What changed in this filing

/stocks — the workspaceLOADING

Item 1. Business

2024-02-27 compared with 2023-02-28 · 201 added, 198 removed, 1096 unchanged (27% of the section changed)

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2023 Business Update

During 2022, we acquired nine new properties and made additional investments into existing properties under development or redevelopment.

As of December 31, 2022, we owned 110 properties comprising an aggregate of approximately 8.7 million rentable square feet (including approximately 1.6 million rentable square feet under development/redevelopment) in Arizona, California, Colorado, Florida, Illinois, Maryland, Massachusetts, Michigan, Minnesota, Missouri, Nevada, New Jersey, New York, North Dakota, Ohio, Pennsylvania, Texas, Virginia and Washington.

Of these properties, we include 108 properties in our operating portfolio, which were 100% leased to state-licensed cannabis operators as of December 31, 2022, with a weighted-average remaining lease term of approximately 15.3 years.

We do not include in our operating portfolio two of our properties, which were previously leased to Kings Garden Inc.

(“Kings Garden”), and an expansion project at a property where Kings Garden continues to occupy the property pursuant to a confidential, contingent settlement agreement, all of which were under development as of December 31, 2022, and together are expected to comprise approximately 395,000 rentable square feet upon completion of development.

As of December 31, 2022, we had invested an aggregate of approximately $2.2 billion across our property portfolio (consisting of purchase price and construction funding and improvements reimbursed to tenants, but excluding transaction costs) and had committed an additional approximately $125.5 million to reimburse certain tenants and sellers for completion of construction and improvements at our properties.

These statistics do not include an $18.5 million loan commitment from us to a developer for construction of a regulated cannabis cultivation and processing facility in California, of which we have funded approximately $18.0 million as of December 31, 2022.

During 2023, we acquired two new properties and made additional investments into existing properties under development or redevelopment.

As of December 31, 2023, we owned 108 properties comprising an aggregate of approximately 8.9 million rentable square feet (including approximately 1.4 million rentable square feet under development/redevelopment) in 19 states.

As of December 31, 2023, we had invested an aggregate of approximately $2.4 billion across our property portfolio (consisting of purchase price and funding of draws for improvements submitted by tenants, if any, but excluding transaction costs) and had committed an additional approximately $40.1 million to fund draws to certain tenants and vendors for improvements at our properties.

Of the approximately $40.1 million committed to fund draws to certain tenants and vendors for improvements at our properties, approximately $9.6 million was incurred but not funded as of December 31, 2023.

These statistics do not include a $23.0 million loan commitment from us to a developer for construction of a regulated cannabis cultivation and processing facility in California, of which we have funded approximately $22.0 million as of December 31, 2023.

Of these 108 properties, we include 103 properties in our operating portfolio, which were 95.8% leased as of December 31, 2023, with a weighted-average remaining lease term of approximately 14.6 years.

We do not include in our operating portfolio the following properties (all of which were under development/redevelopment as of December 31, 2023, and together are expected to comprise approximately 715,000 rentable square feet upon completion of development/redevelopment):

● Inland Center Drive in San Bernardino, California;

● Perez Road in Cathedral City, California (pre-leased);

● 63795 19 th Avenue in Palm Springs, California;

● Leah Avenue in San Marcos, Texas;

● Davis Highway in Dimondale, Michigan (pre-leased).

For more information regarding our properties and tenants, see the sections entitled “— Tenant Concentration” and “— Geographic Concentration” below.

Property Sale

In November 2022, we sold one of our Pennsylvania properties that was leased to a subsidiary of Maitri Holdings, LLC (“Maitri”) for $23.5 million (approximately $461 per square foot), excluding transaction costs, and recognized a gain on sale of the property of approximately $3.6 million.

In March 2023, we sold the portfolio of four properties in California previously leased to affiliates of Medical Investor Holdings, LLC (“Vertical”) for $16.2 million (excluding transaction costs) with a secured loan for $16.1 million with the buyer of the properties.

The transaction did not qualify for recognition as a completed sale since not all of the criteria were met.

Accordingly, we have not derecognized the assets transferred.

All consideration received, as well as any future payments, from the buyer is recognized as a deposit liability and is included in other liabilities on our consolidated balance sheet until such time the criteria for recognition as a sale have been met.

In addition, as we have not met all of the held-for-sale criteria, land and building and improvements with gross carrying values of approximately $3.4 million and approximately $13.9 million, respectively, and accumulated depreciation of approximately $1.6 million as of December 31, 2023, remain on the consolidated balance sheet, and the buildings and improvements continue to be depreciated.

During the year ended December 31, 2023, we received cash interest payments of approximately $1.3 million, which have been recorded as a liability as of December 31, 2023.

Financial Results

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Capital Activities

In April 2022, we issued 1,815,790 shares of common stock in an underwritten public offering, which includes the exercise in full of the underwriters’ option to purchase an additional 236,842 shares, resulting in net proceeds of approximately $330.9 million.

During the year ended December 31, 2022, we sold 117,023 shares of our common stock pursuant to an “at-the-market” offering program (the “Prior ATM Program”) for net proceeds of approximately $21.1 million.

During the year ended December 31, 2022, we issued 413,166 shares of our common stock upon exchange by holders of approximately $26.9 million of outstanding principal amount of our 3.75% Exchangeable Senior Notes due 2024 (the “Exchangeable Senior Notes”).

In January 2023, we terminated the Prior ATM Program and 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, or ATM Program, up to $500.0 million in shares of our common stock.

As of February 28, 2023, we had not sold any shares of common stock under the ATM Program.

In January 2023, we terminated the previously existing “at-the-market” offering program and 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 “ATM Program”) up to $500.0 million in shares of our common stock.

During the year ended December 31, 2023, we sold 101,061 shares of our common stock under the ATM Program for net proceeds of approximately $9.6 million.

In October 2023, our Operating Partnership entered into a loan and security agreement (the “Loan Agreement”) with a federally regulated commercial bank, as lender and as agent for lenders that become party thereto from time to time.

The Loan Agreement matures on October 23, 2026, and provides $30.0 million in aggregate commitments for secured revolving loans (the “Revolving Credit Facility”).

The Loan Agreement also allows the Operating Partnership, subject to the satisfaction of certain conditions, to request additional revolving loan commitments up to a specified amount.

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.

There were no amounts outstanding under the Loan Agreement as of December 31, 2023.

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 3.75% Exchangeable Senior Notes due 2024 (the “Exchangeable Senior Notes”).

Subsequent to year-end, we issued 28,408 shares of our common stock and paid approximately $4.3 million in cash upon exchange by holders of the remaining approximately $4.3 million principal amount of

Exchangeable Senior Notes and paid off the remaining $100,000 principal amount at maturity, in accordance with the terms of the indenture for the Exchangeable Senior Notes.

Our Properties

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These improvements can include enhanced HVAC systems for climate and humidity control, high capacity electrical and plumbing systems, specialized lighting systems, and sophisticated building management, cultivation monitoring and security systems.

Through our sale-leaseback strategy, we serve as a source of capital to these licensed regulated cannabis operators, allowing them to redeploy their sale proceeds into their core operations to grow

their business and achieve higher returns.

Through our sale-leaseback strategy, we serve as a source of capital to these licensed regulated cannabis operators, allowing them to redeploy their sale proceeds into their core operations to grow their business and achieve higher returns.

We may also purchase properties from third parties and fund the necessary improvements through a long-term lease with an identified tenant, which provides those tenants with increased cash flow to deploy in their operating businesses.

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Rentable Square Feet

Rental Revenue

Contractual Rent

Collected for

Development or

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Industrial/Retail (3)

(1) Rental revenue excludes tenant reimbursements.

(2) Rental revenue from industrial properties for the year ended December 31, 2022 includes approximately $2.8 million of rental revenue related to a Pennsylvania property previously leased to Maitri that we sold in November 2022.

Number of properties and rentable square feet include one property acquired in January 2022 which did not satisfy the requirements for sale-leaseback accounting and therefore, the transaction is recognized as a note receivable and is included in other assets, net on our consolidated balance sheet.

(1) Contractual rent collected includes base rent and property management fees, including amounts collected for one property and portions of two properties that did not satisfy the requirements for sale-leaseback accounting and therefore are primarily recognized as other revenue on our consolidated statements of income.

Contractual rent collected excludes tenant reimbursements.

(2) Number of properties and rentable square feet include one property acquired in January 2022 which did not satisfy the requirements for sale-leaseback accounting and therefore, the investment is recognized as a note receivable and is included in other assets, net on our consolidated balance sheet.

(3) “Industrial” reflects facilities utilized or expected to be utilized for regulated cannabis cultivation, processing and/or distribution activities, which can consist of industrial and/or greenhouse space.

As of December 31, 2022, the tenant at each of our leased properties is generally responsible for paying all structural repairs, maintenance expenses, insurance and real estate taxes related to the property during the term of the applicable lease.

For additional information on our properties as of December 31, 2022, see Item 2, “Properties.”

Also includes three properties (one located in San Bernardino, California and two located in Palm Springs, California), where we are evaluating alternative non-cannabis uses for the properties, due in part to changes in the zoning that no longer allow for regulated cannabis cultivation and processing.

As of December 31, 2023, the tenants at our leased properties are generally responsible for paying (or reimbursing us) for all structural repairs, maintenance expenses, insurance and real estate taxes related to the property during the term of the applicable lease.

Our Competitive Strengths

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● Recurring Revenue with Contractual Escalations.

As of December 31, 2022, we had acquired 110 properties.

