Investments Drive 197% Q3 Total Revenues,
205% Q3 Net Income and 192% Q3 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 September 30, 2020.
Third Quarter 2020 and Subsequent Events Highlights
Financial Results and Financing Activity
- IIP generated total revenues of approximately $34.3 million in
the quarter, representing a 197% increase from the prior year’s
third quarter.
- IIP recorded net income available to common stockholders of
approximately $18.9 million for the quarter, or $0.86 per diluted
share, and adjusted funds from operations (AFFO) of approximately
$27.9 million, or $1.28 per diluted share. Net income available to
common stockholders and AFFO increased by 205% and 192% from the
prior year’s third quarter, respectively.
- IIP paid a quarterly dividend of $1.17 per share on October 15,
2020 to common stockholders of record as of September 30, 2020,
representing an approximately 10% increase over the second quarter
2020’s dividend and a 50% increase over the third quarter 2019’s
dividend.
- 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 net proceeds of approximately $248.2 million.
- In September, IIP issued 474,000 shares of common stock for net
proceeds of approximately $58.1 million under its “at-the-market”
equity offering program.
Investment Activity
- From July 1, 2020 through today, IIP acquired five properties,
totaling approximately 448,000 rentable square feet (including
expected rentable square feet upon completion of properties under
development), located in Florida, Michigan and New Jersey.
- From July 1, 2020 through today, IIP also made available
additional funding to tenants at seven existing properties for
continued buildout and expansion of facilities in Illinois,
Michigan, Ohio and Pennsylvania.
- These twelve transactions represented an aggregate investment
by IIP of approximately $180.3 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., Curaleaf Holdings, Inc. (Curaleaf) and
Jushi Holdings Inc., while expanding existing tenant relationships
with Ascend Wellness Holdings, LLC, GR Companies, Inc. (Grassroots,
a subsidiary of Curaleaf), Green Peak Industries, LLC, Green Thumb
Industries Inc., Holistic Industries, Inc. (Holistic), Parallel and
PharmaCann Inc.
- As of November 4, 2020, IIP has invested or committed to invest
through tenant improvement allowances and construction funding
commitments a total of approximately $1.2 billion across its total
portfolio.
Balance Sheet Highlights (at September 30, 2020)
- Approximately $161.1 million in cash and cash equivalents and
approximately $451.2 million in short-term investments, totaling
approximately $612.3 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.
- 9.4% debt to total gross assets, with over $1.5 billion in
total gross assets.
Rent Collections (as of November 4, 2020)
- As reported in IIP’s first quarter earnings release, during
this coronavirus pandemic, IIP worked with three of its 22 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 each of July, August, September and October,
including pro rata repayments of the security deposit and deferred
rent.
- IIP collected 100% of contractual rent due for each of the
months of July, August, September and October 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 November 4,
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 has
negotiated 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 final government approvals
for the transfer of the licenses 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 July 1, 2020 through November 4,
2020 (dollars in thousands):
State
Closing Date
Rentable Sq. Ft.(1)
Purchase Price(2)
Additional Investment
Total Investment
New Jersey
July 13, 2020
111,000
$
5,500
$
29,500
$
35,000
(3)
New Jersey
July 16, 2020
50,000
10,220
1,600
11,820
(4)
New Jersey
July 16, 2020
4,000
2,165
—
2,165
Illinois
August 7, 2020
N/A
N/A
844
844
(5)
Pennsylvania
August 7, 2020
N/A
N/A
1,540
1,540
(6)
Illinois
August 18, 2020
90,000
N/A
18,000
18,000
(7)
Pennsylvania
August 25, 2020
N/A
N/A
2,000
2,000
(8)
Michigan
September 1, 2020
63,000
6,200
18,800
25,000
(9)
Florida
September 18, 2020
220,000
19,550
36,850
56,400
(10)
Ohio
October 1, 2020
80,000
N/A
25,000
25,000
(11)
Michigan
October 25, 2020
N/A
N/A
525
525
(12)
Pennsylvania
November 1, 2020
N/A
N/A
2,000
2,000
(13)
Totals
618,000
$
43,635
$
136,659
$
180,294
____________
(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 $29.5 million. As of November 4,
2020, IIP had funded approximately $8.9 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 $1.6 million. As of November 4,
2020, IIP had not funded any 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 Illinois properties by $844,000 to a total of
approximately $18.6 million, and also resulted in a corresponding
adjustment to the base rent for the lease at the property. As of
November 4, 2020, IIP had funded approximately $11.2 million of the
tenant improvement allowance.
(6) The amount relates to a lease
amendment which increased the tenant improvement allowance under a
lease at one of IIP’s Pennsylvania properties by approximately $1.5
million to a total of approximately $12.4 million, and also
resulted in a corresponding adjustment to the base rent for the
lease at the property. As of November 4, 2020, IIP had funded
approximately $10.6 million 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 Illinois properties by $18.0 million to a
total of $32.0 million, and also resulted in a corresponding
adjustment to the base rent for the lease at the property. The
additional tenant improvement allowance is expected to increase the
property footprint by 90,000 square feet. As of November 4, 2020,
IIP had funded approximately $4.7 million of the tenant improvement
allowance.
