Investments Drive 183% Q2 Total Revenues,
322% Q2 Net Income and 263% Q2 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 medical-use U.S. cannabis industry, announced today
results for the quarter ended June 30, 2020.
Second Quarter 2020 and Subsequent Events Highlights
Financial Results and Financing Activity
- IIP generated total revenues of approximately $24.3 million in
the quarter, representing a 183% increase from the prior year’s
second quarter.
- IIP recorded net income available to common stockholders of
approximately $13.0 million for the quarter, or $0.73 per diluted
share, and adjusted funds from operations (AFFO) of approximately
$21.0 million, or $1.19 per diluted share. Net income available to
common stockholders and AFFO increased by 322% and 263% from the
prior year’s second quarter, respectively.
- IIP paid a quarterly dividend of $1.06 per share on July 15,
2020 to common stockholders of record as of June 30, 2020,
representing a 77% increase over the second quarter 2019’s
dividend.
- In May, IIP completed an underwritten public offering of
1,550,648 shares of common stock, including the exercise in full of
the underwriter’s option to purchase an additional 202,259 shares,
resulting in net proceeds of approximately $114.9 million.
- Subsequent to the end of the quarter, in July, IIP completed an
underwritten public offering of 3,085,867 shares of common stock,
including the exercise in full of the underwriters’ option to
purchase an additional 402,504 shares, resulting in gross proceeds
of approximately $258.7 million.
Investment Activity
- From April 1, 2020 through today, IIP acquired eight
properties, totaling approximately 775,000 rentable square feet
(including expected rentable square feet upon completion of
properties under development), located in California,
Massachusetts, Michigan, New Jersey and Pennsylvania.
- These eight properties represented an aggregate investment by
IIP of approximately $191.5 million (consisting of purchase prices
and development / tenant reimbursement commitments, but excluding
transaction costs).
- In these transactions, IIP established new tenant relationships
with Columbia Care Inc. and Curaleaf Holdings, Inc., while
expanding existing tenant relationships with Ascend Wellness
Holdings, LLC, Cresco Labs Inc., Holistic Industries, Inc.
(Holistic) and Kings Garden Inc.
- As of August 5, 2020, IIP has invested or committed to invest
through tenant improvement allowances and construction funding
commitments a total of approximately $1.1 billion across its total
portfolio.
Balance Sheet Highlights (at June 30, 2020)
- Approximately $50.2 million in cash and cash equivalents and
approximately $323.3 million in short-term investments, totaling
approximately $373.5 million.
- No debt, other than approximately $143.7 million of unsecured
debt, consisting solely of 3.75% exchangeable senior notes maturing
in 2024, representing a fixed cash interest obligation of
approximately $5.4 million annually, or approximately $1.3 million
quarterly.
- 12% debt to total gross assets, with approximately $1.2 billion
in total gross assets.
- These statistics do not incorporate gross proceeds of
approximately $258.7 million from IIP’s follow-on common stock
offering completed in July.
Rent Collections (as of August 5, 2020)
- As reported in IIP’s first quarter earnings release, during
this coronavirus pandemic, IIP worked with three of its 23 tenants
to provide temporary rent deferrals, structured to apply a portion
of the security deposit IIP holds under each lease to pay April
rent in full, defer rent for May and June in full, and provide for
the pro rata repayment of the security deposit and deferred rent
over an 18 month time period starting July 1. All three tenants
paid rent in full for July, including pro rata repayments of the
security deposit and deferred rent.
- IIP collected 100% of contractual rent due for each of the
months of April, May, June, and July 2020 across IIP’s total
portfolio (other than the tenant at IIP’s Los Angeles, California
property that is in receivership), and has not executed rent
deferrals for any additional tenants, other than the three tenants
described above.
Los Angeles, California Property Update (as of August 5,
2020)
- Holistic has entered into a definitive agreement to acquire the
retail, distribution, cultivation and manufacturing licenses for
cannabis operations from the tenant at IIP’s Los Angeles,
California property, which is in receivership, and IIP is in
negotiations for a long-term, triple-net lease with Holistic for
the entire property upon the closing of Holistic’s acquisition of
the licenses. The transaction is subject to court approval and
customary closing conditions, and IIP can provide no assurance that
the transaction, including the lease, will be completed on the
terms described here, or at all.
