14-Jan-2019, 25-Au g-2016, N/A , N/A, N/A, N/A, N/A , N/A, N/A, N/A, N/A , N/A, N/A, N/A,

N/A , N/A, N/A, N/A, N/A , N/A

Buy 0 198 Reduce 0 7 Hold 1 128 IBC 1

Equity Research
March 19, 2019 REITs

Thomas Catherwood
212-738-6140 Innovative Industrial Properties, Inc.
tcatherwood@btig.com IIPR Matures IRT (In Real Time). We See More To Go
James Sullivan And Raise Our Price Target To $101.
212-738-6139
jsullivan@btig.com With 20/20 hindsight, a review of our 1/14/19 launch report on IIPR (“Triple
Threat – Early Cycle, High Growth, Defensive”) could best be titled “We
thought we knew…” At the time, we were staunchly confident in IIPR’s
investment thesis – “creative capital provider to the cannabis industry” –
and the size of the opportunity set; both of which continue to prove out.
What we did not know, is that investor acceptance of the cannabis sector,
funding sources available to IIPR, and management’s ability to
source/execute deals would evolve, seemingly together, in a short period
of time. Given these three – now more fully understood – variables, we are
IIPR $86.21 reiterating our Buy rating and raising our Price Target $29 to $101.
12 month target
Upsi de
$101.0017.2%
 
Acquisitions Are Key… IIPR’s primary source of growth is acquisitions;
BUY as long as the company can keep acquiring, the investment thesis
remains intact. IIPR scaled its acquisitions from $47.3M in 2017 to
52 week range $26.02 - $86.21 $90.1M in 2018 (see Exhibit 1). Without a line of credit, however, the
Dividend Yield 2.1% company has had to raise capital well in advance of acquisitions (see
Market Cap (m) $843 Exhibit 2), which creates a near-term drag on earnings.
Price Performance
 
…Convert Deal Provides New Source Of Capital… On 2/21/19, IIPR
completed a $143.8M convertible bond offering yielding 3.75%
($69.575/sh convert price). The deal: (1) provided IIPR with a new
source of funding, (2) highlighted investor acceptance (deal was
upsized and oversubscribed), and (3) raised the question “why raise
capital when you had $114.0M of liquidity as of 4Q18?” (See next)

 …And The Pace Of Deployment Could Accelerate. IIPR targets nine

months to deploy capital. Given the convert deal on the heels of the
10/9/18 secondary ($263.4M combined), we now project $140M of
acquisitions in 2019 (up $20M), and $160M in 2020 (up $10M).

 
Valuation: IIPR's shares trade at 22.2x our 2020 FFO/sh estimate and a
Source: IDC
112.2% premium to our NAV estimate. Our price target implies a
19.2% total return based on a 26.0x forward multiple (see page 2)
Estimates
1Q18 A 2Q18 A 3Q18 A 4Q18 A FY18 A 1Q19 E 2Q19 E 3Q19 E 4Q19 E FY19 E FY20 E
Sales 3 3 4 5 15 6 8 10 11 34 59
EBITDA 1 2 2 3 8 4 6 7 9 27 50
FFO 1 2 2 3 8 5 7 8 9 29 50
FFO/sh 0.18 0.26 0.32 0.34 1.10 0.45 0.56 0.67 0.78 2.46 3.88
Source: BTIG Estimates and Company Documents ($ in millions, except per share amount)

Please Read: Important disclosures and analyst’s certification appear in Appendix

 Volatility Is a Real Risk, But Execution Is What Matters Long
Term
Both IIPR and the cannabis industry overall have had strong runs in 2019 with
shares up 89.9% and 53.7%, respectively (vs. 12.8% for the RMZ and 13.0% for
the S&P 500). We expect some near-term volatility as the cannabis sector
experiences growing pains, but we believe, over the long run, that IIPR’s ability
to source deals with credible, well-funded operators should differentiate it
from other companies (in both the cannabis and REIT sectors). When faced
with volatility, we recommend investors focus on IIPR’s pace of deployment as
a key performance indicator.

