Acquisitions Drive 210% Q1 Total Revenues,
249% Q1 Net Income and 236% Q1 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 March 31, 2020.
First Quarter 2020 and Year-to-Date Highlights
Financial Results and Financing Activity
- IIP generated total revenues of approximately $21.1 million in
the quarter, representing a 210% increase from the prior year’s
first quarter.
- IIP recorded net income available to common stockholders of
approximately $11.5 million for the quarter, or $0.72 per diluted
share, and adjusted funds from operations (AFFO) of approximately
$17.8 million, or $1.12 per diluted share. Net income available to
common stockholders and AFFO increased by 249% and 236% from the
prior year’s first quarter, respectively.
- IIP paid a quarterly dividend of $1.00 per share on April 15,
2020 to common stockholders of record as of March 31, 2020,
representing an approximately 122% increase over the first quarter
2019’s dividend.
- 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 net proceeds of approximately $239.6 million.
- In January, IIP issued shares of common stock for net proceeds
of approximately $78.2 million under an “at-the-market” equity
offering program.
Investment Activity
- From January 1, 2020 through today, IIP acquired nine
properties, totaling approximately 1.1 million rentable square feet
(including expected rentable square feet upon completion of
properties under development), located in Colorado, Florida,
Illinois, Massachusetts, Michigan, Ohio and Virginia.
- These nine properties represented an aggregate investment by
IIP of approximately $202.1 million (consisting of purchase prices
and development / tenant reimbursement commitments, but excluding
transaction costs).
- In these transactions, IIP established a new tenant
relationship with Parallel (the corporate parent company of
Surterra Wellness), while expanding existing tenant relationships
with Ascend Wellness Holdings, LLC, Cresco Labs Inc., Green Leaf
Medical, LLC, Green Thumb Industries Inc. and LivWell Holdings,
Inc.
Balance Sheet Highlights (at March 31, 2020)
- Approximately $108.3 million in cash and cash equivalents and
approximately $272.9 million in short-term investments, totaling
approximately $381.2 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.
- 13% debt to total gross assets, with approximately $1.1 billion
in total gross assets.
Rent Deferrals (as of May 6, 2020)
- IIP has undertaken in-depth discussions with each of its
tenants in March and April as they navigate this unprecedented
pandemic.
- In light of those discussions, IIP worked with three of its 21
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.
- Pursuant to these amendments, a total of $743,000 of security
deposits that IIP holds in cash were applied to the payment of rent
for April; and a total of approximately $1.5 million in rent was
deferred for May and June. The total of this amount, $2.3 million,
represents approximately 3% of IIP’s total revenues as reported for
the three months ended March 31, 2020, annualized.
“One of the pillars of our business strategy has consistently
been a conservative, flexible balance sheet, and we believe we are
exceptionally well positioned to not only weather this
unprecedented health crisis and economic disruption, but to
continue to make real estate investments on a long-term basis with
best-in-class tenant operators,” said Alan Gold, Executive Chairman
of IIP. “We remain steadfast in our support of this industry and
its bright long-term future, and are working every day through this
crisis with our tenant partners toward continuing to build a
tremendous future forward of growth and strength for many years to
come. When we overcome this crisis through the collective ingenuity
of our top medical professionals and researchers, the regulated
cannabis industry will continue to thrive and be one of the top
drivers of growth and good jobs across the country.”
COVID-19 Regulatory Update
In the vast majority of states, state and local governmental
authorities have recognized both medical-use and adult-use cannabis
operations as “essential businesses” per state guidelines, allowing
them to remain open and operational, extending as well to the
supply chain of the regulated cannabis industry, including
cultivation, processing, distribution and dispensary activities.
State and local governmental authorities and regulated cannabis
businesses have taken additional measures to ensure the safety and
well-being of employees, patients and consumers, including but not
limited to restrictions associated with social distancing
requirements and additional levels of protection for medical
cannabis patients with more vulnerability to health complications
with COVID-19.
