What changed in this filing

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Item 2. Management’s Discussion and Analysis

2026-05-05 compared with 2025-11-04 · 231 added, 319 removed, 233 unchanged (70% of the section changed)

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the demand for regulated cannabis cultivation and processing facilities;

anticipated funding sources for our investment in IQHQ Preferred Stock (as defined below);

defaults on our investments in real estate-related assets, such as the IQHQ Credit Facility and IQHQ Preferred Stock (as defined below);

anticipated funding sources for our investment in IQHQ Preferred Stock (as defined in Note 7 to the consolidated financial statements);

defaults on our investments in real estate-related assets, such as the IQHQ Credit Facility and IQHQ Preferred Stock (as defined in Note 7 to the consolidated financial statements);

our ability to identify, acquire, or profitably operate life science properties;

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or state governments and changes to government policies and the execution and impact of these actions, initiatives and policies, including the fact that cannabis remains illegal under federal law;

the timing, scope and impact of the April 23, 2026 final order issued by the U.S.

Department of Justice and the Drug Enforcement Administration regarding the federal scheduling status of certain marijuana activities;

availability of suitable investment opportunities in the regulated cannabis industry;

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The risks included here are not exhaustive, and additional factors could adversely affect our business and financial performance, including factors and risks included in other sections of this report.

In addition, we discussed a number of material risks in our Annual Report on Form 10-K for the year ended December 31, 2024, our Quarterly Report on Form 10-Q for the quarter ended March 31, 2025 and in Part II, "Item 1A.

In addition, we discussed a number of material risks in our Annual Report on Form 10-K for the year ended December 31, 2025 and in Part II, "Item 1A.

Risk Factors" included in this report.

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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 (the “Operating Partnership”).

We are an internally-managed real estate investment trust (“REIT”) focused on the acquisition, ownership and management of specialized industrial and commercial properties in the United States.

We are an internally-managed real estate investment trust (“REIT”) focused on the acquisition, ownership and management of specialized industrial and investments in the life science industry.

Our properties are primarily leased to experienced, state-licensed operators for their regulated cannabis facilities.

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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.

As of September 30, 2025, we had 23 full-time employees.

As of September 30, 2025, we owned 112 properties comprising 9.0 million square feet (including 483,000 rentable square feet under development/redevelopment) in 19 states.

As of September 30, 2025, we had invested $2.5 billion in the aggregate (consisting of purchase price and funding of draws for construction and improvements submitted by tenants, if any, but excluding transaction costs) and had committed an additional $7.8 million to fund draws to certain tenants and vendors for improvements at our properties.

Of the $7.8 million committed to fund draws to certain tenants and vendors for improvements at our properties, $4.3 million was incurred but not funded as of September 30, 2025.

Of these 112 properties, we include 109 properties in our operating portfolio, which were 95.8% leased as of September 30, 2025, with a weighted-average remaining lease term of 12.9 years.

We do not include in our operating portfolio the following properties (all of which were under development/redevelopment as of September 30, 2025, and together are expected to comprise 491,000 rentable square feet upon completion of development/redevelopment):

• 63795 19th Avenue in Palm Springs, California (pre-leased);

As of March 31, 2026, we had 23 full-time employees.

As of March 31, 2026, we owned 110 properties comprising 8.9 million square feet (including 303,000 rentable square feet under development/redevelopment) in 19 states.

As of March 31, 2026, we had invested $2.5 billion in the aggregate (consisting of purchase price and funding of draws for construction and improvements submitted by tenants, if any, but excluding transaction costs) and had committed an additional $4.4 million to fund draws to certain tenants and vendors for improvements at our properties.

Of the $4.4 million committed to fund draws to certain tenants and vendors for improvements at our properties, $0.9 million was incurred but not funded as of March 31, 2026.

Of these 110 properties, we include 108 properties in our operating portfolio, which were 97.8% leased as of March 31, 2026, with a weighted-average remaining lease term of 12.4 years.

We do not include in our operating portfolio the following properties (all of which were under development/redevelopment as of March 31, 2026, and together are expected to comprise 255,000 rentable square feet upon completion of development/redevelopment):

• Inland Center Drive in San Bernardino, California;

• Leah Avenue in San Marcos, Texas.

As discussed below under the section entitled “—Factors Impacting Our Operating Results—Conditions in Our Markets,” market dynamics in the regulated cannabis industry have been extremely challenging in recent years.

These challenges include federal, state and local taxation burdens;

ineffective enforcement policies with respect to the illicit cannabis market;

declines in unit pricing for regulated cannabis products;

limited access to capital;

and inflation and supply chain constraints.

As we have discussed in this and previous filings with the SEC, these challenges have negatively impacted the ability of certain of our tenants to make their lease payments on the properties they lease from us.

In light of these industry conditions and their impact on our existing portfolio, we have expanded our growth strategy to include a broader range of real estate and real estate-related investments.

See the subsection below entitled “— Recent Developments.”

In March 2025, the Company launched a strategic initiative aimed at improving long-term financial performance by seeking to refresh a substantial portion of its tenant base with more financially viable, long-term tenants.

As part of this initiative, the Company declared certain tenants and their affiliates in default for failure to pay contractual rent in full, including 4Front Ventures Corp., Gold Flora, LLC, and TILT Holdings Inc.

These tenants, which collectively accounted

for approximately 11.4% of the Company’s annualized contractual rent due as of September 30, 2025, owed $18.0 million, $4.6 million and $4.4 million, respectively, in base rent, property management fees, and estimated tax and insurance payments as of such date.

The Company is actively pursuing its rights under these leases, which may include initiating eviction proceedings.

Gold Flora and 4Front Ventures are both currently operating under receivership and 4Front Ventures has filed for bankruptcy protection in Canada and for voluntary receivership in Massachusetts and Illinois.

Therefore, any actions with respect to their leases may involve additional legal processes and delays.

In July 2025, we terminated the lease with an affiliate of Gold Flora for our property located in Palm Springs, California, which represents one of three leases with affiliates of Gold Flora.

During the three months ended September 30, 2025, the Company declared additional defaults on its leases with two tenants for failure to pay rent in full.

These leases represent, in the aggregate, less than 2% of our total rental revenues for the three and nine months ended September 30, 2025.

Additionally, the Company previously declared a default under a secured promissory note in the aggregate principal amount of $16.1 million (the “MIH Note”).

The MIH Note was issued to the Company by the purchaser of four properties in California, and the MIH Note is secured by such four properties.

In September 2025, due to borrower's continued default and voluntary surrender, the Company took back possession and ownership of the four properties through a deed in lieu of foreclosure.

The Company previously entered into leases with PharmaCann Inc.

As previously disclosed, we entered into leases with PharmaCann Inc.

and its affiliates for eleven properties.

Two of such leases, for cultivation facilities in Michigan and Massachusetts, had their monthly base rent of $1.3 million, in the aggregate, fully abated effective February 1, 2025, under lease amendments agreed to by the parties in January 2025.

The Company re-leased the 205,000 square foot Michigan property to Berry Green in April 2025 and is seeking to re-lease the property located in Massachusetts.

As previously disclosed, PharmaCann defaulted on its rent obligations under the remaining nine of these leases, covering properties in New York, Illinois, Pennsylvania, Ohio and Colorado, with total amounts due of $21.4 million as of September 30, 2025.

These properties collectively accounted for approximately 11.4% of the Company’s annualized contractual rent due as of such date.

The Company recovered possession of one of its retail properties in Colorado through a default judgment, and PharmaCann has paid and continues to pay full rent on the remaining four retail properties located in Colorado.

The Company has commenced litigation against PharmaCann and is actively seeking possession of the properties located in New York, Illinois, Pennsylvania, and Ohio.

The Company continues to enforce its rights under these leases and intends to pursue all remedies available under the lease agreements and applicable law.

See Note 6 “Investments in Real Estate” in the notes to our consolidated financial statements for further information regarding our leases with PharmaCann and the MIH Note described above.

Because substantially all of our leases are triple net, our tenants are generally responsible for the maintenance, insurance, and property taxes associated with the properties they lease from us.

We expect to incur some property-level operating costs from time to time, however, in periods during which properties that become vacant are being remarketed or re-positioned.

In addition, we may recognize an expense for certain property costs, such as insurance premiums and real estate taxes billed in arrears, if we believe the tenant is likely to vacate the property before making payment on those obligations or may be unable to pay such costs in a timely manner.

Property costs are generally not significant to our operations, but the amount of property costs can vary quarter to quarter based on the number of property vacancies and whether we have any underperforming properties.

We may advance certain property costs on behalf of our tenants but expect that the majority of these costs will be reimbursed by the tenant and do not anticipate that they will be significant to our operations.

In addition, for properties that are not leased and are under development or redevelopment, we may make significant additional investments in these properties in order to get them ready for their intended use and to re-lease them.

For the three and nine months ended September 30, 2025, property expenses included $0.9 million and $2.3 million, respectively, of non-reimbursed expenses related to operating properties that were not leased.

Recent Developments

Investment in IQHQ

As previously disclosed, on August 6, 2025, the Company through its Operating Partnership entered into a Securities Purchase Agreement (the “Securities Purchase Agreement”) with IQHQ, Inc., a Maryland corporation (“IQHQ REIT”) and certain of IQHQ REIT’s affiliates.

The Securities Purchase Agreement, together with certain exhibits thereto, set forth the terms under which the Operating Partnership agreed to:

(i) purchase up to $170 million of 15.0% Series G-1 Cumulative Redeemable Preferred Stock of IQHQ REIT (the “IQHQ Preferred Stock”) at a price of $1,000 per share, together with corresponding warrants to purchase common equity units of IQHQ Holdings, LP, a Delaware limited partnership, subject to the satisfaction of certain funding milestones of the IQHQ Preferred Stock;

and (ii) provide a $100 million commitment to the operating partnership of IQHQ REIT as a member of a lender syndicate under an Amended and Restated Credit

Agreement (the “IQHQ Credit Facility”) with an initial term of three years, extendable by an additional 12 months upon payment of an extension fee and satisfaction of certain other conditions.

