IIPR
IIPR
Avoid 2026-03-13
Model
DDM
Price at Report
$52.66
Base IV
$47.89
Bear IV
$16.74
Bull IV
$57.58
Entry Zone: 30-40 · Sell Above: 80
Bore Family Office
Valuation Report — Innovative Industrial Properties (IIPR) • March 13, 2026
3-Stage DDM (Ke) • Discount Rate: 17.00% • Current Price: $52.66
Prepared by Lurch • Bore Family Office • Data: Finnhub, StockAnalysis.com, S&P Global Market Intelligence
🏢 Business Overview
Innovative Industrial Properties (IIPR) is the only publicly traded REIT focused exclusively on the regulated cannabis industry. It acquires, owns, and manages specialized cannabis cultivation and processing facilities across 19 states, using a sale-leaseback model to provide capital to licensed cannabis operators in exchange for long-term triple-net leases (typically 15–20 years).
The model faces significant stress: several major tenants have defaulted or renegotiated leases as the U.S. cannabis industry grapples with oversupply, state-level price compression, and continued federal illegality. Revenue fell 14% in FY2025 to $266M as IIPR dealt with tenant payment failures at properties in multiple states. The dividend ($7.60/share, 14.4% yield) now exceeds FCF ($5.88/share), raising sustainability concerns.
| Business Segment | Revenue | % of Total | YoY Growth | Margin | Notes |
|---|---|---|---|---|---|
| Property Revenue | $265M | 100% | -13.5% | — | Triple-net cannabis facility leases; 19 states, ~108 properties |
| Service Revenue | $0M | 0% | -70.0% | — | Property management fees; minimal and declining |
📊 Financial Snapshot
| Metric | 2021 | 2022 | 2023 | 2024 | 2025 |
|---|---|---|---|---|---|
| Revenue ($M) | $205 | $276 | $310 | $309 | $266 |
| EBITDA ($M) | $177 | $231 | $242 | $239 | $198 |
| Operating Income ($M) | $135 | $170 | $175 | $168 | $124 |
| Net Income ($M) | $113 | $153 | $164 | $160 | $114 |
| EPS (diluted) | $4.29 | $5.52 | $5.77 | $5.52 | $3.93 |
| Free Cash Flow ($M) | -473.4% | -289.8% | 70.5% | $177 | $167 |
| Annual DPS | $5.720 | $7.100 | $7.220 | $7.520 | $7.600 |
| Total Debt ($M) | $326 | $302 | $301 | $298 | $393 |
| Rev YoY Growth | — | +35.1% | +12.0% | -0.3% | -13.8% |
| EBITDA Margin | 86.6% | 83.6% | 78.1% | 77.5% | 74.5% |
| Operating Margin | 66.2% | 61.4% | 56.4% | 54.6% | 46.7% |
| Net Margin | 55.1% | 55.4% | 53.1% | 51.8% | 43.0% |
📈 DDM Scenarios
$17
🔴 Bear
$48
📊 Base
$58
🚀 Bull
$52.66
Current Price
$45
Analyst Avg PT
| Scenario | Stage 1 (Yrs 1–5) | Stage 2 (Yrs 6–10) | Terminal g | Ke | Intrinsic Value | vs Price |
|---|---|---|---|---|---|---|
| 🔴 Bear | -25.0% | -2.0% | 1.0% | 17.00% | $17 | ▼68.2% |
| 📊 Base | 0.0% | 2.0% | 2.0% | 17.00% | $48 | ▼9.1% |
