Innovative Industrial Property

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Innovative Industrial Property

overview

Overview Innovative Industrial Properties is a self-advised Maryland corporation focused on the acquisition, ownership and management of specialised industrial properties leased to experienced, state-licensed operators for their regulated medical-use cannabis facilities. Innovative Industrial Properties is taxed as a real estate investment trust. Innovative Industrial Properties, Inc. targets medical-use cannabis facilities for acquisition, including sale-leaseback transactions, with tenants that are licensed growers. Leases with growers are typically structured as long-term triple-net leases, where the tenant is responsible for all aspects and costs of the property and its operation during the lease. Innovative Industrial Properties was the first marijuana REIT listed on the NYSE and one of the only cannabis-based companies that has been allowed such a prestigious listing. REITs, by law, have to pay at least 90% of their pre-tax income as dividends to their shareholders. That can lead to some really great returns for long-term investors. In fact, today, the only real way to invest in the marijuana industry and receive a decent dividend pay-out is to invest in a REIT. Right now there is really only one serious option in the space.

The Properties - Medical-Use Cannabis Cultivation and Processing Facilities They acquire specialised industrial real estate assets that are used for growing medical-use cannabis and operated by statelicensed growers. They focus on properties with sophisticated technology and infrastructure to meet rigorous quality standards for medical-use cannabis. Concurrently with their acquisition of these properties, they enter into leases with the state-licensed growers under long-term, triple-net lease agreements. They act as a source of capital to these licensed medical-use cannabis growers by entering into sale-leaseback transactions with them for their specialised industrial real estate. The Tenants - Sophisticated, Best-in-Class Medical-Use Cannabis Growers They work with growers who have been among the top candidates in the rigorous state licensing process. Through thorough research and analysis of the companies and their management teams, they identify what they consider to be the best licensed medical-use cannabis growers that would benefit from financing for their properties to raise capital to meet their growing needs. Dedicated due diligence and research expertise are instrumental for the company in uncovering opportunities with the most qualified growers. The Leases - Long-Term, Triple-Net Arrangements Their leases with tenants are generally long-term triple-net lease arrangements, where the tenant is responsible for taxes, maintenance, insurance and structural repairs, in addition to base rent. The lease terms are generally fifteen years or more, with renewal options exercisable by the tenant, and with contractual annual rent adjustments. By selling the property and building to IIPR, and then leasing it back from them, growers are able to redeploy the proceeds into their company s core operation and yield a higher return than they would otherwise get from owning their own real estate.

the model

The company has a pretty simple premise: it acquires cannabis facilities and rents them out to licensed growers and producers. These are industrial real estate properties that can allow their tenants to meet the quality standards for medical-use cannabis and provide the space and technology needed to run a successful cannabis company. Option 1: Sale/Leaseback Marijuana producers fit out a warehouse/property in order to meet the licensing requirements of Environment Security Quality IIPR then purchases the property for cash The growers have now turned a fixed asset into short term capital that can be put to better use in the business IIPR enters into a minimum 15 years, triple-net lease The tenant pays all of Taxes Maintenance Insurance, and The Base rent which is annually adjusted

Option 2: Plug and Play IIPR purchases warehouses and other dilapidated buildings They fully refurbish and kit out the building to be perfectly suited for marijuana production and harvest Those companies with a legal license to produce can now move in and start producing without the heavy burden of the enormous start-up capital required to fit out a greenhouse This assists the grower with their cash flow and IIPR gets well-above market related rental for the property As a landlord, you can get much better returns than you can in the marijuana space. There simply aren't many other options. Unless they come up with millions in funding and have deep enough pockets to stay afloat during the years it takes to get a new facility up and running, most companies are best off paying a premium for a space that is ready to roll. One of its clients is PharmaCann, a medical marijuana company that currently pays $319,580 a month in rent and $105,477 per month in property management fees. In Maryland, Innovative Industrial Properties owns a property that it rents to another medical marijuana producer, Holistic Industries. It pays over a million dollars a month to lease the property to grow its medical plants.

growth

Removing Financial Barriers For Licensed Medical-Use Cannabis Growers As the demand for marijuana grows with each new state that legalises both recreational and medical marijuana, the list of prospective tenants grows for Innovative Industrial Properties. It continues to acquire new facilities to bolster its portfolio of properties. Marijuana needs to be grown somewhere. The problem is that setting up a large-scale growing operation can cost millions and millions of dollars. Upstart companies can t always afford to do that especially in the U.S., where financing from traditional banks can be all but impossible. Their acquisition strategy is to act as a source of capital to these licensed medical-use cannabis growers by acquiring and leasing back their real estate locations. By selling the property and building to IIP, and then leasing it back from IIPR, growers have the opportunity to redeploy the proceeds into their company s core operation and yield a higher return than they would otherwise get from owning their own real estate.

management team

Alan Gold Executive Chairman Paul Smithers CEO Catherine Hastings CFO Alan D. Gold has served as executive chairman of the board of directors since our formation. Mr. Gold served as chairman, chief executive officer, and president of BioMed Realty Trust, Inc. (formerly NYSE: BMR), a REIT specialising in acquiring, leasing, developing and managing laboratory and office space for the life science industry, from its inception in 2004 through the sale of the company to affiliates of Blackstone Real Estate Partners VIII L.P. in January 2016. Mr. Gold received his Bachelor of Science Degree in Business Administration and his Master of Business Administration from San Diego State University. Paul E. Smithers has served as the president and chief executive officer since the formation, and is one of the directors. From August 2013 to July 2015, Paul Smithers served as co-founder and chief legal officer of Iso Nano International, LLC, a designer and manufacturer of advanced materials for use in the aerospace, consumer goods, electronics, and safety industries. Prior to his time at Iso Nano, Mr. Smithers was the managing partner of Smithers & Player, Attorneys at Law from September 1989 to July 2013, and was with the law firm of Ropers, Majeski in San Francisco from 1982 through 1988. Much of his 33 years of legal experience has involved both commercial and residential real estate transactions and disputes. Catherine Hastings has served as the chief financial officer since June 2017 and the chief accounting officer and treasurer since January 2017. Until December 2016, Ms. Hastings served as vice president, internal audit of BioMed Realty Trust, Inc. (formerly NYSE: BMR), a REIT specialising in acquiring, leasing, developing and managing laboratory and office space for the life science industry, having joined BioMed Realty in 2009. Ms. Hastings received her Master of Science in Accountancy from San Diego State University and her Bachelor of Arts in Economics and minor in Management from the University of California, Irvine.

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