On September 30, 2025, our Operating Partnership assigned its rights and obligations under the Securities Purchase Agreement to IIP Life Science Investments LLC (“IIP Life Science”), a wholly owned subsidiary of the Operating Partnership.

Following the assignment, IIP Life Science completed the initial closing of the Company’s investment in preferred equity of IQHQ REIT, purchasing 5,000 shares of IQHQ Preferred Stock for $5.0 million.

On October 31, 2025, the Company purchased an additional 45,000 shares of IQHQ Preferred Stock for $45.0 million, resulting in a total investment of 50,000 shares with an aggregate purchase price of $50.0 million.

The IQHQ Preferred Stock accrues cumulative dividends comprised of (i) a 10.0% annual cash dividend and (ii) a 5.0% paid-in-kind (“PIK”) dividend, both calculated on the Base Amount (as defined in the Securities Purchase Agreement), with dividends payable quarterly in arrears.

The PIK dividend rate increases by 1.25% on each of the fourth and fifth anniversaries of issuance.

In the event of a failure by IQHQ REIT to make required redemptions or cash dividend payments, the PIK dividend rate increases by an additional 5.0%, until the failure is cured, subject to a cap on the increase.

The IQHQ Preferred Stock ranks senior to IQHQ REIT’s common equity and any junior securities, pari passu with its Series E Preferred Stock and other parity securities, and junior to its Series A and Series D-1 Preferred Stock with respect to dividends and liquidation preferences.

The IQHQ Preferred Stock is not convertible and carries limited voting rights, except as required by law or with respect to charter amendments that are materially adverse to holder rights.

The IQHQ Preferred Stock may be redeemed by IQHQ REIT at any time at the greater of $1,560 per share or the then-current Base Amount and may also be subject to holder redemption upon a change of control or sale transaction.

The remaining balance of the Company’s committed investment in IQHQ Preferred Stock is expected to be funded in multiple tranches between the fourth quarter of 2025 and the second quarter of 2027, subject to extension options exercisable by IQHQ REIT.

In connection with the initial closing, IIP Life Science also received a warrant (the “IQHQ Warrant”) to purchase common equity units of IQHQ Holdings, LP, a Delaware limited partnership and the parent entity of IQHQ REIT.

The IQHQ Warrant is exercisable for a number of common equity units representing 1.5% of the fully diluted outstanding common equity of IQHQ Holdings, LP (after giving effect to all previously issued warrants) as of the date of the initial closing.

Pursuant to the terms of the Securities Purchase Agreement, upon the initial closing, IIP Life Science obtained the right to appoint one voting member to IQHQ REIT’s board of directors, subject to certain ownership thresholds, and designated Paul Smithers, the Company’s CEO, for this role.

IIP Life Science also entered into a Right of First Offer Letter with IQHQ REIT and its affiliates, granting the Company a contractual right of first offer on certain real estate asset sales of IQHQ REIT and certain of its affiliates, which the Company expects will support the execution of its strategy to acquire life science properties.

IQHQ Revolving Credit Facility Investment

In connection with the initial closing under the Securities Purchase Agreement, on September 30, 2025, IIP Life Science became a lender under the IQHQ Credit Facility.

Pursuant to the terms of the facility, IIP Life Science committed to provide a $100.0 million loan to the operating partnership of IQHQ REIT, which was fully funded on that same date.

As a result of IIP Life Science’s participation, the aggregate amount funded under the IQHQ Credit Facility by all lender parties increased to $400.0 million.

The IQHQ Credit Facility bears interest at a fixed annual rate of 13.5%, consisting of 12.0% payable in cash and 1.5% PIK, with interest payable quarterly.

The IQHQ Credit Facility has an initial term of three years from the closing date, with a one-time extension option of up to 12 months, subject to the satisfaction of certain conditions and payment of a facility extension fee.

All obligations under the IQHQ Credit Facility are unconditionally guaranteed by IQHQ REIT and secured by a first priority pledge of IQHQ, LP’s majority ownership interest in IQHQ Fenway Center, LLC, subordinated to certain construction financing.

IQHQ, LP is the operating partnership of IQHQ REIT.

IIP Life Science is subject to a rate reduction penalty of up to 3.0% in the event it fails to make required purchases of IQHQ Preferred Stock under the Securities Purchase Agreement.

The IQHQ Credit Facility includes customary representations, warranties, and covenants, as well as major decision rights requiring lender approval.

IQHQ, LP is required to prepay loans with proceeds from certain asset or equity sales and may voluntarily prepay or reduce commitments subject to specified conditions.

IIP Life Science Credit Facility

On October 3, 2025, our Operating Partnership and IIP Life Science entered into a loan agreement with a federally regulated commercial bank, as agent for the lenders that become party thereto from time to time (the “IIP Life Science Credit Facility” and together with the Revolving Credit Facility, the “Credit Facilities”).

Under the IIP Life Science Credit Facility, our Operating Partnership has a revolving line of credit available up to $100.0 million until the maturity date on October 3, 2028.

The IIP Life Science Credit Facility includes an accordion feature under which the revolving line of credit may be increased up to an aggregate of $135.0 million, under certain conditions, including obtaining additional lender commitments.

The availability of credit at any given time under the IIP Life Science Credit Facility is subject to, among other things, the amount of collateral available and a borrowing base formula based upon the value of eligible investments in certain securities and an eligible loan receivable.

All obligations under the IIP Life Science Credit Facility are secured by substantial assets of the loan parties, including the Company’s investment through IIP Life Science in IQHQ Preferred Stock, the IQHQ Warrant, and the IQHQ Credit Facility.

Borrowings under the IIP Life Science Credit Facility will bear interest on the outstanding daily balance at a rate of interest per annum equal to the greater of (i) the one-month Secured Overnight Financing Rate ("SOFR"), as administered by CME Group Benchmark Administration, plus 2.0% and (ii) 6.10%.

The IIP Life Science Credit Facility contains a liquidity covenant and a debt service coverage ratio covenant, which requires that the ratio of the Company’s consolidated EBITDA to debt service costs not be less than 2.0 to 1.0, measured as of the end of each fiscal quarter.

As of October 31, 2025, outstanding borrowings under our IIP Life Science Credit Facility were $52.5 million.

Effective February 1, 2025, rent under two cultivation facility leases in Michigan and Massachusetts, representing aggregate monthly base rent of approximately $1.3 million, was fully abated pursuant to lease amendments entered into in January 2025.

In April 2025, we re-leased the approximately 205,000 square foot Michigan property to Berry Green, and we have also leased the former PharmaCann cultivation facility in Holliston, Massachusetts to a third party.

We regained possession of one retail property in Colorado through a default judgment and the property was subsequently sold in December 2025.

PharmaCann has paid, and continues to pay, full rent on the remaining four retail properties in Colorado.

In December 2025, we obtained a judgment in our favor in an eviction action relating to the Dwight, Illinois facility and regained possession of that property.

The property was re-leased to Grown Rogue in March 2026.

PharmaCann defaulted on its rent obligations under three out of seven the remaining leases, covering properties in New York, Pennsylvania, Ohio.

As of March 31, 2026, amounts due under these leases for base rent, property management fees, and estimated tax and insurance payments totaled $38.5 million, including the balance related to the Illinois property.

We have commenced litigation and are actively seeking possession of the remaining properties in New York, Pennsylvania and Ohio.

As of March 31, 2026, the seven properties leased to PharmaCann collectively represented approximately 10.3%

of our annualized contractual rent.

We continue to enforce our rights under the applicable lease agreements and pursue available remedies.

See Note 6, “Investments in Real Estate,” to our consolidated financial statements for additional information.

On February 26, 2026, the Company entered into a settlement agreement (the “PharmaCann Settlement Agreement”) with PharmaCann Inc.

(“PharmaCann”) to resolve pending lawsuits brought by certain indirect, wholly owned subsidiaries of the Company against PharmaCann and certain of its affiliates in connection with rent defaults under leases (the “PharmaCann Leases”) for three properties owned by the Company located in New York, Ohio, and Pennsylvania.

Pursuant to the PharmaCann Settlement Agreement, PharmaCann agreed to wind down and close its operations at each property and surrender possession of the New York and Pennsylvania premises to the Company on or before May 20, 2026, and the Ohio premises on or before May 26, 2026.

Upon PharmaCann's vacating and surrendering of the premises on the applicable surrender dates, the PharmaCann Leases will be deemed terminated.

In connection with the PharmaCann Settlement Agreement, the parties entered into consent orders, stipulations of judgment, and stipulations of settlement with the respective courts in Pennsylvania, New York, and Ohio (collectively, the “Consents”).

The Consents provide for the entry of judgments in favor of the Company's subsidiaries for possession of the premises as well as monetary judgments and were fully executed on March 13, 2026.

The monetary judgments are subject to reduction on a dollar-for-dollar basis for escrowed rent funds released to the Company.

In March 2025, we initiated a strategic effort to improve long-term financial performance by repositioning a portion of our tenant base toward more financially viable, long-term operators.

In connection with this effort, we declared certain tenants and their affiliates in default for failure to pay contractual rent in full, including 4Front Ventures Corp., Gold Flora, LLC and TILT Holdings Inc.

We are actively pursuing our rights under these leases, which may include eviction proceedings.

4Front Ventures has filed for bankruptcy protection in Canada and for voluntary receivership in Massachusetts and Illinois, which may delay our enforcement efforts.

As of March 31, 2026, we have terminated all three leases with affiliates of Gold Flora.

As of March 31, 2026, 4Front Ventures Corp and TILT Holdings Inc collectively represented approximately 8.8% of our annualized contractual rent and owed $28.1 million and $6.6 million, respectively, for base rent, property management fees, and estimated tax and insurance payments.

