It’s better to be a weed company landlord than an actual weed company
Innovative Industrial Properties’ stock price tends to outperform its tenants’.
IIP, a major landlord in the US cannabis industry, seems to be weathering the storm a little better than its tenants.
IIP on Wednesday revealed that its annual revenue slipped for the first time ever in 2024, dipping to $308.5 million from $309.5 million in 2023. Investors were unimpressed but also not particularly disappointed with the company’s results, which were largely in line with Wall Street’s expectations. The stock was up less than 1% by midday Thursday.
The regression was a reversal for IIP, whose sales have skyrocketed since it was founded in 2016, when fewer states had some form of legal cannabis.
US cannabis operators struggle with limited access to banking, an unfriendly tax code, and high levels of debt without the benefit of bankruptcy protections. The US cannabis market has as much as $6 billion in debt maturities coming up in the next year, Beau Whitney, chief economist at Whitney Economics, told Bloomberg.
IIP — the largest cannabis company by market capitalization — isn’t considered a plant-touching company, and therefore it doesn’t face the same legal hurdles as its tenants. Its stock also tends to outperform theirs. (US cannabis-touching companies can’t list on major exchanges, but make up the basket of some ETFs like AdvisorShares Pure US Cannabis ETF.)
But that doesn’t mean it’s completely unexposed to turmoil in the industry. IIP had previously disclosed that one of its tenants, PharmaCann, defaulted on December and January rents. IIP said on Wednesday that it reached a deal with PharmaCann to pay back the missed rent, which included lowering the base rent from $2.8 million to $2.6 million. The company also reported having to apply $5.7 million in security deposits to cover overdue rent from five tenants in the most recent quarter.
