Document and Entity Information
Document and Entity Information - shares | 3 Months Ended | |
Mar. 31, 2024 | May 09, 2024 | |
Document Type | 10-Q | |
Document Quarterly Report | true | |
Document Period End Date | Mar. 31, 2024 | |
Document Transition Report | false | |
Entity File Number | 001-37949 | |
Entity Registrant Name | Innovative Industrial Properties, Inc. | |
Entity Incorporation, State or Country Code | MD | |
Entity Tax Identification Number | 81-2963381 | |
Entity Address, Address Line One | 1389 Center Drive, Suite 200 | |
Entity Address, City or Town | Park City | |
Entity Address, State or Province | UT | |
Entity Address, Postal Zip Code | 84098 | |
City Area Code | 858 | |
Local Phone Number | 997-3332 | |
Entity Current Reporting Status | Yes | |
Entity Interactive Data Current | Yes | |
Entity Filer Category | Large Accelerated Filer | |
Entity Small Business | false | |
Entity Emerging Growth Company | false | |
Entity Shell Company | false | |
Entity Common Stock, Shares Outstanding | 28,328,647 | |
Entity Central Index Key | 0001677576 | |
Current Fiscal Year End Date | --12-31 | |
Document Fiscal Year Focus | 2024 | |
Document Fiscal Period Focus | Q1 | |
Amendment Flag | false | |
Common Stock | ||
Title of 12(b) Security | Common Stock, par value $0.001 per share | |
Trading Symbol | IIPR | |
Security Exchange Name | NYSE | |
Series A Preferred Stock | ||
Title of 12(b) Security | Series A Preferred Stock, par value $0.001 per share | |
Trading Symbol | IIPR-PA | |
Security Exchange Name | NYSE |
Condensed Consolidated Balance
Condensed Consolidated Balance Sheets - USD ($) $ in Thousands | Mar. 31, 2024 | Dec. 31, 2023 |
Real estate, at cost: | ||
Land | $ 142,524 | $ 142,524 |
Buildings and improvements | 2,119,566 | 2,108,218 |
Construction in progress | 123,910 | 117,773 |
Total real estate, at cost | 2,386,000 | 2,368,515 |
Less accumulated depreciation | (219,627) | (202,692) |
Net real estate held for investment | 2,166,373 | 2,165,823 |
Construction loan receivable | 22,000 | 22,000 |
Cash and cash equivalents | 153,502 | 140,249 |
Restricted cash | 1,450 | |
Investments | 20,026 | 21,948 |
Right of use office lease asset | 1,255 | 1,355 |
In-place lease intangible assets, net | 8,030 | 8,245 |
Other assets, net | 28,327 | 30,020 |
Total assets | 2,399,513 | 2,391,090 |
Liabilities: | ||
Exchangeable Senior Notes, net | 4,431 | |
Notes due 2026, net | 296,795 | 296,449 |
Building improvements and construction funding payable | 10,448 | 9,591 |
Accounts payable and accrued expenses | 12,160 | 11,406 |
Dividends payable | 52,295 | 51,827 |
Rent received in advance and tenant security deposits | 60,151 | 59,358 |
Other liabilities | 12,237 | 5,056 |
Total liabilities | 444,086 | 438,118 |
Commitments and contingencies (Notes 6 and 11) | ||
Stockholders' equity: | ||
Preferred stock, par value $0.001 per share, 50,000,000 shares authorized: 9.00% Series A cumulative redeemable preferred stock, $15,000 liquidation preference ($25.00 per share), 600,000 shares issued and outstanding at March 31, 2024 and December 31, 2023 | 14,009 | 14,009 |
Common stock, par value $0.001 per share, 50,000,000 shares authorized: 28,328,647 and 28,140,891 shares issued and outstanding at March 31, 2024 and December 31, 2023, respectively | 28 | 28 |
Additional paid-in capital | 2,111,111 | 2,095,789 |
Dividends in excess of earnings | (169,721) | (156,854) |
Total stockholders' equity | 1,955,427 | 1,952,972 |
Total liabilities and stockholders' equity | $ 2,399,513 | $ 2,391,090 |
Condensed Consolidated Balanc_2
Condensed Consolidated Balance Sheets (Parenthetical) - USD ($) $ in Thousands | 3 Months Ended | 12 Months Ended |
Mar. 31, 2024 | Dec. 31, 2023 | |
Preferred stock, Par Value (in dollars per share) | $ 0.001 | $ 0.001 |
Preferred Stock, Shares Authorized | 50,000,000 | 50,000,000 |
Common Stock, Par Value (in dollars per share) | $ 0.001 | $ 0.001 |
Common Stock, Shares Authorized | 50,000,000 | 50,000,000 |
Common Stock, Shares Issued | 28,328,647 | 28,140,891 |
Common Stock, Shares Outstanding | 28,328,647 | 28,140,891 |
Series A Preferred Stock | ||
Preferred stock, Par Value (in dollars per share) | $ 0.001 | |
Preferred Stock, Dividend Rate, Percentage | 9% | 9% |
Preferred Stock, Liquidation Preference, Value | $ 15,000 | $ 15,000 |
Preferred Stock, Liquidation Preference Per Share | $ 25 | $ 25 |
Preferred Stock, Shares Issued | 600,000 | 600,000 |
Preferred Stock, Shares Outstanding | 600,000 | 600,000 |
Condensed Consolidated Statemen
Condensed Consolidated Statements of Income - USD ($) $ in Thousands | 3 Months Ended | |
Mar. 31, 2024 | Mar. 31, 2023 | |
Revenues: | ||
Rental (including tenant reimbursements) | $ 74,914 | $ 75,529 |
Other | 540 | 538 |
Total revenues | 75,454 | 76,067 |
Expenses: | ||
Property expenses | 6,709 | 5,623 |
General and administrative expense | 9,562 | 10,373 |
Depreciation and amortization expense | 17,150 | 16,714 |
Total expenses | 33,421 | 32,710 |
Income from operations | 42,033 | 43,357 |
Interest income | 1,784 | 2,233 |
Interest expense | (4,389) | (4,520) |
Gain (loss) on exchange of Exchangeable Senior Notes | 22 | |
Net income | 39,428 | 41,092 |
Preferred stock dividends | (338) | (338) |
Net income attributable to common stockholders | $ 39,090 | $ 40,754 |
Net income attributable to common stockholders per share (Note 8): | ||
Basic (in dollars per share) | $ 1.37 | $ 1.45 |
Diluted (in dollars per share) | $ 1.36 | $ 1.43 |
Weighted-average shares outstanding: | ||
Basic (in shares) | 28,145,017 | 27,949,747 |
Diluted (in shares) | 28,461,986 | 28,223,698 |
Condensed Consolidated Statem_2
Condensed Consolidated Statements of Stockholders' Equity - USD ($) $ in Thousands | Series A Preferred Stock Preferred Stock | Common Stock | Additional Paid-In-Capital | Dividends in Excess of Earnings | Total |
Balances at beginning of period at Dec. 31, 2022 | $ 14,009 | $ 28 | $ 2,065,248 | $ (117,392) | $ 1,961,893 |
Balances at beginning of period (in shares) at Dec. 31, 2022 | 27,972,830 | ||||
Net Income (Loss) | 41,092 | 41,092 | |||
Issuance of unvested restricted stock, net of forfeitures | (568) | (568) | |||
Issuance of unvested restricted stock, net of forfeitures (in shares) | 29,969 | ||||
Exchange of Exchangeable Senior Notes | 1,964 | 1,964 | |||
Exchange of Exchangeable Senior Notes (in shares) | 32,200 | ||||
Preferred stock dividend | (338) | (338) | |||
Common stock dividend | (50,725) | (50,725) | |||
Stock-based compensation | 4,829 | 4,829 | |||
Balances at end of period at Mar. 31, 2023 | 14,009 | $ 28 | 2,071,473 | (127,363) | 1,958,147 |
Balances at end of period (in shares) at Mar. 31, 2023 | 28,034,999 | ||||
Balances at beginning of period at Dec. 31, 2023 | 14,009 | $ 28 | 2,095,789 | (156,854) | 1,952,972 |
Balances at beginning of period (in shares) at Dec. 31, 2023 | 28,140,891 | ||||
Net Income (Loss) | 39,428 | 39,428 | |||
Issuance of unvested restricted stock, net of forfeitures | (750) | (750) | |||
Issuance of unvested restricted stock, net of forfeitures (in shares) | 36,124 | ||||
Exchange of Exchangeable Senior Notes (in shares) | 28,408 | ||||
Net proceeds from sale of common stock | 11,757 | 11,757 | |||
Net proceeds from sale of common stock (in shares) | 123,224 | ||||
Preferred stock dividend | (338) | (338) | |||
Common stock dividend | (51,957) | (51,957) | |||
Stock-based compensation | 4,315 | 4,315 | |||
Balances at end of period at Mar. 31, 2024 | $ 14,009 | $ 28 | $ 2,111,111 | $ (169,721) | $ 1,955,427 |
Balances at end of period (in shares) at Mar. 31, 2024 | 28,328,647 |
Condensed Consolidated Statem_3
Condensed Consolidated Statements of Cash Flows - USD ($) $ in Thousands | 3 Months Ended | |
Mar. 31, 2024 | Mar. 31, 2023 | |
Cash flows from operating activities | ||
Net income | $ 39,428 | $ 41,092 |
Adjustments to reconcile net income to net cash provided by (used in) operating activities | ||
Depreciation and amortization | 17,150 | 16,714 |
Loss (gain) on exchange of Exchangeable Senior Notes | (22) | |
Other non-cash adjustments | 28 | 26 |
Stock-based compensation | 4,315 | 4,829 |
Amortization of discounts on investments | (188) | (1,676) |
Amortization of debt discount and issuance costs | 406 | 338 |
Changes in assets and liabilities | ||
Other assets, net | 1,760 | 1,360 |
Accounts payable, accrued expenses and other liabilities | 7,874 | 2,008 |
Rent received in advance and tenant security deposits | 793 | (53) |
Net cash provided by (used in) operating activities | 71,566 | 64,616 |
Cash flows from investing activities | ||
Purchases of investments in real estate | (34,906) | |
Funding of draws for improvements and construction | (16,505) | (66,026) |
Funding of construction loan and other investments | (386) | |
Purchases of short-term investments | (20,026) | (51,772) |
Maturities of short-term investments | 22,136 | 90,414 |
Net cash provided by (used in) investing activities | (14,395) | (62,676) |
Cash flows from financing activities | ||
Issuance of common stock, net of offering costs | 11,757 | |
Principal payment on Exchangeable Senior Notes | (4,436) | |
Payment of deferred financing costs | (112) | |
Dividends paid to common stockholders | (51,489) | (50,502) |
Dividends paid to preferred stockholders | (338) | (338) |
Taxes paid related to net share settlement of equity awards | (750) | (568) |
Net cash provided by (used in) financing activities | (45,368) | (51,408) |
Net increase (decrease) in cash, cash equivalents and restricted cash | 11,803 | (49,468) |
Cash, cash equivalents and restricted cash, beginning of period | 141,699 | 88,572 |
Cash, cash equivalents and restricted cash, end of period | 153,502 | 39,104 |
Supplemental disclosure of cash flow information: | ||
Cash paid during the year for interest, net of interest capitalized | 71 | 121 |
Supplemental disclosure of non-cash investing and financing activities: | ||
Accrual for current-period additions to real estate | 8,980 | 20,264 |
Deposits applied for acquisitions | 250 | |
Accrual for common and preferred stock dividends declared | $ 52,295 | 51,063 |
Exchange of Exchangeable Senior Notes for common stock | $ 1,964 |
Organization
Organization | 3 Months Ended |
Mar. 31, 2024 | |
Organization | |
Organization | 1. Organization As used herein, the terms “we”, “us”, “our” or the “Company” refer to Innovative Industrial Properties, Inc., a Maryland corporation, and any of our subsidiaries, including IIP Operating Partnership, LP, a Delaware limited partnership (our “Operating Partnership”). We are an internally-managed real estate investment trust (“REIT”) focused on the acquisition, ownership and management of specialized industrial properties leased to experienced, state-licensed operators for their regulated cannabis facilities. We have acquired and intend to continue to acquire our properties through sale-leaseback transactions and third-party purchases. We have leased and expect to continue to lease our properties on a triple-net lease basis, where the tenant is responsible for all aspects of and costs related to the property and its operation during the lease term, including structural repairs, maintenance, real estate taxes and insurance. We were incorporated in Maryland on June 15, 2016. We conduct our business through a traditional umbrella partnership real estate investment trust, or UPREIT structure, in which our properties are owned by our Operating Partnership, directly or through subsidiaries. We are the sole general partner of our Operating Partnership and own, directly or through subsidiaries, 100% of the limited partnership interests in our Operating Partnership. |
Summary of Significant Accounti
Summary of Significant Accounting Policies and Procedures and Recent Accounting Pronouncements | 3 Months Ended |
Mar. 31, 2024 | |
Summary of Significant Accounting Policies and Procedures and Recent Accounting Pronouncements | |
