Plenty of cannabis companies must get creative to raise capital due to various legalities. Innovative
Industrial Properties real estate company is no exception. In 2016, the company went public through an
IPO and have set their sight on the cannabis industry.
When the company launched its IPO on the New York Stock Exchange in 2016, the company has
acquired over $250 million. They have funded multiple cannabis operations and over $167 million in real
estate transactions since.
Their national portfolio has a makeup of specialized industrial and greenhouse buildings in nine states
with a total of 1,027,000 rentable square feet.
IIP has created a partnership solution for other commended cannabis businesses through loaning funds
and lease backing in real estate assets.
Paul Smithers, CEO, Director, and President of IIP says that properties are acquired from cannabis
growers that reinvest the profits into fundamental operations. The properties are then leased back to
the cultivators under absolute net long-term leasing agreements.
“Our highly experienced team is institutionalizing the opportunity for entrepreneurs to continue to grow
their medical cannabis businesses by removing financial barriers and providing them with growth
capital,” Smithers says.
Although many cannabis growers start up their businesses from personal or private loans, IIP’s sale and
leaseback program provide growers with the opportunity to leverage their company and free up capital.
IIP identifies potential grower partnerships through a variety of different factors.
“First of all, we look at the quality of the management team and proven track record of success in other
industries they may have been involved in. We look at their capital position. We look at the experience
in the industry and breadth of operations, typically including multi-state operations.” Says Smither.
IIP strategically dissects a company, looking for strong management teams, ethical compliance with
state and federal regulation, and sturdy projected financials. Additionally, the company identifies other
factors like the state’s cannabis program through licensing procedures, succeeding conditions, and
population size.
“In our view, it is critical to have an in-depth understanding of the potential tenant’s management team,
including their experience, track record of success, reputation and most importantly, integrity. In short,
we look for well-capitalized, experienced growers with well-seasoned management teams.
We understand that many of these companies in the new states are startups, and that doesn’t disqualify
them from our program if they’re a startup, as long as they have the management team we like, and
they have retained an experienced grow team, from probably another state. Our team has extensive
experience in underwriting a lot of clients in the life sciences industry, and we apply that understanding
and methodology to the management teams in the cannabis industry,” Smithers says.
IIP also keeps an eye out for regulatory violations, especially if a company has been flagged or fined for
noncompliance.
If IIP deems a business a sufficient partner, there is no formal application process, but rather a verbal
agreement with clear terms.
“Our terms are pretty simple, we have long-term leases, typically 15-20 years, with five-year renewal
options. These are pure triple net leases, so the tenant is responsible for structural repairs and
replacements throughout the term. We have fixed annual rental escalations, and we usually provide a
[tenant improvement] (TI) allowance for [expansion].” Smither says.
As IIP continues to look for qualified cannabis growers, Paul Smithers remains very optimistic for the
potential partnerships to come.
“I think the opportunities in 2019 are really positive for us,” he says. “We like the regulatory
environment [and] the direction the federal government’s going in, so I think that’s going to be very
beneficial for our growers, and therefore for us.”
