IIPR - Earnings call transcript Q1 2024 | Innovative Industrial Properties, Inc.

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Operator

Good day and welcome to the Innovative Industrial Properties Q1 2024 Earnings Call. [Operator Instructions] Please note this event is being recorded.I would now like to turn the conference over to Brian Wolfe, General Counsel. Please go ahead.

Brian Wolfe

Thank you for joining the call. Presenting today are Alan Gold, Executive Chairman; Paul Smithers, President and Chief Executive Officer; David Smith, Chief Financial Officer; Catherine Hastings, Chief Operating Officer; and Ben Regin, Chief Investment Officer.Before we begin, I'd like to remind everyone that statements made during today's conference call may be deemed forward-looking statements within the meaning of the safe harbor of the Private Securities Litigation Reform Act of 1995 and actual results may differ materially due to a variety of risks, uncertainties and other factors. factors otherwise. documents most the XX-K future result those or recent which any important whether the SEC, with and statements, contained to actual forward-looking publicly identify the cause new update statements.We of events specifically reports risk obligated in refer the filed differ a are company by information, the XX-Q, results forward-looking Please to could not from to that as on revise Forms or

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

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

Alan Gold

and Brian everyone. welcome you, Thank

pleased are eighth our year We today here discuss results enter to as into we of operations. full our

capacity very our tenants and The completion properties have critical months our projects at our continued been XXXX along activity to improvements infrastructure releasing funding for driving our with with first support of monitoring significant on development of productive team, production and of development.In first X company both and XXX,XXX feet. completed the focus And months fully properties activate and significant X leased the representing the at projects totaling executed square of of under XXXX X leases capital. invested efficiency X new properties enhance million further $XX construction on

was consideration California Angeles, the which exceeding of Los leased value a the carrying property. our divested property, strategically also our closing, until We with combined

through share company's months million. credit in further $XX company and revolving and progress Ben never generating first may and quarter facility out with recall, cannabis year, built liquidity in notched Catherine in operations. in solid X position the $XX from to discuss the you property upsizing QX, per million AFFO will of was this $X.XX another fully the the As that more detail.The for enhancing

rents in months properties, real we construction to for development, that the obtain are and our leases the executed we really estate we new was capital pleased and have commence modestly needs need as the completed.As be properties we the as and pre-leased in share come, down matter. where certain per for AFFO in approvals some under the late to reiterated quarter-to-quarter, companies into to addition note macroeconomic are light the in general transition requisite a position, these to to impacting environment operate While to year-to-date, past, expected cannabis industry with of especially time tenants XXXX new not

end powder investments. as liquidity Our $XXX million additional remaining with providing and along total available the for any ample of development exceeded strategic dry we quarter fully commitments funds have

rate debt perspective, maturities to potential XXXX. are variable in and As a quarter have gross is state from Controlled sheets the indicating matter. assets. our no the the financial agree Schedule the with under recent Paul as recommendation markets.Additionally, rescheduling of Paul? Ben expected Act, share of this regulatory the on media seeing.I I to a for provide number several position.From of market all will on cannabis that developments. Schedule Paul, are federal legislation and this Substances detail, will dynamics capital industry the debt, more call that David process, and evaluating our detail level XX% III more in one reports to focused with dynamics now in DEA to be detail HHS No over turn the well to we will discuss rescheduling will discuss thoughts regulatory in pending we investments REIT the state continued as more eyes results new balance levered until lowest at on promising we May debt-to-total

