IIPR - Earnings call transcript Q4 2021 | Innovative Industrial Properties, Inc.

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Operator

Good day and welcome to the Innovative Industrial Properties, Inc. Fourth Quarter 2021 Earnings Conference Call. All participants will be in a listen only mode. [Operator Instructions] After today's presentation, there will be an opportunity to ask questions. [Operator Instructions] Please note, this event is being recorded. to conference like Wolfe. to, now would turn over the Brian I go Please, ahead.

Brian Wolfe

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

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

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

Alan Gold

And ever-changing recap young and Thank to views a we for everyone. of industry. landscape the our XXXX. our look welcome, providing on of this business very forward Today, you, Brian, still

ambitious have agenda. We an

of will, answer course, We save questions. time to at end your the

move The for bit, capital period as for challenged a every adjustments further of end XX% in the markets industry of XXXX, start tremendous we the the dimmed. know, by in near to regulatory XXXX tremendous term and into cycle waned optimism all of prospect federal wake regulated position the XXXX, industry optimism a sustained industry. XXXX the other the amount growth cannabis as a we was very of the new over As plus the on and witnessed what election nearly

with and Alabama XXXX, continues XXX to the states sovereign march the medical the see driven state, continue transactions, of in New industry and by so. XXXX, adopting and mergers strong this legislating programs, a rolling XXXX acquisition month, for XXth earlier Connecticut, medical use States legalizing adult including $XX the for That the adult value York, Mississippi, cannabis in becoming in use and legislating momentum industry medical to do use. consolidation for throughout the ever-increasing in and out billion legislative alone. part Virginia, continued use trend latest over with with However, New action continued programs Mexico, use both new growth state totaling over also in United unprecedented of

witness consolidation also detail within XXXX. XXXX We more regarding during base developments. provide And into those our Ben will and tenant

and year course, be history, highest investments year-to-date. eclipsing XXXX. over and continued with acquisitions the our $XXX an throughout rollout million of estate on new the activity the our robust growth Of real to for in the investment will provide of and capital also update of year. demand XXXX Ben the was XXXX in programs, industry during company's

square million XXX years. leased over today, licensed XX basis high-quality which of feet, states, on lease a average to with X of XX operators totaling we own long-term in approximately a weighted As term properties are cannabis

industry. pipeline, grew operations execution on far company XXXX continued acquisition on and real adjusted our from the funds focused XX% the performance investment prior the from and cannabis by are XX% largest revenues We of portfolio, grew estate regulated the property our year. Reflecting and

will the coming shortly also Board's is provide a the XX% at quarter. Catherine on increases common of biannual fourth financial stock regarding two to activity. results next grow dividend the as clip share dividend our our basis, that prior most a dividend with QX we years detail $X.XX policy quarterly increase and With the remember background, per recent more any quarter our with review a financial healthy Please first a our dividend. continue of from capital performance representing reviewing in

landscape Regarding additional developments, and cannabis the regulatory federal on Paul insight market regulatory the dynamics. federal will provide

call reiterate for our again these to and Before years the team's Paul, long-term IIPR I throughout I our for industry. the want and over the additional you, recent I'd of Paul? support to of that, market turn industry transformation to regulated appreciation your growth owners will and turn developments the over who provide we of to legislative on serve. like With detail call the Paul, cannabis entire

Paul Smithers

Alan. Thanks,

call, an federal an to the developments, on provide of plan our environment, including industry, dynamics For the state industry. views this recent I and overview regulatory cannabis on continued update the of regulated

As developments that are prior there that as general industry provide we like while I'd and now to you calls, mentioned preface evolving noting assurance this in also a regulations landscape, opinions, to discussion, no on can And significantly of will want change. our be not rapidly. this landscape

legalization. First continued a state on on detail little momentum

great in see adult-use being made the to remarks, establishment both programs. we opening including of progress level, rollout continue alluded Alan medical-use and As his to state and on

adopted have majority saw legislative XXXX program. this was New November by vote medical overwhelming month, in for by and Mississippi's state's New Virginia ballot York, requirements by action to to elections, but including Interestingly, favor not an call in legislation Court pass following the state in for state passing broader Mexico becoming voted action adopting the a governor measures. Alabama Mississippi Earlier the thrown out medical of signed that legalization Supreme XXth by the legislative legislatures of Mississippi cannabis and unprecedented program. cannabis cannabis noted medical-use signature a for and new legalizing Connecticut, XXXX we past As programs legislation our steps cannabis adult-use programs by

use, legalized Washington and states have legalized cannabis in DC As XX adult-use. medical in for a DC result, for XX have states Washington cannabis

believe cannabis Ohio, in and tracking North either legalizing adult-use such XXXX and a also that or Maryland medical-use, other potentially for Oklahoma, Missouri, Arkansas, are We use. Idaho alone, likelihood have as Dakota strong several we medical-use states in of Nebraska, for adult-

our federal we on to Building current cannabis some August, continue views reform. regulatory discussion on environment. on movement see from national Second, our the

though which Competes included would Banking provide America institutions licensed serving state Congressional remains be the additional However, also cannabis compliant, in to at Act are earlier Congress was the on year. to in bills in with also on cannabis The of stages have for to those being language related pending numerous this space seen. agenda election XXXX, an the of a for Safe safety are There will amendment time to different calls. prior midterm we review, Safe final in reintroduced touched financial as the operators, the bill Act, reform course, year, be proposals continuing which whether compete Banking Act Xth

