INNOVATIVE INDUSTRIAL PROPERTIES INC 10-Q

ITEM 1. FINANCIAL STATEMENTS Innovative Industrial Properties, Inc. Condensed Consolidated Balance Sheets (Unaudited) (In thousands, except share and per share amounts) ​ ​ ​ ​ ​ ​ ​ ​ ​ June 30, December 31, Assets ​ 2024 ​ 2023 Real estate, at cost: ​ ​ ​ ​ ​ ​ Land ​ $ 142,891 ​ $ 142,524 Buildings and improvements ​ 2,161,261 ​ 2,108,218 Construction in progress ​ 97,828 ​ 117,773 Total real estate, at cost ​ 2,401,980 ​ 2,368,515 Less accumulated depreciation ​ ( 235,436 ) ​ ( 202,692 ) Net real estate held for investment ​ 2,166,544 ​ 2,165,823 Construction Loan receivable ​ ​ 22,000 ​ ​ 22,000 Cash and cash equivalents ​ 120,835 ​ 140,249 Restricted cash ​ ​ — ​ ​ 1,450 Investments ​ 40,111 ​ 21,948 Right of use office lease asset ​ ​ 1,154 ​ ​ 1,355 In-place lease intangible assets, net ​ ​ 7,815 ​ ​ 8,245 Other assets, net ​ 25,716 ​ 30,020 Total assets ​ $ 2,384,175 ​ $ 2,391,090 ​ ​ ​ ​ ​ ​ ​ Liabilities and stockholders’ equity ​ ​ ​ ​ ​ ​ Liabilities: ​ ​ ​ ​ ​ ​ Exchangeable Senior Notes, net ​ $ — ​ $ 4,431 Notes due 2026, net ​ ​ 297,146 ​ ​ 296,449 Building improvements and construction funding payable ​ ​ 7,367 ​ ​ 9,591 Accounts payable and accrued expenses ​ 8,912 ​ 11,406 Dividends payable ​ 54,591 ​ 51,827 Rent received in advance and tenant security deposits ​ 58,805 ​ 59,358 Other liabilities ​ 10,154 ​ 5,056 Total liabilities ​ 436,975 ​ 438,118 Commitments and contingencies (Notes 6 and 11) ​ ​ Stockholders’ equity: ​ ​ Preferred stock, par value $ 0.001 per share, 50,000,000 shares authorized: 9.00 % Series A cumulative redeemable preferred stock, $ 15,000 liquidation preference ($ 25.00 per share), 600,000 shares issued and outstanding at June 30, 2024 and December 31, 2023 ​ 14,009 ​ 14,009 Common stock, par value $ 0.001 per share, 50,000,000 shares authorized: 28,331,833 and 28,140,891 shares issued and outstanding at June 30, 2024 and December 31, 2023, respectively ​ 28 ​ 28 Additional paid-in capital ​ 2,115,482 ​ 2,095,789 Dividends in excess of earnings ​ ( 182,319 ) ​ ( 156,854 ) Total stockholders’ equity ​ 1,947,200 ​ 1,952,972 Total liabilities and stockholders’ equity ​ $ 2,384,175 ​ $ 2,391,090 ​ See the accompanying notes to the condensed consolidated financial statements. ​ ​ 3 Table of Contents Innovative Industrial Properties, Inc. Condensed Consolidated Statements of Income (Unaudited) (In thousands, except share and per share amounts) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ For the Three Months Ended For the Six Months Ended ​ ​ June 30, ​ June 30, ​ 2024 2023 2024 2023 Revenues: ​ ​ ​ ​ ​ ​ ​ Rental (including tenant reimbursements) ​ $ 79,253 ​ $ 75,919 ​ $ 154,167 ​ $ 151,448 Other ​ 540 ​ 538 ​ 1,080 ​ 1,076 Total revenues ​ 79,793 ​ 76,457 ​ 155,247 ​ 152,524 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Expenses: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Property expenses ​ 6,863 ​ 5,759 ​ ​ 13,572 ​ 11,382 General and administrative expense ​ 9,661 ​ 10,570 ​ ​ 19,223 ​ 20,943 Depreciation and amortization expense ​ 17,473 ​ 16,704 ​ ​ 34,623 ​ 33,418 Total expenses ​ 33,997 ​ 33,033 ​ 67,418 ​ 65,743 Gain (loss) on sale of real estate ​ ​ ( 3,449 ) ​ ​ — ​ ​ ( 3,449 ) ​ ​ — Income from operations ​ 42,347 ​ 43,424 ​ 84,380 ​ 86,781 Interest income ​ 3,966 ​ 2,317 ​ ​ 5,750 ​ 4,550 Interest expense ​ ​ ( 4,320 ) ​ ​ ( 4,472 ) ​ ​ ( 8,709 ) ​ ​ ( 8,992 ) Gain (loss) on exchange of Exchangeable Senior Notes ​ — ​ — ​ ​ — ​ 22 Net income ​ 41,993 ​ 41,269 ​ 81,421 ​ 82,361 Preferred stock dividends ​ ( 338 ) ​ ​ ( 338 ) ​ ​ ( 676 ) ​ ( 676 ) Net income attributable to common stockholders ​ $ 41,655 ​ $ 40,931 ​ $ 80,745 ​ $ 81,685 Net income attributable to common stockholders per share (Note 8): ​ ​ ​ ​ ​ ​ ​ ​ Basic ​ $ 1.45 ​ $ 1.45 ​ $ 2.82 ​ $ 2.89 Diluted ​ $ 1.44 ​ $ 1.44 ​ $ 2.79 ​ $ 2.87 Weighted-average shares outstanding: ​ ​ ​ ​ ​ ​ ​ ​ Basic ​ 28,250,843 ​ 27,981,517 ​ 28,197,930 ​ 27,965,720 Diluted ​ 28,572,138 ​ 28,257,239 ​ 28,527,419 ​ 28,239,841 ​ See accompanying notes to the condensed consolidated financial statements. ​ ​ 4 Table of Contents Innovative Industrial Properties, Inc. Condensed Consolidated Statements of Stockholders’ Equity (Unaudited) (In thousands, except share amounts) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Three Months Ended June 30, 2024 ​ ​ Three Months Ended June 30, 2023 ​ ​ Series A ​ Shares of ​ ​ ​ ​ Additional ​ Dividends in ​ Total ​ ​ Series A ​ Shares of ​ ​ ​ ​ Additional ​ Dividends in ​ Total ​ ​ Preferred ​ Common ​ Common ​ Paid-In- ​ Excess of ​ Stockholders’ ​ ​ Preferred ​ Common ​ Common ​ Paid-In ​ Excess of ​ Stockholders’ ​ Stock Stock Stock Capital Earnings Equity ​ Stock Stock Stock Capital Earnings Equity Balances at beginning of period ​ $ 14,009 28,328,647 ​ $ 28 ​ $ 2,111,111 ​ $ ( 169,721 ) ​ $ 1,955,427 ​ ​ $ 14,009 28,034,999 ​ $ 28 ​ $ 2,071,473 ​ $ ( 127,363 ) ​ $ 1,958,147 Net income ​ ​ — ​ — ​ ​ — ​ ​ — ​ ​ 41,993 ​ ​ 41,993 ​ ​ ​ — ​ — ​ ​ — ​ ​ — ​ ​ 41,269 ​ ​ 41,269 Issuance of unvested restricted stock, net of forfeitures ​ ​ — ​ 3,186 ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ ​ — ​ 5,055 ​ ​ — ​ ​ — ​ ​ — ​ ​ — Preferred stock dividends ​ ​ — ​ — ​ ​ — ​ ​ — ​ ​ ( 338 ) ​ ​ ( 338 ) ​ ​ ​ — ​ — ​ ​ — ​ ​ — ​ ​ ( 338 ) ​ ​ ( 338 ) Common stock dividends ​ ​ — ​ — ​ ​ — ​ ​ — ​ ​ ( 54,253 ) ​ ​ ( 54,253 ) ​ ​ ​ — ​ — ​ ​ — ​ ​ — ​ ​ ( 50,742 ) ​ ​ ( 50,742 ) Stock-based compensation ​ ​ — ​ — ​ ​ — ​ ​ 4,371 ​ ​ — ​ ​ 4,371 ​ ​ ​ — ​ — ​ ​ — ​ ​ 4,884 ​ ​ — ​ ​ 4,884 Balances at end of period ​ $ 14,009 28,331,833 ​ $ 28 ​ $ 2,115,482 ​ $ ( 182,319 ) ​ $ 1,947,200 ​ ​ $ 14,009 ​ 28,040,054 ​ $ 28 ​ $ 2,076,357 ​ $ ( 137,174 ) ​ $ 1,953,220 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Six Months Ended June 30, 2024 ​ ​ Six Months Ended June 30, 2023 ​ ​ Series A ​ Shares of ​ ​ ​ ​ Additional ​ Dividends in ​ Total ​ ​ Series A ​ Shares of ​ ​ ​ ​ Additional ​ Dividends in ​ Total ​ ​ Preferred ​ Common ​ Common ​ Paid-In ​ Excess of ​ Stockholders’ ​ ​ Preferred ​ Common ​ Common ​ Paid-In ​ Excess of ​ Stockholders’ ​ Stock Stock Stock Capital Earnings Equity ​ Stock Stock Stock Capital Earnings Equity Balances at beginning of period ​ $ 14,009 28,140,891 ​ $ 28 ​ $ 2,095,789 ​ $ ( 156,854 ) ​ $ 1,952,972 ​ ​ $ 14,009 ​ 27,972,830 ​ $ 28 ​ $ 2,065,248 ​ $ ( 117,392 ) ​ $ 1,961,893 Net income ​ ​ — ​ — ​ ​ — ​ ​ — ​ ​ 81,421 ​ ​ 81,421 ​ ​ ​ — ​ — ​ ​ — ​ ​ — ​ ​ 82,361 ​ ​ 82,361 Issuance of unvested restricted stock, net of forfeitures ​ ​ — ​ 39,310 ​ ​ — ​ ​ ( 750 ) ​ ​ — ​ ​ ( 750 ) ​ ​ ​ — ​ 35,024 ​ ​ — ​ ​ ( 568 ) ​ ​ — ​ ​ ( 568 ) Exchange of Exchangeable Senior Notes ​ ​ — ​ 28,408 ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ ​ — ​ 32,200 ​ ​ — ​ ​ 1,964 ​ ​ — ​ ​ 1,964 Net proceeds from sale of common stock ​ ​ — ​ 123,224 ​ ​ — ​ ​ 11,757 ​ ​ — ​ ​ 11,757 ​ ​ ​ — ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ — Preferred stock dividends ​ ​ — ​ — ​ ​ — ​ ​ — ​ ​ ( 676 ) ​ ​ ( 676 ) ​ ​ ​ — ​ — ​ ​ — ​ ​ — ​ ​ ( 676 ) ​ ​ ( 676 ) Common stock dividends ​ ​ — ​ — ​ ​ — ​ ​ — ​ ​ ( 106,210 ) ​ ​ ( 106,210 ) ​ ​ ​ — ​ — ​ ​ — ​ ​ — ​ ​ ( 101,467 ) ​ ​ ( 101,467 ) Stock-based compensation ​ ​ — ​ — ​ ​ — ​ ​ 8,686 ​ ​ — ​ ​ 8,686 ​ ​ ​ — ​ — ​ ​ — ​ ​ 9,713 ​ ​ — ​ ​ 9,713 Balances at end of period ​ $ 14,009 28,331,833 ​ $ 28 ​ $ 2,115,482 ​ $ ( 182,319 ) ​ $ 1,947,200 ​ ​ $ 14,009 ​ 28,040,054 ​ $ 28 ​ $ 2,076,357 ​ $ ( 137,174 ) ​ $ 1,953,220 ​ ​ See accompanying notes to the condensed consolidated financial statements. ​ ​ 5 Table of Contents Innovative Industrial Properties, Inc. Condensed Consolidated Statements of Cash Flows (Unaudited) (In thousands) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ For the Six Months Ended ​ ​ June 30, ​ 2024 2023 Cash flows from operating activities ​ ​ ​ ​ ​ ​ Net income ​ $ 81,421 ​ $ 82,361 Adjustments to reconcile net income to net cash provided by (used in) operating activities ​ ​ ​ ​ ​ ​ Depreciation and amortization ​ 34,623 ​ 33,418 Loss (gain) on exchange of Exchangeable Senior Notes ​ ​ — ​ ​ ( 22 ) Loss (gain) on sale of real estate ​ ​ 3,449 ​ ​ — Other non-cash adjustments ​ ​ 54 ​ ​ 53 Stock-based compensation ​ 8,686 ​ 9,713 Amortization of discounts on investments ​ ( 244 ) ​ ( 2,621 ) Amortization of debt discount and issuance costs ​ 794 ​ 677 Changes in assets and liabilities ​ ​ ​ ​ ​ ​ Other assets, net ​ 4,377 ​ 3,549 Accounts payable, accrued expenses and other liabilities ​ 3,164 ​ ( 514 ) Rent received in advance and tenant security deposits ​ ( 553 ) ​ ( 234 ) Net cash provided by (used in) operating activities ​ 135,771 ​ 126,380 ​ ​ ​ ​ ​ ​ ​ Cash flows from investing activities ​ ​ ​ ​ ​ ​ Purchases of investments in real estate ​ ( 13,026 ) ​ ​ ( 34,906 ) Proceeds from sale of real estate asset ​ ​ 9,100 ​ ​ — Funding of draws for improvements and construction ​ ( 36,988 ) ​ ​ ( 111,457 ) Funding of Construction Loan and other investments ​ ​ — ​ ​ ( 2,896 ) Purchases of short-term investments ​ ( 45,110 ) ​ ​ ( 71,772 ) Maturities of short-term investments ​ 27,191 ​ ​ 202,602 Net cash provided by (used in) investing activities ​ ( 58,833 ) ​ ( 18,429 ) ​ ​ ​ ​ ​ ​ ​ Cash flows from financing activities ​ ​ ​ ​ ​ ​ Issuance of common stock, net of offering costs ​ 11,757 ​ ​ — Principal payment on Exchangeable Senior Notes ​ ​ ( 4,436 ) ​ ​ — Payment of deferred financing costs ​ ​ ( 251 ) ​ ​ — Dividends paid to common stockholders ​ ( 103,446 ) ​ ​ ( 101,227 ) Dividends paid to preferred stockholders ​ ( 676 ) ​ ​ ( 676 ) Taxes paid related to net share settlement of equity awards ​ ( 750 ) ​ ​ ( 568 ) Net cash provided by (used in) financing activities ​ ( 97,802 ) ​ ( 102,471 ) Net increase (decrease) in cash, cash equivalents and restricted cash ​ ( 20,864 ) ​ 5,480 Cash, cash equivalents and restricted cash, beginning of period ​ 141,699 ​ ​ 88,572 Cash, cash equivalents and restricted cash, end of period ​ $ 120,835 ​ $ 94,052 ​ ​ ​ ​ ​ ​ ​ Supplemental disclosure of cash flow information: ​ ​ ​ ​ ​ ​ Cash paid during the period for