SAN DIEGO--(BUSINESS WIRE)--
Innovative Industrial Properties, Inc. (NYSE: IIPR) (the "Company")
announced today results for the fourth quarter and year ended December
31, 2017, the fourth full quarter since the Company commenced real
estate operations and completed its initial public offering in December
2016.
Fourth Quarter 2017 Highlights
Financial Results and Financing Activity
-
The Company generated total revenues of approximately $2.3 million in
the quarter.
-
The Company recorded net income of approximately $284,000 for the
quarter, or $0.07 per diluted share, and adjusted fund from operations
("AFFO") of approximately $817,000, or $0.23 per diluted share.
-
The Company paid its third consecutive quarterly dividend of $0.25 per
share on January 16, 2018 to stockholders of record as of December 29,
2017, representing a 67% increase over the Company's third quarter
2017 dividend.
-
The Company completed an underwritten public offering of 600,000
shares of 9.0% Series A Cumulative Redeemable Preferred Stock (the
"Series A Preferred Stock"), raising $14.0 million in net proceeds,
and paid the initial quarterly dividend of $0.5375 per share on
January 16, 2018 to stockholders of record as of December 29, 2017.
-
Subsequent to the end of the quarter, the Company completed an
underwritten public offering of 3,220,000 shares of common stock,
including the exercise in full of the underwriters' option to purchase
an additional 420,000 shares, resulting in net proceeds of
approximately $79.3 million.
Acquisition Activity
-
The Company acquired a medical-use cannabis cultivation and processing
facility in a sale-leaseback transaction with a subsidiary of The
Pharm, LLC ("The Pharm") in Arizona for total consideration of $18.0
million, comprising a purchase price of $15.0 million and a $3.0
million tenant improvement allowance available for additional
improvements at the property.
-
The Company acquired two medical-use cannabis cultivation and
processing facilities in sale-leaseback transactions with subsidiaries
of Vireo Health, LLC ("Vireo") in New York and Minnesota for an
aggregate consideration of $8.4 million, which includes a $1.0 million
tenant improvement allowance available in each transaction for
additional improvements at each property.
Portfolio Update, Acquisition Activity and Pipeline
Portfolio Update
As of December 31, 2017, the Company owned five properties located in
New York, Maryland, Arizona and Minnesota, totaling approximately
617,000 rentable square feet, which were 100% leased with a
weighted-average remaining lease term of approximately 14.7 years. As of
December 31, 2017, the Company had invested $68.3 million in the
aggregate (excluding transaction costs) and had committed an additional
$5.0 million to reimburse certain tenants for tenant improvements at the
Company's properties. The Company's average initial yield on invested
capital is approximately 15.8% for these five properties, calculated as
the sum of the initial base rents, supplemental rent (with respect to
the lease with PharmaCann LLC at one of the Company's New York
properties (the "PharmaCann NY Property")) and property management fees,
after the expiration of the base rent abatement period (with respect to
the lease with a subsidiary of The Pharm at the Company's Arizona
property), divided by the Company's aggregate investment in these
properties (excluding transaction costs and including aggregate
potential tenant reimbursements of $5.0 million).
Acquisition Activity
On October 23, 2017, the Company acquired a property in New York for
approximately $3.4 million (excluding transaction costs) in a
sale-leaseback transaction, comprising approximately 40,000 square feet
of industrial and greenhouse space. Upon the closing, the Company
entered into a triple-net lease for the entire property with a
subsidiary of Vireo to operate a medical-use cannabis cultivation and
processing facility. The tenant is responsible for paying all structural
repairs, maintenance expenses, insurance and taxes related to the
property, and the lease provides that the Company will fund up to $1.0
million as reimbursement for future tenant improvements at the property.
The initial annualized base rent for the property is $660,000, or 15% of
the sum of the purchase price and the tenant improvement allowance made
available for the property, and subject to annual increases at a rate of
3.5%. The Company also receives a property management fee under the
lease equal to 1.5% of the then-current base rent throughout the term.
The initial lease term is 15 years, with two options to extend the term
of the lease for two additional five-year periods.
On November 8, 2017, the Company acquired a property in Minnesota for
approximately $3.0 million (excluding transaction costs), comprising
approximately 20,000 square feet of industrial and greenhouse space.
Upon the closing, the Company entered into a triple-net lease for the
entire property with another subsidiary of Vireo to operate a
medical-use cannabis cultivation and processing facility. The tenant is
responsible for paying all structural repairs, maintenance expenses,
insurance and taxes related to the property, and the lease provides that
the Company will fund up to $1.0 million as reimbursement for future
tenant improvements at the property. The initial annual base rent for
the property is $600,000, or 15% of the sum of the purchase price and
the tenant improvement allowance made available for the property, and
subject to annual increases at a rate of 3.5%. The Company also receives
a property management fee under the lease equal to 1.5% of the
then-current base rent throughout the term. The initial lease term is 15
years, with two options to extend the term of the lease for two
additional five-year periods.
