IIPR - Earnings call transcript Q4 2017 | Innovative Industrial Properties, Inc.

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Operator

Good day everyone and welcome to the Innovative Industrial Properties Incorporated Fourth Quarter 2017 Earnings Conference Call. All participants will be in listen-only mode. [Operator Instructions] After today’s presentation, there will be an opportunity to ask questions. [Operator Instructions] Please also note that today’s event is being recorded. At this time, I would like to turn the conference call over to Brian Wolfe, General Counsel. ahead. go please Sir,

Brian Wolfe

joining Paul Presenting Executive Smithers, Chief Catherine for Gold, Officer; are Executive Hastings, Officer. Chairman; President Financial the you today call. Alan and Thank and Chief

remind risks, may we Reform XXXX everyone of conference Before a Act and maybe statements Safe of of forward-looking differ and factors. to the deemed would variety Private Harbor I like of call that made the materially during other begin, due statements uncertainties today’s meaning the results within actual to Securities Litigation

a discussion and disclaims X-K, forward-looking Form news or revise with future as business, update you For or whether any statements, detailed the events filed to the of reports of The ongoing on the intention uncertainties I or periodically as Company’s obligation new some risks well to release of any and SEC Company’s filed a with as result issued yesterday the information, of the otherwise. Company the refer SEC.

hand I answer as we call can will Alan, we the Alan? to for but remarks. questions today, want Before as prepared limited to time after have we many mention the that call over our I

Alan Gold

the our first get plan fourth and licensed, stock and square end, year in our August. are quality public and subsequent pleased we Thank XXX% which and were from basis during Overall, year additional welcome cannabis with IPO and XXX,XXX on since industry feet, XXXX. in Series A everyone. and Today, updated in operators. on business of approximately perspective call the execution our last for to and we committed quarter a XXXX. business owned high December in capital long-term medical-use our our from states, of leased properties real provide our results chance totaling four five you, beginning to At estate the operations going four full acquired review we October share our and full properties Brian, XXXX, substantially raised of we preferred financial offering all the a Having year the on operations

XX.X% with term initial on annual X% of average Our yield each remaining a to escalations properties lease nearly minimum weighted from year-end. ranging with XX years X.XX% lease these providing of as blended is

Our in details fourth cannabis very quarter November. a sale-leaseback December, Vireo XXX,XXX New state sale-leaseback provide active will medical-use and two more for we our of terms transactions transactions and tenant on Arizona and the additions was new Paul cultivation In with facility with acquisitions. and transaction the in regarding closed of processing October farm in in square-foot York closed the on these and other Minnesota roster. to a

consecutive common XXXX, company. of record also remarkable a third a increase such stock young truly XX, We year, operations over diluted stockholders share. having the declared XX% quarterly third December $X.XX dividend generated After to of as achievement of $X.XX adjusted from a share funds for XXXX quarter share for and dividend per our per of per representing $X.XX

results. provide Now, financial Catherine detail more will our regarding

our on recent and the to existing call, popular by addition these other in numerous will is tenants markets, including in or growth pipeline. individual constantly and strong in legislation the further discussing years. provide last state vote medical-use in trends our in cannabis properties, our to states of today perspective Paul detail call of changes discussed rollout we As industry passed programs the industry state and new further markets evolving,

industry amazing majority that is nascent state the medical-use markets this witnessing still growth is cannabis with of regulated large now States. comprising a Now, a United

capital that needs. results and tenant our to Paul? of for providing solutions partners, real future to that, call and ability the like key about stakeholders our tailored Paul. With optimistic to operational by I’d enduring estate very are to our turn industry over and the deliver We this value meet

Paul Smithers

Thanks, Alan.

Alan to today as rapidly focusing effective main environment; to topics; evolving on a four can evolution United of three, in Maryland, two, an we’ll New the the have and update the provide industry overview regulatory short try finally one, growth and medical-use this with current is market and the our York, the the we our alluded and an generally; pipeline. time cannabis As Arizona, markets as Minnesota on States tenants; we

regarding environment. First, regulatory the current

spending of enacted status, said much which the carry discussion of of state cannabis and As the United medical-use to Congress March federal you has it cannabis know all Justice on That a Department commercial summarize Substance, using interpreted through bill related as there posture with that by the been X again States. the industry. was the a XXXX Schedule implementation XXrd, interfere which provision continues in has all current preventing prohibits from remains reevaluation enacted to enforcement activity generally Controlled government's the about be use bills spending year. courts relates cannabis since to Their September a Canada’s as with congressional To this funds of cannabis the XX included provision laws. in

