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Innovative Industrial (IIPR) Buys $24.5M Asset in California

Innovative Industrial Properties IIPR recently announced an expansion of its long-term real estate relationship with one of California’s top cannabis producers — Kings Garden Inc. — by acquiring a Southern California property for $25.4 million, in a bid to grow its portfolio and bank on the healthy market fundamentals. This property, comprising 192,000-square-foot industrial space, expands the company’s footprint to 64 properties, with 5.2 million rentable square feet across 16 states.

The real estate investment trust (REIT), focused on a cannabis-centered real estate portfolio, has also entered into a long-term, triple-net lease agreement with Kings Garden. It plans to operate the property as a licensed cannabis cultivation and distribution facility on completion of redevelopment. Innovative Industrial Properties has also agreed to provide reimbursement of up to $25 million for additional tenant improvements for the property.

The partnership with Kings Garden, California’s major cannabis cultivation, processing and manufacturing company is a strategic fit. This is because California generated more than $2.6 billion in regulated cannabis sales through Sep 30, 2020, per BDS Analytics and this is projected to expand to $7.4 billion by 2025.

Moreover, as of June, though 168 of California’s 540 cities and counties permit regulated cannabis companies to operate within their borders, according to Marijuana Business Daily, a number of other cities and county efforts have received nod from voters. This will further spur demand for regulated cannabis products throughout the state.

Along with this Southern California property, Innovative Industrial Properties leases six properties to Kings Garden, comprising 364,000 square feet of industrial space, resulting in a total commitment of roughly $95 million.

The legalization of marijuana’s medical use across several states, as well as the permission of recreational consumption in some, has opened up opportunities for the cannabis industry. Thus, with more states in the United States 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.

Innovative Industrial Properties currently carries a Zacks Rank #2 (Buy). Over the past three months, shares of the company have outperformed the industry. The stock has rallied 28.9% compared with the industry’s gain of 3.7%. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.


Stocks to Consider

Alpine Income Property Trust, Inc.’s PINE FFO per share estimates for 2020 have been revised upward by 1.7% to $1.21 over the past month. The company carries a Zacks Rank of 2 (Buy), currently.

Extra Space Storage Inc.’s EXR Zacks Consensus Estimate for the current-year FFO per share has moved up marginally to $5.02 over the past week. The company currently carries a Zacks Rank of 2.

City Office REIT, Inc.’s CIO Zacks Consensus Estimate for 2020 FFO per share has improved 2.6% to $1.17 in a month’s time. The company holds a Zacks Rank of 2, at present.

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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Extra Space Storage Inc (EXR) : Free Stock Analysis Report
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