Innovative Industrial Properties (IIPR -0.69%), a real estate investment trust (REIT) focused on the medical-use cannabis industry, reported strong second-quarter 2021 results after the market close on Wednesday, Aug. 4. 

Shares gained 1.9% in Wednesday's after-hours trading session. They have returned 108% over the one-year period through Wednesday's regular trading session, compared to the S&P 500's 35.7% return over the same period.

Innovative Industrial Properties' key numbers


Q2 2021

Q2 2020



$48.9 million $24.3 million 101%

Operating income

$32.9 million  $14.2 million 132%

Net income

$29.0 million $13.0 million  124%

Earnings per share (EPS)

$1.17 $0.73 60%

Adjusted funds from operations (AFFO)*

$43.0 million $21.0 million 104%

AFFO per share

$1.64 $1.19 38%

Data source: Innovative Industrial Properties. *Adjusted funds from operations is a closely watched metric for REITs, as it's the main driver of dividend changes. 

The revenue increase "was driven primarily by the acquisition and leasing of new properties, in addition to contractual rental escalations at certain properties," the company said in the earnings release. Wall Street had been expecting EPS of $1.11 on revenue of $45.9 million, as covered in my earnings preview, so IIP (as the company is sometimes called) comfortably beat both estimates.

As with last quarter, the per-share data (EPS and AFFO per share) includes the "dilutive impact of the assumed full exchange of IIP's $143.75 million of exchangeable senior notes for shares of common stock."

The company ended the period with $156.3 million in cash and cash equivalents and $649.4 million in short-term investments, totaling about $805.7 million. Its debt load is 21% of its total gross assets, which total about $2.1 billion, and it has no unsecured debt.

For context, in the first quarter, revenue soared 103% year over year to $42.9 million, EPS jumped 46% to $1.05, and AFFO per share rose 31% to $1.47. 

Tops of several cannabis plants with blue sky in background.

Image source: Getty Images.

What happened with Innovative Industrial Properties in the quarter (and since the quarter ended through Aug. 4)

  • It paid a quarterly dividend of $1.40 per share on July 15, 2021, to stockholders of record as of June 30, 2021, representing an increase of about 32% from the year-ago period. Shares are yielding about 2.6% as of the market close on Wednesday.
  • During the quarter, the company made four property acquisitions: two in Michigan and one each in Pennsylvania and Massachusetts. This compares to three acquisitions in the first quarter, one of which was land only.
  • After the quarter ended (in August), it acquired one more property, in Illinois.
  • During the quarter (June), as reported in my earnings preview: "[T]he company 'closed on a construction loan with a developer for the construction of a regulated cannabis cultivation and processing facility in California,' it said in the press release. The loan is expected to be up to $18.5 million for the approximately 102,000 square foot building. The company has the option to buy the property once completed."

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

As of August 4, 2021, IIP owned 73 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 [18 states], representing a total of approximately 6.8 million rentable square feet (including approximately 2.4 million rentable square feet under development/redevelopment), which were 100% leased with a weighted-average remaining lease term of approximately 16.7 years.

Looking ahead

As usual, Innovative Industrial Properties turned in a robust quarter.

Investors should get more color on the second-quarter results and perhaps some information on how the third quarter is shaping up during the cannabis company's analyst conference call, scheduled for Thursday, Aug. 5. at 1:00 p.m. EDT.