Summary of Significant Accounting Policies and Procedures and Recent Accounting Pronouncements | 2. Summary of Significant Accounting Policies and Procedures and Recent Accounting Pronouncements Basis of Presentation. This interim financial information should be read in conjunction with the audited consolidated financial statements in the Company’s Annual Report on Form 10-K for the year ended December 31, 2023. Any references to square footage or occupancy percentage, and any amounts derived from these values in these notes to the condensed consolidated financial statements, are outside the scope of our independent registered public accounting firm’s review. Management believes that all adjustments of a normal, recurring nature considered necessary for a fair presentation have been included. This interim financial information does not necessarily represent or indicate what the operating results will be for the year ending December 31, 2024. Federal Income Taxes. Use of Estimates. Reportable Segment. Acquisition of Real Estate Properties. The fair value of acquired in-place leases is derived based on our assessment of estimated lost revenue and costs incurred for the period required to lease the “assumed vacant” property to the occupancy level when purchased. The amounts recorded for acquired in-place leases are reflected as in-place lease intangible assets, net on our condensed consolidated balance sheets and are amortized on a straight-line basis as a component of depreciation and amortization expense over the remaining term of the applicable leases. The fair value of the above-market component of an acquired in-place operating lease is based upon the present value (calculated using a market discount rate) of the difference between (i) the contractual rents to be paid pursuant to the lease over its remaining non-cancellable lease term and (ii) our estimate of the rents that would be paid using fair market rental rates and rent escalations at the date of acquisition measured over the remaining non-cancellable term of the lease. The amount recorded for one above-market operating lease is included in other assets, net on our condensed consolidated balance sheets and is amortized on a straight-line basis as a reduction of rental revenues over the remaining term of the applicable lease. Certain acquisitions of real estate did not satisfy the requirements for sale-leaseback accounting and therefore as of both March 31, 2024 and December 31, 2023, acquisitions of $20.0 million have been recognized as notes receivable and are included in other assets, net on our condensed consolidated balance sheets. Sale of Real Estate. Gains and Losses from the Derecognition of Nonfinancial Assets Revenue from Contracts with Customers (Topic 606) Cost Capitalization and Depreciation. Amounts capitalized are depreciated on a straight-line basis over the estimated useful lives determined by management. We depreciate buildings and improvements based on our evaluation of the estimated useful life of each specific asset, not to exceed 40 years. For the three months ended March 31, 2024 and 2023, we recognized depreciation expense of $16.9 million and $16.5 million, respectively. Depreciation expense relating to our real estate held for investment is included in depreciation and amortization expense in our condensed consolidated statements of income. We depreciate office equipment and furniture and fixtures on a straight-line basis over the estimated useful lives ranging from three a straight-line basis over the shorter of the estimated useful lives or the remaining lease term. Depreciation expense relating to our corporate assets is included in general and administrative expense in our condensed consolidated statements of income. Determining whether expenditures meet the criteria for capitalization and the assignment of depreciable lives requires management to exercise significant judgment. Project costs that are clearly associated with the acquisition and development or redevelopment of a real estate project, for which we are the accounting owner, are capitalized as a cost of that project. Expenditures that meet one or more of the following criteria generally qualify for capitalization: ● the expenditure provides benefit in future periods; and ● the expenditure extends the useful life of the asset beyond our original estimates. We define redevelopment properties as existing properties for which we expect to spend significant development and construction costs that are not reimbursements to tenants for improvements at the properties. When existing properties are determined to be redevelopment properties, the net carrying value of the buildings and improvements are transferred to construction in progress while the redevelopment activities are in process. Costs capitalized to construction in progress related to redevelopment properties are transferred to buildings and improvements at historical cost of the properties as the redevelopment project or phases of projects are placed in service. Provision for Impairment. Long-lived assets are individually evaluated for impairment when conditions exist that may indicate that the carrying amount of a long-lived asset may not be recoverable. The carrying amount of a long-lived asset to be held and used is not recoverable if it exceeds the sum of the undiscounted cash flows expected to result from the use and eventual disposition of the asset. Impairment indicators or triggering events for long-lived assets to be held and used are assessed by project and include significant fluctuations in estimated net operating income, occupancy changes, significant near-term lease expirations, current and historical operating and/or cash flow losses, construction costs, estimated completion dates, rental rates, and other market factors. We assess the expected undiscounted cash flows based upon numerous factors, including, but not limited to, construction costs, available market information, current and historical operating results, known trends, current market/economic conditions that may affect the property, and our assumptions about the use of the asset, including, if necessary, a probability-weighted approach if multiple outcomes are under consideration. Upon determination that an impairment has occurred, a write-down is recognized to reduce the carrying amount to its estimated fair value. We may adjust depreciation of properties that are expected to be disposed of or redeveloped prior to the end of their useful lives. No impairment losses were recognized during the three months ended March 31, 2024 and 2023. Revenue Recognition. Construction Loan. In February 2023, we amended the construction loan to provide for, among other things: (1) the additional capital commitment of the borrower into the project of $1.0 million; (2) our agreement to fund an additional $4.5 million into the project; (3) an increase in the interest rate effective April 1, 2023; (4) an extension of the loan term to December 31, 2023; and (5) the provision of additional collateral from the borrower for the loan. Interest on the loan continued to accrue through March 31, 2023, with monthly payment of interest contractual required commencing April 1, 2023. In December 2023, we further amended the construction loan to extend the loan term to June 30, 2024, with an option for the borrower to extend the loan term to December 31, 2024 upon satisfaction of certain conditions and payment of an extension fee. Cash and Cash Equivalents Restricted Cash Investments. Deferred Financing Costs. Stock-Based Compensation. Lease Accounting. Leases The right-of-use asset is measured based on the corresponding lease liability. We did not incur any initial direct leasing costs or exchange any other consideration with the landlord prior to the commencement of the lease. Subsequently, the right-of-use asset is amortized on a straight-line basis during the lease term. In each of the three months ended March 31, 2024 and 2023, we recognized office lease expense of $0.1 million, which is included in general and administrative expenses in our condensed consolidated statements of income. In each of the three months ended March 31, 2024 and 2023, amounts paid and classified as operating activities in our condensed consolidated statements of cash flows for the office lease were $0.1 million. As lessor, for each of our real estate transactions involving the leaseback of the related property to the seller or affiliates of the seller, we determine whether these transactions qualify as sale and leaseback transactions under the accounting guidance. For these transactions, we consider various inputs and assumptions including, but not necessarily limited to, lease terms, renewal options, discount rates, and other rights and provisions in the purchase and sale agreement, lease and other documentation to determine whether control has been transferred to the Company or remains with the lessee. A transaction involving a sale leaseback will be treated as a purchase of a real estate property if it is considered to transfer control of the underlying asset from the lessee. A lease will be classified as direct-financing if risks and rewards are conveyed without the transfer of control and will be classified as a sales-type lease if control of the underlying asset is transferred to the lessee. Otherwise, the lease is treated as an operating lease. These criteria also include estimates and assumptions regarding the fair value of the leased facilities, minimum lease payments, the economic useful life of the facilities, the existence of a purchase option, and certain other terms in the lease agreements. The lease accounting guidance requires accounting for a transaction as a financing in a sale leaseback when the seller-lessee is provided an option to purchase the property from the landlord at the tenant’s option. Substantially all of our leases are classified as operating leases. Lease amendments are evaluated to determine if the modification grants the lessee an additional right-of-use not included in the original lease and if the lease payments increase commensurate with the standalone price of the additional right-of-use, adjusted for the circumstances of the particular contract. If both conditions are present, the lease amendment is accounted for as a new lease that is separate from the original lease. In January 2024, the lease modifications for two of our leases to extend the initial term of each lease changed the lease classification from operating lease to sales-type lease that did not satisfy all the criteria for recognition as a completed sale. Accordingly, we have not derecognized the underlying assets and all lease payments received, as well as any future lease payments, will be recognized as a deposit liability and will be included in other liabilities on our condensed consolidated balance sheet until certain criteria are met. As of March 31, 2024, we have received lease payments of $1.5 million that have been included in other liabilities on our condensed consolidated balance sheet. The underlying assets’ land and building and improvements had a gross carrying value of $4.1 million and $28.9 million, respectively, and accumulated depreciation of $2.8 million as of March 31, 2024. Our leases generally contain options to extend the lease terms at the prevailing market rate or at the expiring rental rate at the time of expiration. Certain of our leases provide the lessee with a right of first refusal or right of first offer in the event we market the leased property for sale. Recent Accounting Pronouncements . In November 2023, the Financial Accounting Standards Board issued Accounting Standards Update 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures (“ASU 2023-07”). The amendments in ASU 2023-07 improve reportable segment disclosure requirements, primarily through enhanced disclosures about significant segment expenses, measures of segment profit and loss, and disclosures of how the chief operating decision maker uses the reported measure(s) of a segment’s profit or loss in assessing segment performance and deciding how to allocate resources. . Concentration of Credit Risk The following table sets forth the five tenants in our portfolio that represented the largest percentage of our total rental revenues for the three months ended March 31, 2024 and 2023, including tenant reimbursements: For the Three Months Ended March 31, 2024 Percentage of Number of Rental Leases Revenue PharmaCann Inc. ("PharmaCann") 11 17 % Ascend Wellness Holdings, Inc. ("Ascend") 4 11 % Green Thumb Industries, Inc. ("Green Thumb") 3 8 % Curaleaf Holdings, Inc. ("Curaleaf") 8 7 % Trulieve Cannabis Corp. ("Trulieve") 6 7 % For the Three Months Ended March 31, 2023 Percentage of Number of Rental Leases Revenue PharmaCann 11 15 % Ascend 4 10 % SH Parent, Inc. ("Parallel") (1) 4 9 % Green Thumb 3 7 % Curaleaf 8 7 % (1) We regained possession of two properties previously leased to Parallel in Texas and Pennsylvania in March and November 2023, respectively. In each of the tables above, these leases include leases with affiliates of each entity, for which the entity has provided a corporate guaranty. As of March 31, 2024 and December 31, 2023, our largest property was located in New York and accounted for 5.5% and 5.4%, respectively, of our net real estate held for investment. No other properties accounted for more than 5% of our net real estate held for investment as of March 31, 2024 and December 31, 2023. We have deposited cash with financial institutions that are insured by the Federal Deposit Insurance Corporation (“FDIC”) up to $250,000. As of March 31, 2024, we had cash accounts in excess of FDIC insured limits. We have not experienced any losses in such accounts. |
Common Stock
Common Stock | 3 Months Ended |
Mar. 31, 2024 | |
Common Stock. | |
