Innovative Industrial Properties, Inc., (NYSE:IIPR) real estate company focused on the regulated U.S. cannabis industry, entered into an amendment of the lease with PharmaCann Inc. in Hamptonburgh, New York, making available $45.0 million in funding for the development of a new 98,000-square-foot industrial building for cultivation and significant enhancements in production capacity and additional upgrades at the existing 127,000-square-foot facility. The lease amendment also adjusted the base rent under the lease to take into account the additional available funding for the development and qualifying improvements to the existing facilities. Assuming full payment of the additional funding, IIP’s total investment in the 225,000-square-foot property will be $108.5 million.
IIP’s $45.0 million additional capital commitment, along with the remaining unfunded proceeds from the prior allowance, is expected to be utilized for the ground-up development of an approximately 98,000-square-foot, three level indoor cultivation facility, including a subterranean level to house specialized mechanical and electrical equipment for cultivation and a penthouse level for additional cultivation support. Eligible direct costs for the project subject to reimbursement by IIP pursuant to the lease and associated development agreement for the project include site planning and preparation, base building construction and the enhanced HVAC, electrical, mechanical, fertigation and other building systems required for indoor cannabis cultivation. PharmaCann is also expected to complete additional renovations for the existing facility, including further infrastructure upgrades in the greenhouses and process optimization renovations in the headhouse, the costs of which will be eligible for reimbursement from IIP’s capital commitment.
In addition to this facility in New York, IIP owns and leases to PharmaCann five regulated cannabis dispensaries and five cultivation and processing facilities in Colorado, Illinois, Massachusetts, Michigan, Ohio and Pennsylvania, comprising a total of approximately 688,000 square feet (including expected square footage under development or redevelopment). Assuming full reimbursement of funding for development and qualifying improvements under the leases, IIP’s total investment in properties leased to PharmaCann is expected to be approximately $306.2 million. PharmaCann is IIP’s largest tenant partner in terms of capital investment and annualized base rents.