Innovative Industrial Properties, Inc. (IIRP – Free Report) is expected to release its second quarter 2022 results after the market close on August 3. The company’s quarterly results are expected to show year-over-year growth in revenue and funds from operations (FFO) per share.
In the last reported quarter, this cannabis-centric real estate portfolio-focused real estate investment trust (“REIT”) delivered a surprise 2.51% in terms of adjusted FFO per share.
Over the past four quarters, the IIPR-adjusted FFO per share has exceeded the consensus mark, averaging 0.85%. The graphic below depicts the company‘s surprise story:
Let’s see how things have evolved before the publication of the results.
Factors at play
Innovative Industrial Properties, focused on acquiring, owning and managing specialty industrial properties leased to experienced state-licensed operators for their state-licensed regulated cannabis facilities, is expected to continue to benefit from its acquisitions. .
The legalization of marijuana for medical purposes in several US states and for recreational use in several states has opened up opportunities for the cannabis industry. Therefore, Innovative Industrial Properties is incentivized to partner with experienced medical cannabis operators and serve as a vital source of capital by acquiring and leasing their real estate assets. Its strategy is to acquire existing, refurbished and developing industrial buildings, including enclosed greenhouses.
This REIT’s expansion efforts also continued into the second quarter, resulting in the company owning 111 properties as of June 30, 2022. The properties totaled 8.6 million leasable square feet of space, of which approximately 2 .5 million leasable square feet under development/redevelopment. These expansion efforts likely boosted sales in the end of June quarter.
During the second quarter, Innovative Industrial Properties announced that it had entered into a lease amendment with Green Thumb Industries Inc. for a property in Danville, PA. This offered an additional $55 million to Green Thumb for the recently completed development of a new 152,000 square foot industrial facility for cultivation and processing. Additionally, IIPR announced that it had completed the acquisition of a property in Texas for $12.0 million and entered into a long-term lease agreement for the property with a subsidiary of Texas Original Holdings, LLC.
Innovative Industrial Properties is expected to have benefited from its expansion measures in the quarter under review on contributions from acquisitions and the letting of new properties, additional leasehold improvement allowances and construction financing of existing properties, resulting in adjustments base rent and contractual rent increases in certain properties.
Zacks’ consensus estimate for quarterly revenue is currently pegged at $68.5 million, suggesting a 40.2% year-over-year increase.
However, Innovative Industrial Properties’ activities during the quarter under review were not enough to win analysts’ confidence. The Zacks consensus estimate for second-quarter FFO per share has not been revised to $2.02 in a month. However, it calls for nearly 23.2% year-over-year growth.
Here is what our quantitative model predicts:
Our proven model does not conclusively predict a surprise in terms of FFO per share for Innovative Industrial Properties this season. The combination of a positive earnings ESP and a Zacks rank of #1 (Strong Buy), 2 (Buy), or 3 (Hold) increases the chance of an FFO beat. However, that is not the case here.
Innovative Industrial Properties currently have a Zacks Rank of 4 (Sell) and an ESP on Earnings of 0.00%. You can discover the best stocks to buy or sell before they’re flagged with our earnings ESP filter.
Actions to Consider
Here are two stocks from the broader REIT sector — public storage (Message of public interest – free report) and Host Hotels & Resorts, Inc. (HST – Free report) – which you might want to consider as our model shows they have the right combination of items to report a surprise this quarter.
Public Storage, which is expected to report quarterly numbers on August 4, has an earnings ESP of +0.31% and currently has a Zacks ranking of 3. You can see the full list of today’s Zacks #1 Rank stocks here.
Host Hotels & Resorts, which is expected to release its quarterly figures on August 3, currently has a revenue ESP of +9.18% and a Zacks ranking of 2.
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To note: Everything related to earnings presented in this article represents funds from operations (FFO) – a metric widely used to assess the performance of REITs.