Revolutionary Industrial Properties is on a marijuana procuring spree, having spent $100 million since April to purchase cultivation and distribution services across the nation whereas offering hashish operators with sorely wanted money.
The San Diego-based actual property funding belief (REIT) now owns 61 hashish industrial properties, greater than double the 26 it owned a yr in the past.
And IIP reveals no signal of letting up, regardless of the COVID-19 pandemic that has despatched the worldwide economic system right into a tailspin.
The corporate, like most REITs that target the marijuana business, acquires buildings from hashish companies after which leases them again to the businesses, which regularly are multistate operators.
In July, for instance, IIP inked a $35 million sale-leaseback take care of MSO Curaleaf for a property in New Jersey.
The REIT’s actual property portfolio spans the nation, with services in Illinois, Massachusetts, Michigan, Pennsylvania and elsewhere. (See map above.)
The sale-leaseback offers give hashish firms a supply of fast money at a time when extra conventional sources of funding reminiscent of debt and fairness offers have receded.
In an indication of investor confidence, IIP just lately raised about $225 million in a inventory providing, making the nation’s largest hashish REIT that a lot larger.
Paul Smithers, CEO and president of Revolutionary Industrial Properties, mentioned he wouldn’t characterize the corporate’s latest acquisitions as a “shopping for spree” however, quite, a “continuation of the exercise now we have seen all through 2019, carrying into 2020.”
The $225 million that IIP raised will permit the corporate to develop its footprint.
However Smithers mentioned the corporate is being selective the place it vegetation its flag.
“We proceed to gravitate towards states which have a extremely aggressive course of to award a restricted variety of licenses to operators,” Smithers mentioned, noting the corporate entered the New Jersey market in July by “establishing new relationships” with Curaleaf and Columbia Care.
IIP’s purchases come as sale-leaseback actual property offers have gotten more and more widespread within the U.S. marijuana sector.
From April 1 via Aug. 5, the corporate paid $101.5 million for eight properties with a complete of 775,000 sq. ft in California, Massachusetts, Michigan, New Jersey and Pennsylvania.
The 61 properties IIP owns signify a complete of 4.5 million sq. ft, greater than double the two million sq. ft the corporate owned a yr in the past.
Smaller hashish funding firms even have inked some acquisitions in 2020:
- In February, Chicago-based NewLake Capital Companions introduced a $19.7 million take care of Illinois-based Grassroots Hashish for 10 marijuana properties with 60,000 sq. ft of retail house in six states.
- In Might, Energy REIT, a small firm based mostly in Previous Bethpage, New York, introduced a $4.9 million funding for the development of a hashish greenhouse in Maine for medical marijuana supplier Candy Dust.
Charles Alovisetti, a Denver-based accomplice of the cannabis-focused regulation agency Vicente Sederberg, mentioned he believes IIP has been probably the most lively REIT because the coronavirus crippled the economic system, noting most of its rivals are small gamers.
“I haven’t seen plenty of exercise this yr” aside from from IIP, mentioned Alovisetti, who’s licensed to apply regulation in Colorado, Massachusetts and New York.
IIP, like many companies, has been challenged by the coronavirus.
“This extreme nationwide financial disruption is absolutely the primary recession that the regulated hashish business has confronted,” Smithers famous.
He mentioned he has been impressed by how briskly the corporate’s tenants responded to the disaster.
“Though these companies have all the time operated in extremely managed, extremely sanitized environments, our tenants shortly took further steps to guard the well being of sufferers, clients and their workers,” he mentioned.
He cited further security steps taken by the MJ business, together with:
- Enhanced cleansing protocols.
- Extra private safety tools.
- Shift staggering.
- Social-distancing protocols.
From April via June, IIP collected 100% of the lease due from tenants.
However the firm did enter right into a “deferral program” for 3 of its 23 tenants, which allowed a portion of their safety deposits to pay April lease in full and defer lease in Might and June. Repayments had been to happen over an 18-month interval beginning July 1.
“We’re actually happy total with our lease collections, and extra importantly, the power of our tenants to adapt to this new surroundings,” throughout which, Smithers famous, most states deemed hashish “important.”
Serving as a funding supply
Corporations reminiscent of IIP “have crammed the void left by tight fairness and debt markets, offering asset-backed capital at charges within the teenagers for 15-year phrases,” mentioned Mike Regan, an fairness analyst and managing member of Denver-based MJResearchCo.
He added that whereas “having money to outlive is all the time paramount,” a sale-lease settlement saddles an organization with long-term and better working prices.
Regan advises hashish corporations leasing properties to “search for flexibility to renegotiate” their lease time period within the occasion of nationwide legalization.
Looking forward to the November presidential choice, lawyer Alovisetti is much more bullish on what a Democratic sweep of Congress and the White Home might imply for the hashish business, together with REITs, and federal legalization.
“Something that advantages the underlying tenants must be good for REITs,” Alovisetti mentioned, “because it creates higher capitalized tenants and will increase the demand for cannabis-specific actual property.”