 21,402
Green Leaf PA Pennsylvania May 20, 2019 266,000 13,592
PharmaCann PA Pennsylvania August 9, 2019 54,000 25,730
GTI PA Pennsylvania November 12, 2019 148,000 39,600
Curaleaf PA Pennsylvania December 20, 2019 72,000 25,749
Holistic PA Pennsylvania June 10, 2020 108,000 15,007

Parallel is working to set up a 120,000-square-foot grow facility in a space owned by The Buncher Co. in the Chateau neighborhood of the North Side, working in partnership with the University of Pittsburgh through its venture called Goodblends PA. The company said that the venture needed a big building for a range of uses that will include growing and processing medical cannabis products, conducting research, training employees as well as meeting basic distribution and warehousing demands. A fully legal state could see an additional boost in real estate. At this time, Pennsylvania is IIP’s second-largest market for a property with rents accounting for 15.7% of rental revenue. Seven properties with 788,000 rentable square feet bring in $18.3 million a year (as of December 2020). 

Maine

An example of the effect on a fully legal state can be seen in the recent increase in stores in Maine, which jumped from 8 in 2019 to 23 in 2021. Propco., a subsidiary of New York-based real estate investment trust Power REIT acquired a three-acre property in York County, Maine. The sales price was $400,000. That property currently houses an under-construction, 32,800-square-foot cannabis cultivation facility. It also has a 2,800 square foot processing/distribution building with construction recently completed. PropCo. Said it will fund the construction of an additional 9,900 square feet of processing space and the renovation of an existing 2,738 square foot building at the recently acquired property. The completion of construction on the new property is targeted for Summer 2021.

The combined properties are expected to be one of the largest cannabis greenhouse cultivation and processing/distribution properties in the state of Maine upon completion. David Lesser, Power REIT’s Chairman and CEO said that it’s not easy to raise capital for large-size facilities despite all the talk. He also noted this his REIT is focused on greenhouse cultivation facilities. 

CT, NH, RI

The remaining states are relatively smaller parts of the real estate story in the Northeast. Connecticut has four producers that account for 18 dispensaries and facilities. Vermont has seven, New Hampshire has five and Rhode Island has three. This week a bill to legalize marijuana in Connecticut was approved by a key committee on Tuesday—but it “remains a work in progress,” the chairman said. The legislation is said to be backed by the governor and includes a series of new social equity provisions. A week ago, Marijuana Moment reported a pair of Rhode Island Senate committees held a joint hearing on two marijuana legalization proposals—including one proposed by the governor—as well as several bills to reform the state’s existing medical cannabis program. In late 2020, Vermont’s governor allowed a legalization law to take effect without his signature. However, it may be some time before actual legal sales can begin as decisions around licensing have yet to be decided. 

Rents

Ultimately, the real estate side of cannabis seems to be a solid choice. Lesser said that so far in cannabis if tenants have trouble making the rent, it often gets worked out. Either new investors come in or the company is acquired, but the situation is typically resolved. IIP has noted that its rents are on time as well. In October 2019, a court-appointed a receiver of the tenant at its Los Angeles, California property. That tenant subsequently defaulted on its lease payments to us for all of 2020. It had been leased to Vertical in southern California, in which Vertical made partial payments of contractual rent due.

The purchase price for the southern California portfolio was approximately $17.3 million.  Then Holistic the cannabis operations from the tenant, which had been in receivership. Holistic closed on this transaction and then quickly executed a long-term, triple-net lease with IIP for the entire property. Assuming full reimbursement for the redevelopment of the property, IIP’s total investment in the property will be $24.0 million. The company did say that for some or all of 2021, it expected that many of its tenants would continue to incur losses as their expenses increase in connection with the expansion of their operations and that they have made and will continue to make rent payments to us from proceeds from the sale of the applicable property or cash on hand, and not funds from operations.IIP says it has not provided deferrals of any rent obligations to any tenant since July 1, 2020.

