IIPR 4Q22 Earning Results.
IIPR's operating portfolio contained 110 properties, which represent 8.7M rentable square feet and 1.9M square feet under development, in 19 states during 4Q22. Cannabis multi-state operators represent 85% of their tenants, and 55% of operators are publically traded companies. In 2022, IIPR made nine acquisitions for properties located in seven states and executed 12 lease amendments to provide additional improvement allowances at properties in seven states, totaling an aggregate of approximately $394 million. In November 2022, IIPR sold a Pennsylvania industrial property leased to a subsidiary of Maitri Holdings, LLC for $23.5 million. As of January 18, 2023, IIP has entered into two definitive purchase agreements to acquire two properties for a total aggregate investment of approximately $63.0 million, which includes amounts expected to be made available as reimbursement to the applicable tenants for qualifying improvements to the properties. IIPR's balance sheet indicates that they have 12% debt to total gross assets ($2.6B in total gross assets) and totally quarterly fixed cash interest obligation of $4.2M. Price compression and lack of capital flows into the cannabis industry really showed up in IIPR's latest press release. They saw three new property defaults, 92% of rent collected for Jan 23, down from 94% for December of 2022 and 97% for the full year 2022.
Michigan Cannabis Trends
In the month of December, Michigan recorded ~$213M in cannabis sales, which represents a sequential increase of 4.7% and a YoY increase of 29.9%. Unit volumes in the month were up 7.4% sequentially and up dramatically 91.5% YoY. Pricing continues to be a headwind in this market, which is to be expected as more cultivation goes online in the state. The average unit price decreased 2.5% sequentially but was down 32.2% YoY.
NYC Black Market
In 2022, the U.S. legal cannabis market saw many headwinds and had a very tough year but at the same time, the illegal market thrived. From the West Coast to the East, major cities that have legalized adult-use cannabis have really struggled to keep the illicit market under control. As we currently stand, there is only one licensed cannabis dispensary in New York City, with an estimated 1,400+ unlicensed cannabis dispensaries in the city. "City Sheriff Anthony Miranda and representatives of the NYPD testified that existing laws make it difficult to immediately close illicit shops and often can issue only measly $250 fines for selling pot without a license — hardly a deterrent even after seizing illegal weed and edibles." How are legal operators supposed to survive when the illegal shops don't have to pay taxes, have access to higher quality cannabis (because they get it from California), and have so many more costs and hoops to jump through from the state to operate? The quick answer is they don't.
