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Marijuana REIT Innovative Industrial Posts Triple-Digit Profitability Growth

By Beth McKenna - Updated May 10, 2019 at 8:16AM

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In the first quarter, AFFO per share -- a key REIT profitability metric -- soared 135% year over year.

Innovative Industrial Properties (IIPR 2.43%), which owns and leases properties to companies involved in the cannabis sector, reported strong first-quarter 2019 results after the market close on Wednesday. 

Shares fell 1.3% on Thursday, which we can attribute to general market sentiment, rather than the company's earnings release. The broader market was down due to escalating trade tensions between China and the United States. The stock has returned a whopping 76.3% in 2019 through Thursday, versus the S&P 500's 15.3%.

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


Q1 2019 

Q1 2018

Year-Over-Year Change**

Net rental revenue 

$6.6 million

$2.7 million 


Operating income

$3.4 million 



Net income

$3.3 million



Earnings per share (EPS)




Adjusted funds from operations (AFFO)*

$5.3 million 

$1.4 million


AFFO per share




Data source: Innovative Industrial Properties. *Adjusted funds from operations (AFFO) is a closely watched metric for REITs, as it's the main driver of dividend changes. **Percentages calculated using figures from financial statements, not the abbreviated ones listed in the table.

IIP's revenue growth was primarily driven by the acquisition of new properties, along with contractual rental increases at certain properties. Year-over-year revenue growth accelerated from last quarter's 111% and from full-year 2018's 128%.

Marijuana plants in a greenhouse with building's supporting structure and fans shown.

Image source: Getty Images.

What happened with Innovative Industrial Properties in the quarter?

  • It paid a quarterly dividend of $0.45 per share on April 15 to stockholders of record as of March 29, representing an increase of 29% from the previous quarter and 80% year over year. At Thursday's closing price, shares are yielding 2.11%. 
  • During the quarter, IIP acquired two properties: a 43,000-square-foot industrial property in California and a property in Ohio with two industrial and greenhouse facilities, which are expected to comprise a total of 58,000 square feet upon completion of development. Both are fully leased via triple-net, long-term leases, with the Ohio property leased to a subsidiary of PharmaCann. (Triple net means that tenants are responsible for paying property taxes, insurance, and maintenance costs.) 
  • After the quarter ended, through May 7, the company acquired six properties: five industrial properties in southern California totaling about 102,000 square feet and an industrial property in Pennsylvania comprised of 51,000 square feet. Each property is fully leased to a tenant via a triple-net, long-term lease.

Here's the current snapshot of Innovative Industrial Properties' business, according to the earnings release:

As of May 7, 2019, IIP owned 19 properties that were 100% leased to state-licensed medical-use cannabis operators and comprising an aggregate of approximately 1.3 million rentable square feet (including approximately 210,000 rentable square feet under development/redevelopment) in Arizona, California, Colorado, Illinois, Maryland, Massachusetts, Michigan, Minnesota, New York, Ohio and Pennsylvania, with a weighted-average remaining lease term of approximately 15.2 years.

What management had to say

Management didn't provide a quote in the earnings release, nor did the company hold a conference call, as it holds calls semiannually, not quarterly. This is not an unusual situation for a smaller company that's relatively new to the public markets. (IIP went public in December 2016.) 

Looking ahead

Innovative Industrial Properties turned in another great quarter.

The company doesn't provide guidance. On last quarter's earnings call, Executive Chairman Alan Gold said the company's pipeline of pending and potential acquisitions is "extremely strong." Moreover, he noted that in addition to growing its presence in its existing states, it also wants to "penetrate new states, such as Florida."

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