Quarterly Dividend Increased 40%, Driven by
Strong Revenue and AFFO Growth
Innovative Industrial Properties, Inc. (NYSE: IIPR) (the
"Company"), the leading provider of creative capital solutions to
the medical-use cannabis industry, announced today results for the
quarter ended September 30, 2018, the seventh full quarter since
the Company commenced real estate operations and completed its
initial public offering in December 2016.
Third Quarter 2018 Highlights
Financial Results and Financing Activity
- The Company generated total revenues of
approximately $3.9 million in the quarter, representing an increase
of more than 150% from the prior year.
- The Company recorded net income
attributable to common stockholders of approximately $1.5 million
for the quarter, or $0.21 per diluted share, and adjusted funds
from operations ("AFFO") of approximately $2.6 million, or $0.38
per diluted share. AFFO for the quarter represented an increase of
more than 250% from the prior year.
- The Company paid its sixth consecutive
quarterly dividend of $0.35 per share on October 15, 2018 to
stockholders of record as of September 28, 2018, representing a 40%
increase over the Company's second quarter 2018 dividend.
- Subsequent to the end of the quarter,
the Company completed an underwritten public offering of 2,990,000
shares of common stock, including the exercise in full of the
underwriters' option to purchase an additional 390,000 shares,
resulting in net proceeds of approximately $113.9 million.
Acquisitions
- In July 2018, the Company acquired a
55,000 square foot cannabis cultivation and processing facility in
a sale-leaseback transaction with Holistic Industries, Inc.
("Holistic") in Massachusetts for $12.75 million (excluding
transaction costs).
- In August 2018, the Company acquired a
property in Michigan and entered into a long-term lease with Green
Peak Industries, LLC ("GPI") for an industrial facility that is
expected to comprise approximately 56,000 square feet upon
completion of development, with the Company's total investment in
the acquisition and development of the property expected to be $13
million (excluding transaction costs).
- Subsequent to the end of the quarter,
in October 2018, the Company acquired a 58,000 square foot cannabis
cultivation facility in Colorado and entered into a long-term lease
with The Green Solution, LLC ("TGS") for $11.25 million (excluding
transaction costs).
Portfolio Update and Acquisition Activity
Portfolio Update
As of November 7, 2018, the Company owned ten properties located
in Arizona, Colorado, Maryland, Massachusetts, Michigan, Minnesota,
New York and Pennsylvania, totaling approximately 952,000 rentable
square feet (including approximately 114,000 rentable square feet
under development), which were 100% leased with a weighted-average
remaining lease term of approximately 14.7 years. As of November 7,
2018, the Company had invested approximately $121.5 million in the
aggregate (excluding transaction costs) and had committed an
additional approximately $15.9 million to reimburse certain tenants
and sellers for completion of construction and tenant improvements
at the Company's properties. The Company's average current yield on
invested capital is approximately 15.4% for these ten properties,
calculated as (a) the sum of the current base rents, supplemental
rent (with respect to the lease with PharmaCann LLC at one of the
Company's New York properties) and property management fees (after
the expiration of the base rent abatement period for the PharmaCann
Massachusetts property), divided by (b) the Company's aggregate
investment in these properties (excluding transaction costs and
including aggregate potential development funding and tenant
reimbursements of approximately $15.9 million).
Acquisition Activity
On July 12, 2018, the Company acquired a property in
Massachusetts for $12.75 million (excluding transaction costs) in a
sale-leaseback transaction, and entered into a triple-net lease for
the entire property with Holistic for continued operation as a
cannabis cultivation and processing facility comprising
approximately 55,000 square feet of industrial space.
On August 2, 2018, the Company acquired a property in Michigan
under development and expected to comprise approximately 56,000
square feet of industrial space upon completion. The initial
purchase price for the property was approximately $5.5 million, and
the seller is responsible for completing certain development
milestones, for which the seller is expected to be reimbursed
approximately $5.3 million (the "Additional Purchase Price"). GPI,
the tenant at the property, is also expected to complete tenant
improvements for the building, for which the Company has agreed to
provide reimbursement of up to $2.2 million (the "TI Allowance").
Assuming full payment for each step of the development, the
Company’s total investment in the property will be $13 million.
Concurrent with the closing of the purchase, the Company entered
into a long-term, triple-net lease agreement with GPI, which
intends to use the facility for medical-use cannabis cultivation
and processing upon completion of development.