interest, net of interest capitalized ​ $ 7,933 ​ $ 8,337 Supplemental disclosure of non-cash investing and financing activities: ​ ​ ​ ​ ​ ​ Accrual for current-period additions to real estate ​ $ 6,161 ​ $ 17,021 Deposits applied for acquisitions ​ ​ — ​ ​ 250 Accrual for common and preferred stock dividends declared ​ 54,591 ​ 51,080 Exchange of Exchangeable Senior Notes for common stock ​ ​ — ​ ​ 1,964 ​ See accompanying notes to the condensed consolidated financial statements. ​ 6 Table of Contents Innovative Industrial Properties, Inc. Notes to the Condensed Consolidated Financial Statements June 30, 2024 (Unaudited) 1. Organization As used herein, the terms “we”, “us”, “our” or the “Company” refer to Innovative Industrial Properties, Inc., a Maryland corporation, and any of our subsidiaries, including IIP Operating Partnership, LP, a Delaware limited partnership (our “Operating Partnership”). We are an internally-managed real estate investment trust (“REIT”) focused on the acquisition, ownership and management of specialized industrial properties leased to experienced, state-licensed operators for their regulated cannabis facilities. We have acquired and intend to continue to acquire our properties through sale-leaseback transactions and third-party purchases. We have leased and expect to continue to lease our properties on a triple-net lease basis, where the tenant is responsible for all aspects of and costs related to the property and its operation during the lease term, including structural repairs, maintenance, real estate taxes and insurance. We were incorporated in Maryland on June 15, 2016. We conduct our business through a traditional umbrella partnership real estate investment trust, or UPREIT structure, in which our properties are owned by our Operating Partnership, directly or through subsidiaries. We are the sole general partner of our Operating Partnership and own, directly or through subsidiaries, 100 % of the limited partnership interests in our Operating Partnership. ​ ​ 2. Summary of Significant Accounting Policies and Procedures and Recent Accounting Pronouncements Basis of Presentation. The condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States (“GAAP”) for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. They do not include all of the information and footnotes required by GAAP for complete financial statements. This interim financial information should be read in conjunction with the audited consolidated financial statements in the Company’s Annual Report on Form 10-K for the year ended December 31, 2023. Any references to square footage or occupancy percentage, and any amounts derived from these values in these notes to the condensed consolidated financial statements, are outside the scope of our independent registered public accounting firm’s review. Management believes that all adjustments of a normal, recurring nature considered necessary for a fair presentation have been included. This interim financial information does not necessarily represent or indicate what the operating results will be for the year ending December 31, 2024. Federal Income Taxes. We believe that we have operated our business so as to qualify to be taxed as a REIT for U.S. federal income tax purposes. Under the REIT operating structure, we are permitted to deduct dividends paid to our stockholders in determining our taxable income. Assuming our dividends equal or exceed our taxable net income, we generally will not be required to pay federal corporate income taxes on such income. The income taxes recorded on our condensed consolidated statements of income represent amounts paid for city and state income and franchise taxes and are included in general and administrative expenses in the accompanying condensed consolidated statements of income. Use of Estimates. The preparation of the condensed consolidated financial statements in conformity with GAAP requires management to make a number of estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the condensed consolidated financial statements and reported amounts of revenues and expenses during the reporting period. Actual results may differ materially from these estimates and assumptions. The most significant estimates and assumptions made include the determination of lease accounting and fair value of acquisition of real estate properties. 7 Table of Contents Reportable Segment. We are engaged in the business of providing real estate for the regulated cannabis industry. Our properties are similar in that they are leased to the state-licensed operators on a long-term triple-net basis, consist of improvements that are reusable and have similar economic characteristics. Our chief operating decision maker reviews financial information for our entire consolidated operations when making decisions related to assessing our operating performance. We have aggregated the properties into one reportable segment as the properties share similar long-term economic characteristics and have other similarities, including the fact that they are operated using consistent business strategies. The financial information disclosed herein represents all of the financial information related to our one reportable segment. Acquisition of Real Estate Properties. Our investment in real estate is recorded at historical cost, less accumulated depreciation. Upon acquisition of a property, the tangible and intangible assets acquired and liabilities assumed are initially measured based upon their relative fair values. We estimate the fair value of land by reviewing comparable sales within the same submarket and/or region. We estimate the fair value of buildings and improvements as if the property was vacant, taking into consideration current replacement costs and other relevant market rate information and may engage third-party valuation specialists. Acquisition costs are capitalized as incurred. All of our acquisitions to date were recorded as asset acquisitions. The fair value of acquired in-place leases is derived based on our assessment of estimated lost revenue and costs incurred for the period required to lease the “assumed vacant” property to the occupancy level when purchased. The amounts recorded for acquired in-place leases are reflected as in-place lease intangible assets, net on our condensed consolidated balance sheets and are amortized on a straight-line basis as a component of depreciation and amortization expense over the remaining term of the applicable leases. The fair value of the above-market component of an acquired in-place operating lease is based upon the present value (calculated using a market discount rate) of the difference between (i) the contractual rents to be paid pursuant to the lease over its remaining non-cancellable lease term and (ii) our estimate of the rents that would be paid using fair market rental rates and rent escalations at the date of acquisition measured over the remaining non-cancellable term of the lease. The amount recorded for one above-market operating lease is included in other assets, net on our condensed consolidated balance sheets and is amortized on a straight-line basis as a reduction of rental revenues over the remaining term of the applicable lease. Certain acquisitions of real estate did not satisfy the requirements for sale-leaseback accounting and therefore as of both June 30, 2024 and December 31, 2023, acquisitions of $ 20.0 million have been recognized as notes receivable and are included in other assets, net on our condensed consolidated balance sheets. Sale of Real Estate. When a real estate asset is sold, we evaluate the provisions of Accounting Standards Codification (“ASC”) 610-20, Gains and Losses from the Derecognition of Nonfinancial Assets (“ASC 610-20”) to determine whether the asset is within the scope of ASC 610-20, including an evaluation of whether the asset being sold is a nonfinancial asset and whether the buyer has gained control of an asset within the scope of ASC 610-20. In assessing whether the buyer has gained control of the asset, we must determine whether the contract criteria in ASC 606, Revenue from Contracts with Customers (Topic 606) have been met, including 1) the parties to the contract have approved the contract and the contract has commercial substance, 2) we can identify each party’s rights regarding the asset to be transferred, 3) we can identify the payment terms for the asset to be transferred, and 4) it is probable that we will collect substantially all of the consideration to which we will be entitled in exchange for the asset to be transferred. If all of the contract criteria have been met, the carrying amount of the applicable asset is derecognized with a corresponding gain or loss from the sale recognized in our consolidated statements of income. If the contract criteria are not all met, the asset transferred is not derecognized and we continue to report the asset in our condensed consolidated balance sheet. See Note 6 “Investments in Real Estate - Property Disposition” for further information. ​ Cost Capitalization and Depreciation. We capitalize costs (including interest) associated with development and redevelopment activities and improvements when we are considered to be the accounting owner of the resulting assets. The development and redevelopment activities may be funded by us pursuant to the lease. We are generally considered the accounting owner for such improvements that are attached to or built into the premises, which are required under the lease to be surrendered to us upon the expiration or earlier termination of the lease. Typically, such improvements include, but are not limited to, ground up development, and enhanced HVAC, plumbing, electrical and other building systems. Amounts capitalized are depreciated on a straight-line basis over the estimated useful lives determined by management. We depreciate buildings and improvements based on our evaluation of the estimated useful life of each specific asset, not to exceed 40 years . For the three months ended June 30, 2024 and 2023, we recognized depreciation expense of $ 17.3 million