Portfolio Update and Investment Activity
IIP acquired the following properties and made the following
additional funds available to tenants for improvements at IIP’s
properties during the period from April 1, 2020 through August 5,
2020 (dollars in thousands):
State
Closing Date
Rentable Sq. Ft.(1)
Purchase Price(2)
Additional Investment
Total Investment
Massachusetts
April 2, 2020
199,000
$
26,750
$
22,250
$
49,000
(3)
Minnesota
April 10, 2020
N/A
N/A
1,060
1,060
(4)
New York
April 10, 2020
N/A
N/A
360
360
(5)
Michigan
April 22, 2020
115,000
5,000
27,000
32,000
(6)
California
May 12, 2020
70,000
17,500
—
17,500
Pennsylvania
June 10, 2020
108,000
8,870
6,380
15,250
(7)
Ohio
June 16, 2020
N/A
N/A
1,000
1,000
(8)
Illinois
June 18, 2020
N/A
N/A
3,000
3,000
(9)
Pennsylvania
June 19, 2020
N/A
N/A
30,000
30,000
(10)
Massachusetts
June 30, 2020
118,000
7,750
21,000
28,750
(11)
New Jersey
July 13, 2020
111,000
5,500
29,500
35,000
(12)
New Jersey
July 16, 2020
50,000
10,220
1,600
11,820
(13)
New Jersey
July 16, 2020
4,000
2,165
—
2,165
Totals
775,000
$
83,755
$
143,150
$
226,905
____________
(1)
Includes expected rentable square feet at
completion of construction for certain properties.
(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 approximately $22.3 million. As of August 5,
2020, IIP had funded approximately $1.4 million of the tenant
improvement allowance.
(4)
The amount relates to a lease amendment
which increased the tenant improvement allowance under a lease at
IIP’s Minnesota property by approximately $1.1 million to a total
of approximately $6.7 million, and also resulted in a corresponding
adjustment to the base rent for the lease at the property. As of
August 5, 2020, IIP had funded approximately $6.5 million of the
tenant improvement allowance.
(5)
The amount relates to a lease amendment
which increased the tenant improvement allowance under a lease at
one of IIP’s New York properties by $360,000 to a total of
approximately $3.4 million, and also resulted in a corresponding
adjustment to the base rent for the lease at the property. As of
August 5, 2020, IIP had funded approximately $3.2 million of the
tenant improvement allowance.
(6)
The tenant is expected to complete tenant
improvements at the property, for which IIP originally agreed to
provide reimbursement of up to $11.0 million. In June, we amended
the lease, which increased the tenant improvement allowance by
$16.0 million to a total of $27.0 million. As of August 5, 2020,
IIP had not funded any of the tenant improvement allowance.
(7)
The tenant is expected to complete tenant
improvements at the property, for which IIP agreed to provide
reimbursement of up to approximately $6.4 million. As of August 5,
2020, IIP had funded approximately $1.3 million of the tenant
improvement allowance.
(8)
The amount relates to a lease amendment
which increased the tenant improvement allowance under the lease by
$1.0 million to a total of approximately $2.9 million, and also
resulted in a corresponding adjustment to the base rent for the
lease at the property. As of August 5, 2020, IIP had not funded any
of the tenant improvement allowance.
(9)
The amount relates to an amendment to our
lease and development agreement which increased the construction
funding at one of IIP’s Illinois’ properties by $3.0 million to a
total of $10.0 million, and also resulted in a corresponding
adjustment to the base rent for the lease at the property. As of
August 5, 2020, IIP had funded approximately $7.5 million of the
construction funding.
(10)
The amount relates to a lease amendment
which provided a tenant improvement allowance under the lease of
$30.0 million, and also resulted in a corresponding adjustment to
the base rent for the lease at the property. As of August 5, 2020,
IIP had not funded any 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 $21.0 million. As of August 5, 2020, IIP had
not funded any of the tenant improvement allowance.
(12)
The tenant is expected to complete tenant
improvements at the property, for which IIP agreed to provide
reimbursement of up to $29.5 million. As of August 5, 2020, IIP had
not funded any 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 $1.6 million. As of August 5, 2020, IIP had
not funded any of the tenant improvement allowance.
