IIPR: Innovative Industrial Properties (IIPR) Continues to Expand Despite Market Conditions

The month of March was devastating for many Real Estate Investment Trusts (REITS). These companies were hit harder than others due to their highly leveraged portfolios.

Innovative Industrial Properties (IIPR) was also hit hard during the fierce selling in March, as the stock dropped from over $100 per share, to $40 in a very short period of time. Immediately when we saw IIPR trading at this extreme discount we knew that these prices would not last. We wrote two previous articles about the company and how we felt the valuation was extremely low. Since then IIPR has made a substantial recovery off the lows of $40 to trade at $75 this week.

Despite the uncertainty in the market, IIPR has still continued to execute its acquisition strategy. Recently IIPR announced that it closed on its most recent acquisition of a property in Athol, Massachusetts. The property has approximately 199,000 square feet of industrial space.

IIPR paid approximately $26.8 million for the Massachusetts property. IIPR also entered into a long-term, triple-net lease agreement with a subsidiary of Ascend Wellness Holdings LLC (AWH). This triple net agreement is part of IIPR’s long term strategy as they work with AWH and expand on their relationship. The facility will be used for continued operation as a licensed cannabis cultivation and processing facility by AWH. The company is expected to complete tenant improvements for the property and IIPR will be compensating them for that. IIPR has agreed to pay AWH approximately $22.2 million for the improvements. After combining the purchase price with the improvement costs IIPR’s total investment will come to around $49 million.

IIPR’s property in Massachusetts represents its third real estate transaction with AWH. In December 2018 IIPR bought a 75,000 square foot industrial facility in Illinois. This was their first transaction as they entered into a long-term, triple-net lease agreement with AWH. The facility is also being used as a regulated cannabis cultivation and processing facility. IIPR’s total investment into that property at the time was $33 million. In July of 2019, IIPR purchased a 145,000 square foot industrial facility in Michigan from AWH.Like the previous two properties mentioned this property is also being used as a regulated cannabis cultivation and processing facility. IIPR’s total investment into this property is expected to be approximately $19.8 million.

Abner Kurtin who is Chief Executive Officer and Co-Founder of AWH had some very positive remarks regarding the latest deal, “We greatly value our real estate partnership with IIP, and are very pleased to team with them for a third time at our Athol facility. With the tremendous acclaim and market success of our Ozone brand in Illinois and Michigan, we look forward to bringing our curated selection of cannabis products to the people of Boston and throughout the Commonwealth.”

What we like the most about IIPR is the fact that they continue to execute on their acquisition strategy, despite these tough market conditions. As IIPR continues to expand across the United States into new markets, we see the company having the ability to grow revenues substantially. When it comes to investing in real estate in 2020, there is plenty of risk but IIPR seems to be moving forward in a smart and calculated way.

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IIPR shares were trading at $75.52 per share on Friday afternoon, up $6.37 (+9.21%). Year-to-date, IIPR has gained 0.79%, versus a -13.06% 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...