PW - Innovative Industrial Properties: Will It Have You Rolling In The Green?

2024-03-09 01:58:11 ET

Summary

• Innovative Industrial Properties is a specialty REIT focused on the regulated cannabis industry, primarily owning industrial-scale greenhouses used for cannabis cultivation.
• The stock has seen a massive correction over the past 2 years due to concerns about tenant quality and valuation.
• EV per sqf is ~70% higher than Prologis, despite lower asset quality, and is ~30% higher than replacement cost.

Summary

Innovative Industrial Properties ( IIPR ) is a specialty REIT focused on the nascent regulated cannabis industry. Its name notwithstanding, IIPR is not a typical industrial REIT. Rather than logistics or distribution facilities, its portfolio consists mainly of industrial-scale greenhouses licensed operators use to grow cannabis. The business exists due to federal laws that prevent cannabis companies from accessing capital the way other corporations do. IIPR's bread and butter growth strategy is to execute sale-leaseback transactions with cannabis companies, front the tenant improvements, and charge exceptionally high rents. The lack of traditional sources of institutional capital enables cannabis REITs, such as IIPR, to negotiate very landlord-friendly lease terms. ...

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