On December 15, 2017, the Company acquired a property in Arizona for
approximately $15.0 million (excluding transaction costs) in a
sale-leaseback transaction, comprising approximately 358,000 square feet
of industrial and greenhouse space. Upon the closing, the Company
entered into a triple-net lease for the entire property with a
subsidiary of The Pharm for continued use as a medical cannabis
cultivation and processing facility. The tenant is responsible for
paying all structural repairs, maintenance expenses, insurance and taxes
related to the property, and the lease provides that the Company will
fund up to $3.0 million as reimbursement for future tenant improvements
at the property. The initial annualized base rent under the lease is
$2,520,000, payable monthly, which is equal to 14% of the sum of the
purchase price for the property ($15.0 million) and the tenant
improvement allowance ($3.0 million), and subject to annual increases of
3.25% during the lease term. The base rent on $5.0 million of the
purchase price ($58,333.33 per month) will be abated until March 31,
2018, and the base rent attributable to the tenant improvement allowance
($35,000.00 per month) was abated until March 14, 2018. The Company also
receives a property management fee under the lease equal to 1.5% of the
then-current base rent throughout the term. The initial lease term is 15
years, with two options to extend the term of the lease for two
additional five-year periods.
Pipeline
Subsequent to the end of the quarter, the Company executed agreements to
purchase two properties for a total investment of $10.5 million. In
addition, the Company executed two non-binding letters of intent for two
properties representing a total expected additional investment by the
Company of approximately $25 million to $30 million, with the final
investment determined based on the Company's review and approval of
future tenant improvements at each property.
As of March 28, 2018, the Company had identified and was in various
stages of reviewing approximately $100 million of additional potential
properties for acquisition, which amount is estimated based on sellers'
asking prices for the properties, ongoing negotiations with sellers, the
Company's assessment of the values of such properties after taking into
account the current and expected lease revenue, operating history, age
and condition of the property, and other relevant factors. The
transactions for which the Company has executed agreements are subject
to the Company's continuing diligence and customary closing conditions,
and the Company cannot provide assurances that it will complete the
purchase of these properties or the other properties in the Company's
pipeline on the terms described herein, or at all.
Financing Activity
On October 19, 2017, the Company completed an underwritten public
offering of 600,000 shares of Series A Preferred Stock at a price to the
public of $25.00 per share, resulting in net proceeds of approximately
$14.0 million, after deducting the underwriters' discounts and
commissions and offering expenses. Dividends on the Series A Preferred
Stock are payable quarterly in arrears on or about the 15th day of
January, April, July and October of each year, with the first dividend
paid on January 16, 2018. The Series A Preferred Stock ranks senior to
the Company's common stock with respect to dividend rights and rights
upon the Company's liquidation, dissolution or winding up. The Series A
Preferred Stock has no stated maturity date and is not subject to
mandatory redemption or any sinking fund. Generally, the Company is not
permitted to redeem the Series A Preferred Stock prior to October 19,
2022, except in limited circumstances relating to the Company's ability
to qualify as a REIT and in certain other circumstances related to a
change of control (as defined in the articles supplementary for the
Series A Preferred Stock).
Subsequent to the end of the quarter, on January 22, 2018, the Company
completed an underwritten public offering of 3,220,000 shares of common
stock, including the exercise in full of the underwriters' option to
purchase an additional 420,000 shares, resulting in net proceeds of
approximately $79.3 million, after deducting the underwriters' discounts
and commissions and offering expenses. The Company expects to use the
net proceeds 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
The Company generated total revenues of approximately $2.3 million for
the three months ended December 31, 2017, and total revenues of
approximately $6.4 million for the year ended December 31, 2017. The
Company began real estate operations after closing its initial public
offering and purchasing the PharmaCann NY Property in December 2016.
For the three months ended December 31, 2017, the Company recorded net
income and net income per diluted share of approximately $284,000 and
$0.07, respectively; funds from operations ("FFO") and FFO per diluted
share of approximately $646,000 and $0.18, respectively; and AFFO and
AFFO per diluted share of approximately $817,000 and $0.23, respectively.
For the year ended December 31, 2017, the Company recorded a net loss
and net loss per basic and diluted share of ($395,000) and ($0.13),
respectively; FFO and FFO per diluted share of $520,000 and $0.15,
respectively; and AFFO and AFFO per diluted share of approximately $2.4
million and $0.67, 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 loss 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 9:00 a.m. Pacific Time (12:00 p.m. Eastern Time)
on Thursday, March 29, 2018 to discuss the Company's financial results
and operations for the fourth quarter and year ended December 31, 2017.