On October 30, 2018, the Company acquired an approximately
58,000 square foot industrial property in Colorado for $11.25
million (excluding transaction costs) and entered into a long-term,
triple-net lease with TGS for continued operation as a cannabis
cultivation facility.
Financial Results
The Company generated total revenues of approximately $3.9
million and $10.0 million for the three and nine months ended
September 30, 2018, respectively, and total revenues of
approximately $1.6 million and $4.1 million for the three and nine
months ended September 30, 2017, respectively. The increases in
both periods were due to the Company's acquisition of new
properties and the annual escalation of base rent for two of the
Company's leases. Base rent under the lease with the PharmaCann
subsidiary for one of the Massachusetts properties is abated until
November 30, 2018, and base rent under the lease with GPI at the
Michigan property was deferred until November 2, 2018.
For the three months ended September 30, 2018, the Company
recorded net income and net income per diluted share of $1.5
million and $0.21, respectively; funds from operations ("FFO") and
FFO per diluted share of $2.2 million and $0.32, respectively; and
AFFO and AFFO per diluted share of $2.6 million and $0.38,
respectively. For the three months ended September 30, 2017, the
Company recorded net income and net income per diluted share of
$334,000 and $0.09, respectively; FFO and FFO per diluted share of
$551,000 and $0.16, respectively; and AFFO and AFFO per diluted
share of $724,000 and $0.21, respectively.
For the nine months ended September 30, 2018, the Company
recorded net income and net income per diluted share of $3.3
million and $0.49, respectively; FFO and FFO per diluted share of
$5.0 million and $0.77, respectively; and AFFO and AFFO per diluted
share of $6.1 million and $0.93, respectively. For the nine months
ended September 30, 2017, the Company recorded a net loss and net
loss per basic and diluted share of ($679,000) and ($0.21),
respectively; FFO and FFO per basic and diluted share of ($126,000)
and ($0.04), respectively; and AFFO and AFFO per diluted share of
$1.5 million and $0.44, 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 / (loss) available to
common stockholders to FFO and AFFO and definitions of terms are
included at the end of this release.
Teleconference and Webcast
Innovative Industrial Properties, Inc. will not be
conducting a conference call to discuss its third quarter
2018 earnings results, but does expect to conduct a conference call
to discuss its fourth quarter and full-year 2018 earnings
results.
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 the Company 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 the Company "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. The Company 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
September 30,2018
December 31,2017
Real estate, at cost: Land $ 17,812 $ 11,514 Buildings and
improvements 78,049 51,315 Tenant improvements 10,829 5,901
Construction in progress 4,678 — Total
real estate, at cost 111,368 68,730 Less accumulated depreciation
(2,657 ) (942 ) Net real estate held for investment
108,711 67,788 Cash and cash equivalents 53,019 11,758 Short-term
investments, net 3,983 — Other assets, net 499
482 Total assets $ 166,212 $ 80,028
Liabilities and stockholders' equity Accounts payable and
accrued expenses $ 1,179 $ 1,082 Tenant improvements and
construction payable 4,341 — Dividends payable 2,713 1,198 Offering
cost liability 21 41 Rents received in advance and tenant security
deposits 6,868 4,158 Total liabilities
15,122 6,479 Commitments and
contingencies Stockholders' equity: Preferred stock, par value
$0.001 per share, 50,000,000 shares authorized: 9.00% Series A
cumulative redeemable preferred stock, $15,000 liquidation
preference ($25.00 per share), 600,000 shares issued and
outstanding at September 30, 2018 and December 31, 2017 14,009
14,009 Common stock, par value $0.001 per share, 50,000,000 shares
authorized: 6,785,800 and 3,501,147 shares issued and outstanding
at September 30, 2018 and December 31, 2017, respectively 7 4
Additional paid-in capital 137,219 64,000 Accumulated deficit
(145 ) (4,464 ) Total stockholders' equity
151,090 73,549 Total liabilities and
stockholders' equity $ 166,212 $ 80,028
INNOVATIVE INDUSTRIAL PROPERTIES,
INC.
