Marijuana Business Magazine

But before you start the rigorous application process, it’s best to know what to expect and how to prepare. Smithers’ advice: Assemble a top team of legal experts, accountants and underwriters with IPO experience, and map out a detailed strategy. And while it may seem obvious, you must “be sure that going public is the right choice,” said Smithers, who co-founded Innovative Industrial Properties with executive chairman Alan Gold in June 2016. “It takes a tremendous dedication of time and resources to conduct a successful IPO and to operate as a public company going forward,” Smithers said. “With our team's extensive management experience in other publicly traded real estate com- panies, we felt that we understood well the benefits and challenges of being a public company.” What to Expect Smithers said conducting an IPO – one subject to detailed review by the Securities and Exchange Commission and a national exchange – is a rigor- ous, long and costly process. According to PricewaterhouseCoop- ers, companies incur an average of about $3.7 million in costs directly attributable to their IPO. That’s in addi- tion to fees paid to underwriters, which often hit 5%-7% of gross proceeds. "It requires a tremendous amount of preparation, an experienced manage- ment team and strong outside advis- ers, including lawyers, accountants and underwriters,” Smithers said. Innovative Industrial Properties initially contacted the NYSE in July 2016 regarding a potential listing in connection to its IPO. Over the course of months of working with the NYSE, the company received authorization for listing its common stock on the NYSE under the ticker "IIPR." The IPO was completed last December. The offering drew a tepid response from investors, closing down 4.25% on its first day. Get Experienced Talent One thing to keep in mind when you’re pursuing an IPO: The experi- ence of your management team and underwriters is one of the key issues the exchange weighs, Smithers said. "We believe that the experience of our management team was one of the most important factors that the NYSE considered," Smithers said. "Our co-founder and executive chairman, Alan Gold, is a 30-year veteran of the real estate industry, having previously co-founded two NYSE-listed REITs.” One of the firms Gold helped launch was BioMed Realty Trust, a life science real estate company that went public in 2004. Gold ran the company as CEO and chairman through its sale to Blackstone Group in early 2016 for about $8 billion. For Innovative Industrial Properties’ IPO, the company assembled a team with veteran heavy hitters: • The lead underwriter was Laden- burg Thalmann, a Wall Street invest- ment bank established in 1876. • The legal counsel was Foley Lardner, a 175-year-old interna- tional law firm. • The accountants were BDO, one of the world’s largest accounting firms. Take Steps to Ease Concerns If you plan to go public, you must be prepared to answer questions about your ancillary company’s ties to the cannabis industry. “This was not a standard IPO – we feel we were breaking new ground at every step of this process, given the industry that we serve,” Smithers said. “In particular, the IPO process required a granular review of state and federal (medical marijuana) laws and inter- pretations of those laws in a rapidly evolving legal landscape. And that is something that we have to focus on every day, not just to run our business Innovative Industrial Properties’ total investment in Maryland’s Holistic Industries’ 72,000-square-foot, medical-use cannabis facility is $15 million. Photo courtesy of Innovative Industrial Properties Paul Smithers is the chief executive officer of San Diego’s Innovative Industrial Properties. Photo courtesy of Innovative Industrial Properties 142 • Marijuana Business Magazine • November / December 2017