IIPR Stock: Cannabis REIT Up 186% Since March, Gains on Solid Q2 Results

Innovative Industrial Properties Still One of the Top Pot Stocks

Innovative Industrial Properties Inc (NYSE:IIPR) is one of the most reliable pot stocks out there. And by all accounts, it will continue to be. A marijuana real estate investment trust (REIT), IIPR stock has advanced 46.5% in 2020 and 186% since the coronavirus pandemic sent the broader market tumbling in March.

The strong rebound comes on the heels of growing optimism in the legal cannabis industry. Innovative Industrial Properties stock’s strong gains over the last number of months also come on the heels of strong financials.

Income-starved investors have also been attracted to IIPR’s frothy quarterly dividend, which currently stands at $1.06 per share, with a yield of 3.6%.  Innovative Industrial Properties has raised its dividend several times since going public in December 2016.

IIPR Stock Overview

Innovative Industrial Properties Inc is the first and, so far, only publicly traded company on the New York Stock Exchange to provide real estate capital to the medical cannabis industry. (Source: “Our Business,” Innovative Industrial Partners Inc, last accessed August 7, 2020.)

The San Diego, California-based company purchases land from experienced, licensed medical cannabis operators and leases the land back to them. Selling the properties to Innovative Industrial Properties and then leasing it back allows the growers to use the proceeds to develop their core operations.

IIPR targets well-funded medical cannabis companies in the $5.0 to $30.0 million range and signs them up for long-term leases of 10 to 20 years. Innovative Industrial Properties then increases annual rent by three percent to 4.5%, providing it with an inflation-beating revenue stream. (Source: “Sale/Leaseback Opportunities,” Innovative Industrial Properties Inc, last accessed August 7, 2020.)

IIPR’s’ portfolio consists of 61 properties located in 16 U.S. states. Those properties cover 4.5 million rentable square feet, which are 99.2% leased, with a weighted-average remaining lease terms of 16.1 years. (Source: “Innovative Industrial Properties Reports Second Quarter 2020 Results,” Innovative Industrial Properties Inc, August 6, 2020.)

Some of IIPR’s top tenants by total investment are Cresco Labs Inc (OTCMKTS:CRLBF, CSE:CL), Green Thumb Industries Inc (OTCMKTS:GTBIF, CNSX:GTII),  LivWell, Pharmacann, and Trulieve Cannabis Corp (OTCMKTS:TCNNF, CNSX:TRUL). (Source: “Investor Presentation 6-9-20,” Innovative Industrial Properties Inc,  June 9, 2020.)

Chart courtesy of StockCharts.com

Q2 Revenue Up 183%, Net Income Soars 322%

On August 6, Innovative Industrial Properties announced that its revenue for the second quarter (ended June 30) advanced 183% year-over-year to $24.3 million. (Source: Innovative Industrial Properties Inc, August 6, 2020, op. cit.)

Net income came in at $13.0 million, or $0.73 per diluted share, a 322% increase year-over-year.

Adjusted funds from operations (AFFO), a non-generally accepted accounting principles (GAAP) measure used in real estate, were about $21.0 million, or $1.19 per share, a 263% increase year-over-year.

On July 15, IIPR paid a quarterly dividend of $1.06 per share, a 77% increase year-over-year.

IIPR ended the second quarter with cash and cash equivalents of about $50.2 and short-term investments of about $323.3 million.

Acquisition Tear

During the second quarter, Innovative Industrial Properties Inc acquired eight properties totaling 775,000 rentable square feet in California, Massachusetts, Michigan, New Jersey, and Pennsylvania.

From these acquisitions, IIPR established new relationships with Columbia Care Inc. and Curaleaf Holdings Inc (OTCMKTS:CURLF, CNSX:CURA). Innovative Industrial Properties also expanded its relationships with Ascend Wellness Holdings LLC, Cresco Labs Inc., Holistic Industries, Inc., and Kings Garden, Inc.

Analyst Take

Innovative Industrial Properties stock could be the perfect stock if you’re following the cannabis industry. The company has a strong balance sheet and aggressive acquisition strategy, and it continues to provide investors with strong capital appreciation and dividend yield growth.

IIPR is poised for greater short-term growth as more and more marijuana companies look to raise capital and expand operations. Longer term, Innovative Industrial Properties Inc will become even more exciting when recreational marijuana is eventually legalized in the U.S. at the federal level.