IIPR - Earnings call transcript Q2 2022 | Innovative Industrial Properties, Inc.

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Operator

Hello, and Welcome to the Innovative Industrial Properties Inc. Q2 2022 Earnings Conference Call [Operator Instructions]. Please note, today's event is being recorded. I now would like to turn the conference over to your host today, Brian Wolfe. Mr. ahead. go please Wolfe,

Brian Wolfe

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

uncertainties to XXXX, everyone differ the Before during variety factors. statements Reform in the Private cause a Forms could forward-looking important other forward within the recent specifically Please Securities today's to and identify documents the refer materially of of that deemed made the maybe contained on filed Litigation that company meaning the actual we looking statements. and to call results by safe risks, like XX-K reports SEC, may which factors the begin, statements and I'd to due XX-Q, actual with remind results conference harbor differ the of risk those Act of most from

publicly statements, events result revise not or any obligated are otherwise. looking or new to of forward We a update information, as whether future

addition FFO. discuss as and today's FFO non-GAAP normalized FFO, financial information, adjusted such In we certain call, will on

You financial can X-K earnings SEC. in Alan. Alan? now information find issued to in release measure as as hand yesterday well our call filed directly comparable with with over to the our reconciliations most this the the GAAP I'll together

Alan Gold

ground will expansion. the leased Of were calls Garden to which quarter. of million with of Kings quarter Kings also rents $X.X do second for Thank you, base what operational up of these properties. call Brian questions the we To which and at welcome, base project properties, everyone. rent recap, I has approximately biggest the for Garden properties, know approximately one one The six Street of today's X% four was those the expansion happened. XX total our and for or six with a collected

lease obligations filed July, in an a that XXth, properties development further Today, we XXth, Garden and [Adell] suit the their filed among properties August Garden or Later On and July asking on Street X-K two we Kings regarding amended in Center defaulted state other making Inland The Dr. July suit on immediate redevelopment other regarding were construction and for demands. default remains other on at to in our the properties, our Kings claims court Xnd, things. with access we among default.

we we that doing unfortunately, note, will to interest. our understanding. all pursue not your the to able please any proceedings. Okay questions answer what happened. I are ask that can is be legal regarding for And And we

before our in resolute quarter, we Properties. minutes we results of and start the to our the with all Industrial us success spend in belief our with of vision said and Innovative for Now future second remain excited why few great that I of want reminding a and

XX% their growth profit critical nearly billion. acquisition always facility long the specifically a growing legal have cannabis, In what licensed, prior what growth potential. There create to comes importantly, and unless the a sales has flexible to can't real or most model, four, estate believe with high possibilities. secured, a and legal and a estate one the with investing cannabis operators. real the real acquisition professionally model to focus portfolio of And with a of diversification industry of lease implementing the tenant vision using balance of, Our With we would now strongest strong industry with of is are with the professionals. to $XX sales strong individual a managed careful quality strong review we sheet, in portfolio. estate strong other grown capital investments rental together We business and states be cannabis limited license that committed has income $XX doubling producing recent this a multi-state We a plan that cannabis and estate portfolio experienced legal risks. XXXX, multi-state vision, regular commensurate of developments designed with professionals the to invested a our operators in in be program, in been states and most focused team Three, flows. property. which over a tenants geographic strategic of from a company term results with our on operators. cannabis real or business industry, a and straightforward and since is team nascent of consistent our we of fast from quarter one, existed XXXX billion Today, emerging our and experienced footprints, the facilities on roster by can to we no US legal in to that Two, industry top industry. strong of the state the cash operations second And total about consists provide growing expected bring

proud to financial all we provide yesterday, publish the continue expect quarterly time published to supplement are We on that our and to you a first quarterly for basis.

terms, economy financial markets for will pricing provide we the As for on structure, impacted Inflation regarding well. we recent inputs At In US XX% which generally, focus continue recent seeing first Total our our is as further raising general regulated tenants, of in operators’ time, a industry broad the has declining, across raising metrics are the the in the months months, in investments. the to the cost and market based portfolio and regular six is to the information unit industry costs. driving in industry operators same their to production year the in labor, cannabis comparison cannabis broader down in also the including constantly the capital over general operations. we seen cannabis US our efficiency are capital overall construction and prior have conditions tightening we and in activity monitoring industry microeconomic our dynamics, period.

growth to and continue long cannabis industry. We believers of regulated the the be prosperity resolute term in

As will focused be rapid undergoing best and I long With industry on the said, way the over to that, discuss industry to the value turn positioning expect to will now Paul success growth at experience the to change, along we Paul? headwinds creation. continue possible with this company call for term in way. That any and team dynamics.