CONDENSED CONSOLIDATED STATEMENTS OF
OPERATIONS
For the Three and Nine Months Ended
September 30, 2018 and 2017
(Unaudited)
(In thousands, except share and per share
amounts)
For the Three Months
EndedSeptember 30,
For the Nine Months
EndedSeptember 30,
2018 2017 2018
2017 Revenues: Rental $ 3,716 $
1,495 $ 9,639 $ 4,074 Tenant reimbursements 210
64 365 64 Total revenues
3,926 1,559 10,004 4,138
Expenses: Property expenses 210 64 365 64 General and
administrative expense
1,442
983
4,393
4,204
Severance expense — — — 113 Depreciation expense 703
217 1,715 553 Total expenses
2,355 1,264 6,473 4,934
Income / (loss) from operations
1,571
295
3,531
(796
)
Interest and other income 261 39 788
117 Net income / (loss) 1,832 334 4,319 (679 )
Preferred stock dividend (338 ) — (1,014 )
— Net income / (loss) attributable to common
stockholders $
1,494
$
334
$
3,305
$
(679
)
Net income / (loss) attributable to common stockholders per share:
Basic $ 0.22 $ 0.09 $ 0.50 $ (0.21 ) Diluted $ 0.21
$ 0.09 $ 0.49 $ (0.21 ) Weighted average shares
outstanding: Basic 6,636,638 3,392,508 6,388,058 3,369,308 Diluted
6,785,800 3,392,508 6,534,300 3,369,308 Dividends declared per
common share $
0.35
$
0.15
$
0.85
$
0.30
INNOVATIVE INDUSTRIAL PROPERTIES,
INC.
CONDENSED CONSOLIDATED FFO AND
AFFO
For the Three and Nine Months Ended
September 30, 2018 and 2017
(Unaudited)
(In thousands, except share and per share
amounts)
The table below is a reconciliation of net
income / (loss) to FFO and AFFO for the three and nine months ended
September 30, 2018 and 2017.
For the Three Months
EndedSeptember 30,
For the Nine Months
EndedSeptember 30,
2018 2017 2018
2017 Net income / (loss) attributable to common
stockholders $
1,494
$
334
$
3,305
$
(679
)
Real estate depreciation 703 217 1,715
553 FFO available to common stockholders
2,197
551
5,020
(126
)
Stock-based compensation 386 173 1,079 1,548 Severance expense
— — — 113 AFFO available to
common stockholders $
2,583
$
724
$
6,099
$
1,535
FFO per share — basic $ 0.33 $ 0.16 $ 0.79 $ (0.04 ) FFO per
share — diluted $ 0.32 $ 0.16 $ 0.77 $ (0.04 ) AFFO per share —
basic $ 0.39 $ 0.21 $ 0.95 $ 0.46 AFFO per share — diluted $
0.38 $ 0.21 $ 0.93 $ 0.44 Weighted average shares
outstanding — basic
6,636,638
3,392,508
6,388,058
3,369,308
Weighted average shares outstanding — diluted
6,785,800
3,501,147
6,534,300
3,509,166
FFO and FFO per share are operating performance measures adopted
by the National Association of Real Estate Investment Trusts, Inc.
(“NAREIT”). NAREIT defines FFO as the most commonly accepted and
reported measure of a REIT’s operating performance equal to “net
income (loss), computed in accordance with accounting principles
generally accepted in the United States (“GAAP”), excluding gains
(or losses) from sales of property, plus depreciation and
amortization related to real estate properties, and after
adjustments for unconsolidated partnerships and joint
ventures.”
Management believes that net income (loss), as defined by GAAP,
is the most appropriate earnings measurement. However, management
believes FFO and FFO per share to be supplemental measures of a
REIT’s performance because they provide an understanding of the
operating performance of the Company'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. Management believes that by excluding the effect of
depreciation, FFO and FFO per share can facilitate comparisons of
operating performance between periods. The Company 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. The Company 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 severance expense.
The Company's computation of FFO and AFFO may differ from the
methodology for calculating FFO and AFFO utilized by other equity
REITs and, accordingly, may not be comparable to such REITs.
Further, FFO and AFFO do not represent cash flow available for
management's discretionary use. FFO and AFFO should not be
considered as an alternative to net income (loss) (computed in
accordance with GAAP) as an indicator of the Company's financial
performance or to cash flow from operating activities (computed in
accordance with GAAP) as an indicator of the Company's liquidity,
nor is it indicative of funds available to fund the Company's cash
needs, including the Company's ability to pay dividends or make
distributions. FFO and AFFO should be considered only as
supplements to net income (loss) computed in accordance with GAAP
as measures of operations.
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version on businesswire.com: https://www.businesswire.com/news/home/20181107005978/en/
Innovative Industrial Properties, Inc.Catherine Hastings,
858-997-3332Chief Financial Officer
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