Acquisitions Drive 269% Q4 Revenue, 311% Q4
Net Income and 293% 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,
2019, the third full year since IIP commenced real estate
operations and completed its initial public offering in December
2016.
Fourth Quarter 2019 and Year-to-Date Highlights
Financial Results and Financing Activity
- IIP generated total revenues of approximately $17.7 million in
the quarter, representing a 269% increase from the prior year’s
quarter.
- IIP recorded net income available to common stockholders of
approximately $9.6 million for the quarter, or $0.78 per diluted
share, and adjusted funds from operations (“AFFO”) of approximately
$14.3 million, or $1.18 per diluted share. AFFO and AFFO per
diluted share represented increases of 293% and 211% from the prior
year’s quarter, respectively.
- IIP paid a quarterly dividend of $1.00 per common share on
January 15, 2020 to stockholders of record as of December 31, 2019,
representing a 186% increase from the prior year’s quarter and a
28% increase from IIP’s third quarter 2019 dividend of $0.78 per
common share.
- In September, IIP established an “at-the-market” equity
offering program, issuing shares of common stock from September
through today for net proceeds totaling approximately $184.8
million.
- Subsequent to the end of the quarter, in January, IIP completed
an underwritten public offering of 3,412,969 shares of common
stock, including the exercise in full of the underwriters’ option
to purchase an additional 445,170 shares, resulting in gross
proceeds of approximately $250.0 million.
Investment Activity
- From October 1, 2019 through today, IIP acquired 20 properties,
totaling approximately 1.0 million rentable square feet (including
expected rentable square feet upon completion of properties under
development), located in Colorado, Florida, Illinois, Michigan,
North Dakota, Ohio, Pennsylvania and Virginia, and executed five
lease amendments to provide additional tenant improvements at
properties located in Arizona, California, Massachusetts and
Pennsylvania.
- These 20 properties and five lease amendments represented an
aggregate investment by IIP of approximately $308.4 million
(consisting of purchase prices and development / tenant
reimbursement commitments, but excluding transaction costs).
- In these transactions, IIP established new tenant relationships
with Cresco Labs Inc., GR Companies Inc. (Grassroots), Green Thumb
Industries Inc. (GTI) and LivWell Holdings, Inc., while expanding
existing tenant relationships with Green Leaf Medical, LLC, Green
Peak Industries LLC, Maitri Genetics, LLC, PharmaCann LLC, The
Pharm, LLC, Trulieve Cannabis Corp. and Vireo Health, Inc.
- From January 1, 2019 through today, IIP has grown its property
portfolio from eleven properties comprising approximately 1.0
million rentable square feet in nine states, to 51 properties
comprising approximately 3.2 million rentable square feet in 15
states. Also since January 1, 2019, IIP’s total investment in its
property portfolio has increased by 307% from $167.4 million to
$680.7 million (consisting of purchase prices and development /
tenant reimbursement commitments, but excluding transaction costs
and approximately $51.5 million in the aggregate, which represents
funds that tenants at certain properties may not elect to have IIP
disburse to them and pay IIP the corresponding base rent on).
Board of Directors
- IIP expanded its board of directors to six members, and
appointed Mary Allis Curran, a former senior banking executive, as
the sixth member; with Ms. Curran also appointed to serve on the
board’s audit committee and nominating and corporate governance
committee.
Portfolio Update and Acquisition Activity
Portfolio Update
IIP acquired the following properties and made the following
additional funds available to tenants for improvements at IIP’s
properties during the period from October 1, 2019 through February
26, 2020 (dollars in thousands):
State
Closing Date
Rentable Sq. Ft.(1)
Purchase Price(2)
Additional Investment
Total Investment
Michigan
October 9, 2019
156,000
$
19,000
$
23,000
$
42,000
(3)
Illinois
October 22, 2019
39,000
20,700
250
20,950
(4)
Illinois
October 22, 2019
51,000
12,100
13,500
25,600
(5)
Florida
October 23, 2019
120,000
17,000
—
17,000
Michigan
Various
31,000
10,042
1,245
11,287
(6)
Illinois
October 30, 2019
66,000
18,000
7,000
25,000
(7)
Illinois
October 30, 2019
120,000
10,500
17,725
28,225
(8)
Pennsylvania
November 12, 2019
148,000
20,300
19,300
39,600
(9)
Pennsylvania
December 20, 2019
72,000
14,220
10,880
25,100
(10)
North Dakota
December 20, 2019
33,000
9,910
2,280
12,190
(11)
Pennsylvania
January 14, 2020
N/A
N/A
4,500
4,500
(12)
Virginia
January 15, 2020
82,000
11,740
8,010
19,750
(13)
Arizona
January 16, 2020
N/A
N/A
2,000
2,000
(14)
Ohio
January 24, 2020
50,000
10,600
1,945
12,545
(15)
California
January 28, 2020
N/A
N/A
1,250
1,250
(16)
Ohio
January 31, 2020
21,000
2,900
4,300
7,200
(17)
Colorado
Various
8,000
3,300
850
4,150
(18)
Pennsylvania
February 19, 2020
N/A
N/A
6,000
6,000
(19)
Massachusetts
February 24, 2020
N/A
N/A
4,000
4,000
(20)
Totals
997,000
$
180,312
$
128,035
$
308,347
(1)
Includes expected rentable square feet at
completion of construction.
