Acquisitions Drive 111% Q4 Revenue, 720% Q4
Net Income and 344% Q4 AFFO Growth Year-over-Year
Innovative Industrial Properties, Inc. ("IIP"), the first and
only real estate company on the New York Stock Exchange (NYSE:
IIPR) focused on the regulated U.S. cannabis industry, announced
today results for the fourth quarter and year ended December 31,
2018, the second full year since IIP commenced real estate
operations and completed its initial public offering in December
2016.
Fourth Quarter 2018 Highlights
Financial Results and Financing Activity
- IIP generated rental revenues of
approximately $4.7 million in the quarter, representing a 111%
increase from the prior year's quarter.
- IIP recorded net income attributable to
common stockholders of approximately $2.3 million for the quarter,
or $0.24 per diluted share, and adjusted funds from operations
("AFFO") of approximately $3.6 million, or $0.38 per diluted share.
AFFO represented an increase of 344% from the prior year's
quarter.
- IIP paid its seventh consecutive
quarterly dividend of $0.35 per share on January 15, 2019 to
stockholders of record as of December 31, 2018, representing a 40%
increase from the prior year's quarter.
- In October 2018, IIP completed an
underwritten public offering of 2,990,000 shares of common stock,
including the exercise in full of the underwriters' option to
purchase an additional 390,000 shares, resulting in net proceeds of
approximately $113.9 million.
- Subsequent to the end of the quarter,
in February 2019, IIP's operating partnership subsidiary (the
"Operating Partnership") completed a private of offering of $143.75
million aggregate principal amount of 3.75% exchangeable senior
notes due 2024 (the "Notes"), which includes the exercise in full
of the initial purchasers' option to purchase additional Notes,
resulting in estimated net proceeds of approximately $138.4
million.
- Subsequent to the end of the quarter,
on March 12, 2019, IIP declared its eighth consecutive quarterly
dividend of $0.45 per share, which is expected to be paid on April
15, 2019 to stockholders of record as of March 29, 2019,
representing an approximately 29% increase from IIP's fourth
quarter 2018 common stock dividend and an 80% increase from IIP's
first quarter 2018 common stock dividend.
Investment Activity
- In October 2018, IIP acquired a 58,000
square foot cannabis cultivation facility in Colorado for
approximately $11.3 million (excluding transaction costs) and
entered into a long-term lease with The Green Solution, LLC
("TGS").
- In December 2018, IIP acquired a 75,000
square foot medical-use cannabis cultivation and processing
facility in Illinois and entered into a long-term lease with a
subsidiary of Ascend Wellness Holdings, LLC ("Ascend") for total
consideration of $25.0 million (excluding transaction costs),
comprising a purchase price of $19.0 million and a $6.0 million
tenant improvement allowance available for additional improvements
at the property.
- In December 2018, IIP amended its
leases with subsidiaries of Vireo Health, Inc. ("Vireo") in
Minnesota, New York and Pennsylvania to provide an additional $5.0
million in aggregate for tenant improvements at these properties,
which also resulted in a corresponding increase to base rent at
each property.
- Subsequent to the end of the quarter,
in February 2019, IIP acquired a 43,000 square foot industrial
property in California and entered into a long-term lease with an
experienced operator, which intends to operate the facility for
cannabis cultivation upon completion of redevelopment, with IIP's
total investment in the acquisition and redevelopment of the
property expected to be approximately $11.5 million (excluding
transaction costs).
- Subsequent to the end of the quarter,
in March 2019, IIP acquired a property in Ohio and entered into a
long-term lease with a subsidiary of PharmaCann LLC ("PharmaCann")
for two industrial and greenhouse facilities that are expected to
comprise a total of 58,000 square feet upon completion of
development, with IIP's total investment in the acquisition and
development of the property expected to be $20.0 million (excluding
transaction costs).
