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 September 30, 2021.
Third Quarter 2021 and Subsequent Events Highlights
Financial Results
- Generated total revenues of approximately $53.9 million in the quarter, representing a 57% increase from the prior year’s third quarter.
- Recorded net income attributable to common stockholders of approximately $29.8 million for the quarter, or $1.20 per diluted share, and adjusted funds from operations (AFFO) of approximately $45.0 million, or $1.71 per diluted share (Note: AFFO per diluted share for the period includes the dilutive impact of the assumed full exchange of IIP’s $143.75 million of exchangeable senior notes (the Exchangeable Senior Notes) for shares of common stock).
- Paid a quarterly dividend of $1.50 per share on October 15, 2021 to common stockholders of record as of September 30, 2021, representing an approximately 28% increase over the third quarter 2020’s dividend. As previously announced, going forward as a general matter, IIP’s board of directors expects to evaluate adjustments to the level of IIP’s quarterly common stock dividend every six months, with any adjustments expected to be declared in the first quarter and third quarter of each year.
Investment Activity
- From July 1, 2021 through today, made five acquisitions (including four new properties and additional land expansion at an existing property) for properties located in California, Illinois, Maryland, Missouri and New York, and executed four lease amendments to provide additional improvement allowances at properties located in Illinois, Maryland, Massachusetts and Michigan.
- In these transactions, established new tenant relationships with Calyx Peak, Inc. and Gold Flora, LLC, while expanding existing relationships with 4Front Ventures Corp., Ascend Wellness Holdings, Inc., Goodness Growth Holdings, Inc. (f/k/a Vireo Health International, Inc.), Green Peak Industries LLC (Skymint), Harvest Health & Recreation Inc. (a subsidiary of Trulieve Inc.), Holistic Industries, Inc. (Holistic) and Temescal Wellness of Massachusetts, LLC.
Balance Sheet Highlights (at September 30, 2021)
- Approximately $127.3 million in cash and cash equivalents and approximately $554.4 million in short-term investments, totaling approximately $681.7 million.
- 20% debt to total gross assets, with approximately $2.2 billion in total gross assets and no secured debt.
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, 2021 through today (dollars in thousands):
(1) | Includes expected rentable square feet at completion of construction for certain properties. | |
| (2) | Excludes transaction costs. | |
| (3) | The tenant is expected to construct a 250,000 square foot industrial facility, for which IIP agreed to provide reimbursement of up to approximately $43.8 million. | |
| (4) | The tenant is expected to complete improvements at the property, for which IIP agreed to provide reimbursement of up to $12.9 million. | |
| (5) | The amount relates to a lease amendment which provided an additional improvement allowance under a lease at one of IIP’s Maryland properties of $8.0 million, and also resulted in a corresponding adjustment to the base rent for the lease at the property. | |
| (6) | The amount relates to a lease amendment which increased the improvement allowance under a lease at one of IIP’s Michigan properties by $15.0 million to a total of approximately $29.5 million, and also resulted in a corresponding adjustment to the base rent for the lease at the property. | |
| (7) | The amount relates to a lease amendment which increased the improvement allowance under a lease at one of IIP’s Illinois properties by $20.0 million to a total of $52.0 million, and also resulted in a corresponding adjustment to the base rent for the lease at the property. | |
| (8) | The tenant is expected to construct an 83,000 square foot industrial facility, for which IIP agreed to provide reimbursement of up to approximately $26.7 million. | |
| (9) | The amounts relate to the acquisition of additional land adjacent to an existing property and a lease amendment which provided an allowance to fund construction of a new building and resulted in a corresponding adjustment to the base rent for the lease at the property. The tenant is expected to construct approximately 324,000 square feet of industrial space, for which IIP agreed to provide reimbursement of up to approximately $46.1 million. | |
| (10) | The tenant is expected to complete improvements at the property, for which IIP agreed to provide reimbursement of up to $9.0 million. | |
| (11) | The amount relates to a lease amendment which increased the improvement allowance under a lease at one of IIP’s Massachusetts properties by $8.7 million to a total of $23.7 million, and also resulted in a corresponding adjustment to the base rent for the lease at the property. |
As of November 3, 2021, IIP owned 76 properties located in Arizona, California, Colorado, Florida, Illinois, Maryland, Massachusetts, Michigan, Minnesota, Missouri, Nevada, New Jersey, New York, North Dakota, Ohio, Pennsylvania, Texas, Virginia and Washington, representing a total of approximately 7.5 million rentable square feet (including approximately 2.7 million rentable square feet under development/redevelopment), which were 100% leased with a weighted-average remaining lease term of approximately 16.7 years. As of November 3, 2021, IIP had invested an aggregate of approximately $1.5 billion (consisting of purchase price and construction funding and improvements reimbursed to tenants, but excluding transaction costs) and had committed an additional approximately $391.7 million to reimburse certain tenants and sellers for completion of construction and improvements at IIP’s properties, which does not include an $18.5 million loan from IIP to a developer for construction of a regulated cannabis cultivation and processing facility in California.
