Portfolio Performance of 76 Properties
Comprising 7.5 Million RSF in 19 States Drives 57% Growth in Q3
Total Revenues Y-O-Y
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):
State
Closing Date
Rentable Sq. Ft.(1)
Purchase Price(2)
Additional Investment
Total Investment
Illinois
August 3, 2021
250,000
$
6,500
$
43,750
$
50,250
(3)
Maryland
August 13, 2021
112,000
16,615
12,900
29,515
(4)
Maryland
August 26, 2021
N/A
N/A
8,000
8,000
(5)
Michigan
September 2, 2021
N/A
N/A
15,000
15,000
(6)
Illinois
September 15, 2021
N/A
N/A
20,000
20,000
(7)
Missouri
September 17, 2021
83,000
1,530
26,720
28,250
(8)
New York
September 24, 2021
324,000
10,225
46,075
56,300
(9)
California
October 15, 2021
201,000
51,000
9,000
60,000
(10)
Massachusetts
November 1, 2021
N/A
N/A
8,700
8,700
(11)
Totals
970,000
$
85,870
$
190,145
$
276,015
___________
(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.
INNOVATIVE INDUSTRIAL
PROPERTIES, INC.
CONDENSED CONSOLIDATED BALANCE
SHEETS
(Unaudited)
(In thousands, except share and
per share amounts)
September 30,
December 31,
Assets
2021
2020
Real estate, at cost:
Land
$
98,930
$
75,660
Buildings and improvements
816,099
644,932
Tenant improvements
551,038
339,647
Construction in progress
4,581
—
Total real estate, at cost
1,470,648
1,060,239
Less accumulated depreciation
(69,766
)
(40,195
)
Net real estate held for investment
1,400,882
1,020,044
Construction loan
8,925
—
Cash and cash equivalents
127,298
126,006
Investments
554,420
619,275
Right of use office lease asset
811
980
Other assets, net
9,749
1,776
Total assets
$
2,102,085
$
1,768,081
Liabilities and stockholders’
equity
Exchangeable Senior Notes, net
$
138,287
$
136,693
Unsecured senior notes, net
293,593
—
Tenant improvements and construction
funding payable
61,674
36,500
Accounts payable and accrued expenses
8,449
4,641
Dividends payable
36,321
30,065
Other liabilities
1,408
1,057
Rent received in advance and tenant
security deposits
51,222
34,153
Total liabilities
590,954
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 September 30,
2021 and December 31, 2020
14,009
14,009
Common stock, par value $0.001 per share,
50,000,000 shares authorized: 23,928,304 and 23,936,928 shares
issued and outstanding at September 30, 2021 and December 31, 2020,
respectively
24
24
Additional paid-in capital
1,562,099
1,559,059
Dividends in excess of earnings
(65,001
)
(48,120
)
Total stockholders’ equity
1,511,131
1,524,972
Total liabilities and stockholders’
equity
$
2,102,085
$
1,768,081
INNOVATIVE INDUSTRIAL
PROPERTIES, INC.
CONDENSED CONSOLIDATED
STATEMENTS OF INCOME
For the Three and Nine Months
Ended September 30, 2021 and 2020
(Unaudited)
(In thousands, except share and
per share amounts)
For the Three Months
Ended
For the Nine Months
Ended
September 30,
September 30,
2021
2020
2021
2020
Revenues:
Rental (including tenant
reimbursements)
$
53,856
$
34,327
$
145,608
$
79,803
Total revenues
53,856
34,327
145,608
79,803
Expenses:
Property expenses
1,365
2,919
2,617
3,933
General and administrative expense
5,307
3,339
16,511
9,695
Depreciation expense
10,891
7,646
29,571
19,299
Total expenses
17,563
13,904
48,699
32,927
Income from operations
36,293
20,423
96,909
46,876
Interest and other income
110
653
325
3,086
Interest expense
(6,309
)
(1,861
)
(11,874
)
(5,565
)
Net income
30,094
19,215
85,360
44,397
Preferred stock dividends
(338
)
(338
)
(1,014
)
(1,014
)
Net income attributable to common
stockholders
$
29,756
$
18,877
$
84,346
$
43,383
Net income attributable to common
stockholders per share:
Basic
$
1.24
$
0.87
$
3.51
$
2.35
Diluted
$
1.20
$
0.86
$
3.41
$
2.33
Weighted-average shares outstanding:
Basic
23,890,537
21,594,637
23,889,903
18,315,231
Diluted
26,260,704
21,708,725
26,257,504
18,429,228
INNOVATIVE INDUSTRIAL
PROPERTIES, INC.
CONDENSED CONSOLIDATED FFO AND
AFFO
For the Three and Nine Months
Ended September 30, 2021 and 2020
(Unaudited)
(In thousands, except share and
per share amounts)
For the Three Months
Ended
For the Nine Months
Ended
September 30,
September 30,
2021
2020
2021
2020
Net income attributable to common
stockholders
$
29,756
$
18,877
$
84,346
$
43,383
Real estate depreciation
10,891
7,646
29,571
19,299
FFO attributable to common stockholders
(basic)
40,647
26,523
113,917
62,682
Cash and non-cash interest expense on
Exchangeable Senior Notes
1,885
—
5,636
—
FFO attributable to common stockholders
(diluted)
42,532
26,523
119,553
62,682
Stock-based compensation
2,191
841
6,424
2,488
Non-cash interest expense
299
513
417
1,521
AFFO attributable to common
stockholders
$
45,022
$
27,877
$
126,394
$
66,691
FFO per common share – basic
$
1.70
$
1.23
$
4.77
$
3.42
FFO per common share – diluted
$
1.62
$
1.22
$
4.55
$
3.40
AFFO per common share – basic
$
1.83
$
1.29
$
5.12
$
3.64
AFFO per common share – diluted
$
1.71
$
1.28
$
4.81
$
3.62
Weighted average common shares outstanding
– basic
23,890,537
21,594,637
23,889,903
18,315,231
Restricted stock, restricted stock units
and PSUs
176,675
114,088
174,109
113,997
Dilutive effect of Exchangeable Senior
Notes
2,193,492
—
2,193,492
—
Weighted average common shares outstanding
– diluted
26,260,704
21,708,725
26,257,504
18,429,228
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 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 the three and nine months ended
September 30, 2020.
For the three and nine months ended September 30, 2021, 78,582
shares issuable upon vesting of performance share units (“PSUs”)
granted to certain employees in January 2021 were dilutive, as the
performance thresholds for vesting of these PSUs were met as
measured as of September 30, 2021.
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/20211103006174/en/
Catherine Hastings Chief Financial Officer Innovative Industrial
Properties, Inc. (858) 997-3332
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