Innovative Industrial Properties (NYSE:IIPR), which owns and leases properties to companies involved in the legal cannabis sector, reported robust second-quarter 2019 results after the market close on Wednesday.

Shares were down 2.4% in after-hours trading on Wednesday, which we can attribute to net revenue coming in a bit lighter than some investors were likely expecting. The stock has returned a whopping 136% in 2019 through the regular trading session on Wednesday, versus the S&P 500's 16.4%.

Here's how the quarter worked out for the San Diego-based real estate investment trust (REIT) company and its investors.

Innovative Industrial Properties' results: The raw numbers


Q2 2019

Q2 2018


Net rental revenue 

$8.28 million

$3.25 million


Operating income

$4.07 million

$1.24 million


Net income

$3.07 million

$1.20 million


Earnings per share (EPS)




Adjusted funds from operations (AFFO)*

$5.80 million 

$2.10 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.

Innovative Industrial's revenue growth continues to be primarily driven by the acquisition of new properties, though contractual rental increases at certain properties also contributed to growth. Moreover, year-over-year revenue growth continued to accelerate in the quarter, up from 146% in the first quarter and 111% in the fourth quarter of 2018. For full-year 2018, revenue grew 128% year over year.

For some context (though investors shouldn't place too much weight on Wall Street's near-term estimates), analysts were looking for EPS of $0.29 on revenue of $8.34 million. So the company slightly beat the profit expectation but fell a tad short on the top line.

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 $0.60 per share on July 15 to stockholders of record as of June 28, representing an increase of 33% from the previous quarter and 140% year over year. At Wednesday's closing price, shares are yielding 2.34%.
  • During the quarter, IIP acquired nine properties: five in Southern California, two in Pennsylvania, and one each in Ohio and Michigan. The five acquired in the Golden State follow the company's initial foray into that key cannabis market earlier this year. All these properties are fully leased via triple-net, long-term leases. (Triple net means that tenants are responsible for paying property taxes, insurance, and maintenance costs.)
  • After the quarter ended, through Aug. 7, IIP acquired four more properties: one each in Michigan, Nevada, California, and Massachusetts. Notably, the Massachusetts property -- which is on the large size comprising 150,000 square feet -- is leased to a subsidiary of Trulieve Cannabis, which is the leading medical cannabis company in Florida. Each property is fully leased to a tenant via a triple-net, long-term lease.
  • After the quarter ended, in July, "IIP completed an underwritten public offering of 1,495,000 shares of common stock, including the exercise in full of the underwriters' option to purchase an additional 195,000 shares, resulting in gross proceeds of approximately $188.4 million," according to the earnings release.

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

As of August 7, 2019, IIP owned 26 properties located in Arizona, California, Colorado, Illinois, Maryland, Massachusetts, Michigan, Minnesota, New York, Nevada, Ohio and Pennsylvania, totaling approximately 2.0 million rentable square feet (including approximately 631,000 rentable square feet under development/redevelopment), which were 100% leased with a weighted-average remaining lease term of approximately 15.5 years. ... IIP's average current yield on invested capital is approximately 14.6% for these 26 properties.

What management had to say

Management didn't provide a quote in the earnings release. However, investors will be able to hear management's thoughts on the company's performance and prospects by tuning into the semiannual earnings call, scheduled for Thursday at 1 p.m. EDT.

Looking ahead

Innovative Industrial Properties turned in another quarter of strong growth.

The company doesn't provide official guidance.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis -- even one of our own -- helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.