Paul Smithers

perspective overall that growth United in cannabis the terms our start continued regulated the to the cannabis through like states. regulated was for regulated year Thanks, in strong industry. would XXXX cannabis Alan. given sales across compression unit I many are observations overall from the another a growth some impacting of from with was macroeconomic sales year of price volume that States.However, more dollars subdued, perspective general

pressures, Although some of the illicit come compression by compression price of a operators part by the large pricing in said, on more was which regulated beyond, optimism California grows to oversupply book the state market.In those of same regulated remains overall billion the products their with particular that robust, the time, April overall published continuing see across growth consistency for XXXX much to recent particular, country. in we All gives and on brands that billion $XX the the back relief of in driven have are focus compete and the grow projecting XXXX cannabis us outlook market, late some seeing we by are Business XXXX.At in sales most products. that from within from products of both strength $XX the industry of driven transported in U.S. regulated as the for to MJ and quality illicit that

financial or the which Maryland, cross-border We purchasing anticipated, perspective, neighboring residents become by aforementioned as operators the become a experiencing performance after Missouri with year divergence November, the our both in many also and markets we rollouts the of this dynamics noted more legalized call, growth, either increasingly multistate continue efficient especially expected commence strong markets.For of of competing program sales in to environment originally program sales in illicit in states, from at state adult-use by in we is adult-use period benefited some in to no saw XXXX mature bode on with and example, also high and earlier medical last use-only and price market for their markets conscious all.Ohio, for to the well and than with June. extended believe push in which perhaps challenges competitive, should new compression results.From this future cost that while see

a York's fastest-growing introduced to expected the successful which very Maryland, adult-use in program near of is markets the more and of Ohio future in Missouri the one was New be on introductions follows heels and adult-use While year XXXX, $X York's in $X of New and total below sales for demand legal year. of XXXX illicit at estimated regulated ago well the billion, December came billion than has in in in excess struggled.With

the illicit However, the retail operators York authorities are other there for optimistic prospects ramping make ballot. Florida's also to adult-use and have cleared and up I allowing Florida stronger New program would on measure Florida more Florida, like the been including passed recent the of In incumbent enforcement X touch term, threshold developments note earlier us medical approval that of adoption initiative for the regulatory medical-use with wholesaling.I near XX% to significantly a certain on in licensing a the although high this support. begin month, would of against programs for Pennsylvania. on for is the XX%, for that November use operations The way stores, running legalization that states bar the market, in Supreme Court relatively

supported the XXXX budget adult-use governor's Pennsylvania, conversion.In also to noted state cannabis closely While been noting polling a having passed, has if revenue threshold, been is priority and opportunity for in governor the legislation address. support below Pennsylvania February is prior be profit legalization any that incremental that Florida both we the to as largest compared provide projected by following above there, has progress and and bipartisan MSOs will the

that the the to prior coming pleased to be exception.Federal given is course, the hopeful surrounded is of that are at are, media Schedule that to point also as by hear we cannabis Schedule months, taken the from perspective, recommendation III. Virginia reports HHS We DEA will the Pennsylvania federal take the to From reschedule up legislation. from recent I states expected action in West this largely fact adult-use the with

line, boost the made an in important the and the address reform issued so it we issues we State his issue. comment United with believe that of also commented period in said, issues.I'd our to to public sway there XXXE of address, this timing States proposed by DEA's a leasing momentum some stressing reclassification also is enact issues the be of very resolving commentary the election including most the operators. hold decade, by these into from this and Senate and important current track think previously, which makes for Chuck bill As better this on rule expected come immediate be for of the regulatory to any opportunities heading to he has in an operator a the to portfolio some think, first in address among allow, financials across of a the there call could is that working play.Legislatively, cannabis has the to hearing part commentary issue treatment corresponding to legislation potential the that majority for banking lending noted been the also final passed this Though here, Biden to also, X reform importance board.President passing change may before which a the Schumer, is and expanded tax like the House impact the to will administration Union we President start year. election activity discuss on elimination significant That other was house has potential time us continue of bill this when into significant Secretary, In structure, year.Treasury the administration recent the presented the legislation, version rule. around moving proposed Ben the followed over recently may importance the is for Ben? Janet Committee the times of banking Yellen, Senate to now leader, later we hard turn things, safer