(8) The amount relates to a lease
amendment which increased the tenant improvement allowance under a
lease at one of IIP’s Pennsylvania properties by $2.0 million to a
total of approximately $10.0 million, and also resulted in a
corresponding adjustment to the base rent for the lease at the
property. As of November 4, 2020, IIP had funded approximately $7.6
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 $18.8 million. As of November 4,
2020, IIP had not funded any 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 $36.9 million. As of
November 4, 2020, IIP had not funded any of the tenant improvement
allowance.
(11) The amount relates to a lease
amendment which increased the tenant improvement allowance under a
lease at one of IIP’s Ohio properties by $25.0 million to a total
of $29.3 million, and also resulted in a corresponding adjustment
to the base rent for the lease at the property. The additional
tenant improvement allowance is expected to increase the property
footprint by 80,000 square feet. As of November 4, 2020, IIP had
funded approximately $4.4 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 Michigan properties by $525,000 to a total of
approximately $1.8 million, and also resulted in a corresponding
adjustment to the base rent for the lease at the property. As of
November 4, 2020, IIP had funded approximately $1.7 million of the
tenant improvement allowance.
(13) The amount relates to an amendment to IIP’s lease and
development agreement which increased the construction funding at
one of IIP’s Pennsylvania properties by $2.0 million to a total of
approximately $27.1 million, and also resulted in a corresponding
adjustment to the base rent for the lease at the property. As of
November 4, 2020, IIP had funded approximately $18.2 million of the
construction funding.
As of November 4, 2020, IIP owned 63 properties located in
Arizona, California, Colorado, Florida, Illinois, Maryland,
Massachusetts, Michigan, Minnesota, Nevada, New Jersey, New York,
North Dakota, Ohio, Pennsylvania and Virginia, totaling
approximately 5.0 million rentable square feet (including
approximately 1.7 million rentable square feet under
development/redevelopment), which were 99.3% leased (based on
square footage) with a weighted-average remaining lease term of
approximately 16.1 years. As of November 4, 2020, IIP had raised
total net proceeds of over $1.4 billion from all of its capital
raising activities to date, after deducting underwriters’ discounts
and commissions and offering expenses, and had invested
approximately $908.4 million in the aggregate (excluding
transaction costs) and had committed an additional approximately
$273.5 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
$7.2 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 tenant at that property may not elect to have IIP disburse
those funds to the tenant 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 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 net proceeds of approximately $248.2 million.
In September, IIP issued 474,000 shares of common stock for net
proceeds of approximately $58.1 million under its “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 cannabis cultivation and processing industry and for
general corporate purposes.
Financial Results
IIP generated total revenues of approximately $34.3 million for
the three months ended September 30, 2020, compared to
approximately $11.6 million for the same period in 2019, an
increase of 197%. The increase was driven primarily by the
acquisition and leasing of new properties, contractual rental
escalations at certain properties and the partial repayment of
deferrals of rent commencing on July 1 from three of IIP’s tenants
described above. Total revenues for the three months ended
September 30, 2020 and 2019 also included approximately $2.8
million and $357,000, respectively, of tenant reimbursements for
property insurance premiums and property tax paid at certain
properties, with the increase driven primarily by the insurance
premiums paid by tenants relating to IIP’s placement of a
portfolio-wide insurance policy in July 2020.
IIP generated total revenues of approximately $79.8 million for
the nine months ended September 30, 2020, compared to approximately
$27.0 million for the same period in 2019, an increase of 196%. 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 nine
months ended September 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. Total revenues for the nine months ended
September 30, 2020 and 2019 also included approximately $3.7
million and $941,000, respectively, of tenant reimbursements for
property insurance premiums and property tax paid at certain
properties.
For the three months ended September 30, 2020, IIP recorded net
income available to common stockholders and net income available to
common stockholders per diluted share of approximately $18.9
million and $0.86, respectively; funds from operations (“FFO”) and
FFO per diluted share of approximately $26.5 million and $1.22,
respectively; and AFFO and AFFO per diluted share of approximately
$27.9 million and $1.28, respectively. Third quarter 2020 AFFO and
AFFO per diluted share for the quarter increased by 192% and 49%
from the prior year’s third quarter, respectively.
