IIPR continues to crush expectations…

When we first launched the National Institute for Cannabis Investors, we sent our members a report about Innovative Industrial Properties Inc. (NYSE: IIPR) on October 23, 2018.

I thought this was a perfect introductory cannabis stock; it is profitable, pays a dividend, and is traded on a major U.S. exchange.

And when I was reviewing the company’s latest earnings report, it confirmed IIPR has lived up to my expectations since I first brought it to your attention.

Here are some quick highlights:

  • Revenue soared 201% year-over-year to $11.2 million.
  • Innovative Industrial acquired 10 properties in Q3.
  • Innovative Industrial now owns 41 properties in 13 states.
  • Innovative Industrial paid a quarterly dividend of $0.78 per share on October 15, 2019 to common stockholders of record as of September 30, 2019. That was a 30% increase from IIPR’s second-quarter 2019 dividend payment.

Now, I know a lot of you have questions about Innovative Industrial’s business model. As a landlord to cannabis businesses, I understand the concern that recreational legalization could affect how it operates.

After all, it would seem that any property owner could just rent or sell their buildings to cannabis companies.

So this is the truth about IIPR and its future…

The Expertise of a Cannabis Landlord

There are a lot of real estate investment trusts (REITs) out there, and they operate in many different sectors.

Some own malls, some own cloud-computing centers, and some own traditional business properties.

When full recreational legalization takes place, some REITs may look to start leasing their buildings to the cannabis industry, creating competition for Innovative Industrial Properties.

Or some may think that cannabis companies will just go out and buy their buildings when federal prohibition is defeated because banks will start handing out cash to this once illegal industry.

But here’s the thing – banks don’t want to loan to unprofitable companies. Even if cannabis is legalized, it’s still a risky industry, and the executives at banks try to minimize their exposure to risk.

Even if some of that happens, Innovative Industrial is still going to be in business for a long time.

The Innovative Way

Running a successful cannabis business is a very cash-intense operation. From equipment to hiring qualified employees, it takes a lot to get one up and running.

And because every cannabis company that wants to be around for the long run needs to operate in multiple states, funding expansion is critical.

Understanding that, Innovative Industrial offers a sales-leaseback opportunity that turns real estate into liquidity for growing cannabis companies. If a cannabis company owns its building, that building is nice to own on paper, but it’s not doing much outside of that.

Innovative Industrial’s solution is that cannabis companies sell their buildings to them, and Innovative then leases those buildings back to the cannabis companies.

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With all that extra cash, cannabis firms can more quickly expand, grow their businesses, and increase their sales. That increased revenue can then help offset the rent.

For example, Cresco Labs Inc. (OTC: CRLBF) sold two cultivation and processing facilities to Innovative Industrial Properties for $46.3 million. Those properties will still be operated by Cresco under a lease agreement, and Cresco can use the cash to prepare for recreational sales in Illinois on January 1, 2020.

And it also works out for IIPR.

Innovative charges a 10% to 16% base rent with lease terms between 10 to 20 years. It’s consistent revenue for IIPR for long periods of time and, it has worked out so far, with Innovative’s yield on invested capital reaching 13.8% as of October 30.

A Lasting Approach

As I said earlier in this report, I understand why some of our members might initially be worried about IIPR as full legalization gets closer and closer in the United States.

But this sales-leaseback model isn’t just in cannabis.

Some of the biggest companies in the world perform these transactions because buying buildings isn’t always the most efficient use of capital for some businesses.

For example – in 2015, Verizon sold and leased back its New Jersey operations center for $650 million.

That was a massive capital infusion all at once.

Now, whether Verizon used that money correctly is another story, but the point is that it had access to a ton of cash to help grow the business.

And with its long-term leases that will generate revenue for decades, if Innovative’s current business structure ever were to falter, it has plenty of time to figure things out while it’s raking in the cash.

Also, the founder and CEO of IIPR has sold a REIT specializing in biotech. He has a unique skill set that allows him to figure out profitable ways to lend to fast-growing companies that don’t yet have profits. He can extend that skill to the cannabis industry, so he will be in business for a long time.

