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Innovative Industrial Boosts California Base on Asset Buyout

Zacks Equity Research
·4-min read

In a move to grow its portfolio and capitalize on the healthy market fundamentals, Innovative Industrial Properties IIPR recently announced the acquisition of a California property for $17.5 million.

The property in southern California encompasses roughly 70,000 square feet of industrial space. This real estate investment trust (REIT), which is focused on cannabis-centered real estate portfolio, has also entered into a long-term, triple-net lease at the property with Kings Garden Inc. for continued operation as a licensed cannabis cultivation, manufacturing and distribution facility.

The company’s partnership with Kings Garden seems a strategic fit. This is because Kings Garden has developed a distinctive brand in the southern California market, including botanicals, concentrates and accessories with its advanced growing techniques, modern facilities and research and development for creation of new proprietary genetics.

With the latest teaming up, Innovative Industrial Properties has leased five properties to Kings Garden. This includes the four-property industrial portfolio consisting of a total of roughly 102,000 square feet that the company acquired in southern California last April.

Notably, the legalization of marijuana’s medical use in several states as well as allowing adult consumption in some states has opened up opportunities for the cannabis industry. Therefore, with more states in the United States giving cannabis the green light, Innovative Industrial Properties has incentive to partner with experienced medical-use cannabis operators, and serve as a source of capital by acquiring and leasing back their real estate assets.

Moreover, amid the coronavirus crisis, regulated cannabis operators have been allowed to carry on selling both adult-use and medical-use cannabis products, and have been categorized as essential. Furthermore, per Marijuana Business Daily, regulated adult-use cannabis sales in California came in roughly at $248 million for April, marking 17% growth year on year, despite stay-at-home restrictions.

Currently, 180 of California’s 482 municipalities and 29 of its 58 counties permit regulated cannabis companies to operate within their borders, according to Marijuana Business Daily. However, amid the coronavirus crisis and the resultant impact on the economy, there is need for job creation and tax revenues. As such, localities are compelled to reevaluate their positions on banning cannabis operations. This is opening up scope for the cannabis industry to grow.

Innovative Industrial Properties currently sports a Zacks Rank #1 (Strong Buy). In the year-to-date period, shares of the company have depreciated 6.7%, narrower than the 19.2% decline of its industry.



Other Stocks to Consider

Monmouth Real Estate Investment Corporation MNR currently carries a Zacks Rank of 2 (Buy). The company’s 2020 funds from operations (FFO) per share estimate of 84 cents is backed by 6.3% year-over-year projected growth in revenues. You can see the complete list of today’s Zacks #1 Rank stocks here.

Americold Realty Trust COLD presently carries a Zacks Rank of 2. The company’s ongoing-year FFO per share estimate of $1.29 moved 4% north over the past week.

CoreSite Realty Corporation’s COR Zacks Consensus Estimate of $5.15 for the current-year FFO per share indicates an increase of roughly 1%, year on year. It currently carries a Zacks Rank of 2.

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CoreSite Realty Corporation (COR) : Free Stock Analysis Report
 
Monmouth Real Estate Investment Corporation (MNR) : Free Stock Analysis Report
 
Innovative Industrial Properties, Inc. (IIPR) : Free Stock Analysis Report
 
Americold Realty Trust (COLD) : Free Stock Analysis Report
 
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Zacks Investment Research