Innovative Industrial Properties Announces Q2 2021 Operating, Investment and Capital Markets Activity

Rhea-AI Summary

Innovative Industrial Properties (IIPR) reported operational and financial updates from April 1, 2021, to July 6, 2021. As of this date, IIP owned 72 properties spanning 6.6 million rentable square feet, all 100% leased with an average lease term of approximately 16.7 years. IIP invested about $1.6 billion in total assets and committed an additional $347.8 million for tenant-related enhancements. The company executed several transactions, including four acquisitions and lease amendments, with total investments reaching $176.95 million. Additionally, IIP raised $300 million through senior notes to support its growth in the cannabis sector.

Positive

• IIP owns 72 properties across 15 states, totaling 6.6 million rentable square feet.
• All properties are 100% leased, offering a stable income stream.
• A total investment of approximately $1.6 billion enhances the company's asset base.
• IIP committed an additional $347.8 million for tenant improvements, boosting future property value.
• Raised $300 million through senior notes, strengthening capital for future investments.

Negative

• None.

Innovative Industrial Properties, Inc. (IIP), the first and only real estate company on the New York Stock Exchange (NYSE: IIPR) focused on the regulated U.S. cannabis industry, announced today its operating, investment and capital markets activity from April 1, 2021 through today.

Operating Activity

As of July 6, 2021, IIP owned 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 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.

Investment Activity

From April 1, 2021 through today, IIP 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 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. Additional detail regarding each transaction is set forth below:

State		Closing Date		Rentable Sq. Ft.(1)			Purchase Price(2)			Additional Investment			Total Investment
Pennsylvania		April 1, 2021			40,000			N/A			30,000			30,000	(3)
Michigan		April 16, 2021			175,000			15,550			14,450			30,000	(4)
Pennsylvania		May 13, 2021			239,000			41,750			26,000			67,750	(5)
Michigan		May 14, 2021			85,000			10,250			5,750			16,000	(6)
Massachusetts		May 26, 2021			70,000			3,100			15,000			18,100	(7)
Florida		June 8, 2021			N/A			N/A			8,000			8,000	(8)
Florida		June 18, 2021			N/A			N/A			7,100			7,100	(9)
		Totals			609,000		$	70,650		$	106,300		$	176,950

___________

(1)		Includes expected rentable square feet at completion of construction for certain properties.
(2)		Excludes transaction costs.
(3)		The amount relates to a lease amendment which increased the tenant improvement allowance under a lease at one of IIP’s Pennsylvania properties by $30.0 million to a total of approximately $40.0 million, and also resulted in a corresponding adjustment to the base rent for the lease at the property. With this additional tenant improvement allowance, the tenant is expected to expand the facility by approximately 40,000 square feet and complete the buildout of the existing 89,000 square foot building.
(4)		The tenant is expected to complete tenant improvements at the property, for which IIP agreed to provide reimbursement of up to approximately $14.4 million.
(5)		The tenant is expected to complete tenant improvements at the property, for which IIP agreed to provide reimbursement of up to $26.0 million.
(6)		The tenant is expected to complete tenant improvements at the property, for which IIP agreed to provide reimbursement of up to approximately $5.7 million.
(7)		The tenant is expected to complete tenant improvements at the property, for which IIP agreed to provide reimbursement of up to $15.0 million.
(8)		The amount relates to a lease amendment which increased the tenant improvement allowance under a lease at one of IIP’s Florida properties by $8.0 million to a total of $16.2 million, and also resulted in a corresponding adjustment to the base rent for the lease at the property.
(9)		The amount relates to a lease amendment which increased the tenant improvement allowance under a lease at one of IIP’s Florida properties by $7.1 million to a total of approximately $17.9 million, and also resulted in a corresponding adjustment to the base rent for the lease at the property.

In addition, on June 25, 2021, IIP closed on a construction loan with a developer for the construction of a regulated cannabis cultivation and processing facility in California. IIP 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 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, through its operating partnership subsidiary (the Operating Partnership), issued $300 million aggregate principal amount of unsecured senior notes (the Notes). The Notes are the Operating Partnership’s general unsecured and unsubordinated obligations, are fully and unconditionally guaranteed by IIP and the Operating Partnership’s subsidiaries, and rank equally in right of payment with all of the Operating Partnership’s existing and future senior unsecured indebtedness, including its 3.75% Exchangeable Senior Notes due 2024. The Notes are governed by an indenture, which includes certain covenants.

The sale of the Notes generated net proceeds of approximately $293 million, after deducting the initial purchasers’ 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 intends to use the net proceeds from the offering to invest in specialized industrial real estate assets that support the regulated cannabis industry that are consistent with its investment strategy, and for general corporate purposes.

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 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.

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FAQ

What recent investments has Innovative Industrial Properties (IIPR) made in the cannabis sector?

From April 1, 2021, to July 6, 2021, IIPR made four property acquisitions and lease amendments valued at $176.95 million.

How many properties does IIPR currently own and where are they located?

IIPR owns 72 properties located across 15 states, including Arizona, California, and Florida.

What is the weighted-average remaining lease term for IIPR's properties?

The weighted-average remaining lease term for IIPR's properties is approximately 16.7 years.

What financing activities has IIPR recently undertaken?

IIPR issued $300 million in unsecured senior notes to fund investments in regulated cannabis real estate.

How much has IIPR invested in total assets?

IIPR has invested an aggregate of approximately $1.6 billion in its properties.