Logo of jester cap with thought bubble.

Image source: The Motley Fool.

Innovative Industrial Properties, Inc. (NYSE:IIPR)
Q3 2019 Earnings Call
Nov 7, 2019, 1:00 p.m. ET

Contents:

  • Prepared Remarks
  • Questions and Answers
  • Call Participants

Prepared Remarks:

Operator

Good day, and welcome to the Innovative Industrial Properties, Inc. Third Quarter 2019 Earnings Conference Call and Webcast. [Operator Instructions]

I would now like to turn the conference over to Mr. Brian Wolfe, General Counsel. Mr. Wolfe, the floor is yours, sir.

Brian Wolfe -- Vice President, General Counsel and Secretary

Thank you for joining the call. Presenting today are Alan Gold, Executive Chairman; Paul Smithers, President and Chief Executive Officer; Catherine Hastings, Chief Financial Officer; and Ben Regin, Director of Investments.

Before we begin, I'd like to remind everyone that statements made during today's conference call may be deemed forward-looking statements within the meaning of the Safe Harbor of the Private Securities Litigation Reform Act of 1995, and actual results may differ materially due to a variety of risks, uncertainties and other factors.

For a detailed discussion of some of the ongoing risks and uncertainties of the Company's business, I refer you to the news release issued yesterday and filed with the SEC on Form 8-K, as well as the Company's reports filed periodically with the SEC. The Company disclaims any intention or obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.

Before I hand the call over to Alan, I want to mention that we have limited time for the call today, but we will answer as many questions as we can after our prepared remarks. Alan?

Alan D. Gold -- Executive Chairman

Thank you, Brian, and welcome everyone. Today, based on the exciting third quarter and subsequent to the quarter acquisition activity, we have chosen to host a call today to share our financial results for the third quarter plus year-to-date 2019, and provide our updated perspective on the business and the industry from our most recent call in August.

Now into our third year of operations, the momentum of our business has been tremendous. To recap briefly, in 2019 year-to-date, we acquired 30 properties in nine states and amended leases with our existing tenants for additional property improvements, collectively representing over $380 million of investments, which included both follow-on transactions with our existing tenant partners to facilitate their continued expansion and new tenant relationships. Ben Regin, our Director of Investments, will discuss our recent acquisitions in more detail, and overall portfolio, including the addition of several top performing multi-state operators in the industry.

As of today, we own 41 properties in 13 states, totaling 2.8 million square feet, which are 100% leased on a long-term basis to a high quality licensed cannabis operators. Our current blended yield on these properties is 13.8% with a weighted average remaining lease term of 15.5 years. In addition, we paid a quarterly stock dividend of $0.78 per share to stockholders on October 15th, representing a 123% increase over our third quarter 2018 dividend, and a testament to our property portfolio's operating performance and confidence in our pipeline of acquisitions.

This dividend was also supported by our tremendous 200% plus growth year-over-year in rental revenue, net income and AFFO, which to note, does not take into account at all the 10 acquisitions we completed after quarter-end constituting over $150 million of additional investments. Catherine will also provide more detail regarding our financial results. The medical use cannabis industry continues to experience tremendous growth and change, and Paul will provide some detail on industry and regulatory trends in our call today.

Finally, as announced earlier this week, we continue to make great additions to our team, most recently with the appointment of Tracie Hager as Vice President, Asset Management; and Kelly Spicher as Senior Real Estate Counsel. Tracie brings nearly three decades of leadership in institutional property management, and Kelly with over 16 years of experience advising clients on a variety of complex real estate matters. We are thrilled to have them join the IIP team.

We continue to be very optimistic about the future of this nascent industry, and our ability to deliver results for our stakeholders and enduring value to our tenant partners by providing tailored real estate solutions that meet key operational and capital needs.

With that, I'd like to turn the call over to Paul. Paul?

Paul Smithers -- Chief Executive Officer, President, and Director

Thanks, Alan. As with prior calls, we'll try to provide as an effective an overview as we can with the short time we have today, focusing in on two main topics. One, the current regulatory environment; and two, the dynamics of the industry and developments that we continue to monitor closely.

