American public pension funds invest in cannabis through California-based REIT

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More than a dozen public pension funds are investing in marijuana through a California real estate investment trust (REIT), a sign that institutional investors wielding billions of dollars in state funds are comfortable pumping money into the cannabis industry.

The public pension funds for government employees represent a broad range of states – from California, where marijuana is legal both medically and recreationally, to states where it is legal only medically, such as Louisiana.

In total, at least 16 state pension funds in the United States and one in Canada are investing in San Diego-based Innovative Industrial Properties, which leases properties to licensed medical cannabis operators, according to the Chicago Sun-Times.They include:

  • New York State Common Retirement Fund
  • California State Teachers Retirement System
  • Texas Permanent School Fund

One of the funds is from Tennessee, even though that state’s governor, Bill Lee, has routinely opposed any move to legalize even medical marijuana.

The report highlights the increasing involvement of institutional investment in the U.S. cannabis sector.

“Pension funds typically invest with a long-term horizon and are viewed by many companies as ‘sticky money’ that doesn’t move in and out of stocks frequently,” said Craig Behnke, equity research analyst at Marijuana Business Daily.

“A rising investment appetite from investors with long-term outlooks could have positive benefits such as serving to de-risk early stage cannabis investing through more stable and consistent exit opportunities.”

The sector is waiting for a potential avalanche of such investment as the cannabis industry becomes increasingly normalized in the U.S.

That could be through eventual federal legalization or through the passage of various banking and state-related bills.

This week alone, there was a landmark Senate hearing on the SAFE Banking act.

Last week, The Arcview Group, a well-established cannabis investment firm, received a $7.7 million Series A funding from institutional investor partners in what was essentially a takeover.

Innovative Industrial Properties trades on the New York Stock Exchange as IIPR.

As of July 19, the REIT owned 24 properties that were 100% leased to state-licensed MMJ operators, according to Innovative Industrial Properties’ website.

These comprise an aggregate of roughly 1.8 million rentable square feet (including approximately 481,000 rentable square feet under development or redevelopment) in Arizona, California, Colorado, Illinois, Maryland, Massachusetts, Michigan, Minnesota, Nevada, New York, Ohio and Pennsylvania, the company said.

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