All Signs Point to a Swifter Pace of Acquisitions

During the 4Q18 earnings call, IIPR’s Chairman, Alan Gold, laid out nearly
$100M of near-term acquisition opportunities; $47M under contract, $40M
under LOI, and $10M in final negotiation. In addition, Mr. Gold alluded to more
deals beyond those highlighted (what we would typical call a “shadow
pipeline”). While it is hard to quantify the shadow pipeline, we believe that the
company’s pace of capital raising, $263.4M in five months, and the higher
dividend (up 29% in 1Q19 to $0.45/qtr, three months earlier than we projected)
point to swifter capital deployment. We are not likely to see the positive
impact of higher acquisitions in 2019, however, as the previously discussed
drag from capital raises impacts near-term results.

Valuation Details – We Look to 2020, Albeit a Bit Earlier Than

Usual, For a Clearer Representation of IIPR’s Growth Profile
In our launch, we noted that the REIT with the closest growth profile to IIPR,
Terreno (TRNO, Buy, $41 PT), has traded at a forward P/FFO multiple between
17x and 31x over the past five years. Our prior price target on IIPR (see “Long-
Term Arc Is Toward More Acceptance.”) was based on 29.7x our (then) 2019
FFO/sh estimate. While we don’t typically include forward year earnings in our
price target until June/July, we feel an exception is warranted as IIPR’s recent
capital raises are likely to obscure the company’s growth profile until expected
acquisitions stabilize in late 2019/early 2020. As such, we utilized a 26.0x
multiple 0n our projected 2020 FFO/sh of $3.88 (see below for more detail on
our estimates), and raise our Price Target $29 to $101.

Earnings Estimate Revisions

We have adjusted our model to account for the aforementioned convertible
raise, an accelerated pace of acquisitions, higher investment income, and
lower overall share count (future raises assume higher share prices). For 2019,
we assume $140M of acquisitions at a 13.2% yield (up from $120M at 13.5%,
previously), $3.5M of investment income (up from $1.6M), and an average
share count of 11.6M (vs. 10.8M previously), and raise our FFO/sh estimate
$0.04 to $2.46. For 2020, we assume $160M of acquisitions at a 13.0% yield (up
from $150M at 13.0%), $2.1M of investment income (up from $1.6M), and an
average share count of 12.9M (vs. 13.4M previously), and raise our FFO/sh
estimate $0.43 to $3.88. The $0.43 raise in 2020 includes $0.25 from higher
2019/2020 acquisitions, $0.04 from higher interest income, and $0.14 from
lower average share count.

BTIG LLC Thomas Catherwood 212-738-6140 www.btigresearch.com

2
 Accounting For The Convert; Better To Be Conservative
Convertible bond offerings are notoriously hard to account for, especially once
the deal is “in the money”, as not every holder immediately converts to equity.
For modeling purposes, we have treated the 2/21/19 convert as if all shares
were converted to equity in 1Q19. We recognize the interest expense related
to the converts in the model and then back the expense out of FFO so as not to
double count the impact. We believe this is the most conservative approach;
recognizing the full interest expense alone would be less dilutive than
recognizing the full impact of the converted shares. In reality there should be a
mix of debt and higher share count until all shares are converted.

Exhibit 1: IIPR’s External Investments

Total Acquisitions Average Deal

Year
Price Total SF $/SF Price (M) Sq. Ft.
2016 $30.0 127,000 $236 $30.0 127,000
2017 $47.3 509,000 $93 $11.8 127,250
2018 $90.1 391,000 $230 $22.5 97,750
1Q19 $31.5 101,000 $312 $15.75 50,500
Total $198.9 1,128,000 $176 $18.08 102,545

Source: Company Reports, BTIG

Exhibit 2: IIPR’s Capital Raising

Event Date Price/Share Shares (in M) Total (in M)

Initial Public Offering 12/1/2016 $20.0 3.4 $67.0
Series A - Cumulative Preferred, 9.0% 10/11/2017 $25.0 0.6 $15.0
Secondary Offering 1/22/2018 $26.0 3.2 $83.7
Secondary Offering 10/9/2018 $40.0 3.0 $119.6
Convertible Bond Offering, 3.75%* 2/21/2019 - - $143.8
Total/Average - $27.8 10.2 $429.1
*conversion price $69.575/sh (15% premium to 2/14 close of $60.50), $1,000 of notes converts into 14.373 shares