Paul Smithers

Thanks, nearly Alan. I of that increase by to top to Alan as cannabis $XX sales to of are expected emphasize, noted, billion. XXXX’s industry would first sales billion total like continues XXXX, doubling $XX revenue and wide legal

of and developments, to be cannabis certain level in products recent we a basic market As for far enforcement number regulated enforcement and in unit by states including as what pricing believe in recent we demand driven decline the state states wholesale non-licensed sales lack reflective conditions. supply seen on structures, of dynamics macroeconomic general level licensing by taxation factors, state have of cannabis certain months, authorities, local meaningful at illicit

exactly strength operators XXXX we continue yield efficiency maintaining We to our on from operations. production specifics. seen that to dynamics of efficient production and with continue production will price Capital for controls controlled cannabis pricing have price to ESG published Also, This expect designed our have product that at buildouts highly require facilities consistent and on report, do brand specialized Over focus at our for facilities are mission availability. the a priority for describes We to high of which scale. believe comes of quality. unit the key critical quality, maximizes combined through product revenue capabilities environment in state's or facilities these provide capabilities. to aspects retail recently and depending XX% that our facilities states a market see across scale environmental compression compression and and program quality degrees, on products dual and production varying enhancing of cannabis

volatility have other capital Larger geopolitical to sides. the on markets operators believe our regulated outlook, monetary markets this drop cannabis capital witnessing. more better board the volatility on year given few have and efficiency taken and Ukraine, chain industry, to well taking the with to of has weather these as our we’ve a began all generally policy to uncertain in now focused the the factors advantage as the across view. in Though, in debt a uncertain regulated in open witnessed monetary US the all policy inflation, both March. in we our federal the more last approach We discussions financial expansion. from supply persistent not As in in outlook operations on are their have availability off that dissipated have war in the economic positions volatile and tightening equity cautious for operators, been MSOs issues contributed view cannabis since reserve are adding months last tensions been That in

higher speaking, most anticipated. time capital is committed issues. As XX% period Inflation a for Alan supply of longer broadly would've with over our run chain think I Inflation, and of noted, invested MSOs. has than

While this for the has construction input up labor development for and all also operators, and to almost costs in cost activities. industries, impacting redevelopment regulated cannabis addition the industry, impacts of this across in driving is

In are and certain addition, continued supply resulting the being in delayed in shortages completion. issues chain labor projects

more be operators. Of course, complete and/or these combination environment of developments for longer complete. limited legislation. projects can as the capital the resulting Federal in In requiring project with these to of capital certain obstacles to current delays the take put generation operator revenue to effect up have the availability, significant

was Banking from the Finally, bill I'd that to SAFE competes removed like note recently.

However, larger six house introduced that Bill. SAFE spending pass a with times, Annual there like SAFE Defense some scale expectations maybe budget into having the the are bill

quarter. SAFE We to closely. operators. greater will now portfolio to to capital over avenue the investment continue developments Should I'd second these in for this be to activity turn monitor discuss our the and may to like pass, call for access Ben in Ben? many

Ben Regin

Thanks, Paul.

proud provides financial our introduce details are consolidates regarding quarter, this portfolio, to We financial which property reporting. our supplement our

we feedbacks, continue As supplement periods. your is the supplement for would Alan our noted, and refine appreciate to future financial this first we

portfolio call, I'd tenant discussing and certain cover our property quarter. in like the during our characteristics investments to roster addition this to recent For of

states, rentable we know, X.X across own feet. you properties comprising XXX As square million XX

XX% due we contractually June property During the collected six fees ended and our from of portfolio. rent XX, months management XXXX, approximately

