Innovative Industrial Properties (NYSE:IIPR), a cannabis industry-focused real estate investment trust (REIT), reported powerful fourth-quarter and full-year 2019 results after the market closed on Wednesday.  

The company didn't release its results until 8:28 p.m. EST, which is after Wednesday's after-hours trading session ended. In a usual market, this stock would be poised to soar on Thursday, since the company crushed the Wall Street consensus estimates on both the top and bottom lines, and adjusted funds from operations (AFFO) came in strong. However, this week's market has been widely negatively affected by the spread of the novel coronavirus, so it's challenging to predict how Innovative Industrial Properties stock will fare on Thursday. 

The stock has returned 27.2% in 2020 through Wednesday, versus the S&P 500's return of negative 3.3%.

Here's how the quarter worked out for IIP and its investors. 

Innovative Industrial Properties' key numbers


Q4 2019

Q4 2018


Rental revenue 

$17.7 million $4.8 million 269%

Operating income

$10.6 million  $1.8 million 487%

Net income

$9.6 million $2.3 million  311%

Earnings per share (EPS)

$0.78 $0.24 225%

Adjusted funds from operations (AFFO)*

$14.3 million $3.6 million 293%

AFFO per share

$1.18 $0.38 211%

Data source: Innovative Industrial Properties. *Adjusted funds from operations (AFFO) is a closely watched metric for REITs, as it's the main driver of dividend changes. **Calculated from full numbers shown in earnings release, not the abbreviated numbers shown here.

For the quarter, Wall Street was looking for earnings per share (EPS) of $0.57 on revenue of $14.4 million, so IIP sailed by both expectations.

The company's revenue growth continues to be primarily driven by the acquisition of new properties, with contractual rental increases at certain properties also contributing. The year-over-year revenue growth rate continued to accelerate, up from 201% in the third quarter, 155% in the second quarter, and 146% in the first quarter.

For full-year 2019, revenue soared 202% year over year to $44.7 million, EPS surged 171% to $2.03, and AFFO per share jumped 144% to $3.27. 

Interior of large cannabis greenhouse.

Image source: Innovative Industrial Properties.

What happened with Innovative Industrial Properties in the quarter (and since the quarter ended through Feb. 26)?

  • It paid a quarterly dividend of $1.00 per share on Jan. 15 to stockholders of record as of Dec. 31, representing an increase of 28% from the previous quarter and 186% from the year-ago period.
  • During the quarter, IIP acquired 15 properties (nine industrial, six retail/dispensary), and after the quarter ended through Feb. 26, it acquired five more properties (three industrial, two retail). In total, the 20 properties have about 1.0 million rentable square feet. 
  • In September, it "established an 'at-the-market' equity offering program, issuing shares of common stock from September through [Feb. 26] for net proceeds totaling approximately $184.8 million," according to the company's earnings release.
  • After the quarter ended, in January, the company "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 gross proceeds of approximately $250.0 million."

Here's the current snapshot of Innovative Industrial Properties' portfolio taken from the earnings release:

As of Feb. 26, IIP owned 51 properties located in Arizona, California, Colorado, Florida, Illinois, Maryland, Massachusetts, Michigan, Minnesota, New York, Nevada, North Dakota, Ohio, Pennsylvania and Virginia [15 states], totaling approximately 3.2 million rentable square feet (including approximately 871,000 rentable square feet under development/redevelopment), which were 98.9% leased (based on square footage) with a weighted-average remaining lease term of approximately 15.6 years. [Emphasis mine.]

Since I've been covering IIP (1.5 years), I believe this is the first time its occupancy rate has dipped below 100%. For these statistics, the company is treating its Los Angeles property as "not leased, due to the tenant's default in its obligation to pay rent at that location in January and February 2020," it said in the earnings release. Certainly, however, a 98.9% occupancy rate is still extremely strong.

Earnings call: Thursday at 1 p.m. EST

Management didn't provide a quote in the earnings release. However, investors will be able to hear management's thoughts on the company's performance and prospects by tuning into the analyst conference call, scheduled for Thursday, Feb. 27, at 1 p.m. EST. (Yes, you read that unusual time correctly.)

Looking ahead

Innovative Industrial Properties topped off a spectacular year with a powerful quarter. 

The company hasn't historically provided official guidance, though management will probably comment on the earnings call about its general outlook. For Q1 2020, Wall Street is modeling for EPS of $0.82 on revenue of $20.5 million, representing growth of 149% and 223%, respectively, year over year.

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