branch as are the clearly to monitor Congress the government positions direction government it closely serves, cautiously optimistic to continued the has see the are will pleased to that executive in the represents federal the we same. of of the do federal we that will While move and people continue

have a over having initiatives cannabis estimated of vote forward the being comprised majority people including XXX or In million by popular the expected United and to update tremendous with States of leading cannabis introduction Revenues. forms various medical through for or million Cannabis cannabis medical-use velocity. to with Tax the support by XXXX legislative States favor the to industry driver Congressional and legalized addition, is the of now in Congress, federal residents, legalized popular the cannabis. at and U.S. of a an Jobs cannabis of be in move in bipartisan use of Congress a number Medical-use that there are medical-use continue cannabis a legalization X.X pull plus Caucus used numerous continues U.S. in to with nationwide, establishment registered the of XX% bills including to process taken industry continues other Onto level. markets general the

In create Frontier XXXX and Arizona, and current which states industry already on in properties medical-or each. over XXX,XXX located, propjets legal that New Drilling legalized where five in our see Minnesota fact, in cannabis. New are and by the $X.X potential could York, specific Maryland, tremendous jobs state taxes cannabis a billion generate down markets Data bit cannabis state have adult-use we

facilities XXXX a XX-year initial may first with and transaction for XX% and yield As has our cultivation awarded Maryland York we are is in triple medical-use cultivation New about and PharmaCann sale-leaseback purchased a in in York. also multistate facility you and net licenses a PharmaCann four operator New our a in Massachusetts, four in and term on medical-use been basis. Illinois in with initial PharmaCann cannabis recall, all property dispensers cannabis two December Pennsylvania. of dispensaries

allowances of XXXX annual with a about York was feet XX-year New of sale-leaseback and We at initial XXX,XXX New an October base completed second Vireo property facility property in square Our the of York XX% Health the construction a in is XXXX. for equal transaction acquired price and to conducting and term rent New mid our is term. X.X% also well the and increases of property and Vireo multistate operations in for operator of cultivation, X.X% a Health improvement and dispensing and Pennsylvania. as Minnesota basement available tenant a management purchase operations as the York cultivation sum processing with annual fee in processing

process pool process recommending practitioners nurse and most patients for restricted initially several program the delivery and last our order additional enable York streamlining call, on as including as treatment, highly allowing condition. health and response include of the many by to the PTSD described pain the cannabis of the taken the In to assistants the New potential expansion of of steps discussed practitioners of certification and most and rolled broader qualifying introduction perhaps chronic of medical-use has physician positive medicine, as and access for regulated. for York has been importantly to As out New in one home professionals registration

Our New representing the million of $X in legal of York's market potential New billion compounded in program, market sales estimated of $XXX from of estimated growth annual overall XX%. has consideration the size a changes of York by XXXX, few and the in nearly the in market XXXX market research made the illicit rate

addition that of with of signs New of York’s a than since encouraging early over more March stages pain medical a impact chronic registered as of of data. ago growth qualifying doubled seeing and has the year of as this the changes regulatory year. accelerating level Patient count We’re XXth condition patients XX,XXX the available in the state

is purchase program available There one improvement rental Health increase base term the over Pharma patients facilitate cannabis industrial sales foot an other price a chronic cannabis abatement Arizona Arizona's that partial medical in market, positioned of registered Arizona of cannabis states. patients into the well cannabis this lease for rent an In in Arizona. medical-use XX-year into treat also medical Services, New XXX,XXX has utilizing of XXXX, the tenant there XXXX, of subject long and the in with allowance term. XXX,XXX an to further onto initial month. and of the as base share the of over is XX% Now, annual XXXX. and to program expires commenced management that to medical-used market base the team of sum The a over pain. grow management in square a entered of Arizona property. of medical-used multidisciplinary February increases experienced Pharma annual property at December is rent greenhouse it's York, a wholesalers in our year-over-year Arizona's According XX% fee Pharma's highly and initial X.X% with in and matured sale-leaseback The qualifying representing cannabis the for transaction with facility Department XX% the equal of X.XX% the is to Arizona to we are expansion largest having

growth spending a total Arizona. to growth rate compound in Our in from to XXXX cannabis nearly projecting XX% continue XXXX annual view expects that legal

in Maryland, we one feet. comprised cannabis. Industries, at onto into integration Alaking have that operators in of approximately Capitol under was XX,XXX cultivation, received property Holistic close of development in XXXX lease the the medical-used square completed Now, licenses of Heights, of entered and purchased pure the Court located net of complete the meeting and we August dispensing XXXX, acquisition, the the with Maryland well for property State in acquisition. At our of a Development time of final processing handful only May triple vertical a

