When you think of the marijuana industry, real estate probably isn't the first way you think to invest in it. But maybe you should. In this Motley Fool Live video clip, recorded on Jan. 24, Fool.com contributors Marc Rapport and Matt Frankel discuss why you might want to put unique real estate investment trust (REIT) Innovative Industrial Properties (IIPR -3.20%) on your radar.
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Matt Frankel: This is Innovative Industrial Properties, ticker symbol IIPR, I believe I got that right. Well, I'll let Marc tell you all about it. It's a fun stock to talk about.
Marc Rapport: It is, because it has such an obvious moat around its properties, although that moat has been breached a bit. But IIPR, they're a medical marijuana landlord, essentially. They buy and lease back to medical marijuana growers. The facilities they use to produce your product, and that's a niche that, a lot of traditional banks, credit unions, commercial lenders of all kinds, they're in a highly regulated business. They're just not going to lend to them as long as pot's illegal on a federal level.
They do have an addressable market, still it's growing because there are more states legalizing medical marijuana. They've only been public, I think, since like early 2017, and they really took off. They're the really pretty much the only ones doing exactly what they do. Now there's a new company doing that called NewLake Capital Partners. They are still traded over the counter, they just went public in recent weeks, and they have like 26 properties, I think, something like that.
IIPR has over 100 and are adding like crazy. The thing with them is I'm going to keep watching as a keep growing, they keep adding properties. They're already doing well, their yield is nice. Their FFO, their funds from operations, is strong. Their basic fundamentals are, I think, really sound, and they probably got overbought. But they also may be prone to being oversold, too, but I'm going to hold onto it and probably buy more of it.
Frankel: You see on your screen you see a chart of Innovative Industrial Properties. Marc mentioned they went public in 2017. Since that time, even with this pullback, they're off about 35% from the highs. Their stock price, not even including dividends, their stock price is up almost 900% since 2017. If we added dividends, we've put in the total return price, you're looking at over 1000% total returns since 2017, even after the recent pullback. Just to put things in perspective, great dividend payer. It's because a lot of people thought it was a gimmick stock when it first hit the market, didn't take it seriously.
You see it kind of flatline throughout 2017, its first year or so as a public company. And then when they actually started buying properties, generating revenue, growing their revenue, growing their dividend, especially in the real estate sector. People said, "Hey, this is a serious business," and you can see just how well it's done over the years. But if you feel like you've missed the boat on this marijuana REIT, now could be a second chance to get in, because it's back down to where it was at the beginning of 2021. It pretty much erased its last year's worth of gains.