Acquisitions Drive 146% Q1 Rental Revenue,
444% Q1 Net Income and 275% 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 regulated U.S. cannabis industry, announced
today results for the quarter ended March 31, 2019, the ninth full
quarter since IIP commenced real estate operations and completed
its initial public offering in December 2016.
Year-to-Date 2019 Highlights
Financial Results and Financing Activity
- IIP generated rental revenues of
approximately $6.6 million in the quarter, representing a 146%
increase from the prior year's first quarter.
- IIP recorded net income available to
common stockholders of approximately $3.3 million for the quarter,
or $0.33 per diluted share, and adjusted funds from operations
("AFFO") of approximately $5.3 million, or $0.54 per diluted share.
AFFO represented an increase of 275% from the prior year's first
quarter.
- IIP paid its eighth consecutive
quarterly dividend of $0.45 per share on April 15, 2019 to common
stockholders of record as of March 29, 2019, representing an
approximately 29% increase from IIP's fourth quarter 2018 dividend
and an 80% increase over the first quarter 2018's dividend.
- IIP's operating partnership subsidiary
(the "Operating Partnership") completed a private offering of
$143.75 million aggregate principal amount of 3.75% exchangeable
senior notes due 2024 (the "Exchangeable Senior Notes"), which
includes the exercise in full of the initial purchasers' option to
purchase additional Exchangeable Senior Notes, resulting in net
proceeds of approximately $138.6 million.
Investment Activity
- In February, IIP acquired a 43,000
square foot industrial property in California and entered into a
long-term triple-net lease with an experienced operator, which
intends to operate the facility for cannabis cultivation upon
completion of redevelopment, with IIP's total investment in the
acquisition and redevelopment of the property expected to be
approximately $11.5 million (excluding transaction costs).
- In March, IIP acquired a property in
Ohio 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
58,000 square feet upon completion of development, with IIP's total
investment in the acquisition and development of the property
expected to be $20.0 million (excluding transaction costs).
- In April, IIP acquired five industrial
properties in southern California totaling approximately 102,000
square feet for approximately $27.1 million in the aggregate
(excluding transaction costs), and entered into a long-term
triple-net lease for each of those properties with a licensed
operator.
- In April, IIP acquired a 51,000 square
foot industrial property in Pennsylvania and entered into a
long-term triple-net lease with Maitri Genetics, LLC ("Maitri"),
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 $16.3 million (excluding
transaction costs).
Portfolio Update
Since January 1, 2019, IIP has acquired eight properties in
three states, representing an aggregate investment of approximately
$74.8 million, which includes committed capital that IIP expects to
deploy for the completion of development, redevelopment or tenant
improvements at certain properties. IIP entered into new tenant
relationships with Maitri and two licensed operators in California,
while expanding its tenant relationship with PharmaCann as
PharmaCann continues to execute on its multi-state growth
initiatives.
As of May 7, 2019, IIP owned 19 properties that were 100% leased
to state-licensed medical-use cannabis operators and comprising an
aggregate of approximately 1.3 million rentable square feet
(including approximately 210,000 rentable square feet under
development/redevelopment) in Arizona, California, Colorado,
Illinois, Maryland, Massachusetts, Michigan, Minnesota, New York,
Ohio and Pennsylvania, with a weighted-average remaining lease term
of approximately 15.2 years. As of May 7, 2019, IIP had invested
$198.3 million in the aggregate (excluding transaction costs) and
had committed an additional $43.9 million to reimburse certain
tenants and sellers for completion of construction and tenant
improvements at IIP's properties. As of May 7, 2019, IIP's average
current yield on invested capital was approximately 14.8% for these
19 properties, calculated as the sum of the initial base rents,
supplemental rent (with respect to the lease with PharmaCann at one
of IIP's New York properties) and property management fees (after
the expiration of applicable base rent abatement periods), divided
by IIP's aggregate investment in these properties (excluding
transaction costs and including the aggregate potential tenant and
seller reimbursements of $43.9 million).
Financing Activity
In February 2019, the Operating Partnership issued the
Exchangeable Senior Notes in a private offering. The Exchangeable
Senior Notes are senior unsecured obligations of the Operating
Partnership, are fully and unconditionally guaranteed by IIP and
the Operating Partnership's subsidiaries and are exchangeable for
cash, shares of IIP common stock, or a combination of cash and
shares of IIP common stock, at the Operating Partnership's option,
at any time prior to the close of business on the second scheduled
trading day immediately preceding the stated maturity date. The
initial exchange rate for the Exchangeable Senior Notes is 14.37298
shares of IIP common stock per $1,000 principal amount of
the Exchangeable Senior Notes and the initial exchange price is
approximately $69.575 per share of IIP common stock. The
initial exchange rate and initial exchange price are subject to
adjustment in certain circumstances. The Exchangeable Senior Notes
will pay interest semiannually at a rate of 3.75% per annum and
will mature on February 21, 2024, unless earlier exchanged or
repurchased in accordance with their terms. The Operating
Partnership will not have the right to redeem the Exchangeable
Senior Notes prior to maturity, but may be required to repurchase
the Exchangeable Senior Notes from holders under certain
circumstances. IIP expects to use the net proceeds from the
offering 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 rental revenues of approximately $6.6 million for
the three months ended March 31, 2019, compared to approximately
$2.7 million for the same period in 2018, an increase of 146%. The
increase was driven primarily by the acquisition and leasing of new
properties, in addition to contractual rental escalations at
certain properties and amendments to certain leases to increase
tenant improvement allowances at those properties, which resulted
in corresponding increases to base rent.
