Morning Commentary: Innovative Industrial Properties hits market, expands on debut

By Abigail W. Adams

Portland, Me., Feb. 15 – The convertibles secondary market opened Friday with more new paper entering the space.

Innovative Industrial Properties Inc. priced an upsized $125 million of five-year exchangeable notes prior to the market open on Friday at the cheap end of talk with a coupon of 3.75% and an initial exchange premium of 15%, according to a company news release.

Price talk had been for a coupon of 3.25% to 3.75% and an initial exchange premium of 15% to 20%, according to a market source.

There is an $18.75 million greenshoe.

The notes will be issued by subsidiary IIP Operating Partnership, LP and exchangeable into Innovative Industrial Properties stock.

The deal size was initially $100 million with a greenshoe of $15 million.

It is rare for a deal to be upsized and price at the cheap end of talk, a market source said.

However, the new paper was performing “extremely well” in the secondary space, the source said.

The 3.75% notes traded up to 103 on an outright basis before the opening bell. They were changing hands between 103.5 and 104 early in Friday’s session.

The notes were expanded about 1 point dollar-neutral, a market source said.

Innovative Industrial Properties stock popped early Friday after getting crushed on Thursday, a market source said.

Stock traded up to $64.54, an increase of 6.68%, shortly before 11 a.m. ET.

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