Sep. 9 at 11:18 AM
Innovative Industrial Properties Preferred Shares are one of the most interesting high yield opportunities on the market today.
Innovative Industrial Properties
$IIPR
is a specialized REIT that owns cultivation and processing facilities leased to licensed cannabis operators across the United States.
The common stock still offers a very high yield, sitting at roughly 13.3%.
However, I’m far more interested in the preferred shares.
IIPR’s 9.00% Series A cumulative preferred shares currently offer a yield of roughly 9%, which is already attractive on its own.
But what makes it so attractive relative to the common stock is that the risk to reward is quite attractive.
The income from the preferred shares is backed by one of the more conservative balance sheets in the REIT sector.
IIPR ended the latest quarter at just 1.7x net debt to adjusted EBITDA, while the preferred dividend is covered roughly 16.6x by annualized AFFO.
That coverage ratio is lower than it was previously because IIPR has issued a significant amount of additional preferred stock, but it is still exceptionally strong-
And especially strong relative to the preferred stock of their peers.
That means the preferred dividend still has a very large cushion before it would come under meaningful pressure.
There have also been some encouraging developments on the tenant side.
One of the biggest recent updates involves the former PharmaCann facility in Hamptonburgh, New York, which was re-leased to Grown Rogue.
The PharmaCann facility had been one of the problem tenants investors were watching closely.
Re-leasing the property does not eliminate tenant risk across the portfolio, but it does show that IIPR has been making real progress repositioning troubled assets and replacing distressed operators with new tenants.
There was also an important new update on the preferred shares themselves from just earlier this month.
On September 1, 2026, IIPR filed an 8-K updating its at-the-market equity program.
The program continues to allow IIPR to sell both common shares and its 9.00% Series A preferred shares, with as much as
$500 million of aggregate offering capacity.
IIPR is still actively preserving the ability to issue more of the 9% preferred stock.
Keep in mind, the preferred is already callable at
$25.
If management were preparing to redeem the security in the near future, it would be somewhat unusual for the company to simultaneously maintain an active mechanism allowing it to issue even more shares of the same preferred.
In my view, this makes an imminent redemption look less likely, which is good news for those of us who want to collect the high yield.
The trade-off, of course, is that every additional preferred share increases IIPR’s fixed dividend obligation.
So if management continues issuing preferred stock aggressively, the preferred dividend coverage ratio will gradually come down.
This is something I will continue watching closely.
For now, though, the cushion remains substantial.
Based on the latest quarter, the preferred dividend is still covered roughly 16.6x by annualized AFFO, while leverage remains just 1.7x net debt to adjusted EBITDA.
And importantly, there has been no new preferred dividend reduction, call or redemption announcement, or major new tenant default.
So the thesis remains largely intact.
The cannabis industry remains volatile, and yes, IIPR still has tenant credit risk, and continued preferred issuance could eventually reduce the margin of safety.
But investors are still collecting around 9% annual income from a cumulative preferred security backed by a very lightly leveraged REIT with strong dividend coverage, while recent tenant developments are moving in the right direction.
The September ATM update actually strengthens one part of the thesis:
Management’s willingness to continue issuing the preferred suggests the company still views 9% preferred capital as useful, making a near-term call appear less likely.
In complete transparency, we added this position in March at
$22.36 a share when the yield was over 10% (a CAGR of roughly 39%!!).
We are currently up roughly 17% on this position with a 10%+ yield locked in.
