Innovative Industrial Properties, Inc. (NYSE:IIPR) Q4 2022 Earnings Call Transcript

Paul Smithers: Yes, so Scott, I know you know California well. It still remains challenge. However, we are certainly aware of and have tenants in the portfolio that know how to navigate the California market. There is money to be made in the California market, if you know how to do it. So, when we look at the global market in California, it looks — can look bleak, but we do have some positive signs. As you know there’s been some legislative reform in Sacramento with regards to taxation. There’s been more funding for enforcement of the illicit market. So those are all positives. I mean we’ve also seen some stabilization of the spot market pricing. So, that’s all positive. But it’s still a very big black market in California just as it is in New York, Michigan and Massachusetts.

So those are the challenges all these large markets do have to face. But as I mentioned, it’s — if you know how to navigate those challenges, you could be very successful in each of these markets.

Alan Gold: And then as to — I think the question revolved around as an example, the — our development asset that is subject to a letter of intent that — for a lease. And it is continuing to proceed, I think very well. We hope to have a final lease in the near future. And so we’re very positive about that situation. As to the other assets, certainly the Texas asset is an asset that we don’t have control of — over and are going to be in the beginning process, but we do believe the land site is in a quality industrial location. And with — I think it has an Amazon distribution facility nearby. So there is value there. In addition to the fact that we’ve, I think we’ve collected — based on the structure of that transaction, where we committed over $27 million, but only have spent $8.7 million and have actually collected what around 81% of the asset value already in cash flow, not to mention the fact that we still have if we get control of the asset, we will have the value of the asset to be able to further enhance the return to our shareholders.

As to — we don’t have control over the assets in Michigan or in Pennsylvania. But we believe that there will be a variety of opportunities for us to deal with those assets. Anything else you want to add Ben or Cat?

Ben Regin: Yes, well, I would say, Scott, about your question about how do you get some of these MSOs interested in these challenged markets, we kind of look at it like it’s almost a monopoly board. And these are strategic acquisitions by some of these MSOs that may not have a presence in one of the states, they want a presence and they’ll look at opportunities through M&A perhaps to get these. So, we’re certainly aware of which players out there are looking for assets in these particular jurisdictions. So it’s something we’re working on.

Scott Fortune : And then one last one quick one for me. Without providing guidance, obviously, you guys have highlighted the challenges in the near-term macro environment and uncertainty in there. You’ve gotten away from acquisition more opportunistically. You’re putting up – deploying capital, around $25 million, the last couple of quarters, it looks like you know $50 million this quarter to date, but fair to kind of project kind of a similar rate moving forward here near-term? And just trying to get a sense for when we can see strong demand or what’s key to begin kind of the acquisition levels and kind of picking opportunities to start acquiring again, kind of what are you looking at for the rest into 2023 from those levels?