and $ 16.5 million, respectively, and for the six months ended June 30, 2024 and 2023, we recognized depreciation expense of $ 34.2 million and $ 33.0 million, respectively. Depreciation expense relating to our real estate held for investment is included in depreciation and amortization expense in our condensed consolidated statements of income. We depreciate office equipment and furniture and fixtures on a straight-line basis over the estimated useful lives ranging from three to seven years . We depreciate the leasehold improvements at our 8 Table of Contents corporate office on a straight-line basis over the shorter of the estimated useful lives or the remaining lease term. Depreciation expense relating to our corporate assets is included in general and administrative expense in our condensed consolidated statements of income. Determining whether expenditures meet the criteria for capitalization and the assignment of depreciable lives requires management to exercise significant judgment. Project costs that are clearly associated with the acquisition and development or redevelopment of a real estate project, for which we are the accounting owner, are capitalized as a cost of that project. Expenditures that meet one or more of the following criteria generally qualify for capitalization: ● the expenditure provides benefit in future periods; and ● the expenditure extends the useful life of the asset beyond our original estimates. We define redevelopment properties as existing properties for which we expect to spend significant development and construction costs that are not reimbursements to tenants for improvements at the properties. When existing properties are determined to be redevelopment properties, the net carrying value of the buildings and improvements are transferred to construction in progress while the redevelopment activities are in process. Costs capitalized to construction in progress related to redevelopment properties are transferred to buildings and improvements at historical cost of the properties as the redevelopment project or phases of projects are placed in service. Provision for Impairment. On a quarterly basis, we review current activities and changes in the business conditions of all of our properties prior to and subsequent to the end of each quarter to determine the existence of any triggering events or impairment indicators requiring an impairment analysis. If triggering events or impairment indicators are identified, we review an estimate of the future undiscounted cash flows for the properties. Long-lived assets are individually evaluated for impairment when conditions exist that may indicate that the carrying amount of a long-lived asset may not be recoverable. The carrying amount of a long-lived asset to be held and used is not recoverable if it exceeds the sum of the undiscounted cash flows expected to result from the use and eventual disposition of the asset. Impairment indicators or triggering events for long-lived assets to be held and used are assessed by project and include significant fluctuations in estimated net operating income, occupancy changes, significant near-term lease expirations, current and historical operating and/or cash flow losses, construction costs, estimated completion dates, rental rates, and other market factors. We assess the expected undiscounted cash flows based upon numerous factors, including, but not limited to, construction costs, available market information, current and historical operating results, known trends, current market/economic conditions that may affect the property, and our assumptions about the use of the asset, including, if necessary, a probability-weighted approach if multiple outcomes are under consideration. Upon determination that an impairment has occurred, a write-down is recognized to reduce the carrying amount to its estimated fair value. We may adjust depreciation of properties that are expected to be disposed of or redeveloped prior to the end of their useful lives. No impairment losses were recognized during the six months ended June 30, 2024 and 2023. Revenue Recognition. Our leases are triple-net leases, an arrangement under which the tenant maintains the property while paying us rent. We recognize revenue for each of the leases at our properties that are classified as operating leases on a cash basis due to the uncertain regulatory environment in the United States pertaining to the regulated cannabis industry, the limited operating history of certain tenants and the resulting uncertainty of collectability of lease payments from each tenant over the duration of the lease term. Additionally, for operating leases, contractually obligated reimbursements from tenants for recoverable real estate taxes, insurance and operating expenses are included in rental revenues in the period when such costs are incurred and reimbursed by the tenants. Contractually obligated real estate taxes that are paid directly by the tenant to the tax authorities are not reflected in our condensed consolidated financial statements. Construction Loan. In June 2021, we executed a construction loan agreement with a developer, pursuant to which we agreed to lend up to $ 18.5 million for the development of a regulated cannabis cultivation and processing facility in California (the “Construction Loan”). We have an option to purchase the property, and may execute a negotiated lease with an affiliate of the developer or with another third party, if we determine to exercise our purchase option. In February 2023, we amended the Construction Loan to provide for, among other things: (1) the additional capital commitment of the borrower into the project of $ 1.0 million; (2) our agreement to fund an additional $ 4.5 million into the project; (3) an increase in the interest rate effective April 1, 2023; (4) an extension of the loan term to December 31, 2023; and (5) the provision of additional collateral from the borrower for the loan. Interest on the loan continued to accrue through March 31, 2023, with monthly payment of interest contractual required commencing April 1, 2023. In December 2023, we further amended the Construction Loan to extend the loan term to June 30, 2024, with an option for the borrower to extend the loan term to December 31, 2024 upon satisfaction of certain conditions and payment of an extension fee. The borrower exercised this extension option in June 2024. As of both June 30, 2024 and December 31, 2023, we 9 Table of Contents had funded $ 22.0 million of the $ 23.0 million total commitment. Interest income on the Construction Loan is recognized on a cash basis. Cash and Cash Equivalents . We consider all highly-liquid investments with original maturities of 90 days or less to be cash equivalents, which is comprised of short-term money market funds, obligations of the U.S. government and certificates of deposit with an original maturity at the time of purchase of less than or equal to 90 days. Restricted Cash . Restricted cash relates to cash held in escrow accounts for future draws for improvements for tenants in accordance with certain lease agreements. Investments. Investments consist of short-term obligations of the U.S. government and certificates of deposit with an original maturity at the time of purchase of greater than 90 days. Investments in obligations of the U.S. government are classified as held-to-maturity and stated at amortized cost. Investments in certificates of deposit are classified as held-to-maturity and stated at cost. Deferred Financing Costs. The deferred financing costs relating to our Notes due 2026 are included as a reduction in the net book value of the related liability on our condensed consolidated balance sheet. These costs are amortized as non-cash interest expense using the effective interest method over the life of the related obligations. Deferred financing costs relating to our Revolving Credit Facility are included in other assets, net in our condensed consolidated balance sheets. These costs are being amortized on a straight-line basis and recognized as non-cash interest expense over the term of the Revolving Credit Facility. Stock-Based Compensation. Stock-based compensation for equity awards is based on the grant date fair value of the equity awards and is recognized over the requisite service or performance period. If awards are forfeited prior to vesting, we reverse any previously recognized expense related to such awards in the period during which the forfeiture occurs and reclassify any non-forfeitable dividends and dividend equivalents previously paid on these awards from retained earnings to compensation expense. Forfeitures are recognized as incurred. Certain equity awards are subject to vesting based upon the satisfaction of various market conditions. Forfeiture of share awards with market-based restrictions does not result in a reversal of previously recognized share-based compensation expense. Lease Accounting. We account for our leases under ASC 842, Leases , and have elected the practical expedient not to separate certain non-lease components from the lease component if the timing and pattern of transfer are the same for the non-lease component and associated lease component, and the lease component would be classified as an operating lease if accounted for separately. We also elected the short-term lease exception for lessees for leases that are less than 12 months. As lessee, we recognized a liability to account for our future obligations and a corresponding right-of-use asset related to our corporate office lease, which ends in January 2027 and contains annual escalations. We measured the lease liability based on the present value of the future lease payments (excluding the extension option that we are not reasonably certain to exercise), discounted using the estimated incremental borrowing rates of 7.25 % and 5.5 %, which were the interest rates that we estimated we would have to pay to borrow on a collateralized basis over a similar term for an amount equal to the lease payments at initial commencement in December 2019 and upon an amendment in