On August 10th, Innovative Industrial Properties Inc. (NYSE:IIPR) hosted a conference call to discuss their recently released Q2'17 financial results. This currently one-of-a-kind, NYSE-listed, dividend-paying, medical-cannabis REIT garners quite a bit of attention from Wall Street. Here are some key aspects of their conference call that the Street paid attention to, and that you should too:
Related: 6 Key Points From Innovative Industrial Properties' Q2'17 Earnings Release
One of the biggest challenges for IIPR upon their IPO in December 2016 was that they were a real estate company that didn't own any real estate. Although that has since changed (IIPR now owns two properties, one in New York and one in Maryland), the company still has capital to put to work.
Related: Cannabis REIT to Acquire Maryland Property
According to IIPR's Executive Chairman, Alan Gold, "[their] top [operational] priority continues to be placing the balance of [the] proceeds from the December IPO in the best properties and with the best tenants for the long-term benefit of [IIPR's] stockholders."
The company's President and CEO, Paul Smithers added more color to their acquisition strategy later on in the call:
"...we are intensely focused on investing the remaining proceeds from the IPO in the best opportunities, high quality assets, top-tiered tenants with strong balance sheets and management teams in a stage where we have confidence in the regulatory environment. We're taking a highly selective and disciplined approach to our capital allocation and we have passed on a number of potential investments based on our underwriting criteria and return requirements. That said we're in advanced discussions regarding a number of potential acquisitions with a pipeline of approximately $100 million spanning a number of states including Arizona, Illinois, Maryland, Massachusetts, Ohio and Pennsylvania to name a few."
Mr. Smithers also mentioned that the company is "closely monitoring developments in California" and is "engaged in numerous discussions with high-quality cultivators". That said, the company expressed that in regards to California they are "careful in underwriting [their] transactions", focusing on high quality cultivators and watching to see how the regulatory environment is evolving.
Related: Marijuana Stocks In and Around California
In their first conference call after their IPO, IIPR shared that they believe the company will be able to fully deploy their capital within a six to twelve-month period. They reiterated in Thursday's call that they are "highly confident" in their ability to achieve that goal.
In response to a question regarding current and potential competition in the space from Ladenburg Thalmann REIT analyst Dan Donlan, Mr. Smithers discussed the competitive landscape for cannabis-focused real estate investors like IIPR:
"We've heard of a group up in Seattle trying to raise a fund, but haven't raised the fund. We know of [the] Kalex reverse merger, but we haven't seen them actually placing any of the capital yet, although we believe that they're out there competing and will be a strong and confident competitor."
Related: Cannabis REIT Kalyx Announces Merger and Private Placement
Mr. Smithers went on to share that he believes that the company has a strong brand reputation, that they are able to attract the best growers as partners and that IIPR has a first mover advantage in the space.
For the full earnings call transcript, click here.
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