As tenant noted ours we in of have continues partial a payments. calls, Vertical, prior in California, to make Southern

us in its six on in defaulted at our properties Southern Garden noted in California. Kings July filed July, rent from X-K As at leases in the

Garden. regard Kings comment against to we We able. proceedings provide continue legal in when update to operator while extent we have strategic will you will these full review are able. their And Parallel, updated Again, that continuing you to legal on keep the we we pay we on meaningful are process. rent proceedings, a are commenced they confidential and cannot In

Our to is square to substantially we approximately $XXX total fund current equates property portfolio's improvements, believe future cost which including commitments replacement below per basis, foot, costs.

committed XX cultivation up than and/or as multi-state with make than of X% and of our entire redevelopment properties, activities, or XX as between retail XX% tenants X% XXX of feet, XXth, of conducting invested properties X.X capital, and XX split our company our capital, processing of tenants facilities, locations, of or capital. is our capital. public invested more Across XX representing of our and capital. portfolio accounts one properties, XX% and/or with with XX% retail approximately Of invested full XX approximately are facilities development, a total state representing or more combined or portfolio invested cultivation than up our Our of approximately XX% invested XX% partial our square of lease capital No no the either representing for our committed of operators processing nine one constituting our invested XX% make capital, years invested or weighted rentable total June more accounts length for our portfolio. properties and average million tenants our for of under

weather the We their months. tremendous conditions monitor estate well continue and and as current as our progress their believe critical will the to for our mission in the to in closely portfolio, operators real continue coming to value ability

terms of investment In activity.

Pennsylvania, Holdings, relationships existing Illinois, Green expanding Cultivation transactions, we for provide Arizona, During relationships total Michigan. representing the New at Sozo, Texas five TILT quarter, York, Trulieve PharmaCann, we and reimbursement Massachusetts, Curaleaf, with In and a million. of these lease including and Thumb, properties, establish about to commitment new spread Maryland, $XXX while amendments investment tenant and and improvements investments across Texas, Maryland these with acquired states, executed Original four Processing, properties with several

said, I capital. will in terms we as activity, capital Catherine. favorable light always, be Catherine? industry quarters to the in pace be place forecasting That note the lighter we would focus anticipate activity to is raise activity reasonably investment I In than as expected of of expect opportunities investment $XXX XXXX to With of prior we approximately activity that, determine on to turn it ability we the million. challenging. additional this to do on additional total in terms that over that closing investment of

Catherine Hastings

We generated from approximately leasing was for a primarily driven QX of total $XX.X last the year. Thank the you. properties. of million quarter, by new of XX% revenues and acquisition increase The increase

Additional on to which the our account cash investments the that impacted also the certain rent next allowances certain tenants executed for and And And of revenues to of a the phase building QX to properties. in at months, at adjustments our phase as revenues infrastructure under properties for leases provided escalations resulted continue by in were six the from rent nine quarter. base ins continue during in rent as partial we've over revenue leases, reflects only quarter certain scheduled all acquisitions and quarters contractual past, we basis. our indicated will to

paid million per For we $X expense normalized non common cash June $XX.X as the July or interest from compensation back $X.XX for common our per annualized an to On share. XX, June $X.XX FFO, we net the which income related and diluted $XX.X of of share. of months adds recorded ended non to approximately record to cash dividend or three Adjusted to quarterly senior of stockholders per unsecured operations based share. XXXX, stock was million dividend XX, equivalent $X.XX XXth, quarter, diluted share of funds notes per our

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

was ratio For payout QX, that XX%.

issue or leases. to for development improvement draws continued also to our allowances We our under construction operators

in to noted, of activity In the our scale. improvements these million products we QX critical submitted improvements approximately quality for draws are previously funded at construction we've at As efficient of in XXXX, cannabis properties. $XXX production

inflation input for mentioned, is costs and labor impacting Paul As operators.