During the quarter ended March 31, 2026, we also declared defaults under leases with two additional tenants, The Cannabist Company and Battle Green Holdings, Inc.

("Battle Green"), for failure to pay rent in full.

As of March 31, 2026, these leases represented, in the aggregate, 5% of our annualized contractual rent.

Factors Impacting Our Operating Results

Our results of operations are affected by a number of factors and depend on the rental revenues we receive from the properties that we acquire, the timing of lease expirations, general market conditions, the regulatory environment in the regulated cannabis industry, and the competitive environment for real estate assets that support the regulated cannabis industry.

Our results of operations are affected by a number of factors and depend on the rental revenues we receive from the properties that we acquire, the timing of lease expirations, general market conditions, the regulatory environment in the regulated cannabis industry, the regulatory and market conditions applicable to the life science industry, and the competitive environment for real estate assets supporting regulated cannabis operators and life science tenants.

Rental Revenues

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

Current unfavorable market dynamics in the regulated cannabis industry have adversely affected our ability to re-lease properties upon tenant defaults at the rental rates we currently receive and, in some cases, for prolonged periods.

Furthermore, changes in federal law and current favorable state or local laws in the cannabis industry may impair our ability to renew or re-lease properties and the ability of our tenants to fulfill their lease obligations and could materially and adversely affect our ability to maintain or increase rental rates for our properties.

Conditions in Our Markets

Positive or negative changes in regulatory, economic or other conditions, drought, and natural disasters in the markets where we acquire properties may affect our overall financial performance.

The success of our tenants in operating their businesses and their ability to pay rent continues to be significantly influenced by a range of macroeconomic and industry-specific challenges.

These include, but are not limited to, inflationary pressures, elevated interest rates, substantial debt maturities, reduced access to capital, labor market constraints, evolving trade policies, supply chain disruptions and U.S.

consumer financial health.

Additionally, market dynamics and the regulatory regime in the states where they operate create challenges that may impact our tenants’ businesses and/or decrease future demand for regulated cannabis cultivation and production facilities.

These conditions have already adversely impacted the ability of certain of our tenants to satisfy their lease obligations and, if such conditions persist or deteriorate further, we expect that additional tenants may default under their leases and we may be unable to re-lease those properties on favorable terms or at all.

These tenant-related challenges are currently having a material adverse

effect on the Company’s financial condition, results of operations, and cash flows.

See “—Results of Operations—Comparison of the three and nine months ended September 30, 2025 and 2024—Rental Revenues” for more information.

The full extent and duration of these challenges remain subject to significant uncertainty.

Conditions in the markets in which we operate, including regulatory, economic and industry-specific developments, influence tenant performance and the performance of our life science investments and, in turn, our financial condition, results of operations and cash flows.

Our tenants primarily operate in the regulated cannabis industry and continue to be affected by a combination of macroeconomic, industry-specific and regulatory factors.

These include federal, state and local taxation burdens;

competitive pressure from illicit, unlicensed cannabis operations;

declines in unit pricing for regulated cannabis products;

constrained access to capital;

inflationary pressures;

elevated interest rates;

significant debt maturities;

labor market constraints;

supply chain disruptions;

evolving trade policies;

and broader U.S.

consumer financial conditions.

Market dynamics and regulatory frameworks vary by state and may influence tenant profitability and demand for regulated cannabis cultivation and production facilities.

These conditions have already adversely affected the ability of certain tenants to meet their lease obligations and have had a material adverse effect on the Company’s financial condition, results of operations, and cash flows.

If these challenges persist or worsen, additional tenants may default under their leases and we may be unable to re-lease affected properties on favorable terms, or at all.

The extent and duration of these impacts depend on developments in the regulated cannabis markets in which we operate and remain subject to significant uncertainty.

These tenant-related challenges are currently having a material adverse effect on the Company’s financial condition, results of operations, and cash flows.

See “—Results of Operations—Comparison of the three months ended March 31, 2026 and 2025—Rental Revenues” for more information.

If these challenges persist or worsen, additional tenants may default under their leases and we may be unable to re-lease affected properties on favorable terms, or at all.

The extend and duration of these impacts depend on developments in the regulated cannabis markets in which we operate and remain subject to significant uncertainty.

On April 23, 2026, the U.S.

Department of Justice (“DOJ”) and the Drug Enforcement Administration (“DEA”) announced a final order reclassifying FDA-approved marijuana drug products and certain state-licensed medical marijuana activities from Schedule I to Schedule III, while adult-use marijuana, synthetic tetrahydrocannabinols and unlicensed marijuana activities remain Schedule I.

The final order creates an expedited DEA registration pathway for eligible state-licensed medical marijuana operators and, if such operators obtain registration, may eliminate the application of Section 280E to qualifying medical marijuana operations.

However, no retrospective tax relief or guidance has been issued, and significant uncertainty remains regarding dual-license operators, actions by the DEA, the U.S.

Department of the Treasury, and the Internal Revenue Service, tenants’ ability to obtain DEA registration, and the outcome of the DEA administrative hearing scheduled to begin on June 29, 2026.

Accordingly, while we believe these developments represent a meaningful step forward for the industry and could improve operator economics, access to capital, and long-term growth, we continue to assess their impact on our tenants, properties, and business and cannot predict the effect on our financial condition, results of operations, or cash flows.

In addition to the regulated cannabis industry, we have investments and strategic objectives related to the life science industry.

Conditions in the life science sector, including capital availability, interest rate trends, new supply, valuation levels and sector consolidation may affect the performance of our life science investments and any life science properties that we may acquire.

Market Dynamics in Regulated Cannabis State Programs

States vary significantly in their market dynamics, driven by many factors, including, but not limited to, regulatory frameworks, enforcement policies with respect to illicit, unlicensed cannabis operations, taxation and licensing structures.

For example, in California, according to Global Go Analytics, t he illicit market for cannabis remains a much larger portion of overall sales in the state, and state and local authorities have assessed significant taxes on regulated cannabis products, both of which have had the impact of significantly limiting the growth and profitability for operators in the state’s regulated cannabis market.

Many states continue to experience significant declines in unit pricing for regulated cannabis products, with that decline more pronounced in certain states than in others, which compresses operating margins for operators.

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.

Regulated cannabis markets differ significantly by state, reflecting variations in regulatory structures, taxation and licensing regimes, and enforcement practices related to illicit cannabis activity.

In certain states, including California, the illicit market continues to represent a substantial portion of overall cannabis sales, and high state and local taxes on regulated cannabis products have impacted operator profitability.

In markets where enforcement against illicit sales is limited or inconsistent, regulated operators may face additional competitive pressure, which can affect demand for regulated cannabis facilities.

In addition, many states have experienced sustained declines in unit pricing for regulated cannabis products, with pricing pressure more pronounced in certain markets.

These trends have compressed margins for operators and, in some cases, led to consolidation of operations or the closure of certain facilities.

These developments have influenced tenant demand for space and capital investment decisions and may continue to affect leasing activity.

Reduced Capital Availability and Significant Debt Maturities for Cannabis Operators

Operators in the regulated cannabis industry are facing a challenging financial environment marked by reduced access to capital and mounting debt obligations.

Over the past several years, capital availability for these operators has declined significantly due to many factors, including heightened financial market volatility, rising interest rates, growing geopolitical risks, and increased risk aversion among institutional investors.

These pressures are compounded by ongoing regulatory uncertainty and the continued federal illegality of cannabis in the United States, which restricts access to traditional financing options, such as bank loans and public equity markets, leaving many reliant on higher-cost alternative financing.

At the same time, a growing number of cannabis companies are approaching the maturity dates of previously issued debt, much of which was incurred during a period of more favorable market conditions.

Many of these debt instruments carry relatively high interest rates and restrictive covenants, which further constrain operational flexibility.

With limited refinancing options available, operators may face challenges meeting upcoming debt obligations, increasing the risk of defaults, asset sales, or operational cutbacks.

These financial pressures, combined with ongoing inflation, compressed margins, and regulatory burdens, pose significant risks to tenant stability and long-term performance in the cannabis sector, potentially impacting our tenant credit quality, lease compliance, and future leasing activity.

Capital availability for regulated cannabis operators remains constrained due to a combination of higher interest rates, increased market volatility, regulatory uncertainty, and the continued federal illegality of cannabis in the United States, which limits access to traditional bank financing and public capital markets.

As a result, many operators rely on alternative sources of capital that are generally more expensive and restrictive.

Since 2021, capital availability for the regulated cannabis industry has declined, in part due to broader macroeconomic conditions.

According to Viridian Capital Advisors (“Viridian”), worldwide cannabis capital raises in 2025 decreased modestly to $2.1 billion, compared to $2.3 billion in 2024, but remained well below levels observed in prior years, including over $4.3 billion in 2022.

In contrast, Viridian reports that mergers and acquisitions activity in the North American regulated cannabis industry increased to approximately $2.1 billion in 2025, up from $1.2 billion in 2024.

At the same time, a number of operators have reached or are approaching the maturity of debt incurred in prior periods.

Limited refinancing options, often at higher interest rates and with restrictive covenants, have increased financial pressure on some tenants and may lead to balance sheet restructurings, asset sales or reductions in operations.

These factors may affect tenant credit profiles and leasing decisions and could influence future rental income and property utilization.

Inflation, Tariffs and Supply Chain Disruption

Recent changes in U.S.

trade policy, including the imposition of significant tariffs on imports from Canada, Mexico, China, and other key trading partners, are expected to increase the costs of key inputs used in cannabis cultivation and production, such as equipment, lighting systems, HVAC units, construction materials and specialized packaging.

These added costs are especially impactful to our tenants operating in the regulated cannabis industry, which already faces heightened compliance, regulatory and tax burdens compared to other sectors.