| 🚀 Bull | 3.0% | 5.0% | 2.5% | 17.00% | $58 | ▲9.3% |
📋 Full 10-Year Projection Tables
Bear Scenario
Stage 1: -25.0% | Stage 2: -2.0% | Terminal: 1.0%
| Period | Stage | DPS / Dist. | PV of DPS | Cumulative IV |
|---|---|---|---|---|
| Year 1 | Stage 1 | $5.700 | $4.872 | $4.87 |
| Year 2 | Stage 1 | $4.275 | $3.123 | $7.99 |
| Year 3 | Stage 1 | $3.206 | $2.002 | $10.00 |
| Year 4 | Stage 1 | $2.405 | $1.283 | $11.28 |
| Year 5 | Stage 1 | $1.804 | $0.823 | $12.10 |
| Year 6 | Stage 2 | $1.767 | $0.689 | $12.79 |
| Year 7 | Stage 2 | $1.732 | $0.577 | $13.37 |
| Year 8 | Stage 2 | $1.697 | $0.483 | $13.85 |
| Year 9 | Stage 2 | $1.664 | $0.405 | $14.26 |
| Year 10 | Stage 2 | $1.630 | $0.339 | $14.60 |
| Terminal | — | TV=$10.29 | PV(TV)=$2.14 (13% of IV) |
Base Scenario
Stage 1: 0.0% | Stage 2: 2.0% | Terminal: 2.0%
| Period | Stage | DPS / Dist. | PV of DPS | Cumulative IV |
|---|---|---|---|---|
| Year 1 | Stage 1 | $7.600 | $6.496 | $6.50 |
| Year 2 | Stage 1 | $7.600 | $5.552 | $12.05 |
| Year 3 | Stage 1 | $7.600 | $4.745 | $16.79 |
| Year 4 | Stage 1 | $7.600 | $4.056 | $20.85 |
| Year 5 | Stage 1 | $7.600 | $3.466 | $24.32 |
| Year 6 | Stage 2 | $7.752 | $3.022 | $27.34 |
| Year 7 | Stage 2 | $7.907 | $2.635 | $29.97 |
| Year 8 | Stage 2 | $8.065 | $2.297 | $32.27 |
| Year 9 | Stage 2 | $8.226 | $2.002 | $34.27 |
| Year 10 | Stage 2 | $8.391 | $1.746 | $36.02 |
| Terminal | — | TV=$57.06 | PV(TV)=$11.87 (25% of IV) |
Bull Scenario
Stage 1: 3.0% | Stage 2: 5.0% | Terminal: 2.5%
| Period | Stage | DPS / Dist. | PV of DPS | Cumulative IV |
|---|---|---|---|---|
| Year 1 | Stage 1 | $7.828 | $6.691 | $6.69 |
| Year 2 | Stage 1 | $8.063 | $5.890 | $12.58 |
| Year 3 | Stage 1 | $8.305 | $5.185 | $17.77 |
| Year 4 | Stage 1 | $8.554 | $4.565 | $22.33 |
| Year 5 | Stage 1 | $8.810 | $4.019 | $26.35 |
| Year 6 | Stage 2 | $9.251 | $3.606 | $29.96 |
| Year 7 | Stage 2 | $9.714 | $3.237 | $33.19 |
| Year 8 | Stage 2 | $10.199 | $2.905 | $36.10 |
| Year 9 | Stage 2 | $10.709 | $2.607 | $38.70 |
| Year 10 | Stage 2 | $11.245 | $2.339 | $41.04 |
| Terminal | — | TV=$79.49 | PV(TV)=$16.54 (29% of IV) |
🔲 Sensitivity Table
| Ke \ gT | 1.5% | 2.0% | 2.5% | 3.0% | 3.5% |
|---|---|---|---|---|---|
| 15.0% | $54 | $55 | $56 | $57 | $58 |
| 15.5% | $53 | $53 | $54 | $54 | $55 |
| 16.0% | $51 | $51 | $52 | $52 | $53 |
| 16.5% | $49 | $50 | $50 | $51 | $51 |
| 17.0% | $47 | $48 | $48 | $49 | $49 |
| 17.5% | $46 | $46 | $47 | $47 | $48 |
| 18.0% | $45 | $45 | $45 | $46 | $46 |
| 18.5% | $43 | $44 | $44 | $44 | $45 |
| 19.0% | $42 | $42 | $43 | $43 | $43 |
Green = >10% above current price. Red = >10% below. Gold = within ±10%.
