Innovative Industrial Properties (IIPR) FY2025 10-K Risk Factors: 36 New, 14 Dropped

What the changes say

The company faces going concern uncertainty due to $291.2 million in Notes due 2026 maturing without sufficient liquidity to retire them.

What changed since the prior 10-K

New

New
ITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
New
Number Description of Exhibit
New
________________________________________________________
New
Going Concern Uncertainty
The company faces substantial doubt about its ability to continue as a going concern because of significant debt maturing within one year.
New
Life Science Investments– Identification of Financial Instruments
The company acquired up to $170.0 million of Series G Preferred Stock and warrants of IQHQ, Inc., and funded a $100.0 million credit facility.
New
Life Science Investments- Fair Value of Financial Instruments
New
Total revenues 265,955 308,517 309,506
New
Net income attributable to common stockholders $ 114,435 $ 159,857 $ 164,236
New
Diluted $ 3.93 $ 5.52 $ 5.77
New
Cash paid during the year for interest, net of interest capitalized $ 17,412 $ 16,051 $ 16,125
New
As of December 31, 2025, the outstanding principal balance on the Notes due 2026 (as defined in Note 8), which matures in May 2026, was $291.2 million. The Company currently does not have sufficient liquidity to satisfy this obligation at maturity
The $291.2 million principal balance of Notes due 2026 matures in May 2026, and the company lacks sufficient liquidity to pay it off.
New
The accompanying consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty
New
If the contract criteria are not all met, the asset transferred is not derecognized and we continue to report the asset in our consolidated balance sheet. See Note 6 “Investments in Real Estate - Property Dispositions” for further information
New
During the year ended December 31, 2025, we recognized an impairment loss on real estate of $3.5 million related to one of our properties in Palm Springs, California, which was under contract for sale and sold in June 2025. No impairment losses were recognized during the years ended December 31, 2024 and 2023
New
expenses, respectively, on our consolidated statements of income. Property taxes paid directly by the lessee to a third party continue to be excluded from our consolidated financial statements
New
Financial instruments that potentially subject us to a concentration of credit risk are cash and cash equivalents, notes and interest receivable, and investments in the IQHQ Preferred Stock and IQHQ Warrant
New
As of December 31, 2025, the Company was authorized to issue up to 50,000,000 shares of common stock, par value $0.001 per share, and there were 28,022,975 shares of common stock issued and outstanding
New
In-place lease intangible assets, net $ 6,366 $ 7,385
New
Above-market lease, net $ 683 $ 775
New
7. Life Science Investments
New
“IQHQ Warrant”) to purchase common equity units of IQHQ. The IQHQ Warrant is exercisable for a number of common equity units representing 1.5% of the fully diluted outstanding common equity of IQHQ (after giving effect to all previously issued warrants) as of the date of the initial closing
New
value of the debt as of the date of the exchange. The issuance of the shares pursuant to the exchanges resulted in a net non-cash increase to our additional paid-in capital account of $2.0 million for the year ended December 31, 2023
New
Total interest expense $ 17,376 $ 17,351 $ 17,214
New
Carrying value $ 290,602 $ 297,865
New
In February 2025, we made early partial repayments at a discount totaling $8.7 million on the Notes due 2026, reducing the principal balance by $8.8 million. Following the partial repayment, all other terms and conditions of the debt agreement remain unchanged
New
The Loan Agreement is subject to certain liquidity and operating covenants and includes customary representations and warranties, affirmative and negative covenants and events of default. Management believes that it was in compliance with those covenants as of December 31, 2025
New
IIP Life Science Credit Facility
New
Net income attributable to common stockholders used to compute net income per share – diluted $ 111,448 $ 157,631 $ 162,966
New
Diluted 28,377,227 28,530,650 28,255,797
New
Financial Instruments Measured at Fair Value on a Nonrecurring Basis
New
Financial Instruments Not Measured at Fair Value
New
are categorized as Level 3 and were valued using a yield analysis. At December 31, 2025 and 2024, the weighted average expected market yields used to determine fair values were 26.5% and 20.6%, respectively
New
Improvement Allowances. As of December 31, 2025, we had $6.5 million of commitments related to improvement allowances, which generally may be requested by the tenants at any time up until a date that is near the expiration of the initial term of the applicable lease
New
Cannabis Portfolio Segment net income 164,270 210,177 218,479
New
Total reportable segment net income 169,317 210,177 218,479
New
Balance at end of year $ 2,456,510 $ 2,439,972 $ 2,368,515