First, regarding the current federal regulatory environment and legislative development. Of course, cannabis remains a Schedule I controlled substance, which generally prohibits all cannabis use and cannabis-related commercial activity in the United States. That said, Congress has continued to enact spending bills since 2014 with a provision that has been interpreted by courts as preventing the Department of Justice from using funds to interfere with the implementation of state medical-use cannabis laws. That provision was again included in this year's congressional spending bill passed earlier this year, which carries through to November 21st of this year, as part of the stopgap spending bill passed on September 27th. Importantly, the Senate Appropriations Committee has also approved this provision again for the fiscal year 2020 spending bill in late September.

As we reported earlier in June, The House voted 267 to 165 to approve a broader provision that would have included these protections for the regulated adult-use cannabis programs as well, but the Senate Appropriations Committee did not include similar language in its proposed legislation. As a result, the provision protecting medical-use cannabis programs is expected to continue as it has since 2014, but will not include the additional similar protection for states adult-use cannabis programs.

In addition, as I'm sure you're all aware, the Secure and Fair Enforcement Banking Act, also known as the SAFE Banking Act, was passed by The House in late September with resounding support in a vote of 321 to 103. The legislation now moves onto the Senate, where it is likely to face more opposition and may be amended. As we noted previously, the SAFE Banking Act, if it became law, will provide greater federal protection to bank servicing state licensed compliant operators and may also result in banks being more open to providing debt capital to these operators.

Finally, we know that in late September, 21 state attorneys general sent a letter urging congressional leaders to pass the STATES Act, which would exempt state legal cannabis activity from the federal Controlled Substances Act. As you can see, the movement continues forward regarding federal legalization in addressing key concerns of the industry.

I also want to touch on other industry developments that we are monitoring closely. Vaping. As you no doubt are aware, there has been a large number of reported lung injury cases associated with the vaping products reported to the CDC. The FDA and CDC have not identified the causes of the lung injuries other than identifying the commonality that all patients reported the use of vaping products. The CDC further noted their findings indicate that the vaping products containing THC, particularly those obtained illicitly were linked to most of the cases.

Officials in Illinois and Wisconsin also conducted in-depth interviews with 86 patients, with the vast majority reporting using illicit THC containing pre-filled vape cartridges purchased from unregulated sources. We are hopeful that authorities will be able to definitively identify the source of these injuries as soon as possible for the protection of the public and that this will further push the industry away from illicit, potentially unsafe products, to the regulated cannabis markets, where products are generally subject to robust laboratory testing in quality and safety requirements.

Consolidation. We've also been monitoring the continued consolidation of the cannabis industry as larger multi-state operators continue to acquire new licenses and businesses in addition to mergers between large multi-state operators themselves. We believe this trend will continue, if not accelerate, as companies with strong capital resources in a national footprint seek to continue to grow their businesses and team with smaller operators with complementary brands and footprints. At the same time, we do continue to see ample space for smaller independent operators with strong ties to local communities to continue to thrive in the industry. Dan will discuss our recent acquisition and leasing activity, which includes leases with some of the leading multi-state operators in the nation.

Capital market. Vaping concerns in addition to challenges in Canada on a number of fronts in connection with the rollout of the nationwide adult-use cannabis program has significantly negatively impacted stock price valuations for many of the publicly traded cannabis companies and have also impacted both public and private capital markets for operators of all sizes. That said, according to Marijuana Business Daily, there were 38 closed capital raises in August of this year, one fewer than in August of 2018. But the amount raised totaled $973 million compared with $369 million from the prior year's month, an increase of over 160%

Despite the recent equity markets pullback and the headwinds we know, we continue to be firm believers in the tremendous long-term growth potential of the regulated cannabis industry. By 2023, Marijuana Business Daily projects total regulated cannabis sales in the United States will reach between $25 billion and $30 billion annually, more than three-fold increase from estimated 2018 annual sales. This is still an industry in its very early stages and there will certainly be more headwinds that emerge from time to time, but we've seen an amazing long-term future for the industry and look forward to continuing to be the key real estate and capital provider for our operator tenants for many years to come.

I'll now turn the call over to Ben, who will walk you through our recent acquisitions. Ben?