The call will be open to all interested investors through a live audio
webcast at the Investor Relations section of the Company's website at www.innovativeindustrialproperties.com,
or live by calling 1-866-807-9684 (domestic) or 1-412-317-5415
(international) and asking to be joined to the Innovative Industrial
Properties, Inc. conference call. The complete webcast will be archived
for 90 days on the Company's website. A telephone playback of the
conference call will also be available from 12:00 p.m. Pacific
Time on Thursday, March 29, 2018 until 12:00 p.m. Pacific Time
on Thursday, April 5, 2018, by calling 1-877-344-7529 (domestic),
1-855-669-9658 (Canada) or 1-412-317-0088 (international) and using
access code 10117771.
About Innovative Industrial Properties
Innovative Industrial Properties, Inc. is a self-advised Maryland
corporation focused on the acquisition, ownership and management of
specialized industrial properties leased to experienced, state-licensed
operators for their regulated medical-use cannabis facilities.
Innovative Industrial Properties, Inc. intends to elect to be taxed as a
real estate investment trust. Additional information is available at www.innovativeindustrialproperties.com.
This press release contains statements that the Company 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 the Company "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.The Company 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 |
(In thousands, except share and per share amounts)
|
(Unaudited)
|
|
| | |
| |
Assets | |
| December 31,
2017 | | December 31,
2016 |
|
Real estate, at cost:
| | | | | |
|
Land
| |
$
|
11,514
| | |
$
|
7,600
| |
|
Buildings and improvements
| | |
51,315
| | | |
22,475
| |
|
Tenant improvements
| |
|
5,901
|
| |
|
—
|
|
|
Total real estate, at cost
| | |
68,730
| | | |
30,075
| |
|
Less accumulated depreciation
| |
|
(942
|
)
| |
|
(27
|
)
|
|
Net real estate held for investment
| | |
67,788
| | | |
30,048
| |
|
Cash and cash equivalents
| | |
11,758
| | | |
33,003
| |
|
Prepaid insurance and other assets, net
| |
|
482
|
| |
|
276
|
|
|
Total assets
| |
$
|
80,028
|
| |
$
|
63,327
|
|
| | | | |
|
| Liabilities and stockholders’ equity | | | | | |
|
Accounts payable and accrued expenses
| |
$
|
1,082
| | |
$
|
70
| |
|
Dividends payable
| | |
1,198
| | | |
—
| |
|
Offering cost liability
| | |
41
| | | |
276
| |
|
Rent received in advance and tenant security deposits
| |
|
4,158
|
| |
|
2,542
|
|
|
Total liabilities
| |
|
6,479
|
| |
|
2,888
|
|
| | | | |
|
|
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
and no shares issued and outstanding at December 31, 2017 and
2016, respectively
| | |
14,009
| | | |
—
| |
|
Common stock, par value $0.001 per share, 50,000,000 shares
authorized: 3,501,147 shares and no shares issued and outstanding at
December 31, 2017 and 2016, respectively
| | |
4
| | | |
—
| |
|
Class A common stock, par value $0.001 per share, no shares and
49,000,000 shares authorized, and no shares and 3,416,508 shares
issued and outstanding as of December 31, 2017 and 2016, respectively
| | |
—
| | | |
3
| |
|
Class B common stock, par value $0.001 per share, no shares and
1,000,000 shares authorized and no shares issued and outstanding as
of December 31, 2017 and 2016, respectively
| | |
—
| | | |
—
| |
|
Additional paid-in-capital
| | |
64,000
| | | |
64,828
| |
|
Accumulated deficit
| |
|
(4,464
|
)
| |
|
(4,392
|
)
|
|
Total stockholders' equity
| |
|
73,549
|
| |
|
60,439
|
|
|
Total liabilities and stockholders' equity
| |
$
|
80,028
|
| |
$
|
63,327
|
|
| | | | | | | |
|
|
| | |
| |
| INNOVATIVE INDUSTRIAL PROPERTIES, INC. |
|
|
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In
thousands, except share and per share amounts)
(Unaudited)
|
|
|
As a result of the timing of our formation, initial public
offering and commencement of active real estate operations,
comparative operating results with prior periods are not relevant
to a discussion of operations for the fourth quarter and year
ended December 31, 2017.
