Innovative Industrial Properties Reports Second Quarter 2022 Results
IIP Closes on $239.4 Million of New Investments in Q2
SAN DIEGO–(BUSINESS WIRE)–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):
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):
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.
Original press release