Innovative Industrial Properties Inc: Pot REIT Up 94%, Soars on Q3 Earnings Beat

Innovative Industrial Properties Inc Pot REIT Up 94%, Soars on Q3 Earnings Beat

Innovative Industrial Properties Inc Is Bullish on Earnings Beat

Innovative Industrial Properties Inc (NYSE:IIPR) continues to be one of the best cannabis plays going. Over the first half of 2019, the price of Innovative Industrial Properties stock increased by 177%.

In the few months that followed, the company’s share price slipped, along with the broader marijuana sector. But the stock soared again after the company reported strong third-quarter results on November 6 that topped revenue and earnings expectations.

Currently trading at $85.50, IIPR stock is up approximately 94% year-to-date. And thanks to the company’s aggressive acquisition strategy, IIPR continues to be one of the most compelling marijuana stocks on Wall Street.

IIPR Stock Overview

Innovative Industrial Properties Inc is a real estate investment trust (REIT) that buys property from state-licensed medical marijuana companies and then leases it back to them. (Source: “Sale/Leaseback Opportunities,” Innovative Industrial Properties Inc., last accessed November 8, 2019.)

This provides cash-strapped medical marijuana producers with an influx of capital, which they then pour back into their operations. This also provides IIPR with a steady revenue stream.

The San Diego, California-based REIT counts some of the biggest medical marijuana producers in the U.S. as its tenants. It looks for targeted deals in the range of $5.0 to $30.0 million (or more), lease terms of 10 to 20 years, and annual rent increases of three percent to 4.5%.

Since the start of 2019, Innovative Industrial Properties Inc has acquired 30 properties in nine states. (Source: “Innovative Industrial Properties Declares Third Quarter 2019 Dividends,” Innovative Industrial Properties, Inc., September 13, 2019.)

Some of the new tenants that the REIT has welcomed in 2019 are Cresco Labs (OTCMKTS:CRLBF, CNSX:CL), Trulieve Cannabis (OTCMKTS:TCNNF, CNSX:TRUL), DionyMed Brands Inc (OTCMKTS:DYMEF, CNSX:DYME), and Green Leaf Medical, LLC.

The company also expanded tenant relationships with Ascend Wellness Holdings, LLC, PharmaCann LLC , and Vireo Health International Inc (OTCMKTS:VREOF, CNSX:VREO).

IIPR owns 41 properties in 13 states, and those properties are 100% leased to state-licensed medical cannabis companies. They comprise about 2.8 million of rentable square feet and have an average weighted-average remaining lease term of about 15.5 years.

Innovative Industrial Properties stock has been rewarding buy-and-hold investors with strong capital gains.

And because it’s a REIT, it also provides a great dividend. In September, the company declared a third-quarter dividend of $0.78 per share (3.7% annual yield).

This is the fifth time that Innovative Industrial Properties has increased its dividend since going public in December 2016. It also represents a 30% increase from the second quarter and a 123% increase year-over-year.

IIPR Stock Information

Market Cap $923.1 Million
52-Week Change 76.1%
52-Week High $139.53
52-Week Low $42.55
Shares Outstanding 11.3 Million
Float 10.9 Million
50-Day Moving Average $81.69
200-Day Moving Average $96.22

(Source: “Innovative Industrial Properties, Inc.Yahoo! Finance, last accessed November 8, 2019.)

Strong Q3 Earnings & Revenue Growth

On November 6, IIPR announced that its rental revenue, for the third quarter ended September 30, increased 201% year-over-year to $11.2 million. This tops Wall Street projections for revenue of $10.7 million. (Source: Innovative Industrial Properties Inc, November 6, 2019, op. cit.)

The company reported third-quarter net income of $6.2 million ($0.55 per share), a 314% increase from the same prior-year period. This topped analysts’ projections of earnings of $0.47 per share.

Adjusted funds from operations—a non-generally accepted accounting principles (GAAP) measure used in real estate—came in at about $9.5 million ($0.86 per share), a 270% increase from the third quarter of 2018.

IIPR ended the third quarter of 2019 with cash and cash equivalents of $99.9 million. As of December 31, 2018, it held cash and cash equivalents of $13.0 million.

Analyst Take

Innovative Industrial Properties Inc is the first and only REIT focused on the regulated medical marijuana industry in the United States. This first-mover advantage has given the company a massive head start on any other company thinking of doing the same thing.

It also puts IIPR in the enviable pole position for the day when recreational marijuana becomes federally legal in the United States. There are a lot of licensed medical marijuana companies looking for capital and there will be even more recreational marijuana growers.

Considering all that, Innovative Industrial Properties stock is a pot stock to keep on your radar in 2020.