IIPR-Trulieve Real Estate Deal in Florida

By

Updated

Innovative Industrial Properties (IIPR), the first real estate investment trust in the medical marijuana segment, used $17 million to buy a cannabis cultivation facility in Florida. IIPR buys and rents industrial warehouses in the cannabis sector.

Article continues below advertisement

More about the deal

On October 23, 2019, IIPR bought a 120,000-square-foot property with five-building cultivation establishment for $17 million in Quincy, Florida. Further, the company bought the property from Trulieve Cannabis Corp. (TCNNF), a famous US medical cannabis company.

Thus, Trulieve entered into a triple-net lease with IIPR. This means the tenant covers all the property expenses. In exchange, Trulieve can use the place for cultivating medical cannabis. Moreover, the deal includes a 10-year initial lease term. The base rent is fixed at 11% of the price paid for the property. Further, Trulieve has two choices. Either it can raise the lease term for five years each or sign up for 10 more years.

Trulieve CEO Kim Rivers said, “It is great to team with IIP again on this transaction, providing us the real estate capital to continue to expand our capacity in one of the largest and most dynamic medical cannabis markets in the United States. These newly developed cultivation facilities provide us with the optimal controlled environments to continue to deliver the highest quality products to patients throughout the state of Florida.”

Article continues below advertisement

IIPR’s past agreement with Trulieve

In July 2019, IIPR signed a leaseback deal with Trulieve. This was for the purchase of a 150,000-square-foot industrial space in Massachusetts. The deal was worth $3.5 million. Also, as per the sale-and-leaseback deal, Trulieve will get the consideration amount and use the property on a lease. Further, IIPR promises to refund nearly $40 million for the upgrade that Trulieve will perform on the property.

Why invest in Florida?

Florida is one of the biggest cannabis markets available for medical use in the US. In 2016, Floridians voted 71% in favor and enabled a legal cannabis program for medical use. Also, some of the eligible medical issues under the program are multiple sclerosis, PTSD, cancer, and epilepsy.

Originally, Florida prohibited the usage of smokable flowers. However, in March 2019, Florida withdrew the ban through the passage of a bill. As of early October, there were more than 270,000 eligible patients and over 2,500 approved physicians in the cannabis program for medical use.

Further, New Frontier’s industry outlook report projects the legal cannabis market size in the US at a 14% CAGR (compound annual growth rate). This could reach $30 billion by 2025. Also, Florida may make up more than 10% of the US cannabis market.

Article continues below advertisement

IIPR’s deal with Cresco Labs

On October 22, 2019, IIPR bought two properties in Illinois for $32.8 million. Both the properties in Joliet and Kankakee put together occupy combined 90,000-square-foot industrial spaces. IIP is renting out these properties on a triple-net basis to Cresco Labs (CRLBF), a Chicago-based medical cannabis company. Per the deal, Cresco will use the property for its cannabis operations. In turn, IIP will refund Cresco close to $13.8 million as a part of tenant developments.

“We are making excellent progress on our efforts to scale our operations in Illinois to meet the increased demand for cannabis in Illinois that will result from the expansion of the medical-use program, as well as the legalization of adult-use cannabis beginning in 2020,” said CEO Charlie Bachtell. In Illinois, the company is in a perfect position to boost production and expand its market share.

IIPR to take advantage of the cannabis industry

IIPR is the REIT (real estate investment trust) that gives services for medical cannabis companies. It gets properties from medical marijuana companies and rents it back to them. Moreover, the company gives other services related to real estate. As of October 23, 2019, IIP has 35 properties across the US that add up to about 2.6 million rentable square feet.

From the investors’ point of view, IIP can enter into more deals similar to that of its agreements with Cresco Labs and Trulieve over the coming months. This should happen as a lot of the states’ approved cannabis markets are now beginning.

Advertisement

More From Market Realist