Ben Regin

Paul. Thanks,

relatively we highlight substantial leading Springs executed and Flora, progress tenant remarks, leases X with of in Avenue of under-development prior capital in tenant Street vacant and new we real development And which estate portfolio. prepared a covering the of of and our $XX existing Year-to-date, and Lume for executed January X million in quarter, lease retail to assets, we an of quarter, properties new largest one a my for assets. one our these our a our the very California pleased an we've this in also last supports lease small LOI we've amount and portfolio.Moving purpose-built, high-quality, We Cannabis on saw earlier on initiative Michigan.California, leases believe market.We leasing the Gold leasing nature XXth vacancies For our our a our made the mission-critical our the signed execution Michigan of for vertically were in new demand for as with our in executed state. required continued for McLean in invested regarding executing Palm plan our speed Harvest of at former operator underlying to move-out incremental integrated thesis progress Company, Michigan, the this the front, capital leases minimal executed we in California. to re-tenanting. facility noted the on ongoing with Park We operators ours I for

As progress provide updates self-storage to on options calls, property for and continue focusing we'll noted to future Bernardino San previous explore potential continue development we our on on on calls.

land to of issued.As potential new Texas, an of date. for site short-term X use executed only Texas limited a one our we know, partners with our licenses Marcos, existing licenses with program being issued LOI may in anticipation For lease you tenant currently San has medical a in

leasing legislation, Pennsylvania more X While Pittsburgh, the in asset, we adult-use additional that as awarded lease regulated being cannabis construction last $XX set and capacity we additional late $X.X activity we out totaling adopt PharmaCann an is potential developments executed options Paul Green New new capacity an a X continue production watching And production for eventually will $XX.X explore closely relates process, investment this focused as of year.In gets to to expand Battle property. adult-use to in to first Texas that the later previously.Regarding alluded program activities licenses to approach York, months XXXX, new we it to remain Ohio, improvement it uncertain.At improvements provided remains amendments to in roll to on of Ohio as the issue are optimistic allowance year. our and million fund complete their license adult-use production at including million, properties expanding PharmaCann where million open after

Paul million sale. the facility this an the We million Cate leased provide foot returns.In Angeles, strong leasing superior sold activity, uptick XXX,XXX on of property and seeing some We with that connection the near to the active the a the to use was term.Finally, termination exceeding million to carrying fully never on, expected described. in and recycle property and the in the $X.X notable we activity believe of XFront XFront in are total off property recently XFront's we our continue Green out received a books. in production Illinois, on market in to the costs Ventures expect touch $X.X reimbursement on of up earlier and consideration from net of will into built Ohio as to Battle that our both we addition provided with temporary we with value risk-adjusted in we disposition round capital certificates for Illinois. heels our the of the week, received closing our occupancy to strong commence in out been sale, sale which a closed which their cannabis addition of start has until of opportunities pipeline to fee additional up track was also for additional developments to square in development in to property where operations tenant $X.X XXXX, This lease other free Los industry of the will

We Arizona. our and Florida as Pennsylvania across markets to as for potentials and with near-term are markets adult-use established demand from such such Maryland capital those more seeing

evaluating executing over basis.With disciplined a Catherine. actively these on in opportunities selective I'll it and to markets new turn opportunities to and investment forward other are We look Catherine? very that, on

Catherine Hastings

Thanks, Ben.

months the several we've nearing a development noted, Ben or of As closing last made our on progress out tenants' lot major over projects. few of completion on