November 2021, respectively. Subsequently, the lease liability is accreted by applying a discount rate established at the lease commencement date to the lease liability balance as of the beginning of the period and is reduced by the payments made during the period. The right-of-use asset is measured based on the corresponding lease liability. We did not incur any initial direct leasing costs or exchange any other consideration with the landlord prior to the commencement of the lease. Subsequently, the right-of-use asset is amortized on a straight-line basis during the lease term. In each of the three and six months ended June 30, 2024 and 2023, we recognized office lease expense of $ 0.1 million and $ 0.2 million, respectively, which is included in general and administrative expenses in our condensed consolidated statements of income. In each of the six months ended June 30, 2024 and 2023, amounts paid and classified as operating activities in our condensed consolidated statements of cash flows for the office lease were $ 0.2 million. As lessor, for each of our real estate transactions involving the leaseback of the related property to the seller or affiliates of the seller, we determine whether these transactions qualify as sale and leaseback transactions under the accounting guidance. For these transactions, we consider various inputs and assumptions including, but not necessarily limited to, lease terms, renewal options, discount rates, and other rights and provisions in the purchase and sale agreement, lease and other documentation to determine whether control has been transferred to the Company or remains with the lessee. A transaction involving a sale leaseback will be treated as a purchase of a real estate property if it is considered to transfer control of the underlying asset from the lessee. A lease will be classified as direct-financing if risks and rewards are conveyed without the transfer of control and will be classified as a sales-type lease if control of the underlying asset is transferred to the lessee. Otherwise, the lease is treated as an operating lease. These criteria also include estimates and assumptions regarding the fair value of the leased facilities, minimum lease payments, the economic useful life of the facilities, the existence of a purchase option, and certain other terms in the lease agreements. The lease accounting guidance 10 Table of Contents requires accounting for a transaction as a financing in a sale leaseback when the seller-lessee is provided an option to purchase the property from the landlord at the tenant’s option. Substantially all of our leases are classified as operating leases. Lease amendments are evaluated to determine if the modification grants the lessee an additional right-of-use not included in the original lease and if the lease payments increase commensurate with the standalone price of the additional right-of-use, adjusted for the circumstances of the particular contract. If both conditions are present, the lease amendment is accounted for as a new lease that is separate from the original lease. In January 2024, the lease modifications for two of our leases to extend the initial term of each lease changed the lease classification from operating lease to sales-type lease that did not satisfy all the criteria for recognition as a completed sale. Accordingly, we have not derecognized the underlying assets and all lease payments received, as well as any future lease payments, will be recognized as a deposit liability and will be included in other liabilities on our condensed consolidated balance sheet until certain criteria are met. As of June 30, 2024, we have received lease payments of $ 2.9 million that have been included in other liabilities on our condensed consolidated balance sheet. The underlying assets’ land and building and improvements had a gross carrying value of $ 4.1 million and $ 28.9 million, respectively, and accumulated depreciation of $ 3.0 million as of June 30, 2024. Our leases generally contain options to extend the lease terms at the prevailing market rate or at the expiring rental rate at the time of expiration. Certain of our leases provide the lessee with a right of first refusal or right of first offer in the event we market the leased property for sale. Recent Accounting Pronouncements . In November 2023, the Financial Accounting Standards Board issued Accounting Standards Update 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures (“ASU 2023-07”). The amendments in ASU 2023-07 improve reportable segment disclosure requirements, primarily through enhanced disclosures about significant segment expenses, measures of segment profit and loss, and disclosures of how the chief operating decision maker uses the reported measure(s) of a segment’s profit or loss in assessing segment performance and deciding how to allocate resources. The amendments are effective for all public entities that are required to report segment information for fiscal years beginning after December 15, 2023 and interim periods beginning after December 15, 2024. ASU 2023-07 also requires a public entity that has a single reportable segment to provide all the disclosures required by the amendments in ASU 2023-07 and all existing segment disclosures in Topic 280. Early adoption is permitted. The amendments should be applied retrospectively to all prior periods presented. The Company is currently evaluating the potential impact that this standard will have on its condensed consolidated financial statements and related disclosures . Concentration of Credit Risk . As of June 30, 2024, we owned 108 properties located in 19 states and leased to 30 tenants (excluding three non-cannabis tenants at two of our properties). The ability of any of our tenants to honor the terms of their leases is dependent upon the economic, regulatory, competition, natural and social factors affecting the community in which that tenant operates. The following table sets forth the five tenants in our portfolio that represented the largest percentage of our total rental revenues for the three and six months ended June 30, 2024 and 2023, including tenant reimbursements: ​ ​ ​ ​ ​ ​ ​ ​ For the Three Months Ended ​ ​ June 30, 2024 ​ ​ ​ ​ ​ Percentage of ​ ​ Number of Rental ​ Leases Revenue ​ PharmaCann Inc. ("PharmaCann") 11 ​ 14 % Holistic Industries Inc. ("Holistic") 5 ​ 11 % Ascend Wellness Holdings, Inc. ("Ascend") 4 ​ 9 % Green Thumb Industries, Inc. ("Green Thumb") 3 ​ 7 % Curaleaf Holdings, Inc. ("Curaleaf") ​ 8 ​ 7 % ​ 11 Table of Contents ​ ​ ​ ​ ​ ​ ​ ​ For the Six Months Ended ​ ​ June 30, 2024 ​ ​ ​ ​ ​ Percentage of ​ ​ Number of Rental ​ Leases Revenue ​ PharmaCann 11 ​ 14 % Ascend ​ 4 ​ 10 % Holistic 5 ​ 9 % Green Thumb 3 ​ 8 % Curaleaf ​ 8 ​ 7 % ​ ​ ​ ​ ​ ​ ​ ​ ​ For the Three Months Ended ​ ​ ​ June 30, 2023 ​ ​ ​ Percentage of ​ Number of Rental ​ Leases Revenue PharmaCann ​ 11 ​ 15 % Ascend ​ 4 ​ 10 % Green Thumb ​ 3 ​ 8 % Curaleaf ​ 8 ​ 7 % Trulieve Cannabis Corp. ("Trulieve") ​ 6 ​ 7 % ​ ​ ​ ​ ​ ​ ​ ​ ​ For the Six Months Ended ​ ​ June 30, 2023 ​ ​ ​ ​ ​ Percentage of ​ ​ Number of Rental ​ Leases Revenue ​ PharmaCann 11 ​ 15 % Ascend ​ 4 ​ 10 % Green Thumb 3 ​ 7 % SH Parent, Inc. ("Parallel") (1) ​ 4 ​ 7 % Curaleaf 8 ​ 7 % ​ (1) We regained possession of two properties previously leased to Parallel in Texas and Pennsylvania in March and November 2023, respectively. In each of the tables above, these leases include leases with affiliates of each entity, for which the entity has provided a corporate guaranty. As of June 30, 2024 and December 31, 2023, our largest property was located in New York and accounted for 5.5 % and 5.4 %, respectively, of our net real estate held for investment. No other properties accounted for more than 5 % of our net real estate held for investment as of June 30, 2024 and December 31, 2023. We have deposited cash with financial institutions that are insured by the Federal Deposit Insurance Corporation (“FDIC”) up to $ 250,000 . As of June 30, 2024, we had cash accounts in excess of FDIC insured limits. We have not experienced any losses in such accounts. ​ 3. Common Stock As of June 30, 2024, the Company was authorized to issue up to 50,000,000 shares of common stock, par value $ 0.001 per share, and there were 28,331,833 shares of common stock issued and outstanding. ​ In May 2024, we terminated the previously existing “at-the-market” offering program (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 (the “ATM Program”), including on a forward basis, shares of our common stock and 9.00 % Series A Cumulative Redeemable Preferred Stock, $ 0.001 par value per share (the “Series A Preferred Stock”) , up to an aggregate offering price of $ 500.0 million . As of June 30, 2024, we had not sold any shares of common stock or Series A Preferred Stock under the ATM Program, including on a forward basis. 