By Alex Ciorogar
Innovative Industrial Properties Inc.—a leading provider of creative real estate capital solutions to the medical-use cannabis industry—will acquire an Arizona-area asset comprising more than 350,000 square feet of greenhouse and industrial space in a $15 million sale-leaseback transaction with a subsidiary of The Pharm LLC.
The firm will also enter into a long-term, triple-net lease agreement with The Pharm subsidiary, which is planning certain tenant improvements, for which Innovative Industrial has agreed to provide reimbursement of up to $3 million.
“The Pharm is pleased to enter into a long-term partnership with Innovative Industrial Properties through a real estate sale-leaseback transaction that will help capitalize our plans for national expansion. Innovative Industrial Properties’ flexible, long-term capital solutions have enabled The Pharm to unlock the equity it had invested in real estate to be redeployed back into our core business, where we expect to generate higher returns,” said Randy Smith, founder & CEO of The Pharm LLC, in prepared remarks.
The initial term of the lease is 15 years, which can be extended for two additional five-year periods. The lease provides for an initial annualized aggregate base rent of $2.5 million or 14 percent of the sum of the purchase. The tenant improvements are subject to an initial partial rent abatement. The aggregate base rent is subject to 3.2 percent annual increases during the term of the lease. The Pharm subsidiary is also responsible for paying Innovative Industrial Properties a property management fee equal to 1.5 percent of the then-existing base rent.
“The Pharm’s team brings together decades of management and business execution success and we believe they are very well-positioned to continue their strong growth in the Arizona medical-use cannabis market, which as of October 2017 had nearly 150,000 registered patients being treated for numerous qualifying medical conditions, including chronic pain,” said Paul Smithers, president & CEO of Innovative Industrial Properties Inc., in a prepared statement.
Earlier this year, Innovative Industrial Propertis Inc. purchased a a 72,000-square-foot cannabis cultivation facility in Capitol Heights, Md.
The deal is expected to close by the end of the year.
Image courtesy of Sunday Goods