REIT Archives - Green Market Report

StaffMay 5, 2022
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2min5650

After the market closed on Wednesday, Innovative Industrial Properties, Inc. (IIP) (NYSE: IIPR) announced results for the first quarter ending March 31, 2022. The cannabis REIT delivered total revenues of approximately $64.5 million in the quarter, representing a 50% increase from the prior year’s quarter. However, it missed the Yahoo Finance Average analyst estimate for revenues of $67 million.

IIP said that the increase was driven primarily by the acquisition and leasing of new properties, additional improvement allowances, and construction funding at existing properties resulting in adjustments to base rent, and contractual rental escalations at certain properties.

IIP recorded net income attributable to common stockholders and net income attributable to common stockholders per diluted share of approximately $34.7 million and $1.32, respectively. This also missed the average analyst estimate for earnings of $1.41.

The funds from operations (FFO) (diluted) and FFO per diluted share of approximately $48.9 million and $1.86, respectively; normalized FFO, which adds back to FFO acquisition-related expense and the loss on exchange of a portion of the Exchangeable Senior Notes during the three months ended March 31, 2022 (Normalized FFO).

Plus a Normalized FFO per diluted share of approximately $49.1 million and $1.87, respectively; and AFFO and AFFO per diluted share of approximately $53.8 million and $2.04, respectively. For the three months ended March 31, 2022, FFO (diluted), Normalized FFO, AFFO and FFO, Normalized FFO and AFFO per diluted share include the dilutive impact of the assumed full exchange of the Exchangeable Senior Notes for shares of common stock.

 


Debra BorchardtFebruary 7, 2022
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3min16010

Last week Innovative Industrial Properties, Inc.  (NYSE: IIPR) announced that its operating partnership, IIP Operating Partnership, LP had launched a $300 million offering, but on Friday after the market closed, the company quietly pulled it. The company’s filing stated that it “determined not to proceed with its proposed public offering of $300 million of senior notes due 2027 previously announced on February 1, 2022, due to market conditions.” IIP stock has tumbled from approximately $286 in November 2021 to lately sell at $193.

The cannabis REIT (real estate investment trust) had originally planned to use the net proceeds from the offering to invest in specialized industrial real estate assets used in the regulated cannabis industry that are consistent with its investment strategy, and for general corporate purposes. The notes were to include a 3.75% Exchangeable Senior Notes due 2024 and 5.50% Senior Notes due 2026. As of September 2021, the company had $127 million in cash and cash equivalents.

IIP Portfolio

At the beginning of January, IIP reported that it owned 103 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 7.7 million rentable square feet (including approximately 2.5 million rentable square feet under development / redevelopment). As of January 5, 2022, IIP had invested approximately $1.7 billion across its portfolio (consisting of purchase price and construction funding and improvements reimbursed to tenants, but excluding transaction costs) and had committed an additional approximately $316.1 million to reimburse certain tenants and sellers for completion of construction and improvements at IIP’s properties. The company said that these statistics did not include an $18.5 million loan from IIP to a developer for construction of a regulated cannabis cultivation and processing facility in California and up to $55.0 million that may be funded between June 15, 2022 and July 31, 2022 pursuant to IIP’s lease with a tenant at one of IIP’s Pennsylvania properties, as the tenant at that property may not elect to have IIP disburse those funds and pay IIP the corresponding base rent on those funds.

Ina short span of time, (from October 1, 2021 through January 5, 2022), IIP made 29 acquisitions (including 28 new properties and the acquisition of certain facilities at an existing property) for properties located in California, Colorado, Michigan, North Dakota and Pennsylvania, and executed one lease amendment to provide an additional improvement allowance at a property located in Massachusetts. In these transactions, IIP established new tenant relationships with Gold Flora, LLC, Medicine Man Technologies, Inc. (Schwazze), and Southwest Alternative Care, LLC (Kaya Cannabis), while expanding existing relationships with Columbia Care Inc., Curaleaf Holdings, Inc., LivWell Holdings, Inc. and Temescal Wellness of Massachusetts, LLC.


