Innovative Industrial Properties (IIP) (IIPR 9.12%) is the top cannabis real estate investment trust, using sale-leaseback deals to acquire and rent industrial properties to existing, licensed medical marijuana operators. It’s been one of the top-performing REITs of the past five years.
But a recent lawsuit seeking class action status could spell big trouble for the company and its shareholders in the near future. Here’s what investors need to know.
Image source: Getty Images.
What’s going on?
A statement by activist investment firm Blue Orca Capital on April 14, arguing that IIP is more of a marijuana bank than a REIT, alleges the company has misrepresented values for its properties and performance by its tenants, putting shareholders at risk in the event of a default. The news crushed share prices for IIP, which have fallen 25% since the release. Today, share prices are down almost 50% year to date.
Innovative Industrial Properties promptly responded to the allegations by stating that Blue Orca Capital’s claim was both false and misleading. It went on to say that the investment firm clearly lacks understanding of commercial real estate and the operation of IIP’s business model as a REIT.
Nonetheless, a lawsuit has been filed by Bronstein, Gewirtz & Grossman, LLC, claiming that IIP made false and/or misleading statements and/or failed to disclose:
(1) that IIP’s focus is to be a cannabis lender rather than a real estate investment trust…