Common Stock | 3. Common Stock As of March 31, 2024, the Company was authorized to issue up to 50,000,000 shares of common stock, par value $0.001 per share, and there were 28,328,647 shares of common stock issued and outstanding. In January 2023, we entered into separate equity distribution agreements with four sales agents, pursuant to which we may offer and sell from time to time through an “at-the-market” offering program (the “ATM Program”) up to $500.0 million in shares of our common stock. During the three months ended March 31, 2024, we sold 123,224 shares of our common stock pursuant to the ATM Program for net proceeds of $11.8 million. No shares of common stock were issued pursuant to the ATM Program during the three months ended March 31, 2023. During the three months ended March 31, 2024, we issued 28,408 shares of our common stock related to the exchange premium upon exchange by holders of $4.3 million of outstanding principal amount of our 3.75% Exchangeable Senior Notes due 2024 (the “Exchangeable Senior Notes”). During the three months ended March 31, 2023, we issued 32,200 shares of our common stock upon exchange by holders of $2.0 million of outstanding principal amount of our Exchangeable Senior Notes. |
Preferred Stock
Preferred Stock | 3 Months Ended |
Mar. 31, 2024 | |
Preferred Stock. | |
Preferred Stock | 4. Preferred Stock As of March 31, 2024, the Company was authorized to issue up to 50,000,000 shares of preferred stock, par value $0.001 per share, and there were 600,000 shares issued and outstanding |
Dividends
Dividends | 3 Months Ended |
Mar. 31, 2024 | |
Dividends | |
Dividends | 5. Dividends The following table describes the dividends declared by the Company during the three months ended March 31, 2024: Amount Dividend Dividend Declaration Date Security Class Per Share Period Covered Paid Date Amount (In thousands) March 15, 2024 Common stock $ 1.82 January 1, 2024 to March 31, 2024 April 15, 2024 $ 51,957 March 15, 2024 Series A preferred stock $ 0.5625 January 15, 2024 to April 14, 2024 April 15, 2024 $ 338 |
Investments in Real Estate
Investments in Real Estate | 3 Months Ended |
Mar. 31, 2024 | |
Investments in Real Estate | |
Investments in Real Estate | 6. Investments in Real Estate Acquired In-Place Lease Intangible Assets In-place lease intangible assets and related accumulated amortization as of March 31, 2024 and December 31, 2023 is as follows (in thousands): March 31, 2024 December 31, 2023 In-place lease intangible assets $ 9,979 $ 9,979 Accumulated amortization (1,949) (1,734) In-place lease intangible assets, net $ 8,030 $ 8,245 Amortization of in-place lease intangible assets classified in depreciation and amortization expense in our condensed consolidated statements of income was $0.2 million in each of the three months ended March 31, 2024 and 2023. The weighted-average remaining amortization period of the acquired in-place leases was 9.5 years, and the estimated annual amortization of the value of the acquired in-place leases as of March 31, 2024 is as follows (in thousands): Year Amount 2024 (nine months ending December 31) $ 645 2025 860 2026 860 2027 860 2028 860 Thereafter 3,945 Total $ 8,030 Above-Market Lease The above-market lease and related accumulated amortization included in other assets, net on our condensed consolidated balance sheets as of March 31, 2024 and December 31, 2023 is as follows (in thousands): March 31, 2024 December 31, 2023 Above-market lease $ 1,054 $ 1,054 Accumulated amortization (210) (187) Above-market lease, net $ 844 $ 867 The above-market lease is amortized on a straight-line basis as a reduction to rental revenues over the remaining lease term of 9.0 years. In each of the three months ended March 31, 2024 and 2023, the amortization of the above-market lease was $23,000. Lease Amendments In January 2024, we entered into lease amendments with subsidiaries of 4Front Ventures Corp. (“4Front”) at the four properties we lease to them in Illinois, Massachusetts and Washington, extending the term of each lease. The Illinois property, which is under development, has experienced significant delays in construction, primarily relating to completion of required utilities enhancements, which has resulted in an extended delay of the estimated completion of the project. As a result, we amended the Illinois lease to reduce base rent owing for the nine months ending September 30, 2024, defer the payback of the security deposit applicable to the lease (with the security deposit being subject to future pro-rata monthly payback), and increase the base rent for the remainder of the term commencing November 1, 2024. In February 2024, we amended our lease and development agreement with PharmaCann at one of our New York properties, increasing the construction funding commitment by $16.0 million, which also resulted in a corresponding adjustment to the base rent for the lease at the property. We also amended the lease to extend the term. New Leases 63795 19th Avenue in Palm Springs, California, with the commencement date under the lease . Capitalized Costs During the three months ended March 31, 2024, we capitalized costs of $17.5 million and funded $16.5 million relating to improvements and construction activities at our properties. Property Disposition In March 2023, we sold the portfolio of four properties in California previously leased to affiliates of Medical Investor Holdings, LLC (“Vertical”) for $16.2 million (excluding transaction costs) and provided a secured loan for $16.1 million to the buyer of the properties. The loan matures on February 29, 2028 with two options to extend the maturity for twelve months, conditional in each instance on the payment of an extension fee and at least $0.5 million of the principal balance. The loan is interest only and payments are payable monthly in advance. The transaction did not qualify for recognition as a completed sale under GAAP since not all of the criteria were met. Accordingly, we have not derecognized the assets transferred on our condensed consolidated balance sheets. All consideration received, as well as any future payments, from the buyer will be recognized as a deposit liability and will be included in other liabilities on our condensed consolidated balance sheet until such time the criteria for recognition as a sale have been met. As of March 31, 2024, we have received interest payments of $1.9 million. In addition, as we have not met all of the held-for-sale criteria, land and building and improvements with a gross carrying value of $3.4 million and $13.9 million, respectively, and accumulated depreciation of $1.7 million as of March 31, 2024, remain on the condensed consolidated balance sheet, and the buildings and improvements continue to be depreciated. Future Contractual Minimum Rent Future contractual minimum rent (including base rent and property management fees) to be received on our leases as of March 31, 2024 for future periods is summarized as follows (in thousands): Year Contractual Minimum Rent 2024 (nine months ending December 31) $ 216,745 2025 305,414 2026 314,436 2027 322,020 2028 329,027 Thereafter 3,904,454 Total $ 5,392,096 Future contractual minimum rent includes payments to be received on two sales-type leases, which will be recognized as a deposit liability and will be included in other liabilities on our condensed consolidated balance sheet until certain criteria are met (see Note 2 “Lease Accounting” for further details). |
Debt
Debt | 3 Months Ended |
Mar. 31, 2024 | |
Debt | |
Debt | 7. Debt Exchangeable Senior Notes During the three months ended March 31, 2024, we issued 28,408 shares of our common stock and paid $4.3 million in cash upon exchange by holders of $4.3 million principal amount of Exchangeable Senior Notes and paid off the remaining $0.1 million principal amount at maturity in February 2024, in accordance with terms of the indenture for the Exchangeable Senior Notes. During the three months ended March 31, 2023, we issued 32,200 shares of our common stock upon exchanges by holders of $2.0 million of outstanding principal amount of our Exchangeable Senior Notes. For the three months ended March 31, 2023, we recognized a gain on the exchange totaling $22,000 , resulting from the difference between the fair value and carrying value of the debt as of the date of the exchange. The issuance of the shares pursuant to the exchanges resulted in a net non-cash increase to our additional paid-in capital account of $2.0 million for the three months ended March 31, 2023. The following table details our interest expense related to the Exchangeable Senior Notes (in thousands): For the Three Months Ended March 31, 2024 2023 Cash coupon $ 24 $ 57 Amortization of issuance cost 5 12 Capitalized interest (1) — Total interest expense $ 28 $ 69 The following table details the carrying value of our Exchangeable Senior Notes (in thousands): March 31, 2024 December 31, 2023 Principal amount $ — $ 4,436 Unamortized issuance cost — (5) Carrying value $ — $ 4,431 Accrued interest payable for the Exchangeable Senior Notes as of December 31, 2023 was $49,000 and was included in accounts payable and accrued expenses on our condensed consolidated balance sheets. Notes due 2026 In May 2021, our Operating Partnership issued $300.0 million aggregate principal amount of its 5.50% Senior Notes due 2026 (the “Notes due 2026”). The Notes due 2026 are senior unsecured obligations of our Operating Partnership, are fully and unconditionally guaranteed by us and rank equally in right of payment with all of the Operating Partnership’s future senior unsecured indebtedness. However, the Notes due 2026 are effectively subordinated to any of the Company’s, the Operating Partnership’s and the Operating Partnership’s subsidiaries’ future secured indebtedness to the extent of the value of the assets securing such indebtedness. The Notes due 2026 will pay interest semiannually at a rate of 5.50% per year and will mature on May 25, 2026. The terms of the Notes due 2026 are governed by an indenture dated May 25, 2021, and provide that if the debt rating on the Notes due 2026 is downgraded or withdrawn entirely, interest on the Notes due 2026 will increase to a range of 6.0% to 6.5% based on such debt rating. In connection with the issuance of the Notes due 2026, we recorded $6.8 million of issuance costs, which are being amortized using the effective interest method and recognized as non-cash interest expense over the term of the Notes due 2026. The effective interest rate including amortization of issuance costs is 6.03%. The following table details our interest expense related to the Notes due 2026 (in thousands): For the Three Months Ended March 31, 2024 2023 Cash coupon $ 4,125 $ 4,125 Amortization of issuance cost 346 326 Capitalized interest (165) — Total interest expense $ 4,306 $ 4,451 The following table details the carrying value of our Notes due 2026 (in thousands): March 31, 2024 December 31, 2023 Principal amount $ 300,000 $ 300,000 Unamortized issuance cost (3,205) (3,551) Carrying value $ 296,795 $ 296,449 The Operating Partnership may redeem some or all of the Notes due 2026 at its option at any time at the applicable redemption price. If the Notes due 2026 are redeemed prior to February 25, 2026, the redemption price will be equal to 100% of the principal amount of the Notes due 2026 being redeemed, plus a make-whole premium and accrued and unpaid interest thereon to, but excluding, the applicable redemption date. If the Notes due 2026 are redeemed on or after February 25, 2026, the redemption price will be equal to 100% of the principal amount of the Notes due 2026 being redeemed, plus accrued and unpaid interest thereon to, but excluding, the applicable redemption date. The terms of the indenture for the Notes due 2026 require compliance with various financial covenants, including minimum level of debt service coverage and limits on the amount of total leverage and secured debt maintained by the Operating Partnership. Management believes that it was in compliance with those covenants as of March 31, 2024. Accrued interest payable for the Notes due 2026 as of March 31, 2024 and December 31, 2023 was $6.2 million and $2.1 million, respectively, and is included in accounts payable and accrued expenses on our condensed consolidated balance sheets. Revolving Credit Facility In October 2023, our Operating Partnership entered into a loan and security agreement (the “Loan Agreement”) with a federally regulated commercial bank, as lender and as agent for lenders that become party thereto from time to time, which matures on October 23, 2026. The Loan Agreement was amended in February 2024 to provide $45.0 million in aggregate commitments for secured revolving loans (the “Revolving Credit Facility”), the availability of which is based on a borrowing base consisting of real properties owned by subsidiaries (the “Subsidiary Guarantors”) of the Operating Partnership that satisfy eligibility criteria set forth in the Loan Agreement. The obligations of the Operating Partnership under the Loan Agreement are guaranteed by the Company and the Subsidiary Guarantors, and are secured by (i) operating accounts of the Operating Partnership into which lease payments under the real property included in the borrowing base are paid, (ii) the equity interest of the Subsidiary Guarantors, (iii) the real estate included in the borrowing base and the leases and rents thereunder, and (iv) all personal property of the Subsidiary Guarantors. Borrowings under the Revolving Credit Facility bear interest at a variable rate based on the greater of the prime rate and an applicable margin based on deposits with the participating bank(s) and a stipulated interest rate. The Revolving Credit Facility is subject to an unused line of credit fee, calculated in accordance with the Loan Agreement. The Loan Agreement is subject to certain liquidity and operating covenants and includes customary representations and warranties, affirmative and negative covenants and events of default. The Loan Agreement also allows the Operating Partnership, subject to the satisfaction of certain conditions, to request additional revolving loan commitments up to a specified amount. There were no amounts outstanding under the Revolving Credit Facility as of March 31, 2024. In connection with the Revolving Credit Facility, we recorded $0.7 million of issuance costs, which are being amortized on a straight-line basis and recognized as non-cash interest expense over the term of the Revolving Credit Facility. For the three months ended March 31, 2024, we recognized $55,000 of non-cash interest expense related to the Revolving Credit Facility. The following table summarizes the principal payments on our outstanding indebtedness as of March 31, 2024 (in thousands): Payments Due by Year Amount 2024 (nine months ending December 31) — 2025 — 2026 300,000 2027 — 2028 — Thereafter — Total $ 300,000 |
