IIPR - Earnings call transcript Q4 2024 | Innovative Industrial Properties, Inc.

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Operator

Good day, and welcome to the Innovative Industrial Properties, Inc. Fourth Quarter 2024 Earnings Call. [Operator Instructions] Please note, this event is being recorded. I would now like to turn the conference over to Eli Kanter Associate Finance. Please go ahead.

Eli Kanter

the joining for you call. Thank Officer. Alan Presenting President and Chairman; Investment Smithers, Executive Chief today Ben Executive Chief Officer; are and Financial Officer; Paul Chief Gold, David Regin, Smith,

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

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

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

information filed find the yesterday in well You issued most our earnings this GAAP SEC. financial can reconciliations measure with directly our in as as with release together the X-K comparable to

the hand over now call Alan? I'll to Alan.

Alan Gold

inception to increasing operations our year from to track record Good to flow our execute, continued over dividends has call our in Thanks, $XXX results everyone, to XXXX. of through annual each activity. returning welcome cash shareholders Eli. company The and continuing $XXX our generating and morning, discuss of recent since dividends, our XXXX and million million over

capacity properties in acquire highly remain deploying for evaluating our opportunities, the facilities to building over X $XX additional front, capital million On providing our allowances infrastructure in operators. enhance investment selective to and we

square representing total also made X leases portfolio. in X% XXX,XXX significant leasing, progress our new or feet properties, executing at We of

with our million, the balance strengthened banks facility position upsizing of and X liquidity credit sheet to $XX.X strong our with we Additionally, further participating. now

million million, at revenues cannabis total with of from to management teams For the cannabis $XXX.X the $XXX.X the we we our navigating generated success of which regulated The through headwinds, are AFFO the continues and one of industry industry. in year, experience industry. generating most significant regulated experienced revenue continuing

with our year-end, powder of to liquidity As available additional $XXX ample strategic pursue us exceeded providing million, total investments. dry

are the industry detail financial will David proud provide strategically debt the assets. of results our balance have gross capital REIT lowest total We sheets on more ourselves at to and to positioned in one have XX% levered to position.

we on to the Curran of over served Board to Last and and since company the not week, has directors, XXXX, made since directors. their Stecher XXXX and are retire we terms stand replacement announced them when decision expire. that thank and and years, the both David David service want process from Mary our have independent for their reelection Mary X Board searching for our for the of the in to

talented are real moment to Senior a and XXXX, fortunate seasoned have value, department support and team. management who such has promoted on Kelly in both truly provided were XXXX. have estate since Tracie Vice Kelly to incredible incredible take want I members and management since to are Both legal and we has professionals congratulate Tracie to also added asset our January. Hager our who managed dedicated President Spicher

to to Paul, I over our with I wanted the touch turn PharmaCann. on resolution call Before

of situations capabilities our detail resolution. the are our provide on benefit to in navigating will with believe We Paul the the reflects pleased announced outcome it shareholders. month additional Paul? team's and challenging last management

Paul Smithers

Alan. Thanks,

that we things, PharmaCann investors included, reached noted on by a press we PharmaCann our infusion rent X capital secured IIP. PharmaCann's of and recommencing last month, junior February, leases defaults among XX required in comprehensive in other to a release As note a payments to resolution issued

We and this value. path maximize best this the swiftly are believe our ability forward to team's situation is to proud navigate shareholder of

in the the drug official President On DEA. begin for cannabis policy a appointed Congress, law the postponement, Trump administrative behind canceling rule-making election recently us drug to reform, not a Cole that DEA January. rescheduling, released stalled Trump efforts related to potential regulatory III has rescheduling to and Schedule Schedule Since front, safe has federal any with opposition directive banking. to Rescheduling lead is there voiced unified the but including by was hearing the set efforts. Terrance and were to Cole from I President judge that reclassify has to legalization