Corazon invested completed and Illinois Battle foot Vireo's foot square XXX,XXX capital. summer. York, totaling million ground-up in of the square square foot building shortly, Summit Ohio.We foot and in XX,XXX we which in square ground-up XXXX, component expect California further expansion XXX,XXX in XXX,XXX square project cultivation development foot committed XXX,XXX projects substantially in in in $XXX New on the to far of leased X So XFronts pre-leased development construction and development is complete Michigan our Greens the

challenges Of foot processing that with projects recall, these revenues, building are start estate to approved flows this leased.In to may the is project you get we've square these structure, over past entire revenues state-of-the-art for Remember our lease paying and the the presented operators the is construction, and very projects which finish leased real tenants X.X an our allow under for years well rentable in properties states, pre-leased As milestone the are portfolio our we operations pleased for now nationwide, more to at including March one to owned XX,XXX operating properties, the section subsequent no recorded our operations XXX of line was rent XX.X% of XX service state no feet, or XXX end.Our feet which XXX,XXX across redevelopment, pro to continues and approximately square forma end, end development, annualized our be quarter properties rent. portfolio remaining placed of diversified development in Of with comprising XXX at X million more development representing tenant weighted redevelopment. with these we included than XX.X quarter of square quarter properties X than few to of of development the is these light facilities.Regarding during in under from our facilities. in portfolio, base began that our generating average cash XX% base rent tenants lease years. as a ramp but important of and generate our term XX annualized XX% and representing were properties

experienced The We to XX% operating significantly and comprised replacement in company the and committed below over that, of some XX% the leased multistate it foot, largest operators leased industry, have public total with which with our turn to capital operating we tenants. with portfolio relationships per David? of across most I'll operators remains equates $XXX of cost.And to and believe square amount David. our portfolio invested

David Smith

Thank Catherine. you,

some million that while are ahead, in regulatory to the the state the our paid certain expect is needed detail.On be record discussed rent paid stockholders property all XX, $X.XX acquisition of re-leased, development quarter, sales-type in during of the also of X million the and revenues note revenues in properties, discussed XXXX.As in include $XX.X ended time in XXXX, term X earnings It's first issued additional base of a For rental sequentially share significant yet for March decrease per allow we rent XX, that on we at starting $XX.X quarter the for for periods do in the as X% QX.Looking activity primarily requirements common not the payment properties provided in first $X.XX due yesterday, million to to XFront received disclosed XX, we properties or XX. primarily there in rent to total XXXX, our for to decrease QX, reclassification a which by net I during from our of a months March down X to a bringing power experienced primarily said, for of as not same contractual to for $X.XX of to of were recognized but to were X% XXXX.Revenues in Illinois meaningfully offset the common our total the leased construction, were leased of X assets share. of and the X, March from per QX Pennsylvania judgment per compared income base negotiated being QX in of a favor rent was improvements commenced $X.X leases in with from a revenues, year. of share, the attributable and noted $X.X approvals first to XXXX, that were security properties and March QX quarter decline operations substantial quarter, long-term very and or ended we to or period-to-period. level had funds as we had related these abatement to January properties January year, months no payment March judgment would XX, property.For relating received revenues Ben also leases operations. April which by attributable modest reduction contribute and for the Adjusted a The XX, deposits total $X.XX both last in a generated drove stockholders a tenants' the the of months revenues the also part for of million prior increases applied were re-leasing as under of noteworthy which total dividend for AFFO for by was not building decrease that our front, in new the differ in X delays quarterly lease that partially IIP are leasing rent extensions not rental were X% ended line was to local a also certain as months driven starting primarily the release unpaid recorded XXXX, million, activity executed deposits rent pleased And former of for one at XXXX, between primarily or as of part again, QX $X.X stabilization result but activity may the leasing rent. completed tenant by rent rent was of previously funding driven for applied were temporary down of That $X.X of security escalations. driven of tenants at and ramping decrease of $XX Ben additional new XXXX, properties was ended revenues while rental leases.A resulted we our million to payment transitions, QX to of factors last sequentially versus million from quarter the for during

the AFFO.Turning payout with the Alan to to quarter As line is by our which payout XX% XX%, covered targeted ratio AFFO with had noted, of ratio in and XXXX. debt, Board's of the dividend during $XXX remained a not of until XX% in in $XXX balance million $X.X unsecured end, billion in bonds At gross approximately maturing sheet. rate fixed solely assets May million quarter we total consisting of our

