Goodness Growth Holdings, Inc. (“Goodness Growth” or the “Company”) (CSE: GDNS; OTCQX: GDNSF), a physician-led, science-focused cannabis company and IP developer, today announced the closing of a sale leaseback transaction with Innovative Industrial Properties, Inc. (“IIP”) (NYSE: IIPR) in the State of New York.
Goodness Growth sold and IIP acquired approximately 92.3 acres of land adjacent to Goodness Growth’s existing cannabis cultivation and processing facility in Johnstown, New York, which was formerly the site of a juvenile detention center. The purchase price for the land was approximately $1.2 million, excluding transaction costs, and IIP is expected to provide tenant improvement reimbursement to Goodness Growth of approximately $55.0 million for the construction of a new 324,000 square foot cannabis cultivation, processing, and research and development facility.
Goodness Growth and IIP will partner on the development of the project and will amend the terms of their existing lease agreement to incorporate the new facility. At closing, IIP reimbursed Goodness Growth for qualifying tenant improvements previously incurred on the project to date of approximately $9.0 million. The initial annualized base rent will be 10.5% of the tenant improvement budget plus the purchase price, for a term of twenty years. The lease amendment contains a rent escalation clause that is triggered in the event that the Company does not satisfy certain strategic benchmarks as specified in the Agreement, which would increase annualized base rent by 1.5%. Base rent will be phased in incrementally over the course of a 16-month period, and will be subject to annual increases of 2.75%.
“We are looking forward to beginning construction on this state-of-the-art facility in New York, which will immediately become the flagship cultivation and processing facility in our Company’s portfolio,” said Goodness Growth Chairman and Chief Executive Officer, Kyle Kingsley, M.D. “This facility will produce the highest-quality indoor flower we’ve ever produced and help prepare our business for the massive spike in demand expected when New York’s adult-use cannabis program goes online next year. This facility will also support the expansion of our retail network in New York as we look to open up to four new dispensaries next year, which would bring our total number of stores in New York to eight.”
The new 324,000 square foot facility will contain approximately 100,000 square feet of indoor cultivation capacity, and 90,000 square feet of combined space for manufacturing, processing, office space, and facilities equipment areas. Approximately 130,000 square feet of the new facility will be built as shell space for potential future expansion. The processing labs in the new facility will be capable of CO2, Ethanol and Hydrocarbon extraction, and will also be equipped with distillation systems, clean room manufacturing, a commercial kitchen with automation, and will be GMP-ready. The facility will allow the Company to produce high-quality flower and manufacture the full suite of cannabis product form factors, including vapes, softgels, oils, oral solutions, balms, concentrate forms, edibles, and beverages.
Goodness Growth is one of ten licensed operators in New York’s medical cannabis program, a vertically integrated program where each licensed operator may operate one cultivation and processing facility and up to four dispensary locations. The Company currently operates four dispensaries in Queens, White Plains, Albany and Binghamton under the Vireo Health name, as well as its home delivery business which serves the New York City metro area. The Company plans to rebrand all its dispensaries in New York to its Green Goods® national dispensary brand after the onset of the adult-use program next year.