October 20, 2016

Innovative Industrial Properties (IIP), a newly formed, San Diego-based real estate investment trust (REIT) focused on building a portfolio of medical marijuana grow facilities, has filed with the Securities and Exchange Commission (SEC) for a $175 million initial public offering (IPO).

Founded this year by Alan Gold, founder of Biomed Realty Trust which has subsequently been acquired by Blackstone for $7 billion in January of this year, Innovative Industrial Properties focuses on acquiring freestanding properties used for growing licensed medical marijuana and then leasing them back through long-term net lease agreements to growers that have undergone state licensing processes, according to the firm’s website.  Through the lease-back process, growers will gain capital to reinvest in their operations resulting in a higher yield and returns for both parties involved.

In its filing IIP states that it intends to sell 8.75 million shares at $20 per share under the symbol IIPR for a total company valuation of over $200 million. Alan Gold will serve at the company’s executive chairman, holding a 10 percent stake, while Paul Smithers, who will serve at CEO will hold 232,500 shares. Other executives formerly with Biomed who will be joining the company include, CFO Robert Sistek, General Counsel Brian Wolfe, and Director Gary Kreitzer.

Will this dog hunt?

The IPO market so far this year has been less than stellar, with this being the least active since the financial crisis, according to Matthew Kennedy, an analyst with Renaissance Capital reports the Cannabist.

“There hasn’t been a history of companies like this going public, so it’s hard to say what its reception might be,” said Kennedy.

A date has not yet been set for the float, however, at this point the earliest it could occur is November 11. But with the upcoming presidential election and Thanksgiving holiday, watchers are expecting it to happen at some point in December.

If successful, IIP plans to use the capital from the float to fund the acquisition of between 10 and 20 properties. The first property in sight for acquisition is PharmaCann – one of the five companies in New York State licensed for the cultivation and dispensing of medical-use marijuana, which will sell and lease back its 70-acre property with a 127,000 square foot facility in Montgomery, New York to IIP for $30 million.

Citing positive market conditions including a liberalization of public sentiment, trackable sales growth, and an industry in need of financing, IIP is eyeing additional deals worth $88 million in its target markets of Arizona, California, Illinois, Maryland, Massachusetts, Nevada, New York, Oregon, and Washington.

“A 2015 poll by Harris found that 81% of Americans support legalization of cannabis for medical use,” IIP states on its website, adding that “As of June 10, 2016, 26 states and the District of Columbia allow their citizens to use medical cannabis, with an estimated combined population of 179.2 million. We expect other states to approve medical-use cannabis in coming years as well.”

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Lynda Kiernan