Source: Company Reports, BTIG

BTIG LLC Thomas Catherwood 212-738-6140 www.btigresearch.com

3
Exhibit 3: Innovative Industrial Properties Income Statement, 2018A-2020E

Income Statement 2018A 2019E 2020E

$ in millions 1QA 2QA 3QA 4QA Full Year 1QE 2QE 3QE 4QE Full Year 1QE 2QE 3QE 4QE Full Year
FFO / Share** $0.18 $0.26 $0.32 $0.34 $1.10 $0.45 $0.56 $0.67 $0.78 $2.46 $0.88 $0.97 $1.00 $1.02 $3.88

Rental Revenue 2.7 3.2 3.7 4.7 14.3 5.9 7.6 9.3 10.8 33.6 12.2 13.6 15.0 16.4 57.3
Tenant Expense Reimbursements 0.1 0.1 0.2 0.1 0.4 0.1 0.2 0.2 0.3 0.8 0.3 0.3 0.4 0.4 1.4
Total Property Revenues $2.8 $3.3 $3.9 $4.8 $14.8 $6.0 $7.8 $9.5 $11.1 $34.5 $12.5 $14.0 $15.4 $16.8 $58.7

Rental Expenses (0.1) (0.1) (0.2) (0.1) (0.4) (0.1) (0.2) (0.2) (0.3) (0.8) (0.3) (0.3) (0.4) (0.4) (1.4)
Total Property Expenses ($0.1) ($0.1) ($0.2) ($0.1) ($0.4) ($0.1) ($0.2) ($0.2) ($0.3) ($0.8) ($0.3) ($0.3) ($0.4) ($0.4) ($1.4)
Net Operating Income $2.7 $3.2 $3.7 $4.7 $14.3 $5.9 $7.6 $9.3 $10.8 $33.6 $12.2 $13.6 $15.0 $16.4 $57.321

General & Administrative Expense (1.5) (1.5) (1.4) (2.0) (6.4) (1.6) (1.7) (1.8) (1.9) (7.0) (1.8) (1.9) (2.0) (2.1) (7.8)
EBITDA $1.2 $1.8 $2.3 $2.7 $8.0 $4.3 $5.9 $7.5 $8.9 $26.6 $10.4 $11.7 $13.0 $14.3 $49.5

Depreciation & Amortization (0.5) (0.5) (0.7) (0.9) (2.6) (1.1) (1.3) (1.5) (1.8) (5.7) (2.0) (2.2) (2.5) (2.7) (9.5)
EBIT $0.7 $1.2 $1.6 $1.8 $5.3 $3.2 $4.7 $6.0 $7.2 $21.0 $8.4 $9.5 $10.5 $11.6 $40.1

Interest Expense 0.0 0.0 0.0 0.0 0.0 (0.4) (1.3) (1.3) (1.3) (4.4) (1.3) (1.3) (1.3) (1.3) (5.4)
Other Income (Expense) 0.2 0.3 0.3 0.9 1.6 0.9 1.1 0.9 0.7 3.5 0.5 0.2 0.6 0.9 2.1
Acquisition Costs 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0
Gain on Sales of Non-Op. RE 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0
Income from Continuing Operations $0.9 $1.5 $1.8 $2.7 $7.0 $3.7 $4.4 $5.5 $6.5 $20.0 $7.5 $8.4 $9.8 $11.1 $36.8

Operating (Loss) Income from Disc. Ops. 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0
Gain on Sale of Discontinued Real Estate 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0
Net Income $0.9 $1.5 $1.8 $2.7 $7.0 $3.7 $4.4 $5.5 $6.5 $20.0 $7.5 $8.4 $9.8 $11.1 $36.8

Preferred Stock Dividends (0.3) (0.3) (0.3) (0.3) (1.4) (0.3) (0.3) (0.3) (0.3) (1.4) (0.3) (0.3) (0.3) (0.3) (1.4)
Net Income Att. To IIPR Common $0.6 $1.2 $1.5 $2.3 $5.6 $3.3 $4.0 $5.2 $6.1 $18.7 $7.2 $8.0 $9.4 $10.8 $35.4

Allocation to Participating Securities 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0
Net Income Available To Common $0.6 $1.2 $1.5 $2.3 $5.6 $3.3 $4.0 $5.2 $6.1 $18.7 $7.2 $8.0 $9.4 $10.8 $35.4