do the However, in we for growth markets with through of President make with in see public legislation XXXX. cautiously for July support cannabis has legalization the use approval Florida, month, Shapiro's rescheduling and remain reform, both X, January beginning sales budget is prospects continue that X, And this exploring XXXX-'XX cannabis the on state in to We shown adult-use legalization Trump X voting Pennsylvania Governor including proposes adult rescheduling to adult-use of XXXX, states will XXXX. earlier effective cannabis and progress. legislation. cannabis continue optimistic

by in states in needed. These projected to the the according billion approximately and XXXX but measure, cannabis XXXX, X generated campaign put the are to back voters, requisite XX% adult-use In Smart U.S. of cannabis the was from After of Safe majority in failed $X.X received in Florida, be the to X receive relaunched XXXX ballot sales Florida support the combined January election. BDSA. the largest to markets on & recent

finalized, businesses OCM while adult-use have to accepting for the cannabis month. regulations for Minnesota, yet be In this cannabis began applications earlier

concluded the and QX for comment are is OCM publish the rules forward this public regulatory to Vireo. our look for to tenant the rollout Thumb adult-use the Additionally, Green 'XX. by and earlier end excited and month, period framework expected the final the of We partners,

overall accounting the of of continues U.S. to industry growth in billion. with U.S. The or of sales approximately is cannabis population. estimated strong, to after cannabis $XX.X BDSA states XX% sales the XX cannabis legalized the U.S. X.X% having XXXX in for increase in recreational projecting XX% XXXX with growth cannabis for medical total remain an use,

Recent data according shows that cannabis consumption in [indiscernible] XXXX strong, to is also volumes XX% up analytics. with

positions surpassed acceptance expansion. studies Additionally, use for growing marijuana highlighted industry cannabis have reflect continued the daily the XXXX. These integration in alcohol trends daily which and of consumption

from challenges the undermine and that regulated gray persist, However, particularly markets illicit industry.

the regulated market. more in made states While New of progress incremental enforcement, estimated than market illicit size California the X.Xx like have is York the to and be

further New both requires and we are issue this and cannabis markets. continued the the Addressing of the level, the federal state efforts expansion Ohio York by at state levels. At encouraged

adult-use August are billion sales December, to their billion projected XXXX adult-use to York's $X.X to launch over according projected grow of first and reach by and Ohio, BDSA, following in surpassed annual by $X exceeded As XXXX. sales $X cannabis $XXX billion million New XXXX In X is within of sales launching since of to of December the of XXXX. in sales months annual

and the leasing over our call to discuss I'd like Ben turn to investment activity. now Ben? to

Ben Regin

the processors led expected lease in totaling Tri-Mountain occupancy. by quarter asset we to X for $XX conditions. Tri-Mountain properties. executed Trulieve and XXX,XXX square Thanks, this leases PurePenn, X a with for subject Also across XXXX. executed of Paul. Pittsburgh including And is in square asset In XXX% XXX,XXX sold closing have diligence we fourth at to that XXXX, million quarter, XXXX, deployed in Pure bringing with we grower of in feet, the one the prior new XXXX, of contract $X.X under over Pennsylvania property to approximately closing Pure November our feet million early the founder

of XX,XXX tenants we X QX in and Additionally, first in Palm of the non-cannabis this quarter square Springs. totaling feet 'XX leases executed year, to

operating efforts to leasing over XX% year-end. as Our leased XXXX of portfolio our brought