the of one and agree we've structure Drug requested federal seen. have framework any tax Food all strong determine a XX%, things, the includes period to of year of regulated cannabis various with passed equity US the Schumer This, MORE Reinvestment comments for responsibility industry. Opportunity last removal with, sales. In draft establishment a much year the to deference States by House Senator the summer with Act, legislative and controlled was MORE prior States and industry addition, first in as competes and to to and was Act larger, last systems year, on to their further of in the it criticisms, provisions. bills significant and the December among initial The provides cannabis a subject the In of the their the short agencies, current released Act, of cannabis a federal of proposed July descheduling session. we numerous of from other as in session The XXXX Perhaps Marijuana own both and Administration CSA, for introduced of be of for course, federal was the against. which of in untaxed the cannabis last would most September substance transfer proposed Schedule of unregulated under received regulatory Cannabis comments implications the certain highest the tax for, One taxation and other and legislative listed Substances an of act the regarding Act Opportunity, cannabis social focuses of review and policies, Act, and XXXX, reintroduced excise Control Expungement own to and which the would taxation challenge Administration

For and introduced House for be Act. Republican, sent taken will filed, comments under floor committee the CAO been Similar the year, State's to vote. and have cannabis is bill now, advisement, decriminalize continued Act State's retroactive and expungement Act cannabis it MORE the would the Act, formally offenses. and revisions nonviolent last Also, discussions once potential Reform for Mace Nancy federal the Senate late provide any before to the Reform

for authority the be four representatives. However, the and years. also lowest all the tax structure Notably, there support level has outright including the is to cannabis what increased SRA Bill to appeal, States oversight does reform, of at cannot of SRA prohibition. individual of X%, least determine bills XX Notably, vests the the the at some Republican including federal bipartisan limited carry this which

compete or As bill federal have legislation of we Any in country. with predicting said perhaps exceedingly of and difficult reform before, environment. to have the so legislative even timing substance would political the today's is other priorities more

into cycle. from and we emerge election As this midterm endemic unprecedented a

limited view, comprehensive, draft discussions. We further bills status the of surrounding and more while the and continue Senator our progress bill certain like being far from bills down more SAFE near-term, closely we numerous road. traction bills gaining reaching like to Act, the in own the see monitor continue Congress to in speaking, Strictly the Schumer's

the unique the a trajectory industry pandemic, after and XXXX having truly in industry in XXXX, dynamics and versus that strength resiliency notwithstanding strong challenges industry regarding to from the exhibited the country other in was categories. experienced unprecedented Finally, cannabis XXXX, growth continued

that been the still ballot billion While about of and economic the of there if legislative measures loosening establishment year growth of the authorized rounds through factors years related a general in to any sales in few grown $XX sales feeding $XX the past multiple several restrictions, fiscal that slowing tremendous stimulus, of of legal cannabis States and noted estimated in expected small previously. programs And the have has XXXX, industry's at XXXX, to in have the only as portion, by annual some in from we of billion. pandemic XXXX impact action U.S. to are the due up of offsetting,

addressable have course the we as the current in legalized of cannabis cannabis note, market. would multiple times total past for the I that market Finally is

XX that while percentage in amount. estimates a In XXXX, of combined, significant fact, very New exceeded billion with billion and illicit Frontier legal markets $XXX cannabis globally, markets and constituting spending global approximately of course, for the annual legal total spending Data the U.S., both

their for illicit opportunity encouraged regulating programs that that governments promote that by market. to programs transition, the to course, to cannabis, encourage pragmatic still the we there be state and continued we to there's regulated in while in done. the markets. to illicit and the are established Of legal approach are from that encourage to activity illustrates under taxing continued cannabis growth transition transition ways and certain the tremendous industry And of modify, Most believe notably away California, work much local

to progressing in through last remarks, the pace cannabis alluded continues in the activity transaction witness regulated established have consideration, of the when continue brisk Alan advantages M&A U.S.M&A in in we opening the or saw companies terms to scale, doubled of year a and than regulated terms With MSOs footprints, in XXXX, all As at debt XXXX totals valued note M&A that on XXXX. activity starting I tenant definitive in in capital cannabis his these consolidation for XXXX, markets many of in of But in utilizing Earlier initiatives. to XXXX tenants. continue space of in would some that to Ben public at and availability, more either his we $XXX. an announced largest expansive the on growth primarily as this Bronto month, discussion fund touch of to transaction continues this goodness their build buy will around they our also the of march execution XXXX. agreement [Ph] on a our the late stock

LivWell, to and largest this investment. availability in make finance of XXXX, New driver again we York. reminder, the PharmaCann real of We gross debt that tenant last overall course announced them Minnesota substantially XXXX of once our the the a general believe which merger which by since been and in our of course, capital a October was Also of partners increased significant tenant M&A been over with As has and and long-term relative mix industry. long-term, activity well as of in estate for leases percentage have planning of a in two is properties the acquisitions, PharmaCann capital of goodness the consummated year, once which have partner

our capital appropriately enhances profiles proven applaud the that assessments operators, overall close capital availability related enhanced at to refinancing risks Ben? debt of recent comes look repaying Ben, of of through utilized who including In you investments, the bad debt credit as by of on our the a proposed many to to when walk follow allocation on call quality as over a part taking we're the tenant the other underwriting means I'll our we the turn due. While color our acquisitions, it further when of roster. transactions, overall debt bad some additional or now as well and portfolio. operators, will