up in We're by the gross billion certain no other and given $XXX.X war continues recent also may redevelopment times lead driving further to with in ongoing end, for activities. for construction construction to quarter of solely the debt of not have addition which longer year the our million outbreaks. face, debt, development similar of months and and of about unsecured construction in approximately with to redevelopment that Ukraine believe maturing next year and seeing which total in until amplified materials, supply projects the cost development $X.X to had generally portfolio, In rolling economy and in debt delays or economic we been total lockdowns continued consisting $XXX in in projects disruptions, broader in we a this million certain response countries At maturities COVID XXXX. assets

tenants. gross fixed decreased grade on current of i. sheet have over interest we capital quarter to annual subtracts total a funding basis of XXth million balances cash to XX% million Our debt This of on our existing future XXth, of quarter. sheet improvements, improvement remaining until e. per a debt or June for for as maintained balance capital reconcile ratio requested we’ll million was $XXX of by our and obligation to approximately with end among unpaid commitments little rating order June as of coverage our and have assets balance fund at our $X uncommitted in approximately $XX.X other XX.X cash service items our ratio million Also our hold acquisitions. investment credit as $XX times. today, which to an position and We've allowance investment total available

pipeline, so. these PSA As investments. of we've In be under $XX and we or million balances indicated a funded year past, our the period time requested expected of new to over have tend next be over the that's in approximately to

raised, common proceeds course, I'll the close transactions, it with may including or have Alan. completed may placed to Alan? four And not our we on those months turn from that, capital occur, just the we we've Assuming ago. successfully which offering stock will of back

Alan Gold

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

We value of estate as years you day for working are the through a and numerous company. and of the we the estate. all skilled of of real ebbs the company our to industry, XX decades managed that decades owners seen committed property real manage to upon long Every leadership, all I've commercial believe that and my highly industry, XXX% in through of flows term. oversee In to the and enhance specialized our Board utilize the in finance experienced protect team company plus firmly to industries and portfolio this of executive critical professionals and mission assembled Directors real have flows environments. a estate, best and the our I effectively experience ebbs in with company for in

Operator, it I'd to call for that, could please you like open up with to open questions. Now, up the questions?

Operator

Yes, first Catherwood Tom the with thank [Operator you question And from comes BTIG. Instructions].

Tom Catherwood

to of here. going a a bit walk fine am I line

in factors that you the Has it resolved, favor. by though, related was court the pandemic overwhelming that lawsuits the in is But issues Let back here end serves move at thinking me went receivership third hit will California if overwhelmed into and interest on. know the you I'm or or of court? drag the had if me, I your of that I when through the rail, and backlog on potential on inbound memory because courts eventually XXXX, pandemic process could Dime and process the right resolved were other But dragged away. filed

Alan Gold

interesting Well, that's know I question. a pretty

the current tested filings. our before court We haven't courts

I it general, delays anything we're say declined, excuses would don't would pandemic that any or have and that related think, But all or have the be same. significantly that hasn't. that to in evidence the state seeing really has California think courts I So I actual for

Tom Catherwood

you going your find been one because Vertical would of of two with and part spoken kind to to that. the of maybe out question. point And not provide hypercompetitive be the even make maybe workout California's California best And to about cycles. operators you over to Vertical Paul, color of ride more paying? bit maybe then can't resolution them, they California concentrate rules, Has a as it, operators, like little investments market not the portion and eroded was on taking you've they're strategies enforcement always whole. or key able then rent it's And illicit best where can share, always the a plans the your the it's for mentioned. of the Kind with

Alan Gold

in So I mean, a obviously, there's that question. lot

it the to knowing able All growers factors efficient still there, are high general, can there and or be the California. an growers, using drive those those accomplish continue while and us erosion continuing efficiency, lots California, very you illicit say feelings to the let’s efficient that be of a to money. successful make is unit well, California, state, you and to First, about very continued knowing in efficient make the the to is pricing, that that in who words, be have need doing knowing give to has market capitalized. your tax positive money, are to In money, of making goals effectively growers and some been you

coming But think expertise. can address brought unique growing in focused than has Vertical, efficiencies that fruition ability than taken that less the on and and on like we successful that a tenant our will we've it X% it and is be looks of pay ways And most refocused market. have continue they pay all hoping quality will we're multiple believe based their that like all revenue, continue new they to the believe wanted. will rent the pay over so Now And rent. rent Vertical, which And and attack that we particular, business. they side with longer to drive in recently, to -- said Vertical time. to unique rent and it is of of times, they have or has was to higher they aspects primarily the or and pay wholesale believe we their and each of and