X pipeline. $XXX With under a million, land well property San California, and in X parcel Bernardino Texas. consist positioned in San our to capitalize are asset Our XX-acre XXX,XXX pursue Marcos, development strategic on total and foot available properties we in of investments of liquidity exceeding square a pre-leased

to hand David? With David. that, it I'll over

David Smith

Ben. you, Thank

or recaptured we to total year payment in the in of The million than generated our deposits. properties to utilized $XXX.X primarily rent properties X% of for less million tenants since XXXX, security certain for XXXX, due fully period certain for and XXXX. amendments sold decrease certain $XXX.X same we was where the we compared to For adjustments ended rent partial collected lease our revenues revenues by cash

our in properties our properties XXXX. from new million by Our acquired resulted escalations sale property was first Los impacted at comparability the lease X year-over-year the was the contingent since the by XXXX additional termination X California classification the we in and connection contractual starting rent operating from in existing with Angeles, leases leases second The to $X.X have offset January changed decrease allowances to we adjustments leases previously quarter, their sales-type other disclosed that rent amendments as that quarter that fee was partially leases when to improvement revenue amended, also for in disposition received of lease in in existing on properties.

both million on to tenants, results quarter quarter collections contractually tenants. yesterday, $X.X decrease XXXX, noted X included rent leased was third with fourth and to a PharmaCann. related million we $XX.X to for decrease driven $X.X quarter a the million of applied press certain release compared of or of fourth As versus our the the also share, AFFO quarter's XXXX per by deposits fourth X% the X% rent for of for which in reduced $X.XX decreases security due properties

we relates and announced could quarterly $X.XX forward, properties. PharmaCann January, to In Michigan going the activities impact results the as at approximately improve to addition, negative rent with in any amendments retenanting which it it Massachusetts in

of XXXX. in gross Our quarter only May bonds the with consisting maturing $XXX in our million assets balance during strong and sheet in debt $X.X unsecured billion total fixed-rate remained

ratio we debt-to-EBITDA a total nearly REIT in coverage banks to added expanded ratio debt-to-gross debt with a capacity X that metrics our of to X facility less service another industry-leading XX% credit and Furthermore, quarter, In bringing and it maintain we of Xx, the XXx. than million. credit net by continue fourth facility, assets $XX.X revolving on of to

at stands as undrawn all on $XX.X capacity today. now total revolver of our of remains which million, Our

liquidity, fourth over cash, comprised under availability total With $XXX we million the facility. credit revolving of and finished our investments quarter with liquidity, of this short-term increased

dialogue Our additional increasing capacity. credit banks about with continues overall our

balance continue positioned strong our be and banking We progress a credit on size with the relationships to expanding liquidity to our of sheet, increase conservative well continued facility.

to turn Alan? back Alan. With will it that, I

Alan Gold

proud our Thanks, David. XXXX. what I'm of accomplished in team

for portfolio our continue the be on benefit business industry stockholders. We laser-focused exceptionally our cannabis the on as headwinds. execute through of regulated value to the to each in company the see positioned while well continue I of navigating maximizing our property And to

of our As support. the open company, I'd like long-term With call can Operator, thank always, for you, up owners please continued for as for up questions. questions. that, to you open it your

Operator

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

William Catherwood

off, and the kudos also their and was of I through tenant first next if and are about you've industry? XXXX very tenant risk know includes with a issues, broadly the is more we cannabis huge, that the given How on your work So the outsized where swift maturities you facing to tenant the that But Green base debt X across Peak, year think for was lenders. and this year, resolution risks, issues the over PharmaCann in with cases step thinking lift. about back had course for an Parallel big

Alan Gold

thanks, Well, Tom.

going -- shoots February green industry I of talking that's first -- to something and we're and perform and mature, is do you're continued and XXXX. -- all, And believe I this has that in to do that, still to we about better. XXXX, think occur think the show

do that occurs the and is seeing, earlier they the should with do that we with are these the with that And and debt to But the many maturity be it deal very tenants that XXXX the markets are stress more believe to maturities that, watching following in a of issue position be have. that of broader acknowledge our able that we tenants, much closely. we an better that

William Catherwood

or scenario I to of flip a then operators role And exists if that, tenants in Alan. injecting it's the taking estate, debt that, a sale whether could plays helping through take process? their sale-leasebacks, also Appreciate side issues, there where fresh leaseback IIP some down real capital more your work through those effectively maybe

