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Innovative Industrial (IIPR) Hikes Dividend, Boosts Asset Funding

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Innovative Industrial Properties (IIPR - Free Report) recently announced a 6% hike in its fourth-quarter dividend to $1.24 per share from the $1.17 paid in the prior quarter. This also represents a 24% increase year on year.

Solid dividend payouts are the biggest enticement for REIT shareholders and Innovative Industrial is committed to that. In fact, the latest hike reflects the ninth dividend increase since this cannabis-focused real estate company completed its initial public offering in December 2016.

Based on the hiked rate, the annualized dividend comes to $4.96 per share. The new dividend will be paid on Jan 15, 2021, to shareholders of record on Dec 31, 2020. At this new rate, the annualized yield comes at 2.9%, based on the stock’s closing price of $168.62 on Dec 14.

Moreover, Innovative Industrial Properties recently announced entering into an amendment of lease with PharmaCann Inc. at a property in Hamptonburgh, NY, offering an additional funding of $31 million. This financing will support the expansion of production capacity as well as further upgrades at the 127,000-square-foot facility. Notably, Innovative Industrial Properties had purchased the property and struck a long-term lease with PharmaCann in 2016.

The latest move has also adjusted the base rent under the lease to incorporate the impact of additional available funding and extended the term of the lease agreement. Considering full payment of the supplementary funding, cannabis-focused real estate company Innovative Industrial Properties’ total investment in the property will be worth $61 million.

Along with this New York property, Innovative Industrial Properties owns and leases regulated cannabis cultivation and processing facilities in Illinois, Massachusetts, Ohio and Pennsylvania to PharmaCann, resulting in $167.5 million of total investment in properties leased to PharmaCann.

The partnership with PharmaCann, a leading multi-state cannabis operator, with licenses in Illinois, Maryland, Massachusetts, New York, Pennsylvania and Ohio, seems a strategic fit. Established in 2014, with dispensaries operating under the brand Verilife, PharmaCann has made a solid footing in this industry that is witnessing robust growth and increasing patient demand for high quality products.

In addition, expansion and upgradation of the New York property is a prudent decision because the New York market generated roughly $77 million in medical cannabis sales in 2019, per BDS Analytics, which is projected to expand to more than $150 million in 2020 and to almost $250 million by 2021.

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 31.7% against the industry’s decline of 2.5%. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

 

Stocks to Consider

CubeSmart’s (CUBE - Free Report) Zacks Consensus Estimate for 2020 funds from operations (FFO) per share has moved up 1.2% to $1.65 over the past month. The company currently carries a Zacks Rank of 2.

Rexford Industrial Realty, Inc. (REXR - Free Report) FFO per share estimate for the current year has been revised upward by 1.6% to $1.30 over the past two months. The company carries a Zacks Rank of 2, currently.

City Office REIT, Inc.’s (CIO - Free Report) Zacks Consensus Estimate for ongoing-year FFO per share has moved 5.3% north to $1.20 in two months’ 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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