Ben Reigns -- Director of Investments and Finance

Thanks, Paul. The last four months, July through October, have been by far the busiest four months in our Company's history in terms of acquisition activity. Since July 1st, we have acquired 20 properties in eight states and executed four lease amendments with tenants at existing properties as they continue to build additional capacity to meet the demand for their products. As of today, we own 41 properties across 13 states, representing approximately 2.8 million square feet, including approximately 903,000 square feet under development or redevelopment.

I plan to touch on each of our acquisitions by state and also provide some information about each tenant and our portfolio overall in the state. Starting with Illinois. We were very active over the last four months, originally entering the state with our acquisition and leased to Ascend Wellness late last year. In September, we amended our lease with Ascend to provide an additional $8 million for tenant improvements at the property, which resulted in a corresponding adjustment to base rent and is expected to significantly increase production capacity at the property. Ascend is a vertically integrated multi-state operator that has raised over $100 million in capital to-date.

In October, we acquired two more properties in Illinois, totaling 90,000 square feet of industrial space, and entered into long-term leases for each property with CRESCO Labs, with our total investment in the acquisition and tenant improvements at the properties expected to be $46.6 million in the aggregate. CRESCO Labs was founded in 2013, and is one of the largest vertically integrated companies in the United States, with licensed operations in nine states and pending transactions in three states. Including its pending acquisitions, CRESCO has 23 licensed cannabis production facilities, 66 retail cannabis licenses, and 34 operational cannabis dispensaries.

Also in October, we acquired a 70,000 square foot industrial property in Illinois and entered into a long-term lease with Grassroots, with our total investment in the acquisition and tenant improvements at the property, including a planned 50,000 square feet expansion expected to be about $28.2 million. Grassroots is one of the leading multi-state cannabis operators with operations in 11 states and signed a definitive agreement earlier this year to be acquired by Curaleaf.

Finally, in October, we acquired a 48,000 square foot industrial property in Illinois and entered into a long-term lease with PharmaCann, with our total investment in the acquisition and tenant improvements at the property, including a planned 18,000 square foot expansion expected to be $25 million. As you know, our first acquisition in 2016 was a sale leaseback transaction with PharmaCann for their cultivation and processing facilities in New York. Our transaction with PharmaCann in Illinois marks our fifth property acquisition and lease with them, including transactions for their licensed cannabis cultivation and processing facilities in Massachusetts, Ohio and Pennsylvania. We are proud to be PharmaCann's go to long-term real estate partner as they continue their multi-state expansion.

Our total investment in properties leased to PharmaCann, including commitments to fund future tenant improvements or construction is $127.5 million not including an additional $4 million which may be requested by PharmaCann at the Pennsylvania property.

As of today, we own five properties in Illinois, and our total investment including committed funding for future tenant improvements is over $115 million, which does not include the additional $17.7 million which may be requested by Grassroots at our Litchfield property. We are very pleased with this group of strong multi-state operators and are excited for the future of the regulated cannabis industry in Illinois. With the medical cannabis program expanding rapidly, through the relaxation of certain regulations and introduction of new qualifying medical conditions and the adult use cannabis program being introduced next year.

Now for Michigan. In July, we acquired a 145,000 square foot industrial property and entered into a long-term lease with Ascend, with our total investment in the acquisition and redevelopment of the property expected to be approximately $19.8 million. Including our Illinois property, our total investment with properties leased to Ascend, including commitments to fund future tenant improvements is $52.8 million.

In October, we acquired a 156,000 square foot industrial property in Michigan and entered into a long-term lease with LivWell, with our total investment in the acquisition and redevelopment of the property expected to be $42 million. Established in 2009, LivWell is one of the pre-eminent licensed cannabis operators in Colorado, with 18 dispensary locations, employing over 700 employees, in addition to operations in Oregon, Michigan, Puerto Rico and Canada.

Also, in October, we completed the acquisition and leases of four dispensary locations in Michigan for a total investment of $9 million, including reimbursement for certain future tenant improvements and entered into long-term leases with Green Peak Innovations for each location. We acquired Green Peak's cultivation and processing facility in mid development in 2018, and together with these dispensary locations, our total investment in properties leased to Green Peak is $40 million, including commitments to fund future tenant improvements.