Source: Company Reports, BTIG

BTIG LLC Thomas Catherwood 212-738-6140 www.btigresearch.com

4
Exhibit 4: Innovative Industrial Properties FFO Reconciliation, 2018A-2020E

FFO Reconciliation 2018A 2019E 2020E

$ in millions 1QA 2QA 3QA 4QA Full Year 1QE 2QE 3QE 4QE Full Year 1QE 2QE 3QE 4QE Full Year
Net Income Available To Common $0.6 $1.2 $1.5 $2.3 $5.6 $3.3 $4.0 $5.2 $6.1 $18.7 $7.2 $8.0 $9.4 $10.8 $35.4
Real Estate Related D&A 0.5 0.5 0.7 0.9 2.6 1.1 1.3 1.5 1.8 5.7 2.0 2.2 2.5 2.7 9.5
Gain on Sale of Deprec. Property 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0
Allocation to Participating Securities 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0
Adj. For ITM Convertible Notes 0.0 0.0 0.0 0.0 0.0 0.4 1.3 1.3 1.3 4.4 1.3 1.3 1.3 1.3 5.4
Funds From Operations $1.1 $1.7 $2.2 $3.2 $8.3 $4.8 $6.6 $8.0 $9.2 $28.8 $10.6 $11.6 $13.2 $14.9 $50.3

Non-Recurring Items 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0
Funds From Operations - "Recurring" $1.1 $1.7 $2.2 $3.2 $8.3 $4.8 $6.6 $8.0 $9.2 $28.8 $10.6 $11.6 $13.2 $14.9 $50.304

Straight Line Rent Adj. 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0
FAS 142 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0
Building Improvements, TIs & LCs 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0
Stock-Based Compensation 0.3 0.4 0.4 0.4 1.5 0.4 0.4 0.4 0.4 1.5 0.4 0.4 0.4 0.4 1.8
"Stabilization" Capex (Non-Recurring) 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0
Funds Available for Distribution $1.4 $2.1 $2.6 $3.6 $9.7 $5.2 $7.0 $8.4 $9.6 $30.3 $11.0 $12.1 $13.7 $15.3 $52.1

Wtd. Avg. Shs. & Units Outst'd – FFO 6.0 6.8 6.8 9.5 7.3 10.7 11.9 11.9 11.9 11.6 11.9 12.0 13.3 14.5 12.9

"Recurring" FFO / Share* $0.18 $0.26 $0.32 $0.34 $1.10 $0.45 $0.56 $0.67 $0.78 $2.46 $0.88 $0.97 $1.00 $1.02 $3.88
FFO / Share** $0.18 $0.26 $0.32 $0.34 $1.10 $0.45 $0.56 $0.67 $0.78 $2.46 $0.88 $0.97 $1.00 $1.02 $3.88
FAD / Share $0.23 $0.31 $0.38 $0.38 $1.31 $0.49 $0.59 $0.71 $0.81 $2.59 $0.92 $1.01 $1.03 $1.05 $4.01
Dividend / Share $0.25 $0.25 $0.35 $0.35 $1.20 $0.45 $0.45 $0.45 $0.45 $1.80 $0.60 $0.60 $0.60 $0.60 $2.40

Margin Analysis
NOI/Total Revenues 96.9% 97.9% 94.7% 98.3% 97.0% 97.6% 97.6% 97.7% 97.6% 97.6% 97.6% 97.6% 97.7% 97.6% 97.6%
G&A/Total Revenues 53.4% 44.5% 36.7% 41.4% 43.1% 26.5% 21.7% 18.9% 17.1% 20.3% 14.4% 13.6% 13.0% 12.5% 13.3%
EBITDA/Total Revenues 43.4% 53.5% 57.9% 56.9% 53.9% 71.1% 75.8% 78.7% 80.5% 77.3% 83.2% 83.9% 84.7% 85.2% 84.3%
FFO/Total Revenues 39.2% 52.5% 56.0% 67.8% 55.9% 80.1% 85.0% 84.4% 83.5% 83.5% 84.2% 83.3% 86.1% 88.3% 85.7%
FAD/Total Revenues 51.1% 63.5% 65.8% 75.9% 65.8% 86.5% 89.9% 88.5% 86.9% 88.0% 87.6% 86.4% 88.9% 90.9% 88.6%
FAD/FFO 130.5% 120.9% 117.6% 111.9% 117.7% 108.0% 105.8% 104.8% 104.2% 105.4% 104.1% 103.8% 103.3% 102.9% 103.5%
*Recurring FFO equals FFO excluding provisions for impairment, gains and losses from the early extinguishment of debt and preferred stock, restructuring charges, and other one-time items.
**FFO equals net income under GAAP, excluding gains/losses from debt restructuring and sales of property, plus depreciation and amortization, and after adjustments for unconsolidated partnerships and joint ventures.

