Innovative Industrial Properties IIPR recently announced completing the acquisition of a Michigan property for $10.3 million. The company acquired the property in a bid to enhance its portfolio and bank on the healthy market fundamentals.
Located in Warren, this property expands the company’s footprint to 71 properties, with 6.5 million square feet of area across several states. The property comprises around 85,000 square feet of industrial space.
This real estate investment trust (REIT), focused on cannabis-centered real estate portfolio, has also entered into a long-term, triple-net lease agreement for the property with a subsidiary of Sozo Companies, Inc. It is for continued use as a regulated cannabis cultivation, processing and retail facility. Considering the full reimbursement for the tenant improvements, Innovative Industrial Properties’ total investment would be $16 million for the same.
The legalization of marijuana for medical use across several states in the United States, as well as the permission of adult consumption in some, has created opportunities for the cannabis industry. Therefore, with more states in the nation giving cannabis the green light, Innovative Industrial Properties has incentives to partner with experienced medical-use cannabis operators, and serve as a vital source of capital by acquiring and leasing back their real-estate assets. Its strategy is to acquire the existing, redeveloped and under-development industrial buildings, including attached enclosed greenhouse facilities.
Over the past six months, shares of the company have outperformed the industry. The stock has gained 11.9% compared with the industry’s rally of 10.9%.
Notably, per the New Frontier Data, in the first year of the adult-use cannabis program, Michigan was one of the top 10 regulated cannabis markets in 2020 with roughly $1 billion in total regulated adult-use and medical-use cannabis sales, the company noted. Moreover, Michigan is riding high this year too, with April reaching a monthly record high in total regulated cannabis sales of $153.6 million, according to the Michigan Marijuana Regulatory Agency.
Innovative Industrial Properties too is well poised to benefit from this favorable trend, with total investment worth $209.3 million in the properties it owns in Michigan, including the committed funding for future tenant improvements.
However, the trend in estimate revision of 2021 funds from operations (FFO) per share does not indicate an upbeat outlook, the estimate being revised downward over the past month. Currently, Innovative Industrial Properties carries a Zacks Rank #5 (Sell).
You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Stocks to Consider
Industrial Logistics Properties Trust’s ILPT FFO per share estimate for the current year moved up 4.5% to $1.87 in the past month. The company currently carries a Zacks Rank of 2 (Buy).
OUTFRONT Media Inc.’s OUT Zacks Consensus Estimate for 2021 FFO per share has moved marginally north to 89 cents over the past month. The company currently carries a Zacks Rank of 2.
Braemar Hotels & Resorts Inc. BHR carries a Zacks Rank of 2 at present. The Zacks Consensus Estimate for the ongoing year’s FFO per share has been revised around 38% upward in a week to 44 cents.
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.
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