Innovative Industrial Properties (NYSE:IIPR), a cannabis industry-focused real estate investment trust (REIT), reported strong second-quarter 2020 results after the market close on Wednesday. Investors were pleased with the results, driving shares to a closing gain of 3.9% on Thursday. 

Innovative Industrial Properties' key numbers

Metric

Q2 2020

Q2 2019

Change**

Revenue 

$24.3 million $8.6 million 183%

Operating income

$14.2 million  $4.1 million 248%

Net income

$13.0 million $3.1 million  322%

Earnings per share (EPS)

$0.73 $0.30 143%

Adjusted funds from operations (AFFO)*

$21.0 million $5.8 million 263%

AFFO per share

$1.19 $0.59 102%

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 using exact numbers.

Revenue growth continues to be driven primarily by the acquisition of new properties, with contractual rental increases at certain properties also contributing.

The company ended the period with $50.2 million in cash and cash equivalents and $323.3 million in short-term investments, totaling $373.5 million.

For context, in the first quarter, revenue surged 210% year over year to $21.1 million and adjusted FFO per share jumped 107% to $1.12.  

A marijuana leaf on a white background.

Image source: Getty Images.

What happened with Innovative Industrial Properties in the quarter (and since the quarter ended through Aug. 5)?

  • It paid a quarterly dividend of $1.06 per share on July 15 to stockholders of record as of June 30, representing an increase of 77% from the year-ago period.
  • During the quarter, IIP acquired five properties -- two in Massachusetts and one each in Michigan, California, and Pennsylvania -- and an additional three properties, all in New Jersey, after the end of the quarter through Aug. 5. This marks somewhat of a slowdown in acquisition activity from the first quarter (when it acquired seven properties), and a considerable slowdown from the fourth quarter of 2019 (acquired 15 properties). The acquisition slowdown is due to the COVID-19 pandemic, which has caused a pause in corporate dealmaking, in general. 
  • During the quarter, the company raised $114.9 million in a May public stock offering of 1,550,648 shares of common stock.
  • After the quarter ended, the company raised $258.7 million in a July public offering of 3,085,867 shares of common stock.

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

As of August 5, 2020, IIP owned 61 properties located in Arizona, California, Colorado, Florida, Illinois, Maryland, Massachusetts, Michigan, Minnesota, New Jersey, New York, Nevada, North Dakota, Ohio, Pennsylvania and Virginia [16 states], totaling approximately 4.5 million rentable square feet (including approximately 1.5 million rentable square feet under development/redevelopment), which were 99.2% leased (based on square footage) with a weighted-average remaining lease term of approximately 16.1 years.

The company entered one new state since the last earnings report -- New Jersey -- bringing its total states to 17. 

Rent collections update

Last quarter, the company reported that it had "worked with three of its 21 tenants to provide temporary rent deferrals" to essentially give them some financial breathing room during the early stages of the pandemic. These deferrals were "structured 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."

The company reported that all three tenants are current on their rent under the terms of the rent deferral agreements. Moreover, IIP hasn't entered into any such agreements with any additional tenants. 

Looking ahead

Despite the continued challenging macroeconomic environment due to the pandemic, IIP turned in a really good quarter. And it's certainly good news that the company didn't need to enter into any additional rent deferral agreements and that all three tenants with whom it has entered into such agreements are current on their rent under these contracts.