Adam JacksonCalifornia-based Innovative Industrial Properties Inc. (NYSE: IIPR) reported a slight dip in net income for the first quarter ending March 31, despite a modest rise in core funds from operations and expansion of its property portfolio.
The cannabis real estate investment trust posted net income of $39.1 million, or $1.36 per diluted share, which was down $2.4 million from a net income of $41.5 million, or $1.43 per share, in the first quarter of 2023. IIPR said its core funds from operations – a key real estate industry metric – rose slightly to $63 million from $62.7 million a year ago.
Total revenue for the quarter dipped 1% year-over-year to $75.5 million, reflecting a decline from properties IIPR took back possession of as well as reclassification of certain leases. However, new and amended leases helped offset those impacts.
“While IIP has re-leased several properties taken back since March 2023, rent commencement on certain of those properties is contingent on the tenants obtaining the requisite approvals to operate, and temporary rent abatements in certain instances as tenants transition into the properties and commence operations,” the company said in a news release. “As a result, IIP does not expect to recognize rental revenue from those properties until that has occurred.”
As of March 31, IIPR’s operating portfolio spanned 103 properties comprising 8.2 million rentable square feet across 19 states. Its weighted-average remaining lease term was 14.8 years.
During the quarter, the company executed four new property leases representing $69.4 million in capital investment, as well as three lease amendments for additional tenant improvements totaling $22.1 million.
It also obtained temporary occupancy permits for major properties recently under development in New York, Illinois, and Ohio, representing a combined 732,000 square feet.
Following the quarter’s end, IIPR sold a Los Angeles property for $9.1 million, netting $13 million including a lease termination fee from the previous tenant, Holistic Industries Inc.
IIPR ended March with $203.5 million in cash and available credit, representing 11% debt to total gross assets of $2.6 billion. The company raised $11.8 million through an at-the-market stock offering during the first quarter and upsized its revolving credit facility to $45 million.
