INNOVATIVE INDUSTRIAL PROPERTIES INC 10-Q

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS The following discussion should be read in conjunction with the consolidated financial statements and notes thereto appearing elsewhere in this report. We make statements in this report that are “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. In particular, statements pertaining to our capital resources, portfolio performance and results of operations contain forward-looking statements. Likewise, our statements regarding anticipated growth in our funds from operations and anticipated market and regulatory conditions, our strategic direction, demographics, results of operations, plans and objectives are forward-looking statements. Forward-looking statements involve numerous risks and uncertainties, and you should not rely on them as predictions of future events. Forward-looking statements depend on assumptions, data or methods which may be incorrect or imprecise, and we may not be able to realize them. We do not guarantee that the transactions and events described will happen as described (or that they will happen at all). You can identify forward-looking statements by the use of forward-looking terminology such as “believes,” “expects,” “may,” “will,” “should,” “seeks,” “approximately,” “intends,” “plans,” “estimates” or “anticipates” or the negative of these words and phrases or similar words or phrases. You can also identify forward-looking statements by discussions of strategy, plans or intentions. The following factors, among others, could cause actual results and future events to differ materially from those set forth or contemplated in the forward-looking statements: rates of default on leases for our assets; our ability to re-lease properties upon tenant defaults or lease terminations for the rent we currently receive, or at all; concentration of our portfolio of assets and limited number of tenants; the estimated growth in and evolving market dynamics of the regulated cannabis market; the demand for regulated cannabis cultivation and processing facilities; 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; market dynamics in the life science sector; decreased economic activity due to fluctuations in trade policies, tariffs, and related government actions; inflation dynamics; the impact of pandemics on us, our business, our tenants, or the economy generally; war and other hostilities, including the conflicts in Ukraine and Israel; our business and investment strategy; our projected operating results; actions and initiatives of the U.S. 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; our understanding of our competition and our potential tenants’ alternative financing sources; the expected medical-use or adult-use cannabis legalization in certain states; shifts in public opinion regarding regulated cannabis; the potential impact on us from litigation matters, including rising liability and insurance costs; the additional risks that may be associated with certain of our tenants cultivating, processing and/or dispensing adult-use cannabis in our facilities; the state of the U.S. economy generally or in specific geographic areas; economic trends and economic recoveries; our ability to access equity or debt capital; financing rates for our target assets; our level of indebtedness, which could reduce funds available for other business purposes and reduce our operational flexibility; covenants in our debt instruments, which may limit our flexibility and adversely affect our financial condition; our ability to maintain our investment grade credit rating; changes in the values of our assets; our expected portfolio of assets; our expected investments; interest rate mismatches between our assets and our borrowings used to fund such investments; changes in interest rates and the market value of our assets; the degree to which any interest rate or other hedging strategies may or may not protect us from interest rate volatility; the impact of and changes in governmental regulations, tax law and rates, accounting guidance and similar matters; how and when any forward equity sales may settle; our ability to maintain our qualification as a REIT for U.S. federal income tax purposes; our ability to maintain our exemption from registration under the Investment Company Act of 1940; availability of qualified personnel; and market trends in our industry, interest rates, real estate values, the securities markets or the general economy. 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, 2025 and in Part II, "Item 1A. Risk Factors" included in this report. Those risks continue to be relevant to our performance and financial condition. Moreover, we operate in a very competitive and rapidly changing environment. New risk factors emerge from time to time and it is not possible for management to predict all such risk factors, nor can it assess the impact of all such risk factors on our Company’s business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statements. Any forward-looking statement made by us speaks only of the date on which we make it. The Company undertakes no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, except as may be required by law. Stockholders and investors are cautioned not to unduly rely on such forward-looking statements when evaluating the information presented in the Company’s filings and reports. 24 Table of Contents The purpose of this Management’s Discussion and Analysis (“MD&A”) is to provide an understanding of the Company’s consolidated financial condition, results of operations and cash flows. MD&A is provided as a supplement to, and should be read in conjunction with, the Company’s consolidated financial statements and accompanying notes. Overview 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 investments in the life science industry. Our properties are primarily leased to experienced, state-licensed operators for their regulated cannabis facilities. We have acquired and intend to continue to acquire our cannabis properties through sale-leaseback transactions and third-party purchases. We have leased and expect to continue to primarily lease our properties on a triple-net lease basis, where the tenant is responsible for all aspects of and costs related to the property and its operation during the lease term, including structural repairs, maintenance, real estate taxes and insurance. Outside of the cannabis sector, our leases may include different lease structures that do not require tenants to assume all property-related expenses. In addition to our cannabis-related real estate portfolio, we also have investments in the life science industry and intend to actively pursue acquisitions of properties within that sector as a key component of our growth strategy. We may continue expanding our investment activities to include joint ventures, debt or mezzanine financing, preferred or joint venture equity interests, and interests in other real estate funds or REITs. We were incorporated in Maryland on June 15, 2016. We conduct our business through a traditional umbrella partnership real estate investment trust, or UPREIT structure, in which our properties are owned by our Operating Partnership, directly or through subsidiaries. We are the sole general partner of our Operating Partnership and own, directly or through subsidiaries, 100% of the limited partnership interests in our Operating Partnership. 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; and • Leah Avenue in San Marcos, Texas. As previously disclosed, we entered into leases with PharmaCann Inc. and its affiliates for eleven properties. 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% 25 Table of Contents 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, 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 We receive income primarily from rental revenues generated by the properties that we acquire. The amount of rental revenues depends upon a number of factors, including: • our ability to enter into leases with increasing or market value rents for the properties that we acquire; and • rent collection, which primarily relates to each of our tenant’s financial condition and ability to make rent payments to us on time. The properties that we have acquired consist of primarily real estate assets that support the regulated cannabis industry. Most states where we own properties issue licenses for cannabis operations for a limited period. 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. 26 Table of Contents Conditions in Our Markets 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 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. 