Innovative Industrial Properties: 2023 Financial Highlights

The TDR Three Key Takeaways 

1. Revenue and Profit Growth: Innovative Industrial Properties reported a revenue increase of 12% and a net income increase of 5% for the full year 2023 compared to 2022.
2. Dividend and Portfolio Expansion: The company continued its trend of increasing dividends, with a total of $7.22 per share in 2023, and expanded its portfolio to 108 properties across 19 states.
3. Use of Adjusted Financial Metrics: The report highlighted the use of adjusted metrics such as AFFO and Normalized FFO, which show growth but need careful interpretation as they are not GAAP measures.

Innovative Industrial Properties (NYSE: IIPR), a real estate company focused on the regulated U.S. cannabis industry, has released its earnings report for the fourth quarter and full-year 2023. The report shows a full-year revenue of approximately $309.5 million, marking a 12% increase from 2022. Net income attributable to common stockholders was about $164.2 million, translating to $5.77 per share, a 5% increase over the previous year. The company also reported adjusted funds from operations (AFFO) and normalized funds from operations (Normalized FFO) of around $256.5 million and $234.1 million, respectively, indicating increases of 10% and 9% over 2022.

During 2023, Innovative Industrial Properties declared dividends to common stockholders totaling $7.22 per share, continuing its trend of increasing dividends annually since its inception in 2016. The company committed up to approximately $119.5 million for various investments, including two property acquisitions, lease amendments for three properties, two new leases in the existing portfolio, and an additional commitment under a construction loan where IIP acts as the lender.

Furthermore, the company sold a portfolio of properties in California in March for $16.2 million, which included secured seller financing with the buyer of the property for $16.1 million. Innovative Industrial Properties also published its third annual Sustainability Report, underscoring its commitment to environmental management, community engagement, and corporate governance principles.

By the end of 2023, IIP’s property portfolio included 108 properties totaling 8.9 million rentable square feet across 19 states.

My Take as an Analyst

The positive aspect of Innovative Industrial Properties’ performance in 2023 includes the steady increase in total revenues and dividends per share, reflecting a strong growth trajectory and a strong commitment to shareholder returns. However, the use of adjusted financial metrics such as adjusted funds from operations (AFFO) and normalized funds from operations (Normalized FFO) necessitates caution. These adjusted numbers, while standard in the real estate industry, may not provide a full picture of the company’s financial health as they exclude certain costs that are considered non-recurring or not related to the core business operations. Investors should consider these adjusted numbers carefully, understanding that they are not GAAP measures and may obscure the company’s true financial performance.

Overall, while the company shows promising growth and a strong position in the cannabis-focused real estate sector, it is important for stakeholders to critically evaluate all financial metrics, including adjusted ones, to get a comprehensive understanding of the company’s financial health and operational efficiency.