IIPR - Innovative Industrial Properties downgraded as JMP frets over tenant issues

JMP analyst Aaron Hecht on Friday downgraded Innovative Industrial Properties ( NYSE: IIPR ) stock to Market Perform from Market Outperform after the company released a business update that reflected "operator issues that appear to be intensifying."

Investors were disappointed with the update -- that showed lower rent collections and tenant issues -- as the stock dropped almost 20% on the news. IIPR slipped 0.4% in premarket trading.

Hecht was primarily concerned that the company "appears to be battling two of its larger tenants in Parallel and Green Peak Industries (12.6% of the company’s invested capital) over rent structure," he wrote in a note.

In addition, the release highlighted five operators who are "either in default, receiving deferrals, or looking to restructure." On a troubling note, 25% of IIPR's invested capital was comprised of the operators highlighted in the release.

That said, Hecht contended that it will take time to fully resolve the operator issues, potentially leaving the company's stock rangebound. IIPR is down 6.3% year-to-date and off nearly 54% Y/Y.

The analyst also lowered his 2022 FFO estimate for $7.62 from $7.76, compared with the $7.73 consensus. For 2023, he sees FFO of $7.68 vs. $8.14 consensus and $8.36 in the prior estimate.

Earlier, Seeking Alpha contributor Dane Bowler flagged IIPR as a Strong Sell as he expects further rent troubles for the company down the road.

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