Net Income Per Share
Net Income Per Share | 3 Months Ended |
Mar. 31, 2024 | |
Net Income Per Share | |
Net Income Per Share | 8. Net Income Per Share Grants of restricted stock and restricted stock units (“RSUs”) of the Company in share-based payment transactions are considered participating securities prior to vesting and, therefore, are considered in computing basic earnings per share under the two-class method. The two-class method is an earnings allocation method for calculating earnings per share when a company’s capital structure includes either two or more classes of common stock or common stock and participating securities. Earnings per basic share under the two-class method is calculated based on dividends declared on common shares and other participating securities (“distributed earnings”) and the rights of participating securities in any undistributed earnings, which represents net income remaining after deduction of dividends accruing during the period. The undistributed earnings are allocated to all outstanding common shares and participating securities based on the relative percentage of each security to the total number of outstanding participating securities. Earnings per basic share represents the summation of the distributed and undistributed earnings per share class divided by the total number of shares. Through March 31, 2024, all of the Company’s participating securities received dividends or dividend equivalents at an equal dividend rate per share or unit. As a result, distributions to participating securities for the three months ended March 31, 2024 and 2023 have been included in net income attributable to common stockholders to calculate net income per basic and diluted share. The 38,079 and 102,210 shares necessary to settle the Exchangeable Senior Notes on the if-exchanged method basis were dilutive for the three months ended March 31, 2024 and 2023, respectively, and were included in the computation of diluted earnings per share. For the three months ended March 31, 2024 and 2023, the performance share units (“PSUs”) granted to certain employees were not included in dilutive securities as the performance thresholds for vesting of the PSUs were not met as measured as of the respective dates (see Note 10 for further discussion of PSUs). Computations of net income per basic and diluted share (in thousands, except share and per share data) were as follows: For the Three Months Ended March 31, 2024 2023 Net income $ 39,428 $ 41,092 Preferred stock dividends (338) (338) Distribution to participating securities (544) (361) Net income attributable to common stockholders used to compute net income per share – basic 38,546 40,393 Dilutive effect of Exchangeable Senior Notes 28 69 Net income attributable to common stockholders used to compute net income per share – diluted $ 38,574 $ 40,462 Weighted-average common shares outstanding: Basic 28,145,017 27,949,747 Restricted stock and RSUs 278,890 171,741 Dilutive effect of Exchangeable Senior Notes 38,079 102,210 Diluted 28,461,986 28,223,698 Net income attributable to common stockholders per share: Basic $ 1.37 $ 1.45 Diluted $ 1.36 $ 1.43 |
Fair Value of Financial Instrum
Fair Value of Financial Instruments | 3 Months Ended |
Mar. 31, 2024 | |
Fair Value of Financial Instruments | |
Fair Value of Financial Instruments | 9. Fair Value of Financial Instruments Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants on the measurement date. Accounting guidance also establishes a fair value hierarchy that requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. The standard describes three levels of inputs that may be used to measure fair value: Level 1—Observable inputs that reflect quoted prices (unadjusted) for identical assets or liabilities in active markets. Level 2—Includes other inputs that are directly or indirectly observable in the marketplace. Level 3—Unobservable inputs that are supported by little or no market activities, therefore requiring an entity to develop its own assumptions. The following table presents the carrying value and approximate fair value of financial instruments at March 31, 2024 and December 31, 2023 (in thousands): At March 31, 2024 At December 31, 2023 Carrying Value Fair Value Carrying Value Fair Value Investments (1) $ 20,026 $ 20,026 $ 21,948 $ 21,951 Investments as cash equivalents (2) $ 15,179 $ 15,099 $ 15,187 $ 15,029 Exchangeable Senior Notes (3) $ — $ — $ 4,431 $ 7,576 Notes due 2026 (3) $ 296,795 $ 286,767 $ 296,449 $ 278,325 Construction Loan (4) $ 22,000 $ 27,551 $ 22,000 $ 27,543 (1) At March 31, 2024, investments consisting of short-term certificates of deposit with an original maturity at the time of purchase of greater than 90 days and less than one year are classified as held-to-maturity and stated at cost, which approximates fair value. At December 31, 2023, investments consisting of short-term obligations of the U.S. government with an original maturity at the time of purchase of greater than 90 days and less than one year are classified as held-to-maturity, stated at amortized cost and valued using Level 1 inputs. (2) Investments as cash equivalents consisting of obligations of the U.S. government with an original maturity at the time of purchase of 90 days or less are classified as held-to-maturity, stated at amortized cost and valued using Level 1 inputs. (3) The fair value is determined based upon Level 2 inputs as the Exchangeable Senior Notes and Notes due 2026 were trading in the private market. (4) The construction loan receivable is categorized as Level 3 and was valued using a yield analysis, which is typically performed for non-credit impaired loans. To determine fair value using a yield analysis, a current price is imputed for the loan based upon an assessment of the expected market yield for a similarly structured loan with a similar level of risk. In the yield analysis, the Company considers the current contractual interest rate, the maturity and other terms of the loan relative to risk of the company and the specific loan. At each of March 31, 2024 and December 31, 2023, the expected market yield used to determine fair value was 16.25% . Changes in market yields may change the fair value of the construction loan. Generally, an increase in market yields may result in a decrease in the fair value of the construction loan. Due to the inherent uncertainty of determining the fair value of a loan that does not have a readily available market value, the fair value of the construction loan may fluctuate from period to period. Additionally, the fair value of the construction loan may differ significantly from the value that would have been used had a readily available market existed for such loan and may differ materially from the value that the Company may ultimately realize. The carrying amounts of cash equivalents, accounts payable, accrued expenses and other liabilities approximate their fair values. |
Common Stock Incentive Plan
Common Stock Incentive Plan | 3 Months Ended |
Mar. 31, 2024 | |
Common Stock Incentive Plan | |
Common Stock Incentive Plan | 10. Common Stock Incentive Plan Our board of directors adopted our 2016 Omnibus Incentive Plan (the “2016 Plan”) to enable us to motivate, attract and retain the services of directors, employees and consultants considered essential to our long-term success. The 2016 Plan offers our directors, employees and consultants an opportunity to own our stock or rights that will reflect our growth, development and financial success. Under the terms of the 2016 Plan, the aggregate number of shares of our common stock subject to options, restricted stock, stock appreciation rights, restricted stock units and other awards, will be no more than 1,000,000 shares. Any equity awards that lapse, expire, terminate, are canceled or are forfeited (including forfeitures in connection with satisfaction of tax withholdings obligations of the recipient) are re-credited to the 2016 Plan’s reserve for future issuance. The 2016 Plan automatically terminates on the date which is ten years following the effective date of the 2016 Plan. A summary of the restricted stock activity under the 2016 Plan and related information for the three months ended March 31, 2024 is included in the table below: Weighted- Unvested Average Restricted Grant Date Fair Stock Value Balance at December 31, 2023 56,711 $ 135.46 Granted 43,566 $ 91.81 Vested (13,698) $ 126.83 Forfeited (1) (7,442) $ 205.15 Balance at March 31, 2024 79,137 $ 106.37 (1) Shares that were forfeited to cover the employees’ tax withholding obligation upon vesting. The remaining unrecognized compensation cost of $7.1 million for restricted stock awards is expected to be recognized over a weighted-average amortization period of 2.1 years as of March 31, 2024. The fair value of restricted stock that vested during the three months ended March 31, 2024 was $2.1 million. The following table summarizes our RSU activity for the three months ended March 31, 2024. RSUs are issued as part of the Innovative Industrial Properties, Inc. Nonqualified Deferred Compensation Plan (the “Deferred Compensation Plan”), which allows a select group of management and our non-employee directors to defer receiving certain of their cash and equity-based compensation. RSUs are subject to vesting conditions of the Deferred Compensation Plan and have the same economic rights as shares of restricted stock under the 2016 Plan: Weighted-Average Restricted Grant Date Fair Stock Units Value Balance at December 31, 2023 149,956 $ 125.34 Granted 69,714 $ 91.81 Balance at March 31, 2024 219,670 $ 114.70 The remaining unrecognized compensation cost of $10.8 million for RSU awards is expected to be recognized over an amortization period of 2.2 years as of March 31, 2024. In January 2021 and 2022, we issued 70,795 and 102,641 “target” PSUs, respectively, to a select group of officers, which vest and are settled in shares of common stock based on the Company’s total stockholder return over a performance period beginning on the applicable grant date and ending on December 31, 2023 and 2024, respectively. Stock-based compensation for market-based PSU awards is based on the grant date fair value of the equity awards and is recognized over the applicable performance period. For the three months ended March 31, 2024 and 2023, we recognized stock-based compensation expense of $1.7 million and $2.7 million, respectively, relating to PSU awards. As of March 31, 2024, the remaining unrecognized compensation cost of $5.0 million relating to PSU awards is expected to be recognized over the remaining performance period of 0.8 years. The PSUs granted in January 2021 were forfeited in their entirety on December 31, 2023 pursuant to the terms of the agreements, as the PSUs failed to meet the performance threshold for vesting. As measured as of March 31, 2024, the performance threshold for the vesting of the PSUs granted in January 2022 also was not met. |
Commitments and Contingencies
Commitments and Contingencies | 3 Months Ended |
Mar. 31, 2024 | |
Commitments and Contingencies | |
