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Share Name | Share Symbol | Market | Type |
---|---|---|---|
Innovative Industrial Properties Inc | NYSE:IIPR | NYSE | Common Stock |
Price Change | % Change | Share Price | High Price | Low Price | Open Price | Shares Traded | Last Trade | |
---|---|---|---|---|---|---|---|---|
-0.17 | -0.17% | 97.71 | 99.23 | 97.70 | 98.05 | 101,460 | 01:00:00 |
Investments Drive 183% Q2 Total Revenues, 322% Q2 Net Income and 263% Q2 AFFO Growth Year-over-Year
Innovative Industrial Properties, Inc. (IIP), the first and only real estate company on the New York Stock Exchange (NYSE: IIPR) focused on the medical-use U.S. cannabis industry, announced today results for the quarter ended June 30, 2020.
Second Quarter 2020 and Subsequent Events Highlights
Financial Results and Financing Activity
Investment Activity
Balance Sheet Highlights (at June 30, 2020)
Rent Collections (as of August 5, 2020)
Los Angeles, California Property Update (as of August 5, 2020)
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 April 1, 2020 through August 5, 2020 (dollars in thousands):
State
Closing Date
Rentable Sq. Ft.(1)
Purchase Price(2)
Additional Investment
Total Investment
Massachusetts
April 2, 2020
199,000
$
26,750
$
22,250
$
49,000
(3)
Minnesota
April 10, 2020
N/A
N/A
1,060
1,060
(4)
New York
April 10, 2020
N/A
N/A
360
360
(5)
Michigan
April 22, 2020
115,000
5,000
27,000
32,000
(6)
California
May 12, 2020
70,000
17,500
—
17,500
Pennsylvania
June 10, 2020
108,000
8,870
6,380
15,250
(7)
Ohio
June 16, 2020
N/A
N/A
1,000
1,000
(8)
Illinois
June 18, 2020
N/A
N/A
3,000
3,000
(9)
Pennsylvania
June 19, 2020
N/A
N/A
30,000
30,000
(10)
Massachusetts
June 30, 2020
118,000
7,750
21,000
28,750
(11)
New Jersey
July 13, 2020
111,000
5,500
29,500
35,000
(12)
New Jersey
July 16, 2020
50,000
10,220
1,600
11,820
(13)
New Jersey
July 16, 2020
4,000
2,165
—
2,165
Totals
775,000
$
83,755
$
143,150
$
226,905
____________
(1)
Includes expected rentable square feet at completion of construction for certain properties.
(2)
Excludes transaction costs.
(3)
The tenant is expected to complete tenant improvements at the property, for which IIP agreed to provide reimbursement of up to approximately $22.3 million. As of August 5, 2020, IIP had funded approximately $1.4 million of the tenant improvement allowance.
(4)
The amount relates to a lease amendment which increased the tenant improvement allowance under a lease at IIP’s Minnesota property by approximately $1.1 million to a total of approximately $6.7 million, and also resulted in a corresponding adjustment to the base rent for the lease at the property. As of August 5, 2020, IIP had funded approximately $6.5 million of the tenant improvement allowance.
(5)
The amount relates to a lease amendment which increased the tenant improvement allowance under a lease at one of IIP’s New York properties by $360,000 to a total of approximately $3.4 million, and also resulted in a corresponding adjustment to the base rent for the lease at the property. As of August 5, 2020, IIP had funded approximately $3.2 million of the tenant improvement allowance.
(6)
The tenant is expected to complete tenant improvements at the property, for which IIP originally agreed to provide reimbursement of up to $11.0 million. In June, we amended the lease, which increased the tenant improvement allowance by $16.0 million to a total of $27.0 million. As of August 5, 2020, IIP had not funded any of the tenant improvement allowance.
(7)
The tenant is expected to complete tenant improvements at the property, for which IIP agreed to provide reimbursement of up to approximately $6.4 million. As of August 5, 2020, IIP had funded approximately $1.3 million of the tenant improvement allowance.
(8)
The amount relates to a lease amendment which increased the tenant improvement allowance under the lease by $1.0 million to a total of approximately $2.9 million, and also resulted in a corresponding adjustment to the base rent for the lease at the property. As of August 5, 2020, IIP had not funded any of the tenant improvement allowance.
(9)
The amount relates to an amendment to our lease and development agreement which increased the construction funding at one of IIP’s Illinois’ properties by $3.0 million to a total of $10.0 million, and also resulted in a corresponding adjustment to the base rent for the lease at the property. As of August 5, 2020, IIP had funded approximately $7.5 million of the construction funding.
(10)
The amount relates to a lease amendment which provided a tenant improvement allowance under the lease of $30.0 million, and also resulted in a corresponding adjustment to the base rent for the lease at the property. As of August 5, 2020, IIP had not funded any of the tenant improvement allowance.
(11)
The tenant is expected to complete tenant improvements at the property, for which IIP agreed to provide reimbursement of up to $21.0 million. As of August 5, 2020, IIP had not funded any of the tenant improvement allowance.