In Closing

The New England market holds a great deal of promise for the cannabis industry. The pandemic has caused a huge disruption in traditional retail for many of these economies. Lockdowns caused a spike in online shopping causing many brick & mortar retailers to close up, presenting opportunities for dispensaries. While rural land values have risen as remote working created an opportunity for urban dwellers to relocate to more rural settings. Once depressed towns have seen new life, so the days of cheap big acreage in remote locations have declined. It’s still relatively early in this cycle for cannabis industries and the picture is sure to change as rules regulations get decided and then perhaps tweaked again. 


Kaitlin DomangueFebruary 25, 2021
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It’s time for your Daily Hit of cannabis financial news for February 25th, 2021. 

On the Site

Should You Use CBD Gummies to Help Mental Health? 

There is plenty of evidence to show that CBD can have a profound impact on mental health. This article dives into some of the research and studies that exist include: 

  • Anti-inflammatory
  • Anxiety relief from CBD 
  • CBD’s interaction with serotonin receptors in the brain
  • And other additional pieces of research 

 

Innovative Industrial Stock Sells Off Despite Solid Earnings

Innovative Industrial Properties, Inc. (IIP) (NYSE: IIPR) released results for the fourth quarter and year ending December 31, 2020, after the market closed on Wednesday. The stock was pulling back in pre-market trading by over 6% to sell near $206 as investors were disappointed with the earnings. Innovative Industrial delivered a fourth-quarter FFO of $1.36 missed by $0.07 and the revenue of $37.09 million missed by $1.41 million despite increasing by 110%.

 

Valens Reiterate Guidance Despite Slight Drop in Sales

The Valens Company Inc. (OTCQX: VLNCF) reported its fourth quarter and fiscal year financial results for the period ended November 30, 2020. Valens reported gross revenue for the fourth fiscal quarter fell to $17.9 million from $18.5 million in the third quarter of 2020. The net loss increased to $16.6 million sequentially over the third quarter’s net loss of $3 million.

 

PharmaDrug Files For DMT To Be Used for Kidney Transplants

PharmaDrug Inc. (CSE: BUZZ) (OTC Pink: LMLLF) has filed for an application with the U.S. Food and Drug Administration to receive Orphan Drug Designation (“ODD”) for N,N-Dimethyltryptamine or DMT in the prevention of ischemia-reperfusion injury in patients undergoing kidney transplantation.

 

Indus Holdings Buys Lowell Herb for $39 Million

California-based Indus Holdings, Inc. (OTCQX: INDXF) is buying Lowell Herb Co. and Lowell Smokes in a deal valued at $39 million. The acquisition includes trademark brands, product portfolio, and production assets of Lowell from The Hacienda Group effective immediately. The company will change its name to Lowell Farms Inc.

 

Acreage Holdings Sells Florida Property for $60 Million

Acreage Holdings, Inc. (OTCQX: ACRDF, ACRHF) announced its subsidiary, High Street Capital Partners was selling Acreage Florida, Inc. to Red White and Bloom Brands, Inc.  (OTCQX: RWBYF) for $60 million. The deal also includes the sale of property in Sanderson, Florida. The stock was dropping over 6% to lately sell at $7.39.

In Other News

MJ Holdings, Inc. to Acquire Medical and Recreational Cultivation Licenses 

MJ Holdings, Inc. (OTC PINK: MJNE) has reached a point of being ready to purchase two cultivation licenses (recreational and medical) and two production licenses (recreational and medical) and transfer the appropriate license to proprietary land. 

“In consideration of $1.250M and 200,000 shares of our common stock (Purchase Price), we will soon fully control our own destiny as we have applied to transfer the cultivation licenses to our proprietary land: The Farm. We have arranged an amicable separation under our existing management agreement with Curaleaf/Acres and are developing our cultivation facility on The Farm for our own use. With the enormous Las Vegas tourism industry soon to be on the rebound, we are well positioned to meet or exceed our fair share of demand,” said Paris Balaouras, Founder and Chief Cultivation Officer of MJ Holdings, Inc. 