Commitments and Contingencies | 11. Commitments and Contingencies Office Lease Year Amount 2024 (nine months ending December 31) $ 384 2025 526 2026 543 2027 45 2028 — Total future contractual lease payments 1,498 Effect of discounting (122) Office lease liability $ 1,376 Improvement Allowances Construction Commitments. million of commitments related to contracts with vendors for improvements at our properties. Construction Loan. Environmental Matters. Litigation Class Action Lawsuit On April 25, 2022, a federal securities class action lawsuit was filed against the Company and certain of its officers. The case was named Michael V. Mallozzi, individually and on behalf of others similarly situated v. Innovative Industrial Properties, Inc., Paul Smithers, Catherine Hastings and Andy Bui, Case No. 2-22-cv-02359, and alleges that we and certain of our officers made false or misleading statements regarding our business in violation of Section 10(b) of the Securities Exchange Act of 1934, as (the “Exchange Act”), SEC Rule 10b-5, and Section 20(a) of the Exchange Act. According to the filed complaint, the p On September 29, 2022, an Amended Class Action Complaint was filed under the same Case Number, adding as defendants Alan D. Gold and Benjamin C. Regin, and asserting causes of action under Sections 10(b) and 20(a) of the Securities Exchange Act of 1934 and Rule 10b-5 promulgated thereunder. According to the Amended Class Action Complaint, the plaintiff is seeking an undetermined amount of damages, interest, attorneys’ fees and costs and other relief on behalf of the putative classes of all persons who acquired shares of the Company’s common stock between August 7, 2020 and August 4, 2022. On December 1, 2022, defendants moved to dismiss the Amended Class Action Complaint. On September 19, 2023, the court granted defendants’ motion to dismiss the Amended Class Action Complaint without prejudice. On October 19, 2023, a Second Amended Class Action Complaint was filed under the same Case Number, and asserted causes of action under Sections 10(b) and 20(a) of the Securities Exchange Act of 1934 and Rule 10b-5 promulgated thereunder. According to the Second Amended Class Action Complaint, the plaintiff is seeking an undetermined amount of damages, interest, attorneys’ fees and costs and other relief on behalf of the putative classes of all persons who acquired shares of the Company’s common stock between August 7, 2020 and August 4, 2022. On December 18, 2023, defendants moved to dismiss the Second Amended Class Action Complaint; on February 1, 2024, plaintiff responded with their opposition to defendants’ motion to dismiss the Second Amended Class Action Complaint; and on March 1, 2024, defendants replied to plaintiff’s response. It is possible that similar lawsuits may yet be filed in the same or other courts that name the same or additional defendants. We intend to defend the lawsuit vigorously. However, at this time, we cannot predict the probable outcome of this action, and, accordingly, no amounts have been accrued in the Company’s condensed consolidated financial statements. Derivative Action Lawsuits On July 26, 2022, a derivative action lawsuit was filed against the Company and certain of its officers and directors. The case was named John Rice, derivatively on behalf of Innovative Industrial Properties, Inc. v. Paul Smithers, Catherine Hastings, Andy Bui, Alan Gold, Gary Kreitzer, Mary Curran, Scott Shoemaker, David Stecher, and Innovative Industrial Properties, Inc., Case Number 24-C-22-003312, The plaintiffs are seeking declaratory relief, direction to reform and improve corporate governance and internal procedures, and an undetermined amount of damages, restitution, interest, and attorneys’ fees and costs. On September 6, 2022, the defendants in this action filed a Consent Motion to Stay the Proceedings, which was granted on October 11, 2022. On September 28, 2022, a second derivative action lawsuit was filed against the Company and certain of its officers and directors. The case was named Karen Draper, derivatively on behalf of Innovative Industrial Properties, Inc. v. Paul Smithers, Catherine Hastings, Andy Bui, Alan Gold, Gary Kreitzer, Mary Curran, Scott Shoemaker, David Stecher, Defendants, and Innovative Industrial Properties Inc., Nominal Defendant Ross Weintraub, derivatively on behalf of Innovative Industrial Properties, Inc. v. Alan Gold, Paul Smithers, Catherine Hastings, Ben Regin, Andy Bui, Tracie Hager, Gary Kreitzer, David Stecher, Scott Shoemaker, Mary Curran, and Innovative Industrial Properties, Inc., Franco DeBlasio, on behalf of Gerich Melenth Nin (GMN) LP, derivatively on behalf of Innovative Industrial Properties, Inc. v. Paul Smithers, Catherine Hastings, Alan D. Gold, Tracie J. Hager, Benjamin C. Regin, Andy Bui, Gary A. Kreitzer, David Stecher, Scott Shoemaker, Mary Curran, and Innovative Industrial Properties, Inc., We may, from time to time, be a party to other legal proceedings, which arise in the ordinary course of our business. Although the results of these proceedings, claims, inquiries, and investigations cannot be predicted with certainty, we do not believe that the final outcome of these matters is reasonably likely to have a material adverse effect on our business, financial condition, or results of operations. Regardless of final outcomes, however, any such proceedings, claims, inquiries, and investigations may nonetheless impose a significant burden on management and employees and may come with significant defense costs or unfavorable preliminary and interim rulings. |
Subsequent Events
Subsequent Events | 3 Months Ended |
Mar. 31, 2024 | |
Subsequent Events | |
Subsequent Events | 12. Subsequent Events New Leases In April 2024, we executed a new long-term lease with Lume Cannabis Co. at our property located at 10070 Harvest Park in Dimondale, Michigan. In May 2024, we executed a new long-term lease at our property located at 19533 McLane Street in Palm Springs, California. The commencement date under each of these leases is conditioned upon, among other things, the tenant’s receipt of approvals to conduct cannabis operations by the requisite state and local authorities. Lease Amendments In April 2024, we amended our lease with a subsidiary of Battle Green Holdings LLC at one of our Ohio properties to provide an additional improvement allowance of $4.5 million, which also resulted in a corresponding adjustment to the base rent for the lease at the property. In April 2024, we amended the lease with a subsidiary of 4Front at one of our Illinois properties to provide an additional improvement allowance of $1.6 million, which also resulted in a corresponding adjustment to the base rent for the lease at the property and increased the annual base rent escalations for the remainder of the lease term. Property Sale and Lease Termination In May 2024, we sold our leased property in Los Angeles, California for $9.1 million (excluding closing costs) to a third-party buyer. Concurrently with the sale, pursuant to a separate agreement previously executed between us and the tenant, the tenant paid us a lease termination fee of $3.9 million, and paid for the closing and other costs incurred by us in connection with the sale of the property. Excluding our reimbursement for those closing and other costs, we received total consideration of $13.0 million in connection with the sale of the property and termination of the existing lease. |
Summary of Significant Accoun_2
Summary of Significant Accounting Policies and Procedures and Recent Accounting Pronouncements (Policies) | 3 Months Ended |
Mar. 31, 2024 | |
Summary of Significant Accounting Policies and Procedures and Recent Accounting Pronouncements | |
Basis of Presentation | Basis of Presentation. This interim financial information should be read in conjunction with the audited consolidated financial statements in the Company’s Annual Report on Form 10-K for the year ended December 31, 2023. Any references to square footage or occupancy percentage, and any amounts derived from these values in these notes to the condensed consolidated financial statements, are outside the scope of our independent registered public accounting firm’s review. Management believes that all adjustments of a normal, recurring nature considered necessary for a fair presentation have been included. This interim financial information does not necessarily represent or indicate what the operating results will be for the year ending December 31, 2024. |
Federal Income Taxes | Federal Income Taxes. |
Use of Estimates | Use of Estimates. |
Reportable Segment | Reportable Segment. |
Acquisition of Real Estate Properties | Acquisition of Real Estate Properties. The fair value of acquired in-place leases is derived based on our assessment of estimated lost revenue and costs incurred for the period required to lease the “assumed vacant” property to the occupancy level when purchased. The amounts recorded for acquired in-place leases are reflected as in-place lease intangible assets, net on our condensed consolidated balance sheets and are amortized on a straight-line basis as a component of depreciation and amortization expense over the remaining term of the applicable leases. The fair value of the above-market component of an acquired in-place operating lease is based upon the present value (calculated using a market discount rate) of the difference between (i) the contractual rents to be paid pursuant to the lease over its remaining non-cancellable lease term and (ii) our estimate of the rents that would be paid using fair market rental rates and rent escalations at the date of acquisition measured over the remaining non-cancellable term of the lease. The amount recorded for one above-market operating lease is included in other assets, net on our condensed consolidated balance sheets and is amortized on a straight-line basis as a reduction of rental revenues over the remaining term of the applicable lease. Certain acquisitions of real estate did not satisfy the requirements for sale-leaseback accounting and therefore as of both March 31, 2024 and December 31, 2023, acquisitions of $20.0 million have been recognized as notes receivable and are included in other assets, net on our condensed consolidated balance sheets. |
Sale of Real Estate | Sale of Real Estate. Gains and Losses from the Derecognition of Nonfinancial Assets Revenue from Contracts with Customers (Topic 606) |
Cost Capitalization and Depreciation | Cost Capitalization and Depreciation. Amounts capitalized are depreciated on a straight-line basis over the estimated useful lives determined by management. We depreciate buildings and improvements based on our evaluation of the estimated useful life of each specific asset, not to exceed 40 years. For the three months ended March 31, 2024 and 2023, we recognized depreciation expense of $16.9 million and $16.5 million, respectively. Depreciation expense relating to our real estate held for investment is included in depreciation and amortization expense in our condensed consolidated statements of income. We depreciate office equipment and furniture and fixtures on a straight-line basis over the estimated useful lives ranging from three a straight-line basis over the shorter of the estimated useful lives or the remaining lease term. Depreciation expense relating to our corporate assets is included in general and administrative expense in our condensed consolidated statements of income. Determining whether expenditures meet the criteria for capitalization and the assignment of depreciable lives requires management to exercise significant judgment. Project costs that are clearly associated with the acquisition and development or redevelopment of a real estate project, for which we are the accounting owner, are capitalized as a cost of that project. Expenditures that meet one or more of the following criteria generally qualify for capitalization: ● the expenditure provides benefit in future periods; and ● the expenditure extends the useful life of the asset beyond our original estimates. We define redevelopment properties as existing properties for which we expect to spend significant development and construction costs that are not reimbursements to tenants for improvements at the properties. When existing properties are determined to be redevelopment properties, the net carrying value of the buildings and improvements are transferred to construction in progress while the redevelopment activities are in process. Costs capitalized to construction in progress related to redevelopment properties are transferred to buildings and improvements at historical cost of the properties as the redevelopment project or phases of projects are placed in service. |
Provision for Impairment | Provision for Impairment. Long-lived assets are individually evaluated for impairment when conditions exist that may indicate that the carrying amount of a long-lived asset may not be recoverable. The carrying amount of a long-lived asset to be held and used is not recoverable if it exceeds the sum of the undiscounted cash flows expected to result from the use and eventual disposition of the asset. Impairment indicators or triggering events for long-lived assets to be held and used are assessed by project and include significant fluctuations in estimated net operating income, occupancy changes, significant near-term lease expirations, current and historical operating and/or cash flow losses, construction costs, estimated completion dates, rental rates, and other market factors. We assess the expected undiscounted cash flows based upon numerous factors, including, but not limited to, construction costs, available market information, current and historical operating results, known trends, current market/economic conditions that may affect the property, and our assumptions about the use of the asset, including, if necessary, a probability-weighted approach if multiple outcomes are under consideration. Upon determination that an impairment has occurred, a write-down is recognized to reduce the carrying amount to its estimated fair value. We may adjust depreciation of properties that are expected to be disposed of or redeveloped prior to the end of their useful lives. No impairment losses were recognized during the three months ended March 31, 2024 and 2023. |