12 Table of Contents ​ During the six months ended June 30, 2024, we sold 123,224 shares of our common stock pursuant to the Prior ATM Program for net proceeds of $ 11.8 million. No shares of common stock were issued pursuant to the Prior ATM Program during the six months ended June 30, 2023. ​ During the six months ended June 30, 2024, we issued 28,408 shares of our common stock related to the exchange premium upon exchange by holders of $ 4.3 million of outstanding principal amount of our 3.75 % Exchangeable Senior Notes due 2024 (the “Exchangeable Senior Notes”). ​ During the six months ended June 30, 2023, we issued 32,200 shares of our common stock upon exchange by holders of $ 2.0 million of outstanding principal amount of our Exchangeable Senior Notes. ​ 4. Preferred Stock As of June 30, 2024, the Company was authorized to issue up to 50,000,000 shares of preferred stock, par value $ 0.001 per share, and there were 600,000 shares issued and outstanding of Series A Preferred Stock. The Company may, at its option, redeem the Series A Preferred Stock, in whole or in part, at any time or from time to time, for cash at a redemption price of $ 25.00 per share, plus all accrued and unpaid dividends on such Series A Preferred Stock up to, but excluding the redemption date. Holders of the Series A Preferred Stock generally have no voting rights except for limited voting rights if the Company fails to pay dividends for six or more quarterly periods (whether or not consecutive) and in certain other circumstances. ​ 5. Dividends The following table describes the dividends declared by the Company during the six months ended June 30, 2024: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Amount ​ Dividend Dividend Declaration Date ​ Security Class ​ Per Share ​ Period Covered ​ Paid Date ​ Amount ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ (In thousands) March 15, 2024 ​ Common stock ​ $ 1.82 ​ January 1, 2024 to March 31, 2024 ​ April 15, 2024 ​ $ 51,957 March 15, 2024 ​ Series A preferred stock ​ $ 0.5625 ​ January 15, 2024 to April 14, 2024 ​ April 15, 2024 ​ $ 338 June 14, 2024 ​ Common stock ​ $ 1.90 ​ April 1, 2024 to June 30, 2024 ​ July 15, 2024 ​ $ 54,253 June 14, 2024 ​ Series A preferred stock ​ $ 0.5625 ​ April 15, 2024 to July 14, 2024 ​ July 15, 2024 ​ $ 338 ​ ​ 6. Investments in Real Estate Acquisitions The Company made the following acquisition during the six months ended June 30, 2024 (dollars in thousands): ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Rentable ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Square ​ Purchase ​ Transaction ​ ​ ​ ​ Property Market Closing Date Feet (1) Price Costs Total ​ Ocala Florida ​ ​ June 7, 2024 ​ 145,000 ​ $ 13,000 ​ $ 26 ​ $ 13,026 (2) Total ​ ​ ​ ​ ​ ​ 145,000 ​ $ 13,000 ​ $ 26 ​ $ 13,026 (3) (1) Includes expected rentable square feet at completion of construction at the property. (2) The tenant is expected to complete improvements at the property, for which we agreed to provide funding of up to $ 30.0 million. (3) $ 2.1 million was allocated to land and $ 10.9 million was allocated to building and improvements. ​ Acquired In-Place Lease Intangible Assets In-place lease intangible assets and related accumulated amortization as of June 30, 2024 and December 31, 2023 is as follows (in thousands): ​ ​ ​ ​ ​ ​ ​ ​ June 30, 2024 December 31, 2023 In-place lease intangible assets ​ $ 9,979 ​ $ 9,979 Accumulated amortization ( 2,164 ) ​ ( 1,734 ) In-place lease intangible assets, net ​ $ 7,815 ​ $ 8,245 ​ 13 Table of Contents Amortization of in-place lease intangible assets classified in depreciation and amortization expense in our condensed consolidated statements of income was $ 0.2 million in each of the three months ended June 30, 2024 and 2023, and $ 0.4 million in each of the six months ended June 30, 2024 and 2023. The weighted-average remaining amortization period of the acquired in-place leases was 9.2 years, and the estimated annual amortization of the value of the acquired in-place leases as of June 30, 2024 is as follows (in thousands): ​ ​ ​ ​ ​ Year Amount 2024 (six months ending December 31) ​ $ 430 2025 ​ 860 2026 ​ 860 2027 ​ 860 2028 ​ ​ 860 Thereafter ​ 3,945 Total ​ $ 7,815 ​ Above-Market Lease The above-market lease and related accumulated amortization included in other assets, net on our condensed consolidated balance sheets as of June 30, 2024 and December 31, 2023 is as follows (in thousands): ​ ​ ​ ​ ​ ​ ​ ​ June 30, 2024 December 31, 2023 Above-market lease ​ $ 1,054 ​ $ 1,054 Accumulated amortization ( 233 ) ​ ( 187 ) Above-market lease, net ​ $ 821 ​ $ 867 ​ The above-market lease is amortized on a straight-line basis as a reduction to rental revenues over the remaining lease term of 9.0 years. In each of the three and six months ended June 30, 2024 and 2023, the amortization of the above-market lease was $ 23,000 and $ 46,000 , respectively. Lease Amendments In January 2024, we entered into lease amendments with subsidiaries of 4Front Ventures Corp. (“4Front”) at the four properties we lease to them in Illinois, Massachusetts and Washington, extending the term of each lease. The Illinois property, which is under development, has experienced significant delays in construction, primarily relating to completion of required utilities enhancements, which has resulted in an extended delay of the estimated completion of the project. As a result, we amended the Illinois lease to reduce base rent owing for the nine months ending September 30, 2024, defer the payback of the security deposit applicable to the lease (with the security deposit being subject to future pro-rata monthly payback), and increase the base rent for the remainder of the term commencing November 1, 2024. In February 2024, we amended our lease and development agreement with PharmaCann at one of our New York properties, increasing the construction funding commitment by $ 16.0 million, which also resulted in a corresponding adjustment to the base rent for the lease at the property. We also amended the lease to extend the term. In April 2024, we amended our lease with a subsidiary of Battle Green Holdings LLC at one of our Ohio properties to provide an additional improvement allowance of $ 4.5 million, which also resulted in a corresponding adjustment to the base rent for the lease at the property. ​ In April 2024, we amended the lease with a subsidiary of 4Front at one of our Illinois properties to provide an additional improvement allowance of $ 1.6 million, which also resulted in a corresponding adjustment to the base rent for the lease at the property and increased the annual base rent escalations for the remainder of the lease term. ​ New Leases In January 2024, we executed a new lease with a tenant at one of our retail properties in Michigan. 14 Table of Contents In March 2024, we executed a new long-term lease with a subsidiary of Gold Flora Corporation (“Gold Flora”) at our property located at 63795 19th Avenue in Palm Springs, California (the “19 th Ave. Lease”). In April 2024, we executed a new long-term lease with Lume Cannabis Co. at our property located at 10070 Harvest Park in Dimondale, Michigan. ​ In May 2024, we executed a new long-term lease with a subsidiary of Gold Flora at our property located at 19533 McLane Street in Palm Springs, California (the “McLane Lease”). ​ The commencement date under each of the 19 th Ave. Lease and McLane Lease is conditioned upon, among other things, the tenant’s receipt of approvals to conduct cannabis operations by the requisite state and local authorities. ​ Capitalized Costs ​ During the six months ended June 30, 2024, we capitalized costs of $ 34.5 million and funded $ 37.0 million relating to improvements and construction activities at our properties. Property Dispositions In May 2024, we sold our leased property in Los Angeles, California for $ 9.1 million (excluding closing costs) to a third-party buyer. Concurrently with the sale, pursuant to a separate agreement previously executed between us and the tenant, the tenant paid us a lease termination fee of $ 3.9 million and paid for the closing and other costs incurred by us in connection with the sale of the property. In connection with this sale, during the three months ended June 30, 2024, we recognized a disposition-contingent lease termination fee of $ 3.9 million, which is included in rental revenue (including tenant reimbursements) on our condensed consolidated statements of income, and a loss on sale of real estate of $ 3.4 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) and provided a secured loan for $ 16.1 million to the buyer of the properties. The loan matures on February 29, 2028 with two options to extend the maturity for twelve months , conditional in each instance on the payment of an extension fee and at least $ 0.5 million of the principal balance. The loan is interest only and payments are payable monthly in advance. The transaction did not qualify for recognition as a completed sale under GAAP since not all of the criteria were met. Accordingly, we have not derecognized the assets transferred on our condensed consolidated balance sheets. All consideration received, as well as any future payments, from the buyer will be recognized as a deposit liability and will be included in other liabilities on our condensed consolidated balance sheet until such time the criteria for recognition as a sale have been met. As of June 30, 2024, we have received interest payments of $ 2.1 million. In addition, as we have not met all of the held-for-sale criteria, land and building and improvements with a gross carrying value of $ 3.4 million and $ 13.9 million, respectively, and accumulated depreciation of $ 1.8 million as of June 30, 2024, remain on the condensed consolidated balance sheet, and the buildings and improvements continue to be depreciated. Future Contractual Minimum Rent Future contractual minimum rent (including base rent and property management fees) to be received on our leases as of June 30, 2024 for future periods is summarized as follows (in thousands): ​ ​ ​ ​ ​ Year Contractual Minimum Rent 2024 (six months ending December 31) ​ $ 146,094 2025 ​ 308,713 2026 ​ 321,210 2027 ​ 329,480 2028 ​ 336,786 Thereafter ​ 3,959,086 Total ​ $ 5,401,369 ​ Future contractual minimum rent includes payments to be received on two sales-type leases, which will be recognized as a deposit liability and will be included in other liabilities on our condensed consolidated balance sheet until certain criteria are met (see Note 2 “Lease Accounting” for further details). ​ ​ 15 Table of Contents 7. Debt Exchangeable Senior Notes During the six months ended June 30, 2024, we issued 28,408 shares of our common stock and paid $ 4.3 million in cash upon exchange by holders of $ 4.3 million principal amount of Exchangeable Senior Notes and paid off the remaining $ 0.1 million principal amount at maturity in February 2024, in accordance with terms of the indenture for the Exchangeable Senior Notes. During the six months ended June 30, 2023, we issued 32,200 shares of our common stock upon exchanges by holders of $ 2.0 million of outstanding principal amount of our Exchangeable Senior Notes. For the six months ended June 30, 2023, we recognized a gain on the exchange totaling $ 22,000 , resulting from the difference between the