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Innovative Industrial Properties(IIPR) - 2025 Q2 - Quarterly Results

Second Quarter 2025 Performance Overview Financial Highlights The company's key financial metrics declined significantly year-over-year due to tenant defaults Q2 2025 Key Financial Metrics (per share) | Metric | Q2 2025 | Q2 2024 | $ Change | % Change | | :--- | :--- | :--- | :--- | :--- | | Net income per share | $0.86 | $1.44 | $(0.58) | (40)% | | Normalized FFO per share | $1.56 | $2.06 | $(0.50) | (24)% | | AFFO per share | $1.71 | $2.29 | $(0.58) | (25)% | Q2 2025 Financial Results (in millions) | Metric | Amount | | :--- | :--- | | Total Revenues | $62.9 million | | Net Income (common stockholders) | $25.1 million | | Normalized FFO | $44.1 million | | AFFO | $48.4 million | - Paid a quarterly dividend of $1.90 per common share on July 15, 2025, with total dividends paid since inception reaching $1.0 billion5 Portfolio Update The company is actively managing its portfolio by addressing tenant defaults and executing property transactions - Launched a strategic initiative in March 2025 to replace underperforming tenants and declared several operators, including PharmaCann, in default3 - Q2 2025 portfolio activity included leasing 205,000 sq ft in Michigan, selling a Michigan property for $9.0 million, and selling a California property for $1.8 million in net proceeds6 - As of June 30, 2025, the total property portfolio comprises 108 properties with 9.0 million rentable square feet across 19 states15 Balance Sheet and Financing Activities The company maintained a strong balance sheet with low leverage while repurchasing stock and issuing preferred shares Balance Sheet Strength (at June 30, 2025) | Metric | Value | | :--- | :--- | | Debt to Total Gross Assets | 11% | | Total Gross Assets | $2.6 billion | | Total Liquidity | $192.4 million | | Debt Service Coverage Ratio | 15.0x | - Repurchased 366,952 shares of common stock for $19.8 million, with $79.9 million remaining available under the share repurchase program15 - Issued 173,834 shares of Series A Preferred Stock, generating $4.0 million in net proceeds under its "at-the-market" equity offering program15 Detailed Financial Statements and Results Consolidated Statements of Income Q2 2025 revenues and net income fell sharply year-over-year, primarily driven by tenant defaults - The 21% decrease in total revenues was primarily caused by tenant defaults totaling $15.8 million from PharmaCann, Gold Flora, TILT, and 4Front9 Q2 2025 vs. Q2 2024 Income Statement (in thousands) | Account | Q2 2025 | Q2 2024 | | :--- | :--- | :--- | | Total Revenues | $62,891 | $79,793 | | Income from Operations | $28,898 | $42,347 | | Net Income | $26,024 | $41,993 | | Net Income Attributable to Common Stockholders | $25,146 | $41,655 | | Diluted EPS | $0.86 | $1.44 | Consolidated Balance Sheets Total assets decreased from year-end 2024, driven by declines in real estate holdings and cash Balance Sheet Comparison (in thousands) | Account | June 30, 2025 | Dec 31, 2024 | | :--- | :--- | :--- | | Net real estate held for investment | $2,146,770 | $2,168,782 | | Cash and cash equivalents | $99,666 | $146,245 | | Total Assets | $2,305,055 | $2,378,047 | | Total Liabilities | $424,649 | $441,987 | | Total Stockholders' Equity | $1,880,406 | $1,936,060 | Shareholder Returns Dividend The company declared a second quarter 2025 dividend of $1.90 per common share - On June 13, 2025, the Board of Directors declared a Q2 2025 dividend of $1.90 per common share11 - The dividend was paid on July 15, 2025, to stockholders of record as of June 30, 202511 Non-GAAP Financial Measures Reconciliation and Performance Non-GAAP metrics such as FFO and AFFO per share experienced significant year-over-year declines Reconciliation of Net Income to AFFO (Q2, in thousands) | Metric | Q2 2025 | Q2 2024 | | :--- | :--- | :--- | | Net income attributable to common stockholders | $25,146 | $41,655 | | Real estate depreciation and amortization | $18,500 | $17,473 | | FFO attributable to common stockholders (diluted) | $43,646 | $58,677 | | Litigation-related expense | $413 | $164 | | Normalized FFO attributable to common stockholders (diluted) | $44,059 | $58,841 | | Stock-based compensation & other adjustments | $4,340 | $6,660 | | AFFO attributable to common stockholders (diluted) | $48,399 | $65,501 | Non-GAAP Metrics Per Share (Diluted) | Metric | Q2 2025 | Q2 2024 | | :--- | :--- | :--- | | FFO per common share | $1.54 | $2.06 | | Normalized FFO per common share | $1.56 | $2.06 | | AFFO per common share | $1.71 | $2.29 | Definition and Usefulness Management uses FFO, Normalized FFO, and AFFO as key supplemental measures to evaluate operating performance - FFO is a standard NAREIT measure that excludes property sales gains/losses and real estate depreciation from GAAP net income2426 - Normalized FFO adjusts FFO for items management deems infrequent, unusual, or unrelated to core real estate operations27 - AFFO adjusts Normalized FFO for certain additional cash and non-cash items to provide another view of operating performance28