Innovative Industrial Properties, Inc. (IIP) closed on a $9 million sale-leaseback transaction with Green Thumb Industries Inc. (GTI) for its 46,000-square-foot cannabis cultivation and processing facility in Oglesby, Illinois. GTI is also expected to make certain improvements to the property, for which IIP has agreed to provide reimbursement of up to $41 million. Assuming full reimbursement for such improvements, IIP’s total investment in the property will be $50 million.
This sale-leaseback transaction marks IIP’s third acquisition and lease with GTI, with prior sale-leaseback transactions for GTI’s licensed medical cannabis cultivation and processing facility in Pennsylvania completed in November 2019 and GTI’s licensed medical cannabis processing facility in Ohio completed earlier this year. Assuming full reimbursement of tenant improvements under the leases, IIP’s total investment in properties leased to GTI is expected to be approximately $96.8 million.
As a pioneering real estate investment trust (REIT) for the medical-use cannabis industry, IIP partners with experienced medical-use cannabis operators and serves as a source of capital by acquiring and leasing back their real estate assets, in addition to offering other creative real estate-based capital solutions.
GTI is a leading national cannabis consumer packaged goods company and owner of Rise and Essence retail stores. GTI has 13 manufacturing facilities, licenses for 96 retail locations and operations across 12 U.S. markets. In addition to the cultivation and processing facility in Oglesby, GTI owns a cultivation and processing facility in Rock Island, Illinois and seven stores throughout the state, with licenses to open three additional retail locations.
Illinois, the 11th state to legalize cannabis for adult-use, commenced adult-use cannabis sales on January 1 of this year. In January alone, despite a significant supply shortage at launch, 41 Illinois dispensaries sold 972,045 individual cannabis products in the first month alone, generating nearly $40 million in sales and $10 million in tax revenue, according to the Illinois Department of Financial and Professional Regulation. With this acquisition, IIP owns six regulated cannabis cultivation and processing facilities in Illinois, representing a total expected investment of approximately $182.8 million, which includes commitments by IIP to fund future tenant improvements and construction at certain properties, and includes $15.9 million that a tenant at one of IIP’s Illinois properties may not elect to have IIP disburse those funds to them.
“We are thrilled to expand our relationship with Green Thumb, one of the country’s leading regulated cannabis operators,” said Paul Smithers, president and chief executive officer of IIP. “This investment enables GTI to significantly expand their consumer products manufacturing capacity and reflects our belief in their continued success in serving the growing demand.”
“The highest ROIC in global cannabis today is in wholesale capacity expansion in our home state of Illinois,” said GTI Founder and CEO Ben Kovler. “IIP is a proven long-term real estate capital partner and provides us with another flexible real estate capital solution that allows us to put our capital to work in the best way possible. With the introduction of Illinois’ adult-use cannabis program this year, we continue to ramp up production to meet the demand from cannabis consumers and patients.”