IIPR Results: “AFFO Per Share Up 7%”; Cannabis REIT Expands Into Life Sciences

By Nicolás Rodríguez, Managing Editor

Innovative Industrial Properties (NYSE: IIPR), a real estate investment trust with significant exposure to the cannabis industry, reported third-quarter adjusted funds from operations (AFFO) of $54.8 million, or $1.96 per share, up from $48.3 million, or $1.71 per share, a year earlier.

However, total revenue remained nearly flat at $64.9 million, up just 0.4% year over year.

Net income attributable to common shareholders reached $28.7 million, or $0.99 per diluted share, compared with $28.3 million a year earlier.

“We are pleased to report strong earnings with our AFFO per share up 7% compared to the second quarter, and are encouraged by the continued leasing momentum across our portfolio, reflecting our team’s ongoing efforts to re-lease properties,” said Alan Gold, Executive Chairman of IIP, in a press release. “Our $245 million mezzanine loan commitment at Alewife Park further expands our presence in the life science sector. Together, these initiatives reflect our focus on improving the performance of our existing portfolio while deploying capital into investments that we believe will drive earnings growth and create long-term value for our shareholders.”

Cannabis Tenant Problems Continue

During the quarter, IIP terminated 16 leases covering approximately 1.2 million square feet and executed six new leases covering 604,000 square feet.

It also applied $3.8 million in security deposits for properties leased to The Cannabist and Parallel, compared with $0.8 million in the same period last year.

Those deposits helped support reported revenue, partially offsetting lower rental income from property sales and terminated leases.

Life Sciences Become a Bigger Business

IIP is increasingly directing capital toward life-science real estate.

During the quarter, the company committed $245 million in mezzanine financing to affiliates of IQHQ for a life-science campus in Cambridge, Massachusetts, funding approximately $111 million at closing. The financing carries an expected yield of 15.8%, subject to a 14% floor.

Interest and other income rose to $14.3 million from $4.4 million a year earlier, including $10.4 million associated with IQHQ investments.

The company ended September with $142.4 million in liquidity and declared a quarterly dividend of $1.90 per common share.

IIP’s results highlight a changing business model: earnings are improving, but growth increasingly depends on financial investments outside cannabis.

That transition raises questions about the long-term economics of cannabis real estate and access to capital, issues that will be explored at IgniteIt’s Cannabis Capital & Policy Summit in Washington, D.C., on November 18.