Revenue Recognition | Revenue Recognition. |
Construction Loan | Construction Loan. In February 2023, we amended the construction loan to provide for, among other things: (1) the additional capital commitment of the borrower into the project of $1.0 million; (2) our agreement to fund an additional $4.5 million into the project; (3) an increase in the interest rate effective April 1, 2023; (4) an extension of the loan term to December 31, 2023; and (5) the provision of additional collateral from the borrower for the loan. Interest on the loan continued to accrue through March 31, 2023, with monthly payment of interest contractual required commencing April 1, 2023. In December 2023, we further amended the construction loan to extend the loan term to June 30, 2024, with an option for the borrower to extend the loan term to December 31, 2024 upon satisfaction of certain conditions and payment of an extension fee. |
Cash and Cash Equivalents | Cash and Cash Equivalents |
Restricted Cash | Restricted Cash |
Investments | Investments. |
Deferred Financing Costs | Deferred Financing Costs. |
Stock-Based Compensation | Stock-Based Compensation. |
Lease Accounting | Lease Accounting. Leases The right-of-use asset is measured based on the corresponding lease liability. We did not incur any initial direct leasing costs or exchange any other consideration with the landlord prior to the commencement of the lease. Subsequently, the right-of-use asset is amortized on a straight-line basis during the lease term. In each of the three months ended March 31, 2024 and 2023, we recognized office lease expense of $0.1 million, which is included in general and administrative expenses in our condensed consolidated statements of income. In each of the three months ended March 31, 2024 and 2023, amounts paid and classified as operating activities in our condensed consolidated statements of cash flows for the office lease were $0.1 million. As lessor, for each of our real estate transactions involving the leaseback of the related property to the seller or affiliates of the seller, we determine whether these transactions qualify as sale and leaseback transactions under the accounting guidance. For these transactions, we consider various inputs and assumptions including, but not necessarily limited to, lease terms, renewal options, discount rates, and other rights and provisions in the purchase and sale agreement, lease and other documentation to determine whether control has been transferred to the Company or remains with the lessee. A transaction involving a sale leaseback will be treated as a purchase of a real estate property if it is considered to transfer control of the underlying asset from the lessee. A lease will be classified as direct-financing if risks and rewards are conveyed without the transfer of control and will be classified as a sales-type lease if control of the underlying asset is transferred to the lessee. Otherwise, the lease is treated as an operating lease. These criteria also include estimates and assumptions regarding the fair value of the leased facilities, minimum lease payments, the economic useful life of the facilities, the existence of a purchase option, and certain other terms in the lease agreements. The lease accounting guidance requires accounting for a transaction as a financing in a sale leaseback when the seller-lessee is provided an option to purchase the property from the landlord at the tenant’s option. Substantially all of our leases are classified as operating leases. Lease amendments are evaluated to determine if the modification grants the lessee an additional right-of-use not included in the original lease and if the lease payments increase commensurate with the standalone price of the additional right-of-use, adjusted for the circumstances of the particular contract. If both conditions are present, the lease amendment is accounted for as a new lease that is separate from the original lease. In January 2024, the lease modifications for two of our leases to extend the initial term of each lease changed the lease classification from operating lease to sales-type lease that did not satisfy all the criteria for recognition as a completed sale. Accordingly, we have not derecognized the underlying assets and all lease payments received, as well as any future lease payments, will be recognized as a deposit liability and will be included in other liabilities on our condensed consolidated balance sheet until certain criteria are met. As of March 31, 2024, we have received lease payments of $1.5 million that have been included in other liabilities on our condensed consolidated balance sheet. The underlying assets’ land and building and improvements had a gross carrying value of $4.1 million and $28.9 million, respectively, and accumulated depreciation of $2.8 million as of March 31, 2024. Our leases generally contain options to extend the lease terms at the prevailing market rate or at the expiring rental rate at the time of expiration. Certain of our leases provide the lessee with a right of first refusal or right of first offer in the event we market the leased property for sale. |
Recent Accounting Pronouncements | Recent Accounting Pronouncements . In November 2023, the Financial Accounting Standards Board issued Accounting Standards Update 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures (“ASU 2023-07”). The amendments in ASU 2023-07 improve reportable segment disclosure requirements, primarily through enhanced disclosures about significant segment expenses, measures of segment profit and loss, and disclosures of how the chief operating decision maker uses the reported measure(s) of a segment’s profit or loss in assessing segment performance and deciding how to allocate resources. . |
Concentration of Credit Risk | Concentration of Credit Risk The following table sets forth the five tenants in our portfolio that represented the largest percentage of our total rental revenues for the three months ended March 31, 2024 and 2023, including tenant reimbursements: For the Three Months Ended March 31, 2024 Percentage of Number of Rental Leases Revenue PharmaCann Inc. ("PharmaCann") 11 17 % Ascend Wellness Holdings, Inc. ("Ascend") 4 11 % Green Thumb Industries, Inc. ("Green Thumb") 3 8 % Curaleaf Holdings, Inc. ("Curaleaf") 8 7 % Trulieve Cannabis Corp. ("Trulieve") 6 7 % For the Three Months Ended March 31, 2023 Percentage of Number of Rental Leases Revenue PharmaCann 11 15 % Ascend 4 10 % SH Parent, Inc. ("Parallel") (1) 4 9 % Green Thumb 3 7 % Curaleaf 8 7 % (1) We regained possession of two properties previously leased to Parallel in Texas and Pennsylvania in March and November 2023, respectively. In each of the tables above, these leases include leases with affiliates of each entity, for which the entity has provided a corporate guaranty. As of March 31, 2024 and December 31, 2023, our largest property was located in New York and accounted for 5.5% and 5.4%, respectively, of our net real estate held for investment. No other properties accounted for more than 5% of our net real estate held for investment as of March 31, 2024 and December 31, 2023. We have deposited cash with financial institutions that are insured by the Federal Deposit Insurance Corporation (“FDIC”) up to $250,000. As of March 31, 2024, we had cash accounts in excess of FDIC insured limits. We have not experienced any losses in such accounts. |
Summary of Significant Accoun_3
Summary of Significant Accounting Policies and Procedures and Recent Accounting Pronouncements (Tables) | 3 Months Ended |
Mar. 31, 2024 | |
Summary of Significant Accounting Policies and Procedures and Recent Accounting Pronouncements | |
Schedule of tenants in the company's portfolio that represented the largest percentage of total rental revenue for each period presented, including tenant reimbursements | The following table sets forth the five tenants in our portfolio that represented the largest percentage of our total rental revenues for the three months ended March 31, 2024 and 2023, including tenant reimbursements: For the Three Months Ended March 31, 2024 Percentage of Number of Rental Leases Revenue PharmaCann Inc. ("PharmaCann") 11 17 % Ascend Wellness Holdings, Inc. ("Ascend") 4 11 % Green Thumb Industries, Inc. ("Green Thumb") 3 8 % Curaleaf Holdings, Inc. ("Curaleaf") 8 7 % Trulieve Cannabis Corp. ("Trulieve") 6 7 % For the Three Months Ended March 31, 2023 Percentage of Number of Rental Leases Revenue PharmaCann 11 15 % Ascend 4 10 % SH Parent, Inc. ("Parallel") (1) 4 9 % Green Thumb 3 7 % Curaleaf 8 7 % (1) We regained possession of two properties previously leased to Parallel in Texas and Pennsylvania in March and November 2023, respectively. In each of the tables above, these leases include leases with affiliates of each entity, for which the entity has provided a corporate guaranty. |
Dividends (Tables)
Dividends (Tables) | 3 Months Ended |
Mar. 31, 2024 | |
Dividends | |
Schedule of dividends declared | The following table describes the dividends declared by the Company during the three months ended March 31, 2024: Amount Dividend Dividend Declaration Date Security Class Per Share Period Covered Paid Date Amount (In thousands) March 15, 2024 Common stock $ 1.82 January 1, 2024 to March 31, 2024 April 15, 2024 $ 51,957 March 15, 2024 Series A preferred stock $ 0.5625 January 15, 2024 to April 14, 2024 April 15, 2024 $ 338 |
Investments in Real Estate (Tab
Investments in Real Estate (Tables) | 3 Months Ended |
Mar. 31, 2024 | |
Schedule of future contractual minimum rent | Future contractual minimum rent (including base rent and property management fees) to be received on our leases as of March 31, 2024 for future periods is summarized as follows (in thousands): Year Contractual Minimum Rent 2024 (nine months ending December 31) $ 216,745 2025 305,414 2026 314,436 2027 322,020 2028 329,027 Thereafter 3,904,454 Total $ 5,392,096 |
Acquired In-Place Lease Intangible Assets | |
Schedule of intangible assets and related accumulated amortization | In-place lease intangible assets and related accumulated amortization as of March 31, 2024 and December 31, 2023 is as follows (in thousands): March 31, 2024 December 31, 2023 In-place lease intangible assets $ 9,979 $ 9,979 Accumulated amortization (1,949) (1,734) In-place lease intangible assets, net $ 8,030 $ 8,245 |
Schedule of estimated annual amortization | Year Amount 2024 (nine months ending December 31) $ 645 2025 860 2026 860 2027 860 2028 860 Thereafter 3,945 Total $ 8,030 |
Above-Market Lease | |
Schedule of intangible assets and related accumulated amortization | The above-market lease and related accumulated amortization included in other assets, net on our condensed consolidated balance sheets as of March 31, 2024 and December 31, 2023 is as follows (in thousands): March 31, 2024 December 31, 2023 Above-market lease $ 1,054 $ 1,054 Accumulated amortization (210) (187) Above-market lease, net $ 844 $ 867 |
Debt (Tables)
Debt (Tables) | 3 Months Ended |
Mar. 31, 2024 | |
Summary of principal payments on outstanding indebtedness | The following table summarizes the principal payments on our outstanding indebtedness as of March 31, 2024 (in thousands): Payments Due by Year Amount 2024 (nine months ending December 31) — 2025 — 2026 300,000 2027 — 2028 — Thereafter — Total $ 300,000 |
Exchangeable Senior Notes | |
Schedule of interest expense | The following table details our interest expense related to the Exchangeable Senior Notes (in thousands): For the Three Months Ended March 31, 2024 2023 Cash coupon $ 24 $ 57 Amortization of issuance cost 5 12 Capitalized interest (1) — Total interest expense $ 28 $ 69 |
Schedule of carrying value | The following table details the carrying value of our Exchangeable Senior Notes (in thousands): March 31, 2024 December 31, 2023 Principal amount $ — $ 4,436 Unamortized issuance cost — (5) Carrying value $ — $ 4,431 |
Notes due 2026 | |
Schedule of interest expense | The following table details our interest expense related to the Notes due 2026 (in thousands): For the Three Months Ended March 31, 2024 2023 Cash coupon $ 4,125 $ 4,125 Amortization of issuance cost 346 326 Capitalized interest (165) — Total interest expense $ 4,306 $ 4,451 |
Schedule of carrying value | The following table details the carrying value of our Notes due 2026 (in thousands): March 31, 2024 December 31, 2023 Principal amount $ 300,000 $ 300,000 Unamortized issuance cost (3,205) (3,551) Carrying value $ 296,795 $ 296,449 |
Net Income Per Share (Tables)
Net Income Per Share (Tables) | 3 Months Ended |
Mar. 31, 2024 | |
Net Income Per Share | |
