Acquisitions Drive 201% Q3 Rental Revenue,
314% Q3 Net Income and 270% Q3 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 quarter ended September 30, 2019.
Third Quarter 2019 Highlights
Financial Results and Financing Activity
- IIP generated rental revenues of approximately $11.2 million in
the quarter, representing a 201% increase from the prior year’s
third quarter.
- IIP recorded net income available to common stockholders of
approximately $6.2 million for the quarter, or $0.55 per diluted
share, and adjusted funds from operations (AFFO) of approximately
$9.5 million, or $0.86 per diluted share. Net income available to
common stockholders and AFFO increased by 314% and 270% from the
prior year’s third quarter, respectively.
- IIP paid a quarterly dividend of $0.78 per share on October 15,
2019 to common stockholders of record as of September 30, 2019,
representing a 30% increase from IIP’s second quarter 2019 dividend
and an approximately 123% increase over the third quarter 2018’s
dividend.
- In July, IIP completed an underwritten public offering of
1,495,000 shares of common stock, including the exercise in full of
the underwriters’ option to purchase an additional 195,000 shares,
resulting in net proceeds of approximately $180.1 million.
- In September and October, IIP issued shares of common stock for
net proceeds of approximately $46.9 million under an
“at-the-market” equity offering program.
Key Hires
- IIP hired Tracie Hager as Vice President, Asset Management,
bringing nearly 30 years of senior management experience in
institutional commercial property management.
- IIP hired Kelly Spicher as Senior Real Estate Counsel, a
commercial real estate transactional attorney with over 16 years of
big law firm experience representing institutional clients on
complex real estate transactions.
Investments
- In July, IIP acquired a 145,000 square foot industrial property
in Michigan and entered into a long-term triple-net lease with a
subsidiary of Ascend Wellness Holdings, LLC (AWH), which intends to
operate the facility for medical-use cannabis cultivation and
processing upon completion of redevelopment, with IIP’s total
investment in the acquisition and redevelopment of the property
expected to be approximately $19.8 million (excluding transaction
costs).
- In July, IIP acquired a 43,000 square foot industrial property
in Nevada and entered into a long-term triple-net lease with a
subsidiary of MJardin Group, Inc. (MJardin) for continued use as a
regulated cannabis cultivation and processing facility, with IIP’s
total investment in the acquisition and redevelopment of the
property expected to be $9.6 million (excluding transaction
costs).
- In July, IIP acquired a 35,000 square foot industrial property
in California and entered into a long-term triple-net lease with
DionyMed Brands, Inc. (DYME) for continued use as a regulated
cannabis cultivation and processing facility and dispensary, with
IIP’s total investment in the acquisition and redevelopment of the
property expected to be $15.0 million (excluding transaction
costs).
- In July, IIP acquired a 150,000 square foot industrial property
in Massachusetts and entered into a long-term triple-net lease with
a subsidiary of Trulieve Cannabis Corp. (Trulieve), which intends
to operate the facility for regulated cannabis cultivation and
processing upon completion of redevelopment, with an initial
purchase price of $3.5 million (excluding transaction costs) and an
additional commitment by IIP to fund up to $40.0 million for
redevelopment of the property, which funding is subject to
reduction at Trulieve’s option within the first six months of the
lease term.
- In August, IIP acquired a property in Pennsylvania and entered
into a long-term triple-net lease with a subsidiary of PharmaCann
LLC (PharmaCann) for two industrial and greenhouse facilities that
are expected to comprise a total of 54,000 square feet upon
completion of development, with IIP's total investment in the
acquisition and development of the property expected to be $26.0
million (excluding transaction costs), which excludes up to an
additional $4.0 million which may be requested by PharmaCann within
nine months following closing.
- In September, IIP amended its lease with AWH at one of its
Illinois properties to provide an additional $8.0 million for
tenant improvements at the property, which resulted in a
corresponding adjustment to base rent.
- In September, IIP amended its lease with Holistic Industries,
Inc. (Holistic) at one of its Massachusetts properties to provide
up to $2.0 million for tenant improvements at the property, which
may be requested by Holistic until March 31, 2020, which funding
will result in a corresponding adjustment to base rent.