(12)
The tenant is expected to complete tenant improvements at the property, for which IIP agreed to provide reimbursement of up to $29.5 million. As of August 5, 2020, IIP had not funded any of the tenant improvement allowance.
(13)
The tenant is expected to complete tenant improvements at the property, for which IIP agreed to provide reimbursement of up to $1.6 million. As of August 5, 2020, IIP had not funded any of the tenant improvement allowance.
As of August 5, 2020, IIP owned 61 properties located in Arizona, California, Colorado, Florida, Illinois, Maryland, Massachusetts, Michigan, Minnesota, New Jersey, New York, Nevada, North Dakota, Ohio, Pennsylvania and Virginia, totaling approximately 4.5 million rentable square feet (including approximately 1.5 million rentable square feet under development/redevelopment), which were 99.2% leased (based on square footage) with a weighted-average remaining lease term of approximately 16.1 years. As of August 5, 2020, IIP had invested approximately $826.6 million in the aggregate (excluding transaction costs) and had committed an additional approximately $207.1 million to reimburse certain tenants and sellers for completion of construction and tenant improvements at IIP’s properties. These statistics do not include up to approximately $7.0 million that may be funded in the future pursuant to IIP’s lease with a tenant at one of IIP’s Illinois properties, or approximately $17.1 million that may be funded in the future pursuant to IIP’s lease with a tenant at one of IIP’s Massachusetts properties, as the tenants at those properties may not elect to have IIP disburse those funds to them and pay IIP the corresponding base rent on those funds. These statistics also treat IIP’s Los Angeles, California property as not leased, due to the tenant being in receivership and its ongoing default in its obligation to pay rent at that location.
Financing Activity
In May, IIP completed an underwritten public offering of 1,550,648 shares of common stock, including the exercise in full of the underwriter’s option to purchase an additional 202,259 shares, resulting in net proceeds of approximately $114.9 million.
Subsequent to the end of the quarter, in July, IIP completed an underwritten public offering of 3,085,867 shares of common stock, including the exercise in full of the underwriters’ option to purchase an additional 402,504 shares, resulting in gross proceeds of approximately $258.7 million.
IIP expects to use the net proceeds from these offerings to invest in specialized industrial real estate assets that support the regulated medical-use cannabis cultivation and processing industry and for general corporate purposes.
Financial Results
IIP generated total revenues of approximately $24.3 million for the three months ended June 30, 2020, compared to approximately $8.6 million for the same period in 2019, an increase of 183%. The increase was driven primarily by the acquisition and leasing of new properties, in addition to contractual rental escalations at certain properties, partially offset by the deferrals of rent from three of IIP’s tenants described above. Total revenues for the three months ended June 30, 2020 also included the drawdown of part of the security deposits totaling approximately $743,000 at certain properties leased to three tenants to pay part of the rent and property management fee as a part of the deferral programs described above.
IIP generated total revenues of approximately $45.5 million for the six months ended June 30, 2020, compared to approximately $15.4 million for the same period in 2019, an increase of 195%. The increase was driven primarily by the acquisition and leasing of new properties, additional tenant improvement allowances and construction funding at existing properties resulting in adjustments to base rent, and contractual rental escalations at certain properties, partially offset by the deferrals of rent from three of IIP’s tenants described above. Total revenues for the six months ended June 30, 2020 also included approximately $422,000 of tenant reimbursements, rent collected and associated lease penalties through the drawdown of the security deposit at IIP’s Los Angeles, California property, where the tenant is in receivership and defaulted on its lease obligations, and the drawdown of part of the security deposits totaling approximately $940,000 at certain properties leased to three tenants to pay part of the rent and property management fee as a part of the deferral programs described above.
For the three months ended June 30, 2020, IIP recorded net income available to common stockholders and net income available to common stockholders per diluted share of approximately $13.0 million and $0.73, respectively; funds from operations (“FFO”) and FFO per diluted share of approximately $19.7 million and $1.12, respectively; and AFFO and AFFO per diluted share of approximately $21.0 million and $1.19, respectively. Second quarter 2020 AFFO and AFFO per diluted share for the quarter increased by 263% and 102% from the prior year period, respectively.
For the six months ended June 30, 2020, IIP recorded net income and net income per diluted share of approximately $24.5 million and $1.45, respectively; FFO and FFO per diluted share of approximately $36.2 million and $2.16, respectively; and AFFO and AFFO per diluted share of approximately $38.8 million and $2.31, respectively. For the six months ended June 30, 2020, AFFO and AFFO per diluted share increased by 250% and 104% from the prior year period, respectively.
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 available to common stockholders to 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, August 6, 2020 to discuss IIP’s financial results and operations for the second quarter ended June 30, 2020. 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 6, 2020 until 12:00 p.m. Pacific Time on Thursday, August 13, 2020, by calling 1-877-344-7529 (domestic), 855-669-9658 (Canada) or 1-412-317-0088 (international) and using access code 10146603.