StaffFebruary 2, 2022
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9min12660

Private company Pelorus Equity Group has updated the business world with its operational results. The company is known for providing bridge commercial real estate loans for cannabis businesses and owners with cannabis-related real estate. The company’s privately-held mortgage real estate investment trust, the Pelorus Fund, ended the year with $243 million assets under management and $193 million of equity. This amounted to a 434% growth year-over-year in 2021.

“As cannabis operators and landlords with commercial real estate continued to enter the sector,  we saw the need for funding to support build-outs, expansions and upgrades spike in 2021,” said  Dan Leimel, CEO of Pelorus Equity Group and Manager of the Pelorus Fund. “In 2022, we expect to see a sustained need for commercial real estate funding to continue. With our ability to structure asset-based lending solutions for complex transactions, we provide our clients innovative loan programs that enable them to scale their operations, and cross numerous thresholds that most thought were unattainable. In the coming year, we plan to aggressively scale our assets under management while bringing more novel deal structures and lending solutions to some of the largest and fastest-growing cannabis companies.”
Pelorus and Pelorus Fund listed the following 2021 highlights in a statement:
  • Upsized Pelorus Fund’s offering to $1B from its previous $250M offering.

  • Pelorus Fund outperformed its original 2021 growth projections of 300% by 134%.

  • Pelorus saw 434% year-over-year growth, ending the year with $243 million AUM and $193 million of equity – more equity than any other privately held or publicly traded commercial real estate lender in the cannabis space.

  • First in the cannabis industry to secure up to a $20M line of credit with an FDIC–insured bank at 4.75% and no non-usage fees.

  • First to close a bond offering of $42,250,000 aggregate principal amount of its 7% Senior Unsecured Notes in the cannabis sector.

  • Pelorus Fund, along with its Notes, became the first privately held mREIT to receive an Investment Grade BBB+ rating from the Egan-Jones Ratings Company.

  • Pelorus Fund entered into a letter of intent (“LOI”) to complete StateHouse Holdings’ real estate financing of US$77.3M of non-dilutive real estate debt financing.

  • Entered into a $19 million construction financing loan with Item 9 Labs Corp., a vertically integrated cannabis dispensary franchisor and operator that produces premium, award-winning products.

  • Since 2016, Pelorus has originated 59 commercial real estate loan transactions and deployed $244 to cannabis-use real estate owners, comprising nearly 2 million sq. ft. in eight states across the U.S.


StaffNovember 30, 2021
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4min27621

Chicago Atlantic Real Estate Finance, Inc. is a newly formed commercial real estate finance company or REIT. The current portfolio is mostly first mortgage loans to state-licensed operators in the cannabis industry. The company expects the IPO to be priced between $16.00 and $18.00 per share and could raise as much as $129 million. It has applied to list the common stock on the Nasdaq Global Market under the symbol “REFI”.

The existing portfolio contains loans to companies with operations that are geographically concentrated in Arizona, Florida, Illinois, Maryland, Massachusetts, Michigan, Nevada, New Jersey, New York, Ohio, Pennsylvania, and West Virginia. The current investment strategy includes a focus on providing loans to companies with operations in states that limit the number of cannabis license issuances in order to protect the value of the collateral, circumstances and developments related to operations in these markets that could negatively affect its business.

According to the company’s filing, as of November 22, 2021, it had originated and closed 30 loans totaling approximately $649 million to companies operating in the cannabis industry, had approximately $318.3 million of loans outstanding and were committed to funding approximately $120 million in additional loans under commitments from existing credit facilities (subject to customary closing conditions), with approximately $98 million of potential loans under executed non-binding term sheets in various stages of underwriting and loan documentation. The interest rates range from a low of 7% to 15% and all the loans have prepayment penalties.