Of these properties, 108 properties were 100% leased to state-licensed cannabis operators on triple-net leasing arrangements with a weighted-average remaining lease term of approximately 15.3 years, and which are subject to contractual rental rate increases.

As of December 31, 2023, we owned 108 properties.

Along with our existing portfolio, we expect to continue to enter into additional similar transactions structured to provide recurring revenue with contractual escalations.

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● Providing Expansion Capital to Existing Tenants as an Additional Source of Income.

We have provided expansion capital for many of our existing tenant operators as they expand operations in additional states and locations within a state, as well as capital for continued enhancements of production capacity at existing facilities that these operators lease from us, which correspond to adjustments in rent under the applicable leases and other provisions in certain cases.

We have provided expansion capital for many of our existing tenant operators as they expand operations in additional states and

locations within a state, as well as capital for continued enhancements of production capacity at existing facilities that these operators lease from us, which correspond to adjustments in rent under the applicable leases and other provisions in certain cases.

We expect to continue to focus on executing on these expansion initiatives with our tenant operators.

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As of December 31, 2023, we had debt comprised of approximately $4.4 million principal amount of Exchangeable Senior Notes and $300.0 million principal amount of our 5.50% Senior Notes due 2026 (the “Notes due 2026”), representing a total quarterly fixed cash interest obligation of approximately $ 4.1 million and approximately 12 % of our total gross assets of approximately $2.

6 billion , with no debt maturing until May 2026, other than the Exchangeable Senior Notes in 2024.

6 billion , with no debt maturing until May 2026 (holders exchanged the remaining principal amount of the Exchangeable Senior Notes for a combination of shares of common stock and cash subsequent to year-end).

Our Target Markets

Our target markets include states that have established regulated cannabis programs.

As of December 31, 2022, we owned 110 properties located in Arizona, California, Colorado, Florida, Illinois, Maryland, Massachusetts, Michigan, Minnesota, Missouri, Nevada, New Jersey, New York, North Dakota, Ohio, Pennsylvania, Texas, Virginia and Washington.

According to the Marijuana Business Daily, as of January 31, 2023, 39 states and the District of Columbia have legalized cannabis for medical use, and 21 states and the District of Columbia have legalized cannabis for adult-use.

As of December 31, 2023, we owned 108 properties located in 19 states.

According to the Marijuana Business Daily, as of November 13, 2023, 40 states and the District of Columbia have legalized cannabis for medical use, and 24 states and the District of Columbia have legalized cannabis for adult-use.

Although these states have approved the regulated use of cannabis, the applicable state and local laws and regulations vary widely.

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Some states permit home cultivation activities.

The states also differ on the

form in which they permit cannabis to be sold.

The states also differ on the form in which they permit cannabis to be sold.

For example, some states do not permit cannabis-infused products such as concentrates, edibles and topicals, while other states ban smoking cannabis.

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We believe that the growth of the regulated cannabis industry has been fueled, in part, by the rapidly changing public attitudes in the United States.

In a poll by Pew Research Center released in November 2022, 88% of U.S.

adults supported either 1) legalization of cannabis for both medical- and adult-use (59%) or 2) legalization of cannabis for medical-use only (30%).

As of January 31, 2023, 39 states, plus the District of Columbia, have passed laws allowing their citizens to use medical cannabis.

In a Gallup poll released in November 2023, a record 70% of U.S.

adults supported federal legalization of cannabis, with majority support found across demographic and political subgroups.

As of November 13, 2023, 40 states, plus the District of Columbia, have passed laws allowing their citizens to use medical cannabis.

The first state to permit the use of cannabis for medicinal purposes was California in 1996, upon adoption of the Compassionate Care Act.

The law allowed doctors to recommend cannabis for serious medical conditions and patients were permitted to use, possess and grow cannabis themselves.

Several other states adopted medical-use cannabis laws in 1998 and 1999, and the remaining medical-use cannabis states adopted their laws on

various dates through 2022.

In addition, as of January 31, 2023, 21 states, plus the District of Columbia, have legalized cannabis for adult-use.

Several other states adopted medical-use cannabis laws in 1998 and 1999, and the remaining medical-use cannabis states adopted their laws on various dates through 2023.

In addition, as of November 13, 2023, 24 states, plus the District of Columbia, have legalized cannabis for adult-use.

Following the approval of state-regulated cannabis, state programs must be developed and businesses must be licensed before commencing cannabis sales.

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Inflation and Supply Chain Constraints

economy is experiencing a sustained increase in inflation rates, which we believe is negatively impacting our tenants.

economy has experienced a sustained increase in inflation rates in recent years, which we believe is negatively impacting our tenants.

This inflation has impacted costs for labor and production inputs for regulated cannabis operators, in addition to increasing costs of construction for development and redevelopment projects.

Ongoing labor shortages and global supply chain issues also continue to adversely impact costs and timing for completion of these development and redevelopment projects, which are resulting in cost overruns and delays in commencing operations on certain of our tenants’ projects.

Labor shortages and global supply chain issues also continue to adversely impact costs and timing for completion of these development and redevelopment projects, which are resulting in cost overruns and delays in commencing operations on certain of our tenants’ projects.

Reduced Capital Availability for Tenants

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Driven in part by overall macroeconomic conditions, capital availability has significantly declined for regulated cannabis operators.

According to Viridian Capital Advisors (“Viridian”), total equity and debt capital raising for public and private cannabis companies in North America decreased by 68% in 2022 versus 2021.

Even more pronounced, total capital raised for the U.S.

regulated cannabis cultivation and retail sector was down over 70% in 2022 versus 2021, with equity capital raised in the sector down over 96% and no equity deal in 2022 raising more than $25 million, according to Viridian.

According to Viridian, cannabis stock prices (as measured by the MSOS ETF) had declined more than 85% since their February 2021 peak, and were trading at multi-year lows.

Also according to Viridian, mergers and acquisitions activity in the North American regulated cannabis industry declined significantly in 2022, with aggregate transaction volume in dollar terms down 73% on 29% fewer transactions versus 2021.

According to Viridian Capital Advisors (“Viridian”), worldwide cannabis capital raises in 2023 constituted a multi-year low, with less than $2 billion in total capital raises, versus over $4.3 billion in 2022 and over $12 billion in 2021.

Total equity and debt capital raising for public and private cannabis cultivation and retail companies in the United States decreased 74% from 2022 and were lower than any previous year since before 2018, with debt accounting for over 80% of all capital raised for cannabis cultivation operations.

According to Viridian, as of December 31, 2023, cannabis stock prices (as measured by the MSOS ETF) had declined more than 87% since their February 2021 peak.

Also according to Viridian, mergers and acquisitions activity in the North American regulated cannabis industry declined significantly in 2023 to $1.75 billion, down from $4.95 billion in 2022.

Tenant Concentration

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The following table sets forth certain information regarding the top ten tenants in our property portfolio that represented the largest total invested and committed capital as of and for the year ended December 31, 2023 (dollars in thousands):

Rental Revenue

Contractual Rent

Total Invested

Collected for

and Committed

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PharmaCann Inc.

("PharmaCann")

SH Parent, Inc.

("Parallel")

("PharmaCann")

Ascend Wellness Holdings, Inc.

("Ascend")

Green Thumb Industries, Inc.

("Green Thumb")

Curaleaf Holdings, Inc.

("Curaleaf")

Columbia Care, Inc.

("Columbia Care")

The Cannabist Company (f/k/a Columbia Care Inc.)

Trulieve Cannabis Corp.

("Trulieve")

Holistic Industries Inc.

("Holistic")

Cresco Labs Inc.

("Cresco")

4Front Ventures Corp.

("4Front") (4)

SH Parent, Inc.

("Parallel") (5)

(1) Includes leases with affiliates of each entity, for which the entity has provided a corporate guaranty.

(2) Total invested and committed capital includes development and improvements allowance not funded as of December 31, 2023.

(3) Rental revenue excludes tenant reimbursements.

(4) Number of properties and total invested and committed capital include one property acquired in January 2022 which did not satisfy the requirements for sale-leaseback accounting and therefore, the transaction is recognized as a note receivable and is included in other assets, net on our consolidated balance sheet.

(3) Contractual rent collected includes base rent and property management fees, including amounts collected for one property and a portion of one property that did not satisfy the requirements for sale-leaseback accounting and therefore are primarily recognized as other revenue on our consolidated statements of income.

Contractual rent collected excludes tenant reimbursements.

(4) Number of properties and total invested and committed capital include one property acquired in January 2022 which did not satisfy the requirements for sale-leaseback accounting and therefore, the investment is recognized as a note receivable and is included in other assets, net on our consolidated balance sheet.

(5) Includes contractual rent collected from two properties previously leased to Parallel in Texas and Pennsylvania.

Parallel defaulted on its obligations to pay rent at the two properties, and we regained possession of the Texas property in March 2023 and the Pennsylvania property in October 2023.

See Note 11 “Commitments and Contingencies — Litigation” to our consolidated financial statements for more information.

Many of our tenants have limited histories of operations, and have not yet been profitable, or have been profitable only for a short period of time.

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For example, Arizona, California, Colorado, Illinois, Maryland, Massachusetts, Michigan, Missouri, Nevada, New Jersey, New York, Virginia and Washington permit licensed adult-use cannabis operations, and our leases with tenants in those states allow for adult-use cannabis operations to be conducted at the properties in compliance with state and local laws.