As of August 5, 2020, IIP owned 61 properties located in
Arizona, California, Colorado, Florida, Illinois, Maryland,
Massachusetts, Michigan, Minnesota, New Jersey, New York, Nevada,
North Dakota, Ohio, Pennsylvania and Virginia, totaling
approximately 4.5 million rentable square feet (including
approximately 1.5 million rentable square feet under
development/redevelopment), which were 99.2% leased (based on
square footage) with a weighted-average remaining lease term of
approximately 16.1 years. As of August 5, 2020, IIP had invested
approximately $826.6 million in the aggregate (excluding
transaction costs) and had committed an additional approximately
$207.1 million to reimburse certain tenants and sellers for
completion of construction and tenant improvements at IIP’s
properties. These statistics do not include up to approximately
$7.0 million that may be funded in the future pursuant to IIP’s
lease with a tenant at one of IIP’s Illinois properties, or
approximately $17.1 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 being
in receivership and its ongoing default in its obligation to pay
rent at that location.
Financing Activity
In May, IIP completed an underwritten public offering of
1,550,648 shares of common stock, including the exercise in full of
the underwriter’s option to purchase an additional 202,259 shares,
resulting in net proceeds of approximately $114.9 million.
Subsequent to the end of the quarter, in July, IIP completed an
underwritten public offering of 3,085,867 shares of common stock,
including the exercise in full of the underwriters’ option to
purchase an additional 402,504 shares, resulting in gross proceeds
of approximately $258.7 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 $24.3 million for
the three months ended June 30, 2020, compared to approximately
$8.6 million for the same period in 2019, an increase of 183%. The
increase was driven primarily by the acquisition and leasing of new
properties, in addition to contractual rental escalations at
certain properties, partially offset by the deferrals of rent from
three of IIP’s tenants described above. Total revenues for the
three months ended June 30, 2020 also included the drawdown of part
of the security deposits totaling approximately $743,000 at certain
properties leased to three tenants to pay part of the rent and
property management fee as a part of the deferral programs
described above.
IIP generated total revenues of approximately $45.5 million for
the six months ended June 30, 2020, compared to approximately $15.4
million for the same period in 2019, an increase of 195%. The
increase was driven primarily by the acquisition and leasing of new
properties, additional tenant improvement allowances and
construction funding at existing properties resulting in
adjustments to base rent, and contractual rental escalations at
certain properties, partially offset by the deferrals of rent from
three of IIP’s tenants described above. Total revenues for the six
months ended June 30, 2020 also included approximately $422,000 of
tenant reimbursements, rent collected and associated lease
penalties through the drawdown of the security deposit at IIP’s Los
Angeles, California property, where the tenant is in receivership
and defaulted on its lease obligations, and the drawdown of part of
the security deposits totaling approximately $940,000 at certain
properties leased to three tenants to pay part of the rent and
property management fee as a part of the deferral programs
described above.
For the three months ended June 30, 2020, IIP recorded net
income available to common stockholders and net income available to
common stockholders per diluted share of approximately $13.0
million and $0.73, respectively; funds from operations (“FFO”) and
FFO per diluted share of approximately $19.7 million and $1.12,
respectively; and AFFO and AFFO per diluted share of approximately
$21.0 million and $1.19, respectively. Second quarter 2020 AFFO and
AFFO per diluted share for the quarter increased by 263% and 102%
from the prior year period, respectively.
For the six months ended June 30, 2020, IIP recorded net income
and net income per diluted share of approximately $24.5 million and
$1.45, respectively; FFO and FFO per diluted share of approximately
$36.2 million and $2.16, respectively; and AFFO and AFFO per
diluted share of approximately $38.8 million and $2.31,
respectively. For the six months ended June 30, 2020, AFFO and AFFO
per diluted share increased by 250% and 104% 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 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, August 6, 2020 to discuss IIP’s financial
results and operations for the second quarter ended June 30, 2020.
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, August
6, 2020 until 12:00 p.m. Pacific Time on Thursday, August 13, 2020,
by calling 1-877-344-7529 (domestic), 855-669-9658 (Canada) or
1-412-317-0088 (international) and using access code 10146603.
