Innovative Industrial Properties (IIPR) risk factors, FY2024 10-K

Other

1. 01ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
2. 02Evaluation of Disclosure Controls and Procedures
3. 03Management’s Report on Internal Control over Financial Reporting
4. 04Changes in Internal Control Over Financial Reporting
5. 05Opinion on Internal Control over Financial Reporting
6. 06Definition and Limitations of Internal Control over Financial Reporting
7. 07(b) Rule 10b5-1 Trading Plans
8. 08ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
9. 09Information About our Executive Officers and Directors
10. 10Chief Financial Officer and Treasurer
11. 11Code of Ethics and Code of Conduct
12. 12ITEM 11. EXECUTIVE COMPENSATION
13. 13ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS
14. 14ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE
15. 15ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES
16. 16ITEM 15. EXHIBIT AND FINANCIAL STATEMENT SCHEDULE
17. 17Form of Certificate for Common Stock.(4)
18. 18Innovative Industrial Properties, Inc
19. 19Notes to Consolidated Financial Statements
20. 20Opinion on the Consolidated Financial Statements
21. 21We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud
22. 22Real Estate Acquisitions - Fair Value of Assets Acquired
23. 23improvements as if the property was vacant utilizing a direct capitalization approach and a current replacement costs approach and takes into consideration other relevant market data
24. 24Liabilities and stockholders’ equity
25. 25Commitments and contingencies (Notes 6 and 11)
26. 26As used herein, the terms “we”, “us”, “our”, or the “Company” refer to Innovative Industrial Properties, Inc., a Maryland corporation, and any of our subsidiaries, including IIP Operating Partnership, LP, a Delaware limited partnership (our “Operating Partnership”)
27. 272. Summary of Significant Accounting Policies and Procedures and Recent Accounting Pronouncements
28. 28For the years ended December 31, 2024, 2023 and 2022, rental revenue included the application of $7.7 million, $8.7 million and $2.7 million of security deposits for contractual rent with certain tenants
29. 29Restricted Cash. Restricted cash relates to cash held in escrow accounts for future draws for improvements for tenants in accordance with certain lease agreements
30. 30Our leases generally contain options to extend the lease terms at the prevailing market rate or at the expiring rental rate at the time of expiration. Certain of our leases provide the lessee with a right of first refusal or right of first offer in the event we market the leased property for sale
31. 31In each of the tables above, these leases include leases with affiliates of each entity, for which the entity has provided a corporate guaranty
32. 32In January 2023, we entered into new equity distribution agreements with four sales agents, pursuant to which we may offer and sell from time-to-time through an “at-the-market” offering program (the “Prior ATM Program”) up to $500.0 million in shares of our common stock
33. 33In April 2022, we issued 1,815,790 shares of common stock in an underwritten public offering, including the exercise in full of the underwriters’ option to purchase an additional 236,842 shares, resulting in net proceeds of approximately $330.9 million
34. 34During the year ended December 31, 2023, we issued 32,200 shares of our common stock upon exchange by holders of $2.0 million of outstanding principal amount of our Exchangeable Senior Notes
35. 35Acquired In-Place Lease Intangible Assets
36. 36In April 2024, we amended our lease with a subsidiary of Battle Green Holdings LLC at one of our Ohio properties to provide an additional improvement allowance of $4.5 million, which also resulted in a corresponding adjustment to the base rent for the lease at the property
37. 37In January 2024, we executed a new lease with a tenant at one of our retail properties in Michigan
38. 38In May 2024, we executed a new long-term lease with a subsidiary of Gold Flora at our property located at 19533 McLane Street in Palm Springs, California (the “McLane Lease”)
39. 39In November 2022, we sold one of our Pennsylvania properties that was leased to a subsidiary Maitri Holdings, LLC for $23.5 million, excluding transaction costs, and recognized a gain on sale of the property of approximately $3.6 million
40. 40Future Contractual Minimum Rent
41. 41Exchangeable Senior Notes
42. 42In connection with the issuance of the Notes due 2026, we recorded $6.8 million of issuance costs, which are being amortized using the effective interest method and recognized as non-cash interest expense over the term of the Notes due 2026. The effective interest rate including amortization of issuance costs is 6.03%
43. 43Revolving Credit Facility
44. 44The 9,468 shares, 81,169 shares and 202,076 shares necessary to settle the Exchangeable Senior Notes on the if-exchanged method basis were dilutive for the years ended December 31, 2024, 2023 and 2022, respectively, and were included in the computation of diluted earnings per share
45. 459. Fair Value of Financial Instruments
46. 46Level 3—Unobservable inputs that are supported by little or no market activities, therefore requiring an entity to develop its own assumptions
47. 47(3) The fair value is determined based upon Level 2 inputs as the Exchangeable Senior Notes and Notes due 2026 were trading in the private market. Th Exchangeable Senior Notes matured in February 2024
48. 4810. Common Stock Incentive Plan
49. 49(1) Shares that were forfeited to cover the employees’ tax withholding obligation upon vesting or employees’ cessation of employment
50. 50The remaining unrecognized compensation cost of $6.5 million for RSU awards is expected to be recognized over an amortization period of 1.7 years as of December 31, 2024
51. 5111. Commitments and Contingencies
52. 52Construction Loan. As of December 31, 2024, we had $0.2 million of commitments related to our construction loan for the development of a regulated cannabis cultivation and processing facility in California
53. 53Derivative Action Lawsuits
54. 54The Company intends to vigorously defend each of these lawsuits. However, at this time, the Company cannot predict the probable outcome of these actions, and, accordingly, no amounts have been accrued in the Company’s consolidated financial statements
55. 55(2) As of December 31, 2024, all or a portion of the property was under development or redevelopment
56. 56As of December 31, 2024, the aggregate gross cost of the properties included above for federal income tax purposes was $2.5 billion, which excludes the four properties that were sold in March 2023 that did not qualify for recognition as a completed sale under GAAP but is recognized as a sale for tax purposes