For the three months ended March 31, 2019, IIP recorded net
income available to common stockholders and net income available to
common stockholders per diluted share of approximately $3.3 million
and $0.33, respectively; funds from operations ("FFO") and FFO per
diluted share of approximately $4.5 million and $0.46,
respectively; and AFFO and AFFO per diluted share of approximately
$5.3 million and $0.54, respectively. First quarter 2019 AFFO and
AFFO per diluted share for the quarter increased by approximately
275% and 135% 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 not be
conducting a conference call to discuss its first quarter
2019 earnings results, but does expect to conduct a conference call
for its second quarter 2019 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 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
(In thousands, except share and per share
amounts)
(Unaudited)
Assets March 31,
2019
December 31,
2018
Real estate, at cost: Land $ 22,563 $ 20,475 Buildings and
improvements 123,927 109,425 Tenant improvements 18,784 14,732
Construction in progress 666 6,298 Total real estate,
at cost 165,940 150,930 Less accumulated depreciation
(4,789) (3,571) Net real estate held for investment 161,151
147,359 Cash and cash equivalents 59,224 13,050 Short-term
investments, net 197,729 120,443 Other assets, net 2,304
614 Total assets $ 420,408 $ 281,466
Liabilities and
stockholders' equity Exchangeable senior notes $ 133,196 $ ―
Tenant improvements and construction funding payable 3,201 2,433
Accounts payable and accrued expenses 1,224 1,968 Dividends payable
4,750 3,759 Rent received in advance and tenant security deposits
9,661 9,014 Total liabilities 152,032
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 March 31, 2019 and December 31, 2018
14,009 14,009 Common stock, par value $0.001 per share, 50,000,000
shares authorized: 9,806,194 and 9,775,800 shares issued and
outstanding at March 31, 2019 and December 31, 2018, respectively
10 10 Additional paid-in capital 265,733 260,540 Dividends in
excess of earnings (11,376) (10,267) Total
stockholders' equity 268,376 264,292 Total
liabilities and stockholders' equity $ 420,408 $ 281,466
INNOVATIVE INDUSTRIAL PROPERTIES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except share and per share
amounts)
(Unaudited)
For the Three Months Ended
March 31, 2019 2018
Revenues: Rental $ 6,576 $ 2,677 Tenant reimbursements
247 87 Total revenues 6,823 2,764
Expenses: Property expenses 247 87 General and
administrative expense 1,918 1,477 Depreciation expense
1,218 476 Total expenses 3,383 2,040 Income
from operations 3,440 724 Interest income 993 221 Interest expense
(792) ― Net income 3,641 945 Preferred stock dividend
(338) (338) Net income available to common
stockholders
$
3,303
$
607
Net income available to common stockholders per share: Basic $ 0.34
$ 0.10 Diluted $ 0.33 $ 0.09 Weighted average shares outstanding:
Basic 9,664,775 5,883,610 Diluted 9,797,676 6,025,067
INNOVATIVE INDUSTRIAL PROPERTIES,
INC.
CONDENSED CONSOLIDATED FFO AND
AFFO
(In thousands, except share and per share amounts) (Unaudited)
The table below is a reconciliation of net income available
to common stockholders to FFO and AFFO for the three months ended
March 31, 2019 and 2018.
For the Three Months Ended
March 31,
2019 2018 Net income available
to common stockholders
$
3,303
$
607
Real estate depreciation 1,218 476 FFO available to
common stockholders
4,521
1,083
Stock-based compensation 563 330 Non-cash interest expense
208 — AFFO available to common stockholders
$
5,292
$
1,413
FFO per share — basic $ 0.47 $ 0.18 FFO per share — diluted $ 0.46
$ 0.18 AFFO per share — basic $ 0.55 $ 0.24 AFFO per share —
diluted $ 0.54 $ 0.23 Weighted average shares outstanding — basic
9,664,775
5,883,610
Weighted average shares outstanding — diluted
9,797,676
6,025,067
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.
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version on businesswire.com: https://www.businesswire.com/news/home/20190508005842/en/
Company Contact:Catherine HastingsChief Financial
OfficerInnovative Industrial Properties, Inc.(858) 997-3332
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