Acquisitions and Portfolio Performance Drive
Q1 Y-O-Y Growth of 103% in Total Revenues, 122% in Net Income and
116% in AFFO
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 first quarter ended March 31, 2021.
First Quarter 2021 and Year-to-Date Highlights
Financial Results
- Generated total revenues of approximately $42.9 million in the
quarter, representing a 103% increase from the prior year’s first
quarter.
- Recorded net income attributable to common stockholders of
approximately $25.6 million for the quarter, or $1.05 per diluted
share, and adjusted funds from operations (“AFFO”) of approximately
$38.4 million, or $1.47 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
for shares of common stock).
- Paid a quarterly dividend of $1.32 per share on April 15, 2021
to common stockholders of record as of March 31, 2021, representing
a 32% increase over the first quarter 2020’s dividend and an
approximately 6% increase over the fourth quarter 2020
dividend.
Investment and Leasing Activity
- From January 1, 2021 through today, made four acquisitions
(including three new properties and additional land expansion at an
existing property) for properties located in California, Florida,
Michigan and Texas; and executed three lease amendments to provide
additional tenant improvements at properties located in Michigan,
New York and Pennsylvania.
- In January 2021, executed a new long-term lease with Holistic
Industries Inc. (Holistic) for IIP’s Los Angeles, California
property, bringing IIP’s property portfolio to 100% leased.
- In these transactions, established a new tenant relationship
with Harvest Health & Recreation Inc., while expanding existing
relationships with Green Peak Industries, LLC (Skymint), Holistic,
Jushi Holdings Inc., Kings Garden Inc., LivWell Holdings, Inc.,
Parallel and PharmaCann Inc.
Balance Sheet Highlights (at March 31, 2021)
- Approximately $122.1 million in cash and cash equivalents and
approximately $539.3 million in short-term investments, totaling
approximately $661.4 million.
- No debt, other than approximately $143.75 million of 3.75%
exchangeable senior notes maturing in 2024 (the Exchangeable Senior
Notes), representing a fixed cash interest obligation of
approximately $5.4 million annually, or approximately $1.3 million
quarterly.
- 7.8% debt to total gross assets, with over $1.8 billion in
total gross assets.
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, 2021 through May 5,
2021 (dollars in thousands):
State
Closing Date
Rentable Sq. Ft.(1)
Purchase Price(2)
Additional Investment
Total Investment
California
January 7, 2021
N/A
$
N/A
$
11,000
$
11,000
(3)
Florida
January 22, 2021
295,000
23,800
10,750
34,550
(4)
California
February 5, 2021
180,000
1,350
51,375
52,725
(5)
Michigan
February 16, 2021
N/A
N/A
6,895
6,895
(6)
New York
February 26, 2021
N/A
N/A
2,500
2,500
(7)
Texas
March 10, 2021
63,000
3,400
24,000
27,400
(8)
Pennsylvania
April 1, 2021
40,000
N/A
30,000
30,000
(9)
Michigan
April 16, 2021
175,000
15,550
14,450
30,000
(10)
Totals
753,000
$
44,100
$
150,970
$
195,070
_______________
(1)
Includes expected rentable square feet at
completion of construction for certain properties.
(2)
Excludes transaction costs.
(3)
The amount relates to a new lease executed
at IIP’s Los Angeles, California property, which provides for a
tenant improvement allowance of up to $11.0 million.
(4)
The tenant is expected to complete tenant
improvements at the property, for which IIP agreed to provide
reimbursement of up to approximately $10.8 million.
(5)
The amounts relate to the acquisition of
additional land adjacent to an existing property and a lease
amendment which provided a tenant improvement allowance and
resulted in a corresponding adjustment to the base rent for the
lease at the property. The tenant is expected to complete
construction of two new buildings at the property comprising
approximately 180,000 square feet in the aggregate, for which IIP
agreed to provide reimbursement of up to approximately $51.4
million.
(6)
The amount relates to a lease amendment
which increased the tenant improvement allowance under a lease at
one of IIP’s Michigan properties by approximately $6.9 million to a
total of approximately $29.9 million, and also resulted in a
corresponding adjustment to the base rent for the lease at the
property.
(7)
The amount relates to amendments to IIP’s
lease and development agreement which increased construction
funding at one of IIP’s New York properties by $2.5 million to a
total of $33.5 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 three
buildings at the property, for which IIP agreed to provide
reimbursement of up to $24.0 million.
(9)
The amount relates to a lease amendment
which increased the tenant improvement allowance under a lease at
one of IIP’s Pennsylvania properties by $30.0 million to a total of
approximately $40.0 million, and also resulted in a corresponding
adjustment to the base rent for the lease at the property. With
this additional tenant improvement allowance, the tenant is
expected to expand the facility by approximately 40,000 square feet
and complete the buildout of the existing 89,000 square foot
building.
(10)
The tenant is expected to complete tenant
improvements at the property, for which IIP agreed to provide
reimbursement of up to approximately $14.5 million.
As of May 5, 2021, IIP owned 69 properties located in Arizona,
California, Colorado, Florida, Illinois, Maryland, Massachusetts,
Michigan, Minnesota, Nevada, New Jersey, New York, North Dakota,
Ohio, Pennsylvania, Texas, Virginia and Washington, representing a
total of approximately 6.2 million rentable square feet (including
approximately 2.3 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 May 5, 2021, IIP had invested approximately $1.2 billion
across its portfolio and had committed an additional approximately
$339.5 million to reimburse certain tenants and sellers for
completion of construction and tenant improvements at IIP’s
properties.
Capital Markets Activity
IIP did not conduct any capital raising activities during the
year-to-date through May 5, 2021 and had approximately $231.7
million in shares of common stock available for issuance under the
ATM Program.