Alan Gold

will sheet and to review to the with work better, what with And have and are giving do general. industry balance perform very which liquidity, interesting occurring. having we needs gross about, us that to broader a opportunities. XX% that. the be we will less debt at -- that. believe we broader and -- the that million believe. continue the to look tenants believe We we looking continue some shoots not to described, around $XXX we flexibility privilege industry opportunities, Paul needs over do at strong as always And we total we're in there and talk Well, for with giving And us, But have that's to and as there play Ben for the us to of several the green opportunities of debt assets industry will

William Catherwood

back your one And Alan. sense in we what of restarting a sense on do that, for got may be the comments Got postponed of next a me. to the that have delayed? what you it. a Paul, or And maybe checkpoints approaching DEA how point at going get appreciate hearings time the are in rescheduling? I Do rescheduling. last better

Paul Smithers

Yes.

ruling time X as do. what indefinitely out. be It I question, judge when track. as to Tom didn't the on on time to line may months. it DEA industry make waiting get or to a the work of the administrative did soon find guess could court It's X think the scheduling be process to or stalled system as could whole in think maybe on no We're kind line. that's that I back a really the There's is

his Florida. a get his safer President House, we clear will with course, rescheduling, and he White think what consistent DEA on. statement But Social, he supported from really where because Truth with HHS as at position fall him, Tom, only think, from Pam White HHS, where we their can guidance don't House the I with eyes as said. look AG they be. the We appointments think what all as think Bondi Jr. on at on that get postings of and the legalization that RFK Terrance are this line, testify as But point, hearings from DEA the process if we those have as I direction If is they to very with Trump a lot Cole I was we'll that of will of historically banking, in September in back and get I

smart money happens to the what White is when think that from the I and So see House might happen.

Operator

from And Grey the Aaron with next Alliance question comes Partners. Global

Aaron Grey

Thanks terms for question me. first the deposits. in So the incremental security of for color

like X.X PharmaCann. looks it from So X.X of that

So X I the you prior calls, more. relating to the them tenants, I had know X and other be believe, and those would in X.X of mentioned, regarding one so

issues going we there there. in were terms nonpayments? through that, deposits anything incremental security Just that you're doing the or of be that resolved either just the And how working partial or being might forward anticipate should is if

broader deposits applied security a there? tenant just So being portfolio the on

Alan Gold

is and them at we're as -- to taking down situation I situation agreed that No, to and to look back to with they way Yes. to drilling be. that special working to and be where it a the them each where unique expect get we the with and tenants them think

have the how so are tenants, we we agreements to I regards confidentiality and -- best can And private, deal them. majority can given with say the tenants our that's, actual the think, with of we

have Ben, said, working to add? be we then, we closely do so us. very further to careful are And what with have very with we anything you And but

Ben Regin

and green seeing of described. we're right, industry really, and tenant them have of that think you of Alan about that tenants we're the that's I industry cannabis we health are, as think Paul about really the in a the talking -- I shoots each the course, overall mentioned, watching tenants, when But Alan. lot private working our closely. very we health, but with of And think

Aaron Grey

there. I appreciate that color

me. for one Second

could on You pipeline liquidity. healthy Just for some the you provide XXXX? have color

year much then you're And reform? pipeline today? or viewing curious how current to change capital that legalization via stand how to at potential also federal committed environment the either we So in for state translating could currently that the the

Ben Regin

is Yes. Ben. this Aaron,

are wide on as it year very think be seeing sheet, of disciplined we which those or are around a So I opportunities. liquidity X, to best. the We're very we last relates continuing variety and we balance opportunities have the million pipeline. capitalize have as we for strong to opportunistic of to a very strong $XXX believe very position

Operator

moving The question from Lauriers Capital Partners. Des next with to We're comes Eric with Capital Group. Kirk Bill ROTH Craig-Hallum on