In addition, escalating geopolitical tensions and retaliatory trade measures have disrupted global supply chains, which may lead to sourcing challenges, longer lead times, and increased costs for capital projects, including the development and redevelopment of our properties.

These factors may result in cost overruns or delays in the development or redevelopment of our properties and may adversely affect the timing and commencement of operations on certain of our tenants’ projects.

However, the ultimate impact remains uncertain, as future changes to tariff policy, including potential adjustments or exemptions, could materially influence cost structures and supply chain decisions across the industry.

Inflationary pressures, changes in trade policy and ongoing supply chain challenges have contributed to higher operating and capital costs for cannabis operators and, in certain cases, for the development or redevelopment of our properties.

Changes in tariff policies may increase the cost of equipment, construction materials and other inputs used in cultivation and production facilities.

These higher costs may further affect tenant capital expenditure plans and operating margins.

In addition, supply chain disruptions and geopolitical developments have resulted in longer lead times and increased costs for certain capital projects, which may delay development or redevelopment activities and the commencement or expansion of tenant operations.

The extent of these impacts will continue to depend on broader economic conditions, regulatory developments and future changes in trade and tariff policies.

Unit Pricing for Regulated Cannabis Products

Many states have experienced declines in unit pricing for regulated cannabis products, with that decline more pronounced in certain states than in others, which compresses operating margins for operators.

As a result, certain regulated cannabis operators have consolidated operations or shuttered certain operations to reduce costs, which could have a negative impact on operators’ demand for regulated cannabis facilities, including our existing tenants.

Significant Tenants and Concentrations of Risk

As of September 30, 2025, we owned 112 properties located in 19 states leased to 36 tenants.

As of March 31, 2026, we owned 110 properties located in 19 states leased to 38 tenants.

Many of our tenants are tenants at multiple properties.

We seek to manage our portfolio-level risk through geographic diversification and by minimizing dependence on any single property or tenant.

At September 30, 2025, our largest property was located in New York and accounted for 5.5% of our net real estate held for investment.

No other properties accounted for more than 5% of our net real estate held for investment at September 30, 2025.

See Note 2 “Concentration of Credit Risk” in the notes to our

consolidated financial statements for further information regarding the tenants in our portfolio that represented the largest percentage of our total rental revenues for the three and nine months ended September 30, 2025.

At March 31, 2026, our largest property was located in New York and accounted for 5.5% of our net real estate held for investment.

No other properties accounted for more than 5% of our net real estate held for investment at March 31, 2026.

See Note 2 “Concentration of Credit Risk” in the notes to our consolidated financial statements for further information regarding the tenants in our portfolio that represented the largest percentage of our total rental revenues for the three months ended March 31, 2026.

Competitive Environment

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Investments in Real Estate

See Note 6 “Investment in Real Estate” in the notes to the consolidated financial statements for information regarding our investments in real estate activity and property portfolio activity during the nine months ended September 30, 2025.

Comparison of the Three and Nine Months Ended September 30, 2025 and 2024

Investment in Life Science

See Note 7 "Life Science Investments" in the notes to the consolidated financial statements for information regarding our life science investment activity during the three months ended March 31, 2026.

Comparison of the Three Months Ended March 31, 2026 and 2025

The following table sets forth the results of our operations (in thousands):

For the Three Months Ended

September 30, For the Nine Months Ended

September 30,

2025 2024 2025 2024

Rental (including tenant reimbursements) $ 64,292 $ 76,052 $ 198,855 $ 230,219

Other 393 474 443 1,554

Total revenues 64,685 76,526 199,298 — 231,773

2026 2025 Change

Cannabis Portfolio Segment:

Rental revenues (including tenant reimbursements) $ 68,920 $ 71,697 $ (2,777)

Other revenues 76 25 51

Property expenses (7,576) (7,379) (197)

General and administrative expense 8,681 9,330 25,768 28,553

Depreciation and amortization expense (18,584) (18,391) (193)

Impairment loss on real estate — (3,527) 3,527

Total expenses 35,271 34,569 107,022 101,987

Gain (loss) on sale of real estate 422 — 422

Income from operations 29,414 41,957 92,276 126,337

Interest and other income 442 600 (158)

Cannabis Portfolio Segment net income 43,700 43,025 675

Life Science Portfolio Segment:

Interest and other income 5,544 — 5,544

Life Science Portfolio Segment net income 5,544 — 5,544

General and administrative expense (10,349) (8,461) (1,888)

Interest and other income 345 1,013 (668)

Interest expense (6,431) (4,500) (1,931)

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Net income attributable to common stockholders $ 30,155 $ 30,296 $ (141)

Cannabis Portfolio Segment

Rental Revenues.

Rental revenues for the three months ended September 30, 2025 decreased by $11.8 million, or 15%, to $64.3 million, compared to $76.1 million for the three months ended September 30, 2024.

The decrease was primarily driven by tenant defaults, resulting in a decrease of $14.9 million related to properties leased to PharmaCann, Gold Flora, TILT and 4Front.

In addition, there was also a decrease of $0.5 million related to properties that have been taken back or sold, and a decrease of $0.9 million in tenant reimbursement revenue primarily due to tenant defaults.

These decreases were partially offset by a $1.4 million increase from the two properties acquired in 2024 and one property acquired in 2025, a $1.6 million increase from new leases on four existing properties and a $1.6 million increase from annual contractual rent escalations.

For the three months ended September 30, 2025, we applied $0.8 million of security deposits for payment of rent on two properties leased to Verdant and a Sacramento tenant.

For the three months ended September 30, 2024, we applied $1.4 million of security deposits for payment of rent on six properties leased to 4Front, TILT and Emerald.

Rental revenues for the nine months ended September 30, 2025 decreased by $31.4 million, or 14%, to $198.9 million, compared to $230.2 million for the nine months ended September 30, 2024.

The decrease was primarily driven by tenant defaults, resulting in a decrease of $37.8 million related to properties leased to PharmaCann, Gold Flora, TILT, 4Front and Temescal.

In addition, there was also a decrease of $1.1 million related to properties that have been taken back or sold, a $3.9 million decrease from a one-time disposition-contingent lease termination fee that was collected during the nine months ended September 30, 2024 in connection with the sale of our property in Los Angeles, California, and a $1.7 million decrease in tenant reimbursement revenue primarily due to tenant defaults.

These decreases were partially offset by a $4.5 million increase from the two properties acquired in 2024 and the one property acquired in 2025, a $4.0 million increase from new leases on five existing properties and a $4.6 million increase from annual contractual rent escalations.

For the nine months ended September 30, 2025, we applied $6.6 million of security deposits for payment of rent on properties leased to PharmaCann, Gold Flora, TILT, Sozo, Emerald, Verdant and a Sacramento tenant.

For the nine months

ended September 30, 2024, we applied $2.0 million of security deposits for payment of rent on properties leased to 4Front, Temescal, TILT and Emerald.

Other Revenues.

Other revenues primarily consisted of interest revenue related to leases for property acquisitions that did not satisfy the requirements for sale-leaseback accounting.

Other revenues for the three and nine months ended September 30, 2025 decreased by $0.1 million and $1.1 million, respectively, compared to the three and nine months ended September 30, 2024, primarily due to non-collection of rent related to one property leased to 4Front.

Rental revenues for the three months ended March 31, 2026 decreased by $2.8 million, or 4%, to $68.9 million, compared to $71.7 million for the three months ended March 31, 2025.

The decline was primarily driven by a $6.9 million decrease related to tenant defaults, partially offset by a $3.1 million increase due to annual contractual rent escalations and $1.0 million increase related to the property acquired in February 2025 and new leases executed on existing properties.

During the three months ended March 31, 2026, we applied $1.2 million of security deposits for payment of rent on properties leased to Battle Green and The Cannabist Company.

During the three months ended March 31, 2025, we applied $5.8 million of security deposits for payment of rent on properties leased to PharmaCann, Gold Flora, TILT and Sozo.

Property Expenses.

Property expenses for the three months ended September 30, 2025 increased by $0.7 million to $8.0 million, compared to $7.3 million for the three months ended September 30, 2024.

The property expenses for the nine months ended September 30, 2025 increased by $1.3 million to $22.2 million, compared to $20.9 million for the nine months ended September 30, 2024.

The increase was primarily due to additional investment in existing properties, which resulted in higher property taxes that we paid for our properties, as well as properties we have taken back possession of from defaulted tenants, which resulted in higher property expenses related to non-leased properties.

The increase was partially offset by a decrease in insurance expense due to lower premiums on the master property insurance policy renewed in August 2024.

Property expenses related to leased properties are generally reimbursable to us by tenants under the terms of the leases.

General and Administrative Expense.

General and administrative expense for the three months ended September 30, 2025 decreased by $0.6 million to $8.7 million, compared to $9.3 million for the three months ended September 30, 2024.

General and administrative expense for the nine months ended September 30, 2025 decreased by $2.8 million to $25.8 million, compared to $28.6 million for the nine months ended September 30, 2024.

The decrease in general and administrative expense in both periods was primarily due to lower stock-based compensation expense driven by PSUs granted in 2022 that were forfeited on December 31, 2024 as they did not meet the performance thresholds.

The non-cash stock based compensation for employees and directors for the three and nine months ended September 30, 2025 decreased by $1.6 million and $5.6 million, respectively, to $2.7 million and $7.4 million, compared to $4.3 million and $13.0 million for the three and nine months ended September 30, 2024.

The decrease was partially offset by an increase in legal, consultant and payroll expenses during the three and nine months ended September 30, 2025.

Property expenses for the three months ended March 31, 2026 increased by $0.2 million to $7.6 million, compared to $7.4 million for the three months ended March 31, 2025.

The increase was primarily attributable to additional investments in existing properties, which resulted in $0.6 million of higher property taxes.

This increase was partially offset by a $0.4 million decrease in insurance expense due to lower premiums under the master property insurance policy renewed in August 2025, as well as lower property expenses related to properties repossessed from defaulted tenants.