|
| | | | |
|
| |
|
Quarter Ended
December 31, 2017 | |
Year Ended
December 31, 2017 |
| Revenues: | | | | | |
|
Rental
| |
$
|
2,228
| |
$
|
6,302
| |
|
Tenant reimbursements
| |
|
54
| |
|
118
|
|
|
Total revenues
| |
|
2,282
| |
|
6,420
|
|
| | | | |
|
| Expenses: | | | | | |
|
Property expenses
| | |
54
| | |
118
| |
|
General and administrative expense
| | |
1,293
| | |
5,497
| |
|
Severance
| | |
—
| | |
113
| |
|
Depreciation expense
| |
|
362
| |
|
915
|
|
|
Total expenses
| |
|
1,709
| |
|
6,643
|
|
|
Income / (loss) from operations
| | |
573
| | |
(223
|
)
|
|
Interest income
| |
|
34
| |
|
151
|
|
|
Net income / (loss)
| | |
607
| | |
(72
|
)
|
|
Preferred stock dividend
| |
|
323
| |
|
323
|
|
|
Net income / (loss) attributable to common stockholders
| |
$
|
284
| |
$
|
(395
|
)
|
|
Net income / (loss) attributable to common stockholders per share:
| |
|
| |
|
|
Basic
| |
$
|
0.08
| |
$
|
(0.13
|
)
|
|
Diluted
| |
$
|
0.07
| |
$
|
(0.13
|
)
|
|
Weighted average shares outstanding:
| | | | | |
|
Basic
| | |
3,393,017
| | |
3,375,284
| |
|
Diluted
| | |
3,501,147
| | |
3,375,284
| |
|
Dividends declared per common share
| |
$
|
0.25
| |
$
|
0.55
| |
| | | | | | |
|
|
|
INNOVATIVE INDUSTRIAL PROPERTIES, INC. |
|
| |
| | | |
CONDENSED CONSOLIDATED FFO AND AFFO
(In thousands,
except share and per share amounts)
(Unaudited)
|
| | | | | |
|
The table below is a reconciliation of net income (loss) to FFO
and AFFO for the fourth quarter and year ended December 31, 2017.
As a result of the timing of our formation, initial public
offering and commencement of active real estate operations,
comparative operating results with prior periods are not relevant
to a discussion of FFO and AFFO for the fourth quarter and year
ended December 31, 2017.
|
| | | | | |
|
| | Quarter Ended
December 31, | | | Year Ended
December 31, | |
| | 2017 | |
| 2017 | |
|
Net income / (loss) attributable to common stockholders
| |
$
|
284
| | |
$
|
(395
|
)
|
|
Real estate depreciation
| |
362
| | |
|
915
| |
|
FFO
| |
$
|
646
| | |
$
|
520
| |
|
Stock-based compensation
| | |
171
| | | |
1,719
| |
|
Severance
| |
|
—
| | |
|
113
| |
|
AFFO
| |
$
|
817
| | |
$
|
2,352
| |
|
FFO per common share – basic
| |
$
|
0.19
| | |
$
|
0.15
| |
|
FFO per common share – diluted
| |
$
|
0.18
| | |
$
|
0.15
| |
|
AFFO per common share – basic
| |
$
|
0.24
| | |
$
|
0.70
| |
|
AFFO per common share – diluted
| |
$
|
0.23
| | |
$
|
0.67
| |
|
Weighted-average common shares outstanding – basic
| |
3,393,017
| | | |
3,375,284
| |
|
Weighted-average common shares outstanding – diluted
| |
3,501,147
| | | |
3,507,145
| |
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 (loss) (computed in
accordance with GAAP), excluding gains (or losses) from sales of
property, plus depreciation and amortization related to real estate
properties, and after adjustments for unconsolidated partnerships and
joint ventures."
Management believes that net income (loss), 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 the Company'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. The Company believes that by excluding the
effect of depreciation, FFO and FFO per share can facilitate comparisons
of operating performance between periods. The Company 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 by 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.
Management believes that AFFO and AFFO per share are also appropriate
supplemental measures of a REIT's operating performance. The Company
calculates AFFO by adding to FFO certain non-cash and non-recurring
expenses, consisting of non-cash stock-based compensation expense and
severance expense.
The Company'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 (loss) (computed in accordance with GAAP) as an indicator of the
Company's financial performance or to cash flow from operating
activities (computed in accordance with GAAP) as an indicator of the
Company's liquidity, nor is it indicative of funds available to fund the
Company's cash needs, including the Company's ability to pay dividends
or make distributions. FFO and AFFO should be considered only as
supplements to net income (loss) computed in accordance with GAAP as
measures of the Company's operations.
View source version on businesswire.com: https://www.businesswire.com/news/home/20180328006164/en/
Innovative Industrial Properties, Inc.
Catherine Hastings
Chief
Financial Officer
(858) 997-3332
Source: Innovative Industrial Properties, Inc.