Innovative Industrial Properties expands PharmaCann partnership in NY and declares 4Q20 dividends (IIPR)
IIPR is a Hedgeye Cannabis Best Idea LONG.
IIPR has entered into an amendment agreement with PharmaCann in Hamptonburgh, NY, making available $31.0 million in funding for significant enhancements in production capacity and additional upgrades at the 127,000 sq. ft. facility. Assuming full payment of the additional funding, IIPR’s total investment in the property will be $61.0 million. Aside from this NY facility, IIPR owns and leases to PharmaCann facilities in IL, MA, OH, and PA, comprising a total of 363,000 sq. ft. and has total investments in leased properties to PharmaCann of $167.5 million.
According to BDS Analytics, medical marijuana sales in NY totaled $77 million in 2019 and are expected to reach $150 million in 2020 and close to $250 million in 2021. NY Gov. Cuomo (D) and the state’s top lawmakers on both sides of the aisle have expressed support for legalizing adult-use in 2021. The unlocking of NY as a recreational market will require an influx of growth capital, which IIPR is strategically poised to provide.
The company also announced its fourth-quarter 2020 dividend of $1.24 per share of common stock, representing an increase of 6% QoQ and 24% YoY. The dividend is equivalent to an annualized dividend of $4.96 per common share and is the ninth dividend increase since IIPR completed its initial public offering in December 2016.
As of December 14, 2020, IIPR owned 64 properties across 16 states, totaling approximately 5.2 million rentable square feet (incl. ~2.0 million rentable sq. ft. under development/redevelopment), which were 99.3% leased (based on sq. ft.) with a weighted-average remaining lease term of approximately 16.5 years. IIPR has invested ~$972.4 million in the aggregate (excl. transaction costs) and had committed an additional ~$298.1 million to reimburse certain tenants and sellers to complete construction and tenant improvements at IIPR’s properties.
In September, we presented our long thesis on IIPR. It stands in a unique position at the intersection of the cannabis industry and the REIT space in a rapidly changing legislative landscape, earning outsized returns in the current environment with few competitors. We cover the stock's misunderstood risks and share our current views on the U.S. cannabis industry's investment themes.
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Colorado’s 2020 YTD sales exceed 2019’s (CCHWF)
October’s legal sales were $199.8 million, representing a sequential decrease of -3.2% and a YoY increase of 32.8%. YTD, Colorado’s legal sales were $1.83 billion – with just 10 months counted, 2020’s legal sales have already exceeded 2019’s record legal sales of $1.75 billion. October’s sales suggest $2.39 billion in annualized revenues. The market has shown sustained strength during the coronavirus pandemic and ensuing economic fallout, despite a plummeting in cannabis tourism, which has historically been a revenue driver for the state of 5.76 million.
Cresco Labs doubles debt financing to $200M (CRLBF)
CRLBF is a Hedgeye Cannabis Best Idea LONG.
Cresco Labs closed an agreement with lenders to extend the maturity of its senior secured term loan exercise of the mutual option to increase the loan size to US$200 million. All lenders have agreed to extend the Senior Loan maturity to January 23rd, 2023, at a reduced interest rate of 12% per annum. Additionally, under the terms of the new agreement, Cresco Labs is provided with greater prepayment optionality. The proceeds will be used to fund the expansion of Cresco Labs’ operations in its strategic 9-state footprint and capitalize on other targeted growth initiatives in key markets. Of the $100 million increase to the Senior Loan, $85 million has been provided by existing lenders, as well as several new, large institutional investors to the company.