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 medical-use 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,
2020
December 31,
2019
Assets
Real estate, at cost:
Land
$
58,467
$
48,652
Buildings and improvements
530,274
382,035
Tenant improvements
226,651
87,344
Total real estate, at cost
815,392
518,031
Less accumulated depreciation
(23,823
)
(12,170
)
Net real estate held for investment
791,569
505,861
Cash and cash equivalents
50,174
82,244
Restricted cash
11,468
35,072
Short-term investments, net
323,255
119,595
Right of use office lease asset
1,091
1,202
Other assets, net
1,591
1,883
Total assets
$
1,179,148
$
745,857
Liabilities and stockholders’ equity
Exchangeable senior notes, net
$
135,661
$
134,654
Tenant improvements and construction funding payable
22,781
24,968
Accounts payable and accrued expenses
3,235
3,417
Dividends payable
20,108
12,975
Office lease liability
1,149
1,202
Rent received in advance and tenant security deposits
26,243
20,631
Total liabilities
209,177
197,847
Commitments and contingencies
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, 2020 and December 31, 2019
14,009
14,009
Common stock, par value $0.001 per share, 50,000,000 shares authorized: 18,614,561 and 12,637,043 shares issued and outstanding at June 30, 2020 and December 31, 2019, respectively
19
13
Additional paid-in capital
988,220
553,932
Dividends in excess of earnings
(32,277
)
(19,944
)
Total stockholders’ equity
969,971
548,010
Total liabilities and stockholders’ equity
$
1,179,148
$
745,857
INNOVATIVE INDUSTRIAL PROPERTIES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
For the Three and Six Months Ended June 30, 2020 and 2019
(Unaudited)
(In thousands, except share and per share amounts)
For the Three Months Ended
June 30,
For the Six Months Ended
June 30,
2020
2019
2020
2019
Revenues:
Rental (including tenant reimbursements)
$
24,346
$
8,617
$
45,476
$
15,440
Total revenues
24,346
8,617
45,476
15,440
Expenses:
Property expenses
414
337
1,014
584
General and administrative expense
3,010
2,593
6,356
4,511
Depreciation expense
6,746
1,615
11,653
2,833
Total expenses
10,170
4,545
19,023
7,928
Income from operations
14,176
4,072
26,453
7,512
Interest and other income
989
1,172
2,433
2,165
Interest expense
(1,855
)
(1,832
)
(3,704
)
(2,624
)
Net income
13,310
3,412
25,182
7,053
Preferred stock dividend
(338
)
(338
)
(676
)
(676
)
Net income attributable to common stockholders
$
12,972
$
3,074
$
24,506
$
6,377
Net income attributable to common stockholders per share:
Basic
$
0.73
$
0.31
$
1.46
$
0.64
Diluted
$
0.73
$
0.30
$
1.45
$
0.64
Weighted average shares outstanding:
Basic
17,530,721
9,667,079
16,657,509
9,665,933
Diluted
17,644,829
9,807,503
16,771,460
9,802,616
INNOVATIVE INDUSTRIAL PROPERTIES, INC.
CONDENSED CONSOLIDATED FFO AND AFFO
For the Three and Six Months Ended June 30, 2020 and 2019
(Unaudited)
(In thousands, except share and per share amounts)
For the Three Months Ended June 30,
For the Six Months
Ended June 30,
2020
2019
2020
2019
Net income attributable to common stockholders
$
12,972
$
3,074
$
24,506
$
6,377
Real estate depreciation
6,746
1,615
11,653
2,833
FFO attributable to common stockholders
19,718
4,689
36,159
9,210
Stock-based compensation
822
623
1,647
1,186
Non-cash interest expense
507
484
1,008
692
AFFO attributable to common stockholders
$
21,047
$
5,796
$
38,814
$
11,088
FFO per share — basic
$
1.12
$
0.49
$
2.17
$
0.95
FFO per share — diluted
$
1.12
$
0.48
$
2.16
$
0.94
AFFO per share — basic
$
1.20
$
0.60
$
2.33
$
1.15
AFFO per share — diluted
$
1.19
$
0.59
$
2.31
$
1.13
Weighted average shares outstanding — basic
17,530,721
9,667,079
16,657,509
9,665,933
Weighted average shares outstanding — diluted
17,644,829
9,807,503
16,771,460
9,802,616
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, plus 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 important 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. FFO and FFO per share are used by management to evaluate the REIT’s operating performance and these measures are the predominant measures used by the REIT industry and industry analysts to evaluate REITs. For these reasons, management has deemed it appropriate to disclose and discuss FFO and FFO per share.
Management believes that AFFO and AFFO per share are also appropriate supplemental measures of a REIT’s operating performance. IIP calculates AFFO by adding to FFO certain non-cash and infrequent or unpredictable expenses which may impact comparability, consisting of non-cash stock-based compensation expense and non-cash interest expense.
IIP’s computation of FFO and AFFO may differ from the methodology for calculating FFO and AFFO utilized by other equity REITs and, accordingly, may not be comparable to such REITs. Further, FFO and AFFO do not represent cash flow available for management’s discretionary use. 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 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/20200805005896/en/
Catherine Hastings Chief Financial Officer Innovative Industrial Properties, Inc. (858) 997-3332
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