A newly formed California real estate company has filed paperwork for an IPO that would make it the first marijuana business publicly traded on the New York Stock Exchange.
Innovative Industrial Properties (IPP), formed in June 2016, operates in an area that could provide the best place to consider for investors interested in getting a piece of the growing marijuana industry: real estate.
IPP operates as a REIT (real estate investment trust) that will focus on buying properties used in the production of specialized medical cannabis. The company currently is negotiating its first deal, a $30 million property in New York, according to CNBC.
IPP is the first REIT of its kind. And if accepted onto the stock exchange, it will become the first marijuana-related business traded on a major public stock exchange.
The business plan.
The business plan for San Diego-based IPP looks to make money in two ways: charging rent for those who grow marijuana in their facilities and through property value appreciation. Certainly, they have leadership with experience in publicly traded REITs.
According to the company website, IPP executive chairman Alan Gold co-founded two REITs that became listed on the New York Stock Exchange. One was BioMed Reality, where Gold served as chairman, chief executive officer and president until Blackstone bought the company earlier this year for $8 billion. Gold also served as president at Alexandria Real Estate Equities, which is still listed on the exchange (ARE).
The company plans to target medical use cannabis facilities for acquisition. “We believe this industry is poised for significant growth in coming years, and we are focused on being a creative capital provider to this industry through the long-term ownership of cultivators’ mission-critical facilities,” according to the IPP website.
IPP plans to offer tenants long-term lease arrangements -- 15 years or more -- with tenants responsible for taxes, maintenance, insurance and structural repairs.
Selling the plan to investors.
The company will begin pitching investors on the IPO in about a month. Miami-based investment banker Ladenburg Thalmann is managing the IPO, according to the San Diego Union-Tribune.
While IPP will not face as much competition as other REITs, the company does have some competitors. In Oregon, for example, Grow Condos offers turn-key condo-style facilities to marijuana growers. In Oregon, voters have approved marijuana for both medical and recreational use.
IPP will focus only on medical marijuana, currently legal in 23 states, with more possibly added depending on the outcome of amendments in a handful of states on the November ballot. On its website, the company said it will seek “sophisticated” tenants who are “among the top candidates in the rigorous state licensing process.”
The risk is the same as other marijuana businesses. Federal law still lists cannabis as an illegal drug, and states have varying rules regarding the growing and distribution of medical marijuana.John Fitzgerald, head of public offering research firm IPO Scoop, told the Union-Tribune that it is still too soon to gauge investor interest in a cannabis business, But everyone will soon know based on how well the IPO pitch for IPP fares later this year.