SAN DIEGO--(BUSINESS WIRE) -- Innovative Industrial Properties, Inc. (NYSE:IIPR) (the "Company") announced today results for the quarter ended March 31, 2018, the fifth full quarter since the Company commenced real estate operations and completed its initial public offering in December 2016.
First Quarter 2018 Highlights
Financial Results and Financing Activity
The Company generated rental revenues of approximately $2.7 million in the quarter.
The Company recorded net income of approximately $607,000 for the quarter, or $0.09 per diluted share, and adjusted funds from operations ("AFFO") of approximately $1.4 million, or $0.23 per diluted share.
The Company paid its fourth consecutive quarterly dividend of $0.25 per common share on April 16, 2018 to stockholders of record as of March 29, 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.
Subsequent to the end of the quarter, the Company acquired an 89,000 square foot medical-use cannabis cultivation and processing facility in a sale-leaseback transaction with a subsidiary of Vireo Health, Inc. ("Vireo") in Pennsylvania for an aggregate consideration of $8.6 million (excluding transaction costs), which includes an approximately $2.8 million tenant improvement allowance available for additional improvements at the property.
Portfolio Update, Acquisition Activity and Pipeline
As of May 9, 2018, the Company owned six properties located in Arizona, Maryland, Minnesota, New York and Pennsylvania, totaling approximately 706,000 rentable square feet, which were 100% leased with a weighted-average remaining lease term of approximately 14.4 years. As of May 9, 2018, the Company had invested approximately $75.4 million in the aggregate (excluding transaction costs) and had committed an additional approximately $6.5 million to reimburse certain tenants for tenant improvements at the Company's properties. The Company's average current yield on invested capital is approximately 15.7% for these six properties, calculated as the sum of the current base rents, supplemental rent (with respect to the lease with PharmaCann LLC at one of the Company's New York properties) and property management fees, divided by the Company's aggregate investment in these properties (excluding transaction costs and including aggregate potential tenant reimbursements of approximately $6.5 million).
Subsequent to the end of the quarter, on April 6, 2018, the Company acquired a property in Pennsylvania for approximately $5.8 million (excluding transaction costs) in a sale-leaseback transaction, comprising approximately 89,000 square feet of industrial 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 approximately $2.8 million as reimbursement for future tenant improvements at the property. The initial annual base rent for the property is equal to 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%.
As of May 9, 2018, the Company had executed an agreement to purchase one property for a total investment of $3 million. In addition, the Company executed three non-binding letters of intent for three properties representing a total expected additional investment by the Company of approximately $38 million, with the final investment determined based on the Company's review and approval of future tenant improvements at each property.
As of May 9, 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 transaction for which the Company has an executed agreement is subject to the Company's continuing diligence and customary closing conditions, and the Company cannot provide assurances that it will complete the purchase of this property or the other properties in the Company's pipeline on the terms described herein, or at all.
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.
The Company generated rental revenues of approximately $2.7 million for the three months ended March 31, 2018. The Company began real estate operations after closing its initial public offering and purchasing the Company's initial property in December 2016.
For the three months ended March 31, 2018, the Company recorded net income and net income per diluted share of approximately $607,000 and $0.09, respectively. For the first quarter 2018, funds from operations ("FFO") and FFO per diluted share were approximately $1.1 million and $0.18, respectively; and AFFO and AFFO per diluted share were approximately $1.4 million and $0.23, 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 not be conducting a conference call to discuss its first quarter 2018 earnings results, but does expect to conduct a conference call for second quarter 2018 earnings results.
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. 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 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.