 

Cronos Group Earnings Preview for Q4 2020 

Cronos Group (OTC:CRON), is set to announce their earnings for the fourth quarter of 2020. The consensus EPS estimate is -$0.08, and the revenue estimate at $13.23 million. The company has beat estimates 75% of the time over the last year, and has beaten revenue estimates 25% of the time. 

 

Kalamazoo Mayor to Attend Ribbon Cutting Ceremony of Cookies Store 

Kalamazoo’s mayor, David Anderson, has confirmed his participation in a ribbon cutting ceremony for a Cookies retail location on February 26th. The event was announced by the company in a press release. 

Cookies is owned by California rapper and entrepreneur, Berner. 

“The Midwest is an important part of Cookies’ overall expansion plan, and our partnership with Gage Cannabis has been integral,” Cookies CEO Berner said in a news release. “We’ve seen tremendous demand from cannabis consumers in Michigan and the surrounding areas and look forward to continuing to serve them as our partnership grows with this second location.”


Debra BorchardtFebruary 25, 2021
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Innovative Industrial Properties, Inc. (IIP) (NYSE: IIPR) released results for the fourth quarter and year ending December 31, 2020, after the market close on Wednesday. The stock was pulling back in pre-market trading by over 6% to sell near $206 as investors were disappointed with the earnings. Innovative Industrial delivered a fourth-quarter FFO of $1.36 missed by $0.07 and the revenue of $37.09 million missed by $1.41 million despite increasing by 110%.

Seven analysts cover the stock with five giving the company a buy rating and two at a hold rating. the average price target is $207 and the stock had been selling for around $220. The 52-week high is $220, so the selling may be related to just some simple profit-taking.

Fourth Quarter

IIP reported that its total revenues increased 110% to $37.1 million in the quarter. The net income was approximately $21.0 million for the quarter, or $0.91 per diluted share, and AFFO of approximately $32.4 million, or $1.29 per diluted share. The company also paid a quarterly dividend of $1.24 per common share on January 15, 2021 to stockholders which was a 24% increase over last year’s fourth quarter and a 6% increase sequentially and equal to an annualized dividend of $4.96 per share. The company also engaged in an “at-the-market” equity offering program, that issued 1,762,500 shares of common stock during the fourth quarter totaling approximately $262.9 million in net proceeds.

Full Year

For the full year of 2020, IIP delivered total revenues of $116.9 million and net income of approximately $64.4 million and adjusted funds from operations (“AFFO”) of approximately $97.8 million, representing increases of 162%, 191%, and 180% over 2019, respectively. The company reported $3.27 of net income attributable to common stockholders per diluted share and $5.00 of adjusted funds from operations (“AFFO”) per diluted share, representing increases of 61% and 53% over 2019, respectively. IIP declared dividends of $4.47 per share, a 58% increase over 2019.

In addition, the company said it closed on over $620 million in new acquisitions and additional investments at existing properties (including commitments to fund future development/redevelopment, but excluding transaction costs), including 20 new property acquisitions, expanding IIP’s footprint to 66 properties totaling 5.4 million rentable square feet in 17 states at year-end.

Renters Are Paying

In a sign of strength within the cannabis community, it seems the rents are getting paid despite COVID challenges. IIP said it had collected 100% of contractual rent due for the fourth quarter of 2020 and 100% of contractual rent due for the months of January and February 2021. The company did note that the tenant at IIP’s Los Angeles, California property was in receivership until IIP signed a new lease with Holistic for the entire property in January 2021. Plus, Medical Investor Holdings, LLC (Vertical) made partial payments of contractual rent due that the properties that Vertical occupied represented less than one percent of IIP’s total gross assets at year-end.

Looking Ahead

The company is sitting comfortably with $126 million in cash and cash equivalents and approximately $619.3 million in short-term investments, totaling approximately $745.3 million. There is no debt, other than approximately $143.75 million of 3.75% exchangeable senior notes maturing in 2024 (the Exchangeable Senior Notes), representing a fixed cash interest obligation of approximately $5.4 million annually, or approximately $1.3 million quarterly.