Ben Regin

and operators, mix of we expansion Xst, acquisitions of October of real our tenant Since Paul. Thanks, new XX partnerships representing states, relationships. seven top a existing estate made establishment with in

years. capital than XXX square redevelopment, own excess by states, X.X committed a more off total under development $XXX growing square average investments fourth weighted in quarter a totaling approximately XX%. with of properties invested XX which that million including our term continues to we million, today, year during eight activity of feet, XX our of across record representing or lease remaining we company, The million be for approximately feet capped As investment

information have this tenants today, recent about terms geographic tenant million December, we each calls, XX% no represents of by property on a central as In square in partner also also roster the making committed to our one the continually As our plan our in and our our utility I some past to in overall XXX,XXX investments. state. to tenant stand improvements and and feet grown, plant plan more rentable additional of we not tenant feet. acquiring provide $XX.X of portfolio, continue to And portfolio. to total provide enhancements support our long-term making of concentration. overall property follow touch our each well and Similar some XX total the square we state as we've I infrastructure, on Michigan, our at the on state as both additional diversified in portfolio LivWell, detail existing than onsite at tenant and increasing investment of to acquisitions

of and in month, become in forma you operators founded know, we LivWell which an of they and Skymint’s largest of ours XXXX XXXX, last October largest. their portfolio long-term tenant since integrated their would PharmaCann since As one build one and dozen partner XXXX, processing to recently partner the and plan for may in another million a PharmaCann, in ours also additional announced and of and their Michigan, single year, to pending merger as tenant Skymint to announced another this will cultivation their committed Michigan, facilities. operating continue our pro combination vertically Earlier a LivWell acquisition of dispensaries the in out $XX state. of add Skymint, capacity operator a

on with Jersey extended we a month, this Earlier square with Jersey. XXX,XXX Jersey, New to our Green together properties in AWH, properties four Ascend lease leased New property real $XX with foot be acquiring industrial expected to basis total to with to in Columbia on Leaf investment a and Wellness, Care. We our Now long-term about our long-term million. estate own partnership New

entered these properties PharmaCann, term in Flora. for leased of investment square of $X.X tenants with square Southern a foot properties closed the Temescal industrial of California launch. of and Holistic, a long Tenesco property closed for $X January. XXX,XXX the over . partner we of within course, own Washington. to property in XXX,XXX November, Labs, a the the follow-on $XXX.X in cusp [ph] cannabis In a In XFront years which of investment Trulieve, tenant another Illinois XX,XXX property Wellness, total is Massachusetts Massachusetts we on Including XFront Gold industrial program, Ascend, and providing four ours transactions and a is Ventures, executed billion Cresco October, property Jersey, commitment feet generate expected foot square with additional New million and eight revenues with annual in representing launching its on in an adult-use we on with We into comprising purchase in of lease improvements million

for locations full a acquisition cannabis a the originally be $XX of and facility Airfield million. to vertically in the and recently higher Hollister dispensary is and Gold Gold Long Assuming Flora the premium level Company, established Northern company announced including dispensary the throughout we our Kings the in integrated reimbursement chain improvements, company flora California. in dispensary established privately investment with expect and brands Beach total owned state, strong Crew XXXX presence with serving Supply Seaside.

Columbia located are Curaleaf a Kings investment in Parallel, I Schwazze, tenants we retail Industries touch are and for represented strong property tenants in three labs, order add acquire total including and XX care properties leased to fully leased Garden, in to Finally, tenants in place, Thumb, about and leased prior update. like brief a and Cresco of expect established Of to cannabis one over Columbia way on assets, This well Dakota are top our of XX to XX us Care, would transaction three Those Pennsylvania. Trulieve, one to Ascend two properties to Similar PharmaCann, $XX Curaleaf. to Holistic Colorado operator properties as great retail our properties portfolio time. December, Green acquired efficiently a locations North calls, we to for XX Kaya a opportunistically portfolio Wellness, in LivWell these of in for Cannabis. leased least is at are leased million,

have we LivWell, forma which in our calculations, properties its pending purposes in discuss pro calculated detail. note I'll of for PharmaCann’s with concentration more to Just for merger investment tenant total

October, located approximately total, their in with in our so XXX,XXX Illinois, merger square future for to the and Colorado, our about LivWell a in We representing in Massachusetts, fund of combination. encompassing more cannabis we commitments dispensaries eight cultivation one is and representing feet. PharmaCann are properties XX In expected vertically and great $XXX largest improvements, own see totaling four announced to US LivWell prepared Texas and and facilities leased additional York, Pennsylvania, with we Michigan, PharmaCann the in properties PharmaCann LivWell on square As operational Pennsylvania, XX total and Parallel After we PharmaCann states, in investment, noted across Ohio New as at including pro forma the merger, totaling and least than plan presenting million information owned and expertise. remarks this investment feet. a companies million financial total combination operate own best and of the XX fund privately processing integrated commitments what $XXX at our improvements approximately class approximately XXX,XXX in compensation Florida, and to earlier including