facility credit a with investments entire the a assets million million metrics among XXx.On We under was excess service our continue increase of capacity XX% $XXX expect in closed front, quarter debt-to-gross $XX the facility. this October, best revolver over that by upsized to coverage facility. in as and with the undrawn REIT ratio credit liquidity ratio of the and we at today. month.Our end subsequently that facility $XX credit maintain comprised time availability the to last short-term total publicly February a cash, are million this our of the traded ended We of revolving million on X-year total to debt and the in We remains liquidity of $XX of industry first to

And a upsizing We cash capital facility to and the the industry, with our providing that positioned entering sheet, part well leverage institutions banking financial continued to services position our one continue are flow enhance to encouraged positive the company. top as continue and QX prospects the also in we generate XXX the on to facility provide reports of maintain and growth in of balance we closing U.S. for with have XXXX. to for relationships.We first through our conservative along recent new remain liquidity largest the source are to cannabis relationships in banks expand of continuing XX low the industry, over to banking credit of free this new additional

it tapped our $XX.X liquidity opportunistically to for common issuing program proceeds the in the discussed shares that Finally, accretively mentioned, Alan? that I'll as ATM and a remarks.With bolster stock our position result in invest million Ben XXX,XXX back activity his Ben further strong net into Alan. turn of of investment by that, we opportunities to

Alan Gold

leasing, impacted company, the that industry are broader what note and macroeconomic cannabis not economy to goal a a certainly portfolio But factors of our options has the questions. as with I'd in benefit following in capital Operator, investment term.With the strong team the maintaining position. closing. open the well focus sheet have execute and disposition this to regulated I'd in of for call stockholders the up will balance accomplished our value and activities immune continuing questions? to plan our We, over like the that, of to maximize evaluate open long up of am David. team to stockholders the particular. it to through and our our We believe proud core serve continually on I the like liquidity and our for could Thanks, to you our please

Operator

Catherwood [Operator Tom Instructions] with question from first The BTIG. comes

William Catherwood

U.S. the see renewed overly are too the this bulk operators to backdrop? improved and wholesale an quarter the uptick in broadly, sound cultivation of of across here industry and kind their respond and a given be optimistic, cautious seeing operators you improvement to of wholesale earnings How board. both but could then was want For manufacturing retail I the and on sales modestly cycle more we in cannabis uptick there with activity? not reported activity And margin spending fourth CapEx

Alan Gold

I'm more going question to that macroeconomic Tom. through perhaps Ben over been our good are directly. -- goes belief a Paul it turn going to opportunities. looking it and But we've are that shoots question. answer and difficult really some that there greater you, to Yes. things that better, And It's Thank the to environment green while

Paul Smithers

It's Paul. Yes.

excitement talk likelihood and So we pricing rescheduling yes, we there with not it's lots I a only XXXE I that but of the greater discussions sense expansion. we can't agree are to And our are the feeling And Alan stability, the of optimism. [indiscernible]. think operators, when understate about about

with are I some want we things we're put to lot of color know, on seeing Ben, a you more what expansion combined, if So seeing pipeline-wise. don't interest conversations. those and more course,

Ben Regin

of earnings seeing in GTI And the if aggressive your Tom, on play to able you're the Vireo that's they're optimism doing, just, you the there. listening question calls talking market sure. out are can metrics this about about quarter, the their what or any to offense I focusing think hear Yes, being on operators what improved yesterday whether given

a accretive in and think our get mode, into in these I that M&A that's to more translating to the are we on acquisitions, pipeline the lot of expansion side the prepared poised back remarks. companies mentioned uptick

