Innovative Industrial Properties (IIPR 0.05%) continues to expand its property portfolio.
The real estate investment trust (REIT) announced on July 29 that it closed on the acquisition of a 150,000-square-foot property in Holyoke, Massachusetts, from marijuana dispensary company Trulieve Cannabis (TCNNF 0.36%).
A subsidiary of Trulieve will lease the property from Innovative Industrial Properties (IIP) on a triple-net basis. Trulieve intends to operate the property as a licensed cannabis growing and processing facility. Trulieve's initial lease term is 10 years, with options to extend the lease for another decade.
"The IIP team provided us with a flexible, creative transaction structure for cash-efficient redevelopment of the property, and moved quickly to meet our time frame," Trulieve CEO Kim Rivers said in a press release. "We look forward to developing this property and to bringing our best-in-class operations and dedication to patient satisfaction to the residents of Massachusetts."
IIP purchased the real estate for $3.5 million. IIP will also reimburse Trulieve for up to $40 million in tenant improvements. In return, it will receive ownership of the property and initial annualized base rent equal to 11% of its $43.5 million investment.
"We are thrilled to add a tenant with the strength of credit and of the caliber of Trulieve to our tenant roster," IIP CEO Paul Smithers said in a press release. "Through its dedication to providing Florida patients with the highest quality products in a welcoming, compassionate environment, Trulieve has become the preeminent operator in Florida, and we look forward to supporting Trulieve as a long-term real estate capital partner as it continues to expand its operations in Massachusetts."
The deal highlights IIP's role as a real estate-based capital provider for the medical cannabis industry. By acquiring and leasing back properties, IIP is helping to fuel the industry's growth by serving as a vital source of capital for cannabis producers.
Innovative Industrial Properties has invested more than $260 million in cannabis-focused real estate. These investments have been highly profitable for the REIT and its shareholders -- the properties generate an average current yield on invested capital of approximately 14.6%.