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Innovative Industrial Properties (IIPR)
Q2 2017 Earnings Conference Call
August 10, 2017 1:00 PM ET
Brian Wolfe - Vice President, General Counsel and Secretary
Alan Gold – Executive Chairman
Paul Smithers – President and Chief Executive Officer
Catherine Hastings – Chief Financial Officer
Dan Donlan – Ladenburg Thalmann
Steve Shaw – Compass Point
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Thank you for joining the call. Presenting today are Alan Gold, Executive Chairman; Paul Smithers, President and Chief Executive Officer; and Catherine Hastings, Chief Financial Officer.
Before we begin, I would like to remind everyone that statements made during today’s conference call maybe deemed forward-looking statements within the meaning of the Safe Harbor of the Private Securities Litigation Reform Act of 1995 and actual results may differ materially due to a variety of risks, uncertainties and other factors. For a detailed discussion of some of the ongoing risks and uncertainties of the company’s business, I refer you to the news release issued yesterday and filed with the SEC on Form 8-K, as well as the company’s reports filed periodically with the SEC. The company disclaims any intention or obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.
Before I hand the call over to Alan, I want to mention that we have limited time for the call today, but we will answer as many questions as we can after our prepared remarks. Alan?
Thank you, Brian, and welcome everyone. Today, we get a chance to review and share our financial results for the second quarter plus year-to-date 2017 and provide our updated perspective on the business and the industry from our last call in March of this year. On the operational side of our business, our top priority continues to be placing the balance of our proceeds from the December IPO in the best properties and with the best tenants for the long-term benefit of our stockholders.
We took another major step this quarter toward completing this – that goal, with our purchase of the property in Capitol Heights, Maryland, a 72,000 square foot building being developed as the start-of-the-art medical-use cannabis cultivation facility. The property is a 100% leased to Holistic Industries for an initial term of 16 years. Holistic is one of 15 companies to receive pre-approval by the Maryland Medical Cannabis Commission to cultivate medical-use cannabis.
And one of only three companies to have received licenses enabling full vertical integration, cultivation, processing and dispensing. In addition, after only our second full quarter of operations, we were able to pay a quarterly dividend of $0.15 per share to stockholders of record as of June 30, 2017 having generated $0.23 of adjusted funds from operations per diluted share during the first six months of the year, truly a remarkable achievement for such a young company. Catherine, who I am very excited to say, was promoted to CFO this quarter will provide more detail regarding our financial results.
As we discussed in our last call, the medical-use cannabis industry is constantly evolving. Including the strong growth of existing state markets, the rollout of new programs passed the numerous states by a popular vote or legislation in recent years and the change in the presidential administration. Paul will provide further perspective on these changes and other industry trends in our call today in addition to discussing in further detail our two properties and pipeline.
This nascent industry that has witnessed amazing growth with state regulated medical-use cannabis markets, now comprising a majority of the United States. We are very optimistic about the future of this industry and our ability to deliver an enduring value to our tenant partners in providing tailored real estate solutions that meet their key operational and capital needs.
Now with that, I would like to turn the call over to Paul. Paul?
Thanks, Alan. As Alan alluded to this is a rapidly evolving industry. I’ll try to provide as effective an overview as we can with the short-time we have today focusing in on four main topics: one, the current regulatory environment; two, the growth and evolution of the medical-use cannabis markets in the United States generally; three, an update on the New York and Maryland markets and our two tenants at those properties, PharmaCann and Holistic Industries; and finally, our pipeline.
First, regarding the current regulatory environment. As you all know, there's been much discussion over the past number of months about a reevaluation of the federal government's enforcement posture as it relates to the cannabis industry. To summarize the current status, the Cole Memorandum is still the guiding directive of the DOJ and DEA, which characterizes enforcement of federal cannabis prohibitions under the Controlled Substances Act as an inefficient use of federal resources when state regulatory measures are in place that are effective in addressing federal enforcement priorities laid out in the memo.
In addition the Rohrabacher-Farr amendment is also still in place, which provides that the DOJ could not use funds from relevant appropriation acts to prosecute individuals for any compliance with the state medical-use cannabis laws. The amendment has been in place for over two years now with increasing congressional support each year. In late July renewal of this amendment was recommended with overwhelming support by the Senate Appropriations Committee to be included in the federal government spending bill for fiscal 2018, which will make its way through the Senate and then generate reconciliation with the House version later this year.