- In September, IIP completed the acquisition of a four-property
portfolio in southern California for a $17.3 million total purchase
price (excluding transaction costs), comprising approximately
79,000 square feet of industrial space in the aggregate, and
entered into long-term leases with subsidiaries of Medical Investor
Holdings LLC (Vertical) for continued operation as licensed
cannabis cultivation, extraction, manufacturing and distribution
facilities.
- In September, IIP amended its lease with PharmaCann at one of
its Massachusetts properties to provide an additional $8.0 million
for tenant improvements at the property, which resulted in a
corresponding adjustment to base rent.
- In September, IIP completed the acquisition of a 2,000 square
foot dispensary location in Arizona for a total investment of $2.5
million (excluding transaction costs), including reimbursement for
certain development costs, and entered into a long-term lease with
a subsidiary of The Pharm, LLC (The Pharm) for operation as a
licensed dispensary upon completion of development.
- In September, IIP amended its lease with a subsidiary of Vireo
Health, Inc. (Vireo) at its Minnesota property to provide an
additional $2.6 million for tenant improvements at the property,
which resulted in a corresponding adjustment to base rent.
- Subsequent to quarter end, in October, IIP acquired a 156,000
square foot industrial property in Michigan and entered into a
long-term triple-net lease with a licensee of LivWell Holdings,
Inc. (LivWell), which intends to operate the facility for regulated
cannabis cultivation and processing upon completion of
redevelopment, with IIP’s total investment in the acquisition and
redevelopment of the property expected to be approximately $42.0
million (excluding transaction costs).
- Subsequent to quarter end, in October, IIP acquired two
properties in Illinois comprising a total of 90,000 square feet of
industrial space and entered into a long-term triple-net lease with
a subsidiary of Cresco Labs Inc. (Cresco), for continued operation
as regulated cannabis cultivation and processing facilities, and
pursuant to which IIP has agreed to provide reimbursement for
certain tenant improvements, with IIP’s total investment in the
acquisition and tenant improvements at the properties expected to
be $46.6 million in the aggregate (excluding transaction
costs).
- Subsequent to quarter end, in October, IIP completed the
acquisition of a property in Florida for $17.0 million (excluding
transaction costs), comprising approximately 120,000 square feet of
industrial space, and entered into a long-term with a subsidiary of
Trulieve for continued operation as a licensed cannabis cultivation
facility.
- Subsequent to quarter end, in October, IIP acquired a 48,000
square foot industrial property in Illinois and entered into a
long-term triple-net lease with PharmaCann, for continued operation
as a regulated cannabis cultivation and processing facility, and
pursuant to which IIP has agreed to provide reimbursement for
certain tenant improvements, including an 18,000 square foot
planned expansion, with IIP’s total investment in the acquisition
and tenant improvements at the property expected to be $25.0
million in the aggregate (excluding transaction costs).
- Subsequent to quarter end, in October, IIP acquired a 70,000
square foot industrial property in Illinois and entered into a
long-term triple-net lease with a subsidiary of GR Companies Inc.
(Grassroots), for continued operation as a regulated cannabis
cultivation and processing facility, and pursuant to which IIP
agreed to provide reimbursement for certain tenant improvements,
including a 50,000 square foot planned expansion, with IIP’s total
investment in the acquisition and tenant improvements at the
property expected to be approximately $28.2 million in the
aggregate (excluding transaction costs).
- Subsequent to quarter end, in October and November, IIP
completed the acquisitions and leases of four dispensary locations
in Michigan for a total investment of approximately $9.0 million
(excluding transaction costs), including reimbursement for certain
tenant improvements, and entered into long-term leases with Green
Peak Industries, LLC (GPI) for operation as licensed
dispensaries.
Portfolio Update
Since January 1, 2019, IIP has acquired 30 properties in nine
states. IIP entered into new tenant relationships with Cresco,
DYME, EGP, Grassroots, Green Leaf, LivWell, Maitri, MJardin,
Trulieve, Vertical and two other licensed operators in California,
while expanding its tenant relationships with AWH, GPI, Holistic,
PharmaCann, The Pharm and Vireo as each company continues to
execute on its growth initiatives.
As of November 6, 2019, IIP owned 41 properties located in
Arizona, California, Colorado, Florida, Illinois, Maryland,
Massachusetts, Michigan, Minnesota, New York, Nevada, Ohio and
Pennsylvania, totaling approximately 2.8 million rentable square
feet (including approximately 903,000 rentable square feet under
development/redevelopment), which were 100% leased with a
weighted-average remaining lease term of approximately 15.5 years.
