Generated Q1 2022 YOY Growth of 50% in Total
Revenues, 36% in Net Income and 40% 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 first quarter ended March 31, 2022.
First Quarter 2022 and Year-to-Date Highlights
Financial Results and Capital Activity
- Generated total revenues of approximately $64.5 million in the
quarter, representing a 50% increase from the prior year’s
quarter.
- Recorded net income attributable to common stockholders of
approximately $34.7 million for the quarter, or $1.32 per diluted
share, and AFFO of approximately $53.8 million, or $2.04 per
diluted share (including the dilutive impact of the assumed full
exchange of the 3.75% Exchangeable Senior Notes due 2024 (the
Exchangeable Senior Notes)).
- Paid a quarterly dividend of $1.75 per common share on April
14, 2022 to stockholders of record as of March 31, 2022,
representing a 17% increase over the fourth quarter 2021 dividend
and a 33% increase over the prior year’s first quarter, equal to an
annualized dividend of $7.00 per share.
- Exchanged approximately $26.9 million principal amount of the
Exchangeable Senior Notes, leaving approximately $6.5 million
principal amount of Exchangeable Senior Notes outstanding as of
today.
- Raised net proceeds of approximately $21.1 million pursuant to
sales under IIP’s “at-the-market” equity offering program (ATM
Program).
- Subsequent to March 31, 2022, completed an underwritten public
offering of common stock, including the exercise in full of the
underwriters’ option to purchase additional shares, resulting in
gross proceeds of approximately $345.0 million.
Investment and Leasing Activity
- From January 1, 2022 through today, made six acquisitions for
properties located in Arizona, California, Maryland, Massachusetts,
New Jersey and Pennsylvania, and executed five lease amendments to
provide additional improvements at properties located in
Massachusetts, Michigan and New York.
- These transactions represented an aggregate additional
investment by IIP of approximately $182.9 million (consisting of
purchase prices and commitments to fund future development and
improvements, but excluding transaction costs).
- In these transactions, IIP established new tenant relationships
with Maryland Cultivation and Processing, LLC (MCP) and Verano
Holdings Corp., while expanding existing relationships with 4Front
Ventures Corp., Ascend Wellness Holdings, Inc., Green Peak
Industries, Inc. (Skymint), Holistic Industries Inc., Kings Garden,
Inc., PharmaCann Inc. and Trulieve Cannabis Corp.
Balance Sheet Highlights (at March 31, 2022)
- 14% debt to total gross assets, with approximately $2.2 billion
in total gross assets, representing a total annual fixed cash
interest obligation of approximately $16.9 million, with no debt
maturing in 2022 or 2023.
Portfolio Update and Acquisition Activity
Acquisitions
IIP acquired the following properties from January 1, 2022
through May 4, 2022 (dollars in thousands, except for per square
foot (PSF) statistics):
State
Closing Date
Rentable Sq. Ft.(1)
Purchase Price(2)
Additional Investment
Total Investment
Total Investment
PSF(3)
Massachusetts
January 28, 2022
57,000
$
16,000
$
—
$
16,000
$
281
New Jersey
February 10, 2022
114,000
35,400
4,600
(4)
40,000
351
Pennsylvania
March 23, 2022
3,000
2,750
—
2,750
917
California
March 25, 2022
23,000
8,158
—
8,158
355
Maryland
April 13, 2022
84,000
25,000
—
25,000
298
Arizona
April 27, 2022
17,000
5,238
—
5,238
308
Totals
298,000
$
92,546
$
4,600
$
97,146
326
_________________
(1)
Includes expected rentable square feet at
completion of construction for certain properties.
(2)
Excludes transaction costs.
(3)
Calculated as IIP’s total investment
divided by the rentable square feet.
(4)
The tenant is expected to complete future
building improvements at the property, for which IIP agreed to
provide reimbursement of up to $4.6 million.
Additional Investments for Building Improvements at Existing
Properties
IIP committed additional capital at certain existing properties
for future building improvements (reflected in the “Additional
Investment” column below), each of which resulted in a
corresponding adjustment to the base rent at the applicable
property, from January 1, 2022 through May 4, 2022 (dollars in
thousands, except for PSF statistics):
State
Date of
Additional Capital
Commitment
Rentable Sq. Ft.(1)
Existing Investment(2)
Additional Investment
Total Investment
Total Investment
PSF(3)
Michigan
February 4, 2022
201,000
$
45,000
$
18,000
$
63,000
$
313
Michigan
March 1, 2022
63,000
25,000
3,500
28,500
452
Michigan
March 23, 2022
145,000
19,750
4,400
24,150
167
Massachusetts
March 23, 2022
199,000
49,000
14,900
63,900
321
New York
April 27, 2022
225,000
63,500
45,000
108,500
482
Totals
833,000
$
202,250
$
85,800
$
288,050
346
_________________
(1)
Includes expected rentable square feet at
completion of construction for certain properties.
