The short answer
In a sale-leaseback you sell the property and lease it back. You get cash now and pay rent after.
Compare it with a refinance on cash raised, total cost and ownership. Ask a tax professional about 280E.
On this page
How a cannabis sale-leaseback works
Innovative Industrial Properties runs a sale leaseback program for state-licensed cannabis operators. Its 10-K calls the leases long-term and triple-net.
What a public landlord reports
Innovative Industrial Properties reported 111 properties at December 31, 2025. Its 109-property operating portfolio was 96.7 percent leased.
The weighted average remaining lease term was 12.8 years. The 10-K says the properties carry contractual rental rate increases.
Source: IIP fiscal 2025 10-K. Use 12.8 years as a reality check on lease length, not as a quote.
Net lease terms to expect
In a net lease, the tenant typically carries property taxes, insurance and maintenance. IIP's filing says triple-net. Its website says absolute net.
The labels differ. Read the lease to see who pays what.
- Lease length and renewal options.
- How rent rises each year.
- Who pays for repairs and capital items.
- What happens on default.
- Whether you may buy the property back.
Each term moves the real cost of the deal.
Rent and net proceeds
Net proceeds are the sale price minus costs. Rent is usually set as a share of the sale price.
Sale-Leaseback vs Refinance
Compare cash raised and cost over the lease term.
How to use this: Enter the property, the sale terms and a refinance quote. Rent here starts as a share of the sale price and rises each year.
* Illustrative only. Not investment advice.
Sale-leaseback vs refinance
| Question | Sale-leaseback | Refinance |
|---|---|---|
| Who owns the property? | The buyer | You |
| What do you pay? | Rent | Loan payments |
| What is left at the end? | A lease to renew | A balance or a paid-off loan |
Tax and 280E
Section 280E denies deductions for businesses trafficking in Schedule I or II substances. Federal scheduling is in flux, so confirm the current rule.
Whether rent is deductible for your business is a question for a tax professional.
Who buys cannabis property
Buyers include public real estate companies and private investors. Some focus only on licensed operators.
Ask any buyer how it handles license changes and lease defaults.
A worked example: a $3 million property
These numbers are an illustration. They match the comparison tool above.
A property is worth $3,000,000 and sells for that price with 3 percent costs. Cash after costs is $2,910,000.
Rent starts at 10 percent, or $300,000 a year, and rises 2.5 percent yearly. Over 15 years rent totals about $5.38 million.
A refinance at 55 percent loan-to-value raises $1,650,000. At 12 percent over 20 years, payments are about $218,000 a year.
After 15 years the loan still has a balance near $816,700. The owner still holds the property.
| Item | Sale-leaseback | Refinance |
|---|---|---|
| Cash raised | $2,910,000 | $1,650,000 |
| Year-1 cost | $300,000 rent | About $218,000 |
| 15-year cost | About $5.38 million | About $3.27 million |
| Owner at the end | No | Yes, with a balance |
Cash raised and total cost differ a lot. Ownership is the real trade.
Questions for a buyer or landlord
- How long is the lease and what are the renewal rights?
- How does rent rise each year?
- Who pays for repairs and capital items?
- What happens if my license changes or lapses?
- Can I buy the property back?
A lease can run longer than a loan. Read it before you sign.
Terms to know
| Term | Plain meaning |
|---|---|
| Net lease | A lease where the tenant pays property costs. |
| Absolute net lease | A net lease with the tenant carrying nearly all property costs. |
| Escalator | A planned annual rent increase. |
| Cap rate | Annual rent divided by price. |
| Buyback option | A right to buy the property later. |
| Landlord | The party that owns the leased property. |
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Sources and further reading
- Innovative Industrial Properties, Form 10-K for fiscal year 2025 (SEC)
- Innovative Industrial Properties, company website
- 26 U.S.C. 280E, Expenditures in connection with the illegal sale of drugs
- FinCEN guidance FIN-2014-G001, BSA Expectations Regarding Marijuana-Related Businesses
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