As of today, we own eight properties in Michigan and our total investment in the market, including committed funding for future tenant improvements is $111.8 million. Michigan's medical use cannabis program is one of the largest in the country and it is expected that sales under Michigan's regulated adult use cannabis program will occur starting in the first quarter of next year.

Now on to California. In July, we acquired a 35,000 square foot industrial property in California and entered into a long-term lease with DionyMed Brands or DYME, with our total investment in the acquisition and redevelopment of the property expected to be $15 million. We note as has been publicly disclosed that DYME has been placed into receivership by senior lender, though it has paid in full its rent owed to us to-date, and we are in close contact with them. We believe the property is well located and offers a very good value for cannabis distribution access to the Greater Los Angeles area for both DYME and another operator, should there be a need to find a replacement tenant. As a reminder, DYME's base rent represents 2.6% of our stabilized base rent, factoring in our acquisitions to-date.

In September, we completed the acquisition of a four-property portfolio in Southern California for a $17.3 million total purchase price, comprising approximately 79,000 square feet of industrial space in the aggregate, and entered into long-term leases with Vertical, for continued operation as licensed cannabis cultivation, extraction, manufacturing and distribution facilities. As of today, we own 10 properties in California and our total investment in the market, including committed allowances for future tenant improvements is almost $71 million.

According to ArcView, California is expected to generate $3.1 billion in regulated cannabis sales in 2019 and $7.2 billion in 2024, making it 40% larger than Canada as a whole. We are hopeful that California will continue to adapt its regulations to promote the continued transition from the illicit market to the regulated market, which by itself would be a very significant driver of growth of the regulated market for years to come.

We now move to Pennsylvania. In August, we acquired a property in Pennsylvania and entered into a long-term lease with PharmaCann for two industrial and greenhouse facilities that are expected to comprise a total of 54,000 square feet upon completion of development, with our total investment in the acquisition and development of the property expected to be $26 million plus up to an additional $4 billion which PharmaCann may request.

As of today, we own four properties in Pennsylvania and our total investment in the market, including committed allowance for future tenant improvements is $64.9 million. Pennsylvania's medical use cannabis program has grown tremendously in a very short period of time, with over 180,000 patients as of August 2019, and first sales commencing just last year.

Now we come to Massachusetts. In July, we acquired a 150,000 square foot industrial property and entered into a long-term lease with Trulieve, with an initial purchase price of $3.5 million, an additional commitment by us to fund up to $40 million for redevelopment of the property, which funding is subject to reduction at Trulieve's option within the first six months of the lease term. Trulieve is one of the leading multi-state operators in the country and a pre-eminent operator in Florida, employing approximately 2,700 people.

In September we amended our lease with Holistic, at one of our Massachusetts properties to provide up to $2 million for tenant improvements at the property, with a corresponding adjustment to base rent upon funding. In addition to the Massachusetts property, Holistic is a tenant at our Maryland property, which we acquired in 2017. Holistic is a multi-state operator with over 400 employees and just closed on a $55 million equity financing in October.

Also in September, we amended our lease with PharmaCann, at one of our Massachusetts properties, to provide an additional $8 million for tenant improvements at the property. As of today, we own three properties in Massachusetts and our total investment in the market is $42.8 million, not including the future funding that may be requested by Trulieve or Holistic.

And on to a new state for us, Florida. In October, we completed the acquisition of a property in Florida for $17 million, comprising approximately 120,000 square feet of industrial space, and entered into a long-term lease with Trulieve. Together with our Massachusetts property, assuming the full funding of the additional $40 million available to Trulieve there, our total investment in properties leased to Trulieve is expected to be $60.5 million. Trulieve recently opened its 38th medical use cannabis dispensary in Florida and captures nearly 50% of all sales in the state. Florida represents one of the largest and one of the fastest growing medical use cannabis markets in the United States with over 270,000 qualified patients as of mid-October.

Moving on, we also acquired our first property in Nevada. In July, we acquired a 43,000 square foot industrial property and entered into a long-term triple-net lease with MJardin, with our total investment in the acquisition and redevelopment of the property expected to be $9.6 million.

In Arizona, we acquired a dispensary location for a total investment of $2.5 million, including reimbursement for completion of development and entered into a long-term lease with Sunday Goods, an affiliate of The Pharm, who also leases our medical cannabis cultivation and processing facility in Arizona.