Eric Des Lauriers

question of there. a bit on follow-up a just Aaron's one, First

So times call. strategic of couple the you mentioned investments a on

clarification, and other are been making? thinking of types these investments be for noncannabis investments? other of or perhaps Or that you looking acquisitions we Just typical perhaps should as a your at you've

Alan Gold

broadened I on think generating that unique We we think estate-related focused to income. but industry, the investment obviously, financial we opportunities, industry. our the real there cannabis side have opportunities are primarily of within invest are the cannabis

And the a balance so of at ways -- our to aspect we're the looking very our enhance and liquidity. available and using our sheet company producing of variety balance strong revenue sheet

Eric Des Lauriers

that seeing for And I overall increasingly to been of that perhaps sorts a could they've shoots competition plateauing some sort level you're the challenging, seeing? of some on green to elaborate of referring you obviously time of in elaboration and here. shoots guess you're the in markets, just you've Wondering cannabis I been overall appreciate challenging but if on the kind industry, of continuing get or that. green

Paul Smithers

Paul. is this Yes,

of Then insignificant. in for gave the prepared We projection rec. 'XX, And for XX% I a some the with which we of just state-by-state and Tennessee. medical analysis that's introduced specifics example, for we some bills Tennessee both look remarks. not start the think our at is growth

about We seen breaking a record, $X Illinois billion talked that. a record. We haven't

for XXXX. a That's his just is We poll today, substantial. the for again XX% saw use over look XX% would Florida part Shapiro Governor support, if course, We at who recent vote held Pennsylvania, in of get was it adult threshold. of rec calls budget which, as in the

So that held. would pass if today was it

in at illegal market look perhaps of the with enforcement, things. we look at -- a we decrease do see more other the grows. a enforcement, the border. Do in with in We see [Indiscernible] aliens crossing possibility we working We black supply border have the on decrease --

may good state, records state But $XXX York be That did New at the in effect. Ohio, its by York we was that in hit then an impressive. X very see New look million again, $X mark. So months. and Ohio first billion We

all But in optimistic what the think a state are still along viewed XX% these this that pretty So very robust and when it with specific. industry to is continue we're a supports grow. aggregate, growth, will pretty we industry

primarily It's the the some going some you headwinds in states. market talked competition. about to black discussed, And we have of as larger

We -- states, that's are about we do And the to we're be states. out. for growers pass. believe drop talked successful the seeing that And larger dynamics in less seeing that's years a consolidation states larger some always we've that certainly, in market of the these there will coming

as in to states, we the we ones while dollars we've So these MSOs our growers -- we've that see support. always with the put tried and the larger that

grow. to the So well we as will markets think do they continue

Eric Des Lauriers

color. me. last one that And for appreciate I then

congratulations resolution, my I'll echo PharmaCann which the Regarding there. swift a on also resolution

lookout in I handling them modest a calls are we tenants with looking And discussions? to that some that? to reductions this on certainly for part rent on that of something from you're sort so, rents. minor with be just modest are did Is I'm imagine wondering to of should if if So of would just reduction follow come or perhaps some other existing of how that do so? tenants? you the those getting

Alan Gold

but to And we question. company said our we what that we what we of talk do going wouldn't we interesting that relies calls, monitoring all It's and we were clear if -- But on to if want very leases, we an our agreements our us for have one monitoring to their very are we difficult It's we focused we're this the live and thing to a tenants, our is we are on. all of very, that make and want about answer should to tenants because say to that. that's be we tenants. do, that receiving expect

Paul Smithers

think past the substantial properties. reached some I as that we in other the the any has a changes of we add, described that also to back just by not note and and committed with investors, their not I'd rent commitments in taking more commitments take financial resolution as PharmaCann debt. some reduction taking such policy we've was course, and PharmaCann

question. So the was it fair -- a fact that

on get properties, loss proceeding PharmaCann they're default, other rent. Our going for get they meet with immediately reduction. with compensate will met. tenants something those But to to them notices and filing try the work going is a all we to we us swiftness out, same we default rent there did a eviction. if of to If something way the will with if be And do, that to they

an there any be important the there cut tenants a rents. something realize needs just I back that business to be If not reduction, to is on stressed, rent potential have that that's we're open point and for will So think, to to end.

