Portfolio Performance and FY 2021
Investments Totaling $714 Million Drive FY 2021 Growth of 75% in
Total Revenues, 75% in Net Income and 78% 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 regulated U.S. cannabis industry, announced today
results for the fourth quarter and year ended December 31,
2021.
Full Year 2021 Highlights
- Generated total revenues of approximately $204.6 million, net
income attributable to common stockholders of approximately $112.6
million and adjusted funds from operations (“AFFO”) of
approximately $175.0 million, representing increases of 75%, 75%
and 78% over 2020, respectively.
- Recorded $4.55 of net income attributable to common
stockholders per diluted share and $6.66 of AFFO per diluted share
(Note: AFFO per diluted share for 2021 includes the dilutive impact
of the assumed full exchange of IIP’s exchangeable senior notes
(the Exchangeable Senior Notes) for shares of common stock).
- Declared dividends to common stockholders totaling $5.72 per
share, a 28% increase over 2020.
- Obtained an investment grade rating from a national rating
agency and closed on a $300.0 million issuance of 5.50% unsecured
senior notes due 2026.
- Invested $714 million in new acquisitions, additional
investments at existing properties and a construction loan
(including commitments to fund future development/redevelopment,
but excluding transaction costs), including 37 new property
acquisitions, expanding IIP’s footprint to 103 properties totaling
7.7 million rentable square feet in 19 states at year-end.
Fourth Quarter 2021 and Year-to-Date 2022 Highlights
Financial Results and Capital Activity
- Generated total revenues of approximately $58.9 million in the
quarter, representing a 59% increase from the prior year’s
quarter.
- Recorded net income attributable to common stockholders of
approximately $28.3 million for the quarter, or $1.14 per diluted
share, and AFFO of approximately $48.6 million, or $1.85 per
diluted share (including the dilutive impact of the assumed full
exchange of the Exchangeable Senior Notes).
- Paid a quarterly dividend of $1.50 per common share on January
14, 2022 to stockholders of record as of December 31, 2021,
representing a 21% increase from the prior year’s fourth quarter
and equal to an annualized dividend of $6.00 per share.
- Executed exchange agreements with certain noteholders and
exchanged approximately $110.4 million principal amount of the
Exchangeable Senior Notes, leaving approximately $33.4 million
principal amount of Exchangeable Senior Notes outstanding as of
December 31, 2021.
Investment and Leasing Activity
- From October 1, 2021 through today, made 31 acquisitions
(including 30 new properties and the acquisition of certain
facilities at an existing property) for properties located in
California, Colorado, Massachusetts, Michigan, New Jersey, North
Dakota and Pennsylvania, and executed two lease amendments to
provide additional improvements at properties located in
Massachusetts and Michigan.
- These transactions represented an aggregate additional
investment by IIP of $250.1 million (consisting of purchase prices
and commitments to fund future development and improvements, but
excluding transaction costs).
- In these transactions, established new tenant relationships
with Gold Flora, LLC, Medicine Man Technologies, Inc. (Schwazze)
and Southwest Alternative Care, LLC (Kaya Cannabis), while
expanding existing relationships with 4Front Ventures Corp., Ascend
Wellness Holdings, Inc., Columbia Care Inc., Curaleaf Holdings,
Inc., Green Peak Industries Inc. (Skymint), LivWell Holdings, Inc.
and Temescal Wellness of Massachusetts, LLC.
Balance Sheet Highlights (at December 31, 2021)
- Approximately $406.0 million in cash and cash equivalents and
short-term investments.
- 15% debt to total gross assets, with approximately $2.2 billion
in total gross assets, representing a total annual fixed cash
interest obligation of approximately $17.8 million, with no debt
maturing in 2022 or 2023.
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 October 1, 2021 through today
(dollars in thousands):
State
Closing Date
Rentable Sq. Ft.(1)
Purchase Price(2)
Additional Investment
Total Investment
California
October 15, 2021
201,000
$
51,000
$
9,000
$
60,000
(3)
Massachusetts
November 1, 2021
N/A
N/A
8,700
8,700
(4)
Michigan
December 9, 2021
15,000
34,150
550
34,700
(5)
Multiple
December 14, 2021
179,000
71,585
1,072
72,657
(6)
Massachusetts
January 28, 2022
57,000
16,000
—
16,000
Michigan
February 4, 2022
N/A
N/A
18,000
18,000
(7)
New Jersey
February 10, 2022
114,000
35,400
4,600
40,000
(8)
Totals
566,000
$
208,135
$
41,922
$
250,057
___________
(1)
Includes expected rentable square
feet at completion of construction for certain properties.
(2)
Excludes transaction costs.
(3)
The tenant is expected to
complete improvements at the property, for which IIP agreed to
provide reimbursement of up to $9.0 million.
(4)
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.
