The first medical marijuana real estate investment trust (REIT) to hold its IPO on the New York Stock Exchange has underperformed this year and many investors have moved to the sidelines with the firm.
So far this year, Innovative Industrial Properties, Inc. (IIPR) has seen the price of its stock fall almost 3% and the REIT has not yet lived up to its expectations.
Early Innings of a Growth Cycle
Today, the NYSE-traded cannabis real estate firm announced its second quarter financial results which represents the second full quarter since the company commenced real estate operations.
During the quarter, Innovative Industrial recorded a $422,000 net loss on $1.3 million in revenue. When compared to the prior quarter, revenue was unchanged and this is because currently, the company’s only source of revenue is from the rent paid by PharmaCann at the medical marijuana cultivation facility in New York, which was one of two properties owned by the REIT as of June 30th.
In May, Innovative Industrial purchased the Alaking Property in Maryland for approximately $8.2 million (including $185,000 in transaction costs), with an additional $3 million payable to the seller upon completion of certain development milestones and an additional $4 million payable to the tenant as reimbursement for certain tenant improvements. Assuming full payment for each step of the development, the property’s total cost will be $15 million.
Maryland to Become a New Revenue Stream
At the time of this announcement, the company also announced a long-term, triple-net lease with tenant Holistic Industries LLC for the entire property. The lease provides for an initial annualized aggregate base rent of 15% of the sum of the initial purchase price, any additional seller reimbursement and any reimbursed tenant improvements, subject to three months of rent abatement at the start of the term.
After the quarter ended, the seller completed the agreed-to development milestones and on August 1st, the company paid the additional reimbursement of $3 million to the seller. As a result, Holistic’s initial annualized base rent at the Alaking Property increased by $450,000 (15% of the $3 million reimbursements) to $1.65 million.