In July 2022, Kings Garden defaulted on its obligations to pay rent at all of the properties it leases with us, and pursuant to a confidential, conditional settlement agreement executed on September 11, 2022 between us and Kings Garden, we terminated the leases for two properties that were in development or redevelopment as of December 31, 2022 and regained possession of those properties.

We have recovered approximately $15.4 million of funds paid to Kings Garden.

See Note 11 “Commitments and Contingencies — Litigation — Kings Garden Lawsuit” to our consolidated financial statements for more information.

In November 2022, Parallel defaulted on its obligations to pay rent at one of our properties in Pennsylvania, and Green Peak Industries, Inc.

(“Green Peak”) defaulted on its obligations to pay rent at one our properties in Michigan.

In February 2023, Parallel also defaulted on its obligations to pay rent at one of our properties in Texas.

In January 2023, we also executed limited rent deferrals for Holistic Industries Inc.

(“Holistic”) for two of our properties in California and Michigan, and a limited rent deferral for Calyx Peak, Inc.

at our Missouri property.

In July 2022, Kings Garden, Inc.

(“Kings Garden”) defaulted on its obligations to pay rent at all of the properties it leases with us, and pursuant to a confidential, conditional settlement agreement executed on September 11, 2022 between us and Kings Garden, we terminated the leases for two properties that were in development or redevelopment as of December 31, 2023 and regained possession of those properties.

In September 2023, we regained possession of the four remaining properties that Kings Garden had occupied, where Kings Garden paid stipulated rent during its period of occupancy until September 20, 2023.

In November 2022, Parallel defaulted on its obligations to pay rent at one of our properties in Pennsylvania, and we regained possession of that property in October 2023.

In February 2023, Parallel also defaulted on its obligations to pay rent at one of our properties in Texas, and we regained possession of that property in March 2023.

In November 2022, Green Peak Industries, Inc.

(“Green Peak”) defaulted on its obligations to pay rent at one of our properties in Michigan.

In March 2023, a receiver was appointed over substantially all of Green Peak’s assets, and we subsequently regained possession of one property that was under redevelopment as a regulated cannabis cultivation and processing facility and three retail properties in Michigan.

We also expect to regain possession of the remaining regulated cannabis cultivation and processing facility still occupied by the receiver on March 1, 2024.

See Note 11 “Commitments and Contingencies — Litigation” to our consolidated financial statements included in this report for more information regarding Kings Garden, Parallel and Green Peak.

In 2023, as previously reported in our periodic filings, we also executed limited rent deferrals for Holistic (at two properties in California and Michigan), Calyx Peak, Inc.

(one property in Missouri), Temescal Wellness of Massachusetts, LLC (one property in Massachusetts) and 4Front (one property in Illinois) (see Note 6 “Investments in Real Estate” to our consolidated financial statements included in this report for more information).

In January 2024, we further amended the 4Front Illinois lease to provide a temporary rent reduction (see Note 12 “Subsequent Events” to our consolidated financial statements included in this report for more information).

See each of the discussions under Item 1A, “Risk Factors,” under the captions “Many of our existing tenants are, and we expect that many of our future tenants will be, companies with limited histories of operations and may be unable to pay rent with funds from operations or at all, which could adversely affect our cash available to make distributions to our stockholders or otherwise impair the value of our common stock,” and “Because we lease our properties to a limited number of tenants, and to the extent we depend on a limited number of tenants in the future, the inability of any single tenant to make its lease payments could adversely affect our business and our ability to make distributions to our stockholders.”

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The following table sets forth certain state-by-state information regarding our property portfolio for the year ended and as of December 31, 2023 (dollars in thousands):

Rental Revenue

Contractual Rent

Collected for

Total Invested and

the Year Ended

Committed Capital (2)

December 31, 2023 (3)

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(1) Includes approximately 1.4 million square feet under development/redevelopment.

(2) Includes tenant reimbursements of approximately $10.1 million for insurance and taxes in the aggregate.

(3) Number of properties and rentable square feet include one property acquired in January 2022 which did not satisfy the requirements for sale-leaseback accounting and therefore, the transaction is recognized as a note receivable and is included in other assets, net on our consolidated balance sheet.

(2) Total invested and committed capital includes development and improvements allowances not funded as of December 31, 2023.

(3) Contractual rent collected includes base rent and property management fees, including amounts collected for one property and portions of two properties that did not satisfy the requirements for sale-leaseback accounting and therefore are primarily recognized as other revenue on our consolidated statements of income.

Contractual rent collected excludes tenant reimbursements.

(4) Number of properties and rentable square feet include one property acquired in January 2022 which did not satisfy the requirements for sale-leaseback accounting and therefore, the investment is recognized as a note receivable and is included in other assets, net on our consolidated balance sheet.

See discussion under Item 1A, “Risk Factors,” under the caption “Our properties are, and are expected to continue to be, geographically concentrated in states that permit licensed cannabis operations, and we will be subject to social, political and economic risks of doing business in these states and any other state in which we may own property.” The regulated cannabis market is in its early stages;

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Our Financing Strategy

We intend to meet our long-term liquidity needs through cash flow from operations and the issuance of equity and debt securities, including common stock, preferred stock and notes.

We intend to meet our long-term liquidity needs through cash flow from operations and the issuance of equity and debt securities, including common stock, preferred stock and notes, and draws from our Revolving Credit Facility.

Where possible, we also may issue limited partnership interests in our Operating Partnership to acquire properties from existing owners seeking a tax-deferred transaction.

We expect to issue equity and debt securities at times when we believe that we can reinvest the proceeds of such an offering in accretive property acquisitions.

We may also issue common stock to permanently finance properties that were previously financed by debt securities.

We may also issue

common stock to permanently finance properties that were previously financed by debt securities or draws from our Revolving Credit Facility.

However, we cannot assure you that we will have access to the capital markets at times and on terms that are acceptable to us.

Our ability to access the capital markets and to obtain other financing arrangements is also significantly limited by our focus on serving the regulated cannabis industry.

investment guidelines provide that our aggregate borrowings (secured and unsecured) will not exceed 50% of the cost of our tangible assets at the time of any new borrowing, subject to our board of directors’ discretion.

Our investment guidelines provide that our aggregate borrowings (secured and unsecured) will not exceed 50% of the cost of our tangible assets at the time of any new borrowing, subject to our board of directors’ discretion.

We have filed an automatic shelf registration statement, which may permit us, from time-to-time, to offer and sell common stock, preferred stock, warrants, debt securities and other securities to the extent necessary or advisable to meet our liquidity needs.

Capital raising activities by U.S.

REITs experienced a steep decline in 2022, with that decline more pronounced in the second half of 2022.

REITs continued to be subdued in 2023, after experiencing a significant decline in the latter part of 2022.

According to the National Association of Real Estate Investment Trusts, Inc.

(“NAREIT”), U.S.

REITs raised $41.5 billion in debt and equity during 2022, compared to $133.6 billion in 2021, representing the lowest level since 2009.

Recently, financial markets have been volatile in general, which has also significantly reduced our access to capital.

REIT 2023 capital raising was modestly higher than 2022, though 2022 represented the lowest level since 2009.

Financial markets for REITs and the cannabis industry have been volatile in general for an extended period of time, which has also significantly reduced our access to capital.

This has contributed to a significant decrease in our investments in new properties in 2022 and 2023.

If sustained, this would have a material adverse effect on our business, financial condition and results of operations, including our ability to continue to make acquisitions of new properties and fund investments for improvements at existing properties.

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We will continue to attempt to diversify the investment size and location of our portfolio of properties in order to manage our portfolio-level risk.

Over the long term, we intend that no single property will exceed 20% of our total assets and that properties leased to a single tenant (individually or together with its affiliates) will not exceed 20% of our total assets.

Over the long term, we expect that no single property will exceed 20% of our total assets and that properties leased to a single tenant (individually or together with its affiliates) will not exceed 20% of our total assets.

Notwithstanding the foregoing, the industry continues to experience significant consolidation among regulated cannabis operators, and certain of our tenant operators may combine, increasing the concentration of our tenant portfolio with those consolidated operators.

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The current market for properties that meet our investment objectives is limited.

In addition, we believe finding properties that are appropriate for the specific use of allowing regulated cannabis operators may be limited as more competitors enter the market, and as regulated cannabis operators obtain greater access to alternative financing sources, including but not limited to equity and debt financing sources.

lenders, and cannabis operators themselves, all of whom may compete with us in our efforts to acquire real estate zoned for regulated cannabis facilities.

In addition, we believe finding properties that are appropriate for the specific use of allowing regulated cannabis operators may be limited as more

competitors enter the market, and as regulated cannabis operators obtain greater access to alternative financing sources, including but not limited to equity and debt financing sources.

We face significant competition from a diverse mix of market participants, including but not limited to, other companies with similar business models, independent investors, hedge funds and other real estate investors, hard money lenders, and cannabis operators themselves, all of whom may compete with us in our efforts to acquire real estate zoned for regulated cannabis facilities.

In some instances, we will be competing to acquire real estate with persons who have no interest in the cannabis industry, but have identified value in a piece of real estate that we may be interested in acquiring.

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The Sessions Memo instructed federal prosecutors to enforce the laws enacted by Congress and to follow well-established principles that govern all federal prosecutors when deciding whether to pursue prosecutions related to cannabis activities.

As a result, federal prosecutors could, and still can, use their prosecutorial discretion to

decide to prosecute actors compliant with their state laws.

As a result, federal prosecutors could, and still can, use their prosecutorial discretion to decide to prosecute actors compliant with their state laws.

