IIPR
Innovative Industrial Properties, Inc.
$63.25
Real Estate Investment Trust
85%
P/FFO × Industrial REIT Multiple
Strong
·
Conviction
Undervalued
Trading 61.8% below fair value
You pay
$63.25
Bear
$135.56
Fair
$165.68
Bull
$195.81
Bear
$135.56
+114.3%
$6.50 FFO × 23x
Fair
$165.68
+161.9%
$6.50 FFO × 29x
Bull
$195.81
+209.6%
$6.50 FFO × 34x
Key Value Driver
FFO/share ($6.50) × industrial P/FFO multiple
Implied Market Multiple
9.7x
Summary
Our base-case estimate uses P/FFO × Industrial REIT Multiple. We then blend that result with the average analyst price target of $84.67 from 11 analysts, using a 20% weight on analyst consensus. That produces an estimated intrinsic value of $165.68 per share.
Warnings
Standard profit figures are misleading for real estate companies — large non-cash accounting charges make profits look artificially low. Dividend yield and funds from operations are better measures.
Dividend yield of 12.0% is unusually high — make sure the company generates enough cash to keep paying it.
Wall Street's average price target is $84.67 (from 11 analysts). Our estimate is 120% above the consensus -- consider that gap carefully.
Key Risks
- P/E and EV/EBITDA are structurally wrong for REITs — use P/FFO and NAV
- Interest rate sensitivity: REIT multiples compress when rates rise
- FFO approximation (NI + D&A) may include gains on property sales — verify