Tom Catherwood

production somewhat from and more but sometimes this all for away of Do that unit up, either of Paul, set going here. Kind what REITs being? two say, is that. percentage a more or whether and I rent as typical end processing you Alan bit, costs, compression, a guess you have is in to costs up be producers. costs sense, as what substantially supply price of cultivation, typically, parts show of different, a both production your it's energy moving a costs level point stat costs costs cover of including you and level expenses And know their And or them is they to get well time, industrial which inputs California have to the where and give at increasing then second, unit I worried rent chain a to you percent there a that, tends mentioned, rent? in transportation be is having that breakeven about margin

Alan Gold

But answer We don't have general, we or operating tenants to operators what and panel. state highest of can we believe a less in or that California in efficient have do or that a rent and their our $X,XXX growers to We of statistics that we question. that entities know their operational at and we $XXX cost. are different who percentage spot growth multi-state or entities to are have and smokeable think All in we who overall available to around that's seen in flower. the and states, the I who a that XX pound, everybody's start for are entities is most that are we've product to operation combined Because percentage, other -- in trying the target of locations make and provide generate believe than a as provide $XXX that are and that a exceeds growers of $X,XXX pound no together detailed variety we trying of in what that mode, rent those be up have price have modes cost statistic. very a phase. a different growth for level a difficult And and around it cost

Tom Catherwood

available a debt capital Do see it up That's your the sense maybe them for all allocating It and that But modes understand tenants? to really you've larger that. got already. tenants would how continue is for sale and less all to you locals than they And the in. complexities they're I MSOs, current last helpful, Alan, totally then just was one from that into that year And there? growth make you demand between demand, And tenants ago. turn me thank about between then you your the I the here. Obviously, leasebacks. it quarter the know are capital then acquisitions. the was and money you the it new four the months. for general, work putting space, maybe on for PSAs stats In cost amongst is a as the or operators for record to across that in prioritizing up regional of lined think thanks Cat, continued operators,

Alan Gold

Another very answer. I which can complex we think question,

XX% goal. have allocating our our our can that statistics and achieved from when the of you we to majority So on of you MSOs, that comes think I look that focused at first, MSOs, rent that been capital we've see over

just of million April say $XXX it half to four for of months, actually to first million And I'm going part I than acquisition you plus the think, faster the and projected or fact achieving placed of business and that's, now The acknowledging was close less And investment it. acquisitions you and successfully the $XXX yes, and in kudos year. appreciate so far than around to -- of goes I team. quarter we strategy over our is we that that that raised the great we're to that’s I capital that mean, and in quarter our team.

that the think is we you're there's you're -- or sale industry. the really capital continued so the the there for have leaseback has I and of amount we XX% in indicated is in cannabis not as opportunities and what's tremendous for over demand our since Because demand -- we the of -- that capital year. about industry of asking for what the whether pace decreased sale raising believe pipeline leasebacks, questioning beginning

bit a the necessity, we we just of closed between tremendous process million and was And maybe because already to this you a on and demand And therefore, think we've the quarter very believe leasebacks, of tremendous $XXX are long assets year, million, a and for above there by as part differently, be occurring place were of $XXX per another half we easily if at real uncommitted or estate a the that and capital. capital and we first the can a process. turmoil we if So capital that The under annually, going $XXX our about sale minimum. think the is had for PSA $XXX more this closer success and be is, $XX what free And have of a indicated certainly because doing continue capacity. evolve quarter to in the $XXX is latter that little we we be beginning to the yields have already, described, acquisition things million $XXX probably our on million. to equity, investments. get have well, us And back that would make million past between pulled us where hundred adjust of we've of million for to we for certainly million we -- $XX to the which we is it's what if necessary to because to pace. million we transactions or of from million cost commitments acquisition capital capital market $XXX while to that have strategically million maybe had that range, to between our already. we to and year is in And decision, the understand that to And that strategic allow to $XXX achieve are -- -- cash think the the the we've flow, we our we're to capital debt and to go would we demand higher

we becomes And equity, question and that to other new us structures, go capital. convertible and opportunities straight and debt unique variety with the $XXX then Now raise think beyond including up million, require debt, come do exploring. of raise the we how we're debt do debt could which that with would we

achieve can as still excited able that be industry. think And very that, achieve we we'll the the tenants are that. about we that easily stabilizes, so as settle we environment down easily believe we markets mind for and to our and Keep long think the in