Take care,

Greg Miller

Executive Director, National Institute for Cannabis Investors

P.S. Companies like IIPR – the ones that don’t directly touch the cannabis plant – can be extremely lucrative. That’s why we’ve devoted an entire chapter in the 2020 Pot Profits Roadmap towards identifying cannabis-related opportunities like IIPR. We’ve got all the details on how to claim your FREE copy of this fantastic resource right here.


Comments

13 responses to “Innovative Industrial Properties Is Here to Stay”

  1. Greg,
    These comments are appreciated, but could you comment on why IIPR has taken such a hit over the past few months? I’m sure many are wondering and a bit concerned about the considerable drop.

    Thanks.

  2. Greg,
    Good article on the purchase of the buildings by IIPR from Cannibis companies and leaseback to them to generate cash to grow their business. That infusion of cash is dependent on the amount of equity that company has in the building its selling to IIPR. If there is not much equity in the buildings, their is not much cash generated by the cannibis company and it may be cheaper to pay mortgage payments on a building they own rather than make a larger lease payment to IIPR.

    Does that make sense?

    Thanks
    Ed

  3. I made some time ago almost 100% when I sold half of this stock. The other half is up a lot more than many of the other srocks from your recommended portfolio.
    Why is IIPR not included in your portfolio recommendations?

  4. Since no one even goes on the forums anymore I will post my comments here. I’m really tired of hearing how the market got this wrong or the market got that wrong. What is the market anyway? Is it investors, or the panicked sellers, or the people with inside information, or the people or companies who are manipulating share prices to their advantage i.e. shorters????? Seriously what is this market anyway? I have had Organigram for quite some time now because I saw the greatness then and I still see it. However, this “market” has not agreed and has seen nothing but a diminished share price because it seems that the “market” is only interested in the price dropping and the “market” will do anything it can to cause it to continue to drop.

  5. One more thing Greg. I’m not being sarcastic but if the market is wrong about Organigram then why did Altacorp cut its price target from $13.15 down to $6.50? Why is it that they do not see the same thing that you see?

  6. I wonder, why is IIRP not in our model portfolio if it is doing so well? I understand it is not a company that deals with only cannabis, however they do have a part in it. Also, it is doing much better than the companies we’ve had to take MASSIVE losses on this year that were supposedly “million dollar opportunities.” I’m sorry if that seems bitter, but we seem to be losing A LOT of money from our current portfolio, so how are we supposed to recover our losses when there are absolutely NO gains? I am not wealthy enough to just keep trying to invest into these highly recommended companies only to lose 80-90% while not making any profits to counter-act those losses.

  7. Hi Greg, just want to thank you for the attention you give us everyday. I think NICI is giving us more bang for our buck than a lot of other things I have subscribed to over the years. Looking forward to the future with you guys. Thank you.

  8. I have a diversified portfolio. Not just marijuana stocks. My marijuana stocks have not yet done well, but I believe in them and I an holding them for the long term. I appreciate the information I get from Greg.

  9. I have taken the advice from NICI and Greg along with the other partners in this NICI organization. I do believe we are in the “early stages” of the marijuana boom and that the future of medicine will be in CBD and hemp, thus marijuana itself… will someday outperform modern medicine in a sense…I myself have tried creams, lotions, balms, oils, hemp oil, CBD oil, no inhaling, but I am convinced of the medicinal healing marijuana can supply. I did make some profit on a couple of stocks recommended in the beginning from subscriptions but I am not ahead by a long shot. I invested pretty heavy in stocks that we were advised to sell and took “hefty” losses. It would be nice if before we get in a stock at a limit price that seems to “plumet” drastically, that there is more time taken to analyze these companies before jumping in… Instead of getting in at the bottom so to say it seems like we got in a limit “TOP PRICE”!!! It seems we are given information of how great a company is and then turn around several months later after holding to get news of something that went amis or is not right and time to sell. It makes me wonder just who is lining their pockets here? I used to be a long term investor and have since found that holding these stocks didn’t get me too far. I am still holding some positions and being open minded but have turned into a day trader to say the least as the market continues to change. Dark Pools are out there suppressing our stocks and there are manipulators all over the stock market!!!

  10. Trends happen. Stocks take the stairs up but the escalator down. There’s a reason you can’t borrow so many names to short imho.

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