IIP Closes on $239.4 Million of New Investments
in Q2
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 second quarter ended June 30, 2022.
Second Quarter 2022 Highlights
Financial Results and Capital Activity
- Generated total revenues of approximately $70.5 million in the
quarter, representing a 44% increase from the prior year’s
quarter.
- Recorded net income attributable to common stockholders of
approximately $39.9 million for the quarter, or $1.42 per diluted
share, and AFFO of approximately $60.1 million, or $2.14 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 July 15,
2022 to stockholders of record as of June 30, 2022, representing a
25% increase over the prior year’s second quarter 2021 dividend,
equal to an annualized dividend of $7.00 per share.
- Completed an underwritten public offering of common stock,
including the exercise in full of the underwriters’ option to
purchase additional shares, resulting in net proceeds of
approximately $330.9 million.
- Exchanged approximately $3.1 million principal amount of the
Exchangeable Senior Notes, leaving approximately $6.5 million
principal amount of Exchangeable Senior Notes outstanding as of
today.
Investment Activity
- Made four acquisitions for properties located in Arizona,
Maryland, Massachusetts and Texas, and executed five lease
amendments to provide reimbursement for additional improvements at
properties located in Illinois, Michigan, New York and
Pennsylvania.
- These transactions represented an aggregate additional
investment by IIP of approximately $239.4 million (consisting of
purchase prices and commitments to fund draws related to future
development and improvements, but excluding transaction
costs).
- In these transactions, IIP established new tenant relationships
with Maryland Cultivation and Processing, LLC, Texas Original
Holdings, LLC and TILT Holdings Inc., while expanding existing
relationships with Curaleaf Holdings, Inc., Green Thumb Industries
Inc., PharmaCann Inc. and Sozo Health Inc.
Balance Sheet Highlights (at June 30, 2022)
- 12% debt to total gross assets, with approximately $2.5 billion
in total gross assets, representing a total annual fixed cash
interest obligation of approximately $16.7 million, with no debt
maturing until 2026, other than $6.5 million principal amount of
Exchangeable Senior Notes in 2024.
Rent Collection
- Rent collection (calculated as base rent and property
management fees collected over contractually due amounts) was 99%
for the six months ended June 30, 2022.
Portfolio Update and Acquisition Activity
Acquisitions
IIP acquired the following properties from April 1, 2022 through
August 3, 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)
Maryland
April 13, 2022
84,000
$
25,000
$
—
$
25,000
$
298
Arizona
April 27, 2022
17,000
5,238
—
5,238
308
Massachusetts
May 16, 2022
104,000
40,000
—
40,000
385
Texas
June 14, 2022
85,000
12,040
9,960
(4)
22,000
259
Totals
290,000
$
82,278
$
9,960
$
92,238
318
(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 fund
draws of up to approximately $10.0 million.
Additional Investments for Building Improvements at Existing
Properties
IIP committed additional capital at certain existing properties
to fund draws related to 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 April 1, 2022 through August 3, 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)
New York
April 27, 2022
225,000
$
63,500
$
45,000
$
108,500
$
482
Illinois
June 1, 2022
127,000
29,069
10,931
40,000
315
Michigan
June 3, 2022
85,000
16,000
1,230
17,230
203
Pennsylvania
June 15, 2022
179,000
26,640
35,000
61,640
344
Pennsylvania
June 29, 2022
300,000
39,600
55,000
94,600
315
Totals
916,000
$
174,809
$
147,161
$
321,970
351
(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 August 3, 2022, IIP owned 110 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 8.6 million
rentable square feet (including approximately 2.2 million rentable
square feet under development / redevelopment), with a
weighted-average remaining lease term of approximately 16 years. As
of August 3, 2022, IIP had invested approximately $2.1 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
$209.6 million to fund draws by certain tenants and sellers related
to construction and improvements at IIP’s properties (assuming full
funding of draws for these improvements, IIP’s total investment in
its portfolio equates to approximately $274 per square foot). These
statistics do not include an $18.5 million loan commitment from IIP
to a developer for construction of a regulated cannabis cultivation
and processing facility in California.