Paul I industry the they to that -- noted As Paula, that in the think revenues to… get expected expected

Paul Smithers

XXXX… by Double

Alan Gold

XXXX. by Doubled

So the and answer us very able cash to we confidence continues Long to to provide positive work but that to hopefully that very that flow. the strong as business our of to and be continuing stable MSOs continue describe giving focus industry question winded helps that you. sales with have we'll growth, way

Tom Catherwood

appreciate sense, total Alan. candor that No, the insight, makes really and it me. the for That's

Operator

Vivas And comes from the next Harrison with Cowen. question

Harrison Vivas

refresh of then it's latest or how during giving greater front. business form policy? affect were to of the me monetary how cost around some specifically? how can impacts think thoughts lame availability offsetting SAFE the you speak would it from would in affect that just assume to Act. this your year, it Paul, And would capital and tighter affect, you passed we one the pipeline it your around capital passed maybe you commentary and broadly, the of more offered Can just Just this you on just some us movement on regulatory duck. If gets

Paul Smithers

pretty being a really it of would to now we SAFE XX right it's get done Booker, now, support support I heavily nice plus Corey think indicated first, would being SAFE. as Chuck by But there's SAFE. pivot debated how right that have that to formulated probably And can says, a that's and have Schumer know, senators think about they a that Right in way pass. version you we basic now, Harrison, what GOP passed. SAFE they've or

of lot loan maybe SBA XXE that's maybe two some language, if provision. Booker’s SAFE a which provisions, some equity So Corey gets includes veteran affairs when up complicated, it language, uplifting plus, and

what of months your Schumer a depends how I it would affect And now us? six to think passing Booker it question, got certainly positive. like. better pivoted. looks I So that have be it's ago, and a chance are does did that that it But think

even SAFE all, in stripped options other as banking I giving version, a be like, a capital, operators whatever looks that and to First for it'll a if banking access. would give of down benefit it's certainly think, the industry whole,

the have and credit tenants So existing with tenants we in that, our with future. stronger

options positive. capital. they debt, would us we in would So as cost we which our raising in to certainly, access capital look lower think that Also, of certainly different at a give

we at plus. as So it look definitely net a

may that, cannabis Some comes maybe of comments there out, SAFE is the about not it. more legalize -- it going deregulate of again, competition. this to thought gee, know, But We've yes, be you little what always a or impact as well, depending SAFE version competition. does

it's stay still So the the on there's be, sidelines a national one because I substance. still going lot schedule a big to banks of think,

happens, to, it it So be when look plus happens, we we and net a us. for it'll think forward if

Operator

[Indiscernible] Capital comes Group. from next the Craig-Hallum And question from

Unidentified Analyst

and what a sort be more might delay the to of I'm of cost in you the expand just on capital the bit and the dynamic sort bit seemingly for seeing then Could unclear just demand sale increasing of that capital. additional drawing available of please you, sort a leaseback? between you're sources on

has could to those you now just capital more environment is cost dynamics. it of more tenants get those you on your macro If really changed, could flesh a of would from be out just great. that future Is turns better bit If expand dynamics, kind it or trying that side? on

Alan Gold

real back is real and points it's non-accommodated in XXX maybe rapidly, were ed evolving XX And basis years things happening cost and with in in the and Those major look, what them the move time, we -- X% in really as both. from in rapid -- what interest our points situation with and going think affect were external that to to factors, happening much to I moving a have plus the didn't XX in really go and evolved about from just and XXX and increasing as was would they're we're were things stance to And our to up going hadn't condition really finally, the changes. this When real we points. are through are more quickly. XX back be time, affected and even --honestly, of such other understand I our basis -- have with such, basis those basis and we absolutely points or industry we're things where talking you increases first, quickly. seen inflation believe other happened of those very has they XX quicker. really end capital. XX%, they're that pretty they I rates cost that And gone and we stance answer to experienced. accommodated estate time though go it we've when and mean, you indicating a we've up, And to rates X%, and a very And took happening recession, to very X%, that how occurring financial great when times capital, interest and