Finally in Minnesota, we amended our lease with Vireo Health to provide an additional $2.6 million for tenant improvements at the property, which resulted in a corresponding adjustment to base rent. It is important to note that when we invest in properties with multi-state operators, which is a very large portion of our overall tenant base, we focus on securing a corporate level lease guarantee, which allows us to underwrite not just the specific operations at the location or within the particular state, but the operator tenants' overall national operations.

I'll now turn the call over to Catherine, who will talk about our capital raising activity and financial results for the third quarter of 2019. Catherine?

Catherine Hastings -- Chief Financial Officer, Chief Accounting Officer and Treasurer

Thanks, Ben. It has been a busy quarter which is reflected in our financial results to the third quarter and nine months year-to-date. We generated rental revenues of approximately $11.2 million and $26.1 million for the three and nine-months ended September 30th, 2019 respectively. The increases in both periods were driven primarily by the acquisition and leasing of new properties, additional tenant improvement allowances provided to tenants at certain properties that resulted in base rent adjustments, and contractual rent escalations at certain properties. Importantly, this revenue growth reflects only partial quarters of revenues from the numerous acquisitions and leases executed during the year, and no revenue, of course, from the 10 leases we executed after the end of the quarter.

Our revenues for the quarter were also impacted by rent abatements or deferrals under certain leases that are expected to burn off in the next few months as we continue to account for all of our leases on a cash basis. Notwithstanding all of this, our Q3 rental revenues more than tripled year-over-year from Q3 of 2018.

For the three months ended September 30, 2019, we recorded net income of $6.2 million; funds from operations, which adds back property depreciation to net income was $8.4 million; adjusted funds from operations, which adds back non-cash stock-based compensation expense and non-cash interest expense related to our exchangeable senior notes was $9.5 million. For the three months ended September 30, 2019, adjusted funds from operations for Q3 grew 270% from the prior period.

For the nine months ended September 30, 2019, we recorded net income of $12.6 million; funds from operations of $17.6 million, and adjusted funds from operations of $20.6 million. For the nine months ended September 30, 2019, adjusted funds from operations increased by 238% from the prior period.

As Alan mentioned, on October 15th, we paid our quarterly dividend of $0.78 per share to common stockholders of record as of September 30th. The Q3 2019 common stock dividend reflects a 30% increase from the prior quarter, and a 123% increase from the prior year's third quarter. This serves as a reflection of our strong growth and operational performance over the past year, and our confidence in our acquisition pipeline, including the post-September 30 acquisitions completed that then discussed earlier.

And with respect to financing activity, in July 2019, we completed a follow-on public offering of common stock, raising net proceeds of about $180 million, including the exercise in full of our underwriters' option to purchase additional shares. In September 2019, we established an at-the-market equity offering program or ATM program, with three sales agents, and raised net proceeds under the program in September and October of about $47 million. We are truly grateful for all of our stakeholders' continued support, and we are focused exclusively on investing the proceeds from our recent equity raises with the best tenants.

And with that, I'll turn it back to Alan. Alan?

Alan D. Gold -- Executive Chairman

Thanks, Catherine. We have had a tremendous year-to-date for acquisitions far outpacing our expectations. With that, we are very excited about the opportunities to come in this fast-growing industry and are singularly focused on executing our business plan. I want to personally thank our stockholders for your continuous support as we aim to continue to create sustainable and long-term value for you.

With that, I'd like to open it up for questions. Operator, could you please open the call up for questions.

Questions and Answers:

Operator

Yes, sir, and thank you. We will now begin the question-and-answer session. [Operator Instructions]. And the first question we have will come from Tom Catherwood of BTIG. Please go ahead.

Thomas Catherwood -- BTIG -- Analyst

Thank you and good morning everybody.

Alan D. Gold -- Executive Chairman

Thanks, Tom.

Thomas Catherwood -- BTIG -- Analyst

When it comes to investment yields, it seems like recently there has been a wider dispersion than normal with Trulieve and CRESCO, both larger operators around 11%, and then some of the more recent deals are closer to your blended average. Have you changed your underwriting in terms of investment hurdle rates and kind of what are your expectations for investment yields over the next 9 to 12 months?