As of February 24, 2021, IIP said it owned 67 properties located in Arizona, California, Colorado, Florida, Illinois, Maryland, Massachusetts, Michigan, Minnesota, Nevada, New Jersey, New York, North Dakota, Ohio, Pennsylvania, Virginia, and Washington, totaling approximately 5.8 million rentable square feet (including approximately 2.0 million rentable square feet under development/redevelopment), which were 100% leased with a weighted-average remaining lease term of approximately 16.7 years. As of February 24, 2021, IIP had invested approximately $1.1 billion in the aggregate (excluding transaction costs) and had committed an additional approximately $328.7 million to reimburse certain tenants and sellers for the completion of construction and tenant improvements at IIP’s properties.


Debra BorchardtNovember 4, 2020
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Innovative Industrial Properties, Inc. (IIP)(NYSE: IIPR) reported total revenues of approximately $34.3 million for the third quarter ending September 30, 2020. This was a 197% increase from the prior year’s third quarter. It also beat the Yahoo Finance average analyst estimate for revenue of $29.63 million. The stock rose over 8% ahead of the company’s earnings to lately trade at $133.

IIP recorded net income available to common stockholders of approximately $18.9 million for the quarter, or $0.86 per diluted share, which beat the Yahoo Finance estimate for $0.78. The adjusted funds from operations (AFFO) were approximately $27.9 million, or $1.28 per diluted share. Net income available to common stockholders and AFFO increased by 205% and 192% from the prior year’s third quarter, respectively.

IIP said that it had approximately $161.1 million in cash and cash equivalents and approximately $451.2 million in short-term investments, totaling approximately $612.3 million. The company said it had no debt, other than approximately $143.7 million of unsecured debt, consisting solely of 3.75% exchangeable senior notes maturing in 2024, representing a fixed cash interest obligation of approximately $5.4 million annually, or approximately $1.3 million quarterly.

IIP paid a quarterly dividend of $1.17 per share on October 15, 2020 to common stockholders of record as of September 30, 2020, representing an approximately 10% increase over the second quarter 2020’s dividend and a 50% increase over the third quarter 2019’s dividend.

COVID Rent Update

IIP has said during the first quarter earnings release, that it worked with three of its 22 tenants to provide temporary rent deferrals, structured to apply a portion of the security deposit IIP holds under each lease to pay April rent in full, defer rent for May and June in full, and provide for the pro rata repayment of the security deposit and deferred rent over an 18 month time period starting July 1. The company said that all three tenants paid rent in full for each of July, August, September and October, including pro rata repayments of the security deposit and deferred rent.

IIP also said that it collected 100% of contractual rent due for each of the months of July, August, September and October 2020 across IIP’s total portfolio (other than the tenant at IIP’s Los Angeles, California property that is in receivership), and has not executed rent deferrals for any additional tenants, other than the three tenants described above.

IIP Is Up To 63 Properties

As of November 4, 2020, IIP said it owned 63 properties located in Arizona, California, Colorado, Florida, Illinois, Maryland, Massachusetts, Michigan, Minnesota, Nevada, New Jersey, New York, North Dakota, Ohio, Pennsylvania and Virginia, totaling approximately 5.0 million rentable square feet (including approximately 1.7 million rentable square feet under development/redevelopment), which were 99.3% leased (based on square footage) with a weighted-average remaining lease term of approximately 16.1 years.

IIP has raised total net proceeds of over $1.4 billion from all of its capital raising activities to date, after deducting underwriters’ discounts and commissions and offering expenses, and had invested approximately $908.4 million in the aggregate (excluding transaction costs) and had committed an additional approximately $273.5 million to reimburse certain tenants and sellers for completion of construction and tenant improvements at IIP’s properties. These statistics do not include up to approximately $7.2 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 tenant at that property may not elect to have IIP disburse those funds to the tenant 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.


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