SAN DIEGO - Innovative Industrial Properties , Inc. (NYSE:IIPR), a real estate investment trust specializing in leased properties to the regulated cannabis industry with a market capitalization of $2.7 billion and an impressive 91% gross profit margin, reported a default by tenant PharmaCann Inc. on lease payments for six facilities across multiple states. InvestingPro analysis indicates the company maintains a GREAT financial health score, suggesting strong fundamentals despite this challenge. The default occurred on Monday, impacting properties located in Illinois, Massachusetts, Michigan, New York, Ohio, and Pennsylvania.
PharmaCann, which operates under leases with IIP for eleven properties, failed to meet its December rent obligations totaling $4.2 million. As a result, IIP applied the security deposits held under these leases to cover the defaulted payments, including late penalties and interest. Despite PharmaCann fulfilling its rent obligations for the remaining five properties, amounting to $90,000, cross-default provisions triggered defaults across all eleven leases due to the non-payment for the six properties.
IIP has initiated discussions with PharmaCann to address the lease defaults and intends to enforce its rights under the leases, which may involve eviction proceedings if deemed necessary.
The properties in question constituted 17% of IIP's total rental revenues for the three and nine months ended September 30, 2024. While the company has not provided specific details on the anticipated impact of the default, InvestingPro data shows IIPR maintains strong liquidity with a current ratio of 2.66 and generates annual revenue of $311 million. According to InvestingPro's Fair Value analysis, IIPR appears undervalued at current levels.
Innovative Industrial Properties has positioned itself as a key player in the cannabis industry real estate market since opting for REIT status in 2017. The company's portfolio includes specialized industrial properties leased to state-licensed cannabis operators.
This news is based on a press release statement from Innovative Industrial Properties and reflects the current state of affairs without projecting future outcomes. Despite current challenges, IIPR maintains a significant 7.97% dividend yield and generated $246 million in EBITDA over the last twelve months. The company cautions investors not to rely heavily on forward-looking statements which are subject to change based on various factors outlined in their SEC filings. For deeper insights into IIPR's financial health and growth prospects, investors can access comprehensive analysis and additional ProTips through InvestingPro.
In other recent news, Innovative Industrial Properties (IIPR) reported third-quarter 2024 earnings with total revenues of $76.5 million and an Adjusted Funds From Operations (AFFO) of $2.25 per share. Piper Sandler maintained a Neutral rating on the company, setting the stock price target at $118. The firm's analysis highlighted the company's positive outlook despite recent political developments and industry challenges.
IIPR has a portfolio of 108 properties across 19 states, maintaining a high occupancy rate of 95.7%. The company has navigated tenant credit issues and experienced a $3 million loss from repossessed properties. Despite these challenges, IIPR remains optimistic about the long-term growth of the cannabis sector.
The company's management sees a stronger chance for the SAFER Banking Act to pass with a unified government, which would impact the industry significantly. However, they remain skeptical about the possibility of full legalization in the near term and immediate access to the full banking system for the cannabis industry. These are among the recent developments in the company's journey through a dynamic regulatory landscape.
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