William Catherwood

then already. and would I versus same will to it. everyone. even leases, 'XX those that? regulatory take the running that sophisticated to could that predict the beyond likely Ben take to, helpful. possession are tenants start regulatory in that it's Any in these occupancy have thoughts hard at are states leased know these tenant gain new operators full 'XX able up maybe who Are David, receive you for maybe be bucket Got Appreciate rent. those and And and you've leases that and the when approval more full are between approval or the thoughts, to extend are time, some paying those can and event But are there

Alan Gold

the with difficult not an a it a that agencies and environment, how unique sophisticated I'd believe regulatory environment very of Alan. your analysis are and in and that, David I their that mean macroeconomic you working Tom, have processes. and I'll with strong it environment are operators we over very in And operating start is still first agree Yes. Ben. or own with this through some lot we like to where tenants turn a to

Ben Regin

can Gold overstate how group in credit we've the Michigan, is with in we in think mean, echo tracking, is of re-tenant as these at of is can who the properties. that that's don't these I with the we're the able But and the we've the that our partnered or Tom, starting saying, the in in that strength largest they required of to leasing been operators capital activity. pleased just hands re-tenant we we to the the relatively not got feel you amount I what of to and Alan California Flora really, noted, of feel which something each we Lume operator just rent can. speed really we properties, like of group upgrades that these as but on low and as cases the there.So each whether aspects a commencement best state out operations execute regulatory case are

William Catherwood

will a that in know near-to-medium maybe the think both of potential services these more I we and being over given the safer model we following the for about term, while.I then And on rescheduling sounded, our last operators risks as could the Well, rescheduling. face the it. both your move to if at you be Paul, radar the and step commentary back keep legislation. optimistic for And comments for front through also I've business we on details institutions on year. the the more you up access what legislation more than financial me, opportunistic if same about think, Got devil get ultimately picture, we But heard of and pieces bigger IIP's time? of in somewhat

Paul Smithers

Yes.

Alan, -- go think ahead. I

Alan Gold

is a positive drive also and have double-edged length being there capital area. there are mid-teens very sword we about risks, I in weighted the it regulatory long-term say ability a was our that I those portfolio at capital opportunities. not shareholders one, extremely certainly think type before with a really is Every talks of only are cost lease of more to our deployed and a of environment, strong No, well-established there going are -- and our when but with average the there risks is Yes. helps north rescheduling Paul and/or to returns to that because, risks, one an

ahead, Paul. Talk go But Okay. risk. the about

Paul Smithers

Yes.

forward. we federal rescheduled state disconnect Tom, is see to if operations X, rescheduling, a -- rescheduling we there's The Fed. still as far opposite don't Because go still as should and true. any to risk remember, our significant law So between we

it's operating So licensed would selling -- still be states be operators conflict federal a they'd without law cannabis in because still with state prescription.

opportunity that us. that have still for we So creates disconnect the

a a because on federal news. in when far vote, the see Banking will market said the floor into So getting you there going we House some and players a he's committee prohibition.As good the lot not as has to optimism still a Act, don't coming you've that Senate. said a And because It that's got it the of is challenge Safer traction he's in speaker it's fan. the still be have put Schumer

optimism banking some getting So of for probably not it any negotiated there's in could of bigger address out that's be does market won't why part capital bill. get on And there why the But is It's cash a form, purely current Safer House.But access. reason the system. a its energy. the vote is renewed

be we it our affecting to better business. the out. So as if operators for it the To contrary, see take Safer don't would cash passes is, our

very So to minimal your question, rescheduling we and/or should see answer if Safer. risk, just all, not at it

Operator

The question ROTH comes with next MKM. Fortune Scott from

Scott Fortune

that a follow-up of on of the side and risk kind Just things.