Dropped

Dropped
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Disclosed that the Notes due 2026 bear a fixed rate of 5.50% and the Revolving Credit Facility has a variable rate.
Dropped
ITEM 15. EXHIBIT AND FINANCIAL STATEMENT SCHEDULE
Dropped
improvements 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
Dropped
2. Summary of Significant Accounting Policies and Procedures and Recent Accounting Pronouncements
Dropped
Restricted Cash. Restricted cash relates to cash held in escrow accounts for future draws for improvements for tenants in accordance with certain lease agreements
Dropped
In each of the tables above, these leases include leases with affiliates of each entity, for which the entity has provided a corporate guaranty
Dropped
In 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
Dropped
In 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
Dropped
In 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
Dropped
In January 2024, we executed a new lease with a tenant at one of our retail properties in Michigan
Dropped
In 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”)
Dropped
In 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
Dropped
Level 3—Unobservable inputs that are supported by little or no market activities, therefore requiring an entity to develop its own assumptions
Dropped
The 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

Reworded

97% rewritten
(6)The fair value is determined based upon Level 2 inputs as the Notes due 2026 were not traded in an active market
Updated fair value disclosures to categorize the Revolving Credit Facility and Life Science Credit Facility as Level 2 inputs.
Was: (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
97% rewritten
Acquired In-Place Lease Intangible Assets
95% rewritten
Commitments and contingencies (Notes 6, 7 and 12)
Was: Commitments and contingencies (Notes 6 and 11)
93% rewritten
Liabilities and stockholders’ equity
Added $102.5 million in revolving credit facilities to liabilities and updated the carrying value of Notes due 2026 to $290.6 million.
92% rewritten
For the years ended December 31, 2025, 2024 and 2023, rental revenue included the application of $6.6 million, $7.7 million and $8.7 million of security deposits for contractual rent with certain tenants
Was: For 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
92% rewritten
In 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%
Updated the effective interest rate of the Notes due 2026 to 6.03% and revised cash coupon and capitalized interest figures.
83% rewritten
As of December 31, 2025, the aggregate gross cost of the properties included above for federal income tax purposes was $2.5 billion, which excludes one property that was sold in April 2025 that did not qualify for recognition as a completed sale under GAAP but is recognized as a sale for tax purposes
Updated historical real estate cost reconciliations and added a $3.5 million impairment loss for the year ended December 31, 2025.
Was: As 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
77% rewritten
12. Commitments and Contingencies
Updated future contractual office lease payments schedule to show $543 thousand due in 2026 and $45 thousand in 2027.
Was: 11. Commitments and Contingencies
76% rewritten
Real Estate Acquisitions - Fair Value of Assets Acquired
75% rewritten
During the year ended December 31, 2023, we issued 32,200 shares of our common stock upon exchange by holders of approximately $2.0 million of outstanding principal amount of our Exchangeable Senior Notes
Was: During 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
74% rewritten
Derivative Action Lawsuits
73% rewritten
Form of Certificate for Common Stock.(4)
72% rewritten
(1)As of December 31, 2025, all or a portion of the property was under development or redevelopment
Was: (2) As of December 31, 2024, all or a portion of the property was under development or redevelopment
71% rewritten
The 9,468 shares and 81,169 shares necessary to settle the Exchangeable Senior Notes on the if-exchanged method basis were dilutive for the years ended December 31, 2024, and 2023, respectively, and were included in the computation of diluted earnings per share
Was: The 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
70% rewritten
David Smith Chief Financial Officer and Treasurer
Was: Chief Financial Officer and Treasurer
69% rewritten
The remaining unrecognized compensation cost of $5.5 million for RSU awards is expected to be recognized over an amortization period of 1.7 years as of December 31, 2025
Was: The 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
67% rewritten
Exchangeable Senior Notes
60% rewritten
Our 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
59% rewritten
Revolving Credit Facility
54% rewritten
ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
51% rewritten
(1)Shares that were forfeited to cover the employees’ tax withholding obligation upon vesting or employees’ cessation of employment
51% rewritten
Future Contractual Minimum Rent
51% rewritten
Information About our Executive Officers and Directors
49% rewritten
Opinion on the Consolidated Financial Statements
47% rewritten
As 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”)
46% rewritten
Construction Loan. As of December 31, 2025, 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
Was: Construction 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
41% rewritten
Innovative Industrial Properties, Inc
34% rewritten
We 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
32% rewritten
(b) Rule 10b5-1 Trading Plans
30% rewritten
11. Common Stock Incentive Plan
Was: 10. Common Stock Incentive Plan
29% rewritten
ITEM 11. EXECUTIVE COMPENSATION
28% rewritten
Notes to Consolidated Financial Statements
25% rewritten
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE
25% rewritten
ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES
20% rewritten
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS

All 78 risk factors

Headings as the filing states them, in filing order.

Other

01Evaluation of Disclosure Controls and Procedures
02Management’s Report on Internal Control over Financial Reporting
03Changes in Internal Control Over Financial Reporting
04Opinion on Internal Control over Financial Reporting
05Definition and Limitations of Internal Control over Financial Reporting
06(b) Rule 10b5-1 Trading Plans32% rewritten
07ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE54% rewritten
08Information About our Executive Officers and Directors51% rewritten
09David Smith Chief Financial Officer and Treasurer70% rewritten
10Code of Ethics and Code of Conduct
11ITEM 11. EXECUTIVE COMPENSATION29% rewritten
12ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS20% rewritten
13ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE25% rewritten
14ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES25% rewritten
15ITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULESNew
16Number Description of ExhibitNew
17Form of Certificate for Common Stock.(4)73% rewritten
18________________________________________________________New
19Innovative Industrial Properties, Inc41% rewritten
20Notes to Consolidated Financial Statements28% rewritten
21Opinion on the Consolidated Financial Statements49% rewritten
22Going Concern UncertaintyNew
23We 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 fraud34% rewritten
24Real Estate Acquisitions - Fair Value of Assets Acquired76% rewritten
25Life Science Investments– Identification of Financial InstrumentsNew
26Life Science Investments- Fair Value of Financial InstrumentsNew
27Liabilities and stockholders’ equity93% rewritten
28Commitments and contingencies (Notes 6, 7 and 12)95% rewritten
29Total revenues 265,955 308,517 309,506New
30Net income attributable to common stockholders $ 114,435 $ 159,857 $ 164,236New
31Diluted $ 3.93 $ 5.52 $ 5.77New
32Cash paid during the year for interest, net of interest capitalized $ 17,412 $ 16,051 $ 16,125New
33As 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”)47% rewritten
34As of December 31, 2025, the outstanding principal balance on the Notes due 2026 (as defined in Note 8), which matures in May 2026, was $291.2 million. The Company currently does not have sufficient liquidity to satisfy this obligation at maturityNew
35The accompanying consolidated financial statements do not include any adjustments that might result from the outcome of this uncertaintyNew
36If the contract criteria are not all met, the asset transferred is not derecognized and we continue to report the asset in our consolidated balance sheet. See Note 6 “Investments in Real Estate - Property Dispositions” for further informationNew
37During the year ended December 31, 2025, we recognized an impairment loss on real estate of $3.5 million related to one of our properties in Palm Springs, California, which was under contract for sale and sold in June 2025. No impairment losses were recognized during the years ended December 31, 2024 and 2023New
38For the years ended December 31, 2025, 2024 and 2023, rental revenue included the application of $6.6 million, $7.7 million and $8.7 million of security deposits for contractual rent with certain tenants92% rewritten
39expenses, respectively, on our consolidated statements of income. Property taxes paid directly by the lessee to a third party continue to be excluded from our consolidated financial statementsNew
40Our 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 sale60% rewritten
41Financial instruments that potentially subject us to a concentration of credit risk are cash and cash equivalents, notes and interest receivable, and investments in the IQHQ Preferred Stock and IQHQ WarrantNew
42As of December 31, 2025, the Company was authorized to issue up to 50,000,000 shares of common stock, par value $0.001 per share, and there were 28,022,975 shares of common stock issued and outstandingNew
43During the year ended December 31, 2023, we issued 32,200 shares of our common stock upon exchange by holders of approximately $2.0 million of outstanding principal amount of our Exchangeable Senior Notes75% rewritten
44Acquired In-Place Lease Intangible Assets97% rewritten
45In-place lease intangible assets, net $ 6,366 $ 7,385New
46Above-market lease, net $ 683 $ 775New
47Future Contractual Minimum Rent51% rewritten