Portfolio Update and Acquisition Activity
Portfolio Update
As of March 13, 2019, IIP owned 13 properties that were 100%
leased to state-licensed medical-use cannabis operators and
comprising an aggregate of approximately 1,128,000 rentable square
feet (including approximately 159,000 rentable square feet under
development/redevelopment) in Arizona, California, Colorado,
Illinois, Maryland, Massachusetts, Michigan, Minnesota, New York,
Ohio and Pennsylvania, with a weighted-average remaining lease term
of approximately 14.3 years. As of March 13, 2019, IIP had invested
$161.2 million in the aggregate (excluding transaction costs) and
had committed an additional $37.7 million to reimburse certain
tenants and sellers for completion of construction and tenant
improvements at IIP's properties. As of March 13, 2019, IIP's
average current yield on invested capital was approximately 15.1%
for these 13 properties, calculated as the sum of the initial base
rents, supplemental rent (with respect to the lease with PharmaCann
LLC ("PharmaCann") at one of IIP's New York properties) and
property management fees (after the expiration of applicable base
rent abatement periods), divided by IIP's aggregate investment in
these properties (excluding transaction costs and including the
aggregate potential tenant reimbursements of $37.7 million).
Investment Activity
On October 30, 2018, IIP completed the acquisition of a 58,000
square foot industrial property located in Colorado for
approximately $11.3 million (excluding transaction costs) and
entered into a long-term, triple-net lease with TGS for continued
operation of a cannabis cultivation facility.
On December 7, 2018, IIP amended its leases with subsidiaries of
Vireo in Minnesota, New York and Pennsylvania to provide an
additional $5.0 million in aggregate for tenant improvements at
these properties, which also resulted in a corresponding increase
to base rent at each property.
On December 21, 2018, IIP completed the acquisition of a 75,000
square foot industrial property located in Illinois for $19.0
million (excluding transaction costs). Concurrent with the closing
of the purchase, IIP entered into a long-term, triple-net lease
agreement with a wholly owned subsidiary of Ascend, which intends
to operate the property as a medical-use cannabis cultivation and
processing facility. Ascend is expected to complete additional
tenant improvements for the building, for which IIP has agreed to
provide reimbursement of up to $6.0 million, none of which was
incurred or funded as of December 31, 2018. Assuming full
reimbursement for the tenant improvements, IIP's total investment
in the property will be $25.0 million.
On February 8, 2019, IIP completed the acquisition of a 43,000
square foot industrial property located in California for
approximately $6.7 million (excluding transaction costs).
Concurrent with the closing of the purchase, IIP entered into a
long-term, triple-net lease agreement with an experienced operator,
which intends to operate the property as a cannabis cultivation
facility upon completion of redevelopment. The seller of the
property is expected to complete redevelopment of the building, for
which IIP has agreed to provide reimbursement of up to
approximately $4.8 million. Assuming full reimbursement for the
redevelopment, IIP's total investment in the property will be
approximately $11.5 million.
On March 13, 2019, IIP acquired a property in Ohio and entered
into a long-term lease and development agreement with a subsidiary
of PharmaCann for an approximately 26,000 square foot industrial
facility and an approximately 32,000 square foot greenhouse
facility on the property. The purchase price for the property was
$700,000 (excluding transaction costs). The PharmaCann subsidiary
is expected to construct the two buildings at the property, for
which IIP has agreed to provide reimbursement of up to $19.3
million. Assuming full reimbursement for the construction, IIP's
total investment in the property will be $20.0 million.
Financing Activity
In October 2018, IIP completed an underwritten public offering
of 2,990,000 shares of common stock, including the exercise in full
of the underwriters' option to purchase an additional 390,000
shares, resulting in net proceeds of approximately $113.9 million,
after deducting the underwriters' discounts and commissions and
offering expenses.