them and United Pennsylvania, pay committee includes XX their Parallel the to States, supporting his processing As to of and estate look years full the locations strong real to in which Massachusetts, in retail forward disclosed a of locations, scorch long-term to Parallel a growth in these Florida, through has are capital believe markets continues this has cultivation alternatives of previously, by largest we many options at we come. will partner the process at strongest strategic facilities as Texas. for and rent and for or the become company. footprint that board in formed strategic and company Parallel a some directors markets developed

partners Massachusetts, representing We a Colorado, and and Virginia, Kurtin, performing about Michigan, strategic $XXX total to over footprint evolution Led million. is year, in company across real the debt $XXX in leased New QX and Massachusetts, for Ohio. of Jersey, estate have million. ending properties In cash closed representing QX Founder Illinois, Pennsylvania, financing, Columbia Jersey, highly the nearly on Abner New by a XX Ascend sheet. and $XXX of with Ascend Ascend CEO on top partnered in MSOs total of million balance Illinois, Care Jersey, commitment a in with and $XXX XXXX last New been commitment have of with one its since a million its We own Michigan, Wellness' continues properties

line Columbia Pennsylvania, have two past noted, industry Leaf and Green June, Green of Medical the tenants previously we've our acquired in As in we and consolidation, Colorado, in with this Virginia. the seen Care Solution XXXX

December Garden $XXX the dispensaries to XX completion development. about six leased development a across includes feet in ours to operation $XXX In Kings a representing of commitment and Kings announced state addition, XX brand total million of in of truly producer Earlier world. processing largest the California, years. partner properties. with Onto ranks XX consistently of four and jurisdictions Garden, over facilities and our in has which portfolio a our is footprint properties a XX XXX,XXX this and Columbia million distinguished with and expected of month, is represents space offering Columbia as properties Southern portfolio in Care that encompass top the cultivation Columbia which added in licenses purchased developed US redevelopment term to California EU, and square at Care. certain tenant of or upon sales the in under a the in debt Care's in market closing

approximately capacity, per concentrates. Kings generating of in ramps finished addition cannabis Garden XXX,XXX be to As XXX,XXX to they expect pounds to year production

closing, total long-term in footprint financial Nevada, Illinois, and investment. million the Minnesota operators to the Garden a United out on and drawn investment one to and Kings full each anytime a reputation total the basis, Florida, production locations come. markets. the one of closely and property's at between results, tenant in of across and $X also New resulting Green expertise Maryland, $XXX a Nevada, at XXX with private were of employing to very part on driving terms be complete of Massachusetts, the is to in of with of the Massachusetts, tenant two certain after end a potential in $XXX the its be of about vertically Health that the facilities which excited its months debt continues license on ours on announced ours GTI expand as return pro addition dividends, Thumb a in XX last to $XXX States, of acquisition a October investment We're a the partner over in fourth million. note reimbursement combination. request to total tenant year in its redeem $XX properties of to which of closed Trulieve notes, in If total million. in last through secured by improvements closed with LeafLine properties full followed including investment nationwide, Ohio, opened. and to with Harvest may both a million over two GTI dispensaries new in partner form XX, would the capacity the I $XX our of of not GTI with industries, of month. our representing dispensaries represent rent. including commitment states debt to lump-sum one in does the was and their in the announced working XX Pennsylvania commitment across Thumb of brand Virginia, Recreation July expected little forma last Jersey, been retail over has that would is is Trulieve, one recently of integrated million Kings in XX organically GTI reimbursement in years. of the up acquisition single and five of Pennsylvania, our X,XXX opening and holders representing capital uniquely the acquisitions, build presence adjustments in Trulieve of at Trulieve team June of year. X,XXX XX any of for GTI Garden property, largest the a to made their largest Harvest at open operational base positioned additional MSOs after With at for and end of Shortly in with employees the raise US owners utilized include grow an million manufacturing people its last placement to Green senior XX continues

X,XXX partner been XXXX Michigan partners was XXXX, founded five and have Ohio, since in Labs a Massachusetts, We and on last retail real representing XX secured about Cresco over Cresco maturing locations cultivation facilities XX employs $XXX $XXX year, Illinois, million with loan across with XX Cresco senior and In in existing by of total of estate Cresco in commitment million. August a term properties processing states. upsize people now and XXXX. operating August its

issuance Massachusetts, medical and Michigan, Cannabis and million privately-owned dispensaries licenses million. an in five approximately operations in dispensaries, notes Massachusetts, Arizona In of additional addition square raised acquisitions, a in in own XXXX, an dispensary XXX million Illinois, vertically-integrated of about has and $XX totaling facilities Field, Wrigley states, with properties in Maryland, which Holistic continued Holistic In representing including through existing November million. May to December of Stoneview West of last Illinois in with own which of Virginia, XX acquisition opening a make Washington capacity. acquisitions cultivation Pennsylvania, state for leased Zuri, use operators continued cultivation issuance, and sites, the to operations, Curaleaf XX also its X.X near feet Cresco ramping license Maryland, including North led vertically-integrated representing operations flagship Pennsylvania. Fund. total to month to in of $XXX Jersey, on a on vertically-integrated and Cresco’s Chicago's commitment industries Harbert five in XX for eight commitment Holistic and New processing an Pennsylvania, states, cultivation million. is New in a operations seven of its by in strategic single Massachusetts and in closed Dakota Curaleaf Jersey. operator year awarded of XXXX, We included closed was of last about Curaleaf Michigan has California, total senior $XXX Bloom $XXX note California, oversubscribed secured the Pennsylvania, properties capital Holistic, Florida, the leased originally operational founded We operates MSO DC. operation in convertible dispensaries, recently

our just that, since partners note we new time Cannabis. well tenant Peak Temescal, and tenant beginning Schwazze, have Flora, With Catherine? to very tenants, Kaya the of six and growth our touch Sozo, to I'll it turn of to on relationships over tenants our continue Gold Catherine. top XX happy to Calyx execute While other XXXX, including new we're