The Sessions Memo states that “these principles require federal prosecutors deciding which cases to prosecute to weigh all relevant considerations, including federal law enforcement priorities set by the Attorney General, the seriousness of the crime, the deterrent effect of criminal prosecution, and the cumulative impact of particular crimes on the community.” The Sessions Memo went on to state that given the DOJ’s well-established general principles, “previous nationwide guidance specific to marijuana is unnecessary and is rescinded, effective immediately.” Although there have not been any identified prosecutions of state law compliant cannabis entities, there can be no assurance that the federal government will not enforce federal laws relating to cannabis in the future and it remains unclear what impact the Sessions Memo will have on the regulated cannabis industry, if any.

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federal laws.

In August 2023, the U.S.

Department of Health and Human Services (“HHS”) recommended to the DEA that cannabis be reclassified from a Schedule I drug to a Schedule III drug under the CSA.

HHS based this recommendation on a Food and Drug Administration (“FDA”) review of cannabis’ classification pursuant to President Biden’s executive order in October 2022.

The process for reclassification will require DEA approval and likely complex administrative rulemaking proceedings, and it remains unclear how long this process will take and the scope of any final decisions or rules.

One legislative safeguard for the medical cannabis industry, appended to federal appropriations legislation, remains in place.

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Under the terms of the Rohrabacher-Blumenauer rider, the federal government is prohibited from using congressionally appropriated funds to enforce federal cannabis laws against regulated medical cannabis actors operating in compliance with state and local law.

In December 2022, the omnibus spending bill passed including the Rohrabacher-Blumenauer Amendment, extending its application until September 30, 2023.

In January 2024, a stopgap spending bill passed, extending the application of the Rohrabacher-Blumenauer Amendment until March 8, 2024.

There is no assurance that Congress will approve inclusion of a similar prohibition on DOJ spending in the appropriations bills for future years.

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Concurrently with the FinCEN Memorandum, the DOJ issued supplemental guidance directing federal prosecutors to consider the federal enforcement priorities enumerated in the Cole Memo with respect to federal anti-money laundering, unlicensed money transmitter and Bank Secrecy Act offenses based on cannabis-related violations of the CSA.

The FinCEN Memorandum sets forth extensive requirements for financial institutions to meet if they want to offer bank accounts to cannabis-related businesses and echoed the enforcement priorities of the Cole Memo.

The FinCEN Memorandum sets forth extensive requirements for financial institutions to meet if they want to offer bank accounts to

cannabis-related businesses and echoed the enforcement priorities of the Cole Memo.

Under these guidelines, financial institutions must submit a Suspicious Activity Report (“SAR”) in connection with all cannabis-related banking activities by any client of such financial institution, in accordance with federal anti-money laundering laws.

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As a result, many banks are hesitant to offer any banking services to cannabis-related businesses, including opening bank accounts.

While we currently maintain banking relationships, our inability to maintain those accounts or the lack of

access to bank accounts or other banking services in the future, would make it difficult for us to operate our business, increase our operating costs, and pose additional operational, logistical and security challenges.

While we currently maintain banking relationships, our inability to maintain those accounts or the lack of access to bank accounts or other banking services in the future, would make it difficult for us to operate our business, increase our operating costs, and pose additional operational, logistical and security challenges.

Similarly, if our proposed tenants are unable to access banking services, they will not be able to enter into triple-net leasing arrangements with us, as our leases will require rent payments to be made by check or wire transfer.

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Reports on the usage of such chemicals and materials must be submitted pursuant to applicable laws, ordinances, and regulations and the terms of the specific licenses, permits and approvals.

Failure to comply with laws,

ordinances and regulations, to obtain required licenses, permits and approvals or to comply with the terms of such licenses, permits and approvals could result in fines, penalties and/or imprisonment.

Failure to comply with laws, ordinances and regulations, to obtain required licenses, permits and approvals or to comply with the terms of such licenses, permits and approvals could result in fines, penalties and/or imprisonment.

The use of land for agricultural purposes in certain jurisdictions is also subject to regulations governing the protection of endangered species.

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Changes to zoning, land use and other laws, ordinances and regulations may also prevent us from leasing a property for regulated cannabis cultivation, processing and/or dispensing in the future.

For one of our properties located in San Bernardino, California, as of December 31, 2022, we were evaluating alternative non-cannabis uses for the property, due in part to changes in the zoning of the property that no longer allow for regulated cannabis cultivation and processing.

For three of our properties (one located in San Bernardino, California and two located in Palm Springs, California), as of December 31, 2023, we were evaluating alternative non-cannabis uses for the properties, due in part to changes in the zoning of the property that no longer allow for regulated cannabis cultivation and processing.

Our property management activities, to the extent we are required to engage in them due to lease defaults by tenants or vacancies on certain properties, will likely be subject to state real estate brokerage laws and regulations as determined by the particular real estate commission for each state.

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All of our properties are required to comply with the Americans with Disabilities Act (“ADA”), which generally requires that buildings be made accessible to people with disabilities.

Compliance with ADA requirements may require

removal of access barriers, and noncompliance may result in imposition of fines by the U.S.

Compliance with ADA requirements may require removal of access barriers, and noncompliance may result in imposition of fines by the U.S.

government or an award of damages to private litigants, or both.

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Available Information

We make available to the public free of charge through our internet website our Definitive Proxy Statement, Annual Report on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K, and amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Exchange as soon as reasonably practicable after we electronically file such reports with, or furnish such reports to, the SEC.

We make available to the public free of charge through our website our Definitive Proxy Statement, Annual Report on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K, and amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Exchange as soon as reasonably practicable after we electronically file such reports with, or furnish such reports to, the SEC.

Our internet website address is www.innovativeindustrialproperties.com.

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● The assets we acquire may be subject to impairment charges.

● We have identified a material weakness in our system of internal controls.

If not remediated, this material weakness could result in material misstatements in our consolidated financial statements.

● We face significant risks associated with the development and redevelopment of properties that we acquire.

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● Our ability to grow our business depends on state laws pertaining to the cannabis industry.

Food and Drug Administration (“FDA”) regulation of cannabis facilities could negatively affect the regulated cannabis industry.

● FDA regulation of cannabis facilities could negatively affect the regulated cannabis industry.

● We and our tenants may have difficulty accessing the service of banks and other financial institutions.

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In addition, in general, our tenants are more vulnerable to adverse conditions resulting from federal and state regulations affecting their businesses or industries or other changes in the marketplace for their products, and have limited access to traditional forms of financing.

For example, during the COVID-19 pandemic, our tenants were generally not able to access federal assistance programs that were available to companies in other industries, due to cannabis being a Schedule 1 controlled substance under the CSA.

The success of our tenants will also heavily depend on the growth and development of the state markets in which the tenants operate, many of which have a very limited history or are still in the stages of establishing the regulatory framework.

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Furthermore, we may be unable to monitor and evaluate tenant credit quality on an on-going basis.

According to Viridian, total equity and debt capital raising for public and private cannabis companies in North America decreased by more than 65% in 2022 versus 2021.

Even more pronounced, total capital raised for the U.S.

According to Viridian, worldwide cannabis capital raises in 2023 constituted a multi-year low, with less than $2 billion in total capital raises, versus over $4.3 billion in 2022 and over $12 billion in 2021.

Total equity and debt capital raising for public and private cannabis cultivation and retail companies in the United States decreased 74% from 2022 and were lower than any previously year since before 2018, with debt accounting for over 80% of all capital raised for cannabis cultivation operations.

Any lease payment defaults by a tenant could adversely affect our cash flows and cause us to reduce the amount of distributions to stockholders.

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Furthermore, we will not operate any of the facilities that we purchase.

In July 2022, Kings Garden, a tenant of ours at six properties that we own in southern California, defaulted on its obligations to pay rent.

In November 2022, Parallel defaulted on its obligations to pay rent at one of our properties in Pennsylvania, and Green Peak defaulted on its obligations to pay rent at one our properties in Michigan.

In February 2023, Parallel defaulted on its obligations to pay rent at one of our properties in Texas.

See Part I, Item 3.

Legal Proceedings and Note

11 “Commitments and Contingencies — Litigation” to our consolidated financial statements for more information regarding Kings Garden, Parallel and Green Peak.

In November 2022, Parallel defaulted on its obligations to pay rent at one of our properties in Pennsylvania, and we regained possession of that property in October 2023.

In February 2023, Parallel also defaulted on its obligations to pay rent at one of our properties in Texas, and we regained possession of that property in March 2023.

In November 2022, Green Peak defaulted on its obligations to pay rent at one of our properties in Michigan.

We also expect to regain possession of the remaining regulated cannabis cultivation and processing facility still occupied by the receiver on March 1, 2024.

See Note 11 “Commitments and Contingencies — Litigation” to our consolidated financial statements included in this report for more information regarding Kings Garden, Parallel and Green Peak.

Because we lease our properties to a limited number of tenants, and to the extent we depend on a limited number of tenants in the future, the inability of any single tenant to make its lease payments could adversely affect our business and our ability to make distributions to our stockholders.

As of December 31, 2023, we owned 108 properties.

Five of our tenants, PharmaCann (at eleven of our properties), Parallel (at four of our properties), Ascend (at four of our properties), Green Thumb (at three of our properties) and Trulieve (at six of our properties), represented approximately 14%, 10%, 9%, 7% and 7%, respectively, of our rental revenues (including tenant reimbursements) for the twelve months ended December 31, 2022.

