Innovative Industrial Properties (NYSE:IIPR) is expanding in Michigan. 

The real estate investment trust (REIT) purchased a new 156,000-square-foot property in Warren, Michigan for $19 million, excluding transaction costs.

IIP is leasing the facility to LivWell Holdings licensee LivWell Michigan. Once upgrades are completed -- IIP will cover up to $23 million in tenant improvements -- LivWell will use the facility to cultivate and process cannabis.

A cannabis-growing facility.

Innovative Industrial Properties leases cannabis production facilities to licensed growers. Image source: Getty Images.

"We are excited to announce the beginning of our long-term real estate partnership with LivWell," IIP CEO Paul Smithers said in a press release. "LivWell has developed a tremendous track record of success in Colorado during the last decade, and we look forward to supporting the rapid expansion of their operations in Michigan." 

IIP has positioned itself as a valuable real estate partner for medical marijuana companies. By acquiring and leasing properties to cannabis producers, it allows them to expand faster by reducing their capital requirements. This is particularly important today, as many cannabis companies are finding it difficult to raise capital from traditional sources, such as commercial banks. 

IIP has already invested more than $300 million in real estate acquisitions. The REIT owns 32 properties in 12 U.S. states that together cover 2.3 million rentable square feet. Demand for these facilities has been strong; the properties are 100% leased with average terms of nearly 16 years. They're also highly profitable for IIP and its shareholders, with average returns on invested capital of more than 14.1%.

With more states expected to legalize marijuana in the coming years, demand for cannabis production facilities should continue to grow. Investors, in turn, can expect Innovative Industrial Properties to steadily expand its real estate portfolio in the months and years ahead.

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