Alan D. Gold -- Executive Chairman

Sure. Yeah, it's a great question, Tom. First, normal, I guess, it's hard to say what's normal given how fast industry is growing and how relatively nascent the industry is. And the fact that we've only been in the acquisition market doing these sale leaseback transactions over the last three years. But yes, you have seen a greater dispersion in acquisition yields, going all the way down to an 11% for some of the most highest quality growers and that's done on purpose.

We -- focused on increasing our -- the quality and the size and the number of the top name growers in the industry on purpose. And have added those -- several of those players to those growers to our tenant roster, which we're very excited about. It's a very strong roster. The -- where we are today, we are seeing increased acquisition yields, higher acquisition yields than we saw even as of mid last year or earlier this year. And we are now projecting our acquisition yields to be ranging anywhere from 12% to north of 15%, and that's a 100 basis points to 200 basis points increase in our acquisition yields just in the most recent time period.

Thomas Catherwood -- BTIG -- Analyst

Got it. Appreciate that. And then, just may not be the right way to think of it, but when it comes to investment opportunities, do you have a sense of the aggregate volume that you typically underwrite, and of that, kind of, how much do you tend to pursue, and then what's your hit rate been and what you tend to pursue? Is that even a proper way to think about it for your business?

Alan D. Gold -- Executive Chairman

We could -- I guess, I could, you know have been perhaps go down that path. But keeping in mind that we focus on a -- our tenant growers -- our tenant roster and if you can see from the acquisition, probably over 75% of our most recent acquisition are actually repeat business with our existing growers. And if you -- if -- I think Ben if we talked about our pipeline, we would say, what percentage is with the existing growers today?

Ben Reigns -- Director of Investments and Finance

Yeah, I'd say, going forward, it's anywhere from 50% to 75% depending on the pipeline at the time.

Alan D. Gold -- Executive Chairman

Right. So given the fact that we've already underwritten these growers and we're highly focused on being a very strong capital partner for these growers, we see -- we tend to be -- we tend to move forward on a greater percentage with those growers, although I do know that some of the growers have proposed some transactions. It just haven't recently fit our new acquisition yields and have chosen to go with other capital providers.

On top of that, perhaps more directly to answer your direct -- your question. We have -- we do consistently receive a lot of inquiries from growers that just aren't in the -- don't fit our underwriting criteria today. We do stay in contact with them as they continue to move forward on their business plan. And then, hopefully, they get large enough to become part of our tenant roster at some point in the future.

Thomas Catherwood -- BTIG -- Analyst

Got it. It makes a lot of sense. And then, I appreciate the color on DionyMed. Moving beyond them though, are there any other of your tenants that you have in any kind of a watch list and what kind of steps would you take or could you even take if you had a challenge tenant?

Alan D. Gold -- Executive Chairman

Well, we watch all of our tenants. We are...

Thomas Catherwood -- BTIG -- Analyst

Fair. Very fair.

Alan D. Gold -- Executive Chairman

And we do believe that this is still a nascent industry and there is still a lot of moving things or part -- moving parts going on in the industry. There isn't any single-tenant right now that we're watching more closely than any other tenant. Obviously, you -- we are in direct contact with DionyMed and looking to see how the receivership process is going to play out with them. We think its -- we think that we've underwritten that asset correctly. We think that that asset has tremendous long-term value. We think that -- we've been contacted by several other MSOs who have indicated interest, because -- interest in the site given that they -- given how publicly the issue that DionyMed is going through. So then -- and when we underwrite, we absolutely look for MSOs with multi -- with a lot of operations. We think that the assets themselves, given the fact that they are closely tied or linked to licenses have tremendous value and it's obviously proving out in the DionyMed situation.

So we think that should we end up in that situation, one, we have security deposits that we could use and drawdown on, should we need them. Two, we believe the growers themselves have -- have cash balances and will support the most valuable -- most mission critical aspect of their business, which is their growth facilities or their ability to generate revenue from. Three, the licenses that are tied to it, creating a tremendous value to the real estate itself. And four, the industry is continuing to grow and there are -- I mean, year-over-year growth rate of sales in the industry is still exceeding the -- approaching the 30% plus year-over-year in sales that we've seen over the last several years. And so we believe that there are tremendous number of growers that are interest -- our people interested getting into the business. And all those become factors that help protect the value of the asset and the longevity of the cash flow that we anticipate.