Five of our tenants, PharmaCann (at eleven of our properties), Ascend (at four of our properties), Green Thumb (at three of our properties), Parallel (at four of our properties, two of which we regained possession in 2023 as a result of Parallel’s defaults under those leases) and Curaleaf (at eight of our properties), represented approximately 15%, 10%, 8%, 7% and 7%, respectively, of our rental revenues (including tenant reimbursements) for the twelve months ended December 31, 2023.

Lease payment defaults by any of our tenants or a significant decline in the value of any single property would materially adversely affect our business, financial position and results of operations, including our ability to make distributions to our stockholders.

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We may experience delays in enforcing our rights as landlord and may incur substantial costs in protecting our investment and re-leasing that property.

Furthermore, we cannot assure you that we will be able to re-lease that property for the rent we currently receive, or at all, or that a lease termination would not result in our having to sell the property at a loss.

Furthermore, we cannot assure you that

we will be able to re-lease that property for the rent we currently receive, or at all, or that a lease termination would not result in our having to sell the property at a loss.

The result of any of the foregoing risks could materially and adversely affect our business, financial condition and results of operations and our ability to make distributions to our stockholders.

In July 2022, Kings Garden, a tenant of ours at six properties that we own in southern California, defaulted on its obligations to pay rent.

In February 2023, Parallel defaulted on its obligations to pay rent at one of our properties in Texas.

See Part I, Item 3.

Legal Proceedings and Note 11 “Commitments and Contingencies — Litigation” to our consolidated financial statements for more information regarding Kings Garden, Parallel and Green Peak.

See Note 11 “Commitments and Contingencies — Litigation” to our consolidated financial statements for more information regarding Kings Garden, Parallel and Green Peak, which defaulted on their obligations under certain leases with us.

Because our real estate investments consist of primarily industrial and greenhouse properties suitable for cultivation and production of cannabis, our rental revenues are significantly influenced by demand for these facilities generally, and a decrease in such demand would likely have a greater adverse effect on our rental revenues than if we owned a more diversified real estate portfolio.

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Any such decrease could impair our ability to make distributions to you.

Other than with respect to our property located in San Bernardino, California, we do not currently and do not expect in the future to invest in other real estate or businesses to hedge against the risk that industry trends might decrease the profitability of our facilities leased for cannabis operations.

Other than with respect to three properties (one located in San Bernardino, California and two located in Palm Springs, California) where we are evaluating alternative non-cannabis uses as of December 31, 2023, we do not currently and do not expect in the future to invest in other real estate or businesses to hedge against the risk that industry trends might decrease the profitability of our facilities leased for cannabis operations.

Our real estate investments consist of primarily industrial and greenhouse properties suitable for cultivation and production of cannabis, which may be difficult to sell or re-lease upon tenant defaults or lease terminations, either of which would adversely affect returns to stockholders.

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With these kinds of properties, if the current lease is terminated or not renewed, we may be required to make expenditures and rent concessions in order to lease the property to another tenant.

In addition, in the event we are forced to sell or re-lease the property, we may have difficulty finding qualified purchasers who are willing to buy the property or tenants who are willing to lease the property on terms that we expect, or at all.

As our properties are concentrated in the regulated cannabis industry, a shift in property preferences by regulated cannabis operators, including but not limited to changing preferences regarding location and types of improvements, could have a significant negative impact on the desirability of our properties to prospective tenants when we need to re-lease them, in addition to other challenges, such as obtaining the necessary state and local authorizations for a new tenant to commence operations at the property.

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Certain regulated cannabis operators have recently announced that they are consolidating operations or shuttering certain operations to reduce costs, which if prolonged, could have a material negative impact on operators’ demand for regulated cannabis facilities, including our existing tenants.

In July 2022, Kings Garden, a tenant of ours at six properties that we own in southern California, defaulted on its obligations to pay rent.

In February 2023, Parallel defaulted on its obligations to pay rent at one of our properties in Texas.

See Part I, Item 3.

Legal Proceedings and Note 11 “Commitments and Contingencies — Litigation” to our consolidated financial statements for more information regarding Kings Garden, Parallel and Green Peak.

We have a limited operating history, and may not be able to continue to operate our business successfully or generate sufficient cash flow to sustain distributions to our stockholders.

We completed our initial public offering and commenced real estate operations with the acquisition of our first property in December 2016, and have a limited operating history.

We are subject to many of the business risks and uncertainties associated with any new business enterprise.

We are subject to many of the business risks and uncertainties associated with any business enterprise with a limited operating history.

Furthermore, our properties are concentrated in the regulated cannabis industry, an industry in its very early stages of development, and we cannot predict how tenant demand and competition for these properties will change over time.

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Our ability to provide attractive risk-adjusted returns to our stockholders over the long term is dependent on our ability both to generate sufficient cash flow to pay an attractive dividend and to achieve capital appreciation, and we cannot assure you we will do either.

There can be no assurance that

we will be able to continue to generate sufficient revenue from operations to pay our operating expenses and make distributions to stockholders.

There can be no assurance that we will be able to continue to generate sufficient revenue from operations to pay our operating expenses and make distributions to stockholders.

The results of our operations and the execution on our business plan depend on several factors, including the availability of additional opportunities for investment, the performance of our existing properties and tenants, the evolution of tenant demand for regulated cannabis facilities, competition, the evolution of alternative capital sources for potential tenants, the availability of adequate equity and debt financing, the federal and state regulatory environment relating to the regulated cannabis industry, conditions in the financial markets and economic conditions.

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If we determine that an impairment has occurred, we would be required to make an adjustment to the net carrying value of the asset which could have an adverse effect on our results of operations in the period in which the impairment charge is recorded.

In July 2022, Kings Garden, a tenant of ours at six properties that we own in southern California, defaulted on its obligations to pay rent.

In November 2022, Parallel defaulted on its obligations to pay rent at one of our properties in Pennsylvania, and Green Peak defaulted on its obligations to pay rent at one of our properties in Michigan.

In February 2023, Parallel defaulted on its obligations to pay rent at one of our properties in Texas.

See Part I, Item 3.

Legal Proceedings and Note 11 “Commitments and Contingencies — Litigation” to our consolidated financial statements for more information regarding Kings Garden, Parallel and Green Peak.

While we have not determined that an impairment has occurred with respect to these properties, as we periodically evaluate these and other properties, we may be required to make an adjustment to the net carrying value of one or more of these properties in the future.

We have identified a material weakness in our system of internal controls pursuant to Section 404 of the Sarbanes-Oxley Act of 2002.

If not remediated, this material weakness could result in material misstatements in our consolidated financial statements.

We may be unable to develop, implement and maintain appropriate controls in future periods.

As previously disclosed in our Quarterly Report on Form 10-Q for the period ending September 30, 2022, our management identified a material weakness in our internal control over financial reporting.

A material weakness is a deficiency, or a combination of deficiencies, in internal control, such that there is a reasonable possibility that a material misstatement of our annual or interim financial statements will not be prevented or detected and corrected on a timely basis.

Management has concluded that, because of this material weakness, our internal control over financial reporting was not effective as of December 31, 2022.

These operational deficiencies related to the Company’s reviews and approvals of requests for funding disbursements by the Company for tenant improvements at the Company’s properties previously leased to Kings Garden.

As a result of the material weakness, the Company’s management, under the supervision of the Audit Committee of the Board of Directors and with participation of the Company’s Chief Executive Officer and Chief Financial Officer, concluded that the Company’s internal control over financial reporting was not effective as of December 31, 2022.

Although we are working to remedy the ineffectiveness of the Company’s internal control over financial reporting, there can be no assurance as to when the remediation plan will be fully developed and implemented.

Until our remediation plan is fully implemented, our management will continue to devote significant time, attention and financial resources to these efforts.

If we do not complete our remediation in a timely fashion, or at all, or if our remediation plan is inadequate, there will continue to be an increased risk that our future consolidated financial statements could contain errors that will be undetected.

Further and continued determinations that there are one or more material weaknesses in the effectiveness of the Company’s internal control over financial reporting could also reduce our ability to obtain financing or could increase the cost of any financing we obtain and require additional expenditures of both money and our management’s time to comply with applicable requirements.

For more information relating to the Company’s internal control over financial reporting, the material weakness that existed as of December 31, 2022 and the remediation activities undertaken by us, see Part II, Item 9A, “Controls and Procedures” of this Annual Report on Form 10-K.

We face significant risks associated with the development and redevelopment of properties that we acquire.

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The realization of any of the risks above or other delays in development and redevelopment activities at a property may also materially adversely impact our tenant’s ability to commence, continue or expand its operations, which may result in that tenant defaulting on its rent obligations to us.

As of February 28, 2023, we had properties consisting of an aggregate of approximately 1.6 million rentable square feet under development or redevelopment, and we had committed

to provide construction funding and fund tenant improvements at our properties in the future totaling up to approximately $131.8 million.

As of December 31, 2023, we had properties consisting of an aggregate of approximately 1.4 million rentable square feet under development or redevelopment, and we had committed to fund improvements at our properties in the future totaling up to approximately $40.1 million.

For one of our properties located in San Bernardino, California, as of December 31, 2023, we are evaluating alternative non-cannabis uses for the property, due in part to changes in the zoning of the property that no longer allow for regulated cannabis cultivation and processing.

In November 2022, Green Peak defaulted on its obligations to pay rent at one of our properties in Michigan, which was under redevelopment, and in February 2023, Parallel defaulted on its obligations to pay rent at one of our properties in Texas, which was under development.

In November 2022, Green Peak defaulted on its obligations to pay rent at one of our properties in Michigan, which was under redevelopment as a regulated cannabis cultivation and processing facility, and we subsequently regained possession of that property in March 2023.