The company said it had reviewed over 500 cannabis loan opportunities, of which 30 loans have been funded, and, as of November 22, 2021, were evaluating 45 loan opportunities representing potential total loan commitments of approximately $882.9 million. “We believe our relationship with our Manager benefits us by providing access to a robust pipeline of potentially actionable opportunities, an extensive relationship network of cannabis industry operators and other real estate loan opportunities and significant back-office personnel to assist in the origination and management of loans.”

“We expect cannabis lending will continue to be a principal investment strategy for the foreseeable future; however, we expect to also lend to or invest in companies or properties that are not related to the cannabis industry if they provide return characteristics consistent with our investment objective. We are externally managed by Chicago Atlantic REIT Manager, a subsidiary of Chicago Atlantic Group.”


StaffAugust 20, 2021
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3min19920

Cannabis REIT NewLake Capital Partners, Inc. (OCTQX: NLCP) closed on its initial public offering raising $102 million and began trading on the OTC on Friday August 20. The company closed on 3,905,950 shares of common stock at an initial public offering price of $26.00 per share.

“The closing of our IPO is a significant milestone and provides us with additional investment capital to continue our growth trajectory as one of the leading providers of real estate capital across the cannabis industry,” said David Weinstein, Chief Executive Officer of NewLake Capital Partners. “We want to express our gratitude to the investment community for supporting our initial public offering and believing in our long-term vision.”

NewLake Capital Partners is an internally managed triple-net lease REIT that purchases properties leased to state-licensed U.S. cannabis operators. NewLake currently owns a geographically diversified portfolio of 27 properties across 10 states with 8 tenants, comprised of 17 dispensaries and 10 cultivation facilities. The company said its tenants include companies like Curaleaf, Cresco Labs, Trulieve and Columbia Care. As of June 30, 2021, New Lake said these properties were 100% leased and primarily located in limited-license jurisdictions.

Anthony Coniglio, President and Chief Investment Officer of NewLake Capital Partners, commented, “NewLake’s current portfolio consists of assets leased to high-quality companies in the cannabis space. As the cannabis industry continues to expand, with additional states recently legalizing cannabis for medical or adult-use, the potential for further growth of our portfolio continues to accelerate. With the additional capital, we expect to expand our portfolio and increase our revenue streams to provide meaningful value to our shareholders.”

Executive Management

 Chairman of the Board of Directors, Gordon DuGan, most recently served as Chief Executive Officer of Gramercy Property Trust, a formerly NYSE-listed REIT, during which time the company grew substantially and was sold to Blackstone Equity Partners VIII, LP for $7.6 billion. Chief Executive Officer, David Weinstein, has extensive commercial real estate banking and investment experience and was formerly the Chief Executive Officer of a NYSE-listed office REIT. Anthony Coniglio, President and Chief Investment Officer, founded a cannabis REIT that the Company merged with in March 2021 and has more than 30 years of experience in real estate and banking. Board member, Peter Kadens, was the Co-Founder and former Chief Executive Officer of Green Thumb Industries, one of the leading cannabis companies, and provides valuable insight into the cannabis industry.


Debra BorchardtAugust 9, 2021

22min16940

Debra Borchardt, Editor-in-Chief, Green Market Report:

Rob Sechrist is the president of Pelorus Equity Group, a company that you may not be familiar with, but you will soon. This company is a little unique. It’s a mortgage REIT (real estate investment trust), not a traditional REIT. And Rob, why don’t you explain to our audience a little bit about that difference? Because most people are really familiar with their traditional REIT that buys buildings and then takes the lease money and gives that back to the shareholders. This is a little bit different. Can you go into that?

Rob Sechrist, President, and Co-founder of Pelorus Equity Group:  

Sure. Debra, thanks for having me. I’m happy to explain the difference. Most people are unfamiliar that there’s more than one type of REIT that traditional REIT owns properties, like IIPR. A mortgage REIT simply means that that is a lender that’s able to get the same tax advantages of a traditional REIT. Those tax advantages, just to re-clarify are 20% savings on your federal taxes. You only pay state taxes in the state that you’re domiciled.

