Innovative Industrial Properties (IIPR -1.61%), which owns and leases properties to companies involved in the cannabis industry, reported strong third-quarter 2018 results after the market close on Wednesday. 

Shares closed up 6.8% on Thursday. We can safely attribute the stock's jump to investors being pleased with the results, as marijuana stocks in general were down on Thursday.

Here's how the quarter worked out for the company that's organized as a real estate investment trust (REIT) and its investors.

Innovative Industrial Properties' results: The raw numbers


Q3 2018 

Q3 2017

Year-Over-Year Change


$3.93 million

$1.56 million   


Operating income

$1.57 million 



Net income

$1.49 million



Earnings per share (EPS)




Adjusted funds from operations (AFFO)*

$2.58 million



AFFO per share




Data source: Innovative Industrial Properties. *Adjusted funds from operations (AFFO) is a closely watched metric for companies organized as real estate investment trusts. It's akin to "earnings" for REITs. 

The increase in revenue from the year-ago period was driven by the company's acquisition of new properties and the annual increase of base rent for two of its leases. 

Before we move onto happenings in the quarter, here's a current snapshot of San Diego-based Innovative Industrial Properties: Its portfolio includes 10 properties located in Arizona, Colorado, Maryland, Massachusetts, Michigan, Minnesota, New York, and Pennsylvania, "which were 100% leased with a weighted-average remaining lease term of approximately 14.7 years," the company said in the earnings release. Total rentable area is approximately 952,000 square feet, including about 114,000 square feet under development. The company's average current yield on invested capital is approximately 15.4% for its portfolio. 

Marijuana plants in a greenhouse.

Image source: Getty Images.

What happened with Innovative Industrial Properties in the quarter?

  • It paid a dividend of $0.35 per share on Oct. 15 to stockholders of record as of Sept. 28, representing a 40% increase over its second-quarter 2018 dividend. At Thursday's closing price, shares are yielding 3.1%. 
  • The company acquired two properties during the quarter and one soon after the quarter ended. Leases with all three tenants are triple net, meaning tenants are responsible for paying property taxes, insurance, and maintenance costs. 
  • During the quarter, it acquired a 55,000-square-foot marijuana growing and processing facility in Massachusetts via a sale-leaseback transaction with Holistic Industries. Acquisition cost was $12.75 million, excluding transaction costs. 
  • During the quarter, the company acquired a 56,000-square-foot property under development in Michigan and entered into a long-term lease with Green Peak Industries. Its total acquisition and development costs are expected to be $13 million, excluding transaction costs. Green Peak intends to use the property to grow and process marijuana for medical use. 
  • After the quarter ended, it acquired a 58,000-square-foot marijuana growing facility in Colorado for $11.25 million, excluding transaction costs, and signed a long-term lease with The Green Solution.  

What management had to say

Management didn't provide a quote in the earnings release, nor did the company hold a conference call. This is not unusual for a smaller company relatively new to the public markets. (The company went public in December 2016.) 

Looking ahead

Innovative Industrial Properties doesn't provide guidance. 

The company said in its earnings release that it intends to hold a conference call following the release of its fourth-quarter and full-year 2018 results, so investors should get some color on its 2018 results and, perhaps, plans for 2019 in about three or four months.