In February 2023, Parallel also defaulted on its obligations to pay rent at one of our properties in Texas, which was under development, and we regained possession of that property in March 2023.

Ongoing inflation for construction and labor costs, labor shortages and global supply chain issues also continue to adversely impact costs and timing for completion of our development and redevelopment projects, which are resulting in cost overruns and delays in commencing operations on certain projects.

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During times when inflation is greater than increases in rent as provided for in our leases, rent increases may not keep up with the rate of inflation.

Likewise, even though net leases reduce our exposure to rising property expenses due to inflation, substantial inflationary pressures and increased costs may have an adverse impact on our tenants if increases in their operating expenses exceed increases in their revenues, which may adversely affect our tenants’ ability to pay rent.

Likewise, even though net leases reduce our exposure to rising property expenses due to inflation,

substantial inflationary pressures and increased costs may have an adverse impact on our tenants if increases in their operating expenses exceed increases in their revenues, which may adversely affect our tenants’ ability to pay rent.

Substantial inflation in the cost of construction materials and labor may also adversely impact our and our tenants’ ability to complete building projects on budget and on time, which may also materially adversely impact our tenants’ ability to commence operations of facilities and consequently our tenants’ ability to pay rent.

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● a complete or partial closure of, or other operational issues at, one or more of our properties resulting from government or tenant actions;

financial condition and liquidity and may cause one or more of our tenants to be unable to meet their obligations to us in full, or at all, or to otherwise seek modifications of such obligations;

● the temporary inability of consumers and patients to purchase our tenant’s cannabis products due to a number of factors, including but limited to illness, dispensary closures or limitations on operations (including but not limited to shortened operating hours, social distancing requirements and mandated “curbside only” pickup), quarantine, financial hardship, and “stay at home” orders, could severely impact our tenants’ businesses, financial condition and liquidity and may cause one or more of our tenants to be unable to meet their obligations to us in full, or at all, or to otherwise seek modifications of such obligations;

● difficulty accessing equity and debt capital on attractive terms, or at all, and a severe disruption and instability in the global financial markets or deteriorations in credit and financing conditions may affect our access to capital necessary to fund business operations and our tenants’ ability to fund their business operations and meet their obligations to us;

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We rely on our tenants to renew or otherwise maintain the requisite state and local cannabis licenses and other authorizations on a continuous basis.

If one or more of our tenants are unable to renew or otherwise maintain its licenses or other state and

local authorizations necessary to continue its cannabis operations, such tenants may default on their lease payments to us.

If one or more of our tenants are unable to renew or otherwise maintain its licenses or other state and local authorizations necessary to continue its cannabis operations, such tenants may default on their lease payments to us.

Any such noncompliance by our tenants of state and local laws, rules and regulations may also subject us, as the owner of such properties, to potential penalties, fines or other liabilities.

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In the event of a default by a tenant, we may also experience delays in enforcing our rights as landlord and may incur substantial costs in protecting our investment and re-leasing our property as operators of cannabis cultivation and production facilities are generally subject to extensive state licensing requirements, including required state and local authorizations for a new tenant to take over operations at a facility.

In July 2022, Kings Garden, a tenant of ours at six properties that we own in southern California, defaulted on its obligations to pay rent.

In February 2023, Parallel defaulted on its obligations to pay rent at one of our properties in Texas.

See Part I, Item 3.

Legal Proceedings and Note 11 “Commitments and Contingencies — Litigation” to our consolidated financial statements for more information regarding Kings Garden, Parallel and Green Peak.

In July 2022, Kings Garden, a prior tenant of ours at six properties that we own in southern California, defaulted on

its obligations to pay rent.

As previously disclosed, for one property in San Bernardino, California, we are evaluating alternative non-cannabis uses for the property, due in part to changes in the zoning of the property that no longer allow for regulated cannabis cultivation and processing.

In September 2023, we regained possession of the remaining four properties that Kings Garden previously occupied.

Of those four properties, we are evaluating non-cannabis uses for two properties representing less than 1% of our invested capital at December 31, 2023, also due in part to changes in the zoning of the property that no longer allow for regulated cannabis cultivation and processing.

In November 2022, a subsidiary of Parallel defaulted on its obligations to pay rent at one of our properties in Pennsylvania, and we regained possession of the property in October 2023.

The Pennsylvania regulated cannabis program issued a limited number of operator licenses, and as a result, we may encounter longer delays and other challenges in finding a suitable tenant, versus in states with more licensed operators.

In February 2023, Parallel also defaulted on its obligations to pay rent at one of our properties in Texas, and we regained possession of that property in March 2023.

The Texas regulated cannabis program is a restricted medical cannabis program with a limited number of operator licenses, and as a result, we may encounter longer delays and other challenges in development and finding a suitable tenant, versus in states with more licensed operators and a more open regulated cannabis program.

See Note 11 “Commitments and Contingencies — Litigation” to our consolidated financial statements for more information regarding Kings Garden and Parallel.

We acquired our properties, and expect to acquire other properties, “as-is,” which increases the risk of an investment that requires us to remedy defects or costs without recourse to the prior owner.

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cannabis entities, there can be no assurance that the federal government will not enforce federal laws against the regulated cannabis industry generally, including our tenants and us.

Attorney General Merrick Garland, who was confirmed as U.S.

Attorney General on March 10, 2021, has not provided a clear policy directive for the United States as it pertains to state-legal cannabis-related activities, and there can be no assurance that DOJ or other law enforcement authorities will not seek to vigorously enforce existing laws.

Current Attorney General Merrick Garland has not provided a clear policy directive for the United States as it pertains to state-legal cannabis-related activities, and there can be no assurance that DOJ or other law enforcement authorities will not seek to vigorously enforce existing laws.

Congress previously enacted an omnibus spending bill that includes the Rohrabacher-Blumenauer Amendment prohibiting the DOJ (which includes the DEA) from using funds appropriated by that bill to prevent states from implementing their medical-use cannabis laws.

This provision will expire on September 30, 2023.

This provision will expire on March 8, 2024.

There can be no assurance that Congress will approve inclusion of a similar prohibition in future appropriations bills to prevent DOJ from using congressionally appropriated funds to enforce federal cannabis laws against regulated medical cannabis actors operating in compliance with state and local law.

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However, the Ninth Circuit’s opinion, which only applies to the states of Alaska, Arizona, California, Hawaii, and Idaho, also held that persons who do not strictly comply with all state laws and regulations regarding the distribution, possession and cultivation of medical-use cannabis have engaged in conduct that is unauthorized, and in such instances the DOJ may prosecute those individuals.

Furthermore, while we target the acquisition of medical-use cannabis facilities, our leases do not prohibit cannabis cultivation for adult-use that is permissible under the state and local laws where our facilities are located, such as in Arizona, California, Colorado, Illinois, Massachusetts, Michigan, Nevada, New Jersey, New York, Virginia and Washington.

Consequently, certain of our tenants currently (and additional tenants may in the future) cultivate adult-use cannabis in our medical-use cannabis facilities, as permitted by such state and local laws now or in the future, which may in turn subject the tenant, us and our properties to greater and/or different federal legal and other risks as compared to facilities where cannabis is cultivated exclusively for medical use, including not providing protection under the Congressional spending bill provision described above.

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Federal prosecutors have significant discretion and no assurance can be given that the federal prosecutor in each judicial district where we purchase a property will not choose to strictly enforce the federal laws governing cannabis operations.

Any change in the federal government’s enforcement posture with respect to state-licensed cannabis operations, including the enforcement postures of individual federal prosecutors in judicial districts where we purchase properties, would result in our inability to execute our business plan, and we would likely suffer significant losses with

respect to our investment in cannabis facilities in the United States, which would adversely affect the trading price of our securities.

Furthermore, following any such change in the federal government’s enforcement position, we could be subject to criminal prosecution, which could lead to imprisonment and/or the imposition of penalties, fines, or forfeiture.

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In addition, while we may purchase properties in states that only permit medical-use cannabis at the time of acquisition, such states may in the future authorize by state legislation or popular vote the legalization of adult-use cannabis, thus permitting our tenants to engage in adult-use cannabis operations at our properties.

For example, Arizona, California, Colorado, Illinois, Massachusetts, Michigan, Nevada, New Jersey, New York, Virginia and Washington permit licensed adult-use cannabis operations, and our leases with tenants in those states allow for adult-use cannabis operations to be conducted at the properties in compliance with state and local laws.

For example, a number of states permit licensed adult-use cannabis operations, and our leases with tenants in those states allow for adult-use cannabis operations to be conducted at the properties in compliance with state and local laws.

Our ability to grow our business depends on state laws pertaining to the cannabis industry.

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Recently, many states have also experienced significant declines in unit pricing for regulated cannabis products, with that decline more pronounced in certain states than in others.

For example, according to New Leaf Data Services, spot wholesale cannabis flower prices in California and Michigan have each declined more than 30% during 2022.

As a result, certain regulated cannabis operators have announced that they are consolidating operations or shuttering certain operations to reduce costs, which if prolonged, could have a material negative impact on operators’ demand for regulated cannabis facilities, including our existing tenants.

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We have acquired and are targeting for acquisition properties that are owned by state-licensed cannabis operators.

Relevant state or local laws may be amended or repealed, or new laws may be enacted in the future to eliminate existing laws permitting cannabis operations.

Relevant state or local laws may be amended or repealed, or new laws may be enacted in the future to eliminate existing

laws permitting cannabis operations.

