Opening Bell: Cannabis Stocks May See Green on the New York Stock Exchange
Cannabis REIT Innovative Industrial Properties Set to Become First Publicly Traded Cannabis Company
Author – Max Richardson-Davis
Edited by Noah Persin & Jon Russell
Innovative Industrial Properties, a cannabis-related real estate investment trust (REIT), looks poised to become the first cannabis-related company listed on the New York Stock Exchange (NYSE). This would mark the first Big Board listing for any member of the cannabis industry.
According to their company website, the purpose of Innovative Industrial Properties is to, “acquire specialized industrial real estate assets that are used for growing medical-use cannabis and operated by state-licensed growers. We focus on properties with sophisticated technology and infrastructure to meet rigorous quality standards for medical-use cannabis. Concurrently with our acquisition of these properties, we enter into leases with the state-licensed growers under long-term, triple-net lease agreements. We act as a source of capital to these licensed medical-use cannabis growers by entering into sale-leaseback transactions with them for their specialized industrial real estate.”
Currently there are 28 states and Washington D.C. with medical marijuana programs.
Innovative Industrial Properties is based in San Diego, though incorporated in Maryland. They filed an S-11 with the NYSE in Oct. 2016 seeking a public listing on the exchange. The company hopes to sell 8.75mm shares at $20 per share with a symbol of IIPR. Should the company become listed, the company will be the first publicly traded cannabis-related company.
While other private companies have worked with cannabis businesses through purchasing real estate and leasing it back, Innovative Industrial Properties marks the cannabis industry’s first publicly traded REIT.
The company filed a Securities and Exchange Commission filing this week. They are expecting to be listed soon. In the S-11 filing, the company said, “We have been approved to list our shares of Class A common stock on the New York Stock Exchange, or the NYSE, subject to official notice of issuance, under the symbol ‘IIPR’.”
The company’s first tenant will be PharmaCannis, one of the five licensed dispensaries in the state of New York. According to 420Investor’s Alan Brochstein, “[Innovative Industrial Properties] will sell and lease back its 127K s.f. facility in New York for $30mm. The company expects its acquisitions will be between $5mm and $30mm and has identified over $88mm in potential additional acquisitions thus far.”
Jeremy Unruh, General Counsel of PharmaCann, spoke on the topic in Forbes by saying, “The IIP listing on the NYSE is every bit as important to the cannabis movement as the Rohrabacher-Farr Amendment barring the Department of Justice from spending federal funding to enforce the Controlled Substance Act against responsible medical cannabis licensees, or the commitment of Scott’s Miracle Gro to the cannabis industry”. He continued by commenting, “IIP’s publicly-traded REIT will be the very first opportunity for institutional investors to comfortably generate exposure to an industry that currently lacks the sort of transparency that SEC oversight provides.”
Innovative Industrial Properties was created by Alan Gold, an experienced healthcare real estate investor. Gold has played leadership roles in a number of mostly health care related REITs. Gold’s resume includes being a co-founder of Alexandria Realty (NYSE: ARE) and Biomed Realty Trust (formerly NYSE: BMR). Biomed Realty Trust has since been purchased by Blackstone as part of a $7 billion transaction that closed early January 2016.
Unruh also commented on the leadership of founder Alan Gold by saying, “I know the IIPR guys are in their silent period, but Alan Gold and Chief Executive Officer Paul Smithers have a tremendous track record in the bio-med field. I believe it will translate well into medical cannabis.”
With four new states recently legalizing recreational cannabis, in addition to a three new states legalizing cannabis for medicinal use, the company’s financial prospects look set to continue to grow. According to Marijuana Business Daily’s preliminary estimates, the new recreational states could add $7 billion in annual retail cannabis sales.
Currently, Innovative Industrial Properties only caters to the medicinal markets.
While not the NYSE, the NASDAQ has previously rejected applications from a cannabis-related businesses. In mid-2016, the exchange refused to list MassRoots, a cannabis social media website. While no public announcement was made regarding the rejection, it is presumed it is because MassRoots is promotes the use of cannabis, still a Schedule 1 substance in the United States as defined by the Drug Enforcement Agency.
Should the first cannabis REIT be approved to be listed, the NYSE may notice a dramatic increase in cannabis related businesses applying for public listings.
UPDATE: The first cannabis REIT was officially approved and will be offering its initial public offering Nov. 30, 2016. The NYSE continues to disregard questions from the public in regards to the cannabis-related company.