Innovative industrial property presents the results of the second quarter of 2022
IIP closes with $239.4 million of new investments in the second quarter
SAN DIEGO–(BUSINESS WIRE)–Innovative Industrial Properties, Inc. (IIP), the first and only New York Stock Exchange (NYSE: IIPR) real estate company focused on the U.S. regulated cannabis industry, today announced the results of its second. quarter ended June 30, 2022.
Highlights of the second quarter of 2022
Financial results and capital activity
- It generated total revenue of approximately $70.5 million during the quarter, representing a 44% increase over the prior-year quarter.
- Recorded net income attributable to common shareholders 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 shareholders of record on June 30, 2022, which represents a 25% increase over the prior year’s Q2 2021 dividend , equivalent to an annualized dividend of $7.00 per share.
- An underwritten public offering of common stock has been completed, including the exercise in full of the underwriters’ option to purchase additional shares, resulting in net proceeds of approximately $330.9 million.
- Approximately $3.1 million in principal amount of the Exchangeable Senior Notes has been exchanged, leaving approximately $6.5 million in principal amount of the Exchangeable Senior Notes outstanding as of today.
- It made four acquisitions of properties located in Arizona, Maryland, Massachusetts and Texas, and executed five lease amendments to provide repayment of additional improvements to 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 development and future 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 (as of June 30, 2022)
- 12% debt on 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 through 2026, at portion of the principal amount of $6.5 million of senior notes exchangeable in 2024.
- Rent collection (calculated as base rent and property management fees collected on amounts contractually owed) was 99% for the six months ended June 30, 2022.
Activity to update and acquire portfolios
IIP acquired the following properties from April 1, 2022 to August 3, 2022 ($thousands, excluding PSF statistics):
Additional investments for building improvements in existing properties
The IIP committed additional capital in 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 of the applicable property, beginning April 1, 2022. through August 3, 2022 ($thousands, excluding 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 entire portfolio (consisting of purchase price and construction financing and tenant improvements reimbursed to tenants, but excluding transaction costs) and had committed an additional approximately $209.6 million to fund certain tenant and vendor draws related to the construction of and improvements to the IIP properties (assuming full funding of the draws for such improvements, IIP’s total investment in their 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 the construction of a regulated cannabis cultivation and processing facility in California.
Capital markets activity
From April 1, 2022 to the present, holders of an aggregate of approximately $3.1 million of IIP’s senior exchangeable notes tendered their exchangeable senior notes for exchange , and the IIP issued a total of 47,059 ordinary shares to these holders in accordance with the terms of the contract governing the Senior Convertible Notes. As of August 3, 2022, approximately $6.5 million aggregate principal amount of the Redeemable Senior Notes remains outstanding.
On April 5, 2022, IIP completed an underwritten public offering of 1,578,948 common shares and on April 6, 2022, IIP completed the issuance of an additional 236,842 common shares pursuant to the full exercise 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 of this offering to invest in specialty industrial real estate assets used in the regulated cannabis industry and for general corporate purposes. As of August 3, 2022, 27,973,429 IIP shares are outstanding.
IIP generated total revenue 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 primarily driven by the acquisition and leasing of new properties, additional improvement allowances and construction financing at existing properties that resulted in base rent adjustments and contractual rent escalations at certain properties.
For the three months ended June 30, 2022, IIP reported 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 to FFO acquisition-related expenses, financing costs and loss on exchange of a portion of the Senior Convertible Notes for 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 reported 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 diluted AFFO per share include the dilutive impact of the subject full exchange of the Senior Notes exchangeable for shares of common stock.
IIP paid a quarterly dividend of $1.75 per common share on July 15, 2022 to shareholders of record on June 30, 2022, equivalent to an annual 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 additional 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 of GAAP net income attributable to common stockholders to FFO, normalized FFO and AFFO and definitions of terms is included at the end of this release.
Additional financial information is available on the Investor Relations section of IIP’s website at www.innovativeindustrialproperties.com.
Teleconference and webcast
Innovative Industrial Properties, Inc. will hold 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 in the second quarter ended June 30. 2022. The call will be open to all interested investors via a live audio webcast on the Investor Relations section of the IIP website at www.innovativeindustrialproperties.com, or by calling live at 1-877-328 -5514 (domestic) or 1-412-902-6764 (international) and requesting to join the Innovative Industrial Properties, Inc. conference call. The full webcast will be archived for 90 days on the IIP website. A telephone replay of the conference call will also be available beginning at 12:00 p.m. m Pacific Time on Thursday, August 4, 2022 until 12:00 pm Pacific Time on Thursday, August 11, 2022 by calling 1-877-344-7529 (national), 855-669 -9658 (Canada) or 1-412-317-0088 (international) and using the access code 3947127.
About innovative industrial properties
Innovative Industrial Properties, Inc. is a self-advised Maryland corporation focused on acquiring, owning and managing specialty 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, beginning with the year ended December 31, 2017. Additional information is available at www.innovativeindustrialproperties.com.