Operator

from next . the with comes Capital Kirk Bill And Partners. ROTH question

William Kirk

forward tech kind of and between difficulties of the then today related maybe business you cultivation Sorry the smaller with operators. single-state today kind you for here. the opportunities is And is, see second is most of question multistate part of cultivation do to operators? have kind How The some multistate opportunities see going I do of forward a primarily operators versus the retail the mix like portfolio assets? my X-part How earlier. properties.

Alan Gold

First we're highly cultivation assets focused very on been the very, and clear we've that of on that. all, focused

And your opportunities with to what? percentage cultivation at the part do focused our -- look then, I second I'm will retail mean, same sorry, assets primarily within your and question assets. We of the of our had are again, portfolio,

William Kirk

single versus state? tenants Multistate

Alan Gold

best, criteria multistate do they're a to -- on be and at operators, one has whether to continue focused state, single continued but underwriting the We've looking the to or going Yes. that. of highly multistate our made we're

Operator

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

Alexander Goldfarb

And your other to to PharmaCann. warning all follow appreciate trying tenants

address. here. I public questions So Two like the

on and since about et industry X% and First, growth XXXX investments states CAGR medical declined slide you sort the yet commented or has despite certainly, talk in the cetera. of you your legalizing some of recreational, deck, XX-plus

how translates much that do see capacity So when out to think growth in over is investment Like you this think renewed interest space. you commensurate, there? we in like do your X% investments growth such that

do think you turns? when So this

Alan Gold

think to, we reduced headwinds And And market as I still that headwinds as has illicit that that those industry alluded to the growers. the as industry -- -- described. to from going capital the is border come as types to and Paul that's illicit the the enforcement I the allow enforcement, be able growth whether or other of have within continue through think to industry.

type about feel factor banking looking to in the real which for Number everybody a time. providing that's other the that and that's provision really comfortable safer is the something industry talked capital long been period for, of That's will to more and number -- one. allow something providers has been capital

important see be it in is the believe that not I that will the short coming, very do something we -- term, industry. So and particularly, do do we but for it

Alexander Goldfarb

another. that improvement Garden issues, that you yet, Kings obviously, that, then been the an always provides, And second MCO was was and the PharmaCann guys question, about very have had MCO credit Okay. again, vocal exposure

guys Or is, business greater is good. side comfort provide that So MCO as the really good of is look on starting things more you to my the there other operator a are are that credit? has that you evolved, credit money towards the metric question to

Alan Gold

multistate The operator? MSO, the

Alexander Goldfarb

MCO sorry. MSO. not MSO, Sorry,

Alan Gold

have That a aspect, to which -- operators ability single-state is an a show that. operate able why significant that and we're does the we in at multiple about, have states, form on raise amount and but company of that focused it a -- we capital of why it is we've provide for to be does diverse a to very is looked diversification excited

ability sell operators themselves to to are environment, and what a product really and in and we're We experience at challenging ability looking product for. to expertise looking and capital their their the the have and grow that's raise very

Alexander Goldfarb

we reassessment So and but before geez, reduce they're of them may want that now and you're looking have at you they're tenants you exposure would of had forward? current, going any ranked credit to have highly going, fine,

Alan Gold

think our -- we're tenants. all we're as said, I of watching I

We are doing tenants, every operators. deep ones state into one single dives and the strongest including of our single the

Operator

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

Alan Gold

joining we've over thank once again, for say you. And we all Thanks. hard, want today. you team last this Thank and the really for year the to all work quarter. the And us you I to thank last smart done that, with conclude.

Operator

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

disconnect. You may now

Innovative Industrial Properties (IIPR) 20 Feb 252024 Q4 Earnings call transcript