GMR: 

Your company specifically focuses on the cannabis industry and what you guys do is help cannabis companies that need money to build out their facilities, which can be a really expensive endeavor for a cannabis company. How are you approaching these cannabis companies with this help?

Sechrist: 

Our background is what we call value-added lending. In our world “value add” means that we are improving the property with a portion of our loan is going back into the property with a pre-approved budget. Typically, it’s going to be tenant improvements. It could be ground-up construction, but this is the largest newly created asset class in the country. We’ve extrapolated the data that it’s about $50 billion real estate asset class that just magically appeared. When that asset class was created by the legislature, in each of these states, those properties actually in order for them to be legal the real estate needs to be approved and that side is one element of it. It has to be built out. It has to be a purpose for cannabis use tenant, and then the tenant, the cannabis use operator must also be approved by the state. Those two elements, once they’re plugged together, that is a legalized property and now you’re on your way and it’s one of the 50 billion.

GMR:

To your point with cannabis, it isn’t so easy to just go to a bank and get a construction loan. So you’ve put up all this money to buy this building. You’ve spent all this money to get these licenses and these applications approved. A lot of these companies have spent millions just to get to basically square one. That’s really just the first inning of the ball game. They still have to build out these facilities, which is even more money. A lot of times, they’re kind of starting to get tapped out at that point and they can’t just go to a typical bank and say, “Hey, we got to build out this building. We’re a legit company. We’re not doing things that are illegal.” But the banks are just like, “No way.” The major banks want nothing to do with this, right?

Sechrist:  

The major federal banks are not in the sector. The state banks and credit unions, there are 684 that are doing deposit relations for tier-one plant-touching operators and businesses. And of those banks, there’s probably a few dozen that are actually lending, but the banks are difficult to get loans in general. They certainly are not in the value add lending space at this time. And more importantly is that when you go to build a cannabis facility, typically these properties, the tenants are doing 10 to 15 times more revenue per month than a non-cannabis use tenant. And why I’m giving that and focusing on that is that to be focusing purely on your rate and points for the loan, as opposed to the speed of getting that property up and stabilized is very shortsighted. You want to get your property built as quickly as possible.

Our average borrower takes about 12 months to build and stabilize their property. And we’re typically processing 50 to 100 draws for the borrower to be reimbursed for the expenses that they’ve put out for the pre-approved budget. So for example, if your facility is doing one to $2 million a month or has the ability to do that, and you want to save a couple of percent, and even if it was a 10% difference between our rate and a bank rate, that premium might be a million dollars or $2 million in a year. But if you’re doing one to 2 million a month, that premium is absorbed, if we save them one month. Typically, we’re going to save at least 20% compared to other private lenders best in class and probably six months with a bank. And so it’s a no-brainer once you analyze it.

Unfortunately, the cannabis use borrowers are so focused on brands. They have so many things going on, compliance, inventory, genetics, all the stuff that they’re trying to deal with. A lot of them haven’t worked with a construction loan before, and they have only done their own home mortgage. The only thing they ever knew at that time was the rate and the points. So they’re not aware that you need a high-performance loan and they might get into a loan and realize, “This isn’t even going anywhere. I have to advance the money. I’m not getting reimbursed fast enough.” Usually the project comes to a stop. That is not the situation you want to be in. Plus Pelorus is the first dedicated holistic lender for the cannabis sector back in 2016. And we look at the cannabis use properties as a holistic approach. A bank does not do that.