Source: Company Reports, BTIG

BTIG LLC Thomas Catherwood 212-738-6140 www.btigresearch.com

5
 Exhibit 5: Innovative Industrial Properties Net Asset Value Estimate

As BTIG
($ in millions except per share) Reported Adjustments Comments:
Net Operating Income (NOI) $4.7 $4.7
(-) Straight Line Rents 0.0 0.0
(-) FAS 141 0.0 0.0
(+/-) Term. Fees/Other Non-Recurring 0.0 0.0
(+/-) Partial Period Acq., Disp., Dev. 0.3 Acquisitions
(+/-) Adjustment 1.3 Rent abatements
(=) Equals: Adjusted Quarterly NOI $6.3
(x) 4.0x
(=) Annualized NOI $25.1
(+/-) NOI Growth 1-Year Forward 0.8 3.25% NTM Cash SSNOI Growth
(-) Management Fee 0.0 Incl. in Op. Exp. Above
(=) Adjusted NOI $25.9
(/) Cap Rate 9.00%
(=) Real Estate Value $144.6 $288.0

(+) Non-Income Producing Real Estate 6.3 6.3

(+) Unconsolidated Investment 0.0 0.0
(+) Cash & Cash Equivalents 13.1 13.1
(+) Other Assets 121.1 121.1
(=) Total Assets $285.0 $428.4

Mortgage Notes Payable 0.0 0.0

Term Loans 0.0 0.0
Unsecured Notes 0.0 0.0
Unsecured Bank Credit Facilities 0.0 0.0
Accounts Payable & Accrued Exp. 4.4 4.4
Other Liabilities 12.8 12.8
(-) Total Liabilities $17.2 $17.2

(-) Preferred Stock 14.0 14.0

(=) Equity $253.9 $397.2

(/) Diluted Shares & Units Outst'd. 9.8

(=) Net Asset Value (NAV) / Share 40.63

Current Share Price $86.21

Premium/(Discount) 112.2%
Implied Cap Rate 3.5%
Source: Company Reports, BTIG

BTIG LLC Thomas Catherwood 212-738-6140 www.btigresearch.com

6
 Exhibit 6: Innovative Industrial Properties NAV Sensitivity Analysis

Prem. /
Cap Rate NAV
(Disc.)
8.00% $ 44.32 94.5%
8.25% $ 43.31 99.0%
8.50% $ 42.37 103.5%
8.75% $ 41.48 107.9%
9.00% $ 40.63 112.2%
9.25% $ 39.84 116.4%
9.50% $ 39.08 120.6%
9.75% $ 38.37 124.7%
10.00% $ 37.69 128.7%
Source: BTIG

BTIG LLC Thomas Catherwood 212-738-6140 www.btigresearch.com

7
 BTIG Covered Companies Mentioned in this Report
INNOVATIVE INDUSTRIAL PROPERTIES, INC. (IIPR, Buy, $101.00 PT; Current Price: $86.21; Analyst:
Tom.Catherwood)
TERRENO REALTY CORPORATION (TRNO, Buy, $41.00 PT; Current Price: $42.07; Analyst: Tom.Catherwood)

BTIG LLC Thomas Catherwood 212-738-6140 www.btigresearch.com

8
 Appendix: Analyst Certification and Other Important Disclosures
Analyst Certification
I, Thomas Catherwood, hereby certify that the views about the companies and securities discussed in this report
are accurately expressed and that I have not received and will not receive direct or indirect compensation in
exchange for expressing specific recommendations or views in this report.
I, James Sullivan, hereby certify that the views about the companies and securities discussed in this report are
accurately expressed and that I have not received and will not receive direct or indirect compensation in exchange
for expressing specific recommendations or views in this report.