including yield $XX on total million fixed escalations is of of industry commitments operators the the regulated in working in three experience Holistic D.C., medical-use leased in Washington of excluding commencement rental investment, of years term. The Our initial our secured cannabis million million as of Holistic financing XX support significant quarter in on with the with $XX.X agreed $X its our closing year XX.X% brings cost Maryland. investment team in to XXXX initial operations over a

still and the of anticipated the pain with development stages initial in size it's from that and qualifying the PTSD conditions we’re optimistic represents its Maryland's legal driven the medical-use industry regulators in among chronic late is XXXX, Although demand, population inclusion Maryland the economic by view very the of development in opportunity. open and general in an market first regarding early policymakers dispensary cannabis the

annual in a in Minnesota tenant including experienced New to out Minnesota over Growth expanded of acquire includes of an for year-over-year base improvement conditions, for was highly base in annual property by autism Minnesota, a cannabis State price XX% practitioners a sleep is XXXX over as apnea. accelerating and regulated transaction of and rental began and a Health experienced rolled available in equal trajectory medical on mid-XXXX, and of while the two market registry and licensed sum allowance. the XXX% XXXX. Minnesota significant we XX Similar to X.X% of Vireo in restricted intractable property the one fee lease that spectrum cannabis November medical Minnesota, The recently increasing in sale-leaseback the of has cannabis the the term. has similar initially X,XXX program Vireo operators a rent cannabis year healthcare that XXXX approved management is as term program medical over and patient PTSD York, pain medical and now sales X.X% purchase treatment system. smaller initial the with for disorders healthcare Lastly, program year-end increases at the count with of practitioners medical most gradually actively to growth, patients enrolled program additional in

investing high on tenants we in focused stock teams assets, intensely offering top are the two million. we first opportunities, purchase with strong the state completed and follow-on proceeds pipeline, regulatory the quality acquisition from our onto executed Now, balance properties tiered to a the have recent agreements common where a of in in $XX.X quarter, total our In management sheet investment environment. confidence we best for

addition, with executed the total two we In our review final for properties future letters after we million intent level of representing two complete $XX investment and expected of of each improvements at nonbinding $XX additional million determined improve to approximately amounts tenant property. a

numerous We actively pipeline programs. states million are in spanning evaluate have $XXX cannabis approved also approximately medical-use additional of acquisitions

are discussions cultivators in with high-quality numerous developments engaged We in monitoring California also closely are and there.

getting criteria emerging acquisition any strategy and we're with industry, growth accordingly. As dynamic in high

walk the opportunities to fourth quarter results will investment turn call and are through XXXX. excellent our and the Catherine? I seeing now our and year We over near-term includes both who will opportunity. you financial full Catherine, for longer-dated opportunities pipeline

Catherine Hastings

Thanks Paul, first revenues and of in completed property thereafter our year begun and IPO had million X.X million of quarter for York, acquisition full We New real operations our the of XXXX. having X.X XXXX operation. having XXXX just shortly our represents initial in December XXXX fourth total with in estate

ends property Vireo As acquired we in acquired Health an abatement to initial fourth quarter. which the rent for is our this properties subject both noted, rent that in the December we of partial and in month, we Arizona

a recognized cash three only all rental partial rent So, on our of properties. of we leases a from recognized basis. for revenue quarter We these

which loss three For ended net XXXX, of December stock-based compensation back from months depreciation we non-cash net to which funds back was from and operations income adds $XXX,XXX. recorded XX, adds XXX,XXX. XXX,XXX, Funds property the was adjusted operations

full operations operations year from $XXX,XXX, from of the funds For net XXX,XXX, recorded million. we of X.X and XXXX, adjusted funds a of loss

represents XXXX third mentioned dividend is over stock QX consecutive on record increase And weeks common quarter of XXth, on per our our of dividend today. April ago of per shareholders dividend third the XXth, to share $X.XX per quarterly a January as to December as As of XXth two of which of stockholders Alan which share, record we $X.XX common share. paid payable we $X.XX of declared XX% common

overallotment On raising offering. XXX,XXX an We preferred the capital XX.X offering million follow-on the underwritten the shares the of million common of underwriters. October common in Series of exercise additional A in issuance of issuance we in to raised proceeds net XX the stock stock January in completed shares in an net of through underwritten side, an raising public in granted of the X,XXX,XXX public proceeds through includes stock, then option which fill

With equity like utilizing Alan. capital would debt. structure overall were turn our entirely that funded note no and results I preferred achieved conservative to Finally, very financial back and common to with that it I’ll a Alan?