We want to make sure that we provide all the money that is necessary or make sure that all that is encapsulated in our loan that gets the property acquired, built out with the tenant permits and the equipment to make sure that, that tenant can actually start operating. A bank would not provide all those features to that loan. And so you might have a situation where the tenant doesn’t have the money because the property is not cash flowing yet. And they’re not able to go raise that equity that’s necessary for the equipment to build it out. And this equipment is enormously expensive. Some of the equipment as a whole, for the project might be more than the purchase price of the building. And so if you are trying to go raise that money for equipment for a building you don’t even own, it’s a very difficult challenge. So you want to have a solution that is holistic in the approach. And we were the first to do that.

GMR:

One of the things that kind of differentiates Pelorus is your rates are quite high, but to your point, you’re getting the money to the client faster, correct?

Sechrist:  

We offer high-performance loans to achieve what the borrowers looking to do. 100% closing ratio of all the transactions that we’ve ever done. I don’t know if any other lender can say that. More importantly, or just as important as closing is to make sure that the facility gets up and running and built as quickly as possible. And so you need to look at that ratio of what is the pricing savings that you would get with a lower pricing loan as opposed to what is the opportunity revenue that we lost by not penetrating the market and not getting this facility up and running as quickly as possible. So as today, most of the cannabis community knows who we are and knows that this is the place that they want to go to get a facility built.

GMR:

How much money have you guys raised today?

Sechrist:

We’ve deployed more than $185 billion. We’ve got about $60 million going out in the next 30 days or so. So we’ll be to $250 million here in the very near future.

GMR:

You’re working with some pretty big names. I saw you’re doing a deal with Acreage Holdings (OTC: ACRHF) for a fairly large amount.

Sechrist: 

We did a deal with Acreage Holdings in the fourth quarter of last year. By the way, they are big enough that they could have gone to an institutional rate. So in that specific scenario, their board came to the realization that they needed to look at the entire cost of the capital, not just the pricing of the loan and they quickly determined in the end that was the direction to go after. Our pricing does shock people, but that’s because you’re buying a high-performance loan and there’s a lot to go into process, an unlimited amount of draws in one to three days. Nobody else can do that. That is so important. And that’s what you need to be focused on. If you want to go and take your time and have the lowest cost, and it really doesn’t matter how long it takes for that facility, then you probably want to start with another lender.

GMR: 

That’s pretty interesting. Now, we’ve seen a lot of situations in Canada with regards to overbuilding. Some of the companies like Canopy Growth (NASDAQ: CGC) has shut down some of their indoor facilities. Do you feel that because the United States is so early on in its legalization, that we’re not going to be in that kind of situation, that we have companies that could get overbuilt with regards to facilities?

Sechrist:    

So two comments there. In Canada, as far as we know, there’s nobody that had built a hundred thousand or a million square foot facilities that were at scale in the entire country and anywhere in the world. So you have people that are trying to scale from zero to a thousand or whatever on the first try and by the time that facility gets built, you realize we didn’t build this correctly, and you have to write that whole facility off. So, they didn’t have a learning curve and they made mistakes up in Canada that I don’t think that you’ll see duplicated. And certainly not to that same extent, that happened up there. One was, is that you really only had a gray market or illegal market operators that were mostly operating outdoors. Some of them might’ve had some indoor greenhouses, but they would have been tens of thousands of feet, not hundreds of thousands or millions of square feet.

When you go to that scale, you have different challenges that you’re trying to deal with. And if you get it wrong, you’ve already built the facility, before you realize we didn’t configure this properly. And it’s actually less expensive to sell this property and to go somewhere else. We started analyzing the sector because we realized that our skills in value add lending were immediately applicable to the sector. We analyzed it and we originated the first transaction in 2016. We only did small transactions to make sure that not only were we learning what the borrowers needed to do, but they were learning as well.

So we scaled with small facilities, 10,000 square feet, 20,000. Now, we do 100,000 square feet and larger, but we worked our way up to understanding the market. Secondly, we also built the first proprietary database where we analyze each of the cannabis operators that are licensed within each state. We identify who they are, what types of licenses they have and we associate what properties they’re in. We look at the average build cost, the average price per square foot of the universe of properties. For each of these types of licenses. So we know the size of the capacity of the market is existing. We also look at some other things with other technology we look at to understand, “Is this market reaching capacity from a production size? Is it oversupplied? Is it under-supplied?”