has share whatever, and XX% price understand. thing and dropped a plus, to us for that's swallow Our big

things believe with of made conclusion many plus could And capital, are XXX, of we’ve be that, of their nine as and and back. plans we the come back new MSOs that their has take not -- are I had just -- that capital, to moving. But strategic to the mix has to able adjusting certainly achieve going how tolerance fast costs for to the growth how -- and pull XXX months to it have And from to next which in coming we've been might. months. that match start in of cost think increases they're we doesn't higher to sourcing debt their can their we because source and some And we that to capital a fact they acquisition with of time the we such, there's of that together from really basis now are as potentially Our provide. process impacted, nine seeing, tie the close, you cost And the is it decisions really availability quickly any deal new increased six when points. six thought as from that anywhere that acquisitions by

Unidentified Analyst

last aside from lawsuit Just on of one the you those me any here, seeing leaving Are here. for the demand any properties? commentary --

Alan Gold

anything trying not. decide or can say I'm not I to whether or

industry growing the answer efficient the in the proven very because understand to that, opportunity are already we product proven are. grow to able grow, do have money And and they the growers we think have be and able make I to that really be is to are to to to assets need efficiently.

and is high and -- had their others recognized we brand growing, to Kings as the Garden facilities, ability quality. have their their facilities -- of brand quality is they're of of their have know high Now industry and something of and brand in certainly a well product inquirers. And envious position with and been it's provide of their that others where

Operator

Massocca John on with comes question next the And Thalmann. Ladenburg

John Massocca

the or question. July, Just and extent XXX% you to Is on the data a kind every of starting Garden of of August? outside straightforward the Kings rent have Vertical as tenant

Alan Gold

as August, July, of yes. of As their obligations in yes. And

John Massocca

and Kings tenants California Vertical, investment to property the Garden the or And the -- of loan tied what's affiliate then other and outside construction outlook loan? for that

Alan Gold

to to of we're is I'm at. where to just turn million. loan $XX.X if project that over Ben, you going want the describe So construction that

think that's I done, right? much pretty

Ben Regin

to construction we've facility that with to been out close our operator up, is how to Certainly, potentially monitoring the close the to continue will very itself overall the monitoring. on and that market options we'll be wrapping which and work very proceed We're -- evaluating growing going forward.

John Massocca

and/or your we of the deploy liquidity kind and/or I cash remaining liquidity? limited some committed give you of or position, view Kings kind of should kind in think in the cash under of external let's guess, terms How should on maybe versus Garden of How about cash think committing funding investments this. to future terms in investments? kind to can on committed kind its deployable And about doing we kind position of terms of impact of commentary the of growth. on then say, future And

Alan Gold

that I'm going Well, about. talk that's something alone, because we leave Kings just that don't should to Garden I think

So we've that's disclosed $XX have have $XX free certainly million annually. generally of we and cash that anywhere $XX we million million uncommitted to from capital flow running around

come have then and that we I we sources, we unique say, anything capital plenty will access capital add for, external debt. phase including is about happen. -- future our growth, you that right a external in opportunities complete rent because our MSOs. to any close and average I So which And mentioned, that XX% MSOs. under we for there's certainly And over have that I'll growth, on And believe to demand in capital. we times that to are as tell we convertible to the strong currently already -- of rents adjustments gives that additional now opportunity our those us are ask that of and what as continues assets very the mentioned And leased projects that of before, construction to annually, X%. are? more. leaseback thing many you development we've But our discussed have growth opportunities some come and around construction one some internal described for the And exploring. didn't are believe of that of as on And from debt from as projects that And rent XX%

we have So growth of addition possibility amount for tremendous internal the external. to in

John Massocca

that I'm to form, the as are projects are anywhere then of tools about to close to at intended if today? those either it came this ongoing think two if of of kind point? their down were in can't But fair being going And development then usable Garden, the you you fine. answer, assume kind Kings that one on And is totally two properties, that's to try it

