2019 has been an extremely tough year for the cannabis sector. We have seen the strongest and longest pullback in its entire history. Luckily for a select few companies, their businesses have continued to flourish and 2020 is looking even brighter. 2019 has been a very exciting year for Innovative Industrial Properties (IIPR), as the company has raised over $100 million this year and managed to make over 30 acquisitions. This has almost quadrupled the size of their real estate portfolio from 11 properties at the start of 2019 to 43 properties to end the year. This week the company announced more exciting news regarding their two newest acquisitions.
Innovative Industrial Properties announced that it closed the transaction on two sale-leaseback agreements with subsidiaries of GrassRoots Companies Inc. The two properties in Pennsylvania and North Dakota contain approximately 105,000 square feet of industrial space. Innovative Industrial Properties paid approximately $24.1 million in total for both properties. Along with the closings of the purchases, Innovative Industrial Properties has entered into a long-term triple-net lease agreement for both properties with a subsidiary of Grassroots Inc. The company plans to continue to operate the properties as regulated cannabis cultivation and processing facilities for the foreseeable future.
On top of the $24.1 million purchase price Grassroots is expected to complete additional tenant improvements for the properties. These improvements include a 35,000 square foot redevelopment at the Pennsylvania property. Innovative Industrial Properties has agreed to provide reimbursement of up to approximately $13.2 million. If Innovative Industrial Properties gives full reimbursement the total investment in the two properties will total $37.3 Million. This will be the second and third acquisition and lease with Grassroots. Earlier in October Innovative Industrial Properties completed a sale-leaseback transaction in Illinois with Grassroots.
Innovative Industrial Properties CEO Paul Smithers had some positive remarks regarding the company’s most recent acquisition ” We are thrilled to partner again with Grassroots as their real estate capital partner in Pennsylvania and North Dakota, on the heels of our transaction with Grassroots’ Illinois facility in October.” Paul also has some positive comments regarding Grassroots and their partnership ” Grassroots is an operator with a proven track record of bringing the highest quality products to market, resulting in tremendous brand recognition and patient and consumer loyalty. We are proud to team with them once again on these two facilities, providing an efficient capital solution for them to focus on expanding their presence in both states.”
As Innovative Industrial Properties continues to acquire properties across the United States they strive to diversify their income streams across multiple verticals in the cannabis sector. The company continues to cement themselves as an industry leader and despite the stocks pull back from an all-time high, the company is showing stability. At current levels, the stock offers an over 5% dividend yield with more stable earnings than most cannabis companies. For an investor looking for exposure to the cannabis sector while collecting a hefty dividend Innovative Industrial Properties could be the perfect fit. Going into 2020 we are very excited to see how this company will perform and as they expand, there could be more profits on the way.
Innovative Industrial Properties Inc. (IIPR) was trading at $78.60 per share on Thursday afternoon, up $2.60 (+3.42%). Year-to-date, IIPR has gained 145.62%, versus a 21.26% rise in the benchmark S&P 500 index during the same period.
About the Author: Aaron Missere
Aaron Missere is the CEO and founder of financial media company Departures Capital Inc. He is an avid and experienced investor, with a primary focus on the cannabis industry. In addition to being a featured contributor to StockNews.com and ETFDailyNews.com, he is an author for SmarterAnalyst.com. Aaron also currently hosts a weekly show on YouTube that recaps and explains the movement in the stock market, with a heavy emphasis on marijuana stocks.