(5)
IIP acquired the central utility
plant facilities from the tenant at the property, which increased
the total rentable square feet at the property to 205,000 square
feet, provided reimbursement to the tenant for certain other
improvements made at the property, and amended the lease to
increase the improvement allowance for future improvements by
$550,000, all of which resulted in a corresponding adjustment to
the base rent for the property.
(6)
IIP acquired a portfolio of 27
properties in Colorado, Pennsylvania and North Dakota. Tenants are
expected to complete improvements at three of the properties, for
which IIP is obligated to provide reimbursement of up to a total of
approximately $1.1 million.
(7)
The amount relates to a lease
amendment which increased the improvement allowance under a lease
at one of IIP’s Michigan properties by $18.0 million to a total of
$47.45 million, and also resulted in a corresponding adjustment to
the base rent for the lease at the property.
(8)
The tenant is expected to
complete improvements at the property, for which IIP agreed to
provide reimbursement of up to $4.6 million.
As of February 23, 2022, IIP owned 105 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 7.9 million
rentable square feet (including approximately 2.4 million rentable
square feet under development / redevelopment), with a
weighted-average remaining lease term of approximately 16.6 years.
As of February 23, 2022, IIP had invested approximately $1.8
billion across its portfolio (consisting of purchase price and
construction funding and improvements reimbursed to tenants, but
excluding transaction costs) and had committed an additional
approximately $268.6 million to reimburse certain tenants and
sellers for completion of construction and improvements at IIP’s
properties. These statistics do not include an $18.5 million loan
from IIP to a developer for construction of a regulated cannabis
cultivation and processing facility in California and up to $55.0
million that may be funded between June 15, 2022 and July 31, 2022
pursuant to IIP’s lease with a tenant at one of IIP’s Pennsylvania
properties, as the tenant at that property may not elect to have
IIP disburse those funds and pay IIP the corresponding base rent on
those funds.
Financing Activity
In December 2021, IIP Operating Partnership, LP, IIP’s operating
partnership subsidiary (the Operating Partnership), and IIP entered
into privately-negotiated exchange agreements with certain holders
of the Exchangeable Senior Notes, pursuant to which the Operating
Partnership delivered and paid an aggregate of (a) 1,684,237 shares
of IIP common stock, which were the number of aggregate shares
issuable upon exchange of the Exchangeable Senior Notes pursuant to
the indenture governing the Exchangeable Senior Notes; and (b)
approximately $2.3 million in cash, collectively, in exchange for
approximately $110.4 million principal amount of the Exchangeable
Senior Notes (the Exchange Transactions). Following the closing of
the Exchange Transactions, approximately $33.4 million in aggregate
principal amount of the Exchangeable Senior Notes remain
outstanding with terms unchanged. IIP executed the Exchange
Transactions in part to mitigate expected future stockholder
dilution, as the exchange rate for the Exchangeable Senior Notes
adjusts each quarter pursuant to the indenture as a result of IIP’s
issuances of common stock dividends, resulting in additional shares
being issuable to holders of the Exchangeable Senior Notes over
time upon an election by the noteholder to exchange the
Exchangeable Senior Notes for shares of IIP’s common stock.
During 2021 and year-to-date, IIP did not issue any shares of
common stock under its “at-the-market” equity offering program, and
as of February 23, 2022, had approximately $231.7 million available
for future issuance under the program.
Financial Results
IIP generated total revenues of approximately $58.9 million for
the three months ended December 31, 2021, compared to approximately
$37.1 million for the same period in 2020, an increase of 59%. IIP
generated total revenues of approximately $204.6 million for the
year ended December 31, 2021, compared to approximately $116.9
million for 2020, an increase of 75%. The increase in both periods
was driven primarily by the acquisition and leasing of new
properties, additional 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 December 31, 2021, IIP recorded net
income attributable to common stockholders and net income
attributable to common stockholders per diluted share of
approximately $28.3 million and $1.14, respectively; funds from
operations (“FFO”) (diluted) and FFO per diluted share of
approximately $42.4 million and $1.61, respectively; normalized
FFO, which adds back to FFO the loss on induced exchange of the
Exchangeable Senior Notes as a result of the Exchange Transactions
and acquisition-related expense during the three months ended
December 31, 2021 (“Normalized FFO”), and Normalized FFO per
diluted share of approximately $46.1 million and $1.75,
respectively; and AFFO and AFFO per diluted share of approximately
$48.6 million and $1.85, respectively. The loss on induced exchange
of the Exchangeable Senior Notes as a result of the Exchange
Transactions in the fourth quarter reduced net income attributable
to common stockholders and FFO (diluted) by approximately $3.7
million, or $0.14 per diluted share.