(2)
Excludes transaction costs.
(3)
Calculated as IIP’s total investment
divided by the rentable square feet.
As of May 4, 2022, IIP owned 109 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 8.1 million rentable square
feet (including approximately 2.4 million rentable square feet
under development / redevelopment), with a weighted-average
remaining lease term of approximately 16.4 years. As of May 4,
2022, IIP had invested approximately $2.0 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 $237.2 million
to reimburse certain tenants and sellers for completion of
construction and improvements at IIP’s properties (assuming full
reimbursement for these improvements, IIP’s total investment in its
portfolio equates to approximately $269 per square foot). 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.
Capital Markets Activity
From January 1, 2022 through today, holders of an aggregate of
approximately $26.9 million of IIP’s Exchangeable Senior Notes
submitted their Exchangeable Senior Notes for exchange, and IIP
issued a total of 412,901 shares of common stock to these holders
in accordance with the terms of the indenture governing the
Exchangeable Senior Notes. As of May 4, 2022, approximately $6.5
million aggregate principal amount of the Exchangeable Senior Notes
remains outstanding.
From January 1, 2022 through May 4, 2022, IIP sold 117,023
shares of its common stock pursuant to the ATM Program, raising net
proceeds, after sales commissions, fees and expenses, of
approximately $21.1 million. As of May 4, 2022, the remaining
amount available to be sold under the ATM Program is approximately
$209.9 million.
On April 5, 2022, IIP completed an underwritten public offering
of 1,578,948 shares of common stock, and on April 6, 2022, IIP
completed the issuance of an additional 236,842 shares of common
stock pursuant to the exercise in full of the underwriters’ option
to purchase additional shares in the offering, resulting in
aggregate gross proceeds of approximately $345.0 million.
IIP expects to use the net proceeds from these offerings to
invest in specialized industrial real estate assets that are used
in the regulated cannabis industry and for general corporate
purposes. As of May 4, 2022, 27,970,618 shares of IIP common stock
are outstanding.
Financial Results
IIP generated total revenues of approximately $64.5 million for
the three months ended March 31, 2022, compared to approximately
$42.9 million for the same period in 2021, an increase of 50%. The
increase 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 March 31, 2022, IIP recorded net
income attributable to common stockholders and net income
attributable to common stockholders per diluted share of
approximately $34.7 million and $1.32, respectively; funds from
operations (FFO) (diluted) and FFO per diluted share of
approximately $48.9 million and $1.86, respectively; normalized
FFO, which adds back to FFO acquisition-related expense and the
loss on exchange of a portion of the Exchangeable Senior Notes
during the three months ended March 31, 2022 (Normalized FFO), and
Normalized FFO per diluted share of approximately $49.1 million and
$1.87, respectively; and AFFO and AFFO per diluted share of
approximately $53.8 million and $2.04, respectively. For the three
months ended March 31, 2022, 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.
IIP paid a quarterly dividend of $1.75 per common share on April
14, 2022 to stockholders of record as of March 31, 2022,
representing a 17% increase over the fourth quarter 2021 dividend
and a 33% increase over the prior year’s first quarter, equal to an
annualized dividend of $7.00 per share. IIP’s “stabilized” AFFO
payout ratio was 79% (calculated by dividing the quarterly dividend
by the sum of (1) IIP’s AFFO for the quarter plus (2) approximately
$4.4 million of additional lease payments assuming a full quarter
of contractual lease payments for leases of properties acquired
during the quarter and existing leases after the expiration of any
scheduled base rent phase-in periods).
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, May 5, 2022 to discuss IIP’s financial results
and operations for the first quarter ended March 31, 2022. 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, May 5,
2022 until 12:00 p.m. Pacific Time on Thursday, May 12, 2022, by
calling 1-877-344-7529 (domestic), 855-669-9658 (Canada) or
1-412-317-0088 (international) and using access code 3390252.
