Innovative Industrial Properties beats Q3 earnings, shares rise on IQHQ investment

Investing.com -- Innovative Industrial Properties Inc (NYSE:IIPR) shares jumped 3.4% in after-hours trading Monday after the cannabis-focused real estate investment trust reported third-quarter earnings that exceeded analyst expectations, despite revenue challenges.

The company posted adjusted earnings per share of $0.97 for the third quarter, surpassing the analyst consensus of $0.93. Revenue came in at $64.7 million, slightly below the consensus estimate of $65.07 million and down 15% from $76.5 million in the same period last year. The revenue decline was primarily attributed to tenant defaults from companies including PharmaCann, Gold Flora, TILT, and 4Front, which accounted for a $14.9 million decrease.

Investors responded positively to the company’s strategic diversification beyond cannabis with its $270 million investment in IQHQ, a life science real estate platform with over $5 billion in total assets. The investment is expected to generate a weighted average interest rate exceeding 14% per annum.

"We are pleased to have made our first investment outside of the cannabis industry during the third quarter with our $270 million financial investment into IQHQ, marking IIP’s return to growth and providing meaningful diversification and accretion for IIP’s shareholders," said Alan Gold, Executive Chairman of IIP.

The company also strengthened its financial position by closing a new three-year, $100 million secured revolving credit facility in October. This facility bears interest at one-month SOFR plus 200 basis points (6.2% based on rates as of September 30) and includes a $35 million "accordion feature" that could expand borrowing capacity to $135 million.

IIP maintained its quarterly dividend of $1.90 per share, representing an annualized dividend of $7.60. The company’s portfolio currently comprises 112 properties across 19 states, with 9.0 million rentable square feet, including 483,000 square feet under development or redevelopment.

The REIT continues to address challenges with underperforming tenants, having declared several in default for nonpayment of rent and pursuing legal remedies including evictions, while actively working to re-lease vacated properties.

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