(2)
Excludes transaction costs.
(3)
The tenant is expected to complete tenant
improvements at the property, for which IIP agreed to provide
reimbursement of up to $23.0 million. As of February 26, 2020, IIP
funded approximately $11.2 million of the reimbursement.
(4)
The tenant is expected to complete tenant
improvements at the property, for which IIP agreed to provide
reimbursement of up to approximately $250,000. As of February 26,
2020, IIP funded approximately $244,000 of the reimbursement.
(5)
The tenant is expected to complete tenant
improvements at the property, for which IIP agreed to provide
reimbursement of up to approximately $13.5 million. As of February
26, 2020, IIP funded approximately $9.4 million of the
reimbursement.
(6)
The portfolio consists of six retail
properties, with one property closing on October 25, 2019, three
properties closing on November 4, 2019, one property closing on
November 8, 2019 and one property closing on November 25, 2019. The
tenant is expected to complete tenant improvements at certain of
the properties, for which IIP agreed to provide reimbursement of up
to approximately $1.2 million. As of February 26, 2020, IIP had
funded approximately $312,000 of the tenant improvement
allowance.
(7)
The tenant is expected to perform
construction at the property, for which IIP agreed to provide
reimbursement of up to $7.0 million. As of February 26, 2020, IIP
funded approximately $2.0 million of the reimbursement.
(8)
The tenant is expected to complete tenant
improvements at the property, for which IIP agreed to provide
reimbursement of up to approximately $17.7 million, of which $10.7
million and $7.0 million are subject to reduction at the tenant’s
option before April 30, 2020 and July 30, 2020, respectively. As of
February 26, 2020, IIP had funded approximately $1.9 million of the
tenant improvement allowance.
(9)
The tenant is expected to complete tenant
improvements at the property, for which IIP agreed to provide
reimbursement of up to $19.3 million. As of February 26, 2020, IIP
had funded approximately $1.0 million of the tenant improvement
allowance.
(10)
The tenant is expected to complete tenant
improvements at the property, for which IIP agreed to provide
reimbursement of up to approximately $10.9 million. As of February
26, 2020, IIP had funded approximately $1.0 million of the tenant
improvement allowance.
(11)
The tenant is expected to complete tenant
improvements at the property, for which IIP agreed to provide
reimbursement of up to approximately $2.3 million. As of February
26, 2020, IIP had funded approximately $1.2 million of the tenant
improvement allowance.
(12)
The amount relates to a lease amendment
which increased the tenant improvement allowance under a lease at
one of IIP’s Pennsylvania properties by $4.5 million to a total of
approximately $8.3 million. As of February 26, 2020, IIP had funded
$3.4 million of the tenant improvement allowance.
(13)
The tenant is expected to complete tenant
improvements at the property, for which IIP agreed to provide
reimbursement of up to approximately $8.0 million. As of February
26, 2020, IIP had funded approximately $2.7 million of the tenant
improvement allowance.
(14)
The amount relates to a lease amendment
which increased the tenant improvement allowance under a lease at
one of IIP’s Arizona properties by $2.0 million to a total of $5.0
million. As of February 26, 2020, IIP had funded approximately $4.5
million of the tenant improvement allowance.
(15)
The tenant is expected to complete tenant
improvements at the property, for which IIP agreed to provide
reimbursement of up to approximately $1.9 million. As of February
26, 2020, IIP had not funded any of the tenant improvement
allowance.
(16)
The amount relates to a lease amendment
which increased the tenant improvement allowance under a lease at
one of IIP’s California properties by approximately $1.3 million.
As of February 26, 2020, IIP had funded approximately $1.0 million
of the tenant improvement allowance.
(17)
The tenant is expected to complete tenant
improvements at the property, for which IIP agreed to provide
reimbursement of up to $4.3 million. As of February 26, 2020, IIP
had not funded any of the tenant improvement allowance.
(18)
The portfolio consists of two retail
properties, with one property closing on February 19, 2020 and one
property closing on February 21, 2020. The tenant is expected to
complete tenant improvements at one of the properties, for which
IIP agreed to provide reimbursement of up to $850,000. As of
February 26, 2020, IIP had not funded any of the tenant improvement
allowance.
