Three of the licensed cannabis cultivation facilities planning to serve Illinois’ forthcoming adult-use market will soon be owned by Innovative Industrial Properties (IIP), a California-based real estate investment trust (REIT) that acquires property assets and leases them back to cannabis licensees to provide them with capital.

“We believe that our years of experience in the regulated cannabis real estate industry and decades of commercial real estate experience overall have earned us a reputation as a reliable, trustworthy, long-term real estate capital partner,” IIP President and CEO Paul Smithers told Cannabis Business Times.

RELATED: This Company Helps Medical Cannabis Cultivators Access Real Estate Capital

So far, seven of Illinois’ existing medical cannabis cultivation facilities have been licensed to grow product for the state’s adult-use market, which is set to launch Jan. 1, 2020. Cresco Labs secured three of the licenses, PharmaCann won two, and Ascend Wellness and Columbia Care scored one license each in the first round, according to a Chicago Sun-Times report.

Ascend sold its licensed facility to IIP late last year, Chicago Sun-Times reported, and Cresco announced last month that it, too, had reached an agreement to sell two of its three properties to the company for approximately $46.3 million.

“This sale-and-leaseback agreement with IIP represents a non-dilutive capital solution for Cresco Labs that will support the expansion of our Illinois operations in preparation for the legalization of adult-use cannabis on Jan. 1, 2020,” Cresco Labs CEO and Co-Founder Charlie Bachtell said in a public statement. “A portion of the proceeds from the sale of the two properties will be utilized to create the scale in our cultivation capacity and retail dispensary network necessary to meet the significant increase in demand projected from the legalization of adult-use cannabis and the expansion of the medical-use program in Illinois. With the Illinois cannabis market projected to reach $2 billion to $4 billion in annual sales at maturity, the expansion of our operations will position Cresco Labs to build upon our leading market share and significantly increase the revenue we generate from Illinois in the coming years.”

Cresco’s agreement with IIP is expected to close within the next 30 days.

“Regarding Cresco Labs, we signed definitive agreements to purchase two facilities in Illinois and expect to execute long-term leases at closing, and are working expeditiously to complete our property diligence and move towards closing,” Smithers said.

As for Ascend, IIP worked closely with the company’s management team to facilitate an overall business acquisition, where IIP would act as Ascend’s long-term real estate partner, Smithers said.

“As a part of the transaction, we provided Ascend additional capital to make certain enhancements to the facility that are expected to vastly increase the facility’s productive capacity, as they focus on meeting the demand in the state,” he said.

Overall, IIP acts as a provider of real estate capital to the cannabis industry. By acquiring and leasing back licensees’ real estate assets, IIP provides operators quick, liquid cash that they can reinvest into their core operations, Smithers said.

In Illinois, IIP’s acquisitions provide licensed operators with the capital necessary to make the leap to the adult-use market, he said. “We believe, as a general matter, that we provide a key, reliable capital source for licensed operators to allow them to focus less on financing of real estate capital, and more on the roll-out and expansion of their operations.”

IIP currently owns 31 properties, totaling approximately 2.2 million square feet, across 12 states: Arizona, California, Colorado, Illinois, Maryland, Massachusetts, Michigan, Minnesota, Nevada, New York, Ohio and Pennsylvania.

While IIP does initiate conversations with licensed operators to discuss ways they can work together, Smithers said many of IIP’s transactions are sourced through recommendations from its existing relationships.

“We focus on supporting our existing tenants with their ongoing growth capital needs, including expansions of existing facilities to meet demand in a state, as well as expansion of their operations to other states,” he said. “We conduct a thorough underwriting of our tenants prior to acquiring a facility and entering into a long-term lease, utilizing the decades of experience our team brings from underwriting tenants in life science and other high-growth industries.”

Under Illinois law, cannabis companies can only hold three cultivation licenses a piece, but IIP acts as a landlord, not a cannabis licensee, and is therefore not subject to the same regulations.

“We are strictly a landlord—all of our leases are structured as long-term, pure triple-net leases, and we do not in any way participate in the operations of the licensed operator tenant,” Smithers said.

Through its due diligence processes, IIP focuses on ensuring that its tenants remain in compliance with all applicable state and local regulations, he added.

“Our essential strategy has been, and continues to be, to leverage our reputation and experience as a reliable long-term real estate capital partner to the regulated cannabis industry and provide creative real estate capital solutions that meet the critical capital needs of our tenant partners,” Smithers said. “Over time, while we continue to diversify our business on both geographic and tenant levels, we remain exclusively dedicated to being the go-to real estate capital provider for this dynamic, high-growth industry."

The Massachusetts Cannabis Control Commission (CCC) is advancing plans to allow social consumption cannabis lounges in the state, but Gov. Charlie Baker is urging lawmakers to take up legislation on impaired driving before allowing the lounges to become a reality.

The CCC approved rules last month to allow adults to use cannabis on-site at certain establishments, according to a 1420 WBSM report, and now the state legislature needs to take action before a pilot program can launch in the state. Baker, however, said during an Oct. 7 press conference that lawmakers should not allow plans for social consumption lounges to move ahead until impaired driving concerns are addressed, according to the news outlet.

“While this idea still requires a change in statute before social consumption sites become a reality, this move underscores the reality that our commonwealth and our communities are facing new public safety challenges in the context of the legalization of the adult use of marijuana,” Baker said. “Just as the social consumption of alcohol is a major driver of impaired driving, these sites also create new challenges for our public safety officials seeking to keep our communities safe.”