We’re monitoring all of that stuff. So we’re using data and facts to analyze this. Typically in most lending sectors of the country, there would be a hedge fund, or there would be a third party doing this and spending millions of dollars to analyze this. Well, we needed that data. So we had to make the investment ourselves and so today we have a very robust, what we call the big data project that we pull all that data and extrapolate it to help us make our decisions.

GMR:

I was wondering with regards to risks, so risks for your investors. In this situation, you’re lending money to these companies to build out their facilities. What is the risk that they potentially aren’t able to complete that facility, whether they’ve run into other problems elsewhere? Certainly, it’s the cannabis industry. We’ve seen lots of situations blow up pretty quickly. Are you, or have you seen anything like this, and have you seen other companies willing to then jump in and take over? What is your situation with that?

Sechrist:

We’ve originated more than 5,000 of these types of transactions. Whether you’re a cannabis company building a facility or somebody else building a facility, that’s an issue that we have to de-risk or look at. The way that we start is we first start with a feasibility review of the budget to make sure that, that budget is sufficient, regardless of who the contractor is. If we had to replace the contractor, that there’s sufficient capital, and it’s also reviewed to make sure the water’s there, the permits are in place, the electricity has ample to supply that for what we’re building, etc. We take that budget and we run it through our data to make sure that it’s sufficient, no matter who we use for the budget, that there’s enough capital. Then we build a contingency as well, just in case there are some overruns.

We start with that aspect and then as we are going through that project, actually the borrower has to advance the money first. Then we go and verify that the invoices have been paid. We get proof of payment. We get lien releases from the contractors to make sure that they can’t lien the project. Once all that’s been reviewed and completed, then we do a physical inspection to verify that those went into our property and you get a percentage of completion. So we’ve de-risked that and we’re prepared to fund that project and complete that project, whether it’s with our borrower, that contractor, or if we take it ourselves. So that’s on the property side. As far as the tenant or operator side, we also analyze to make sure that we’ve got a path through to replace that tenant ourselves, if necessary, if the borrower failed and if the tenant failed.

We have the ability to complete the building and we have the ability to replace the tenant. As far as our portfolio, we haven’t seen a situation where the tenant has not been able to be replaced. We don’t have any transactions that we’ve had to replace the tenant yet. We do have one of our borrowers that replaced another facility next door, not ours, but they did it in 90 days. We use that as a case study to make sure that what we’re thinking is as possible and what the timelines are. And once these facilities are built out, they have the power, the water, the infrastructure, the general configuration, isn’t going to change that much. Most of our facilities start with indoor cultivation, and then they might have some processing or some extraction, and some other things in there.

Once you’ve got kind of that layout, different operators reconfigure within those rooms, but the general gist of it, it’s going to be the same. Commercial properties are a lot easier to reposition walls and things than in residential houses where everything’s load-bearing. So it’s a different situation.

GMR:

Absolutely. So what are the plans for Pelorus for the rest of the year? Are you guys going to continue to raise money? I would assume keep lending.

Sechrist:

We’re scaling the company. We continue to add to our team. We just opened a New York office to get a presence on the East Coast. Our goal is to get to a billion dollars assets under management. Our investments in the company, from our team and our people that we work with are positioned on that on growth and to maintaining our position as the number one value add lender and the first and the most experienced in the sector.

GMR:

Well, there will certainly be a lot of activity happening in the Northeast, now that all the legalization is happening in New Jersey, in New York. Rob, thank you so much for taking time out of your very busy day to talk to Green Market Report.

Sechrist:                                       Thank you so much.