fair value and carrying value of the debt as of the date of the exchange. The issuance of the shares pursuant to the exchanges resulted in a net non-cash increase to our additional paid-in capital account of $ 2.0 million for the six months ended June 30, 2023. The following table details our interest expense related to the Exchangeable Senior Notes which matured in February 2024 (in thousands): ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ For the Three Months Ended June 30, ​ For the Six Months Ended June 30, ​ 2024 2023 2024 2023 Cash coupon $ — $ 42 $ 24 $ 99 Amortization of issuance cost ​ — ​ 8 ​ 5 ​ 20 Capitalized interest ​ ​ — ​ ​ — ​ ​ ( 1 ) ​ ​ — Total interest expense $ — $ 50 $ 28 $ 119 ​ The following table details the carrying value of our Exchangeable Senior Notes (in thousands): ​ ​ ​ ​ ​ ​ ​ ​ ​ June 30, 2024 December 31, 2023 Principal amount $ — $ 4,436 Unamortized issuance cost — ​ ( 5 ) Carrying value $ — $ 4,431 ​ Accrued interest payable for the Exchangeable Senior Notes as of December 31, 2023 was $ 49,000 and was included in accounts payable and accrued expenses on our condensed consolidated balance sheets. Notes due 2026 In May 2021, our Operating Partnership issued $ 300.0 million aggregate principal amount of its 5.50 % Senior Notes due 2026 (the “Notes due 2026”). The Notes due 2026 are senior unsecured obligations of our Operating Partnership, are fully and unconditionally guaranteed by us and rank equally in right of payment with all of the Operating Partnership’s future senior unsecured indebtedness. However, the Notes due 2026 are effectively subordinated to any of the Company’s, the Operating Partnership’s and the Operating Partnership’s subsidiaries’ future secured indebtedness to the extent of the value of the assets securing such indebtedness. The Notes due 2026 will pay interest semiannually at a rate of 5.50 % per year and will mature on May 25, 2026. The terms of the Notes due 2026 are governed by an indenture dated May 25, 2021, and provide that if the debt rating on the Notes due 2026 is downgraded or withdrawn entirely, interest on the Notes due 2026 will increase to a range of 6.0 % to 6.5 % based on such debt rating. In connection with the issuance of the Notes due 2026, we recorded $ 6.8 million of issuance costs, which are being amortized using the effective interest method and recognized as non-cash interest expense over the term of the Notes due 2026. The effective interest rate including amortization of issuance costs is 6.03 %. 16 Table of Contents The following table details our interest expense related to the Notes due 2026 (in thousands): ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ For the Three Months Ended June 30, ​ For the Six Months Ended June 30, ​ 2024 ​ 2023 2024 ​ 2023 Cash coupon ​ $ 4,125 ​ $ 4,125 ​ $ 8,250 ​ $ 8,250 Amortization of issuance cost ​ 351 ​ ​ 331 ​ ​ 697 ​ ​ 657 Capitalized interest ​ ( 224 ) ​ ​ ( 34 ) ​ ​ ( 389 ) ​ ​ ( 34 ) Total interest expense ​ $ 4,252 ​ $ 4,422 ​ $ 8,558 ​ $ 8,873 ​ The following table details the carrying value of our Notes due 2026 (in thousands): ​ ​ ​ ​ ​ ​ ​ ​ June 30, 2024 December 31, 2023 Principal amount $ 300,000 $ 300,000 Unamortized issuance cost ( 2,854 ) ​ ( 3,551 ) Carrying value $ 297,146 $ 296,449 ​ The Operating Partnership may redeem some or all of the Notes due 2026 at its option at any time at the applicable redemption price. If the Notes due 2026 are redeemed prior to February 25, 2026, the redemption price will be equal to 100 % of the principal amount of the Notes due 2026 being redeemed, plus a make-whole premium and accrued and unpaid interest thereon to, but excluding, the applicable redemption date. If the Notes due 2026 are redeemed on or after February 25, 2026, the redemption price will be equal to 100 % of the principal amount of the Notes due 2026 being redeemed, plus accrued and unpaid interest thereon to, but excluding, the applicable redemption date. The terms of the indenture for the Notes due 2026 require compliance with various financial covenants, including minimum level of debt service coverage and limits on the amount of total leverage and secured debt maintained by the Operating Partnership. Management believes that it was in compliance with those covenants as of June 30, 2024. Accrued interest payable for the Notes due 2026 as of both June 30, 2024 and December 31, 2023 was $ 2.1 million, respectively, and is included in accounts payable and accrued expenses on our condensed consolidated balance sheets. Revolving Credit Facility 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, which matures on October 23, 2026. The Loan Agreement was most recently amended in May 2024 to provide $ 50.0 million in aggregate commitments for secured revolving loans (the “Revolving Credit Facility”), the availability of which is based on a borrowing base consisting of real properties owned by subsidiaries (the “Subsidiary Guarantors”) of the Operating Partnership that satisfy eligibility criteria set forth in the Loan Agreement. The obligations of the Operating Partnership under the Loan Agreement are guaranteed by the Company and the Subsidiary Guarantors, and are secured by (i) operating accounts of the Operating Partnership into which lease payments under the real property included in the borrowing base are paid, (ii) the equity interest of the Subsidiary Guarantors, (iii) the real estate included in the borrowing base and the leases and rents thereunder, and (iv) all personal property of the Subsidiary Guarantors. Borrowings under the Revolving Credit Facility bear interest at a variable rate based on the greater of the prime rate and an applicable margin based on deposits with the participating bank(s) and a stipulated interest rate. The Revolving Credit Facility is subject to an unused line of credit fee, calculated in accordance with the Loan Agreement. 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. 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. There were no amounts outstanding under the Revolving Credit Facility as of June 30, 2024. In connection with the Revolving Credit Facility, we recorded $ 0.7 million of issuance costs, which are being amortized on a straight-line basis and recognized as non-cash interest expense over the term of the Revolving Credit Facility. For the three and six months ended June 30, 2024, we recognized $ 68,000 and $ 0.1 million, respectively, of non-cash interest expense related to the Revolving Credit Facility. 17 Table of Contents The following table summarizes the principal payments on our outstanding indebtedness as of June 30, 2024 (in thousands): ​ ​ ​ ​ Payments Due ​ ​ by Year Amount 2024 (six months ending December 31) ​ $ — 2025 ​ ​ — 2026 ​ ​ 300,000 2027 ​ ​ — 2028 ​ ​ — Thereafter ​ ​ — Total ​ $ 300,000 ​ ​ 8. Net Income Per Share Grants of restricted stock and restricted stock units (“RSUs”) of the Company in share-based payment transactions are considered participating securities prior to vesting and, therefore, are considered in computing basic earnings per share under the two-class method. The two-class method is an earnings allocation method for calculating earnings per share when a company’s capital structure includes either two or more classes of common stock or common stock and participating securities. Earnings per basic share under the two-class method is calculated based on dividends declared on common shares and other participating securities (“distributed earnings”) and the rights of participating securities in any undistributed earnings, which represents net income remaining after deduction of dividends accruing during the period. The undistributed earnings are allocated to all outstanding common shares and participating securities based on the relative percentage of each security to the total number of outstanding participating securities. Earnings per basic share represents the summation of the distributed and undistributed earnings per share class divided by the total number of shares. Through June 30, 2024, all of the Company’s participating securities received dividends or dividend equivalents at an equal dividend rate per share or unit. As a result, distributions to participating securities for the three and six months ended June 30, 2024 and 2023 have been included in net income attributable to common stockholders to calculate net income per basic and diluted share. The 19,040 shares necessary to settle the Exchangeable Senior Notes on the if-exchanged method basis were dilutive for the six months ended June 30, 2024 and were included in the computation of diluted earnings per share. The 74,260 and 87,437 shares necessary to settle the Exchangeable Senior Notes on the if-exchanged method basis were dilutive for the three and six months ended June 30, 2023, respectively, and were included in the computation of diluted earnings per share. For the three and six months ended June 30, 2024, 20,713 shares issuable upon vesting of the performance share units (“PSUs”) granted to certain employees were included in dilutive securities as the performance thresholds for vesting of the PSUs were met as measured as of June 30, 2024. For the three and six months ended June 30, 2023, the PSUs granted to certain employees were not included in dilutive securities as the performance thresholds for vesting of the PSUs were not met as measured as of June 30, 2023 (see Note 10 “Common Stock Incentive Plan” for further discussion of PSUs). 