Baker filed H. 71 earlier this year to address the issue of impaired driving following cannabis legalization in the state, WBSM reported. The bill tackles the detection of impaired drivers, how police officers should interact with drivers suspected to be under the influence of drugs or alcohol, and how impaired driving cases should be handled in court.

Baker announced at Monday’s press conference that his bill “will equalize treatment of alcohol and drugs with respect to driving under the influence and aims to improve the process leading up to, during and after a suspected operating under the influence incident.”

H. 71 was referred to the Joint Committee on the Judiciary, although the committee has not yet scheduled a hearing on the legislation.

Ilera Therapeutics is a therapeutically focused medicinal cannabis and cannabinoid science company recently spun-out of Ilera Healthcare LLC, with which Zelda had entered into a strategic partnership in March 2019. Its operations are centred in the US States of Pennsylvania and Louisiana while its clinical networks and distribution channels span North America.

The merger between Zelda and Ilera Therapeutics will create a global medicinal cannabis company, which will be rebranded as "Zelira Therapeutics Limited."

The merger brings together a world-class portfolio of revenue generating medicines and products undergoing clinical development that are expected to enter the market from 2020. Zelira's disruptive 'launch, learn and develop' model will be deployed to rapidly commercialise products targeting large addressable markets such as pain, sleep and anxiety.

With operations in Australia and the USA, Zelira will have a strong platform to access global medicinal cannabis markets. Ilera Therapeutics provides direct access to the USA, the world's largest medicinal cannabis market with over four million registered patients, while Zelda provides complementary access to the world's fastest growing markets including Australia, Germany and the United Kingdom. The merger brings together long-term supply and distribution relationships with pharmaceutical grade manufacturers in Europe (HAPA pharm BV via Zelda) and the USA (Ilera Healthcare and Ilera Holistic via Ilera) ensuring access to large scale quantities of pharmaceutical-grade medicinal cannabis to supply large and growing patient populations.

Zelira Therapeutics will also bring together world-class expertise in clinical trial design, drug development, cannabinoid science research and consumer marketing along with a strategy to commercialise and disrupt existing medicinal cannabis and pharmaceutical markets.

The merged company also gains a highly experienced US-based management team with a successful track-record in the cannabis sector. It is proposed that three members of the Ilera Therapeutics team will join the Zelira Therapeutics Board including Mr Osagie Imasogie (as Chairman) and Ms Lisa Gray (as Director).

Osagie and Lisa each bring over 30 years' experience in the fields of law, corporate finance, intellectual property, global healthcare and the pharmaceutical industry. Most recently, Osagie and Lisa were part of the team that founded their first cannabis company, Ilera Healthcare LLC. In just over two years the business was established, underwent significant growth and expects to generate annual revenues in excess of US$40 million. In August 2019 it was announced that Ilera Healthcare LLC was to be acquired by TerrAscend Corp in a deal worth a minimum of US$125 million and up to US$225 million, contingent on performance milestones being met. The transaction successfully closed on September 16, 2019.

Zelda's Chairman, Harry Karelis commented: "This is a transformational opportunity for both companies. The merger will create one of the world's leading medicinal cannabis companies with a rich pipeline of clinically validated products under development and unique access to the world's largest and fastest growing cannabis markets. As markets for medicinal cannabis become increasingly regulated, our strategy of undertaking robust clinical trials to validate and differentiate our products is recognised as being at the forefront in this sector. The merger will enable the combined company to accelerate plans to disrupt the medicinal cannabis and pharmaceutical markets globally."

Ilera Therapeutics' Chairman, Osagie Imasogie said: "Ilera Therapeutics and Zelda are an excellent and natural fit, given our respective clinical development strategies and operational expertise. Both companies have successful track records of creating substantial value for shareholders and, together, we will retain and further build on this focus. Our ability as a merged company to immediately capture growth opportunities in the rapidly expanding global medicinal cannabis market will be significantly enhanced. Ultimately, our objective is to deliver high quality, clinically validated products and options to patients and physicians."

TORONTO and DENVER, Oct. 04, 2019 (GLOBE NEWSWIRE) --  PRESS RELEASE -- MJardin Group, Inc., a cannabis producer, has announced that, subsequent to its recently announced non-binding letter of intent (LOI) with Peguis First Nation in connection with its Warman cultivation facility located in Winnipeg, Manitoba, the company has entered into an agreement whereby Peguis has agreed to pay the full amount of the purchase price in advance of the closing of the transaction pursuant to a promissory note.

MJardin has received the C$11 million payment from Peguis, which immediately allows the company to commence Phase 2 construction and expedite the path to full production of the Warman facility.

On Aug. 28, 2019, MJardin announced the signing of a non-binding LOI with Peguis concerning a joint venture (JV) in connection with the operation and ownership of its Warman cultivation facility. Under the terms of the agreement, Peguis (51%) will purchase existing land and buildings from MJardin (49%) for C$11 million and execute a concurrent long-term lease back to the JV. Peguis will additionally fund the capital expenditures required to complete Phase 2 of the facility for approximately C$20.5 million.

Design plans for the Warman facility were released last month and include a hybrid facility encompassing indoor and greenhouse production capacity, along with full EU GMP certified extraction, processing and packaging capabilities. Phase 2 of the build-out will see the facility reach production capacity of approximately 4,500 kg of high-quality dried flower and 800 litres of bulk oil for use in refined products by Q2 2020.