Subsequent to the end of the quarter, in February 2019, the
Operating Partnership issued the Notes in a private offering. The
Notes are senior unsecured obligations of the Operating
Partnership, are fully and unconditionally guaranteed by IIP and
the Operating Partnership's subsidiaries and are exchangeable for
cash, shares of IIP common stock, or a combination of cash and
shares of IIP common stock, at the Operating Partnership's option,
at any time prior to the close of business on the second scheduled
trading day immediately preceding the stated maturity date. The
initial exchange rate for the Notes is 14.37298 shares of IIP
common stock per $1,000 principal amount of the Notes and
the initial exchange price is approximately $69.575 per
share of IIP common stock. The initial exchange rate and initial
exchange price are subject to adjustment in certain circumstances.
The Notes will pay interest semiannually at a rate of 3.75% per
annum and will mature on February 21, 2024, unless earlier
exchanged or repurchased in accordance with their terms. The
Operating Partnership will not have the right to redeem the Notes
prior to maturity, but may be required to repurchase the Notes from
holders under certain circumstances.
IIP expects to use the net proceeds from both offerings to
invest in specialized industrial real estate assets that support
the regulated medical-use cannabis cultivation and processing
industry and for general corporate purposes.
Financial Results
IIP generated rental revenues of approximately $4.7 million for
the three months ended December 31, 2018, compared to approximately
$2.2 million for the same period in 2017, an increase of 111%. IIP
generated rental revenues of approximately $14.3 million for the
year ended December 31, 2018, compared to approximately $6.3
million for 2017, an increase of 128%. The increase was driven
primarily by the acquisition and leasing of new properties, in
addition to contractual rental escalations at certain
properties.
For the three months ended December 31, 2018, IIP recorded net
income attributable to common stockholders and net income
attributable to common stockholders per diluted share of
approximately $2.3 million and $0.24, respectively; funds from
operations ("FFO") and FFO per diluted share of approximately $3.2
million and $0.34, respectively; and AFFO and AFFO per diluted
share of approximately $3.6 million and $0.38, respectively. Fourth
quarter 2018 AFFO and AFFO per diluted share for the quarter
increased by approximately 344% and 65% from the prior year period,
respectively.
For the year ended December 31, 2018, IIP recorded net income
attributable to common stockholders and net income attributable to
common stockholders per diluted share of $5.6 million and $0.75,
respectively; FFO and FFO per diluted share of $8.3 million and
$1.13, respectively; and AFFO and AFFO per diluted share of
approximately $9.7 million and $1.34, respectively. 2018 AFFO and
AFFO per diluted share increased by approximately 314% and 100%
from the prior year, respectively.
FFO and AFFO are supplemental non-GAAP financial measures used
in the real estate industry to measure and compare the operating
performance of real estate companies. A complete reconciliation
containing adjustments from GAAP net loss available to common
stockholders to FFO and AFFO and definitions of terms are included
at the end of this release.
Teleconference and Webcast
Innovative Industrial Properties, Inc. will conduct a
conference call and webcast at 10:00 a.m. Pacific
Time (1:00 p.m. Eastern Time) on Thursday, March 14,
2019 to discuss IIP's financial results and operations for the
fourth quarter and year ended December 31, 2018. The call will be
open to all interested investors through a live audio webcast at
the Investor Relations section of IIP's website at
www.innovativeindustrialproperties.com, or live by calling
1-877-328-5514 (domestic) or 1-412-902-6764 (international) and
asking to be joined to the Innovative Industrial Properties, Inc.
conference call. The complete webcast will be archived for 90 days
on IIP's website. A telephone playback of the conference call will
also be available from 12:00 p.m. Pacific
Time on Thursday, March 14, 2019 until 12:00
p.m. Pacific Time on Thursday, March 21, 2019, by calling
1-877-344-7529 (domestic), 855-669-9658 (Canada) or 1-412-317-0088
(international) and using access code 10129227.
About Innovative Industrial Properties
Innovative Industrial Properties, Inc. is a self-advised
Maryland corporation focused on the acquisition, ownership and
management of specialized industrial properties leased to
experienced, state-licensed operators for their regulated
medical-use cannabis facilities. Innovative Industrial Properties,
Inc. has elected to be taxed as a real estate investment trust,
commencing with the year ended December 31, 2017. Additional
information is available at
www.innovativeindustrialproperties.com.