Property expenses related to leased properties are generally reimbursable by tenants under the terms of the leases.

Depreciation and Amortization Expense.

Depreciation and amortization expense for the three months ended September 30, 2025 increased by $0.7 million to $18.6 million, compared to $17.9 million for the three months ended September 30, 2024.

Depreciation and amortization expense for the nine months ended September 30, 2025 increased by $2.9 million to $55.5 million, compared to $52.6 million for the nine months ended September 30, 2024.

The increase in depreciation and amortization expense was primarily related to depreciation on properties that we acquired in 2024, one property we acquired in February 2025 and the placement into service of construction and improvements at certain of our properties.

Depreciation and amortization expense for the three months ended March 31, 2026 increased by $0.2 million to $18.6 million, compared to $18.4 million for the three months ended March 31, 2025.

The increase was primarily attributable to depreciation on new assets placed into service subsequent to March 31, 2025, partially offset by lower depreciation on the properties sold during the same period.

Impairment Loss on Real Estate.

Impairment loss on real estate of $3.5 million for the nine months ended September 30, 2025 is related to one of our properties located in Palm Springs, California which was sold in June 2025.

Loss on Sale of Real Estate.

Amount relates to the sale of property in Los Angeles, California (see Note 6 “Investments in Real Estate” to our consolidated financial statements included in this report for more information).

Impairment loss on real estate of $3.5 million for the three months ended March 31, 2025 related to one of our properties located in Palm Springs, California which was under contract to be sold for less than its carrying value as of March 31, 2005 and was sold in June 2025.

Gain on Sale of Real Estate .

Gain on sale of real estate for the three months ended March 31, 2026 related to the sale of a property located in Phoenix, Arizona in February 2026.

Interest and Other income .

Interest and other income for the three months ended September 30, 2025 increased by $1.7 million to $4.4 million, compared to $2.7 million for the three months ended September 30, 2024.

The increase was primarily due to interest payments on the MIH Note, which were previously recognized as a deposit liability on our consolidated balance sheets but was recognized as interest and other income in September 2025 in connection with the termination of the note.

Interest and other income for the nine months ended September 30, 2025 decreased by $0.8 million to $7.6 million, compared to $8.4 million for the nine months ended September 30, 2024.

The decrease was primarily due to (1) having less interest-bearing investments and lower rates earned on those investments;

(2) less cash interest received on our construction loan pursuant to which we agreed to lend up to $23.0 million, for the development of a regulated cannabis cultivation and processing facility in California (the “Construction Loan”);

and (3) partially offset by interest payments on the MIH Note, which were previously recognized as a deposit liability on our consolidated balance sheets but was recognized as interest and other income in September 2025 in connection with the termination of the note.

Cash interest received on our Construction Loan for the nine months ended September 30, 2025 was $2.3 million, compared to $3.2 million for the nine months ended September 30, 2024.

Interest and other income related to the interest income on the construction loan for the development of a regulated cannabis cultivation and processing facility in California.

Life Science Portfolio Segment

Interest and Other Income.

Interest and other income for the three months ended March 31, 2026 was $5.5 million and consisted of interest and dividend income earned on our investments in the IQHQ Credit Facility and IQHQ Preferred Stock.

These investments were made in September 2025 and, accordingly, did not generate income during the three months ended March 31, 2025.

Unallocated Items

General and Administrative Expense.

General and administrative expense for the three months ended March 31, 2026 increased $1.9 million to $10.3 million from $8.5 million for the three months ended March 31, 2025.

The increase was primarily driven by a $1.5 million increase in litigation expense.

Interest and Other Income.

Interest and other income decreased by $0.7 million to $0.3 million for the three months ended March 31, 2026, compared to $1.0 million for the three months ended March 31, 2025.

The decrease was due to lower interest-bearing investments and lower rates earned on those investments.

Interest Expense .

Interest expense primarily consists of interest on our Notes due 2026.

Interest expense for the three and nine months ended September 30, 2025 increased by $0.1 million and $0.4 million, respectively, to $4.5 million and $13.5 million compared to $4.4 million and $13.1 million for the three and nine months ended September 30, 2024.

The increase was primarily due to an increase in interest expense related to the Revolving Credit Facility and a decrease in the amount of interest capitalized for both three and nine months ended September 30, 2025.

The increase was partially offset by a decrease in interest expense on our Notes due 2026 as we made an early partial repayment in February 2025, reducing the outstanding balance from $300 million to $291.2 million.

Comparison of the Nine Months Ended September 30, 2025 and 2024 (in thousands)

Nine Months Ended September 30,

Interest expense primarily consists of interest on our Notes due 2026 and interest on our credit facilities.

Interest expense for the three months ended March 31, 2026 increased by $1.9 million to $6.4 million, compared to $4.5 million for the three months ended March 31, 2025.

The increase was primarily driven by interest incurred on borrowings under our revolving credit facilities beginning in September 2025.

Preferred Stock Dividends.

Preferred stock dividends for the three months ended March 31, 2026 increased by $1.9 million, to $2.7 million, compared to $0.8 million for the three months ended March 31, 2025.

The increase was due to additional shares of the Series A Preferred Stock issued under the ATM Program subsequent to March 31, 2025.

Comparison of the Three Months Ended March 31, 2026 and 2025 (in thousands)

Three Months Ended March 31,

2026 2025 Change

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Operating Activities

Cash flows provided by operating activities for the nine months ended September 30, 2025 and 2024 were $148.3 million and $200.6 million, respectively.

Cash flows provided by operating activities for the three months ended March 31, 2026 and 2025 were $56.0 million and $54.2 million, respectively.

Cash flows provided by operating activities were generally from contractual rent and tenant reimbursements from our properties, partially offset by our general and administrative expense, interest expense, property expenses in excess of tenant reimbursements and property expenses at properties that were not leased.

The decrease in cash flows provided by operating activities for the nine months ended September 30, 2025 compared to the nine months ended September 30, 2024 was primarily due to lower net income and the application of $6.6 million of security deposits for contractual rent due to tenant defaults.

Cash flows provided by operating activities for the nine months ended September 30, 2024 also included a $3.9 million disposition-contingent lease termination fee that was received concurrently with the sale of our property in Los Angeles, California.

For the three months ended March 31, 2026, cash flows provided by operating activities also included interest and dividend income

earned on our investments in the IQHQ Credit Facility and IQHQ Preferred Stock.

The increase in cash flows provided by operating activities for the three months ended March 31, 2026 compared to the three months ended March 31, 2025 was primarily due to interest and dividend income earned on our investments in the IQHQ Credit Facility and IQHQ Preferred Stock, partially offset by lower rental revenue and timing differences in working capital and application of tenant security deposits.

Investing Activities

Cash flows used in investing activities for the nine months ended September 30, 2025 were $132.6 million, of which $105.2 million was related to investments in life science financial instruments, $28.8 million was related to investments in real estate and funding of draws for improvement and construction funding at our properties, $0.3 million was related to net purchases and maturities of short-term investments, partially offset by $1.8 million in proceeds related to the sale of our Palm Springs, California property.

Cash flows used in investing activities for the nine months ended September 30, 2024 were $52.4 million, of which $58.7 million was related to investments in real estate and funding of draws for improvement and construction funding at our properties, $2.8 million was related to net purchases and maturities of short-term investments, and was partially offset by $9.1 million in proceeds related to the sale of our Los Angeles, California property.

For the three months ended March 31, 2026, cash flows used in investing activities consisted of $2.9 million in funding of draws for improvements and construction, partially offset by $2.6 million in proceeds from the sale of real estate asset.

For the three months ended March 31, 2025, net cash used in investing activities was $17.2 million, driven by $16.9 million of investments in real estate and funding of draws for improvements and construction at our properties, and $0.3 million related to net purchases and maturities of short-term investments.

Financing Activities

Net cash used in financing activities of $125.3 million during the nine months ended September 30, 2025 was primarily due to dividend payments of $164.7 million to common and preferred stockholders, partial principal payment on the Notes due 2026 of $8.7 million, $0.9 million related to net share settlement of equity awards to pay the required withholding taxes upon vesting of restricted stock or conversion of vested RSUs to common stock for certain employees, and $20.1 million related to repurchase of common stock, partially offset by a $50.0 million draw on our Revolving Credit Facility and $19.1 million in net proceeds from the issuance of our Series A Preferred Stock pursuant to our ATM Program.

Net cash used in financing activities of $142.8 million during the nine months ended September 30, 2024 was primarily the result of dividend payments of $158.7 million to common and preferred stockholders and a principal payment on the Exchangeable Senior Notes of $4.4 million, and $1.1 million related to net share settlement of equity awards to pay the required withholding taxes upon vesting of restricted stock for certain employees and payment of deferred financing

costs, partially offset by $11.8 million in net proceeds from the issuance of our common stock and $9.6 million in net proceeds from the issuance of our Series A Preferred Stock pursuant to our ATM Program.

Net cash used in financing activities of $14.2 million during the three months ended March 31, 2026 was driven by dividend payments of $54.9 million to common and preferred stockholders, principal repayments of $32.5 million on one of our credit facilities and $1.3 million related to the net share settlement of equity awards to satisfy employee withholding taxes upon the vesting of restricted stock.

These amounts were partially offset by $60.3 million of net proceeds from the issuance of Series A Preferred Stock and $9.3 million of net proceeds from the issuance of common stock under our ATM program and draws of $5.0 million on one of our credit facilities.

Net cash used in financing activities of $55.3 million during the three months ended March 31, 2025 was primarily driven by dividend payments of $54.8 million to common and preferred stockholders, a partial principal repayment of $8.7 million on the Notes due 2026 and $0.7 million related to the net share settlement of equity awards to satisfy employee withholding taxes upon the vesting of restricted stock.

These amounts were partially offset by $9.2 million in net proceeds from the issuance of Series A Preferred Stock under our at-the-market offering program.