If our tenants were forced to close their operations, we would need to replace those tenants with tenants who are not engaged in the cannabis industry, who most likely pay significantly lower rents.

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While the United States House of Representatives has passed the SAFE Banking Act, which would permit commercial banks to offer services to cannabis companies that are in compliance with state law, it remains under consideration by the Senate, and if Congress fails to pass the SAFE Banking Act, the Company’s inability, or limitations on the Company’s ability, to open or maintain bank accounts, obtain other banking services and/or accept credit card and debit card payments may make it difficult for the Company to operate and conduct its business as planned or to operate efficiently.

Federal and state banking regulators closed two U.S.

banks in March 2023, and another U.S.

bank in May 2023, with which we have no banking, financing or other business relationships, precipitating financial industry and capital markets turmoil centered on concerns about the stability and solvency of other banks and financial institutions and the attendant risk they may be closed and/or forced by governmental agencies into receivership or sale.

The failure of other banks and financial institutions, if it occurs, could have a material adverse effect on our or our tenants’ liquidity or consolidated financial statements if we or our tenants have placed cash and cash equivalent deposits at such banks or financial institutions or have lending relationships with those banks.

Owners of properties located in close proximity to our properties may assert claims against us regarding the use of the property as a regulated cannabis cultivation, processing or dispensing facility, which if successful, could materially and adversely affect our business.

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We cannot predict the nature of any future laws, regulations, interpretations or applications, nor can we determine what effect additional governmental regulations or administrative policies and procedures, when and if promulgated, could have on our business.

In August 2023, HHS recommended to the DEA that cannabis be reclassified from a Schedule I drug to a Schedule III drug under the CSA.

HHS based this recommendation on an FDA review of cannabis’ classification pursuant to

President Biden’s executive order in October 2022.

Further, the impact of such decisions or rules, if any are promulgated, on existing state-regulated cannabis programs remains unclear, including but not limited to FDA and other federal regulatory agency involvement, the impact of such a decision on potential federal legislative reform such as proposals to de-schedule cannabis and provide greater access to capital markets for state-regulated cannabis operators, and the potential entry into the cannabis markets of large, well-capitalized companies as a result of any re-scheduling.

Assets leased to cannabis businesses may be forfeited to the federal government.

Any assets used in conjunction with the violation of federal law are potentially subject to federal forfeiture, even in states where cannabis is legal.

forfeiture cases and prosecute them at the federal level, allowing for state and local agencies to keep up to 80% of any forfeiture revenue.

In July 2017, the DOJ issued a new policy directive regarding asset forfeiture, referred to as the “equitable sharing program.” Under this new policy directive, federal authorities may adopt state and local forfeiture cases and prosecute them at the federal level, allowing for state and local agencies to keep up to 80% of any forfeiture revenue.

This policy directive represents a reversal of the DOJ’s policy under the Obama administration, and allows for forfeitures to proceed that are not in accord with the limitations imposed by state-specific forfeiture laws.

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The presence of hazardous substances on a property may materially and adversely affect our ability to sell the property and we may incur substantial remediation costs.

In addition, although we may require in our leases that tenants operate in compliance with all applicable laws and indemnify us against any environmental liabilities arising from a tenant’s activities on the property, we could nonetheless be subject to liability by virtue of our ownership interest and we cannot be sure that our tenants would satisfy their indemnification obligations to us.

be sure that our tenants would satisfy their indemnification obligations to us.

Such environmental liability exposure associated with properties we acquire could harm our business, financial condition, liquidity and results of operations.

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We expect to acquire additional real estate assets, which we intend to finance primarily through newly issued equity or debt.

cannabis industry, restrictions that potential investors may have to own our equity or debt due to our tenant’s operations in the regulated cannabis industry, changes in market conditions for the regulated cannabis industry, our own operating or financial performance or otherwise, to access capital markets on a timely basis and on favorable terms or at all.

We may not be in a position to take advantage of attractive investment opportunities for growth if we are unable, due to global or regional economic uncertainty, changes in the state or federal regulatory environment relating to the cannabis industry, restrictions that potential investors may have to own our equity or debt due to our tenant’s operations in the regulated cannabis industry, changes in market conditions for the regulated cannabis industry, our own operating or financial performance or otherwise, to access capital markets on a timely basis and on favorable terms or at all.

In addition, U.S.

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If sustained, this would have a material adverse effect on our business, financial condition and results of operations , including our ability to continue to make acquisitions of new properties and fund draws for future improvements at existing properties.

Our Notes due 2026, Exchangeable Senior Notes and any future indebtedness reduce our cash available for distribution and may expose us to the risk of default.

As of February 28, 2023, we had outstanding $300.0 million aggregate principal amount of our Notes due 2026 and approximately $6.4 million aggregate principal amount of Exchangeable Senior Notes.

Payments of principal and interest on our Notes due 2026 and Exchangeable Senior Notes and borrowings that we may incur in the future may leave us with insufficient cash resources to operate our properties or to pay the distributions currently contemplated or necessary to satisfy the requirements for REIT qualification.

Our Notes due 2026 and any future indebtedness reduce our cash available for distribution and may expose us to the risk of default.

As of February 27, 2024, we had outstanding $300.0 million aggregate principal amount of our Notes due 2026.

Payments of principal and interest on our Notes due 2026 and borrowings that we may incur in the future, including pursuant to the Revolving Credit Facility, may leave us with insufficient cash resources to operate our properties or to

pay the distributions currently contemplated or necessary to satisfy the requirements for REIT qualification.

Our level of debt and the limitations imposed on us by these debt agreements could have significant material and adverse consequences, including the following:

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Any downgrade in terms of rating or outlook by the rating agency could have a material adverse impact on our cost and availability of capital, which could in turn have a material adverse impact on our financial condition, results of operations and liquidity and a material adverse effect on the market price of our common stock.

The terms governing our Notes due 2026 include restrictive covenants relating to our operations, which could limit our ability to respond to changing market conditions and our ability to make distributions to our stockholders.

The indenture governing the Notes due 2026 contains financial and operating covenants that, among other things, restrict our ability to take specific actions, even if we believe them to be in our best interest, including restrictions on our ability to (1) consummate a merger, consolidation or sale of all or substantially all of our assets and (2) incur additional secured and unsecured indebtedness.

The covenants relating to our Notes due 2026 may adversely affect our flexibility and our ability to achieve our operating plans.

The indenture governing the Exchangeable Senior Notes also contains certain covenants.

Our ability to comply with these covenants and other provisions relating to our indentures governing the Notes due 2026 and the Exchangeable Senior Notes may be affected by changes in our operating and financial performance, changes in general business and economic conditions, adverse regulatory developments or other events adversely impacting us.

The terms governing our Notes due 2026 and the Revolving Credit Facility include restrictive covenants relating to our operations, which could limit our ability to respond to changing market conditions and our ability to make distributions to our stockholders.

The indenture governing the Notes due 2026 and the Loan Agreement governing the Revolving Credit Facility each contains financial and operating covenants that, among other things, restrict our ability to take specific actions, even if we believe them to be in our best interest, including restrictions on our ability to (1) consummate a merger, consolidation or sale of all or substantially all of our assets and (2) incur additional secured and unsecured indebtedness.

The covenants relating to our Notes due 2026 and Revolving Credit Facility may adversely affect our flexibility and our ability to achieve our operating plans.

Our ability to comply with these covenants and other provisions relating to our indenture governing the Notes due 2026 and the Loan Agreement governing the Revolving Credit Facility may be affected by changes in our operating and financial performance, changes in general business and economic conditions, adverse regulatory developments or other events adversely impacting us.

The breach of any of these covenants could result in a default under our indebtedness, which could cause those and other obligations to become due and payable.

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A Maryland corporation’s board of directors may provide that its approval is subject to compliance with any terms and conditions determined by it.

These provisions of the MGCL do not apply, however, to business combinations that

are approved or exempted by a Maryland corporation’s board of directors prior to the time that the interested stockholder becomes an interested stockholder.

These provisions of the MGCL do not apply, however, to business combinations that are approved or exempted by a Maryland corporation’s board of directors prior to the time that the interested stockholder becomes an interested stockholder.

The “control share” provisions of the MGCL provide that, subject to certain exceptions, a holder of “control shares” of a Maryland corporation (defined as shares which, if aggregated with all other shares of stock owned by the acquirer or in respect of which the acquirer is able to exercise or direct the exercise of voting power (except solely by virtue of a revocable proxy), entitle the stockholder to exercise one of three increasing ranges of voting power in electing directors) acquired in a “control share acquisition” (defined as the direct or indirect acquisition of ownership or control of issued and outstanding “control shares”) has no voting rights with respect to such shares except to the extent approved by our stockholders by the affirmative vote of at least two-thirds of all the votes entitled to be cast on the matter, excluding votes entitled to be cast by the acquirer of control shares, our officers and our personnel who are also our directors.

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Our charter permits our board of directors to authorize us to issue additional shares of our authorized but unissued common or preferred stock.

In addition, our board of directors may, without stockholder approval, amend our charter to increase the aggregate number of our shares of stock or the number of shares of stock of any class or series that we have the authority to issue and classify or reclassify any unissued shares of common or preferred stock and set the terms of the classified or reclassified shares.

In addition, our board of directors may, without stockholder approval, amend our charter to

increase the aggregate number of our shares of stock or the number of shares of stock of any class or series that we have the authority to issue and classify or reclassify any unissued shares of common or preferred stock and set the terms of the classified or reclassified shares.