For the year ended December 31, 2021, IIP recorded net income
attributable to common stockholders and net income attributable to
common stockholders per diluted share of approximately $112.6
million and $4.55, respectively; FFO (diluted) and FFO per diluted
share of approximately $161.9 million and $6.17, respectively;
Normalized FFO and Normalized FFO per diluted share of
approximately $165.6 million and $6.31, respectively; and AFFO and
AFFO per diluted share of approximately $175.0 million and $6.66,
respectively.
For the three months and year ended December 31, 2021, FFO
(diluted), Normalized FFO, AFFO and FFO, Normalized 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. The Exchangeable Senior Notes were anti-dilutive for
purposes of calculating earnings per diluted share for the year
ended December 31, 2020, and as such, were treated as anti-dilutive
for purposes of calculating FFO, Normalized FFO, AFFO and FFO,
Normalized FFO and AFFO per diluted share for the year ended
December 31, 2020.
FFO, Normalized 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, Normalized FFO and AFFO
and definitions of terms are included at the end of this
release.
Teleconference and Webcast
Innovative Industrial Properties, Inc. will conduct a conference
call and webcast at 10:00 a.m. Pacific Time (1:00 p.m. Eastern
Time) on Thursday, February 24, 2022 to discuss IIP’s financial
results and operations for the fourth quarter and year ended
December 31, 2021. The call will be open to all interested
investors through a live audio webcast at the Investor Relations
section of IIP’s website at www.innovativeindustrialproperties.com,
or live by calling 1-877-328-5514 (domestic) or 1-412-902-6764
(international) and asking to be joined to the Innovative
Industrial Properties, Inc. conference call. The complete webcast
will be archived for 90 days on IIP’s website. A telephone playback
of the conference call will also be available from 12:00 p.m.
Pacific Time on Thursday, February 24, 2022 until 12:00 p.m.
Pacific Time on Thursday, March 3, 2022, by calling 1-877-344-7529
(domestic), 855-669-9658 (Canada) or 1-412-317-0088 (international)
and using access code 9452042.
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.
CONSOLIDATED BALANCE
SHEETS
(Unaudited)
(In thousands, except share and
per share amounts)
December 31,
December 31,
Assets
2021
2020
Real estate, at cost:
Land
$
122,386
$
75,660
Buildings and improvements
979,417
644,932
Tenant improvements
620,301
339,647
Total real estate, at cost
1,722,104
1,060,239
Less accumulated depreciation
(81,938
)
(40,195
)
Net real estate held for investment
1,640,166
1,020,044
Construction loan receivable
12,916
—
Cash and cash equivalents
81,096
126,006
Restricted cash
5,323
—
Investments
324,889
619,275
Right of use office lease asset
1,068
980
In-place lease intangible assets, net
9,148
—
Other assets, net
9,996
1,776
Total assets
$
2,084,602
$
1,768,081
Liabilities and stockholders’
equity
Exchangeable senior notes, net
$
32,232
$
136,693
Notes due 2026, net
293,860
—
Tenant improvements and construction
funding payable
46,274
36,500
Accounts payable and accrued expenses
7,718
4,641
Dividends payable
38,847
30,065
Other liabilities
1,167
1,057
Rent received in advance and tenant
security deposits
52,805
34,153
Total liabilities
472,903
243,109
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 December 31,
2021 and December 31, 2020
14,009
14,009
Common stock, par value $0.001 per share,
50,000,000 shares authorized: 25,612,541 and 23,936,928 shares
issued and outstanding at December 31, 2021 and December 31, 2020,
respectively
26
24
Additional paid-in capital
1,672,882
1,559,059
Dividends in excess of earnings
(75,218
)
(48,120
)
Total stockholders’ equity
1,611,699
1,524,972
Total liabilities and stockholders’
equity
$
2,084,602
$
1,768,081
INNOVATIVE INDUSTRIAL
PROPERTIES, INC.
CONSOLIDATED STATEMENTS OF
INCOME
For the Three Months and Years
Ended December 31, 2021 and 2020
(Unaudited)
(In thousands, except share and
per share amounts)
For the Three Months
Ended
For the Years Ended
December 31,
December 31,
2021
2020
2021
2020
Revenues:
Rental (including tenant
reimbursements)
$
58,943
$
37,093
$
204,551
$
116,896
Total revenues
58,943
37,093
204,551
116,896
Expenses:
Property expenses
1,826
1,019
4,443
4,952
General and administrative expense
6,450
4,487
22,961
14,182
Depreciation and amortization expense
12,205
8,726
41,776
28,025
Total expenses
20,481
14,232
69,180
47,159
Income from operations
38,462
22,861
135,371
69,737
Interest and other income
72
338
397
3,424
Interest expense
(6,212
)
(1,866
)
(18,086
)
(7,431
)
Loss on induced exchange of exchangeable
senior notes
(3,692
)
—
(3,692
)
—
Net income
28,630
21,333
113,990
65,730
Preferred stock dividends
(338
)
(338
)
(1,352
)
(1,352
)
Net income attributable to common
stockholders
$
28,292
$
20,995
$
112,638
$
64,378
Net income attributable to common
stockholders per share:
Basic
$
1.18
$
0.91
$
4.69
$
3.28
Diluted
$
1.14
$
0.91
$
4.55
$
3.27
Weighted-average shares outstanding:
Basic
23,941,930
22,804,185
23,903,017
19,443,602
Diluted
26,263,585
25,077,099
26,261,155
19,557,619
INNOVATIVE INDUSTRIAL
PROPERTIES, INC.
