U.S. Markets closed

Innovative Industrial Buys California Asset, Expands Portfolio

Zacks Equity Research

In a move to grow its portfolio and capitalize on the healthy market fundamentals, Innovative Industrial Properties IIPR recently announced the acquisition of a California-property portfolio for approximately $17.3 million. With this acquisition, the company’s footprint expands to 2.2 million square feet across 12 states.

Particularly, the company closed on the final parcel of a four-property portfolio, which encompasses approximately 79,000 square feet of industrial space in aggregate. This real estate investment trust (REIT), which is focused on cannabis-centered real estate portfolio, has also entered into a long-term, triple-net lease at each property with a subsidiary of Medical Investor Holdings LLC (doing business as Vertical).

The legalization of marijuana’s medical use in several states as well as allowing adult consumption in some states has opened up opportunities for the cannabis industry. Therefore, with more states in the United States giving cannabis the green light, Innovative Industrial Properties has incentive to partner with experienced medical-use cannabis operators and serve as a source of capital by acquiring and leasing back their real estate assets.

According to the ArcView Market Research report, U.S.-regulated cannabis sales rose to $8.6 billion in 2017, including $5.9 billion of medical-use cannabis sales. Further, sales are expected to reach $22.2 billion by 2022.

Moreover, the company’s partnership with Vertical seems a strategic fit as it is a multi-state operator licensed for cannabis cultivation, extraction, manufacturing and distribution in California together with cultivation operations in Arizona and Ohio, with an extensive portfolio of branded cannabis products.

Innovative Industrial Properties currently carries a Zacks Rank #3 (Hold). In the year-to-date period, shares of the company have outperformed the industry. While the stock has surged 94.8%, the industry has gained 23.3% during this period.



Stocks to Consider

Investors can also consider some better-ranked stocks from the same space like Alexandria Real Estate Equities, Inc. ARE, Equity Residential EQR and Mid-America Apartment Communities, Inc. MAA, each carrying a Zacks Rank of 2 (Buy), at present. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Alexandria Real Estate’s Zacks Consensus Estimate for 2019 funds from operations (FFO) per share has moved marginally north to $6.98 in the past three months.

Equity Residential’s FFO per share estimate for the current year moved up 0.6% to $3.45 over the past month.

Mid-America’s Zacks Consensus Estimate for the ongoing year’s FFO per share climbed marginally to $6.28 in a month’s time.

Note: Anything related to earnings presented in this write-up represent funds from operations (FFO) — a widely used metric to gauge the performance of REITs.

Today's Best Stocks from Zacks

Would you like to see the updated picks from our best market-beating strategies? From 2017 through 2018, while the S&P 500 gained +15.8%, five of our screens returned +38.0%, +61.3%, +61.6%, +68.1%, and +98.3%.

This outperformance has not just been a recent phenomenon. From 2000 – 2018, while the S&P averaged +4.8% per year, our top strategies averaged up to +56.2% per year.

See their latest picks free >>