(19)
The amount relates to a lease amendment
which increased the tenant improvement allowance under a lease at
one of IIP’s Pennsylvania properties by $6.0 million to a total of
$16.0 million, which additional allowance may be drawn by the
tenant starting on March 1, 2020. As of February 26, 2020, IIP had
funded $8.8 million of the tenant improvement allowance.
(20)
The amount relates to a lease amendment
and development agreement amendment which increased the
construction funding at one of IIP’s Massachusetts properties by
$4.0 million for a total of $27.5 million. IIP also canceled a
remaining commitment to provide construction funding of $4.0
million for the tenant at one of IIP’s Pennsylvania properties. As
of February 26, 2020, IIP had funded approximately $23.0 million of
the construction funding at the Massachusetts property.
From January 1, 2019 through February 26, 2020, IIP acquired 40
properties, totaling approximately 2.2 million rentable square feet
(including expected rentable square feet upon completion of
properties under development), located in Arizona, California,
Colorado, Florida, Illinois, Massachusetts, Michigan, Nevada, North
Dakota, Ohio, Pennsylvania and Virginia, and executed ten lease
amendments to provide additional tenant improvements at properties
located in Arizona, California, Illinois, Massachusetts, Michigan,
Minnesota and Pennsylvania.
As of February 26, 2020, IIP owned 51 properties located in
Arizona, California, Colorado, Florida, Illinois, Maryland,
Massachusetts, Michigan, Minnesota, New York, Nevada, North Dakota,
Ohio, Pennsylvania and Virginia, totaling approximately 3.2 million
rentable square feet (including approximately 871,000 rentable
square feet under development/redevelopment), which were 98.9%
leased (based on square footage) with a weighted-average remaining
lease term of approximately 15.6 years. As of February 26, 2020,
IIP had invested approximately $563.2 million in the aggregate
(excluding transaction costs) and had committed an additional
approximately $117.5 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 13.3% for these 51 properties, calculated as (a)
the sum of the current base rents, supplemental rent (with respect
to the lease with a tenant at one of IIP’s New York properties) and
property management fees (after the expiration of applicable base
rent abatement or deferral periods), 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 $117.5 million). These
statistics do not include up to approximately $15.9 million that
may be funded in the future pursuant to IIP’s lease with a tenant
at one of IIP’s Illinois properties, or the approximately $35.7
million that may be funded in the future pursuant to IIP’s lease
with a tenant 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. These statistics also treat IIP’s Los Angeles,
California property as not leased, due to the tenant’s default in
its obligation to pay rent at that location in January and February
2020.
Financing Activity
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. From
September through today, IIP sold shares of its common stock for
net proceeds of approximately $184.8 million under this
program.
Subsequent to the end of the quarter, in January 2020, IIP
completed an underwritten public offering of 3,412,969 shares of
common stock, including the exercise in full of the underwriters’
option to purchase an additional 445,170 shares, resulting in gross
proceeds of approximately $250.0 million.
IIP expects to use the net proceeds from these 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 total revenues of approximately $17.7 million for
the three months ended December 31, 2019, compared to approximately
$4.8 million for the same period in 2018, an increase of 269%. IIP
generated total revenues of approximately $44.7 million for the
year ended December 31, 2019, compared to approximately $14.8
million for 2018, an increase of 202%. The increase in both periods
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, 2019, IIP recorded net
income available to common stockholders and net income available to
common stockholders per diluted share of approximately $9.6 million
and $0.78, respectively; funds from operations (“FFO”) and FFO per
diluted share of approximately $13.1 million and $1.09,
respectively; and AFFO and AFFO per diluted share of approximately
$14.3 million and $1.18, respectively. Fourth quarter 2019 AFFO and
AFFO per diluted share for the quarter increased by 293% and 211%
from the prior year period, respectively.
For the year ended December 31, 2019, IIP recorded net income
available to common stockholders and net income available to common
stockholders per diluted share of $22.1 million and $2.03,
respectively; FFO and FFO per diluted share of $30.7 million and
$2.88, respectively; and AFFO and AFFO per diluted share of
approximately $34.9 million and $3.27, respectively. 2019 AFFO and
AFFO per diluted share increased by 259% and 144% 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 income 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, February 27, 2020 to discuss IIP’s financial
results and operations for the fourth quarter and year ended
December 31, 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, February 27, 2020 until 12:00 p.m.
Pacific Time on Thursday, March 5, 2020, by calling 1-877-344-7529
(domestic), 855-669-9658 (Canada) or 1-412-317-0088 (international)
and using access code 10139231.
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.