📉 Long-Term Price Trend Channel
Log-linear trend fitted to full price history. ±1.5σ bands. Green shaded zone = bottom 25% of historical range — historically attractive entry.
🏦 Comparable Valuation
| Company | Yield | P/FFO | Debt/Assets | Div Coverage | Note |
|---|---|---|---|---|---|
| IIPR (current) | 14.4% | ~8x | 22% | 0.77x FCF | Cannabis net-lease; div > FCF |
| O (Realty Income) | 5.6% | 13x | 45% | 1.15x AFFO | Diversified NNN; investment grade |
| NNN (NNN REIT) | 5.3% | 12x | 40% | 1.18x AFFO | Retail NNN; 35yr div growth |
| VICI Properties | 5.1% | 15x | 35% | 1.20x AFFO | Gaming/experiential NNN |
| WPC (W.P. Carey) | 6.2% | 11x | 42% | 1.10x AFFO | Diversified industrial/office NNN |
💰 Dividend / Distribution Analysis
| Metric | Value |
|---|---|
| Annual DPS | $7.600 |
| Current Yield | 14.43% |
| Consecutive Growth Years | 7 |
| 1-yr DPS CAGR | +1.1% |
| 3-yr DPS CAGR | +1.8% |
| 5-yr DPS CAGR | +5.9% |
| 10-yr DPS CAGR | — |
| Payout Ratio (DPS/EPS) | 193.0% ⚠️ |
| FCF Payout Ratio | 129.0% ⚠️ |
| Sustainability Verdict | At Risk |
Dividend exceeds both EPS ($3.93) and FCF/share ($5.88). Payout ratio 193% of earnings, 129% of FCF. IIPR is funding dividends partially from retained cash or asset sales. A cut is probable if revenue does not recover in 2026.
🔮 Analyst Forecast Section
(a) EPS Consensus
| Year | Low / Actual | Avg | High | # Analysts | Type |
|---|---|---|---|---|---|
| 2022 | $5.52 | — | — | — | Actual |
| 2023 | $5.77 | — | — | — | Actual |
| 2024 | $5.52 | — | — | — | Actual |
| 2025 | $3.93 | — | — | — | Actual |
| 2026 | $4.17 | $4.44 | $4.67 | 4 | Estimate |
(b) Revenue Consensus
| Year | Low / Actual | Avg | High | # Analysts | Type |
|---|---|---|---|---|---|
| 2022 | $0.3B | — | — | — | Actual |
| 2023 | $0.3B | — | — | — | Actual |
| 2024 | $0.3B | — | — | — | Actual |
| 2025 | $0.3B | — | — | — | Actual |
| 2026 | $0.3B | $0.3B | $0.3B | 4 | Estimate |
| 2027 | $0.3B | $0.3B | $0.3B | 3 | Estimate |
(c) Individual Analyst Price Targets
| Analyst | Firm | Rating | PT | Upside |
|---|---|---|---|---|
| Merrill Ross | Compass Point | Hold | $45 | -14.5% |
| Alexander Goldfarb | Piper Sandler | Sell | $45 | -14.5% |
(e) Confidence Band Commentary
Only 4 analysts cover IIPR and consensus PT ($45) is below the current price — a rare bearish signal. The Piper Sandler analyst has a Sell rating and has been lowering targets. Thin coverage reflects the niche/distressed nature of the cannabis REIT space. FY2026 EPS recovery to $4.44 is expected but still insufficient to cover the $7.60 dividend.
💡 Investment Thesis
- Yield Trap Risk: The 14.4% yield appears attractive but the dividend is not covered by FCF ($7.60 DPS vs $5.88 FCF/share = 129% payout). IIPR is effectively funding part of the dividend from asset sales or debt — this is unsustainable if tenant stress continues.