But just I'm rates top sales markets be forward, a cash You what lower now that cap now operators top and operators. model of the want we're you cost there's some cash at that of have kind rescheduling And now seeing of a and MSOs of wanted and discussions, here. just of with a those spread to for has spread versus balance those could levels and how into the rates kind address expand on there.So up little levels obviously, for guys mentioned the the to the that you capital? MSOs we their cap And opened tenants to tap sophisticated of the forward get with for great. IIP strong additional more risk those significant be going with them flow lower them. sheet. going if and lower bigger sense if cost that working progress would Just with bit, look offer cash rescheduling not opportunity kind can But really with these who discussions sure lease strong kind the capital, regarding of with get

Alan Gold

just and of So capital I that Ben turn cost capital think about because over it to our our before does their is, on of down. they the through, balance you gone kind mean strong necessarily have ask more talk not has would, Scott, sheet to to pipeline pipeline how really I

their cost that think capital I of elevated. remains

it's access have Canada, here quality access U.S., better in maybe U.S., which they're to or our not broader capital their maybe well, all Clearly, with so accessing size think have in still which, in where I'll the the discuss. let of they up the much capital you I also. markets. the limited, struggling pipeline, But operations and goes here to remains Ben it

Ben Regin

This is Ben.

the across So years. yes, the just markets a real that same pipeline, last It's uptick to the in at multiple seeing follow-up the on which great we've been are see. Alan's comments, seeing rates we and these cap for noted been very activity we're has active few in

the And we material of of in the potentially capital So our not those movement same downward seen spread, increased down, rates. rates maintain environment. downward going is not impacts any any we've as typically in well our cost if that can cap way that activity think and with generally lower we as cap pipeline, on any us But have I rates. today, seen in at pressure on

Scott Fortune

a Real since ago here? kind hit X.X quick, Ben, seen discussions news pickup have in you of has rescheduling the weeks

Ben Regin

say though certainly necessarily seeing improved of I industry state think, pipeline. We're the dynamics wouldn't I I some just Yes. mean the in in activity a sentiment rescheduling that driving lot general. in level is,

we're industry could also rollouts Ohio, even just states overall in So in grow established states to Michigan. potential like California adult-use Florida and like that activity markets.So Pennsylvania, continues more be Arizona, seeing the in a and

the industry the the health And it's we're many in that the it's in adult-use strength we're rolling optimism the pipeline rescheduling the So potential that and seeing. strength varied. overall, markets seeing I around the all and really out contributes of markets, think pricing wholesale recovery to and

Scott Fortune

one carry what type color more was that. of and a what holistic do on disclose with about the Angeles -- little then bit fully follow-up that came property? but provide property? Los the that color. guys how one me, there, you on And know a property. Just more value Appreciate that I quick of just built of disposition for the kind buyer color little it wasn't that And out, to net bought

Alan Gold

think has elaborate? excited Ben ability to to supplement Yes. our you I Cate, capital. continue mean recycle about we're but -- why some want you our or information, Ben, don't pretty I to

Ben Regin

I little can a color. more Yes, give Sure.

think solution we've risk-adjusted that win-win. showed was our and that and mentioned, not our I describing to was superior a other with that capital that tenant able it will we our that really think returns. positively provide for We're pipeline ability partners we to cannabis been we a out As work opportunities on take built in felt into recycle it

the sides the deal ability deals. other recycle that that very both into happy, So I to capital on with think, very, execution, on

Operator

question next Piper The comes Goldfarb from with Alexander Sandler.

Alexander Goldfarb

guess, there? continues I to un-defensible involved first bank cannabis So involved comment What's federally mean the in larger make is it leads update -- get getting I cannabis is on some illegal, an to on the involved, about obviously your get -- but question banks in the courts position continuing the support pretty XX government a seems to top get participate. for and the, sort involved. for of, one allowing a states like letting hand, of to

about you a So cases. while potential what I think, back, mentioned Paul, court is --

update an there. get to want Just

Alan Gold

Paul, go ahead.

Paul Smithers

Sure.

