Innovative Industrial Stock Sells Off Despite Solid Earnings

Innovative Industrial Properties, Inc. (IIP) (NYSE: IIPR) released results for the fourth quarter and year ending December 31, 2020, after the market close on Wednesday. The stock was pulling back in pre-market trading by over 6% to sell near $206 as investors were disappointed with the earnings. Innovative Industrial delivered a fourth-quarter FFO of $1.36 missed by $0.07 and the revenue of $37.09 million missed by $1.41 million despite increasing by 110%.

Seven analysts cover the stock with five giving the company a buy rating and two at a hold rating. the average price target is $207 and the stock had been selling for around $220. The 52-week high is $220, so the selling may be related to just some simple profit-taking.

Fourth Quarter

IIP reported that its total revenues increased 110% to $37.1 million in the quarter. The net income was approximately $21.0 million for the quarter, or $0.91 per diluted share, and AFFO of approximately $32.4 million, or $1.29 per diluted share. The company also paid a quarterly dividend of $1.24 per common share on January 15, 2021 to stockholders which was a 24% increase over last year’s fourth quarter and a 6% increase sequentially and equal to an annualized dividend of $4.96 per share. The company also engaged in an “at-the-market” equity offering program, that issued 1,762,500 shares of common stock during the fourth quarter totaling approximately $262.9 million in net proceeds.

Full Year

For the full year of 2020, IIP delivered total revenues of $116.9 million and net income of approximately $64.4 million and adjusted funds from operations (“AFFO”) of approximately $97.8 million, representing increases of 162%, 191%, and 180% over 2019, respectively. The company reported $3.27 of net income attributable to common stockholders per diluted share and $5.00 of adjusted funds from operations (“AFFO”) per diluted share, representing increases of 61% and 53% over 2019, respectively. IIP declared dividends of $4.47 per share, a 58% increase over 2019.

In addition, the company said it closed on over $620 million in new acquisitions and additional investments at existing properties (including commitments to fund future development/redevelopment, but excluding transaction costs), including 20 new property acquisitions, expanding IIP’s footprint to 66 properties totaling 5.4 million rentable square feet in 17 states at year-end.

Renters Are Paying

In a sign of strength within the cannabis community, it seems the rents are getting paid despite COVID challenges. IIP said it had collected 100% of contractual rent due for the fourth quarter of 2020 and 100% of contractual rent due for the months of January and February 2021. The company did note that the tenant at IIP’s Los Angeles, California property was in receivership until IIP signed a new lease with Holistic for the entire property in January 2021. Plus, Medical Investor Holdings, LLC (Vertical) made partial payments of contractual rent due that the properties that Vertical occupied represented less than one percent of IIP’s total gross assets at year-end.

Looking Ahead

The company is sitting comfortably with $126 million in cash and cash equivalents and approximately $619.3 million in short-term investments, totaling approximately $745.3 million. There is no debt, other than approximately $143.75 million of 3.75% exchangeable senior notes maturing in 2024 (the Exchangeable Senior Notes), representing a fixed cash interest obligation of approximately $5.4 million annually, or approximately $1.3 million quarterly.

As of February 24, 2021, IIP said it owned 67 properties located in Arizona, California, Colorado, Florida, Illinois, Maryland, Massachusetts, Michigan, Minnesota, Nevada, New Jersey, New York, North Dakota, Ohio, Pennsylvania, Virginia, and Washington, totaling approximately 5.8 million rentable square feet (including approximately 2.0 million rentable square feet under development/redevelopment), which were 100% leased with a weighted-average remaining lease term of approximately 16.7 years. As of February 24, 2021, IIP had invested approximately $1.1 billion in the aggregate (excluding transaction costs) and had committed an additional approximately $328.7 million to reimburse certain tenants and sellers for the completion of construction and tenant improvements at IIP’s properties.

Debra Borchardt

Debra BorchardtDebra Borchardt

Debra Borchardt is the CEO, Co-Founder, and Editor-In-Chief of GMR. She has covered the cannabis industry for several years at Forbes, Seeking Alpha and TheStreet. Prior to becoming a financial journalist, Debra was a Vice President at Bear Stearns where she held a Series 7 and Registered Investment Advisor license. Debra has a Masters degree in Business Journalism from New York University.


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