Innovative Industrial Properties IIPR recently announced that it has entered into an amendment of the lease with Green Thumb Industries Inc. for a property in Danville, PA. This offered an additional $55 million to Green Thumb for the recently completed development of a new 152,000-square-foot industrial facility for cultivation and processing.
Reflecting investors’ optimism, IIPR shares climbed 1.88% to $111.94 during Friday’s regular trading session.
The latest move has also adjusted the base rent under the lease to incorporate the impact of additional available funding. Considering the full payment of supplementary funding, the cannabis-focused real estate company’s — Innovative Industrial Properties — total investments in the 300,000-square-foot property reached $94.6 million. IIPR had originally acquired the property for $20.3 million and entered into a long-term lease with Green Thumb in 2019.
The partnership with Green Thumb, a national cannabis consumer packaged goods company and retailer with 17 manufacturing facilities, 77 open retail locations and operations across 15 U.S. markets, will help Innovative Industrial Properties bank on solid market fundamentals.
Along with this Danville property, Innovative Industrial Properties owns and leases two regulated cannabis cultivation and processing facilities in Illinois and Ohio to Green Thumb, encompassing a total of roughly 606,000 square feet, resulting in $176.8 million of total investments in properties leased to Green Thumb.
The legalization of marijuana for medical use across several U.S states and recreational use in several states has opened opportunities for the cannabis industry. Therefore, 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 existing, redeveloped and under-development industrial buildings, including enclosed greenhouse facilities.
In Pennsylvania, medical-use cannabis dispensaries, in particular, made their first sales in 2018. As of March 2022, the Pennsylvania Department of Health reported that more than 740,000 patients and caregivers had been registered for the state’s medical cannabis program. Moreover, regulated medical-use cannabis sales are projected to reach $1.6 to $2.0 billion for 2022 by Marijuana Business Daily. Hence, the latest expansion of the real estate partnership with Green Thumb Industries for the Pennsylvania property seems a strategic fit for IIPR.
Over the past month, shares of this Zacks Rank #4 (Sell) company have declined 16.9%, wider than the 5.5% fall of the industry.
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Some key picks from the REIT sector include Extra Space Storage Inc. EXR and OUTFRONT Media OUT.
The Zacks Consensus Estimate for Extra Space Storage’s 2022 funds from operations (FFO) per share has moved marginally upward in the past month to $8.20. EXR presently carries a Zacks Rank of 2 (Buy).
The Zacks Consensus Estimate for OUTFRONT Media’s ongoing year’s FFO per share has been raised 1.5% over the past two months to $2.09. OUT carries a Zacks Rank #2 currently.
Note: Anything related to earnings presented in this write-up represents funds from operations (FFO) — a widely used metric to gauge the performance of REITs.
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