As of November 6, 2019, IIP had invested approximately $410.2
million in the aggregate (excluding transaction costs) and had
committed an additional approximately $138.9 million to reimburse
certain tenants and sellers for completion of construction and
tenant improvements at IIP’s properties. IIP’s average current
yield on invested capital is approximately 13.8% for these 41
properties, calculated as (a) the sum of the current base rents
(after the expiration of applicable base rent abatement or deferral
periods), supplemental rent (with respect to the lease with
PharmaCann at one of IIP’s New York properties) and property
management fees, divided by (b) IIP’s aggregate investment in these
properties (excluding transaction costs and including aggregate
potential development/redevelopment funding and tenant
reimbursements of approximately $138.9 million).
These statistics do not include up to $17.7 million that may be
funded in the future pursuant to IIP’s lease with Grassroots at one
of IIP’s Illinois properties, $40.0 million that may be funded in
the future pursuant to IIP’s lease with Trulieve at one of IIP’s
Massachusetts properties, the additional $4.0 million which may be
requested by PharmaCann at one of IIP’s Pennsylvania properties or
$2.0 million that may be funded in the future pursuant to IIP’s
lease with Holistic at one of IIP’s Massachusetts properties, as
the tenants at those properties may not elect to have IIP disburse
those funds to them and pay IIP the corresponding base rent on
those funds.
Financing Activity
In July 2019, IIP completed an underwritten public offering of
1,495,000 shares of common stock, including the exercise in full of
the underwriters’ option to purchase an additional 195,000 shares,
resulting in net proceeds of approximately $180.1 million.
In September 2019, IIP entered into equity distribution
agreements with three sales agents, pursuant to which IIP may offer
and sell from time to time through an “at-the-market” offering
program up to $250 million in shares of its common stock. In
September and October, IIP sold shares of its common stock for net
proceeds of approximately $46.9 million under this program.
IIP expects to use the proceeds from these offerings to invest
in specialized industrial real estate assets that support the
regulated cannabis cultivation and processing industry and for
general corporate purposes.
Financial Results
IIP generated rental revenues of approximately $11.2 million and
$26.1 million for the three and nine months ended September 30,
2019, respectively, and rental revenues of approximately $3.7
million and $9.6 million for the three and nine months ended
September 30, 2018, respectively. The increase for both periods was
driven primarily by the acquisition and leasing of new properties,
additional tenant improvement allowances provided to tenants at
certain properties that resulted in base rent adjustments, and
contractual rental escalations at certain properties.
For the three months ended September 30, 2019, IIP recorded net
income and net income per diluted share of approximately $6.2
million and $0.55, respectively; funds from operations (FFO) and
FFO per diluted share of approximately $8.4 million and $0.76,
respectively; and AFFO and AFFO per diluted share of approximately
$9.5 million and $0.86, respectively. For the three months ended
September 30, 2019, AFFO and AFFO per diluted share increased by
approximately 270% and 126% from the prior year period,
respectively.
For the nine months ended September 30, 2019, IIP recorded net
income and net income per diluted share of approximately $12.6
million and $1.20, respectively; FFO and FFO per diluted share of
approximately $17.6 million and $1.72, respectively; and AFFO and
AFFO per diluted share of approximately $20.6 million and $2.02,
respectively. For the nine months ended September 30, 2019, AFFO
and AFFO per diluted share increased by approximately 238% and 117%
from the prior year period, 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 income attributable 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, November 7, 2019 to discuss IIP’s financial
results and operations for the third quarter ended September 30,
2019. 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,
November 7, 2019 until 12:00 p.m. Pacific Time on Thursday,
November 14, 2019, by calling 1-877-344-7529 (domestic),
855-669-9658 (Canada) or 1-412-317-0088 (international) and using
access code 10136465.