Capital Markets Activity
From April 1, 2022 through today, holders of an aggregate of
approximately $3.1 million of IIP’s Exchangeable Senior Notes
submitted their Exchangeable Senior Notes for exchange, and IIP
issued a total of 47,059 shares of common stock to these holders in
accordance with the terms of the indenture governing the
Exchangeable Senior Notes. As of August 3, 2022, approximately $6.5
million aggregate principal amount of the Exchangeable Senior Notes
remains outstanding.
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 net proceeds of approximately $330.9 million. IIP expects
to use the net proceeds from this offering to invest in specialized
industrial real estate assets that are used in the regulated
cannabis industry and for general corporate purposes. As of August
3, 2022, 27,973,429 shares of IIP common stock are outstanding.
Financial Results
IIP generated total revenues of approximately $70.5 million for
the three months ended June 30, 2022, compared to approximately
$48.9 million for the same period in 2021, an increase of 44%. 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 June 30, 2022, IIP recorded net
income attributable to common stockholders and net income
attributable to common stockholders per diluted share of
approximately $39.9 million and $1.42, respectively; funds from
operations (FFO) (diluted) and FFO per diluted share of
approximately $55.2 million and $1.97, respectively; normalized
FFO, which adds back to FFO acquisition-related expense, financing
expenses and the loss on exchange of a portion of the Exchangeable
Senior Notes during the three months ended June 30, 2022
(Normalized FFO), and Normalized FFO per diluted share of
approximately $55.3 million and $1.97, respectively; and AFFO and
AFFO per diluted share of approximately $60.1 million and $2.14,
respectively.
For the six months ended June 30, 2022, IIP recorded net income
attributable to common stockholders and net income attributable to
common stockholders per diluted share of approximately $74.6
million and $2.75, respectively; FFO (diluted) and FFO per diluted
share of approximately $104.1 million and $3.83, respectively;
Normalized FFO and Normalized FFO per diluted share of
approximately $104.4 million and $3.84, respectively; and AFFO and
AFFO per diluted share of approximately $113.9 million and $4.19,
respectively.
For the three and six months ended June 30, 2022 and 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.
IIP paid a quarterly dividend of $1.75 per common share on July
15, 2022 to stockholders of record as of June 30, 2022, equal to an
annualized dividend of $7.00 per share. IIP’s AFFO payout ratio was
82% (calculated by dividing the quarterly dividend by IIP’s AFFO
for the quarter).
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.
Supplemental Information
Supplemental financial information is available in the Investor
Relations section of the IIP’s website at
www.innovativeindustrialproperties.com.
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, August 4, 2022 to discuss IIP’s financial
results and operations for the second quarter ended June 30, 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, August
4, 2022 until 12:00 p.m. Pacific Time on Thursday, August 11, 2022,
by calling 1-877-344-7529 (domestic), 855-669-9658 (Canada) or
1-412-317-0088 (international) and using access code 3947127.
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)
June 30,
December 31,
Assets
2022
2021
Real estate, at cost:
Land
$
136,123
$
122,386
Buildings and improvements
1,220,821
979,417
Tenant improvements
699,856
620,301
Construction in progress
68,909
—
Total real estate, at cost
2,125,709
1,722,104
Less accumulated depreciation
(109,100
)
(81,938
)
Net real estate held for investment
2,016,609
1,640,166
Construction loan receivable
17,698
12,916
Cash and cash equivalents
45,432
81,096
Restricted cash
530
5,323
Investments
309,442
324,889
Right of use office lease asset
1,921
1,068
In-place lease intangible assets, net
9,535
9,148
Other assets, net
24,515
9,996
Total assets
$
2,425,682
$
2,084,602
Liabilities and stockholders’
equity
Exchangeable senior notes, net
$
6,374
$
32,232
Notes due 2026, net
294,478
293,860
Tenant improvements and construction
funding payable
