Innovative Industrial Properties (IIPR) makes an important announcement

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September 12, 2019 11:37am ETF BASIC NEWS

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From Eric Bowler

This week Innovative Industrial Properties, Inc. (IIPR) announced it would be providing an extra $8 million in funding to a subsidiary of Ascend Wellness Holdings, as part of a new lease amendment, which puts the company on track to capitalize on one of the United States’ newest markets: Illinois.  

As of last month, Illinois’ Compassionate Use of Medical Cannabis Program Act was officially designated a permanent program, and its “pilot” status was eliminated. And earlier this year the State approved recreational cannabis use, which will go into effect January 2020.

“It is heartening to see the many significant steps that Illinois officials have taken to open the medical cannabis market for patients in need, and we are excited to support AWH in the enhancement of this facility to meet that demand,” said Paul Smithers, President/CEO of Innovative Industrial Properties, Inc.

IIPR’s $8 million in financing will be put toward the expansion of Ascend Wellness Holdings’ marijuana cultivation and processing facilities at the property in Barry, IL.

AWH is a vertically integrated cannabis company expected to be operational in Massachusetts, Illinois, Michigan and Ohio by the end of 2019. The company has raised more than $100 million in capital to date. 

“It is great to have a real estate partner like IIP, with the flexibility and reliability we need to optimally fund our real estate needs to support our operations growth,” said Abner Kurtin, Co-Founder/CEO of AWH.

The lease amendment between IIPR and AWH stipulates a base rent adjustment to compensate for IIPR’s funding, while also extending the term of the lease agreement. IIPR initially acquired and entered into the long-term lease with Ascend Wellness as recently as December 2018.

Assuming that Innovative Industrial Properties collects full payment of its funding throughout the entire duration of the lease, IIPR stands to bring in $33 million. And this isn’t IIPR’s only agreement with AWH. 

Back in July, IIPR also acquired and executed a lease with Ascend Wellness for additional marijuana cultivation and processing facilities in Michigan.

How IIPR makes its money

Innovative Industrial Properties, Inc. is the first company of its kind – it is the only NYSE-traded REIT focused on the U.S. cannabis industry. The company partners with medical-use cannabis operators, supplying them with capital by acquiring and leasing back their real estate assets (in addition to offering other creative real estate-based capital solutions). 

IIPR owns 29 properties across Arizona, California, Colorado, Illinois, Maryland, Massachusetts, Michigan, Minnesota, New York, Nevada, Ohio and Pennsylvania.  These properties total roughly 2.1 million rentable square feet, which are 100% leased with a weighted-average remaining lease term of about 15.8 years.

Innovative Industrial Properties reported a 155% year-over-year net rental revenue increase in Q2. The company’s 2nd quarter earnings spiked 155% as well.

IIPR is also one of few cannabis stocks issuing dividend payments to its shareholders. As a REIT, it’s required to distribute 90% of taxable income to shareholders in the form of dividend payments. 

The company currently yields a dividend of 2.4%, which would be even higher had its share price not doubled year-to-date. But shares of IIPR declined 15.6% in August 2019, and no dividends were paid during that month.

Year-to-date, shares of IIPR stock have outperformed the market. Shares of IIPR are up 89.3% versus industry gains of 25% during the same period. Wall Street analysts anticipate year-over-year revenue growth of 162% in 2019, and an additional 83% in 2020.

Innovative Industrial Properties Inc. (IIPR) was trading at $88.71 per share on Thursday morning, down $2.16 (-2.38%). Year-to-date, IIPR has gained 177.22%, versus a 13.34% rise in the benchmark S&P 500 index during the same period.

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About the Author: Eric Bowler

eric-bowlerEric Bowler is an accomplished journalist providing in-depth insights for more than two decades. Over the past several years his focus has been on the marijuana industry, with a special interest in cannabis growth stocks. His daily coverage of the industry keeps him on top of the key trends with the goal of helping investors make well-informed decisions.

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