About Innovative Industrial Properties
Innovative Industrial Properties, Inc. is a self-advised
Maryland corporation focused on the acquisition, ownership and
management of specialized 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
(Unaudited) (In thousands, except share and per share
amounts)
September 30, 2019
December 31, 2018
Assets
Real estate, at cost:
Land
$
37,959
$
20,475
Buildings and improvements
231,252
109,425
Tenant improvements
43,397
14,732
Construction in progress
―
6,298
Total real estate, at cost
312,608
150,930
Less accumulated depreciation
(8,625
)
(3,571
)
Net real estate held for investment
303,983
147,359
Cash and cash equivalents
99,917
13,050
Restricted cash
9,354
―
Short-term investments, net
208,828
120,443
Other assets, net
1,068
614
Total assets
$
623,150
$
281,466
Liabilities and stockholders'
equity
Exchangeable senior notes, net
$
134,158
$
―
Tenant improvements and construction
funding payable
12,700
2,433
Accounts payable and accrued expenses
1,044
1,968
Dividends payable
9,204
3,759
Offering cost liability
62
―
Rent received in advance and tenant
security deposits
16,199
9,014
Total liabilities
173,367
17,174
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 September 30,
2019 and December 31, 2018
14,009
14,009
Common stock, par value $0.001 per share,
50,000,000 shares authorized: 11,367,828 and 9,775,800 shares
issued and outstanding at September 30, 2019 and December 31, 2018,
respectively
11
10
Additional paid-in capital
452,634
260,540
Dividends in excess of earnings
(16,871
)
(10,267
)
Total stockholders' equity
449,783
264,292
Total liabilities and stockholders'
equity
$
623,150
$
281,466
INNOVATIVE INDUSTRIAL
PROPERTIES, INC. CONDENSED CONSOLIDATED STATEMENTS OF INCOME
For the Three and Nine Months Ended September 30, 2019 and 2018
(Unaudited) (In thousands, except share and per share
amounts)
For the Three Months Ended
September 30,
For the Nine Months Ended
September 30,
2019
2018
2019
2018
Revenues:
Rental
$
11,198
$
3,716
$
26,054
$
9,639
Tenant reimbursements
357
210
941
365
Total revenues
11,555
3,926
26,995
10,004
Expenses:
Property expenses
357
210
941
365
General and administrative expense
2,156
1,442
6,667
4,393
Depreciation expense
2,221
703
5,054
1,715
Total expenses
4,734
2,355
12,662
6,473
Income from operations
6,821
1,571
14,333
3,531
Interest and other income
1,537
261
3,702
788
Interest expense
(1,838
)
―
(4,462
)
―
Net income
6,520
1,832
13,573
4,319
Preferred stock dividend
(338
)
(338
)
(1,014
)
(1,014
)
Net income attributable to common
stockholders
$
6,182
$
1,494
$
12,559
$
3,305
Net income attributable to common
stockholders per share:
Basic
$
0.56
$
0.22
$
1.22
$
0.50
Diluted
$
0.55
$
0.21
$
1.20
$
0.49
Weighted average shares outstanding:
Basic
10,918,477
6,636,638
10,088,036
6,388,058
Diluted
11,057,697
6,785,800
10,225,574
6,534,300
INNOVATIVE INDUSTRIAL
PROPERTIES, INC. CONDENSED CONSOLIDATED FFO AND AFFO For the
Three and Nine Months Ended September 30, 2019 and 2018
(Unaudited) (In thousands, except share and per share
amounts)
For the Three Months Ended
September 30,
For the Nine Months Ended
September 30,
2019
2018
2019
2018
Net income attributable to common
stockholders
$
6,182
$
1,494
$
12,559
$
3,305
Real estate depreciation
2,221
703
5,054
1,715
FFO available to common stockholders
8,403
2,197
17,613
5,020
Stock-based compensation
655
386
1,841
1,079
Non-cash interest expense
489
—
1,181
—
AFFO available to common stockholders
$
9,547
$
2,583
$
20,635
$
6,099
FFO per share — basic
$
0.77
$
0.33
$
1.75
$
0.79
FFO per share — diluted
$
0.76
$
0.32
$
1.72
$
0.77
AFFO per share — basic
$
0.87
$
0.39
$
2.05
$
0.95
AFFO per share — diluted
$
0.86
$
0.38
$
2.02
$
0.93
Weighted average shares outstanding —
basic
10,918,477
6,636,638
10,088,036
6,388,058
Weighted average shares outstanding —
diluted
11,057,697
6,785,800
10,225,574
6,534,300
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, 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, 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 infrequent or unpredictable expenses which may impact
comparability, consisting of non-cash stock-based compensation
expense and non-cash interest 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 (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 computed in accordance
with GAAP as measures of IIP’s operations.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20191106006114/en/
Catherine Hastings Chief Financial Officer Innovative Industrial
Properties, Inc. (858) 997-3332
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