31,210
46,274
Accounts payable and accrued expenses
6,428
7,718
Dividends payable
49,439
38,847
Rent received in advance and tenant
security deposits
59,899
52,805
Other liabilities
2,082
1,167
Total liabilities
449,910
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 June 30, 2022
and December 31, 2021
14,009
14,009
Common stock, par value $0.001 per share,
50,000,000 shares authorized: 27,973,429 and 25,612,541 shares
issued and outstanding at June 30, 2022 and December 31, 2021,
respectively
28
26
Additional paid-in capital
2,056,568
1,672,882
Dividends in excess of earnings
(94,833
)
(75,218
)
Total stockholders’ equity
1,975,772
1,611,699
Total liabilities and stockholders’
equity
$
2,425,682
$
2,084,602
INNOVATIVE INDUSTRIAL
PROPERTIES, INC. CONDENSED CONSOLIDATED STATEMENTS OF
INCOME
For the Three and Six Months
Ended June 30, 2022 and 2021
(Unaudited)
(In thousands, except share and
per share amounts)
For the Three Months
Ended
For the Six Months
Ended
June 30,
June 30,
2022
2021
2022
2021
Revenues:
Rental (including tenant
reimbursements)
$
69,995
$
48,867
$
134,109
$
91,752
Other
516
—
906
—
Total revenues
70,511
48,867
135,015
91,752
Expenses:
Property expenses
2,427
482
4,409
1,252
General and administrative expense
8,707
5,604
17,484
11,204
Depreciation and amortization expense
15,233
9,841
29,101
18,680
Total expenses
26,367
15,927
50,994
31,136
Income from operations
44,144
32,940
84,021
60,616
Interest and other income
581
91
638
215
Interest expense
(4,504
)
(3,692
)
(9,270
)
(5,565
)
Loss on exchange of Exchangeable Senior
Notes
(7
)
—
(125
)
—
Net income
40,214
29,339
75,264
55,266
Preferred stock dividends
(338
)
(338
)
(676
)
(676
)
Net income attributable to common
stockholders
$
39,876
$
29,001
$
74,588
$
54,590
Net income attributable to common
stockholders per share:
Basic
$
1.42
$
1.21
$
2.77
$
2.27
Diluted
$
1.42
$
1.17
$
2.75
$
2.22
Weighted-average shares outstanding:
Basic
27,850,561
23,889,761
26,741,568
23,889,580
Diluted
28,036,690
26,168,682
27,159,774
26,166,494
INNOVATIVE INDUSTRIAL
PROPERTIES, INC. CONDENSED CONSOLIDATED FFO, NORMALIZED FFO
AND AFFO
For the Three and Six Months
Ended June 30, 2022 and 2021
(Unaudited)
(In thousands, except share and
per share amounts)
For the Three Months
Ended
For the Six Months
Ended
June 30,
June 30,
2022
2021
2022
2021
Net income attributable to common
stockholders
$
39,876
$
29,001
$
74,588
$
54,590
Real estate depreciation and
amortization
15,233
9,841
29,101
18,680
FFO attributable to common stockholders
(basic)
55,109
38,842
103,689
73,270
Cash and non-cash interest expense on
Exchangeable Senior Notes
68
1,879
402
3,752
FFO attributable to common stockholders
(diluted)
55,177
40,721
104,091
77,022
Acquisition-related expense
—
11
95
19
Financing expense
104
—
104
—
Loss on exchange of Exchangeable Senior
Notes
7
—
125
—
Normalized FFO attributable to common
stockholders (diluted)
55,288
40,732
104,415
77,041
Stock-based compensation
4,437
2,132
8,816
4,233
Non-cash interest expense
311
118
618
118
Above-market lease amortization
23
—
46
—
AFFO attributable to common stockholders
(diluted)
$
60,059
$
42,982
$
113,895
$
81,392
FFO per common share – diluted
$
1.97
$
1.56
$
3.83
$
2.94
Normalized FFO per common share –
diluted
$
1.97
$
1.56
$
3.84
$
2.94
AFFO per common share – diluted
$
2.14
$
1.64
$
4.19
$
3.11
Weighted average common shares outstanding
– basic
27,850,561
23,889,761
26,741,568
23,889,580
Restricted stock and RSUs
82,387
96,230
113,858
94,223
PSUs
—
—
—
—
Dilutive effect of Exchangeable Senior
Notes
103,742
2,182,691
304,348
2,182,691
Weighted average common shares outstanding
– diluted
28,036,690
26,168,682
27,159,774
26,166,494
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 and six months ended June 30, 2022 and 2021, as
the performance thresholds for vesting of the performance share
units were not met as measured as of the respective dates, they
were excluded from the calculation of weighted average common
shares outstanding – diluted for all periods presented.
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/20220803005910/en/
Company Contact: Catherine Hastings Chief Financial Officer
Innovative Industrial Properties, Inc. (858) 997-3332
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