Liquidity and Capital Resources

Sources and Uses of Cash

Our principal future uses of cash and cash equivalents include the acquisition of additional properties and other investments (including the completion of our investment in IQHQ Preferred Stock), associated acquisition and improvement costs, non-reimbursed expenses associated with unleased properties, operating and administrative expenses, scheduled debt service and repayments, and the payment of dividends to holders of our Common Stock and Preferred Stock, as well as any future series of preferred stock we may issue.

As of September 30, 2025, we had cash and cash equivalents of $36.7 million.

Liquidity is a measure of our ability to meet potential cash requirements.

We derive substantially all of our revenues from leasing our properties and collecting rental income, which includes operating expense reimbursements, based on contractual arrangements with our tenants.

This source of revenue represents our primary source of liquidity to fund the acquisition of additional properties, the development and redevelopment of existing properties, dividends to our stockholders, scheduled debt service under our Notes due 2026, repayment of borrowings and interest payments under our Credit Facilities, general and administrative expenses, property development and redevelopment activities, property operating expenses and other expenses incurred related to managing our existing portfolio and investing in additional properties.

As of March 31, 2026, we had cash and cash equivalents of $89.1 million.

We derive substantially all of our income from leasing our properties and life science investments, collecting rental, interest and dividend income.

These sources of income represent our primary source of liquidity to fund the acquisition of additional properties, the development and redevelopment of existing properties, the funding of our remaining investment in IQHQ Preferred Stock, dividends to our stockholders, scheduled debt service under our Notes due 2026, repayment of borrowings and interest payments under our Credit Facilities, general and administrative expenses, property development and redevelopment activities, property operating expenses and other expenses incurred related to managing our existing portfolio and investing in additional properties.

Because substantially all of our leases are triple net, our tenants are generally responsible for the maintenance, insurance and property taxes associated with the properties they lease from us.

If a tenant defaults on one of our leases or the lease term expires with no tenant renewal, we would incur property costs not paid by the tenant during the time it takes to re-lease or sell the property.

We expect to meet our liquidity needs through a combination of rental income from our properties, cash and investments on hand, borrowings under our Credit Facilities, and access to capital markets, including potential note issuances, equity offerings (of both common stock and preferred stock), including under our ATM Program, or other financing arrangements.

We believe that our liquidity and these sources of capital will be adequate to satisfy our cash requirements over the next 12-month period.

We cannot, however, be certain that these sources of funds will be available at a time and upon terms acceptable to the Company in sufficient amounts to meet our liquidity needs.

We expect to meet our liquidity needs through a combination of rental income from our properties, cash and investments on hand, borrowings under our Credit Facilities, mortgage financing on certain of our properties, and access to capital markets, including potential note issuances, equity offerings (of both common stock and preferred stock), including under our ATM Program, or other financing arrangements.

At March 31, 2026, the outstanding principal balance on the Notes due 2026 was $291.2 million, which matures in May 2026.

The maturity of the Notes due 2026 within one year from the date of issuance of the Company’s financial

statements, together with the Company’s current liquidity position, raises substantial doubt about the Company’s ability to continue as a going concern within one year after the date the financial statements are issued.

Management is actively evaluating alternatives to address the maturity of the Notes due 2026, which may include refinancing the existing indebtedness or raising additional capital combined with existing cash resources to retire the obligation.

Although management believes that it is more likely than not that the Company will be able to address the maturity of the Notes due 2026, guidance issued under Accounting Standard Codification ("ASC") 205-40, Presentation of Financial Statements - Going Concern, requires that management not conclude that such an outcome is "probable" if, among other factors, the outcome is not within control of the Company.

Because there has not been a sufficient amount of capital raised to pay off the bonds as of the date of this filing, such outcomes are not solely within the control of the Company and therefore, management is unable to conclude that such an outcome is probable.

Accordingly, management has concluded that there is substantial doubt about the Company’s ability to continue as a going concern within one year following the date of issuance of these consolidated financial statements.

The failure to retire or refinance the Notes due 2026 could lead to an event of default, which would have a material adverse effect on the Company’s financial condition.

In recent years, financial markets have been volatile in general.

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These investments represent a strategic expansion of our portfolio and are expected to be funded over an extended period through a combination of available cash on hand, operating cash flows, our Credit Facilities, and potential future financing activities.

On September 30, 2025, IIP Life Science completed the initial closing of the Company’s investment in preferred equity of IQHQ REIT pursuant to the Securities Purchase Agreement, acquiring 5,000 shares of IQHQ Preferred Stock for an aggregate purchase price of $5.0 million.

In September 2025, IIP Life Science completed the initial closing of the Company’s investment in preferred equity of IQHQ REIT pursuant to the Securities Purchase Agreement, acquiring 5,000 shares of IQHQ Preferred Stock for an aggregate purchase price of $5.0 million.

Under the terms of the Securities Purchase Agreement, IIP Life Science holds the right and obligation to purchase up to an aggregate of $170.0 million of IQHQ Preferred Stock, subject to the exercise of preemptive rights by existing IQHQ investors and certain other conditions.

Our remaining investment in IQHQ Preferred Stock pursuant to the Securities Purchase Agreement is expected to be funded in multiple tranches between the fourth quarter of 2025 and the second quarter of 2027.

Our remaining investment in IQHQ Preferred Stock pursuant to the Securities Purchase Agreement is expected to be funded in multiple tranches commencing the second quarter of 2026 and continuing through the second quarter of 2027.

IQHQ REIT may elect to delay or cancel scheduled funding dates under the terms of the Securities Purchase Agreement, which could affect the timing or total amount of our investment.

We expect to fund the additional investments in IQHQ Preferred Stock with cash on hand, draws on our IIP Life Science Credit Facility and potential proceeds from future financing activities.

In connection with the initial closing of our investment in IQHQ Preferred Stock, we also became a lender under the IQHQ Revolving Credit Facility and funded our $100.0 million loan commitment using available cash on hand and

borrowings under our Revolving Credit Facility.

See the section above entitled “Overview—Recent Developments” for a discussion of the terms of the IQHQ Credit Facility.

Notes Due 2026

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The terms of the Notes due 2026 are governed by an indenture, which requires compliance with various financial covenants including limits on the amount of total leverage and secured debt maintained by the Operating Partnership and which require the Operating Partnership to maintain minimum levels of debt service coverage.

Management believes that it was in compliance with those covenants as of September 30, 2025.

Management believes that it was in compliance with those covenants as of March 31, 2026.

In addition, the terms of the indenture 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.

At September 30, 2025, the outstanding principal balance on our Notes due 2026 was $291.2 million and we plan to refinance these notes prior to maturity in May 2026.

We have an “at the market” equity offering program (“ATM Program”), pursuant to which we may offer and sell from time to time, 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.

During the nine months ended September 30, 2025, we sold 805,009 shares of our Series A Preferred Stock for net proceeds of $19.1 million.

As of September 30, 2025, shares of the Company’s common stock and Series A Preferred Stock having an aggregate offering price of up to $470.0 million remain available for offer and sale pu rsuant to the ATM Program.

At March 31, 2026, the outstanding principal

balance on our Notes due 2026 was $291.2 million.

We expect to address the repayment or refinancing of the Notes due 2026 by their maturity in May 2026 and may do so through one or a combination of sources, which may include new or replacement financing arrangements, including mortgage financing secured by certain of our properties, cash on hand, and proceeds from issuances of common stock and preferred stock under our at-the-market offering program (“ATM Program”).

However, there can be no assurance as to the availability or terms of any such financing or capital raising transactions.

We have an ATM Program, pursuant to which we may offer and sell from time to time, 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.

During the three months ended March 31, 2026, we sold 2,698,523 shares of our Series A Preferred Stock for net proceeds of $60.3 million.

As of March 31, 2026, shares of the Company’s common stock and Series A Preferred Stock having an aggregate offering price of up to $393.8 million remain available for offer and sale pursuant to the ATM Program.

Credit Facilities

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Borrowings under the Revolving Credit Facility bear interest at a variable rate based on the greater of (i) the prime rate plus an applicable margin based on deposits with the participating bank(s) ranging from 0.5% to 2.05% and (ii) 9.0%.

At March 31, 2026, the interest rate was 9.0%.

The Loan Agreement is subject to certain liquidity and operating covenants, including a debt service coverage ratio covenant, defined as the ratio of (i) consolidated EBITDA to (ii) debt service costs and required to be not less than 2.0 to 1.0, measured as of the end of each fiscal quarter.

The Loan Agreement also includes customary representations and warranties, affirmative and negative covenants and events of default.

Our Operating Partnership drew $50.0 million under the Revolving Credit Facility in connection with the funding of the Company’s investment in the IQHQ Credit Facility and its initial investment in IQHQ Preferred Stock on September 30, 2025.

See the section above entitled “Overview—Recent Developments” for a discussion of the IIP Life Science Credit Facility that we entered in October 2025.

Management believes it was in compliance with these covenants as of March 31, 2026.

As of March 31, 2026, there were no amounts outstanding under the Revolving Credit Facility.

In October 2025, our Operating Partnership and IIP Life Science entered into a loan agreement with a federally regulated commercial bank, as agent for the lenders that become party thereto from time to time (the “IIP Life Science Credit Facility” and together with the Revolving Credit Facility, the “Credit Facilities”).

Under the IIP Life Science Credit Facility, our Operating Partnership has a revolving line of credit available up to $100.0 million until the maturity date on October 3, 2028.

At March 31, 2026, the interest rate was 6.1%.

Management believes it was in compliance with these covenants as of March 31, 2026.

As of March 31, 2026, the outstanding borrowings under our IIP Life Science Credit Facility were $75.0 million.

Share Repurchase Program

We may voluntarily repurchase our outstanding debt or equity securities (depending on prevailing market conditions, our liquidity, contractual restrictions and other factors) through cash purchases, open-market purchases, privately negotiated transactions, tender offers or otherwise.