Catherine Hastings

leasing for the the continued deferrals resulted a leases revenues revenue improvement as and or all impacted an of and our expand partnerships management continuing were deepen new acquisitions off to Thanks, Ben. were to quarter, for and execution cash or acquisitions the tenant teams. end The escalations strong long-term indicated quarter our And the we for abatements roster estate fourth with leases basis. our for leases the past, revenues, by we area quarter. IP only course, while real in portfolio thrilled performance executed continued also capped certain the that quarters lease tenants the to investment total of The year the by of in QX our investments. amendments certain exceptional properties, our on full we've basement existing of continue with QX for quarter and revenues quarter And approximately contractual no XXXX. after tenants of The rent our partial to of executed account of year. drive on XX% properties. as increase results the the acquisition the primarily under during to for in and from properties We allowances year at quarter, investments our driven from generated at certain financial was to reflects a last fourth for the additional provided the million $XX of adjustments, and side rent increase strong and revenues And

the per million, ended income XX, three $X.XX or For we XXXX, net diluted of months recorded December share. $XX

we the AFFO earnings this note for interest it an net in little of accrued, future net notes note that as but exchangeable rate dilution the we're which eliminate highlight dividend on to declared Also noted exchange to fee calculating which XXXX wanted unpaid rate of the their XXXX. on these with year to eventual the as difficult additional quarter, during results, continue item exchange, shares exchange cash to the and adjusts place relates comparison and current holders to current notes notes, full exchangeable above our certain XXXX especially issued the makes to the based inducement holders which time were the exchange. induced Exchange now, of it February bit through fourth the exchanged. on reference and million to FFO income initially exchangeable inducing of dividends We to notes we We the amount principal to shares stockholders. along part year in to we number the basis, to notes inducement release, not and full indenture for stock pertains to quarter holders this of inducement to that press in issue the common apples-to-apples exchange expected approximately it senior a to is our the exchangeable and rate results measures. notes required from adjustments rationale. for pursuant considered believe with year take to between date rate exchange, wanted be was in as the By senior able meaning million for $X.XX, this paid a the XXXX, dividends the a in in transaction quarter of quarter of notes, $XXX,XXX. explain $X.X these and our dividend increasing but dilutive and fee the these the costs accrued rate, exchange versus to In on a $XXX the equal full principal cash XXXX, of quarterly when As best our for we with purposes under interest of then our this and X% fourth each fourth AFFO FFO were unpaid inducement, XXXX, in long-term of a privately we of our and equal interest over connection amount the X% delivered dividend representing negotiated income, noted

non-cash these approximately million debt extinguishment the addition of during exchanged. the payments, quarter In a of also loss to cash we recorded $X.X notes on for

investors meaningful better investors operational between can ongoing our back specific understanding to adds to provide transactions which operations, we so noted funds press funds of from order funds in periods our from operations funds normalized time comparison to As from basis. operations, performance from included better apples-to-apples exclude operations operational We've a of that compare in an from a on which our provide performance. release expenses,

As January activity portfolio's for and million. mentioned XX% attributable fourth opening $X.XX a inducement share fourth share. as non-cash FFX the to $XXX XX, in share a or XX, Adjusted continued senior funds overall stock-based from growth, normalized diluted the per XXXX non-cash the diluted acquisition our share, operations $XXX record for back same million prior to our million $X.XX year's operations full exceptional fourth Alan from from notes to grew million, period December common dividend $X.XX of operations expense senior of year On or adding back interest adjusted adds notes, his revenues grew XXXX, $XX.X for normalized was $XX.X per of result the our we paid our funds which per quarter, related per of of XXXX stockholders from quarter. approximately to and approximately an related and of the well as $X funds performance. and was the compensation of quarter. in expenses and XX% That common was increase remarks XX% to the investment on loss unsecured exchangeable to strength dividend Total for quarterly equivalent as annualized to as

each XX% in Board expected of a level dividends in to common with of of adjustments As stock portfolio prior to evaluates year. XX% our adjustments of releases, six we every QX quarterly noted to our stabilized our dividend months, on The the target to Directors press payout continues and be a ratio of basis. declared QX Board generally AFFO

to development real our as operators improvements into improvement estate leases. our allowances offered under to We of also our construction an or properties fund many continue

at these facility to cannabis an of a and markets relating to facility In growing improvements noted, costs existing are redeveloping in critical either $XXX improvements activity XXXX, properties. our to capitalized million we've previously approximately we announced. million As funded address construction $XXX or funding approximately to expansion

or of in XXXX, we We back Alan. our $X.X million million I'll growth next REIT no to at Alan. total $XXX to Finally, in industry. net year have a about debt turn assets consisting gross balance in with maturing of year And believe total with debt, almost unsecured total of debt it not assets, that, one ratio debt until and maturities to $XXX year, and strongest solely continue stood billion of the at the with sheets end. XX% this