Alan Gold

this by to come. for our year open It as And long-term eventful promising capital execute long-term very estate real I open the Catherine. up up continuing first our support. questions? like please that, to very I’d the about for questions. servicing And creating provider and could with and a exciting as want for opportunities your continued to forward model sustainable to a stockholders. been And to it value to a for look excited the Operator, are call thank you on we business we industry company. Thanks, has public stockholders

Operator

we’ll the your Instructions] first And this begin with Thalmann. Massocca today comes at go from gentlemen ahead question and our Please Ladenburg Ladies from session. [Operator John question-and-answer question.

John Massocca

numbers color cap What properties and ballpark ramp can properties it, bumps LOI? under $XX.X provide of lease are cetera? can the the give et the for you extent acquisition rate, term, kind some under on you the of agreement million To

Alan Gold

able mean acquisitions are numbers in we the our that that I think lease teen term pleased ranging this we lease Sure, we on acquired in transactions requirements very I were on the to and described mid sort of structure maintain XXXX. same yield and Paul with the

a We in to and transactions are the type mid-teen same with type understanding see with of criteria pipeline our very similar continue structures. deals investment strong people

John Massocca

pricing vein, rates availability reduced have of et of the that appeal sources capital Memo, capital Has kind private seen the I that your for you moved up giving have i.e. for same maybe going cetera? for loans tenants, of tenants? moved there alternative been capital Cole of mean to just potential for some of potential that a your

Alan Gold

we talking in that we very are us in are we seeing that for pipeline, mean which a we of product capital leads same hearing One, are and anecdotally and that of or our general, to more believe in increased growers that market of the there to constrained looking size I type sales. an is of are either many thing. market our

success as that of we have innovative capital growth access looking think source industrial and that that capital. growers a to given also I are of to fact properties now continue the the us primary to

I those are we think So, two benefiting situations. from

John Massocca

new there particularly Florida, maybe cannabis to for along point mind, medical framework to as are certain Are regulatory come and coming getting focus any Pennsylvania programs? other into states are that markets the farther the

Paul Smithers

this is Paul. John Sure,

there is part that the or program. stage up looking in five of roll definitely So for six or the at

Ohio, states this looking You is, But is also California. kind there to November it notice mentioned and at that we of ballot five will Pennsylvania, have medical we on Michigan fun a are was cannabis Massachusetts Florida, probably programs.

at year having real Utah, time year. this South next probably it’s these will and of ballot Missouri chance states Kentucky, on good to going have Oklahoma, So, Dakota, a the looking programs probably we this be medical

very the looking growth. positive it’s market So for

John Massocca

Jersey seen a have I medical know relax talked that restrictive, less up the a you becoming a making then opening recently less patients move in restrictive, trend to are get more the are easier cannabis Is or of has Minnesota into have you program. program, kind that York program it's New announced markets beyond of become you maybe New historically mentioned? your already less maybe markets restrictive program? And that you becoming about have to I for already -- a conditions the within the kind from just mature it's to seeing

Paul Smithers

absolutely. Yes,

in have XX% well, we level the approval you market. states in that that our interested the individual and states programs department a So, with with scheme and states cannabis for of state would medical those really of they regulatory the mentioned works other like as really the at the plus are and a the national business being some health

So, there different where hands it count they flower patient or lot medical if are of conditions, to on idea are delivery, give add additional delivery like methods there or is maybe an will they not eatable be the maybe they're home add needs tropical.

at states working fully adjusting the we're yes, these are So, programs it ensure patient looking the all count. needed as in and to with

that trend forward So, maybe is definitely definitely more it's getting the looking.

Alan Gold

I states is there, the provide for but the growers to just these primary revenues tax had regulatory the reason not think increase any. to comment with that environments states add to patients And only working Paul's benefit does the also to

Operator

Instructions] it time this closing is I questions. showing would call for turn any back at remarks. additional no [Operator the gentlemen, over ladies And and conference to like

Alan Gold

look you, again like Thank you. this success that, today us thank all thank is joining over. on move and as Well, you forward. With we operator, we I to for and once to the call greater forward call,

Operator

thank We presentation. today's does that attending you gentlemen, call. and today's conference do Ladies conclude for

You may lines. your disconnect now

Innovative Industrial Properties (IIPR) 29 Mar 182017 Q4 Earnings call transcript