Thomas Catherwood -- BTIG -- Analyst

Got it. I appreciate that background and color, Alan. And then last one for me. Then you had mentioned the Trulieve facility in Massachusetts. So I think they have until the end of January to finalize their plans, pricing, and decide, kind of, what kind of budget they are looking for and what you're reimbursement is. Do you have any kind of sense on timeline there is going to happen before January, is that something we might see this year or should we just -- is that a 2020 event?

Alan D. Gold -- Executive Chairman

Yes. Thanks, Tom. I think that's likely to be in 2020. We're remaining in close contact with Trulieve and working with them as they continue to finalize their plans and their budget for their facility and will support them on the amount that's ultimately needed for the build out of the property.

Thomas Catherwood -- BTIG -- Analyst

Got it. All right. Thanks everyone.

Alan D. Gold -- Executive Chairman

Thank you, Tom.

Operator

Next we have John Massocca of Ladenburg Thalmann.

John Massocca -- Ladenburg Thalmann -- Analyst

Good morning.

Alan D. Gold -- Executive Chairman

Good morning, John.

John Massocca -- Ladenburg Thalmann -- Analyst

So just following up on that last question, maybe a little bit more philosophically, you think about the -- the potential funding you have out there for tenants that can kind of draw down that capital at their choice. How do you think about matching that with kind of cash on hand. I mean, is that something where given you have the ATM in place today, you can kind of match that at the time of the draw or is it much like some of the stuff where you've kind of committed to TI dollars that -- that you know the tenant kind of has to take, the tenant is going to pay rent for any way. Even though that cash hasn't gone out of the door today, you still want to have it on hand given the fact that you don't have access to credit facility or something like that. So is it similar to that type of money or is it something where you feel you can fund that later when you get the actual decision from the tenant?

Alan D. Gold -- Executive Chairman

Well, certainly all those options are available to us to consider and think through. And I'm going to have, Cat, kind of run through where we are on a cash basis, just so that it -- so that's clear. But when we make a commitment to our tenant growers, we're making a commitment and the capital needs to be available and -- for them based on that commitment. There is -- these aren't -- this -- it's not at our option to provided if they desire -- demand it, we need to make sure that we have it available for them. So we take those commitments extremely seriously and retain cash and -- retain cash on our balance sheet for that -- for those commitments.

But Cat, why don't you go through where we -- where we stand on a cash basis today?

Catherine Hastings -- Chief Financial Officer, Chief Accounting Officer and Treasurer

Yeah, John, I think what Alan said is extremely important. I mean, that's one of our big differentiators, I think, between us and other players out there who are doing is that we have capital available and when we committed it to those operators, we make sure that we have raised and held in reserve. We do monitor the construction and the development plans of the various operators and understand kind of timing of when they are actually going to be requesting those trials, and so that also enabled us to understand that timeline of when that cash needs to be available and paid out to them. And that's why you do see the large $140 million commitments that is unfunded to-date and we do manage that with the cash that we have on balance sheet as well.

So if you look at what we've raised to date with capital and including the ATM proceeds, we've raised about $634 million to-date, and have funded $410 million of that -- with that unfunded commitments of that $140 million.

John Massocca -- Ladenburg Thalmann -- Analyst

In that unfunded commitments, does that include the stuff that's at the tenants options such as Trulieve and one of the PharmaCann assets?

Catherine Hastings -- Chief Financial Officer, Chief Accounting Officer and Treasurer

No. We've excluded that since they have the ability to turn a portion of that back.

John Massocca -- Ladenburg Thalmann -- Analyst

So, if you include all of that, let's say, that's fully executed, where would that leave you versus kind of cash today?

Catherine Hastings -- Chief Financial Officer, Chief Accounting Officer and Treasurer

We're bout $20 million to $30 million of cash today. We're extremely happy to have the additional capacity on that ATM to continue to grow with our growing pipeline that we have as well. We also are very happy to have other options like the common follow-on raises, as well as the convertible debt options, because we see incredible opportunity to continue to raise capital and be able to place it. I think when we did the July common raise, we said we wanted to be able to place that capital that we raised within six to nine months. And you can see from the pace of the acquisitions that we have been ahead of that pace.