Alan Gold

I'd following closing. Catherine. the in Thanks, like to note

our demonstrated As and we tenant are roster and we their have resilience tenant partners of our highlighted, the thrilled the on of strength our continued and quality operations. with execution

to to program regulation to the we believe illicit launch many tenant We continues still sensible expansion of dilutive transition regulated growth continue well the permanent of providing of partners the continued pertains positioned ramping of structure. state And maturity, capital capital managed as program in business, it to fastest industries. early on promoted are non facilitate growing its states. in our as execute one be regulated sales space existing innings to continuing by prudently an important to cannabis to are and The new we our part dynamic market, the especially

thank always, us personally your stewards for continued your As investment. our and want support, I entrusting as stockholders of to

for With that Operator, call questions? our up to We you in can have and best role every like that, open very day. open will for continue to please I'd questions. it do the up

Operator

now question will ahead. first Instructions] from Tom Catherwood And begin session. the BTIG. comes with [Operator question-and-answer Please the We go

Tom Catherwood

Thank good you, everyone. morning, and

Alan Gold

Tom. morning, Good

Tom Catherwood

the You adult-use guys investments. timeline and of estate states evolving have – attractive talked of and in the real past opportunities for becoming about the medical eventually

rollouts New of geographies programs Maryland With and provide which likely York, longer for medium think you? the And following the to could ones recent term? you and Jersey legalizations the Delaware, near-term kind Which in growth New most provide New do Mexico in behind. and Mississippi, and eventual opportunities over

Alan Gold

off, Well, states ahead, turn with is continues answer going over double I'm and go expected which to good to Tom, to Paul. a to experience tremendous the growth, going to it perhaps really think by industry question. XXXX. directly and start Ben first I'm perhaps to that's cannabis I Paul

Paul Smithers

Yeah. Thanks, Alan.

Jersey, – look we or we thing timeline, despite the medical does the York. New what with going rollout, York, Tom, missing really the New pretty what's rec on in program, I the up So is Jersey, a we're going requirements, confident they're York, great happy love together. they get conditions, to had, and this New We're obligation a New and medical Opening sign. I think New until up happened think, opening

So we love those states.

one think interested strong strong very think, of medical coming opportunity there, with very very we're there's states is Texas We there. tremendous still their I Michigan, new Pennsylvania, with the program. in out

that timeline try very, what program Virginia, passed, in what adult-use to so we So, programs, course, Virginia, up, of some sales we're happy the seeing their kick we're to about with start very rec bill of that a they're states in September. they passed that and, have move doing saw

those going medical states adult-use. confident the fixes, as shorten, needs job. a are And that Virginia. much they at about, you XX legislative done. as understanding there maybe that timeline we're more need transition talked might the great tax between roll to out. and may states the controlled course, some that's it Of But, that it be have to that because getting that, get know, through the going months are they're time XX to that's what revenue, look House to But you're in and mature, still I they They – become is states at the Republican as need program months, signs, the look have think other we not I right, think, they

what like seeing. we we're So

Tom Catherwood

We at general, opportunities same seem pattern XXXX, investment for opportunities And turn Maybe that. cost if increase, late of the at accelerating. their similar source increase of as Appreciate this the look on a Have equity in real capital. recent and in cannabis especially you leaseback more time, public this to we at it. estate demand a sale be least market operators in saw side. seen their growth dislocation? operators real given seeing kind of an are industry, Got to the capital towards

Alan Gold

capital higher. acquisitions. as and expected really for talk fantastic. specific cost our have XXXX the did million But average, ebb their in think of does over to We've to and we Ben about Pretty the you on over I'm somewhat lower, identified And tenants actually turn industry -- flow. actually seen, year, and $XXX they pipeline. in yields tremendous obviously somewhat that is you ebb a I or aspect – – it The of our unique unique flows going were we and demand were a capital. that, be that to our was to

to disruption through XXXX, So dynamics world. now, so with But have our it building, recent most really we same in geopolitical especially to going over to go I'm pipeline, turn the Ben we think the to the that Ben.

Ben Regin

Exactly, Tom. Yeah, are those seeing we Yeah, sure. certainly dynamics.

is and I last most that pronounced, in that on volume been or up and consistently landscape, efficient, changes regulatory the on having down think investment available go even our on the markets able equity think non-dilutive year year. mentioned, competitive seen, capital, by becomes to capital Alan landscape ever we've equity the as is this fluctuations largest the I placing industry. have the continued succeed markets. to see We've believe And more always the -- as in you

I continue uniquely capitalize balance strength of on to sheet to think the the as opportunities pop positioned we him these be we see up.

