If you think that owning shares of cannabis cultivators is the only way to invest in the burgeoning pot market, think again. There’s an indirect angle to the marijuana market with Innovative Industrial Properties (NYSE:IIPR), although admittedly, IIPR stock isn’t the most affordable name.

That’s because its share price is high and its valuation might be considered elevated. I’ll delve into those details shortly, as well as the lowdown on the company’s fascinating business model.

As you may recall, voters in five U.S. states approved pro-marijuana-rights measures in November. As a result, 15 U.S. states are expected to allow recreational marijuana sales, while 25 states will permit some form of medical marijuana sales.

So it’s an exciting time to be involved in marijuana stocks. And yet, I think you’ll find that Innovative Industrial Properties is a cannabis company like no other. And perhaps it’s not really a cannabis company at all.

A Closer Look at IIPR Stock

Innovative Industrial Properties wasn’t always a pricey stock, but over the past year it climbed relentlessly higher.

In mid-March of 2020, the shares were changing hands for around $60 apiece. You won’t likely be able to buy them at that price today, though, as the stock closed at $172.84 yesterday.

Interestingly, the stock has gone higher than that. Specifically, IIPR stock topped out at a 52-week high of $222.08 on Feb. 24, 2021.

Therefore, you at least have an opportunity to buy the shares below their peak price. On the other hand, some value-focused investors might balk at the idea of buying a stock with a trailing 12-month price–earnings ratio of 52.7.

That’s a somewhat elevated valuation, I must admit. But then, income-oriented investors might appreciate IIPR stock’s forward annual dividend yield of 3.05%.

A Cannabis Real Estate Powerhouse

Some cautious investors prefer to avoid cannabis cultivators, in favor of businesses that don’t actually “touch the plant.”

Does Innovative Industrial Properties fit into this category? I’ll let you decide. The company gets involved with cannabis plants, but it doesn’t actually grow them.

Some folks wouldn’t even classify Innovative Industrial Properties as a cannabis company, but as a real estate company.

The firm purchases properties from cannabis growers and then leases the sites back to the growers. This could be called a “sale-leaseback” business model.

As InvestorPlace contributor Chris Tyler reports, Innovative Industrial Properties is a “$4 billion powerhouse” with 46 properties in 17 U.S. states.

And indeed, the company bills itself as, “The Leading Provider of Real Estate Capital for the Medical-Use Cannabis Industry.” But does Innovative Industrial Properties actually live up to this lofty claim?

A Potent Portfolio

If you’re thinking of investing in a real estate company, you’ll undoubtedly want to analyze its portfolio first.

Moreover, if it’s a cannabis real estate business, its property should definitely be located in pot-friendly jurisdictions.

Innovative Industrial Properties has this angle covered as its holdings are located in states with favorable medical-use regulatory environments.

We’re talking about states like California, Colorado, Arizona and New Jersey. To put it simply, Innovative Industrial Properties operates in regions where medical marijuana growers want to build their businesses.

Further, the company’s real estate footprint is expanding. In fact, Innovative Industrial Properties recently announced that it had completed its acquisition of a property in San Marcos, Texas.

After this purchase, Innovative Industrial Properties either owns or leases 68 properties covering more than 5.9 million square feet.

Investors should expect those numbers to increase as the medical marijuana industry gains further traction in 2021 and beyond.

The Bottom Line

In the final analysis, Innovative Industrial Properties is an unusual real estate company as well as a generous dividend payer.

Should we call Innovative Industrial Properties a pot stock or not? Instead of debating that topic, just consider taking a positive position in IIPR stock as the medical cannabis market continues its growth trajectory in America.

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