Financial Results
IIP generated total revenues of approximately $42.9 million for
the three months ended March 31, 2021, compared to approximately
$21.1 million for the same period in 2020, an increase of 103%. 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.
For the three months ended March 31, 2021, IIP recorded net
income attributable to common stockholders and net income
attributable to common stockholders per diluted share of
approximately $25.6 million and $1.05, respectively; funds from
operations (“FFO”) (diluted) and FFO per diluted share of
approximately $36.3 million and $1.39, respectively; and AFFO and
AFFO per diluted share of approximately $38.4 million and $1.47,
respectively. In the first quarter 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, resulting in the “add-back” to FFO (diluted) from
net income of approximately $1.9 million in cash and non-cash
interest expense, and the addition of approximately 2.2 million
shares to IIP’s total diluted share count for the quarter. The
Exchangeable Senior Notes were anti-dilutive for purposes of
calculating earnings per diluted share for the first quarter 2020,
and as such, treated as anti-dilutive for purposes of calculating
FFO, AFFO and FFO and AFFO per diluted share for that period.
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 first quarter 2021 earnings results,
but does expect to conduct a conference call to discuss its second
quarter 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 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)
March 31,
December 31,
Assets
2021
2020
Real estate, at cost:
Land
$
79,991
$
75,660
Buildings and improvements
691,529
644,932
Tenant improvements
408,610
339,647
Construction in progress
2,433
—
Total real estate, at cost
1,182,563
1,060,239
Less accumulated depreciation
(49,033
)
(40,195
)
Net real estate held for investment
1,133,530
1,020,044
Cash and cash equivalents
122,133
126,006
Investments
539,323
619,275
Right of use office lease asset
922
980
Other assets, net
2,022
1,776
Total assets
$
1,797,930
$
1,768,081
Liabilities and stockholders’
equity
Exchangeable senior notes, net
$
137,218
$
136,693
Tenant improvements and construction
funding payable
66,074
36,500
Accounts payable and accrued expenses
2,358
4,641
Dividends payable
31,998
30,065
Office lease liability
998
1,057
Rent received in advance and tenant
security deposits
41,666
34,153
Total liabilities
280,312
243,109
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, 2021
and December 31, 2020
14,009
14,009
Common stock, par value $0.001 per share,
50,000,000 shares authorized: 23,926,317 and 23,936,928 shares
issued and outstanding at March 31, 2021 and December 31, 2020,
respectively
24
24
Additional paid-in capital
1,557,776
1,559,059
Dividends in excess of earnings
(54,191
)
(48,120
)
Total stockholders’ equity
1,517,618
1,524,972
Total liabilities and stockholders’
equity
$
1,797,930
$
1,768,081
INNOVATIVE INDUSTRIAL
PROPERTIES, INC.
CONDENSED CONSOLIDATED
STATEMENTS OF INCOME
For the Three Months Ended
March 31, 2021 and 2020
(Unaudited)
(In thousands, except share and
per share amounts)
For the Three Months
Ended
March 31,
2021
2020
Revenues:
Rental (including tenant
reimbursements)
$
42,885
$
21,130
Total revenues
42,885
21,130
Expenses:
Property expenses
770
600
General and administrative expense
5,600
3,346
Depreciation expense
8,839
4,907
Total expenses
15,209
8,853
Income from operations
27,676
12,277
Interest and other income
124
1,444
Interest expense
(1,873
)
(1,849
)
Net income
25,927
11,872
Preferred stock dividends
(338
)
(338
)
Net income attributable to common
stockholders
$
25,589
$
11,534
Net income attributable to common
stockholders per share:
Basic
$
1.07
$
0.72
Diluted
$
1.05
$
0.72
Weighted-average shares outstanding:
Basic
23,889,398
15,784,296
Diluted
26,152,551
15,898,091
INNOVATIVE INDUSTRIAL
PROPERTIES, INC.
CONDENSED CONSOLIDATED FFO AND
AFFO
For the Three Months Ended
March 31, 2021 and 2020
(Unaudited)
(In thousands, except share and
per share amounts)
For the Three Months
Ended
March 31,
2021
2020
Net income attributable to common
stockholders
$
25,589
$
11,534
Real estate depreciation
8,839
4,907
FFO attributable to common stockholders
(basic)
34,428
16,441
Cash and non-cash interest expense
1,873
—
FFO attributable to common stockholders
(diluted)
36,301
16,441
Stock-based compensation
2,101
825
Non-cash interest expense
—
501
AFFO attributable to common
stockholders
$
38,402
$
17,767
FFO per common share – basic
$
1.44
$
1.04
FFO per common share – diluted
$
1.39
$
1.03
AFFO per common share – basic
$
1.55
$
1.13
AFFO per common share – diluted
$
1.47
$
1.12
Weighted average common shares outstanding
– basic
23,889,398
15,784,296
Restricted stock and restricted stock
units
92,194
113,795
Dilutive effect of Exchangeable Senior
Notes
2,170,959
—
Weighted average common shares outstanding
– diluted
26,152,551
15,898,091
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, 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 generally.
For the three months ended March 31, 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 totaling approximately $1.9 million was
added back to FFO (diluted), and the total diluted weighted-average
common shares outstanding increased by 2,170,959 shares for the
period, which were the potentially issuable shares as if the
Exchangeable Senior Notes were exchanged at the beginning of the
period. These adjustments applied only for the three months ended
March 31, 2021. The Exchangeable Senior Notes were anti-dilutive
for purposes of calculating earnings per diluted share for the
first quarter 2020, and as such, were treated as anti-dilutive for
purposes of calculating FFO, AFFO and FFO and AFFO per diluted
share for that period.
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/20210505006042/en/
Catherine Hastings Chief Financial Officer Innovative Industrial
Properties, Inc. (858) 997-3332
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