Innovative Industrial Properties (NYSE:IIPR) is back to doing what it does best: purchase facilities that can be used to grow and process cannabis, lease them to state-licensed operators, and pass the profits on to investors.

The real estate investment trust (REIT) completed a sale-leaseback deal with multistate dispensary company PharmaCann on Oct. 30. IIP paid $18 million plus transaction costs for a 48,000-square-foot industrial property in Dwight, Illinois. The REIT immediately entered into a triple-net lease with PharmaCann, which will continue to use the facility for cannabis cultivation and processing. 

IIP will also reimburse PharmaCann for up to $7 million in tenant improvements. PharmaCann intends to use the funds to expand the property by about 18,000 square feet as it seeks to double its production capacity.

Miniature houses on top of rising stacks of gold coins

Innovative Industrial Properties is growing its real estate empire. Image source: Getty Images.

The deal is the fifth time IIP has acquired a property from, and leased it back to, PharmaCann.

"We have been the preferred real estate capital partner for PharmaCann since our initial acquisition and lease of PharmaCann's New York cultivation and processing facility in 2016," IIP CEO Paul Smithers said in a press release. "In the past three years of our relationship, PharmaCann has made tremendous strides in executing on its business plan."

PharmaCann recently scrapped its merger with high-end cannabis retailer MedMen Enterprises (OTC:MMNFF).

"The cannabis sector has evolved tremendously since we first announced the PharmaCann transaction, and based on the current macro-environment and future opportunities that exist for our business, we believe it is now in the best interest of our shareholders to deepen, rather than widen, our company's reach," MedMen CEO Adam Bierman said at the time. 

It appears that PharmaCann is taking a similar approach to MedMen, by deepening its footprint in one of its core markets. The company currently operates four medical-use dispensaries in Illinois, and it plans to add four retail stores in the state in 2020 after Illinois allows recreational cannabis sales to begin on Jan. 1 as expected.

"As we start a new chapter in the evolution of our business, we are thrilled to team once again with IIP as our long-term real estate partner in Illinois," PharmaCann CEO Brett Novey said. "With our expected doubling of production capacity at our Dwight facility and doubling of our retail presence in high-traffic locations across greater Chicago, we are extremely well positioned to both continue to maximize our product reach to patients in need through Illinois' medical cannabis program and to meet the tremendous demand anticipated in connection with the roll-out of the adult-use cannabis program in just a few months' time."

More real estate deals = more cash for investors

By serving as a valuable real estate partner for leading cannabis retailers, IIP has positioned itself to profit alongside them as they expand their operations. IIP passes those profits on to investors through its rapidly rising dividend. And with more states likely to legalize marijuana in the coming decade, shareholders can expect Innovative Industrial Properties to continue to grow both its real estate holdings -- and its cash payout -- for many years to come.