CONSOLIDATED BALANCE
SHEETS
(Unaudited)
(In thousands, except share and
per share amounts)
Assets
December 31, 2019
December 31, 2018
Real estate, at cost:
Land
$
48,652
$
20,475
Buildings and improvements
382,035
109,425
Tenant improvements
87,344
14,732
Construction in progress
—
6,298
Total real estate, at cost
518,031
150,930
Less accumulated depreciation
(12,170
)
(3,571
)
Net real estate held for investment
505,861
147,359
Cash and cash equivalents
82,244
13,050
Restricted cash
35,072
—
Investments
119,595
120,443
Right of use office lease asset
1,202
—
Other assets, net
1,883
614
Total assets
$
745,857
$
281,466
Liabilities and stockholders’
equity
Exchangeable senior notes, net
$
134,654
$
—
Tenant improvements and construction
funding payable
24,968
2,433
Accounts payable and accrued expenses
3,417
1,968
Dividends payable
12,975
3,759
Office lease liability
1,202
—
Rent received in advance and tenant
security deposits
20,631
9,014
Total liabilities
197,847
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 December 31,
2019 and 2018
14,009
14,009
Common stock, par value $0.001 per share,
50,000,000 shares authorized: 12,637,043 and 9,775,800 shares
issued and outstanding at December 31, 2019 and 2018,
respectively
13
10
Additional paid-in-capital
553,932
260,540
Dividends in excess of earnings
(19,944
)
(10,267
)
Total stockholders’ equity
548,010
264,292
Total liabilities and stockholders’
equity
$
745,857
$
281,466
INNOVATIVE INDUSTRIAL
PROPERTIES, INC.
CONSOLIDATED STATEMENTS OF
INCOME
For the Three Months and Years
Ended December 31, 2019 and 2018
(Unaudited)
(In thousands, except share and
per share amounts)
For the Three Months Ended
December 31,
For the Year Ended December
31,
2019
2018
2019
2018
Revenues:
Rental (including tenant
reimbursements)
$
17,672
$
4,783
$
44,667
$
14,787
Total revenues
17,672
4,783
44,667
14,787
Expenses:
Property expenses
374
80
1,315
445
General and administrative expense
3,151
1,982
9,818
6,375
Depreciation expense
3,545
914
8,599
2,629
Total expenses
7,070
2,976
19,732
9,449
Income from operations
10,602
1,807
24,935
5,338
Interest and other income
1,144
859
4,846
1,647
Interest expense
(1,844
)
—
(6,306
)
—
Net income
9,902
2,666
23,475
6,985
Preferred stock dividend
(338
)
(338
)
(1,352
)
(1,352
)
Net income available to common
stockholders
$
9,564
$
2,328
$
22,123
$
5,633
Net income available to common
stockholders per share:
Basic
$
0.79
$
0.24
$
2.06
$
0.76
Diluted
$
0.78
$
0.24
$
2.03
$
0.75
Weighted average shares outstanding:
Basic
11,905,021
9,367,148
10,546,016
7,138,952
Diluted
12,044,602
9,515,800
10,684,068
7,285,801
Dividends declared per common share
$
1.00
0.35
$
2.83
$
1.20
INNOVATIVE INDUSTRIAL PROPERTIES,
INC.
CONSOLIDATED FFO AND AFFO For
the Three Months and Years Ended December 31, 2019 and 2018
(Unaudited) (In thousands, except share and per share
amounts)
The table below is a reconciliation of net income available to
common stockholders to FFO and AFFO for the three months and years
ended December 31, 2019 and 2018:
For the Three Months Ended
December 31,
For the Years Ended December
31,
2019
2018
2019
2018
Net income available to common
stockholders
$
9,564
$
2,328
$
22,123
$
5,633
Real estate depreciation
3,545
914
8,599
2,629
FFO
13,109
3,242
30,722
8,262
Stock-based compensation
654
386
2,495
1,465
Non-cash interest expense
497
—
1,678
—
AFFO
$
14,260
$
3,628
$
34,895
$
9,727
FFO per common share - basic
$
1.10
$
0.35
$
2.91
$
1.16
FFO per common share - diluted
$
1.09
$
0.34
$
2.88
$
1.13
AFFO per common share - basic
$
1.20
$
0.39
$
3.31
$
1.36
AFFO per common share - diluted
$
1.18
$
0.38
$
3.27
$
1.34
Weighted average shares outstanding:
Basic
11,905,021
9,367,148
10,546,016
7,138,952
Diluted
12,044,602
9,515,800
10,684,068
7,285,801
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 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/20200226006063/en/
Company Contact: Catherine Hastings Chief Financial Officer
Innovative Industrial Properties, Inc. (858) 997-3332
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