Financing Activity
IIP did not conduct any capital raising activities during the period from July 1, 2021 through today and had approximately $231.7 million in shares of common stock available for issuance under its “at-the-market” equity offering program.
Financial Results
IIP generated total revenues of approximately $53.9 million for the three months ended September 30, 2021, compared to approximately $34.3 million for the same period in 2020, an increase of 57%. The increase was driven primarily by the acquisition and leasing of new properties, in addition to contractual rental escalations and amendments at certain properties to provide additional improvement allowances that resulted in adjustments to rent. Rental revenues for the three months ended September 30, 2021 and 2020 included approximately $1.4 million and $2.8 million, respectively, of tenant reimbursements for property insurance premiums and property taxes.
IIP generated total revenues of approximately $145.6 million for the nine months ended September 30, 2021, compared to approximately $79.8 million for the same period in 2020, an increase of 82%. The increase was driven primarily by the acquisition and leasing of new properties, in addition to contractual rental escalations and amendments at certain properties to provide additional improvement allowances and construction funding that resulted in adjustments to rent. Rental revenues for the nine months ended September 30, 2021 and 2020 included approximately $2.6 million and $3.7 million, respectively, of tenant reimbursements for property insurance premiums and property taxes.
Total revenues for the nine months ended September 30, 2021 included $625,000 in stipulated rent paid by the receivership in place previously at IIP’s Los Angeles, California property related to rent owed to IIP in 2020. The receivership concluded and IIP re-leased the property in January 2021 to a subsidiary of Holistic.
Total revenues for the nine months ended September 30, 2020 included the drawdown of part of the security deposits totaling approximately $940,000 at certain properties as part of temporary rent deferral programs offered to three tenants in April 2020 at the onset of the COVID-19 pandemic, that were applied to the payment of base rent, property management fees and associated lease penalties. In addition to the drawdown of part of the security deposits, approximately $1.5 million in base rent and property management fees due from these three tenants for May and June 2020 were deferred. As of September 30, 2021, approximately $2.1 million of the deferred rents, property management fees and security deposits have been repaid, with approximately $411,000 remaining to be paid. Total revenues for the nine months ended September 30, 2020 also included approximately $422,000 of rent and associated lease penalties, and tenant reimbursements received through the drawdown of the security deposit at IIP’s Los Angeles, California property, where the prior tenant was in receivership and defaulted on its lease obligations.
For the three months ended September 30, 2021, IIP recorded net income attributable to common stockholders and net income attributable to common stockholders per diluted share of approximately $29.8 million and $1.20, respectively; funds from operations (“FFO”) (diluted) and FFO per diluted share of approximately $42.5 million and $1.62, respectively; and AFFO and AFFO per diluted share of approximately $45.0 million and $1.71, respectively.
For the nine months ended September 30, 2021, IIP recorded net income attributable to common stockholders and net income attributable to common stockholders per diluted share of approximately $84.3 million and $3.41, respectively; FFO (diluted) and FFO per diluted share of approximately $119.6 million and $4.55, respectively; and AFFO and AFFO per diluted share of approximately $126.4 million and $4.81, respectively.
For the three and nine months ended September 30, 2021, FFO (diluted), AFFO and FFO and AFFO per diluted share include the dilutive impact of the assumed full exchange of the Exchangeable Senior Notes for shares of common stock. As a result, for purposes of calculating FFO (diluted), cash and non-cash interest expense of the Exchangeable Senior Notes was added back to FFO, and the total diluted weighted-average common shares outstanding increased by 2,193,492 shares for both periods, which were the potentially issuable shares as if the Exchangeable Senior Notes were exchanged at the beginning of the respective periods. These adjustments applied only for the three and nine months ended September 30, 2021. The Exchangeable Senior Notes were anti-dilutive for purposes of calculating earnings per diluted share for the three and nine months ended September 30, 2020, and as such, were treated as anti-dilutive for purposes of calculating FFO, AFFO and FFO and AFFO per diluted share for those periods.
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 attributable 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 2021 earnings results, but does expect to conduct a conference call to discuss its fourth quarter and full-year 2021 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 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.
Financials here.
