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Is there a problem with Innovative Industrial Properties Inc. (IIPR)?

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Its stock price has increased much higher than that of other cannabis firms in the last year. Not only that, but it’s outperforming other prominent REITs in the process. But, as we all know, what goes up must come down, so let’s see if IIPR will crash and burn.

Companies involved with or affiliated with the marijuana industry are now unpopular. Every marijuana investor wishes for full legalization and/or decriminalization, but given the present political climate, this is unlikely to happen anytime soon. Piecemeal, state-by-state legalization is encouraging, but it’s not moving fast enough and it’s certainly not as comprehensive as top-down federal legislation.

And that’s just one reason restricting the upward potential of any cannabis stock. Pot businesses are impeded by several constraints, including a lack of access to even the most basic of banking services, due to the fact that marijuana remains a Schedule I narcotic under US drug legislation. As a result, cannabis businesses seldom turn a profit. Investors may be a tough lot who can persevere in the face of adversity but they have very little tolerance for consistent, constant losses.

That’s one of the reasons IIPR, as the marijuana industry’s biggest landlord, is such a popular figure among the audience. It consistently makes a profit and the company can easily buy buildings through sale-leaseback arrangements because they have funds from floundering marijuana enterprises. A rising portfolio, all other things being equal, tends to indicate increasing income and profitability, as every stock REIT observer already knows.

IIPR is not just a rarity in the marijuana sector, but it’s also a rare REIT. It’s one of only a handful of niche cannabis REITs on the market and it’s by far the most well-known.

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