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 January 1, 2020 through May 6,
2020 (dollars in thousands):
State
Closing Date
Rentable Sq. Ft.(1)
Purchase Price(2)
Additional Investment
Total Investment
Pennsylvania
January 14, 2020
N/A
$
N/A
$
4,500
$
4,500
(3)
Virginia
January 15, 2020
82,000
11,740
8,010
19,750
(4)
Arizona
January 16, 2020
N/A
N/A
2,000
2,000
(5)
Ohio
January 24, 2020
50,000
10,600
1,945
12,545
(6)
California
January 28, 2020
N/A
N/A
1,250
1,250
(7)
Ohio
January 31, 2020
21,000
2,900
4,300
7,200
(8)
Colorado
Various
8,000
3,300
850
4,150
(9)
Pennsylvania
February 19, 2020
N/A
N/A
6,000
6,000
(10)
Massachusetts
February 24, 2020
N/A
N/A
4,000
4,000
(11)
Maryland
March 3, 2020
N/A
N/A
5,500
5,500
(12)
Illinois
March 6, 2020
231,000
9,000
41,000
50,000
(13)
Florida
March 11, 2020
373,000
35,300
8,200
43,500
(14)
Massachusetts
April 2, 2020
199,000
26,750
22,250
49,000
(15)
Minnesota
April 10, 2020
N/A
N/A
1,060
1,060
(16)
New York
April 10, 2020
N/A
N/A
360
360
(17)
Michigan
April 22, 2020
115,000
5,000
11,000
16,000
(18)
Totals
1,079,000
$
104,590
$
122,225
$
226,815
____________
(1)
Includes expected rentable square feet at
completion of construction for certain properties.
(2)
Excludes transaction costs.
(3)
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 May 6, 2020, we had funded $5.6
million of the tenant improvement allowance.
(4)
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 May 6,
2020, IIP funded approximately $6.4 million of the
reimbursement.
(5)
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 May 6, 2020, IIP had funded $5.0 million of the
tenant improvement allowance.
(6)
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 May 6,
2020, IIP had funded none of the tenant improvement allowance.
(7)
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 to
a total of approximately $6.0 million. As of May 6, 2020, IIP had
funded approximately $6.0 million of the tenant improvement
allowance.
(8)
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 May 6, 2020, IIP had
funded approximately $3.0 million of the tenant improvement
allowance.
(9)
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 May 6,
2020, IIP had funded approximately $49,000 of the tenant
improvement allowance.
(10)
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. As of May 6, 2020, IIP had funded approximately $9.5
million of the tenant improvement allowance.
(11)
The amount relates to amendments to a
lease and development agreement which increased the construction
funding at one of IIP’s Massachusetts properties by $4.0 million to
a total of $27.5 million. IIP also canceled the optional commitment
to provide construction funding of $4.0 million for the tenant at
one of IIP’s Pennsylvania properties. As of May 6, 2020, IIP had
funded approximately $26.0 million of the construction funding at
the Massachusetts property.
(12)
The amount relates to a lease amendment to
provide a tenant improvement allowance under a lease at one of
IIP’s Maryland properties for $5.5 million. As of May 6, 2020, IIP
had funded approximately $568,000 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 $41.0 million. As of May 6, 2020, IIP had
funded approximately $8.1 million of the tenant improvement
allowance.
(14)
The tenant is expected to complete tenant
improvements at the property, for which IIP agreed to provide
reimbursement of up to $8.2 million. As of May 6, 2020, IIP had
funded none 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 $22.3 million. As of May 6,
2020, IIP had funded none of the tenant improvement allowance.
(16)
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. As of May 6, 2020, we had funded
approximately $6.2 million of the tenant improvement allowance.
(17)
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. As of May 6, 2020, we had funded
approximately $3.0 million of the tenant improvement allowance.
(18)
The tenant is expected to complete tenant
improvements at the property, for which IIP agreed to provide
reimbursement of up to $11.0 million. As of May 6, 2020, IIP had
funded none of the tenant improvement allowance.
As of May 6, 2020, IIP owned 55 properties located in Arizona,
California, Colorado, Florida, Illinois, Maryland, Massachusetts,
Michigan, Minnesota, New York, Nevada, North Dakota, Ohio,
Pennsylvania and Virginia, totaling approximately 4.1 million
rentable square feet (including approximately 1.3 million rentable
square feet under development/redevelopment), which were 99.1%
leased (based on square footage) with a weighted-average remaining
lease term of approximately 15.9 years. As of May 6, 2020, IIP had
invested approximately $719.7 million in the aggregate (excluding
transaction costs) and had committed an additional approximately
$143.2 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
$10.7 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 $23.8 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 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 net proceeds of approximately $239.6 million.
In January, IIP issued shares of common stock for net proceeds
of approximately $78.2 million under an “at-the-market” equity
offering program.
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 $21.1 million for
the three months ended March 31, 2020, compared to approximately
$6.8 million for the same period in 2019, an increase of 210%. The
increase was driven primarily by the acquisition and leasing of new
properties, in addition to contractual rental escalations at
certain properties. Total revenues for the three months ended March
31, 2020 also included approximately $422,000 of tenant
reimbursements, rent collected and associated lease penalties
through the drawdown of the security deposit at our Los Angeles,
California property, as a result of the tenant’s ongoing lease
default, and the drawdown of part of the security deposits totaling
approximately $195,000 at certain properties in southern California
leased to Vertical to pay part of the rent and associated lease
penalties for March.