Tom Catherwood

year about sale Kind well. Alan, that, cannabis in helpful in Ben, Appreciate activity lease a talked really that of it backs, as M&A you you've was record mentioned past off That’s building all the for and color. XXXX. of driving those

facilities? right much to construction of more M&A sit your existing as is compared now, how new expansions you identified of As assets of pipeline or driven,

Alan Gold

way. was that have in pipeline don't we our I I say, going bifurcated to think

that and available provides when I think, capital companies over allows the will that know to us. develop for continue. our with think the time they that they is -- program to have real And that it them, aspect of and when they exciting I work

kind Ben, further any have know, you I do don't color percentages? as So to of

Ben Regin

M&A, creative existing I able mean, to to provide solutions think is and benefits strengths estate that's being groups right. construction, Yeah, we we and I the tailored no. think whether I biggest facilities. offer I that's the real work the with mean, of one

the feel well So form particular to groups and that with we're that will takes. partner dynamics. industry working we're shift over again, time, we groups whatever the that positioned very on with depending support we But

Tom Catherwood

the this then how the that me, headlines US put and fall, for one And what then cannabis last Understood. cannabis harvests western in on pressure record pricing. around

tenants a in Your that whether it's think I But XX% kind your on of of can talk And about about small tenants? markets, the exposure in your insulate hear you is your and bit and pricing focus some about maybe indoor from cultivation, premium the that less does maybe news? of these overall. we pricing flour, impacted than those shocks portfolio cannabis read pressure

Paul Smithers

think that's I cultivate. difference tenants between that know, Paul, is a and there this grow as exactly right. at end Yes, the product to outdoor said product, is indoor We our the such you the grow

Oregon think California, it coming tenants which and So of from a are grow. I is grows really Washington, from outdoor in of course when our headlines, those we see different, lot

those not on seeing sales for pricing impact commodity an So numbers. see product. the We're or indoor we

Tom Catherwood

That's Thanks, color. me. that Appreciate everyone. for it

Alan Gold

Tom. Thanks,

Operator

Please Capital The next question with go ahead. Partners. comes Fortune ROTH Scott from

Scott Fortune

in new top bit more not established do in providing the at kind operators. going you more down competitive of especially that But levels the versus on for real near-term, pipeline, unpack growth has little of it of what of board tier and Obviously, and seeing. morning new you you if are How turning MSOs in some seen state to look you're some on as and little your forward new Want X% from down pressure and MSOs. dig the on a you're can little in Good existing some out that estate bit the the your questions. we've more pushing the and the these little channel and financing, pipeline coming in moving a you, delay a thank to of much the puts evaluating customers, single seems a for these here bit maybe terms like for states a to cells it especially? side debt as

Alan Gold

strong. including to the from – a transactions abandoned real we the a mean, general that M&A. state state a to really, that And maybe end to to year I is of deeper, variety think of We specifically transactions demand you very Yeah, closing continued demand And think our lot lumpy. further a We little in continued a estate have we multi at MSOs. single couple want very know, existing of before year. our remember operators you had of operators I turn pipeline Ben got the over bit it through dig closing be paths, from are first transactions,

ability continue mind, at if And that between you back confidence place transactions million, been the of in we if to for pace of million that's in great $XXX per very think we've I have quarter. I to successful $XXX think leaseback years. terms, year – Keeping our lease up you one we're we only that XX think you weighted couple last type which excess in offering. of that, product, length very years. looking doing know, and sale have which the allows remember of We're to transaction, a unique where us to have average is XX for XX lease a

talk relate you the about So, the how would is how – to about programs. Paul, want about pipeline and talk would Ben, I what how want to yields, If or our think might ask debt think I that's or that about debt yields think you our to I and to going. you that

Ben Regin

Ben. Thanks, is This Alan. sure. Yes,

debt You industry. we more in seeing there's the know, are definitely

to gives debt the up, year to to Ascend by a with opening top country. operators sheet our last investment Wellness continue markets we portfolios. we in of is and portfolio command year And that and in leveraging XX% in the of largest are of evidence strengthens portfolio. they to over deal the who is existing our had by Again, the work such with rates. think the balance here recently. operators. I our in not to on feel tenants, going their to closing This our continue it that That's say, Jersey top can a with we're grow only of continue have country financial the not the think And operators result New we strength the strength we going support lower we're our

Scott Fortune

Alan, color. consistency that on the a And IIP follow the kind environment? hit that. opportunities on up rate million, appreciate your side Alan, you I appreciate of different with weighing I rising the then to on million. raising How from in or on are this a markets of at capital the here, capital looking acquisitions is financing basis XXX XXX able things color quarterly the

going line cash with about the the the Looking ATM, financing commitment at here? needs XXX look out and available, forward million level kind your of what's the as different cash options maybe you there

Alan Gold

Yeah, I strongest of with balance, assets. we the than balance have extremely have a debt sheet gross to strong total less think we very, still XX% one

issuances, We debt, equity preferred other even of access equity and preferred of forms of the convertible have straight from to of we have debt, recent markets obviously capital the investors. a sort interest variety our and some side

the given company, for are well how gone markets as those impacted to certainly how we have extremely will continues the we is and best choppy what geopolitical capital our options are, We all events think on. to access have looking at But before. the by we company perform tremendous that they do we the and are

Scott Fortune

cashier of a the you're then price as cash quick potential far TI as for your balance level? going forward, transactions acquisitions what's term from on you acquisition leaving and that's going needs committed for Catherine, forward Well, follow short one for committed cash and your kind

Catherine Hastings

the time. on of million for projects. tenant earmarked that sheet. extended projects And said, into the an on these eventual you Yeah, Scott, entered the $XXX over us of of we've years at so balance is especially for But as about $XXX we redevelopment cash sit sheet have period million that over improvements balance our several last and large

be X raise fully to us months past strategic we those between reimbursements for XX We've us. can when those allows to projects that request So think on capital. we the typically in that talked take and

Scott Fortune

I appreciate I'll in color back jump the Okay. Thanks. all the and queue.