 


StaffJuly 7, 2021
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4min15480

Following the close of the market on Tuesday, cannabis REIT (Real Estate Investment Trust) Innovative Industrial Properties, Inc. (IIP) (NYSE: IIPR) posted its operating, investment, and capital markets activity from April 1, 2021, through today. The company’s first quarter ended in March, but since that time IIP has been very active.

IIP said that from April 1, 2021, through Tuesday, it has made four acquisitions for properties located in Massachusetts, Michigan, and Pennsylvania, and executed three lease amendments to provide additional tenant improvements at properties located in Florida and Pennsylvania. In these transactions, IIP said it established new tenant relationships with Sozo Companies, Inc. and Temescal Wellness of Massachusetts, LLC, while expanding existing relationships with Green Peak Industries LLC (Skymint), Harvest Health & Recreation Inc., Jushi Holdings Inc., and Parallel.

In addition, on June 25, 2021, IIP said it closed on a construction loan with a developer for the construction of a regulated cannabis cultivation and processing facility in California. IIP said it is expected to lend up to $18.5 million to the developer for the construction of an approximately 102,000 square foot building. Following completion of development of the property, IIP said it has an option to purchase the property and may execute a negotiated lease with an affiliate of the developer or with another third party if IIP determines to exercise its purchase option.

Capital Markets Activity

On May 25, 2021, IIP issued a $300 million aggregate principal amount of unsecured senior notes. The sale of the notes generated net proceeds of approximately $293 million, after deducting the initial purchaser’s discounts and commissions and offering expenses. The notes bear interest at 5.50% per annum, payable semi-annually in arrears on May 15 and November 15 of each year, until the maturity date of May 25, 2026. IIP said it intends to use the net proceeds from the offering to invest in specialized industrial real estate assets that support the regulated cannabis industry that is consistent with its investment strategy, and for general corporate purposes.

Portfolio

As of July 6, 2021, IIP owns 72 properties located in Arizona, California, Colorado, Florida, Illinois, Maryland, Massachusetts, Michigan, Minnesota, Nevada, New Jersey, New York, North Dakota, Ohio, Pennsylvania, Texas, Virginia, and Washington, representing a total of approximately 6.6 million rentable square feet (including approximately 2.2 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 July 6, 2021, IIP had invested an aggregate of approximately $1.6 billion (consisting of the purchase price and development and tenant reimbursement commitments funded, but excluding transaction costs) and had committed an additional approximately $347.8 million to reimburse certain tenants and sellers for completion of construction and tenant improvements at IIP’s properties, which does not include an $18.5 million loan from IIP to a developer for construction of a regulated cannabis cultivation and processing facility in California.

 


StaffMay 6, 2021
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3min12000

After the market closed on Wednesday, Innovative Industrial Properties, Inc. (IIP) (NYSE: IIPR) delivered another quarter of solid results. The real estate investment trust (REIT) reported that its total revenues increased 103% to $42.9 million for the first quarter ending March 31, 2021. This beat the yahoo Finance average analyst estimate for revenues of $42.88 for the quarter.

IIP also recorded net income of approximately $25.6 million for the quarter, or $1.05 per diluted share, and adjusted funds from operations (“AFFO”) of approximately $38.4 million, or $1.47 per diluted share (Note: AFFO per diluted share for the period includes the dilutive impact of the assumed full exchange of IIP’s $143.75 million of exchangeable senior notes for shares of common stock). This also beat the analyst estimate for $0.96. In addition, IIP paid a quarterly dividend of $1.32 per share on April 15, 2021, to common stockholders of record as of March 31, 2021, representing a 32% increase over the first quarter of 2020’s dividend and an approximately 6% increase over the fourth quarter 2020 dividend. The company also decided against hosting a conference call to discuss its first-quarter results and management made no comments in the company’s press release.

The REIT noted that the increase in its first-quarter revenue over last year 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.