Alan Gold

development facts go facts. I of think the that? the why And are don’t three you describe why don't Ben, the can projects we -- -- through that

Ben Regin

those projects We of of has have drawn been capital a that, three little committed towards those has development that over completion towards the intended of $XXX their three, to use. of been million and invested, projects, a XX% north

our with portfolio. of and there entire assets I options continuing to value we're evaluate our think, maximize those, to along of all elsewhere,

Operator

the Piper comes with Goldfarb Sandler. Alexander And next from question

Alexander Goldfarb

nascent doesn't for California. is few issues. And always discussing current, California and things. downs. you people have said job think, can a issue. states make doesn't But seeing a industry questions, can I in information sound Certainly, make Along with ups other if like based doesn't this like there's I money like think, you Paul, good sound appreciates answering lines, a operational sure a in done so one, you're tenants sound the understand all it’s sounds you just thank being those it. And all far. I the and everyone It it any I guys on that that

guys go pro guess, with far obviously, [FFO]? we security deposits? guess just out And us you I you give can part in security our Cat, you take But security Kings. I deposit the balance the as rata of just earnings deposits But on ask how X% as So update can't underwrite as you year about should far of underwriting, to an I of a your pay used think, really as directly and month on typical rent Kings.

Catherine Hastings

is X%. Garden Kings So

in had were our the that million related QX portfolio. Kings revenues talked disclosed remarks, and think, to I about that we've than of of less Vertical $X.X Garden, prepared we is X%

Alexander Goldfarb

should take just balance, the we from -- a out earnings. of that our -- as should far perspective, million GAAP Correct? we as out quarterly $X.X earning take But then should

Catherine Hastings

we're cash that revenue. is rent we're Remembering no that -- receive revenue. that collecting collecting we're on record only cash, not we we're recording line that, we recording if have we not impacting if not revenue, as Yes, revenue straight not

Alan Gold

Garden, revenue you have a the be model out. portion you was of to expected your Kings should expected revenue that if In your -- take you're to reported

Alexander Goldfarb

guarantees of credit, as security corporate far or deposits, security as little all letters tenants have then just talk for do could you bit you cetera. about those or deposits, And et maybe a

Alan Gold

our in general, on So every we, one of security require deposits transactions.

have depending in tenant size tenant, have and a can put range if security relationship base transactions -- isn't deposits range anywhere security tenants of one months. comfort not the in require strongest deposits our and or of transactions recent new tenants who six us we and security may that give more any do in multiple we a MSO, Now, certainly on our to tenant, with security the those a to for -- up we deposits other tenant But the require deposits, quality absolutely from transaction.

Alexander Goldfarb

doing right, then said million in you $XX total, But Paul, just maybe final think, you've you And done at in if uncommitted million said you you're And have then is off. there's the math $XXX thing about $XXX think you got is, have guys my I acquisitions, I of of looking I'm $XX million you see Cat, XX also said, lined of million or have up. cash. capital you total and I million

get sounds be think stock acquisitions, you towards or So should we maybe and just around $XXX sources million? where then given like the you maybe million thoughts to modeling it is, because won't and XXX uses

Alan Gold

think got it I all you've confused…

Alexander Goldfarb

I asked… why That's

Alan Gold

your would us I that or for for are already us an So four to go can something we on better offline make three thoughts this have over -- over and conversation, be it you that times accurate. we've to would for I call, think sure gone what

Catherine Hastings

quoted. point through for our the walks that's XX, will available $XX to financial and not of subtracting get out sheet million balance I reconciliation cash we which Slide you on investments And to supplement, that the to that cash

Operator

session. the concludes this And question and answer

to to turn closing call I comments. I'd Alan Now Gold for over any

Alan Gold

today. the look, all are work team again, And that hard we to you. taken, to where this for and us efforts congratulate Thank get to they've I want once

committed everything the all. to for thank And that supporting we sure that we shareholders. Thank best all absolutely in making is all their our support of to our company. and interest are our -- investments do shareholders you We this certainly commitment continued and want to

Operator

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

disconnect You may lines. your now

Innovative Industrial Properties (IIPR) 4 Aug 222022 Q2 Earnings call transcript