487. Life Science InvestmentsNew
49“IQHQ Warrant”) to purchase common equity units of IQHQ. The IQHQ Warrant is exercisable for a number of common equity units representing 1.5% of the fully diluted outstanding common equity of IQHQ (after giving effect to all previously issued warrants) as of the date of the initial closingNew
50Exchangeable Senior Notes67% rewritten
51value of the debt as of the date of the exchange. The issuance of the shares pursuant to the exchanges resulted in a net non-cash increase to our additional paid-in capital account of $2.0 million for the year ended December 31, 2023New
52In 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%92% rewritten
53Total interest expense $ 17,376 $ 17,351 $ 17,214New
54Carrying value $ 290,602 $ 297,865New
55In February 2025, we made early partial repayments at a discount totaling $8.7 million on the Notes due 2026, reducing the principal balance by $8.8 million. Following the partial repayment, all other terms and conditions of the debt agreement remain unchangedNew
56Revolving Credit Facility59% rewritten
57The Loan Agreement is subject to certain liquidity and operating covenants and includes customary representations and warranties, affirmative and negative covenants and events of default. Management believes that it was in compliance with those covenants as of December 31, 2025New
58IIP Life Science Credit FacilityNew
59The 9,468 shares and 81,169 shares necessary to settle the Exchangeable Senior Notes on the if-exchanged method basis were dilutive for the years ended December 31, 2024, and 2023, respectively, and were included in the computation of diluted earnings per share71% rewritten
60Net income attributable to common stockholders used to compute net income per share – diluted $ 111,448 $ 157,631 $ 162,966New
61Diluted 28,377,227 28,530,650 28,255,797New
6210. Fair Value of Financial Instruments
63Financial Instruments Measured at Fair Value on a Nonrecurring BasisNew
64Financial Instruments Not Measured at Fair ValueNew
65are categorized as Level 3 and were valued using a yield analysis. At December 31, 2025 and 2024, the weighted average expected market yields used to determine fair values were 26.5% and 20.6%, respectivelyNew
66(6)The fair value is determined based upon Level 2 inputs as the Notes due 2026 were not traded in an active market97% rewritten
6711. Common Stock Incentive Plan30% rewritten
68(1)Shares that were forfeited to cover the employees’ tax withholding obligation upon vesting or employees’ cessation of employment51% rewritten
69The remaining unrecognized compensation cost of $5.5 million for RSU awards is expected to be recognized over an amortization period of 1.7 years as of December 31, 202569% rewritten
7012. Commitments and Contingencies77% rewritten
71Improvement Allowances. As of December 31, 2025, we had $6.5 million of commitments related to improvement allowances, which generally may be requested by the tenants at any time up until a date that is near the expiration of the initial term of the applicable leaseNew
72Construction Loan. As of December 31, 2025, we had $0.2 million of commitments related to our construction loan for the development of a regulated cannabis cultivation and processing facility in California46% rewritten
73Derivative Action Lawsuits74% rewritten
74Cannabis Portfolio Segment net income 164,270 210,177 218,479New
75Total reportable segment net income 169,317 210,177 218,479New
76(1)As of December 31, 2025, all or a portion of the property was under development or redevelopment72% rewritten
77As of December 31, 2025, the aggregate gross cost of the properties included above for federal income tax purposes was $2.5 billion, which excludes one property that was sold in April 2025 that did not qualify for recognition as a completed sale under GAAP but is recognized as a sale for tax purposes83% rewritten
78Balance at end of year $ 2,456,510 $ 2,439,972 $ 2,368,515New

Other Innovative Industrial Properties 10-Ks

FY2024 10-K risk factors
56 risks
Cannabis REIT focused on specialized industrial properties leased to state-licensed operators via sale-leaseback transactions.
Filed Feb 21, 2025

About this page

The headings are the filing's own. The one-line readings and the overview are automated and can be wrong: read Item 1A of the 10-K for the exact wording.