For the nine months ended September 30, 2020, IIP recorded net
income and net income per diluted share of approximately $43.4
million and $2.33, respectively; FFO and FFO per diluted share of
approximately $62.7 million and $3.40, respectively; and AFFO and
AFFO per diluted share of approximately $66.7 million and $3.62,
respectively. For the nine months ended September 30, 2020, AFFO
and AFFO per diluted share increased by 223% and 79% 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 third quarter 2020 earnings results,
but does expect to conduct a conference call to discuss its fourth
quarter and full-year 2020 earnings results. IIP’s current policy
is generally to conduct earnings conference calls two times per
year, for its second quarter earnings results and fourth quarter
and full-year 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 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)
September 30,
December 31,
2020
2019
Assets
Real estate, at cost:
Land
$
68,033
$
48,652
Buildings and improvements
575,529
382,035
Tenant improvements
272,934
87,344
Total real estate, at cost
916,496
518,031
Less accumulated depreciation
(31,469)
(12,170)
Net real estate held for investment
885,027
505,861
Cash and cash equivalents
161,074
82,244
Restricted cash
—
35,072
Short-term investments, net
451,178
119,595
Right of use office lease asset
1,035
1,202
Other assets, net
1,536
1,883
Total assets
$
1,499,850
$
745,857
Liabilities and stockholders’
equity
Exchangeable senior notes, net
$
136,174
$
134,654
Tenant improvements and construction
funding payable
30,583
24,968
Accounts payable and accrued expenses
1,336
3,417
Dividends payable
26,325
12,975
Office lease liability
1,113
1,202
Rent received in advance and tenant
security deposits
34,323
20,631
Total liabilities
229,854
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 September 30,
2020 and December 31, 2019
14,009
14,009
Common stock, par value $0.001 per share,
50,000,000 shares authorized: 22,174,428 and 12,637,043 shares
issued and outstanding at September 30, 2020 and December 31, 2019,
respectively
22
13
Additional paid-in capital
1,295,352
553,932
Dividends in excess of earnings
(39,387)
(19,944)
Total stockholders’ equity
1,269,996
548,010
Total liabilities and stockholders’
equity
$
1,499,850
$
745,857
INNOVATIVE INDUSTRIAL
PROPERTIES, INC.
CONDENSED CONSOLIDATED
STATEMENTS OF INCOME
For the Three and Nine Months
Ended September 30, 2020 and 2019
(Unaudited)
(In thousands, except share and
per share amounts)
For the Three Months
Ended
For the Nine Months
Ended
September 30,
September 30,
2020
2019
2020
2019
Revenues:
Rental (including tenant
reimbursements)
$
34,327
$
11,555
$
79,803
$
26,995
Total revenues
34,327
11,555
79,803
26,995
Expenses:
Property expenses
2,919
357
3,933
941
General and administrative expense
3,339
2,156
9,695
6,667
Depreciation expense
7,646
2,221
19,299
5,054
Total expenses
13,904
4,734
32,927
12,662
Income from operations
20,423
6,821
46,876
14,333
Interest and other income
653
1,537
3,086
3,702
Interest expense
(1,861)
(1,838)
(5,565)
(4,462)
Net income
19,215
6,520
44,397
13,573
Preferred stock dividend
(338)
(338)
(1,014)
(1,014)
Net income attributable to common
stockholders
$
18,877
$
6,182
$
43,383
$
12,559
Net income attributable to common
stockholders per share:
Basic
$
0.87
$
0.56
$
2.35
$
1.22
Diluted
$
0.86
$
0.55
$
2.33
$
1.20
Weighted average shares outstanding:
Basic
21,594,637
10,918,477
18,315,231
10,088,036
Diluted
21,708,725
11,057,697
18,429,228
10,225,574
INNOVATIVE INDUSTRIAL
PROPERTIES, INC.
CONDENSED CONSOLIDATED FFO AND
AFFO
For the Three and Nine Months
Ended September 30, 2020 and 2019
(Unaudited)
(In thousands, except share and
per share amounts)
For the Three Months
For the Nine Months
Ended
Ended
September 30,
September 30,
2020
2019
2020
2019
Net income attributable to common
stockholders
$
18,877
$
6,182
$
43,383
$
12,559
Real estate depreciation
7,646
2,221
19,299
5,054
FFO attributable to common
stockholders
26,523
8,403
62,682
17,613
Stock-based compensation
841
655
2,488
1,841
Non-cash interest expense
513
489
1,521
1,181
AFFO attributable to common
stockholders
$
27,877
$
9,547
$
66,691
$
20,635
FFO per share — basic
$
1.23
$
0.77
$
3.42
$
1.75
FFO per share — diluted
$
1.22
$
0.76
$
3.40
$
1.72
AFFO per share — basic
$
1.29
$
0.87
$
3.64
$
2.05
AFFO per share — diluted
$
1.28
$
0.86
$
3.62
$
2.02
Weighted average shares outstanding —
basic
21,594,637
10,918,477
18,315,231
10,088,036
Weighted average shares outstanding —
diluted
21,708,725
11,057,697
18,429,228
10,225,574
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/20201104005764/en/
Catherine Hastings Chief Financial Officer Innovative Industrial
Properties, Inc. (858) 997-3332
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