Investing in Innovative Industrial Properties (NYSE: IIPR)
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When we first started investing in the cannabis space, every stock we bought was a penny stock.
We bought Canopy Growth Corporation (TSX: WEED) for $1.60.
Today it trades for more than $36.00:
We bought Aphria, Inc. (TSX: APH) for $1.13.
Today it trades for more than $21.00:
We bought OrganiGram Holdings (TSX-V: OGI) for $0.40.
Today it trades for nearly $5.00:
As you can see, we made an absolute fortune on those stocks.
But make no mistake: When we bought them, we took on significant risk.
Of course, back then, every cannabis stock was somewhat hazardous. So it should come as no surprise that a lot of folks lost out on those massive gains because they just didn’t have the appetite for that kind of risk. And I get it. Certainly, taking on a lot of risk is something many of us are unwilling to do.
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But Here’s the Good News…
Because the cannabis industry has grown and developed so rapidly over the past few years, you no longer have to take on a lot of risk to make money from the cannabis market. In fact, today, there are a number of cannabis stocks that pose very little risk to investors.
Take Innovative Industrial Properties (NYSE: IIPR), for instance.
Innovative Industrial Properties is a cannabis REIT that acquires specialized industrial real estate assets that are used for growing cannabis. And these guys have a pretty spectacular thing going.
You see, concurrently with the company’s acquisition of these assets, it enters into leases with the growers under long-term, triple-net lease agreements.
With these triple-net lease arrangements, the tenant is responsible for taxes, maintenance, insurance, and structural repairs, as well as base rent. The lease terms are typically set at a minimum of 15 years, with renewal options exercisable by the tenant and with contractual annual rent adjustments.
One of the advantages with IIPR is that by selling the property and building to the company, and then leasing it back from the company, growers can redeploy their proceeds into core operations, allowing them to yield a higher return than they would get if they owned the property outright. This is a very big deal for an industry where access to conventional capital is still hard to come by.
Management is solid, too. In fact, the company’s executive chairman is a 30-year veteran of the real estate industry. He co-founded two NYSE-listed REITs. One was BioMed Realty Trust, which was sold to Blackstone in 2016 for $8 billion.
These aren’t potheads. These are major Wall Street players. And for the sake of full disclosure, I do own shares of IIPR. How could I not? It’s a no-brainer.
The stock trades on the New York Stock Exchange, so it’s not some random penny stock trading on the pink sheets. It’s run by the Wall Street elite, it pays a dividend, and it has a war chest of capital.
Truth is, if you’re looking for a cannabis stock that offers little risk with significant reward, IIPR is a solid play. In fact, thanks to a public offering that was announced yesterday, you can actually buy shares of IIPR pretty cheap.
The offering was 2.8 million shares of common stock at $26.00 a share.
The stock was trading at around $30 a share before the announcement, so naturally the stock took a hit yesterday. But it didn’t stay down long, and it’s starting to inch right back up. It’ll likely be back at $36.00 a share, which is where it was trading just a couple of weeks ago.
To a new way of life and a new generation of wealth...
@JeffSiegel on Twitter
Jeff is the founder and managing editor of Green Chip Stocks, a private investment community that capitalizes on opportunities in alternative energy, organic food markets, legal cannabis, and socially responsible investing. He has been a featured guest on Fox, CNBC, and Bloomberg Asia, and is the author of the best-selling book, Investing in Renewable Energy: Making Money on Green Chip Stocks. For more on Jeff, go to his editor's page.
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