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)
March 31,
December 31,
Assets
2022
2021
Real estate, at cost:
Land
$
131,925
$
122,386
Buildings and improvements
1,070,431
979,417
Tenant improvements
694,251
620,301
Total real estate, at cost
1,896,607
1,722,104
Less accumulated depreciation
(95,608
)
(81,938
)
Net real estate held for investment
1,800,999
1,640,166
Construction loan receivable
15,525
12,916
Cash and cash equivalents
43,094
81,096
Restricted cash
1,930
5,323
Investments
209,935
324,889
Right of use office lease asset
2,011
1,068
In-place lease intangible assets, net
9,215
9,148
Other assets, net
25,399
9,996
Total assets
$
2,108,108
$
2,084,602
Liabilities and stockholders’
equity
Exchangeable senior notes, net
$
9,369
$
32,232
Notes due 2026, net
294,167
293,860
Tenant improvements and construction
funding payable
43,802
46,274
Accounts payable and accrued expenses
8,990
7,718
Dividends payable
46,168
38,847
Other liabilities
2,150
1,167
Rent received in advance and tenant
security deposits
56,801
52,805
Total liabilities
461,447
472,903
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, 2022
and December 31, 2021
14,009
14,009
Common stock, par value $0.001 per share,
50,000,000 shares authorized: 26,107,769 and 25,612,541 shares
issued and outstanding at March 31, 2022 and December 31, 2021,
respectively
26
26
Additional paid-in capital
1,718,234
1,672,882
Dividends in excess of earnings
(85,608
)
(75,218
)
Total stockholders’ equity
1,646,661
1,611,699
Total liabilities and stockholders’
equity
$
2,108,108
$
2,084,602
INNOVATIVE INDUSTRIAL
PROPERTIES, INC.
CONDENSED CONSOLIDATED
STATEMENTS OF INCOME
For the Three Months Ended
March 31, 2022 and 2021
(Unaudited)
(In thousands, except share and
per share amounts)
For the Three Months
Ended
March 31,
2022
2021
Revenues:
Rental (including tenant
reimbursements)
$
64,114
$
42,885
Other revenue
390
—
Total revenues
64,504
42,885
Expenses:
Property expenses
1,982
770
General and administrative expense
8,777
5,600
Depreciation and amortization expense
13,868
8,839
Total expenses
24,627
15,209
Income from operations
39,877
27,676
Interest and other income
57
124
Interest expense
(4,766
)
(1,873
)
Loss on exchange of Exchangeable Senior
Notes
(118
)
—
Net income
35,050
25,927
Preferred stock dividends
(338
)
(338
)
Net income attributable to common
stockholders
$
34,712
$
25,589
Net income attributable to common
stockholders per share:
Basic
$
1.35
$
1.07
Diluted
$
1.32
$
1.05
Weighted-average shares outstanding:
Basic
25,620,253
23,889,398
Diluted
26,340,224
26,152,551
INNOVATIVE INDUSTRIAL
PROPERTIES, INC.
CONDENSED CONSOLIDATED FFO,
NORMALIZED FFO AND AFFO
For the Three Months Ended
March 31, 2022 and 2021
(Unaudited)
(In thousands, except share and
per share amounts)
For the Three Months
Ended
March 31,
2022
2021
Net income attributable to common
stockholders
$
34,712
$
25,589
Real estate depreciation and
amortization
13,868
8,839
FFO attributable to common stockholders
(basic)
48,580
34,428
Cash and non-cash interest expense on
Exchangeable Senior Notes
334
1,873
FFO attributable to common stockholders
(diluted)
48,914
36,301
Acquisition-related expense
95
8
Loss on exchange of Exchangeable Senior
Notes
118
—
Normalized FFO attributable to common
stockholders (diluted)
$
49,127
$
36,309
Stock-based compensation
4,379
2,101
Non-cash interest expense
307
—
Above-market lease amortization
23
—
AFFO attributable to common stockholders
(diluted)
$
53,836
$
38,410
FFO per common share – diluted
$
1.86
$
1.39
Normalized FFO per common share –
diluted
$
1.87
$
1.39
AFFO per common share – diluted
$
2.04
$
1.47
Weighted average common shares outstanding
– basic
25,620,253
23,889,398
Restricted stock and RSUs
110,457
92,194
PSUs
102,333
—
Dilutive effect of Exchangeable Senior
Notes
507,181
2,170,959
Weighted average common shares outstanding
– diluted
26,340,224
26,152,551
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 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 IIP’s 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 periods presented, 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.
For the three ended March 31, 2022, 102,333 shares issuable upon
vesting performance share units (“PSUs”) granted to certain
employees were dilutive, as the performance thresholds for vesting
of these PSUs were met as measured as of March 31, 2022. For the
three months ended March 31, 2021, the performance thresholds for
vesting of these PSUs were not met as measured as of March 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/20220504006109/en/
Company Contact: Catherine Hastings Chief Financial Officer
Innovative Industrial Properties, Inc. (858) 997-3332
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