In March of 2025, our Board of Directors authorized the purchase of up to $100.0 million in shares of our common stock.

The timing, volume and nature of the repurchases will be at the discretion of management based on its evaluation of the capital needs of the Company, market conditions, applicable legal requirements and other factors.

On March 3, 2026, our Board of Directors approved a new share repurchase program authorizing the purchase of up to $100.0 million in shares of our common stock, which replaces our share repurchase program that expired on March 17, 2026.

The timing, volume and nature of the repurchases will be at the

discretion of management based on its evaluation of the capital needs of the Company, market conditions, applicable legal requirements and other factors.

There is no guarantee as to the number of shares that will be repurchased.

Repurchases under the share repurchase plan are expected to be funded from existing cash balances and proceeds from the sale of the

Company’s Series A Preferred Stock under its ATM Program.

No shares were repurchased under the share repurchase plan during the three months ended September 30, 2025.

During the nine months ended September 30, 2025, 371,538 shares were repurchased under the share repurchase plan.

The repurchase plan expires on March 17, 2026, and may be extended, suspended, modified or discontinued at any time at the Company’s discretion.

Repurchases under the share repurchase plan are expected to be funded from existing cash balances and proceeds from the sale of the Company’s Series A Preferred Stock under its ATM Program.

No shares were repurchased under the previous or the current share repurchase plan during the three months ended March 31, 2026.

The current share repurchase program expires on March 4, 2027, and may be extended, suspended, modified or discontinued at any time at the Company’s discretion.

The Company is required to pay dividends to its stockholders at least equal to 90% of its taxable income in order to qualify and maintain its qualification as a REIT.

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Our ability to continue to pay dividends is dependent upon our ability to continue to generate cash flows, service any debt obligations we have, including our Notes due 2026 and borrowings under our Credit Facilities, and make accretive new investments.

The following table describes the dividends declared by the Company during the nine months ended September 30, 2025:

The following table describes the dividends declared by the Company during the three months ended March 31, 2026:

Declaration Date Security Class Amount

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March 13, 2026 Series A preferred stock $ 0.5625 March 31, 2026 April 15, 2026 $ 2,654

June 13, 2025 Common stock $ 1.90 June 30, 2025 July 15, 2025 $ 53,783

June 13, 2025 Series A preferred stock $ 0.5625 June 30, 2025 July 15, 2025 $ 878

September 15, 2025 Common stock $ 1.90 September 30, 2025 October 15, 2025 $ 53,776

September 15, 2025 Series A preferred stock $ 0.5625 September 30, 2025 October 15, 2025 $ 1,017

Contractual Obligations

The following table summarizes our contractual obligations as of September 30, 2025 (in thousands):

by Year Notes due 2026 Revolving Credit Facility Interest Office Rent Total

2025 (three months ending December 31) $ — $ — $ 5,129 $ 132 $ 5,261

2026 291,215 50,000 10,113 543 351,871

2027 — — — 45 45

Contractual Debt Obligations

The following table summarizes our contractual debt obligations as of March 31, 2026 (in thousands):

by Year Notes due 2026 Credit Facilities Interest Total

2026 (nine months ending December 31) $ 291,215 $ — $ 5,926 $ 297,141

2027 — — 4,639 4,639

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Total $ 291,215 $ 75,000 $ 14,082 $ 380,297

Additionally, as of September 30, 2025, we had (1) $165.0 million remaining on our commitment to purchase up to $170.0 million of IQHQ Preferred Stock which is scheduled to be funded in various installments by June 30, 2027, subject to extension options exercisable by IQHQ;

(2) $7.8 million outstanding in 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;

and (3) $0.2 million outstanding in commitments to fund the Construction Loan.

Additionally, as of March 31, 2026, we had (1) $120.0 million remaining on our commitment to purchase up to $170.0 million of IQHQ Preferred Stock which is scheduled to be funded in various installments by June 30, 2027, subject to extension options exercisable by IQHQ;

and (2) $4.4 million outstanding in 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.

The commitments discussed in this paragraph are excluded from the table of contractual obligations above as there is no explicit time frame for incurring the obligations, which generally may be requested from time to time, subject to satisfaction of certain conditions.

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Funds from operations (“FFO”) and FFO per share are operating performance measures adopted by the National Association of Real Estate Investment Trusts, Inc.

NAREIT defines FFO as the most commonly accepted and reported measure of a REIT’s operating performance equal to net income (computed in accordance with GAAP), excluding gains (or losses) from sales of property, depreciation, amortization and impairment related to real estate properties, and after adjustments for unconsolidated partnerships and joint ventures.

The Company also excludes the disposition-contingent lease termination fee relating to the sale of our property in Los Angeles, California in May 2024.

NAREIT defines FFO as the most commonly accepted and reported measure of a REIT’s operating performance equal to net income (computed in accordance with GAAP),

excluding gains (or losses) from sales of property, depreciation, amortization and impairment related to real estate properties, and after adjustments for unconsolidated partnerships and joint ventures.

Management believes that net income, as defined by GAAP, is the most appropriate earnings measurement.

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Normalized FFO is used by management in evaluating the performance of our core business operations.

During the three months ended September 30, 2025, the Company revised its presentation of Normalized FFO to include two adjustments related to income on seller-financed notes and deferred lease payments received on sales-type leases that were previously reflected in adjusted funds from operations (“AFFO”), which has been reflected for all periods presented.

Management believes this change better aligns the Company’s presentation with its assessment of core operating performance and improves comparability with industry peers.

Items included in calculating FFO that may be excluded in calculating Normalized FFO include certain transaction-related gains, losses, income or expense or other non-core amounts as they occur.

Management believes that adjusted funds from operations (“AFFO”) and AFFO per share are also appropriate supplemental measures of a REIT’s operating performance.

We calculate AFFO by adjusting Normalized FFO for certain non-cash items.

For the nine months ended September 30, 2024 , FFO (diluted), Normalized FFO and AFFO, and FFO, Normalized FFO and AFFO per diluted share include the dilutive impact of the assumed full exchange of the Exchangeable Senior Notes for shares of common stock as if the Exchangeable Senior Notes were exchanged at the beginning of the respective reporting period.

The Exchangeable Senior Notes matured in February 2024.

For the three and nine months ended September 30, 2024, the performance share units (“PSUs”) granted to certain employees were included in dilutive securities to the extent the performance thresholds for vesting of the PSUs were met as measured as of September 30, 2024.

The PSUs expired on December 31, 2024.

Our computation of FFO, Normalized FFO, and AFFO may differ from the methodology for calculating FFO, Normalized FFO and AFFO utilized by other equity REITs and, accordingly, may not be comparable to such REITs.

Further, FFO and AFFO do not represent cash flow available for management’s discretionary use.

FFO, Normalized FFO and AFFO should not be considered as an alternative to net income (computed in accordance with GAAP) as an indicator of our financial performance or to cash flow from operating activities (computed in accordance with GAAP) as an indicator of our liquidity, nor is it indicative of funds available to fund our cash needs, including our ability to pay dividends or make

distributions.

FFO, Normalized FFO and AFFO should be considered only as supplements to net income computed in accordance with GAAP as measures of operations.

The table below is a reconciliation of net income attributable to common stockholders to FFO, Normalized FFO and AFFO for the three and nine months ended September 30, 2025 and 2024 (in thousands, except share and per share amounts):

The table below is a reconciliation of net income attributable to common stockholders to FFO, Normalized FFO and AFFO for the three months ended March 31, 2026 and 2025 (in thousands, except share and per share amounts):

For the Three Months Ended

September 30, For the Nine Months Ended

September 30,

2025 2024 2025 2024

Net income attributable to common stockholders $ 30,155 $ 30,296

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Impairment loss on real estate — 3,527

Disposition-contingent lease termination fee, net of loss on sale of real estate (1)

FFO attributable to common stockholders (basic) 46,927 57,595 142,787 172,512

Cash and non-cash interest expense on Exchangeable Senior Notes — — — 28

FFO attributable to common stockholders (diluted) 46,927 57,595 142,787 172,540

Loss (gain) on sale of real estate

FFO attributable to common stockholders (basic and diluted) 48,317 52,214

Litigation-related expense 1,870 406

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Income on seller-financed notes (1)

(2,375) 268 (1,058) 1,074

Deferred lease payments received on sales-type leases (2)

— 1,452 25 4,370

Normalized FFO attributable to common stockholders (diluted) 50,585 52,761

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Non-cash interest expense 576 470

Non-cash accretion of life science investments (334) —

Above-market lease amortization 23 23

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Restricted stock and RSUs 475,274 312,473

PSUs — 25,352 — 25,352

Dilutive effect of Exchangeable Senior Notes — — — 12,647

Weighted average common shares outstanding – diluted 28,467,184 28,588,022

(1) Amount reflects the $3.9 million disposition-contingent lease termination fee received concurrently with the sale of our property in Los Angeles, California, net of the loss on sale of real estate of $3.4 million.

(2) Positive amounts represent non-refundable cash payments received pursuant to two seller-financed notes issued by us in connection with our disposition of certain properties.

As the transactions did not qualify for recognition as completed sales under GAAP, the payments were initially recorded as a deposit liability and included in other liabilities on our consolidated balance sheet.

For both the three and nine months ended September 30, 2025, the negative amounts resulted from the recognition of $2.6 million of non-refundable cash payments received on the MIH Note as interest and other income in connection with the termination of the seller-financed note.

(3) Amount reflects the non-refundable lease payments received on two sales-type leases which are recognized as a deposit liability starting on January 1, 2024, and is included in other liabilities in our consolidated balance sheet as of September 30, 2025, as the transaction did not qualify for recognition as a completed sale (see Note 2 “Lease Accounting” to our consolidated financial statements included in this report for more information).