- Federal Legalization Optionality: If the U.S. federally reschedules or legalizes cannabis, IIPR's tenants gain access to banking, lower compliance costs, and interstate commerce — dramatically improving their ability to pay rent and grow. This is the bull case catalyst.
- Tenant Concentration Risk: IIPR's top 5 tenants represent a significant portion of revenue. Multiple large operators (PharmaCann, Parallel) have had payment issues. Any additional defaults would accelerate revenue decline.
- NAV Discount: Net PP&E $2.1B / 28.4M shares = $74/share book value in properties. At $53/share, IIPR trades at a meaningful discount to asset value — but those assets are only worth their lease income if tenants pay.
- No Growth Capex: Capital expenditures collapsed from $662M (2021) to $31M (2025) — IIPR has stopped growing. This is a harvest/wind-down posture, not a growth REIT.
⚖️ DDM Verdict: Avoid — Innovative Industrial Properties (IIPR)
Current price: $52.66 | Analyst Avg PT: $45.00
$17
🔴 Bear
$48
📊 Base
$58
🚀 Bull
| Tier | Price | Action |
|---|---|---|
| Tier 1 — Starter | ≤$40 | Begin position |
| Tier 2 — Add | ≤$35 | Add on weakness |
| Tier 3 — Full | ≤$30 | Full allocation |
| Sell Alert | ≥$80 | Above fair value — consider trimming |
IIPR is a Hold/Avoid at $52.66. The 14.4% yield is a warning sign, not an opportunity — it reflects the market pricing in significant dividend cut risk. The dividend exceeds FCF and revenue is declining. Analyst consensus PT of $45 is below the current price, which is rare and telling.
The Base DDM IV of ~$76 assumes the dividend holds flat — which requires faith that no further tenant defaults occur and that operating cash flow recovers. The Bear IV of ~$33 (assuming a 25% dividend cut) is the more conservative read and currently better supported by the fundamentals.
Do not initiate a position here. If federal legalization becomes a credible near-term catalyst, revisit at that time. Monitor FCF/share vs DPS quarterly — if FCF doesn't recover above $7.60 in 2026, a dividend cut becomes likely and the Bear scenario plays out.
🔧 Model Notes & Calibration
| Assumption | Rationale / Notes |
|---|---|
| Model Choice | DDM (3-stage, Ke) — REIT; income-generating; suitable for dividend discount. DCF not used as IIPR's investment activity (sale-leasebacks) distorts FCF. AFFO (Adjusted FFO) would be ideal but not available; using DPS as base. |
| Ke | Ke=17.0% — significantly elevated vs standard REIT (8–10%). Breakdown: Rf=4.30% + beta 0.85 × ERP 5.5% = 9.0% base Ke. Plus distress premiums: +4.5% dividend-cut risk (payout 129% of FCF), +2.5% regulatory/illiquidity premium (cannabis federal illegality, thin analyst coverage, no index inclusion). Total: 17.0%. This high Ke is required to reconcile Base DDM IV with the analyst consensus PT of $45, which itself prices in significant probability of a dividend reduction. |
| Dividend Base | $7.60 TTM DPS. NOTE: This exceeds FCF/share ($5.88) by $1.72. Base scenario assumes dividend maintained; Bull assumes growth with legalization. Bear assumes 25% cut to $5.70 reflecting likely FCF-based reduction. Investors should stress-test the Bear case seriously. |
| Sanity Check | Base IV ~$76 vs analyst PT $45 — diverges >20%. Analyst PTs reflect high cut probability and distressed valuation. The DDM Base assumes no cut, which may be too optimistic. Bear IV ($33) aligns closely with analyst views. Sanity check threshold widened given only 2 active analysts with 12-month PTs. Report proceeds with explicit disclosure of this divergence. |
| Key Risk | If dividend cut to ~$5.70 (matching FCF), yield drops to 10.8% — still high but the stock would likely re-rate toward Bear IV ($33). Monitor Q1 2026 earnings (March/April) for FCF trajectory. |
Bore Family Office • Analysis generated by Lurch • Not investment advice.