Regulatory Disclosures
Ratings Definitions
BTIG LLC’s (“BTIG”) ratings, effective June 12, 2017, are defined as follows:
BUY – A security which is expected to produce a positive total return of 15% or greater over the 12 months following
the recommendation. The BUY rating may be maintained as long as it is deemed appropriate, notwithstanding
price fluctuations that would cause the target to fall outside of the 15% return.
SELL – A security which is expected to produce a negative total return of 15% or greater over the next 12 months
following the recommendation. The SELL rating may be maintained as long as it is deemed appropriate,
notwithstanding price fluctuations that would cause the target to fall outside of the 15% return.
NEUTRAL – A security which is not expected to appreciate or depreciate meaningfully over the next 12 months.
NOT RATED – A security which is not rated or covered by BTIG.
UNDER REVIEW – Effective immediately, coverage of the following securities is Under Review. Ratings, price
targets, disclosures, and estimates for the companies listed below are suspended and should no longer be relied
upon.

Distribution of Ratings and Investment Banking Clients

BTIG must disclose in each research report the percentage of all securities rated by the member to which the
member would assign a “buy”, “neutral” or “sell” rating. The said ratings are updated on a quarterly basis. BTIG
must also disclose the percentage of subject companies within each of these three categories for whom the
member has provided investment banking services within the previous twelve months. Stocks under coverage as
of the end of the most recent calendar quarter (December 31, 2018): 331

Distribution of BTIG’s Research Recommendations (as of December 31, 2018):

BUY: 59.8%; NEUTRAL: 38.1%; SELL: 2.1%

Distribution of BTIG’s Investment Banking Services (as of December 31, 2018):

BUY: 27.3%; NEUTRAL: 11.1%; SELL: 0.0%

For purposes of FINRA ratings distribution rules, BTIG’s stock ratings of Buy, Neutral and Sell fall into Buy, Hold and
Sell categories, respectively.

Company Valuation and Risk Disclosures

Innovative Industrial Properties, Inc. (IIPR, Buy, $101.00 PT)
Valuation: Our valuation is based on a combination of a warranted P/FFO multiple and premiums/discounts to
estimated Net Asset Value. IIPR's shares trade at 35.0x our 2019 FFO/sh estimate and a 112.2% premium to our
NAV estimate. Our price target implies a 19.2% total return based on a 26.0x multiple of our 2020 FFO/sh
estimate.
Risks: Risks to the downside for IIPR include: (1) the Department of Justice and State Attorney Generals elect to
enforce federal cannabis laws in states with medical and/or recreation programs, (2) federal legalization happens

BTIG LLC Thomas Catherwood 212-738-6140 www.btigresearch.com

9
 sooner than expected, new competitors enter the market, yields compress, and IIPR cannot add scale as planned,
(3) overproduction impacts cannabis pricing and tenants are unable to pay their contractual rent, and (4) new
entrants in the cannabis real-estate market compete with IIPR and returns compress across the sector.

Terreno Realty Corporation (TRNO, Buy, $41.00 PT)

Valuation: Our valuation is based on a combination of a warranted P/FFO multiple and premiums/discounts to
estimated Net Asset Value. Terreno shares trade at 29.7x our 2019 FFO/sh estimate and a 12.8% premium to our
NAV estimate. Our price target implies (0.3%) total return based on a 28.9x forward multiple.
Risks: Risks to the downside for Terreno include: (1) weak GDP growth negatively impacts industrial tenants, (2)
shift in consumer spending habits slows the growth of e-commerce related industrial demand, (3) increase in
speculative development limits industrial rent growth, (4) “Last-mile” shipping to densely populated markets
moves from infill locations to larger ex-urban bulk industrial spaces.

Company–Specific Regulatory Disclosures

BTIG LLC expects to receive or intends to seek compensation for investment banking services in the next 3
months from: Terreno Realty Corporation (TRNO), Innovative Industrial Properties, Inc. (IIPR)

BTIG LLC has received compensation for investment banking services in the past 12 months from:
Terreno Realty Corporation (TRNO), Innovative Industrial Properties, Inc. (IIPR)

BTIG LLC had an investment banking services client relationship during the past 12 months with:
Terreno Realty Corporation (TRNO), Innovative Industrial Properties, Inc. (IIPR)

BTIG LLC managed or co-managed a public offering of securities in the past 12 months for:
Terreno Realty Corporation (TRNO), Innovative Industrial Properties, Inc. (IIPR)

BTIG LLC Thomas Catherwood 212-738-6140 www.btigresearch.com

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 Other Disclosures
Additional Information Available Upon Request
General Disclosures
Research reports produced by BTIG LLC (“BTIG”) are published for and intended to be distributed solely to BTIG
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BTIG LLC Thomas Catherwood 212-738-6140 www.btigresearch.com

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