Prior to the lease modifications on January 1, 2024, which extended the initial lease terms, the leases were classified as operating leases and the lease payments received were recognized as rental revenue and therefore, included in net income attributable to common stockholders.

(1) Amounts reflects non-refundable cash payments received pursuant to seller-financed notes issued by us in connection with our disposition of certain properties.

As the transactions did not qualify for recognition as completed sales under GAAP, the payments received are recorded as a deposit liability and included in other liabilities on our consolidated balance sheet.

(2) Amount reflects the non-refundable lease payments received on two sales-type leases which are recognized as a deposit liability starting on January 1, 2024, and is included in other liabilities in our consolidated balance sheet as of March 31, 2026, as the transaction did not qualify for recognition as a completed sale.

Critical Accounting Estimates

Our consolidated financial statements have been prepared in accordance with GAAP, which requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting periods.

Actual results could differ materially from those estimates and assumptions.

We continually evaluate the estimates and assumptions we use to prepare our consolidated financial statements.

Our critical accounting estimates are defined as accounting estimates or assumptions made in accordance with GAAP, which involve a significant level of estimation uncertainty or subjectivity and have had or are reasonably likely to have a material impact on our financial condition or results of operations.

The following critical accounting estimates discussion reflects what we believe are the most significant estimates and assumptions used in the preparation of our consolidated financial statements.

This discussion of our critical accounting estimates is intended to supplement the description of our accounting policies in the footnotes to our consolidated financial statements and to provide additional insight into the information used by management when evaluating significant estimates and assumptions.

For further discussion of our significant accounting policies, see Note 2 “Summary of Significant Accounting Policies and Procedures and Recent Accounting Pronouncements” to our consolidated financial statements in our Annual Report on Form 10-K for the year ended December 31, 2024 and to our consolidated financial statements included in this report.

Lease Accounting

We account for our leases under Accounting Standards Codification 842, Leases , which requires significant estimates and judgments by management in its application.

Upon lease inception or lease modification, we assess the lease classification of both the land and building components of the property.

The determination of lease classification requires the calculation of the rate implicit in the lease, which is driven by significant estimates relating to the unguaranteed residual value of the assets at the end of the non-cancelable lease term.

A decrease of 5% in the estimated unguaranteed residual value of our properties would not change the lease classification of any new leases or leases that were modified during the nine months ended September 30, 2025.

Acquisition of Rental Property, Depreciation and Impairment

All of our acquisitions of rental properties to date were accounted for as asset acquisitions and not business combinations because substantially all of the fair value is concentrated in a single identifiable asset or group of similar identifiable assets (i.e., land, buildings, and related intangible assets).

The accounting model for asset acquisitions requires that the acquisition consideration (including acquisition costs) be allocated to the individual assets acquired and liabilities assumed on a relative fair value basis.

We exercise judgment to determine key assumptions used in each valuation technique (cost, income, and sales approach).

For example, we are required to use judgment and make a number of assumptions, including those related to projected growth in rental rates and operating expenses, anticipated trends and market/economic conditions.

The use of different assumptions can affect the amount of consideration allocated to the acquired depreciable/amortizable asset, which in turn can impact our net income due to the recognition of the related depreciation/amortization expense in our consolidated statements of income.

We depreciate buildings and improvements where we are considered the owner for accounting purposes based on our evaluation of the estimated useful life of each specific asset, not to exceed 40 years.

Determining whether expenditures meet the criteria for capitalization and the assignment of depreciable lives requires management to exercise significant judgment.

The determination of whether we are or the tenant is the owner of improvements for accounting purposes is subject to significant judgment.

In making that determination, we consider numerous factors and perform a detailed evaluation of each individual lease.

No one factor is determinative in reaching a conclusion.

The factors we evaluate include but are not limited to the following:

• whether the lease agreement requires landlord approval of how the improvement allowance is spent prior to installation of the improvements;

• whether the lease agreement requires the tenant to provide evidence to the landlord supporting the cost and what the improvement allowance was spent on prior to payment by the landlord for such improvements;

• whether the improvements are unique to the tenant or reusable by other tenants;

• whether the tenant is permitted to alter or remove the improvements without the consent of the landlord or without compensating the landlord for any lost utility or diminution in fair value;

• whether the ownership of the improvements remains with the landlord or remains with the tenant at the end of the lease term.

When we conclude that we are the owner of improvements for accounting purposes using the factors discussed above, we record the cost to construct the improvements as our capital asset.

We evaluate our real estate assets for potential impairment whenever events or changes in circumstances indicate that the carrying amount of a given asset may not be recoverable.

We evaluate our real estate assets for impairment on a property-by-property basis.

Indicators we use to determine whether an impairment evaluation is necessary include:

• deterioration in rental rates for a specific property;

• deterioration of a given rental submarket;

• significant change in strategy or use of a specific property or any other event that could result in a decreased holding period, including classifying a property as held for sale, or significant development delay;

• evidence of material physical damage to the property;

• default by a significant tenant when any of the other indicators above are present.

When we evaluate for potential impairment our real estate assets to be held and used, we first evaluate whether there are any indicators of impairment.

If any impairment indicators are present for a specific real estate asset, we then perform an undiscounted cash flow analysis and compare the net carrying amount of the real estate asset to the real estate asset’s estimated undiscounted future cash flow over the anticipated holding period.

If the estimated undiscounted future cash flow is less than the net carrying amount of the real estate asset, we perform an impairment loss calculation to determine if the fair value of the real estate asset is less than the net carrying value of the real estate asset.

Our impairment loss calculation compares the net carrying amount of the real estate asset to the real estate asset’s estimated fair value, which may be based on estimated discounted future cash flow calculations or third-party valuations or appraisals.

We recognize an impairment loss if the amount of the asset’s net carrying amount exceeds the asset’s estimated fair value.

If we recognize an impairment loss, the estimated fair value of the asset becomes its new cost basis.

For a depreciable long-lived asset, the new cost basis would be depreciated (amortized) over the remaining useful life of that asset.

If a real estate asset is designated as real estate held for sale, it is carried at the lower of the net carrying value or estimated fair value less costs to sell, and depreciation ceases.

Our undiscounted cash flow and fair value calculations contain uncertainties because they require management to make assumptions and to apply judgment to estimate future cash flow and property fair values, including determining our estimated holding period.

We are also required to make a number of assumptions relating to future economic and market events and prospective operating trends.

For each property where such an indicator occurred, we completed an impairment evaluation.

During the three months ended March 2025, we recognized an impairment loss on real estate of $3.5 million related to one of our properties in Palm Springs, California which was under contract for sale.

We completed the sale of the property in June 2025 for net proceeds of $1.8 million and no gain or loss was recognized on the sale as the property was impaired and recognized at fair value less selling costs as of March 31, 2025.

For all other operating properties that were evaluated, we determined that the undiscounted cash flows over the holding period were in excess of carrying value and, therefore, we did not record any impairment losses for these properties for the nine months ended September 30, 2025.

Significant adverse changes in the critical accounting estimates used in the impairment evaluation are required for the undiscounted cash flows over the holding period to be less than the carrying value of these properties as of September 30, 2025.

The preparation of our financial statements in accordance with U.S.

GAAP requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities as of the date of our financial statements, the reported amounts of revenues and expenses during the reporting periods and the related disclosures in our unaudited consolidated financial statements and accompanying footnotes.

We have discussed those estimates that we believe are critical and require the use of complex judgment in their application in the consolidated financial statements included in our Annual Report on Form 10-K for the year ended December 31, 2025, filed with the Securities and Exchange Commission on February 24, 2026.

There have been no material changes to our critical accounting estimates or the methods or assumptions we apply.

Impact of Real Estate and Credit Markets

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Interest Rate Risk

As of September 30, 2025, we had $291.2 million principal amount of Notes due 2026 outstanding at a fixed interest rate of 5.50%, and therefore, if interest rates decline, our required payments may exceed those based on current market rates.

It is possible that a property we acquire in the future would be subject to a mortgage, which we may assume.

In recent years, the commercial real estate market generally has experienced significant disruptions from, among other things, significant increases in interest rates and changing tenant preferences for space.

Our Revolving Credit Facility bears interest at a variable rate based on the greater of the prime rate and an applicable margin and a stipulated interest rate;

therefore, if interest rates increase, our required payments on any amounts outstanding on our Revolving Credit Facility may also increase.

As of September 30, 2025, we had $50.0 million outstanding borrowings on our Revolving Credit Facility.

Our IIP Life Science Credit Facility bears interest at a variable rate based on the greater of SOFR and an applicable margin and a stipulated interest rate;

therefore, if interest rates increase our required payments on any amounts outstanding under our IIP Life Science Credit Facility may also increase.

As of October 31, 2025, we had outstanding borrowings of $52.5 million on our IIP Life Science Credit Facility.

We are exposed to interest rate risk primarily through our variable-rate indebtedness, including amounts outstanding under our Revolving Credit Facility and our IIP Life Science Credit Facility.

Borrowings under these facilities bear interest at variable rates based on the greater of prime rate or SOFR, as applicable, plus an applicable margin and stipulated rate.

As a result, increases in market interest rates may increase our borrowing costs and adversely affect our results of operations and cash flows.

Our Notes due 2026 bear interest at a fixed rate of 5.50% per annum and therefore are not subject to variability in interest payments due to changes in market interest rates.

Our investments in IQHQ Preferred Stock and the IQHQ Credit Facility provide fixed cash and PIK returns and are not directly exposed to changes in prevailing market interest rates.

However, to the extent these investments are funded with variable-rate indebtedness or other interest-sensitive capital sources, increases in interest rates may increase our cost of capital and reduce investment spreads.

We monitor our exposure to interest rate risk and may use a mix of fixed- and variable-rate debt to manage such exposure over time.

Quantitative and Qualitative Disclosures About Market Risk” for additional information regarding our interest rate sensitivity.

Impact of Inflation

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What changed 10-Q

Item 2. Management’s Discussion and Analysis