18 Table of Contents Computations of net income per basic and diluted share (in thousands, except share and per share data) were as follows: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ For the Three Months Ended ​ For the Six Months Ended ​ ​ June 30, ​ June 30, ​ 2024 2023 2024 2023 Net income ​ $ 41,993 ​ $ 41,269 ​ $ 81,421 ​ $ 82,361 Preferred stock dividends ​ ( 338 ) ​ ( 338 ) ​ ​ ( 676 ) ​ ​ ( 676 ) Distribution to participating securities ​ ( 570 ) ​ ( 373 ) ​ ​ ( 1,114 ) ​ ​ ( 734 ) Net income attributable to common stockholders used to compute net income per share – basic ​ ​ 41,085 ​ ​ 40,558 ​ ​ 79,631 ​ ​ 80,951 Dilutive effect of Exchangeable Senior Notes ​ ​ — ​ ​ 50 ​ ​ 28 ​ ​ 119 Net income attributable to common stockholders used to compute net income per share – diluted ​ $ 41,085 ​ $ 40,608 ​ $ 79,659 ​ $ 81,070 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Weighted-average common shares outstanding: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Basic ​ 28,250,843 ​ 27,981,517 ​ ​ 28,197,930 ​ ​ 27,965,720 Restricted stock and RSUs ​ ​ 300,582 ​ ​ 201,462 ​ ​ 289,736 ​ ​ 186,684 PSUs ​ ​ 20,713 ​ ​ — ​ ​ 20,713 ​ ​ — Dilutive effect of Exchangeable Senior Notes ​ ​ — ​ ​ 74,260 ​ ​ 19,040 ​ ​ 87,437 Diluted ​ 28,572,138 ​ 28,257,239 ​ ​ 28,527,419 ​ ​ 28,239,841 Net income attributable to common stockholders per share: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Basic ​ $ 1.45 ​ $ 1.45 ​ $ 2.82 ​ $ 2.89 Diluted ​ $ 1.44 ​ $ 1.44 ​ $ 2.79 ​ $ 2.87 ​ ​ 9. Fair Value of Financial Instruments Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants on the measurement date. Accounting guidance also establishes a fair value hierarchy that requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. The standard describes three levels of inputs that may be used to measure fair value: Level 1—Observable inputs that reflect quoted prices (unadjusted) for identical assets or liabilities in active markets. Level 2—Includes other inputs that are directly or indirectly observable in the marketplace. Level 3—Unobservable inputs that are supported by little or no market activities, therefore requiring an entity to develop its own assumptions. The following table presents the carrying value and approximate fair value of financial instruments at June 30, 2024 and December 31, 2023 (in thousands): ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ At June 30, 2024 ​ At December 31, 2023 ​ ​ ​ ​ ​ ​ Carrying Value Fair Value Carrying Value Fair Value Investments (1) ​ $ 40,111 ​ $ 40,103 ​ $ 21,948 ​ $ 21,951 Investments as cash equivalents (2) ​ $ — ​ $ — ​ $ 15,187 ​ $ 15,029 Exchangeable Senior Notes (3) ​ $ — ​ $ — ​ $ 4,431 ​ $ 7,576 Notes due 2026 (3) ​ $ 297,146 ​ $ 287,154 ​ $ 296,449 ​ $ 278,325 Construction Loan (4) ​ $ 22,000 ​ $ 27,835 ​ $ 22,000 ​ $ 27,543 Notes receivable (5) ​ $ 19,975 ​ $ 19,975 ​ $ 20,028 ​ $ 20,028 (1) At June 30, 2024, investments consisting of short-term certificates of deposit with an original maturity at the time of purchase of greater than 90 days and less than one year are classified as held-to-maturity and stated at cost, which approximates fair value, and investments consisting of short-term obligations of the U.S. government with an original maturity at the time of purchase of greater than 90 days and less than one year are classified as held-to-maturity, stated at amortized cost and valued using Level 1 inputs. At December 31, 2023, investments consisting of short-term obligations of the U.S. government with an original maturity at the time of purchase of greater than 90 days and less than one year are classified as held-to-maturity, stated at amortized cost and valued using Level 1 inputs. (2) Investments as cash equivalents consisting of obligations of the U.S. government with an original maturity at the time of purchase of 90 days or less are classified as held-to-maturity, stated at amortized cost and valued using Level 1 inputs. 19 Table of Contents (3) The fair value is determined based upon Level 2 inputs as the Exchangeable Senior Notes and Notes due 2026 were trading in the private market. The Exchangeable Senior Notes matured in February 2024. (4) The Construction Loan receivable is categorized as Level 3 and was valued using a yield analysis, which is typically performed for non-credit impaired loans. To determine fair value using a yield analysis, a current price is imputed for the loan based upon an assessment of the expected market yield for a similarly structured loan with a similar level of risk. In the yield analysis, the Company considers the current contractual interest rate, the maturity and other terms of the loan relative to risk of the company and the specific loan. At each of June 30, 2024 and December 31, 2023, the expected market yield used to determine fair value was 16.25 % . Changes in market yields may change the fair value of the Construction Loan. Generally, an increase in market yields may result in a decrease in the fair value of the Construction Loan. Due to the inherent uncertainty of determining the fair value of a loan that does not have a readily available market value, the fair value of the Construction Loan may fluctuate from period to period. Additionally, the fair value of the Construction Loan may differ significantly from the value that would have been used had a readily available market existed for such loan and may differ materially from the value that the Company may ultimately realize. (5) Notes receivable relate to certain acquisitions of real estate which did not satisfy the requirements for sale-leaseback accounting (see Note 2 “Acquisition of Real Estate Properties” to our condensed consolidated financial statements for more information). The notes receivable are categorized as Level 3 and were also valued using a yield analysis. At June 30, 2024 and December 31, 2023, the weighted average expected market yields used to determine fair values were 19.9 % and 16.9 % , respectively. ​ The carrying amounts of cash equivalents, accounts payable, accrued expenses and other liabilities approximate their fair values. 10. Common Stock Incentive Plan Our board of directors adopted our 2016 Omnibus Incentive Plan (the “2016 Plan”) to enable us to motivate, attract and retain the services of directors, employees and consultants considered essential to our long-term success. The 2016 Plan offers our directors, employees and consultants an opportunity to own our stock or rights that will reflect our growth, development and financial success. Under the terms of the 2016 Plan, the aggregate number of shares of our common stock subject to options, restricted stock, stock appreciation rights, restricted stock units and other awards, will be no more than 1,000,000 shares. Any equity awards that lapse, expire, terminate, are canceled or are forfeited (including forfeitures in connection with satisfaction of tax withholdings obligations of the recipient) are re-credited to the 2016 Plan’s reserve for future issuance. The 2016 Plan automatically terminates on the date which is ten years following the effective date of the 2016 Plan. A summary of the restricted stock activity under the 2016 Plan and related information for the six months ended June 30, 2024 is included in the table below: ​ ​ ​ ​ ​ ​ ​ ​ Weighted- ​ ​ Unvested ​ Average ​ ​ Restricted ​ Grant Date Fair ​ ​ Stock ​ Value Balance at December 31, 2023 56,711 ​ $ 135.46 Granted 43,566 ​ $ 91.81 Vested ( 13,698 ) ​ $ 126.83 Forfeited (1) ( 7,442 ) ​ $ 205.15 Balance at March 31, 2024 79,137 ​ $ 106.37 Granted ​ 3,186 ​ $ 113.05 Vested ​ ( 5,055 ) ​ $ 71.23 Balance at June 30, 2024 ​ 77,268 ​ $ 108.95 (1) Shares that were forfeited to cover the employees’ tax withholding obligation upon vesting. The remaining unrecognized compensation cost of $ 6.3 million for restricted stock awards is expected to be recognized over a weighted-average amortization period of 1.9 years as of June 30, 2024. The fair value of restricted stock that vested during the six months ended June 30, 2024 was $ 2.6 million. 20 Table of Contents The following table summarizes our RSU activity for the six months ended June 30, 2024. RSUs are issued as part of the Innovative Industrial Properties, Inc. Nonqualified Deferred Compensation Plan (the “Deferred Compensation Plan”), which allows a select group of management and our non-employee directors to defer receiving certain of their cash and equity-based compensation. RSUs are subject to vesting conditions of the Deferred Compensation Plan and have the same economic rights as shares of restricted stock under the 2016 Plan: ​ ​ ​ ​ ​ ​ ​ ​ ​ Weighted-Average ​ ​ Restricted ​ Grant Date Fair ​ ​ Stock Units ​ Value Balance at December 31, 2023 ​ 149,956 ​ $ 125.34 Granted ​ 69,714 ​ $ 91.81 Balance at March 31, 2024 ​ 219,670 ​ $ 114.70 Granted ​ 2,832 ​ $ 113.05 Balance at June 30, 2024 ​ 222,502 ​ $ 114.68 ​ The remaining unrecognized compensation cost of $ 9.6 million for RSU awards is expected to be recognized over an amortization period of 2.0 years as of June 30, 2024. In January 2021 and 2022, we issued 70,795 and 102,641 “target” PSUs, respectively, to a select group of officers, which vest and are settled in shares of common stock based on the Company’s total stockholder return over a performance period beginning on the applicable grant date and ending on December 31, 2023 and 2024, respectively. ​ Stock-based compensation for market-based PSU awards is based on the grant date fair value of the equity awards and is recognized over the applicable performance period. For the three months ended June 30, 2024 and 2023, we recognized stock-based compensation expense of $ 1.7 million and $ 2.7 million, respectively, relating to PSU awards. For the six months ended June 30, 2024 and 2023, we recognized stock-based compensation expense of $ 3.3 million and $ 5.3 million, respectively, relating to PSU awards. As of June 30, 2024, the remaining unrecognized compensation cost of $ 3.3 million relating to PSU awards is expected to be recognized over the remaining performance period of 0.5 years. The PSUs granted in January 2021 were forfeited in their entirety on December 31, 2023 pursuant to the terms of the agreements, as the PSUs failed to meet the performance threshold for vesting. 