This year has been an extremely eventful year for Innovative Industrial Properties, the first and only Cannabis REIT on the NYSE. They have been really living up to their name, and their sky-high valuation by going on a massive acquisition spree. The company started out 2019 with only 11 properties and has more than doubled its portfolio with a spree of 19 acquisitions to date. Recently the company has gone through some volatile times when looking at their share price, but long-term investors may look back at these times and laugh. The company was trading in the mid ’40s around the start of 2019, going on to almost triple and hit highs of over $139 per share. At peak valuations, the company did something that some investors were not pleased with, but this might have been one of the smartest things IIPR has done and in their case, could translate into long term gains for even long-term shareholders. The company issued an additional 1.3 million shares at $126 per share to fund future growth initiatives.
Now for some companies in the cannabis sector, raising additional capital could be viewed as negative, especially in the dilutive manner that most cannabis companies have to resort to in order to raise additional capital. The case for IIPR could be much different as their path to revenue is much clearer and also a lot simpler.
When it comes to a REIT the goal is to continue to acquire profitable properties and keep them fully leased with the highest quality tenants occupying their properties. With IIPRs most recent California acquisition they have acquired four properties in total adding an additional 79,000 square feet to their portfolio. The deal cost IIPR 17.3 and IIPR also entered into a long-term triple-net lease at each property with Vertical which is a subsidiary of Medical Investor Holdings LLC. The properties will be used for licensed cannabis cultivation, extraction, and manufacturing all falling within California regulation. IIPR continues to emphasize its focus on capitalizing on the medical cannabis market adding tenant after tenant on long term leases. This recent acquisition brings its count to 30 properties across twelve states. The company now owns 2.2 million square feet of rentable space.
One thing we really like about IIPR is their simplified path to profitability and their focus on high-quality long-term tenants especially those who focus on the medical cannabis aspect of the business. When IIPR was trading over $100 per share sitting at fresh 52 week highs, we were not in favor of the company on a sheer valuation perspective, but now that they have pulled back to trade around $90 per share, we feel that IIPR could be a very interesting company to consider under $100, if it stays low for that long. Recently we have seen a sharp bounce off of $80 and it’s almost as if investors like the fact that IIPR has wasted no time in putting their newfound capital to work.
At this rate, the company is set to dramatically grow revenues for next quarter and hopefully continue to raise their dividend which is just icing on the cake for many growth-focused cannabis investors. IIPR has had a huge year so far in terms of acquisitions, and the best could be yet to come for investors who stick with the company and continue to believe in their business model.
IIPR shares were trading at $93.11 per share on Monday morning, up $1.78 (+1.95%). Year-to-date, IIPR has gained 107.19%, versus a 21.29% rise in the benchmark S&P 500 index during the same period.
About the Author: Aaron Missere
Aaron is an experienced investor who is also the CEO of Departures Capital. His primary focus is on the cannabis industry. He also hosts a weekly show on YouTube about marijuana stocks. Learn more about Aaron’s background, along with links to his most recent articles. More...