CONSOLIDATED FFO, NORMALIZED
FFO AND AFFO
For the Three Months and Years
Ended December 31, 2021 and 2020
(Unaudited)
(In thousands, except share and
per share amounts)
For the Three Months
Ended
For the Years Ended
December 31,
December 31,
2021
2020
2021
2020
Net income attributable to common
stockholders
$
28,292
$
20,995
$
112,638
$
64,378
Real estate depreciation and
amortization
12,205
8,726
41,776
28,025
FFO attributable to common stockholders
(basic)
40,497
29,721
154,414
92,403
Cash and non-cash interest expense on
Exchangeable Senior Notes
1,880
1,866
7,517
—
FFO attributable to common stockholders
(diluted)
42,377
31,587
161,931
92,403
Acquisition-related expense
7
8
26
94
Financing expense
—
75
—
211
Loss on induced exchange of Exchangeable
Senior Notes
3,692
—
3,692
—
Normalized FFO attributable to common
stockholders (diluted)
46,076
31,670
165,649
92,708
Stock-based compensation
2,192
842
8,616
3,330
Non-cash interest expense
298
—
715
2,040
Above-market lease amortization
4
—
4
—
AFFO attributable to common stockholders
(diluted)
$
48,570
$
32,512
$
174,984
$
98,078
FFO per common share – diluted
$
1.61
$
1.26
$
6.17
$
4.72
Normalized FFO per common share –
diluted
$
1.75
$
1.26
$
6.31
$
4.74
AFFO per common share – diluted
$
1.85
$
1.30
$
6.66
$
5.01
Weighted average common shares outstanding
– basic
23,941,930
22,804,185
23,903,017
19,443,602
Restricted stock and restricted stock
units
98,093
114,077
96,174
114,017
Performance share units
81,414
—
81,414
—
Dilutive effect of Exchangeable Senior
Notes
2,142,148
2,158,837
2,180,550
—
Weighted average common shares outstanding
– diluted
26,263,585
25,077,099
26,261,155
19,557,619
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 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 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.
IIP computes normalized funds from operations (“Normalized FFO”)
by adjusting FFO, as defined by NAREIT, to exclude certain GAAP
income and expense amounts that management believes are infrequent
and unusual in nature and/or not related to IIP’s core real estate
operations. Exclusion of these items from similar FFO-type metrics
is common within the equity REIT industry, and management believes
that presentation of Normalized FFO and Normalized FFO per share
provides investors with a metric to assist in their evaluation of
our operating performance across multiple periods and in comparison
to the operating performance of other companies, because it removes
the effect of unusual items that are not expected to impact IIP’s
operating performance on an ongoing basis. Normalized FFO is used
by management in evaluating the performance of its core business
operations. Items included in calculating FFO that may be excluded
in calculating Normalized FFO include certain transaction-related
gains, losses, income or expense or other non-core amounts as they
occur.
Management believes that AFFO and AFFO per share are also
appropriate supplemental measures of a REIT’s operating
performance. IIP calculates AFFO by adjusting Normalized FFO for
certain non-cash items.
For the three months and year ended December 31, 2021 and the
three months ended December 31, 2020, FFO (diluted), Normalized
FFO, AFFO and FFO, Normalized 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. The
Exchangeable Senior Notes were anti-dilutive for purposes of
calculating earnings per diluted share for the year ended December
31, 2020, and as such, were treated as anti-dilutive for purposes
of calculating FFO, Normalized FFO, AFFO and FFO, Normalized FFO
and AFFO per diluted share for the year ended December 31,
2020.
For the three months and year ended December 31, 2021, 81,414
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 December 31, 2021.
IIP’s computation of FFO, Normalized FFO and AFFO may differ
from the methodology for calculating FFO, Normalized FFO and AFFO
utilized by other equity REITs and, accordingly, may not be
comparable to such REITs. Further, FFO, Normalized FFO and AFFO do
not represent cash flow available for management’s discretionary
use. FFO, Normalized 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, Normalized 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/20220223006176/en/
Company Contact: Catherine Hastings Chief Financial Officer
Innovative Industrial Properties, Inc. (858) 997-3332
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