Portfolio of Properties

As of May 5, 2021, IIP said it owned 69 properties located in Arizona, California, Colorado, Florida, Illinois, Maryland, Massachusetts, Michigan, Minnesota, Nevada, New Jersey, New York, North Dakota, Ohio, Pennsylvania, Texas, Virginia and Washington, representing a total of approximately 6.2 million rentable square feet (including approximately 2.3 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 May 5, 2021, IIP had invested approximately $1.2 billion across its portfolio and had committed an additional approximately $339.5 million to reimburse certain tenants and sellers for the completion of construction and tenant improvements at IIP’s properties.

The average price target for the stock is $217 and the shares were lately trading at $173. It looks as if the shares are selling slightly higher in early trading on Thursday.

 


Debra BorchardtFebruary 25, 2021
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5min11840

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 BorchardtMay 7, 2020
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Cannabis REIT Innovative Industrial Properties, Inc.  (NYSE:IIPR) reported its results for the first quarter ending March 31, 2020, with total revenues of approximately $21.1 million. This was a 210% increase from the prior year’s first quarter. Innovative Industrial also delivered a net income of approximately $11.5 million or $0.72 per diluted share.

The adjusted funds from operations (AFFO) were approximately $17.8 million, or $1.12 per diluted share. Net income available to common stockholders and AFFO increased by 249% and 236% from the prior year’s first quarter, respectively. The company paid a quarterly dividend of $1.00 per share on April 15, 2020, which increased approximately 122% increase over the first quarter of 2019’s dividend.

“One of the pillars of our business strategy has consistently been a conservative, flexible balance sheet, and we believe we are exceptionally well-positioned to not only weather this unprecedented health crisis and economic disruption but to continue to make real estate investments on a long-term basis with best-in-class tenant operators,” said Alan Gold, Executive Chairman of IIP. “We remain steadfast in our support of this industry and its bright long-term future and are working every day through this crisis with our tenant partners toward continuing to build a tremendous future forward of growth and strength for many years to come. When we overcome this crisis through the collective ingenuity of our top medical professionals and researchers, the regulated cannabis industry will continue to thrive and be one of the top drivers of growth and good jobs across the country.”

COVID Rent Deferrals

While cannabis was deemed an essential service in many states, social distancing was still required. This makes working in a grow facility a challenging prospect. IIP said it has had conversations with each of its tenants in March and April over the situation. As a result, the company said that it is providing temporary rent deferrals for three of its 21 tenants. The decision was to apply a portion of the security deposit IIP holds under each lease to pay April rent in full, defer rent for May and June in full, and provide for the pro-rata repayment of the security deposit and deferred rent over an 18 month time period starting July 1.

That means a total of $743,000 of security deposits that IIP holds in cash were applied to the payment of rent for April, and a total of approximately $1.5 million in rent was deferred for May and June. The total of this amount, $2.3 million, represents approximately 3% of IIP’s total revenues as reported for the three months ended March 31, 2020, annualized.

Current Portfolio

As of May 6, 2020, IIP said it owned 55 properties located in Arizona, California, Colorado, Florida, Illinois, Maryland, Massachusetts, Michigan, Minnesota, New York, Nevada, North Dakota, Ohio, Pennsylvania, and Virginia, totaling approximately 4.1 million rentable square feet (including approximately 1.3 million rentable square feet under development/redevelopment), which were 99.1% leased (based on square footage) with a weighted-average remaining lease term of approximately 15.9 years. As of May 6, 2020, the company has invested approximately $719.7 million in the aggregate and had committed an additional approximately $143.2 million to reimburse certain tenants and sellers for completion of construction and tenant improvements at IIP’s properties.

Financial Picture

In January, IIP completed an underwritten public offering of 3,412,969 shares of common stock, including the exercise in full of the underwriters’ option to purchase an additional 445,170 shares, resulting in net proceeds of approximately $239.6 million. The company reported that it has roughly $108.3 million in cash and cash equivalents and approximately $272.9 million in short-term investments, totaling approximately $381.2 million.


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