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Innovative Industrial Boosts Michigan Base With Asset Buyout

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In a bid to grow its portfolio and capitalize on the healthy market fundamentals, Innovative Industrial Properties (IIPR - Free Report) recently announced completing the acquisition of a Michigan property for $6.2 million. Located at 29600 Stephenson Highway in Madison Heights, the property expands the company’s footprint to 62 properties with more than 4.7 million square feet across 16 states.

This real estate investment trust (REIT), which is focused on cannabis-centered real estate portfolio, also entered into a long-term, triple-net lease agreement with a subsidiary of Holistic Industries Inc., which on completing the development of a roughly 63,000 square foot industrial building, will operate the property as a regulated cannabis cultivation, processing and dispensing facility. Considering the full reimbursement of the property development, Innovative Industrial Properties’ total investment in it will be $25 million.

The company’s partnership with Holistic seems a strategic fit. This is because Holistic is one of the largest private, vertically-integrated multi-state operators in the cannabis industry with operations in California, Maryland, Massachusetts, Michigan, Pennsylvania and Washington DC. Apart from the Michigan property, Innovative Industrial Properties owns and leases three other properties in Maryland, Massachusetts and Pennsylvania to Holistic.

Notably, the legalization of marijuana’s medical use across several states as well as the permission for recreational consumption in some created opportunities for the cannabis industry. Therefore with more states in the United States giving cannabis the green light, Innovative Industrial Properties has incentives to partner with the experienced medical-use cannabis operators and serve as a vital source of capital by acquiring and leasing back their real-estate assets. Its plan is to acquire the existing, redeveloped and under-development industrial buildings including attached and enclosed greenhouse facilities.

In fact, Michigan started regulated adult-use cannabis sales last December and per a Michigan Marijuana Regulatory Agency report, total sales for medical-use and adult-use cannabis were $109.6 million in July, reflecting solid growth month over month. Innovative Industrial Properties too remains well poised to benefit from this favorable trend with its total investment worth $155.8 million in the properties it owns in Michigan including its committed funding for future tenant improvements.

Innovative Industrial Properties currently carries a Zacks Rank #3 (Hold). Year to date, shares of the company have outperformed the industry. The stock has rallied 64.8% against the industry’s decline of 6.4%. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Stocks to Consider

The Zacks Consensus Estimate for Duke Realty Corporation’s 2020 FFO per share has been revised 2.8% upward to $1.49 over the past month. The company currently carries a Zacks Rank #2 (Buy).

Cousins Properties Incorporated’s (CUZ - Free Report) FFO per share estimate for the ongoing year has moved 1.5% north to $2.78 over the past month. The company currently carries a Zacks Rank of 2.

Four Corners Property Trust, Inc.’s (FCPT - Free Report) FFO per share estimate for 2020 has moved 6.7% up to $1.43 over the past two months. It is currently a Zacks #2 Ranked player.

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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