As a result, our board of directors may establish a class or series of shares of common or preferred stock that could delay or prevent a transaction or a change in control that might involve a premium price for shares of our common stock or otherwise be in the best interest of our stockholders.

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If we issue limited partnership interests in our Operating Partnership in exchange for property, the value placed on such partnership interests may not accurately reflect their market value, which may dilute your interest in us.

If we issue limited partnership interests in our Operating Partnership in exchange for property, the per unit value attributable to such interests will be determined based on negotiations with the property seller and, therefore, may not reflect the fair market value of such limited partnership interests if a public market for such limited partnership interests existed.

If the value of such limited partnership interests is greater than the value of the related property, your interest in us may be diluted.

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In order for us to qualify as a REIT under the Code, the relevant sections of our charter provide that, subject to certain exceptions, no person or entity may own, or be deemed to own, by virtue of the applicable constructive ownership provisions of the Code, more than 9.8% (in value or number of shares, whichever is more restrictive) of the aggregate of our outstanding shares of stock or more than 9.8% (in value or number of shares, whichever is more restrictive) of our outstanding common stock or any class or series of our outstanding preferred stock, including our 9.00% Series A Cumulative Redeemable Preferred Stock (the “Series A Preferred Stock”).

These ownership limits and other restrictions could have the effect of discouraging a takeover or other transaction in which holders of our common stock might receive a premium for their shares over the then prevailing market price or which holders might believe to be otherwise in their best interests.

These ownership limits and other restrictions could have the effect of discouraging a takeover or other transaction in which

holders of our common stock might receive a premium for their shares over the then prevailing market price or which holders might believe to be otherwise in their best interests.

We plan to continue to operate our business so that we are not required to register as an investment company under the Investment Company Act.

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● our ability to make acquisitions on preferable terms or at all;

● equity issuances by us, including issuances by us of shares of common stock in connection with exchanges of our Exchangeable Senior Notes or under our ATM Program, or share resales by our stockholders, or the perception that such issuances or resales may occur;

● equity issuances by us, including issuances by us of shares of common stock under our ATM Program, or share resales by our stockholders, or the perception that such issuances or resales may occur;

● actual or anticipated accounting problems;

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Sales of substantial amounts of our common stock or operating partnership units of our Operating Partnership, or the perception that these sales could occur, may adversely affect the prevailing market price of our common stock or may adversely affect the terms upon which we may be able to obtain additional capital through the sale of equity securities.

As of February 28, 2023, 28,002,799 shares of our common stock were issued and outstanding, and we had reserved an additional 724,297 shares of common stock for future issuance under our 2016 Omnibus Incentive Plan (the “2016 Plan”) and 103,625 shares potentially issuable upon exchange of our Exchangeable Senior Notes (based on the exchange rate as of February 28, 2023).

In addition, as of February 28, 2023, we had $500.0 million in shares of common stock available for future issuance under the ATM Program.

The existence of operating partnership units, Exchangeable Senior

Notes, shares of Series A Preferred Stock, shares of our common stock reserved for issuance under our 2016 Plan and shares available for future issuance under the ATM Program may adversely affect the terms upon which we may be able to obtain additional capital through the sale of equity securities.

As of February 27, 2024, 28,205,423 shares of our common stock were issued and outstanding, and we had reserved an additional 683,342 shares of common stock for future issuance under our 2016 Omnibus Incentive Plan (the “2016 Plan”).

In addition, as of February 27, 2024, we had approximately $490.0 million in shares of common stock available for future issuance under the ATM Program.

The existence of operating partnership units, shares of Series A Preferred Stock, shares of our common stock reserved for issuance under our 2016 Plan and shares available for future issuance under the ATM Program may adversely affect the terms upon which we may be able to obtain additional capital through the sale of equity securities.

We cannot assure you of our ability to make distributions in the future.

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We believe that we have been organized and operated in such a manner as to qualify for taxation as a REIT under the Code for such taxable year and all subsequent taxable years to date, and intend to continue to operate in such a manner in the future.

We have not requested and do not intend to request a ruling from

the Internal Revenue Service (the “Service”) that we qualify as a REIT, and the statements in this report are not binding on the Service or any court.

We have not requested and do not intend to request a ruling from the Internal Revenue Service (the “Service”) that we qualify as a REIT, and the statements in this report are not binding on the Service or any court.

Qualification as a REIT involves the application of highly technical and complex Code provisions and regulations promulgated by the U.S.

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federal income tax and the 4% nondeductible excise tax.

However, we can provide no assurances that we will have sufficient cash or other liquid assets to meet these requirements.

However, we can

provide no assurances that we will have sufficient cash or other liquid assets to meet these requirements.

Difficulties in meeting the distribution requirements might arise due to competing demands for available funds or timing differences between tax reporting and cash receipts.

In addition, if the Service were to disallow certain of our deductions, such as employee salaries, depreciation or interest expense, by alleging that we, through our rental agreements with our state-licensed medical cannabis tenants, are primarily or vicariously liable for “trafficking” a Schedule 1 substance (cannabis) under Section 280E of the Code or otherwise, we would be unable to meet the distribution requirements and would fail to qualify as a REIT.

In addition, if the Service were to disallow certain of our deductions, such as employee salaries, depreciation or interest expense, by alleging that we, through our rental agreements with our state-licensed medical cannabis tenants, are primarily or vicariously liable for “trafficking” a Schedule I substance (cannabis) under Section 280E of the Code or otherwise, we would be unable to meet the distribution requirements and would fail to qualify as a REIT.

Likewise, if any governmental entity were to impose fines on us for our business involvement in state-licensed cannabis, such fines would not be deductible and the inability to deduct such fines could also cause us to be unable to satisfy the distribution requirement.

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To meet these tests, we may be required to take or forgo taking actions that we would otherwise consider advantageous.

For instance, in order to satisfy the gross income or asset tests applicable to REITs under the Code, we

may be required to forego investments that we otherwise would make.

For instance, in order to satisfy the gross income or asset tests applicable to REITs under the Code, we may be required to forego investments that we otherwise would make.

Furthermore, we may be required to liquidate from our portfolio otherwise attractive investments.

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As a result of these rules, we may need to limit our use of advantageous hedging techniques or implement those hedges through a TRS.

This could increase the cost of our

hedging activities because our TRSs would be subject to tax on gains or expose us to greater risks associated with changes in interest rates than we would otherwise want to bear.

This could increase the cost of our hedging activities because our TRSs would be subject to tax on gains or expose us to greater risks associated with changes in interest rates than we would otherwise want to bear.

In addition, losses in a TRS generally will not provide any tax benefit, except for being carried forward against future taxable income of such TRS, provided, however, losses in a TRS arising in taxable years beginning after December 31, 2017 may only be deducted against 80% of future taxable income in the TRS.

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Section 280E of the Code provides that, with respect to any taxpayer, no deduction or credit is allowed for expenses incurred during a taxable year “in carrying on any trade or business if such trade or business (or the activities which comprise such trade or business) consists of trafficking in controlled substances (within the meaning of Schedule I and II of the CSA) which is prohibited by federal law or the law of any State in which such trade or business is conducted.” Because cannabis is a Schedule I controlled substance under the CSA, Section 280E of the Code by its terms applies to the purchase and sale of cannabis products.

If the Service were to take the position that, through our rental agreements with our state-licensed cannabis tenants, we are primarily or vicariously liable under federal law for “trafficking” a Schedule 1 substance (cannabis) under Section 280E of the Code or for any other violations of the CSA, the Service may apply the provisions of Section 280E of the Code to our company and disallow certain tax deductions, including for employee salaries, depreciation or interest expense.

If such tax deductions are disallowed, we would be unable to meet the distribution requirements applicable to REITs under the Code, which could cause us to incur U.S.

If the Service were to take the position that, through our rental agreements with our state-licensed cannabis tenants, we are primarily or vicariously liable under federal law for “trafficking” a Schedule I substance (cannabis) under Section 280E of the Code or for any other violations of the CSA, the Service may apply the provisions of Section 280E of the Code to our company and disallow certain tax deductions, including for employee salaries, depreciation or interest expense.

such tax deductions are disallowed, we would be unable to meet the distribution requirements applicable to REITs under the Code, which could cause us to incur U.S.

federal income tax and fail to qualify as a REIT.

In addition, tax legislation originally introduced as the Tax Cuts and Jobs Act and signed into law in December 2017 (the “TCJA”) makes numerous changes to the tax rules that do not affect the REIT qualification rules directly, but may otherwise affect us or our stockholders.

Among the changes made by the TCJA are permanently reducing the generally applicable corporate tax rate, generally reducing the tax rate applicable to individuals and other non-corporate taxpayers for tax years beginning after December 31, 2017 and before January 1, 2026, eliminating or modifying certain previously allowed deductions (including substantially limiting interest deductibility and, for individuals, the deduction for non-business state and local taxes), and, for taxable years beginning after December 31, 2017 and before January 1, 2026, providing for preferential rates of taxation through a deduction of up to 20% (subject to certain limitations) on

most ordinary REIT dividends and certain trade or business income of non-corporate taxpayers.

The TCJA also imposes new limitations on the deduction of net operating losses, which may result in us having to make additional taxable distributions to our stockholders in order to comply with REIT distribution requirements or avoid taxes on retained income and gains.

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If the magnitude of such unknown liabilities is high, individually or in the aggregate, our business, financial condition, liquidity and results of operations would be materially and adversely affected.

UNRESOLVED STAFF COMMENTS

Not applicable.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 1. Business