For the three months ended March 31, 2020, IIP recorded net
income available to common stockholders and net income available to
common stockholders per diluted share of approximately $11.5
million and $0.72, respectively; funds from operations (“FFO”) and
FFO per diluted share of approximately $16.4 million and $1.03,
respectively; and AFFO and AFFO per diluted share of approximately
$17.8 million and $1.12, respectively. First quarter 2020 AFFO and
AFFO per diluted share for the quarter increased by 236% and 107%
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, May 7, 2020 to discuss IIP’s financial results
and operations for the first quarter ended March 31, 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, May 7,
2020 until 12:00 p.m. Pacific Time on Thursday, May 14, 2020, by
calling 1-877-344-7529 (domestic), 855-669-9658 (Canada) or
1-412-317-0088 (international) and using access code 10143382.
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)
Assets
March 31, 2020
December 31, 2019
Real estate, at cost:
Land
$
51,712
$
48,652
Buildings and improvements
464,267
382,035
Tenant improvements
173,974
87,344
Total real estate, at cost
689,953
518,031
Less accumulated depreciation
(17,077)
(12,170)
Net real estate held for investment
672,876
505,861
Cash and cash equivalents
108,261
82,244
Restricted cash
23,032
35,072
Short-term investments, net
272,907
119,595
Right of use office lease asset
1,147
1,202
Other assets, net
2,247
1,883
Total assets
$
1,080,470
$
745,857
Liabilities and stockholders’
equity
Exchangeable senior notes
$
135,154
$
134,654
Tenant improvements and construction
funding payable
41,185
24,968
Accounts payable and accrued expenses
1,305
3,417
Dividends payable
17,407
12,975
Office lease liability
1,204
1,202
Rent received in advance and tenant
security deposits
25,236
20,631
Total liabilities
221,491
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 March 31, 2020
and December 31, 2019
14,009
14,009
Common stock, par value $0.001 per share,
50,000,000 shares authorized: 17,035,674 and 12,637,043 shares
issued and outstanding at March 31, 2020 and December 31, 2019,
respectively
17
13
Additional paid-in capital
870,433
553,932
Dividends in excess of earnings
(25,480)
(19,944)
Total stockholders’ equity
858,979
548,010
Total liabilities and stockholders’
equity
$
1,080,470
$
745,857
INNOVATIVE INDUSTRIAL
PROPERTIES, INC.
CONDENSED CONSOLIDATED
STATEMENTS OF INCOME
For the Three Months Ended
March 31, 2020 and 2019
(Unaudited)
(In thousands, except share and
per share amounts)
For the Three Months Ended
March 31,
2020
2019
Revenues:
Rental (including tenant
reimbursements)
$
21,130
$
6,823
Total revenues
21,130
6,823
Expenses:
Property expenses
600
247
General and administrative expense
3,346
1,918
Depreciation expense
4,907
1,218
Total expenses
8,853
3,383
Income from operations
12,277
3,440
Interest and other income
1,444
993
Interest expense
(1,849)
(792)
Net income
11,872
3,641
Preferred stock dividend
(338)
(338)
Net income attributable to common
stockholders
$
11,534
$
3,303
Net income attributable to common
stockholders per share:
Basic
$
0.72
$
0.34
Diluted
$
0.72
$
0.33
Weighted average shares outstanding:
Basic
15,784,296
9,664,775
Diluted
15,898,091
9,797,676
INNOVATIVE INDUSTRIAL
PROPERTIES, INC.
CONDENSED CONSOLIDATED FFO AND
AFFO
For the Three Months Ended
March 31, 2020 and 2019
(Unaudited)
(In thousands, except share and
per share amounts)
For the Three Months Ended
March 31,
2020
2019
Net income attributable to common
stockholders
$
11,534
$
3,303
Real estate depreciation
4,907
1,218
FFO attributable to common
stockholders
16,441
4,521
Stock-based compensation
825
563
Non-cash interest expense
501
208
AFFO attributable to common
stockholders
$
17,767
$
5,292
FFO per share — basic
$
1.04
$
0.47
FFO per share — diluted
$
1.03
$
0.46
AFFO per share — basic
$
1.13
$
0.55
AFFO per share — diluted
$
1.12
$
0.54
Weighted average shares outstanding —
basic
15,784,296
9,664,775
Weighted average shares outstanding —
diluted
15,898,091
9,797,676
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/20200506006018/en/
Catherine Hastings Chief Financial Officer Innovative Industrial
Properties, Inc. (858) 997-3332
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