Innovative Industrial Properties (IIPR -1.92%) delivered an impressive 141% gain in 2020. It's off to a great start this year as well, with shares rising 13%. However, that double-digit gain probably won't last much longer.

The cannabis-focused real estate investment trust (REIT) announced its fourth-quarter results after the market closed on Wednesday. IIP's shares fell nearly 5% in after-hours trading. Here are the highlights from the company's Q4 update.

Shadow of a dollar sign over marijuana leaves.

Image source: Getty Images.

By the numbers

IIP reported revenue in the fourth quarter of $37.1 million, up 110% year over year. However, that tremendous gain still wasn't enough to meet the average analyst estimate of $38.5 million.

The REIT announced Q4 net income of $21 million, or $0.91 per diluted share, based on generally accepted accounting principles (GAAP). This reflected significant improvement from the company's GAAP earnings of $9.6 million, or $0.78 per share, posted in the prior-year period. It fell short of the Wall Street consensus earnings estimate of $1.07 per share, though.

IIP delivered adjusted funds from operations (FFO) of $32.4 million, or $1.29 per diluted share, in the fourth quarter. This result included the impact of the company's exchange of $143.75 million of senior notes for shares of common stock.

Behind the numbers

Most of IIP's revenue growth stemmed from acquiring and leasing new properties. Between Jan. 1, 2020, and Feb. 24, 2021, the company acquired 22 medical cannabis properties. IIP also made additional money through funding construction at existing properties and adjusting rents accordingly, as well as through contractual rent escalations.

Roughly $424,000 of IIP's Q4 revenue came from a security deposit for properties leased to cannabis operator Vertical. This deposit was used to pay part of Vertical's rent and lease penalties in the fourth quarter.

Aside from Vertical and a California tenant that went into receivership, IIP collected 100% of its contractual rent in the fourth quarter. In January, IIP signed a new lease for the California property in receivership with Holistic.

The company's total expenses doubled year over year in the fourth quarter. However, this growth rate was less than IIP's revenue growth, resulting in its solid bottom-line improvement. The issuance of new shares, though, caused the company's earnings-per-share growth to be lower than its total net income growth.

Looking ahead

Since the beginning of the fourth quarter, IIP has acquired or made improvements at 13 properties. These deals should boost the company's revenue going forward.

IIP also remains a money machine with its dividend. The REIT recently increased its quarterly dividend by 24% year over year and 6% quarter over quarter. Look for more dividend hikes to come as IIP's revenue and earnings grow.