This press release contains statements that IIP believes to be
"forward-looking statements" within the meaning of the safe harbor
provisions of the Private Securities Litigation Reform Act of 1995.
All statements other than historical facts are forward-looking
statements. When used in this press release, words such as IIP
"expects," "intends," "plans," "estimates," "anticipates,"
"believes" or "should" or the negative thereof or similar
terminology are generally intended to identify forward-looking
statements. Such forward-looking statements are subject to risks
and uncertainties that could cause actual results to differ
materially from those expressed in, or implied by, such statements.
Investors should not place undue reliance upon forward-looking
statements. IIP disclaims any obligation to update or revise any
forward-looking statements, whether as a result of new information,
future events or otherwise.
INNOVATIVE INDUSTRIAL PROPERTIES, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands, except share and per share
amounts)
(Unaudited)
Assets
December 31, 2018 December 31, 2017 Real
estate, at cost: Land $ 20,475 $ 11,514 Buildings and improvements
109,425 51,315 Tenant improvements 14,732 5,901 Construction in
progress 6,298 — Total real estate, at
cost 150,930 68,730 Less accumulated depreciation (3,571 )
(942 ) Net real estate held for investment 147,359 67,788
Cash and cash equivalents 13,050 11,758 Short-term investments
120,443 — Other assets, net 614 482
Total assets $ 281,466 $ 80,028
Liabilities
and stockholders’ equity Tenant improvements and construction
funding payable $ 2,433 $ 20 Accounts payable and accrued expenses
1,968 1,062 Dividends payable 3,759 1,198 Offering cost liability —
41 Rent received in advance and tenant security deposits
9,014 4,158 Total liabilities 17,174
6,479 Commitments and contingencies
Stockholders’ equity
Preferred stock (par value $0.001 per
share, 50,000,000 shares authorized: 9.00% Series A cumulative
redeemable preferred stock, $15,000 liquidation preference ($25.00
per share), 600,000 shares issued and outstanding at December 31,
2018 and 2017
14,009
14,009
Common stock, par value $0.001 per share, 50,000,000 shares
authorized: 9,775,800 and 3,501,147 shares issued and outstanding
at December 31, 2018 and 2017, respectively
10
4
Additional paid-in-capital 250,273 64,000 Accumulated deficit
— (4,464 ) Total stockholders' equity
264,292 73,549 Total liabilities and
stockholders' equity $ 281,466 $ 80,028
INNOVATIVE INDUSTRIAL PROPERTIES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except share and per share
amounts)
(Unaudited)
For the Three Months Ended
December 31,
For the Year Ended
December 31,
2018 2017 2018
2017 Revenues: Rental $ 4,703 $ 2,228 $ 14,342 $
6,302 Tenant reimbursements 80 54 445
118 Total revenues 4,783 2,282 14,787
6,420
Expenses: Property expenses 80 54
445 118 General and administrative expense 1,982 1,293 6,375 5,497
Severance — — — 113 Depreciation expense 914 362
2,629 915 Total expenses 2,976
1,709 9,449 6,643 Income / (loss) from
operations 1,807 573 5,338 (223 ) Interest and other income
859 34 1,647 151 Net income / (loss)
2,666 607 6,985 (72 ) Preferred stock dividend 338
323 1,352 323 Net income / (loss) attributable
to common stockholders
$
2,328
$
284
$
5,633
$
(395
)
Net income / (loss) attributable to common stockholders per share:
Basic $ 0.24 $ 0.08 $ 0.76 $ (0.13 ) Diluted $ 0.24 $ 0.07 $ 0.75 $
(0.13 ) Weighted average shares outstanding: Basic 9,367,148
3,393,107 7,138,952 3,375,284 Diluted 9,515,800 3,501,147 7,285,801
3,375,284
INNOVATIVE INDUSTRIAL PROPERTIES,
INC. CONDENSED CONSOLIDATED FFO AND AFFO
(In thousands, except share and per share
amounts)
(Unaudited)
The table below is a reconciliation of net
income / (loss) attributable to common stockholders to FFO and AFFO
for the three months and years ended December 31, 2018 and
2017:
For the Three Months Ended December 31, For the
Years Ended
December 31,
2018 2017 2018 2017
Net income / (loss) attributable to common stockholders
$
2,328
$
284
$
5,633
$
(395
)
Real estate depreciation 914 362 2,629
915 FFO 3,242 646 8,262 520 Stock-based compensation 386 171
1,465 1,719 Severance — — — 113
AFFO $ 3,628 $ 817 $ 9,727 $ 2,352 FFO per common share –
basic $ 0.35 $ 0.19 $ 1.16 $ 0.15 FFO per common share –
diluted $ 0.34 $ 0.18 $ 1.13 $ 0.15 AFFO per common share –
basic $ 0.39 $ 0.24 $ 1.36 $ 0.70 AFFO per common share –
diluted $ 0.38 $ 0.23 $ 1.34 $ 0.67 Weighted average shares
outstanding: Basic 9,367,148 3,393,107 7,138,952 3,375,284 Diluted
9,515,800 3,501,147 7,285,801 3,507,145
FFO and FFO per share are operating performance measures adopted
by the National Association of Real Estate Investment Trusts, Inc.
(“NAREIT”). NAREIT defines FFO as the most commonly accepted and
reported measure of a REIT’s operating performance equal to “net
income (loss), computed in accordance with accounting principles
generally accepted in the United States (“GAAP”), excluding gains
(or losses) from sales of property, plus depreciation, amortization
and impairment related to real estate properties, and after
adjustments for unconsolidated partnerships and joint
ventures.”
Management believes that net income (loss), as defined by GAAP,
is the most appropriate earnings measurement. However, management
believes FFO and FFO per share to be important supplemental
measures of a REIT's performance because they provide an
understanding of the operating performance of IIP's properties
without giving effect to certain significant non-cash items,
primarily depreciation expense. Historical cost accounting for real
estate assets in accordance with GAAP assumes that the value of
real estate assets diminishes predictably over time. However, real
estate values instead have historically risen or fallen with market
conditions. IIP believes that by excluding the effect of
depreciation, FFO and FFO per share can facilitate comparisons of
operating performance between periods. IIP reports FFO and FFO per
share because these measures are observed by management to also be
the predominant measures used by the REIT industry and by industry
analysts to evaluate REITs and because FFO per share is
consistently reported, discussed, and compared by research analysts
in their notes and publications about REITs. For these reasons,
management has deemed it appropriate to disclose and discuss FFO
and FFO per share.
Management believes that AFFO and AFFO per share are also
appropriate supplemental measures of a REIT's operating
performance. IIP calculates AFFO by adding to FFO certain non-cash
and non-recurring expenses, consisting of non-cash stock-based
compensation expense and severance expense.
IIP's computation of FFO and AFFO may differ from the
methodology for calculating FFO and AFFO utilized by other equity
REITs and, accordingly, may not be comparable to such REITs.
Further, FFO and AFFO do not represent cash flow available for
management's discretionary use. FFO and AFFO should not be
considered as an alternative to net income (loss) (computed in
accordance with GAAP) as an indicator of IIP's financial
performance or to cash flow from operating activities (computed in
accordance with GAAP) as an indicator of IIP's liquidity, nor is it
indicative of funds available to fund IIP's cash needs, including
IIP's ability to pay dividends or make distributions. FFO and AFFO
should be considered only as supplements to net income (loss)
computed in accordance with GAAP as measures of IIP's
operations.
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version on businesswire.com: https://www.businesswire.com/news/home/20190313005875/en/
Catherine HastingsChief Financial OfficerInnovative Industrial
Properties, Inc.(858) 997-3332
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