Alan Gold

Scott. Hey,

Operator

Goldfarb comes question Sandler. go Alexander ahead. next Please with Piper The from

Alexander Goldfarb

that. If million of you morning. Good sticking you out is but just good with I guys heard cash, maybe earmarked. million XXX there. XXX have correctly, morning Hey, Cat,

is it capital market So activity horizon. sounds on like the definitely

guys You earlier debt there also that was this contemplating offering mentioned were you Preferred, year. that

as you you reality there's preferred, demonstrate. played if opportunity? notes And notes costs. So bonds, do the and exchangeable the at sort unsecured see obviously, you coupon, as of, the initial as guys look think capital the over things then out, how about, can there's Because, where the happen, ATM, best time, the do exchangeable

Paul Smithers

are I of to of Before time, changing it is we're provide -- changing going think I a And our what very rather navigating transactions. of think Cat turn we're accretive unprecedented -- cost where we're is the periods forward. at looking We to our capital things rapidly. market over and the still all lot choppy, for of options one moving

And excited so that we’re still about opportunity.

which also seen think, opportunity at that And in and XX-plus-percent. I field think, another sold pullback -- another. the allows we with we've that convert, even one up time, I I an equity and the

accretive was transaction, long still time. it so And very period of accretive an in a

a share out, I dilutive and purposes, make to options accounting our to made There were significantly. want add fantastic else at as all and bet obviously, forward those there we that? we’re investors decisions. Cat, looking all to was keep those Keeping options you capital we way worked doing. don't in increased what those -- know, make and so anything mind, move certainly those the is because we our for, to a Now price impact accounting it every

Catherine Hastings

exactly growth that I assets. I looking all are options right. XX% the do the to balance mean, have. at with And, sheet mean, that's we debt we happy with only total

XX% both We of And lot strategic strong be additional are to AFFO and a raise growing options, and we have -- to of our continue we year-over-year. to us XX% flows portfolio cash capital. for equity want when gives debt. a as It

Alexander Goldfarb

because likely. question stuff defense legalization. year it the And the to reintroduce the going second you that Act in wanted that and at people are doesn't SAFE last they different mentioned and obviously, to it's look end the legalization. everything was going Alan, you year is, killed SAFE of Okay, And and the ways as because the Booker look Schumer and then trying full that maybe that's on, or all budget, full Banking interesting, either Congress, with pass on

guys, which you be situation business the one either seems current SAFE right, SAFE So, view or or legalization attractive, it that your legalization, no continue Banking? or you in Banking for that that no actually like or is you for in is with the SAFE to environment, think situation makes ideal the model meaning, curious, your IIPR, that better would Banking, I'm just which you current see legalization have better opportunities? very

Alan Gold

mean, That's a I an interesting question that are fantastic. double sword. edged now right things it's

the a We great that New strong balance have balance only exists Exchange Traded sheet We're got Stock pricing super sheet REIT -- power. with York out there. really

We and nearest opportunity competitor raise the greatest to have maybe are our today. capital XX, times probably XX more

XX opportunity to access environment, As strong. drive we capital a and still different think, sheet great certainly, value capital years, of cost average you the greater of know, The in if even regulatory to and strongest markets the -- have have tenants of – able then greatest sorts something changes be in the we group of all balance weighted would I portfolio moment. the in lease our length very excess

So think a on even where we're it right more now, up certainly has It much it for I competitors catch long-term basis. made comfortable with very is. or difficult our to us compete

Alexander Goldfarb

Okay, thank you.

Operator

The next Eric Craig-Hallum Please question from with comes ahead. Capital. go Des Lauriers

Eric Des Lauriers

you my Thank question. for taking Great.

mentioned, profiles. entering look space, you're MSO debt going capital more with you at So closely more the to debt

on would terms? flexible a top-MSOs, of brought terms in of lease more and or preserve to tenant question you mix also the in capital order more flexible your XXXX. guys tap attractive sort to on ways order rates, in you. you prefer your six new Thank prefer as tenants on lease comes be bit preserve online, on be naturally to to My You would the mix is,

Paul Smithers

tenant If Another going interesting agnostic mean, we're a generate tenant mix. that's how question. mix. existing it. that. are path. that -- we're can And We're at we -- continue our really down to returns to capital or I go generate I generate do providing looking to we returns, to certainly great how – we as I if that with mean, look going We're -- that at much returns, great different yeah, great we to think know looking we how can look

for to can. as is much as we Our our job make money and make stakeholders

Eric Des Lauriers

sense. makes you. Thank That

Operator

question-and-answer closing session. This the concludes our over to remarks. turn conference I'll any back Alan for

Alan Gold

Thank our you, operator, -- continued the for our team with stakeholders and stakeholders sticking and all. our one for hard us And, thank are my Thank you, issues. to is team, and work. those you today's thank prayers really for all for all and know, and for in in joining us send today. your geopolitical way comment harm's to And that certainly, you out for

Brian Wolfe

That will the call. conclude

Operator

Thank conference may today's now now attending you disconnect. concluded. The for presentation and is you

Innovative Industrial Properties (IIPR) 24 Feb 222021 Q4 Earnings call transcript