Schedule of earnings per share, basic and diluted | Computations of net income per basic and diluted share (in thousands, except share and per share data) were as follows: For the Three Months Ended March 31, 2024 2023 Net income $ 39,428 $ 41,092 Preferred stock dividends (338) (338) Distribution to participating securities (544) (361) Net income attributable to common stockholders used to compute net income per share – basic 38,546 40,393 Dilutive effect of Exchangeable Senior Notes 28 69 Net income attributable to common stockholders used to compute net income per share – diluted $ 38,574 $ 40,462 Weighted-average common shares outstanding: Basic 28,145,017 27,949,747 Restricted stock and RSUs 278,890 171,741 Dilutive effect of Exchangeable Senior Notes 38,079 102,210 Diluted 28,461,986 28,223,698 Net income attributable to common stockholders per share: Basic $ 1.37 $ 1.45 Diluted $ 1.36 $ 1.43 |
Fair Value of Financial Instr_2
Fair Value of Financial Instruments (Tables) | 3 Months Ended |
Mar. 31, 2024 | |
Fair Value of Financial Instruments | |
Schedule of condensed financial statements | The following table presents the carrying value and approximate fair value of financial instruments at March 31, 2024 and December 31, 2023 (in thousands): At March 31, 2024 At December 31, 2023 Carrying Value Fair Value Carrying Value Fair Value Investments (1) $ 20,026 $ 20,026 $ 21,948 $ 21,951 Investments as cash equivalents (2) $ 15,179 $ 15,099 $ 15,187 $ 15,029 Exchangeable Senior Notes (3) $ — $ — $ 4,431 $ 7,576 Notes due 2026 (3) $ 296,795 $ 286,767 $ 296,449 $ 278,325 Construction Loan (4) $ 22,000 $ 27,551 $ 22,000 $ 27,543 (1) At March 31, 2024, investments consisting of short-term certificates of deposit with an original maturity at the time of purchase of greater than 90 days and less than one year are classified as held-to-maturity and stated at cost, which approximates fair value. At December 31, 2023, investments consisting of short-term obligations of the U.S. government with an original maturity at the time of purchase of greater than 90 days and less than one year are classified as held-to-maturity, stated at amortized cost and valued using Level 1 inputs. (2) Investments as cash equivalents consisting of obligations of the U.S. government with an original maturity at the time of purchase of 90 days or less are classified as held-to-maturity, stated at amortized cost and valued using Level 1 inputs. (3) The fair value is determined based upon Level 2 inputs as the Exchangeable Senior Notes and Notes due 2026 were trading in the private market. (4) The construction loan receivable is categorized as Level 3 and was valued using a yield analysis, which is typically performed for non-credit impaired loans. To determine fair value using a yield analysis, a current price is imputed for the loan based upon an assessment of the expected market yield for a similarly structured loan with a similar level of risk. In the yield analysis, the Company considers the current contractual interest rate, the maturity and other terms of the loan relative to risk of the company and the specific loan. At each of March 31, 2024 and December 31, 2023, the expected market yield used to determine fair value was 16.25% . Changes in market yields may change the fair value of the construction loan. Generally, an increase in market yields may result in a decrease in the fair value of the construction loan. Due to the inherent uncertainty of determining the fair value of a loan that does not have a readily available market value, the fair value of the construction loan may fluctuate from period to period. Additionally, the fair value of the construction loan may differ significantly from the value that would have been used had a readily available market existed for such loan and may differ materially from the value that the Company may ultimately realize. |
Common Stock Incentive Plan (Ta
Common Stock Incentive Plan (Tables) | 3 Months Ended |
Mar. 31, 2024 | |
Restricted Shares | |
Common Stock Incentive Plan | |
Summary of the activity | A summary of the restricted stock activity under the 2016 Plan and related information for the three months ended March 31, 2024 is included in the table below: Weighted- Unvested Average Restricted Grant Date Fair Stock Value Balance at December 31, 2023 56,711 $ 135.46 Granted 43,566 $ 91.81 Vested (13,698) $ 126.83 Forfeited (1) (7,442) $ 205.15 Balance at March 31, 2024 79,137 $ 106.37 (1) Shares that were forfeited to cover the employees’ tax withholding obligation upon vesting. |
RSUs | |
Common Stock Incentive Plan | |
Summary of the activity | The following table summarizes our RSU activity for the three months ended March 31, 2024. RSUs are issued as part of the Innovative Industrial Properties, Inc. Nonqualified Deferred Compensation Plan (the “Deferred Compensation Plan”), which allows a select group of management and our non-employee directors to defer receiving certain of their cash and equity-based compensation. RSUs are subject to vesting conditions of the Deferred Compensation Plan and have the same economic rights as shares of restricted stock under the 2016 Plan: Weighted-Average Restricted Grant Date Fair Stock Units Value Balance at December 31, 2023 149,956 $ 125.34 Granted 69,714 $ 91.81 Balance at March 31, 2024 219,670 $ 114.70 |
Commitments and Contingencies (
Commitments and Contingencies (Tables) | 3 Months Ended |
Mar. 31, 2024 | |
Commitments and Contingencies | |
Schedule of future contractual lease payments | Office Lease Year Amount 2024 (nine months ending December 31) $ 384 2025 526 2026 543 2027 45 2028 — Total future contractual lease payments 1,498 Effect of discounting (122) Office lease liability $ 1,376 |
Organization (Details)
Organization (Details) | Mar. 31, 2024 |
IIP Operating Partnership, LP | |
Percentage of limited partnership interests | 100% |
Summary of Significant Accoun_4
Summary of Significant Accounting Policies and Procedures and Recent Accounting Pronouncements - Additional Information (Details) | 1 Months Ended | 3 Months Ended | ||||||
Jan. 31, 2024 lease | Mar. 31, 2024 USD ($) segment | Mar. 31, 2023 USD ($) | Dec. 31, 2023 USD ($) | Feb. 28, 2023 USD ($) | Nov. 30, 2021 | Jun. 30, 2021 USD ($) | Dec. 31, 2019 | |
Number of reportable segment | segment | 1 | |||||||
Depreciation expense | $ 16,900,000 | $ 16,500,000 | ||||||
Impairment losses | 0 | 0 | ||||||
Construction loan funded | 22,000,000 | $ 22,000,000 | ||||||
Construction loan, total commitment amount | $ 23,000,000 | 23,000,000 | ||||||
Lease, Practical Expedients, Package | true | |||||||
Incremental borrowing rate | 5.50% | 7.25% | ||||||
Amounts paid and classified as operating activities for the office lease | $ 100,000 | 100,000 | ||||||
Number of lease modifications | lease | 2 | |||||||
Underlying assets accumulated depreciation | 2,800,000 | |||||||
Other assets, net | ||||||||
Acquisitions of real estate did not satisfy the requirements for sale-leaseback accounting | 20,000,000 | $ 20,000,000 | ||||||
Other liabilities | ||||||||
Received lease payments | 1,500,000 | |||||||
Cannabis cultivation and processing facility, California | ||||||||
Maximum construction loan agreed to lend | $ 18,500,000 | |||||||
Additional capital commitment | $ 1,000,000 | |||||||
Additional amount of construction loan | $ 4,500,000 | |||||||
General and administrative expense | ||||||||
Office lease expense | 100,000 | $ 100,000 | ||||||
Maximum | ||||||||
Cash FDI | $ 250,000 | |||||||
Building and Improvements | ||||||||
Estimated useful lives (in years) | 40 years | |||||||
Underlying assets gross carrying value | $ 28,900,000 | |||||||
Office equipment and furniture and fixtures | Minimum | ||||||||
Estimated useful lives (in years) | 3 years | |||||||
Office equipment and furniture and fixtures | Maximum | ||||||||
Estimated useful lives (in years) | 7 years | |||||||
Land | ||||||||
Underlying assets gross carrying value | $ 4,100,000 |
Summary of Significant Accoun_5
Summary of Significant Accounting Policies and Procedures and Recent Accounting Pronouncements - Concentration of Credit Risk (Details) | 3 Months Ended | 9 Months Ended | 12 Months Ended | |
Mar. 31, 2024 tenant item lease property | Mar. 31, 2023 lease tenant | Nov. 30, 2023 property | Dec. 31, 2023 | |
Concentration Risk | ||||
Number of properties | property | 108 | |||
Number of states in which properties are owned | item | 19 | |||
Number of tenants | tenant | 30 | |||
Number of properties for which possession regained | property | 2 | |||
Non cannabis tenants | ||||
Concentration Risk | ||||
Number of tenants excluded from lease | tenant | 3 | |||
Number of properties excluded from lease | property | 2 | |||
Rental revenues (including tenant reimbursements) | Customer concentration | ||||
Concentration Risk | ||||
Number of tenants | tenant | 5 | 5 | ||
Rental revenues (including tenant reimbursements) | Customer concentration | PharmaCann Inc. | ||||
Concentration Risk | ||||
Number of Leases | 11 | 11 | ||
Percentage of concentration risk | 17% | 15% | ||
Rental revenues (including tenant reimbursements) | Customer concentration | Ascend Wellness Holdings, Inc. | ||||
Concentration Risk | ||||
Number of Leases | 4 | |||
Percentage of concentration risk | 11% | |||
Rental revenues (including tenant reimbursements) | Customer concentration | Green Thumb Industries, Inc. | ||||
Concentration Risk | ||||
Number of Leases | 3 | 3 | ||
Percentage of concentration risk | 8% | 7% | ||
Rental revenues (including tenant reimbursements) | Customer concentration | SH Parent, Inc. ("Parallel") | ||||
Concentration Risk | ||||
Number of Leases | 4 | |||
Percentage of concentration risk | 9% | |||
Rental revenues (including tenant reimbursements) | Customer concentration | Curaleaf Holdings, Inc. | ||||
Concentration Risk | ||||
Number of Leases | 8 | |||
Percentage of concentration risk | 7% | |||
Rental revenues (including tenant reimbursements) | Customer concentration | Curaleaf | ||||
Concentration Risk | ||||
Number of Leases | 8 | |||
Percentage of concentration risk | 7% | |||
Rental revenues (including tenant reimbursements) | Customer concentration | Trulieve Cannabis Corp. | ||||
Concentration Risk | ||||
Number of Leases | 6 | |||
Percentage of concentration risk | 7% | |||
Rental revenues (including tenant reimbursements) | Customer concentration | Ascend Wellness Holdings, Inc [Member] | ||||
Concentration Risk | ||||
Number of Leases | 4 | |||
Percentage of concentration risk | 10% | |||
Net real estate held for investment | Geographic Concentration Risk | ||||
Concentration Risk | ||||
Concentration risk | 5% | 5% | ||
Net real estate held for investment | Geographic Concentration Risk | New York | ||||
Concentration Risk | ||||
Concentration risk | 5.50% | 5.40% |
Common Stock (Details)
Common Stock (Details) $ / shares in Units, $ in Thousands | 1 Months Ended | 3 Months Ended | ||
Jan. 31, 2023 item shares | Mar. 31, 2024 USD ($) $ / shares shares | Mar. 31, 2023 USD ($) shares | Dec. 31, 2023 $ / shares shares | |
Common stock, shares authorized | 50,000,000 | 50,000,000 | ||
Common stock, par value (in dollars per share) | $ / shares | $ 0.001 | $ 0.001 | ||
Common stock, shares issued | 28,328,647 | 28,140,891 | ||
Common stock, shares outstanding | 28,328,647 | 28,140,891 | ||
Net proceeds from issuance | $ | $ 11,757 | |||
Number of shares issued upon conversion | 28,408 | 32,200 | ||
Outstanding principal amount | $ | $ 4,300 | $ 2,000 | ||
Exchangeable Senior Notes, rate | 3.75% | |||
At The Market Offerings | ||||
Number of sales agents | item | 4 | |||
Number of shares issued | 123,224 | 0 | ||
Net proceeds from issuance | $ | $ 11,800 | |||
At The Market Offerings | Maximum | ||||
Maximum number of common stock issuable | 500,000,000 |
Preferred Stock (Details)
Preferred Stock (Details) - $ / shares | 3 Months Ended | 12 Months Ended |
Mar. 31, 2024 | Dec. 31, 2023 | |
Preferred Stock, Shares Authorized | 50,000,000 | 50,000,000 |
Preferred stock, Par Value (in dollars per share) | $ 0.001 | $ 0.001 |
Series A Preferred Stock | ||
Preferred stock, Par Value (in dollars per share) | $ 0.001 | |
Preferred Stock, Shares Issued | 600,000 | 600,000 |
Preferred Stock, Shares Outstanding | 600,000 | 600,000 |
Preferred Stock, Dividend Rate, Percentage | 9% | 9% |
Preferred Stock, Redemption Price Per Share | $ 25 | |
Preferred Stock, Voting Rights | Holders of the Series A Preferred Stock generally have no voting rights except for limited voting rights if the Company fails to pay dividends for six or more quarterly periods (whether or not consecutive) and in certain other circumstances. |
Dividends (Details)
Dividends (Details) - USD ($) $ / shares in Units, $ in Thousands | 3 Months Ended | |||
Apr. 15, 2024 | Mar. 15, 2024 | Mar. 31, 2024 | Mar. 31, 2023 | |
Dividends | ||||
Dividends declared per common share | $ 1.82 | |||
Dividends declared per Series A preferred stock | $ 0.5625 | |||
Dividend amount - Common stock | $ 51,957 | $ 51,489 | $ 50,502 | |
Dividend amount - Series A preferred stock | $ 338 | $ 338 | $ 338 |
Investments in Real Estate - In
Investments in Real Estate - Intangible assets and related accumulated amortization (Details) - USD ($) $ in Thousands | Mar. 31, 2024 | Dec. 31, 2023 |