John Massocca -- Ladenburg Thalmann -- Analyst

Okay. That makes sense. Then switching gears a little bit, given you completed your first dispensaries acquisitions in 3Q '19, 4Q '19, what is the opportunity to complete more transactions for dispensary real estate and what made the retail assets you did buy attractive?

Alan D. Gold -- Executive Chairman

So we've always indicated that we would look at a portfolio of retail type assets with a strong grower and we believe that we have -- we continue to go down the path of supporting our growers and their capital needs when appropriate. And the opportunity to work with Green Peak industry is -- for -- in Michigan with -- for their dispensaries made sense for us. The -- we think supporting Green Peak and their ability to generate tremendous amount of revenues from a very exciting Michigan market was appropriate. Keeping in mind that we aren't -- aren't interested in a one-off type transactions with -- on retail dispensaries, just given the size and the complexity of underwriting any transaction, let alone a small -- small retail located transaction.

John Massocca -- Ladenburg Thalmann -- Analyst

Very helpful color. And then, what kind of -- was there anything specific you think that drove some of these lease amendments to, kind of, give additional funding to like existing properties. I just feel like this quarter and subsequent to -- sorry 3Q and kind of -- subsequent to 3Q is the first time we saw a lot of additional funding to existing buildings, is it just the demand is so high that they need money to continue to expand their facilities or is it just maybe the natural kind of capex requirement to kind of keep the buildings functioning -- as efficient as possible for their operations. Just any color there would be helpful?

Alan D. Gold -- Executive Chairman

All right. So there is a combination of factors occurring. One, when we enter into the transaction -- the initial transaction, the tenants are still finalizing their development plans and for the individual projects. And as they go through them, they sometimes come to the situation where they would like more capital provided to fully built out a facility, especially with how quickly some of these state programs are moving and progressing in a positive way.

And so with that, we've worked with our growers to amend the leases and provide additional capital, keeping in mind that does not stop rent from the original -- from any original funding that was started. And more than likely -- not more than likely, and most often, the leases are amended and extended and the -- when we do add additional tenant improvements.

So you have that and then you do have the fact that when -- like as what's happened in Illinois, the program has changed, not only going from the medical cannabis focus that we are primarily focused on, but these growers also then have the ability to participate in the adult use program. And when that occurs, there is also additional demand for improvement dollars at our facilities.

John Massocca -- Ladenburg Thalmann -- Analyst

Okay.

Catherine Hastings -- Chief Financial Officer, Chief Accounting Officer and Treasurer

And just to kind of add on to that, John. Many of our facilities do have expansion capacity within the building as well, especially when a new license -- when a new program rolls out in that state. The operators will get up and running within a portion of the building that supports that market, but then as that market continues to grow and add on as Alan was indicating, they're able to grow into different portions of the building and add infrastructure which we support through the amendment tenant improvements.

John Massocca -- Ladenburg Thalmann -- Analyst

Very helpful. That's it from me. Thank you guys very much.

Alan D. Gold -- Executive Chairman

Thank you, John.

Operator

[Operator Instructions]

Alan D. Gold -- Executive Chairman

All right. It appears operator that there are no more questions. So with that, we'd certainly like to thank all our stakeholders for their support, and I'd love to thank the team for just a fantastic quarter and thank you all for your hard and dedicated work. With that, we'll sign off. Thank you, operator.

Operator

[Operator Closing Remarks].

Duration: 49 minutes

Call participants:

Brian Wolfe -- Vice President, General Counsel and Secretary

Alan D. Gold -- Executive Chairman

Paul Smithers -- Chief Executive Officer, President, and Director

Ben Reigns -- Director of Investments and Finance

Catherine Hastings -- Chief Financial Officer, Chief Accounting Officer and Treasurer

Thomas Catherwood -- BTIG -- Analyst

John Massocca -- Ladenburg Thalmann -- Analyst

More IIPR analysis

All earnings call transcripts

AlphaStreet Logo