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)
June 30,
2020
December 31,
2019
Assets
Real estate, at cost:
Land
$
58,467
$
48,652
Buildings and improvements
530,274
382,035
Tenant improvements
226,651
87,344
Total real estate, at cost
815,392
518,031
Less accumulated depreciation
(23,823
)
(12,170
)
Net real estate held for investment
791,569
505,861
Cash and cash equivalents
50,174
82,244
Restricted cash
11,468
35,072
Short-term investments, net
323,255
119,595
Right of use office lease asset
1,091
1,202
Other assets, net
1,591
1,883
Total assets
$
1,179,148
$
745,857
Liabilities and stockholders’
equity
Exchangeable senior notes, net
$
135,661
$
134,654
Tenant improvements and construction
funding payable
22,781
24,968
Accounts payable and accrued expenses
3,235
3,417
Dividends payable
20,108
12,975
Office lease liability
1,149
1,202
Rent received in advance and tenant
security deposits
26,243
20,631
Total liabilities
209,177
197,847
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 June 30, 2020
and December 31, 2019
14,009
14,009
Common stock, par value $0.001 per share,
50,000,000 shares authorized: 18,614,561 and 12,637,043 shares
issued and outstanding at June 30, 2020 and December 31, 2019,
respectively
19
13
Additional paid-in capital
988,220
553,932
Dividends in excess of earnings
(32,277
)
(19,944
)
Total stockholders’ equity
969,971
548,010
Total liabilities and stockholders’
equity
$
1,179,148
$
745,857
INNOVATIVE INDUSTRIAL
PROPERTIES, INC.
CONDENSED CONSOLIDATED
STATEMENTS OF INCOME
For the Three and Six Months
Ended June 30, 2020 and 2019
(Unaudited)
(In thousands, except share and
per share amounts)
For the Three Months
Ended
June 30,
For the Six Months
Ended
June 30,
2020
2019
2020
2019
Revenues:
Rental (including tenant
reimbursements)
$
24,346
$
8,617
$
45,476
$
15,440
Total revenues
24,346
8,617
45,476
15,440
Expenses:
Property expenses
414
337
1,014
584
General and administrative expense
3,010
2,593
6,356
4,511
Depreciation expense
6,746
1,615
11,653
2,833
Total expenses
10,170
4,545
19,023
7,928
Income from operations
14,176
4,072
26,453
7,512
Interest and other income
989
1,172
2,433
2,165
Interest expense
(1,855
)
(1,832
)
(3,704
)
(2,624
)
Net income
13,310
3,412
25,182
7,053
Preferred stock dividend
(338
)
(338
)
(676
)
(676
)
Net income attributable to common
stockholders
$
12,972
$
3,074
$
24,506
$
6,377
Net income attributable to common
stockholders per share:
Basic
$
0.73
$
0.31
$
1.46
$
0.64
Diluted
$
0.73
$
0.30
$
1.45
$
0.64
Weighted average shares outstanding:
Basic
17,530,721
9,667,079
16,657,509
9,665,933
Diluted
17,644,829
9,807,503
16,771,460
9,802,616
INNOVATIVE INDUSTRIAL
PROPERTIES, INC.
CONDENSED CONSOLIDATED FFO AND
AFFO
For the Three and Six Months
Ended June 30, 2020 and 2019
(Unaudited)
(In thousands, except share and
per share amounts)
For the Three Months Ended
June 30,
For the Six Months
Ended June 30,
2020
2019
2020
2019
Net income attributable to common
stockholders
$
12,972
$
3,074
$
24,506
$
6,377
Real estate depreciation
6,746
1,615
11,653
2,833
FFO attributable to common
stockholders
19,718
4,689
36,159
9,210
Stock-based compensation
822
623
1,647
1,186
Non-cash interest expense
507
484
1,008
692
AFFO attributable to common
stockholders
$
21,047
$
5,796
$
38,814
$
11,088
FFO per share — basic
$
1.12
$
0.49
$
2.17
$
0.95
FFO per share — diluted
$
1.12
$
0.48
$
2.16
$
0.94
AFFO per share — basic
$
1.20
$
0.60
$
2.33
$
1.15
AFFO per share — diluted
$
1.19
$
0.59
$
2.31
$
1.13
Weighted average shares outstanding —
basic
17,530,721
9,667,079
16,657,509
9,665,933
Weighted average shares outstanding —
diluted
17,644,829
9,807,503
16,771,460
9,802,616
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. FFO and FFO per share are used by management to evaluate
the REIT’s operating performance and these measures are the
predominant measures used by the REIT industry and industry
analysts to evaluate 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/20200805005896/en/
Catherine Hastings Chief Financial Officer Innovative Industrial
Properties, Inc. (858) 997-3332
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