Acquired In-Place Lease Intangible Assets | ||
Investments in Real Estate | ||
Gross | $ 9,979 | $ 9,979 |
Accumulated amortization | (1,949) | (1,734) |
Total | 8,030 | 8,245 |
Above-Market Lease | ||
Investments in Real Estate | ||
Gross | 1,054 | 1,054 |
Accumulated amortization | (210) | (187) |
Total | $ 844 | $ 867 |
Investments in Real Estate - Es
Investments in Real Estate - Estimated annual amortization (Details) - USD ($) $ in Thousands | Mar. 31, 2024 | Dec. 31, 2023 |
Acquired In-Place Lease Intangible Assets | ||
Finite-Lived Intangible Assets, Net, Amortization Expense, Fiscal Year Maturity | ||
2024 (nine months ending December 31) | $ 645 | |
2025 | 860 | |
2026 | 860 | |
2027 | 860 | |
2028 | 860 | |
Thereafter | 3,945 | |
Total | 8,030 | $ 8,245 |
Above-Market Lease | ||
Finite-Lived Intangible Assets, Net, Amortization Expense, Fiscal Year Maturity | ||
Total | $ 844 | $ 867 |
Investments in Real Estate - Ad
Investments in Real Estate - Additional Information (Details) | 1 Months Ended | 3 Months Ended | |||
Feb. 29, 2024 USD ($) property | Mar. 31, 2023 USD ($) property | Mar. 31, 2024 USD ($) | Mar. 31, 2023 USD ($) item | Jan. 31, 2024 property | |
Real estate property cost | $ 17,500,000 | ||||
Tenant improvements and construction activities funded | 16,500,000 | ||||
Accrued interest | 1,900,000 | ||||
4Front Ventures Corp. | |||||
Number of leased properties | property | 4 | ||||
Michigan Properties | |||||
Number of leased properties | property | 1 | ||||
Acquired In-Place Lease Intangible Assets | |||||
Amortization expense | $ 200,000 | $ 200,000 | |||
Weighted-average amortization period (in years) | 9 years 6 months | ||||
Above-Market Lease | |||||
Amortization expense | $ 23,000 | 23,000 | |||
Amortization period (in years) | 9 years | ||||
PharmaCann | New York Properties | |||||
Number of leased properties | property | 1 | ||||
Medical Investor Holdings LLC | California Property | |||||
Number of properties sold | property | 4 | ||||
Contracted sale price of properties disposed | 16,200,000 | ||||
Real estate loans receivable | $ 16,100,000 | $ 16,100,000 | |||
Number of options to extend | item | 2 | ||||
Extension term | 12 months | ||||
Minimum principal balance payment | $ 500,000 | $ 500,000 | |||
Accumulated depreciation | $ 1,700,000 | ||||
Medical Investor Holdings LLC | Land | California Property | |||||
Gross carrying value | 3,400,000 | ||||
Medical Investor Holdings LLC | Building and Improvements | California Property | |||||
Gross carrying value | $ 13,900,000 | ||||
PharmaCann At New York [Member] | |||||
Increase in construction funding | $ 16,000,000 |
Investments in Real Estate - Fu
Investments in Real Estate - Future Contractual Minimum Rent (Details) $ in Thousands | Mar. 31, 2024 USD ($) |
Contractual Minimum Rent | |
2024 (nine months ending December 31) | $ 216,745 |
2025 | 305,414 |
2026 | 314,436 |
2027 | 322,020 |
2028 | 329,027 |
Thereafter | 3,904,454 |
Total | $ 5,392,096 |
Debt - Exchangeable Senior Note
Debt - Exchangeable Senior Notes - Additional Information (Details) - USD ($) | 1 Months Ended | 3 Months Ended | |
Feb. 29, 2024 | Mar. 31, 2024 | Mar. 31, 2023 | |
Number of shares issued upon conversion | 28,408 | 32,200 | |
Outstanding principal amount | $ 4,300,000 | $ 2,000,000 | |
Principal amount | 300,000,000 | ||
Gain on exchange of debt | $ 22,000 | ||
Principal amount paid | 4,436,000 | ||
Additional Paid-In-Capital | |||
Stock Issued During Period, Value, Conversion of Convertible Securities | $ 2,000,000 | ||
Exchangeable Senior Notes | |||
Number of shares issued upon conversion | 32,200 | ||
Outstanding principal amount | $ 2,000,000 | ||
Principal amount paid off at maturity | 4,300,000 | ||
Principal amount paid | $ 100,000 | ||
Exchangeable Senior Notes | Accounts payable and accrued expenses | |||
Accrued interest payable | $ 49,000 | ||
Exchangeable Senior Notes | Common Stock | |||
Conversion of Stock, Shares Issued | 28,408 | ||
Principal amount paid | $ 4,300,000 |
Debt - Exchangeable Senior No_2
Debt - Exchangeable Senior Notes - Interest expense (Details) - Exchangeable Senior Notes - USD ($) $ in Thousands | 3 Months Ended | |
Mar. 31, 2024 | Mar. 31, 2023 | |
Cash coupon | $ 24 | $ 57 |
Amortization of issuance cost | 5 | 12 |
Capitalized interest | (1) | |
Total interest expense | $ 28 | $ 69 |
Debt - Exchangeable Senior No_3
Debt - Exchangeable Senior Notes - Carrying value (Details) $ in Thousands | Mar. 31, 2024 USD ($) |
Debt | |
Principal amount | $ 300,000 |
Debt - Notes due 2026 (Details)
Debt - Notes due 2026 (Details) - USD ($) $ in Thousands | 3 Months Ended | ||
May 25, 2021 | Mar. 31, 2024 | Dec. 31, 2023 | |
Principal amount | $ 300,000 | ||
Notes due 2026 | |||
Principal amount | $ 300,000 | $ 300,000 | |
Interest rate | 5.50% | ||
Issuance costs | $ 6,800 | ||
Debt Instrument, Interest Rate, Effective Percentage | 6.03% | ||
Notes due 2026 | Minimum | |||
Debt instrument change in debt rating interest rate | 6% | ||
Notes due 2026 | Maximum | |||
Debt instrument change in debt rating interest rate | 6.50% | ||
Notes due 2026 | Redeemed Prior To February 25, 2026 | |||
Percentage of principal amount redeemed | 100% | ||
Notes due 2026 | Redeemed On Or After February 25, 2026 | |||
Percentage of principal amount redeemed | 100% | ||
Notes due 2026 | Accounts payable and accrued expenses | |||
Accrued interest payable | $ 6,200 | $ 2,100 |
Debt - Notes due 2026 - Interes
Debt - Notes due 2026 - Interest expense (Details) - Notes due 2026 - USD ($) $ in Thousands | 3 Months Ended | |
Mar. 31, 2024 | Mar. 31, 2023 | |
Cash coupon | $ 4,125 | $ 4,125 |
Amortization of issuance cost | 346 | 326 |
Capitalized interest | (165) | |
Total interest expense | $ 4,306 | $ 4,451 |
Debt - Notes due 2026 - Carryin
Debt - Notes due 2026 - Carrying value (Details) - USD ($) $ in Thousands | Mar. 31, 2024 | May 25, 2021 |
Principal amount | $ 300,000 | |
Notes due 2026 | ||
Principal amount | 300,000 | $ 300,000 |
Unamortized issuance cost | (3,205) | |
Carrying value | $ 296,795 |
Debt - Revolving Credit Facilit
Debt - Revolving Credit Facility (Details) - Revolving Credit Facility - USD ($) | 3 Months Ended | |
Mar. 31, 2024 | Feb. 29, 2024 | |
Aggregate commitments | $ 45,000,000 | |
Loan amount outstanding | $ 0 | |
Issuance costs | 700,000 | |
Non-cash interest expense | $ 55,000 |
Debt - Principal Payments (Deta
Debt - Principal Payments (Details) $ in Thousands | Mar. 31, 2024 USD ($) |
Debt | |
2026 | $ 300,000 |
Total | $ 300,000 |
Net Income Per Share - Addition
Net Income Per Share - Additional information (Details) - shares | 3 Months Ended | |
Mar. 31, 2024 | Mar. 31, 2023 | |
Dilutive effect of Exchangeable Senior Notes | 38,079 | 102,210 |
Incremental common shares attributable to share-based payment arrangements | 278,890 | |
PSUs | ||
Antidilutive securities excluded from computation | 0 | 0 |
Net Income Per Share - Computat
Net Income Per Share - Computations of net income per basic and diluted share (Details) - USD ($) $ / shares in Units, $ in Thousands | 3 Months Ended | |
Mar. 31, 2024 | Mar. 31, 2023 | |
Net Income Per Share | ||
Net income | $ 39,428 | $ 41,092 |
Preferred stock dividends | (338) | $ (338) |
Distribution to participating securities | (544) | |
Net income attributable to common stockholders used to compute net income per share - basic | 38,546 | |
Dilutive effect of Exchangeable Senior Notes | 28 | |
Net income attributable to common stockholders used to compute net income per share - diluted | $ 38,574 | |
Weighted-average common shares outstanding: | ||
Basic | 28,145,017 | 27,949,747 |
Incremental common shares attributable to share-based payment arrangements | 278,890 | |
Dilutive effect of Exchangeable Senior Notes | 38,079 | 102,210 |
Diluted | 28,461,986 | 28,223,698 |
Net income attributable to common stockholders per share: | ||
Basic (in dollars per share) | $ 1.37 | $ 1.45 |
Diluted (in dollars per share) | $ 1.36 | $ 1.43 |
Fair Value of Financial Instr_3
Fair Value of Financial Instruments (Details) $ in Thousands | Mar. 31, 2024 USD ($) | Dec. 31, 2023 USD ($) |
Investments, Carrying Value | $ 20,026 | $ 21,948 |
Investments as cash equivalents, Carrying Value | 15,179 | 15,187 |
Exchangeable Senior Notes, Carrying Value | 4,431 | |
Notes due 2026, Carrying Value | 296,795 | 296,449 |
Construction loan receivable | 22,000 | 22,000 |
Investments, Fair Value | 20,026 | 21,951 |
Investments as cash equivalents, Fair Value | 15,099 | 15,029 |
Exchangeable Senior Notes, Fair Value | 7,576 | |
Notes due 2026, Fair Value | 286,767 | 278,325 |
Construction Loan, Fair Value | $ 27,551 | $ 27,543 |
Expected market yield | ||
Loan Receivable, Measurement Input | 0.1625 | 0.1625 |
Common Stock Incentive Plan - A
Common Stock Incentive Plan - Additional Information (Details) - USD ($) $ in Millions | 1 Months Ended | 3 Months Ended | ||
Jan. 31, 2022 | Jan. 31, 2021 | Mar. 31, 2024 | Mar. 31, 2023 | |
Restricted Stock | ||||
Unrecognized compensation cost | $ 7.1 | |||
Amortization period | 2 years 1 month 6 days | |||
Fair value of restricted stock | $ 2.1 | |||
Granted | 43,566 | |||
RSUs | ||||
Unrecognized compensation cost | $ 10.8 | |||
Amortization period | 2 years 2 months 12 days | |||
Granted | 69,714 | |||
PSUs | ||||
Amortization period | 9 months 18 days | |||
Granted | 102,641 | 70,795 | ||
Stock-based compensation expense | $ 1.7 | $ 2.7 | ||
Remaining unrecognized compensation | $ 5 | |||
2016 Plan | ||||
Expiration term | 10 years | |||
2016 Plan | Maximum | ||||
Number of shares authorized | 1,000,000 |
Common Stock Incentive Plan -_2
Common Stock Incentive Plan - Activity (Details) | 3 Months Ended |
Mar. 31, 2024 $ / shares shares | |
Restricted Stock | |
Common Stock Incentive Plan | |
Shares, Beginning Balance | shares | 56,711 |
Granted | shares | 43,566 |
Vested | shares | (13,698) |
Forfeited | shares | (7,442) |
Shares, Ending Balance | shares | 79,137 |
Weighted-Average Grant Date Fair Value, Beginning Balance | $ / shares | $ 135.46 |
Weighted-Average Grant Date Fair Value, Granted | $ / shares | 91.81 |
Weighted-Average Grant Date Fair Value, Vested | $ / shares | 126.83 |
Weighted-Average Grant Date Fair Value, Forfeited | $ / shares | 205.15 |
Weighted-Average Grant Date Fair Value, Ending Balance | $ / shares | $ 106.37 |
Restricted Stock Units | |
Common Stock Incentive Plan | |
Shares, Beginning Balance | shares | 149,956 |
Granted | shares | 69,714 |
Shares, Ending Balance | shares | 219,670 |
Weighted-Average Grant Date Fair Value, Beginning Balance | $ / shares | $ 125.34 |
Weighted-Average Grant Date Fair Value, Granted | $ / shares | 91.81 |
Weighted-Average Grant Date Fair Value, Ending Balance | $ / shares | $ 114.70 |
Commitments and Contingencies_2
Commitments and Contingencies (Details) $ in Thousands | Mar. 31, 2024 USD ($) |
Commitments and Contingencies | |
2024 (nine months ending December 31) | $ 384 |
2025 | 526 |
2026 | 543 |
2027 | 45 |
Total future contractual lease payments | 1,498 |
Effect of discounting | (122) |
Office lease liability | $ 1,376 |
Operating Lease, Liability, Statement of Financial Position [Extensible Enumeration] | Other Liabilities |
Commitments and Contingencies -
Commitments and Contingencies - Additional Information (Details) | Mar. 31, 2024 USD ($) |
Amended Class Action Lawsuit | |
Commitments and Contingencies | |
Amount accrued | $ 0 |
Derivative Action Lawsuit | |
Commitments and Contingencies | |
Amount accrued | 0 |
Commitments related to improvement allowances | |
Commitments and Contingencies | |
Other Commitment | 24,100,000 |
Commitments related to construction commitments | |
Commitments and Contingencies | |
Other Commitment | 6,800,000 |
Commitments related to construction loan | |
Commitments and Contingencies | |
Other Commitment | $ 1,000,000 |
Subsequent Events (Details)
Subsequent Events (Details) - Subsequent Event $ in Millions | 1 Months Ended | |
May 31, 2024 USD ($) | Apr. 30, 2024 USD ($) property | |
Property in Los Angeles, California | ||
Subsequent Events | ||
Contracted sale price of properties disposed | $ 9.1 | |
Lease termination fee | 3.9 | |
Amount received related to sale of the property and termination of the existing lease | $ 13 | |
Battle Green Holdings LLC | Ohio properties | ||
Subsequent Events | ||
Number of leased properties | property | 1 | |
Increase amount of tenant improvement allowance | $ 4.5 | |
4Front Ventures Corp. | Illinois properties | ||
Subsequent Events | ||
Number of leased properties | property | 1 | |
Increase amount of tenant improvement allowance | $ 1.6 |
Pay vs Performance Disclosure
Pay vs Performance Disclosure - USD ($) $ in Thousands | 3 Months Ended | |
Mar. 31, 2024 | Mar. 31, 2023 | |
Pay vs Performance Disclosure | ||
Net Income (Loss) | $ 39,428 | $ 41,092 |
Insider Trading Arrangements
Insider Trading Arrangements | 3 Months Ended |
Mar. 31, 2024 | |
Trading Arrangements, by Individual | |
Rule 10b5-1 Arrangement Adopted | false |
Non-Rule 10b5-1 Arrangement Adopted | false |
Rule 10b5-1 Arrangement Terminated | false |
Non-Rule 10b5-1 Arrangement Terminated | false |