11. Commitments and Contingencies Office Lease . The future contractual lease payments for our office lease and the reconciliation to the office lease liability reflected in other liabilities in our condensed consolidated balance sheet as of June 30, 2024 is presented in the table below (in thousands): ​ ​ ​ ​ ​ Year Amount 2024 (six months ending December 31) ​ $ 256 2025 ​ 526 2026 ​ 543 2027 ​ 45 2028 ​ — Total future contractual lease payments ​ 1,370 Effect of discounting ​ ( 101 ) Office lease liability ​ $ 1,269 ​ Improvement Allowances . As of June 30, 2024, we had $ 52.2 million of commitments related to improvement allowances, which generally may be requested by the tenants at any time up until a date that is near the expiration of the initial term of the applicable lease. Construction Commitments. As of June 30, 2024, we had $ 2.5 million of commitments related to contracts with vendors for improvements at our properties. Construction Loan. As of June 30, 2024, we had $ 1.0 million of commitments related to our Construction Loan for the development of a regulated cannabis cultivation and processing facility in California. 21 Table of Contents Environmental Matters. We follow the policy of monitoring our properties, both targeted acquisition and existing properties, for the presence of hazardous or toxic substances. While there can be no assurance that a material environmental liability does not exist, we are not currently aware of any environmental liabilities that would have a material adverse effect on our financial condition, results of operations and cash flow, or that we believe would require disclosure or the recording of a loss contingency. Litigation . Class Action Lawsuit On April 25, 2022, a federal securities class action lawsuit was filed against the Company and certain of its officers. The case was named Michael V. Mallozzi, individually and on behalf of others similarly situated v. Innovative Industrial Properties, Inc., Paul Smithers, Catherine Hastings and Andy Bui, Case No. 2-22-cv-02359, and was filed in the U.S. District Court for the District of New Jersey. The lawsuit was purportedly brought on behalf of purchasers of our common stock and alleges that we and certain of our officers made false or misleading statements regarding our business in violation of Section 10(b) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), SEC Rule 10b-5, and Section 20(a) of the Exchange Act. According to the filed complaint, the p laintiff is seeking an undetermined amount of damages, interest, attorneys’ fees and costs and other relief on behalf of the putative classes of all persons who acquired shares of the Company’s common stock between May 7, 2020 and April 13, 2022. On September 29, 2022, an Amended Class Action Complaint was filed under the same Case Number, adding as defendants Alan D. Gold and Benjamin C. Regin, and asserting causes of action under Sections 10(b) and 20(a) of the Securities Exchange Act of 1934 and Rule 10b-5 promulgated thereunder. According to the Amended Class Action Complaint, the plaintiff is seeking an undetermined amount of damages, interest, attorneys’ fees and costs and other relief on behalf of the putative classes of all persons who acquired shares of the Company’s common stock between August 7, 2020 and August 4, 2022. On December 1, 2022, defendants moved to dismiss the Amended Class Action Complaint. On September 19, 2023, the court granted defendants’ motion to dismiss the Amended Class Action Complaint without prejudice. ​ On October 19, 2023, a Second Amended Class Action Complaint was filed under the same Case Number, and asserted causes of action under Sections 10(b) and 20(a) of the Securities Exchange Act of 1934 and Rule 10b-5 promulgated thereunder. According to the Second Amended Class Action Complaint, the plaintiff is seeking an undetermined amount of damages, interest, attorneys’ fees and costs and other relief on behalf of the putative classes of all persons who acquired shares of the Company’s common stock between August 7, 2020 and August 4, 2022. On December 18, 2023, defendants moved to dismiss the Second Amended Class Action Complaint; on February 1, 2024, plaintiff responded with their opposition to defendants’ motion to dismiss the Second Amended Class Action Complaint; and on March 1, 2024, defendants replied to plaintiff’s response. It is possible that similar lawsuits may yet be filed in the same or other courts that name the same or additional defendants. We intend to defend the lawsuit vigorously. However, at this time, we cannot predict the probable outcome of this action, and, accordingly, no amounts have been accrued in the Company’s condensed consolidated financial statements. ​ Derivative Action Lawsuits On July 26, 2022, a derivative action lawsuit was filed against the Company and certain of its officers and directors. The case was named John Rice, derivatively on behalf of Innovative Industrial Properties, Inc. v. Paul Smithers, Catherine Hastings, Andy Bui, Alan Gold, Gary Kreitzer, Mary Curran, Scott Shoemaker, David Stecher, and Innovative Industrial Properties, Inc., Case Number 24-C-22-003312, and was filed in the Circuit Court for Baltimore City, Maryland. The lawsuit asserts putative derivative claims for breach of fiduciary duty, unjust enrichment, abuse of control, gross mismanagement, and waste of corporate assets against the directors and certain officers of the Company. The plaintiffs are seeking declaratory relief, direction to reform and improve corporate governance and internal procedures, and an undetermined amount of damages, restitution, interest, and attorneys’ fees and costs. On September 6, 2022, the defendants in this action filed a Consent Motion to Stay the Proceedings, which was granted on October 11, 2022. On September 28, 2022, a second derivative action lawsuit was filed against the Company and certain of its officers and directors. The case was named Karen Draper, derivatively on behalf of Innovative Industrial Properties, Inc. v. Paul Smithers, Catherine Hastings, Andy Bui, Alan Gold, Gary Kreitzer, Mary Curran, Scott Shoemaker, David Stecher, Defendants, and Innovative Industrial Properties Inc., Nominal Defendant , Case Number 24-C-22-004243, and filed in the Circuit Court for Baltimore City, Maryland. The lawsuit asserts putative derivative claims for breach of fiduciary duty, and seeks actions to reform and improve the Company, and an undetermined amount of damages, restitution, interest, and attorneys’ fees and costs. On October 19, 2022, the parties to both cases filed a Joint Motion to Consolidate Related Shareholder Derivative Actions and to Appoint Lead and Liaison Counsel for plaintiffs, which was granted on December 19, 2022, along with a stay in the lawsuit pending a ruling on the defendants’ motion to dismiss the federal class action lawsuit described above. On April 17, 2023, a third derivative action lawsuit was filed against the Company and certain of its officers and directors. The case was named Ross Weintraub, derivatively on behalf of Innovative Industrial Properties, Inc. v. Alan Gold, Paul Smithers, Catherine Hastings, Ben Regin, Andy Bui, Tracie Hager, Gary 22 Table of Contents Kreitzer, David Stecher, Scott Shoemaker, Mary Curran, and Innovative Industrial Properties, Inc., Case Number 1:23-cv-00737-GLR, and filed in the United States District Court for the District of Maryland. The lawsuit asserts putative derivative claims for breach of fiduciary duty and violations of Section 14(a) of the Exchange Act, and seeks an undetermined amount of damages, equitable relief, and attorneys’ fees and costs. Defendants in this action filed a Consent Motion to Stay the Proceeding, which was granted on April 17, 2023. On June 5, 2023, a fourth derivative action lawsuit was filed against the Company and certain of its officers and directors. The case was named Franco DeBlasio, on behalf of Gerich Melenth Nin (GMN) LP, derivatively on behalf of Innovative Industrial Properties, Inc. v. Paul Smithers, Catherine Hastings, Alan D. Gold, Tracie J. Hager, Benjamin C. Regin, Andy Bui, Gary A. Kreitzer, David Stecher, Scott Shoemaker, Mary Curran, and Innovative Industrial Properties, Inc., Case Number 1:23-cv-01513-GLR, and filed in the United States District Court for the District of Maryland. On July 19, 2023, the United States Court for the District of Maryland consolidated Case Nos. 1:23-cv-00737-GLR and 1:23-cv-01513-GLR with case number 1:23-cv-00737-GLR as the lead case, and kept the stay in place. The consolidated case remains stayed as Case Number 24-C-22-003312. ​ On May 9, 2024, a fifth derivative action lawsuit was filed against the Company and certain of its officers and directors. The case was named Gary A Gedig, derivatively on behalf of Innovative Industrial Properties, Inc. v. Paul Smithers, Catherine Hastings, Ben Regin, Andy Bui, Tracy Hager, Alan Gold, Gary A. Kreitzer, Mary Curran, Scott Shoemaker, M.D., and David Stecher, and Innovative Industrial Properties, Inc., Civil No. C-24-CV-24-000130, and filed in the Circuit Court for Baltimore City, Maryland. Plaintiff and Defendants in this action filed a Joint Stipulation to Stay the Proceedings, which is pending review by the court. ​ The Company intends to vigorously defend each of these lawsuits. However, at this time, the Company cannot predict the probable outcome of these actions, and, accordingly, no amounts have been accrued in the Company’s condensed consolidated financial statements. ​ We may, from time to time, be a party to other legal proceedings, which arise in the ordinary course of our business. Although the results of these proceedings, claims, inquiries, and investigations cannot be predicted with certainty, we do not believe that the final outcome of these matters is reasonably likely to have a material adverse effect on our business, financial condition, or results of operations. Regardless of final outcomes, however, any such proceedings, claims, inquiries, and investigations may nonetheless impose a significant burden on management and employees and may come with significant defense costs or unfavorable preliminary and interim rulings. ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 12. Subsequent Events The Company has evaluated subsequent events through the filing of this Quarterly Report on Form 10-Q and determined that there have been no events that have occurred that would require adjustments to our disclosures in the condensed consolidated financial statements. ​ ​ ​ 23 Table of Contents ​