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Innovative Industrial execs talk explosive growth pipeline

Legal cannabis landlord Innovative Industrial Properties Inc. is "well ahead of schedule" putting the capital it raised at the start of 2019 to work in the market, Executive Chairman Alan Gold said Aug. 8.

"What we're seeing are more mature companies [cannabis operators] looking at our program and coming away very excited and very interested," Gold said on the real estate investment trust's second-quarter earnings call.

Innovative Industrial, whose stock price has more than doubled this year after an equally sharp runup in 2018, specializes in sale-leaseback deals with medical cannabis operators. So far in 2019, the company has acquired 15 properties valued at more than $167 million combined, across six states. For comparison, the company executed $90 million of acquisitions in 2018.

The company executed its IPO and its first acquisition in December 2016, and as of Aug. 8 it counts 26 properties, comprising more than 2 million square feet across 12 states, in its portfolio, which is 100% leased.

Gold cited the growing prominence of the Innovative Industrial brand and its sale-leaseback program in the legal cannabis industry as a likely driver of its deal pipeline. A deceleration in the Canadian capital markets has also boosted business in the U.S., he said.

"I think the Canadian capital markets have slowed down somewhat, giving ... these major companies a pause [to consider] where capital can be raised," Gold said. "And certainly we are a significant and exciting positive source for that capital."

President and CEO Paul Smithers said the company is now considering select retail real estate opportunities as part of a cultivation package or in a portfolio deal. The company so far has confined itself to cultivation properties.

"We're looking at these as they come across [us], but they do have different yields typically and different lease terms," Smithers said. "So we look at each one individually, but we're open-minded to them."