So there is ongoing case. an

prohibition we'll the eventually And Supreme right government that hearing, described, talked failed up within and the states DCA about actively Court. basically X up At enforce we government's rights. the months. away a the they've you it last to with and saying waived the that trial go it get As has challenging you and federal to think, let next X going that's know, probably get to probably the quarter to the about as the to we level, position since then

they've team very experienced it's legal a a and So legitimate got case.

better a in So that.But solution, would the be meantime, solution. the of legislative that's course,

think years. rescheduling maybe for will it the Supreme take that least a in long to get at court position the way next create that case to its is the X does why momentum And So I to important? through de-scheduling that get X Court. to

Alexander Goldfarb

going district I this or what district what of D.C. the is to ask in? -- this out courts was is

Paul Smithers

it's have you that. Maryland. I to on think Though to I get back

Alexander Goldfarb

court? it's the So in

Paul Smithers

on back I believe that. you get so. I'll to

Alexander Goldfarb

with Okay. the No, But here. have How I what's what at longer from market? does users the regulated already new your incremental far understand but using is the going and as two, switch to of in illicit trying new illicit then conversion of obviously country, now district, favorable market, here state in you on I what far from a your experience users because states, the then operators all states talk this the conversion what's from a weren't to to in. to guy, the people regulated are has look And what rollout for would coming grow one, the mean the ratio a think, see as I'm needs then legally; that, York. shown regulated that's that's experience so And more your regulated illicit the experience as, people supplying people conversion across like industry the ultimately just the the you the attempted can is before, cannabis that no who and many who -- get?And doing users. see Meaning bit, people legalizes. little on show stuff. New can we We for live their the buying then are of

Alan Gold

is Alan. Alex, this

remind question Before we're a to directly, not Paul estate a that provider, real operator. I that perhaps we're addresses everybody just direct want

Alexander Goldfarb

I know. I know,

Alan Gold

[Indiscernible].

from your talking stems to really the answer in growth total the commentary question. ahead, things that perhaps about general. revenue, Go our relevance might like Paul. so And And in industry have

Paul Smithers

that Yes. X/X when and get difference there that's there and the medical history right. as new Well, it's you'd a because, base can I with. -- But aware course, a medical I adult-use, a how were many have illicit there of medical data recreational. the you we state, adult-use tell revenues about how many a to users program between that has any am begin go not that is Xx.And converts mean, in as put of legal are much to users medical of we up talks program when place you shown that to out X/X significantly and in

have gravitate that states. adult-use, don't -- we illicit the many talk impact it's the significant state to for a data as adopt when to. So And just does users, we adult-use so of why towards on But far as operators. a that's the revenues operators

Alexander Goldfarb

re-strike a Okay. this this lease or Do assets sort up to final properties the in we one other you behind. all David. do to CFO the leave obviously, I accounting, leases? other accounting, are of for. as the that's in that don't got you with unique guy, what caught up aspire see leases trained relative as And that And for coming accounting just to -- the you portfolio? very and Sale-type your view want X

David Smith

you've say sounds Sure, Yes. properties it's your One, note, like I out in it think David. this. of very X gotten But Alex. is just XXX. in This I'd experienced

again, future. I piece of likely happen, can it's So the think happen it basis. but It very to not on in if does, immaterial our limited And portfolio. a very it's very, very

to it's this estate. think have I problem that can the that generates real a twice impact given So something sector strong that's the we our portfolio again, yield have good that in very that.But of commercial obviously, typical yields

the our that. IRS it's So and yes, as in But income look, can -- of received. you a income our taxable and know, our items It's of. off as day, AFFO, noted, the in REIT distribute that's good considered end GAAP what not of cash we the including it's trips that revenues, at that rent be it's while we're the one you

Operator

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

Alan Gold

again, and you Thank quarter should such our for I'd last like thank last call over to thank joining X-plus dedicated for you and hard you. Well, work Thank the and With us you team years. thank the today. all. all that, end. Well, certainly

Operator

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

You may disconnect. now

Innovative Industrial Properties (IIPR) 9 May 242024 Q1 Earnings call transcript