Innovative Industrial Properties (NYSE:IIPR) is on an expansion drive as it sets its eyes on more cannabis-related real estate. In a recent news release, the company revealed the acquisition of an industrial space approximately 102,000 sq. ft. in size. The property is in California and it comprises of five units in total.
IIPR boasts two properties in California
Notably, the statement reports that IIPR spent about $27.1 million without including transaction costs to lay claim to the real estate. Interestingly, the company followed the acquisition with a long term lease agreement with a licensed cannabis operator. In particular, the operator will use the properties to cultivate cannabis. In addition, the lessee will manufacture cannabis products as well as processing and distributing the products subject to existence regulations.
For starters, the acquisition of the property becomes the second investment by IIPR in California this year. In mid-February, the company agreed to take up a 43,000 sq. ft. industrial space in Sacramento for $6.7 million. Concurrently, the company agreed to lease the property to an experienced operator who would use it for developing a facility for cultivation of cannabis. Further, the company revealed that the seller of property would do some redevelopment on the real estate before complete handover. As such, IIPR agreed to reimburse the costs of redevelopment which will take the total acquisition cost to $11.5 million.
California has huge potential for revenue growth
Speaking in the aftermath of the acquisition of the Sacramento property, Paul Smithers, President and CEO of IIPR expressed his confidence in the incoming tenant. Further, he said that the redevelopment of the property would help the tenant to expand their reach significantly. On the tenant of the second property in California, the CEO said that he has confidence in the innovator mentality of the new tenant.
California’s regulated cannabis market is very critical to companies that want to grow and capture as much revenue as possible. With a total population of residents in the region of 40 million, the state has a huge population of marijuana users. Also, the state has a favorable marijuana track record with the first legal recognition of the therapeutic abilities of the substance coming in 1996. Also, IIPR’s interest in California adds to properties spread in 10 other states including Colorado and New York.