27 Table of Contents Reduced Capital Availability and Significant Debt Maturities for Cannabis Operators 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 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 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 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 We face competition from a diverse mix of market participants, including but not limited to, other companies with similar business models, independent investors, hedge funds, lenders and other real estate investors, as well as potential tenants (cannabis operators themselves), all of whom may compete with us in our efforts to acquire real estate zoned for regulated cannabis operations. Competition from others may diminish our opportunities to acquire a desired property on favorable terms or at all. In addition, this competition may put pressure on us to reduce the rental rates below those that we expect to charge for the properties that we acquire, which would adversely affect our financial results. 28 Table of Contents Operating Expenses Our operating expenses include general and administrative expenses, including personnel costs, stock-based compensation, and legal, accounting and other expenses related to corporate governance, public reporting and compliance with the various provisions of U.S. securities laws. Our operating expenses also include costs that we incur for properties that are not leased (or are leased but tenant’s rent obligations, including for payment of operating expenses, have not yet commenced), including taxes, insurance, maintenance, security, utilities and other property-specific costs. We generally structure our leases so that the tenant is responsible for taxes, maintenance, insurance and structural repairs with respect to the premises throughout the lease term. Increases or decreases in such operating expenses will impact our overall financial performance. Our Qualification as a REIT We have been organized and operate our business so as to qualify to be taxed as a REIT for U.S. federal income tax purposes. Shares of our common stock and Series A Preferred Stock are subject to restrictions on ownership and transfer that are intended, among other purposes, to assist us in qualifying and maintaining our qualification as a REIT. In order for us to qualify as a REIT under the Internal Revenue Code of 1986, as amended (the “Code”), the relevant sections of our charter provide that, subject to certain exceptions, no person or entity may own, or be deemed to own, by virtue of the applicable constructive ownership provisions of the Code, more than 9.8% (in value or number of shares, whichever is more restrictive) of the aggregate of our outstanding shares of stock or Series A Preferred Stock or more than 9.8% (in value or number of shares, whichever is more restrictive) of our outstanding common stock or any class or series of our outstanding preferred stock. Results of Operations 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 three months ended March 31, 2026. 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. 29 Table of Contents 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 March 31, 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) Depreciation and amortization expense (18,584) (18,391) (193) Impairment loss on real estate — (3,527) 3,527 Gain (loss) on sale of real estate 422 — 422 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 Unallocated: 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) Net income 32,809 31,077 1,732 Preferred stock dividends (2,654) (781) (1,873) Net income attributable to common stockholders $ 30,155 $ 30,296 $ (141) Cannabis Portfolio Segment Rental Revenues. 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 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 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. 30 Table of Contents 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 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 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 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. Cash Flows Comparison of the Three Months Ended March 31, 2026 and 2025 (in thousands) Three Months Ended March 31, 2026 2025 Change Net cash provided by (used in) operating activities $ 56,031 $ 54,242 $ 1,789 Net cash provided by (used in) investing activities (341) (17,156) 16,815 Net cash provided by (used in) financing activities (14,170) (55,321) 41,151 Ending cash and cash equivalents 89,117 128,010 (38,893) Operating Activities 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. For the three months ended March 31, 2026, cash flows provided by operating activities also included interest and dividend income 31 Table of Contents 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 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 $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 Liquidity is a measure of our ability to meet potential cash requirements. 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 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, 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 32 Table of Contents 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. If sustained, this could have a material adverse effect on our business, financial condition and results of operations, including our ability to continue to make acquisitions of new properties and fund investments for improvements at existing properties, and refinance our existing indebtedness. Our investment guidelines also provide that our aggregate borrowings (secured and unsecured) will not exceed 50% of the cost of our tangible assets at the time of any new borrowing, subject to our board of directors’ discretion. IQHQ Investments We have made a long-term capital commitment to fund investments in IQHQ REIT through both purchases of preferred equity and secured credit instruments. 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. 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. 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. 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 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. Notes Due 2026 In May 2021, we received an investment grade rating from a ratings agency. We sought to obtain an investment grade rating to facilitate access to the investment grade unsecured debt market as part of our overall strategy to maximize our financial flexibility and manage our overall cost of capital. In May 2021, our Operating Partnership issued $300.0 million aggregate principal amount of Notes due 2026. The Notes due 2026 are the Operating Partnership’s general unsecured and unsubordinated obligations, and rank equally in right of payment with all of the Operating Partnership’s future senior unsecured indebtedness. 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 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 March 31, 2026, the outstanding principal 33 Table of Contents 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. ATM Program 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 In October 2023, our Operating Partnership entered into a loan and security agreement (the “Loan Agreement”) with a federally regulated commercial bank, as lender and as agent for lenders that become party thereto from time to time. The Loan Agreement matures on October 23, 2026, and was most recently amended in November 2024 to increase aggregate commitments for secured revolving loans to $87.5 million (the “Revolving Credit Facility”). The Loan Agreement also allows the Operating Partnership, subject to the satisfaction of certain conditions, to request additional revolving incremental loan commitments up to a specified amount. 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. 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. 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%. At March 31, 2026, the interest rate was 6.1%. 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. 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. 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 34 Table of Contents 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 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. Dividends 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. As a result of this distribution requirement, our Operating Partnership cannot rely on retained earnings to fund its ongoing operations to the same extent that other companies whose parent companies are not REITs can. 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 three months ended March 31, 2026: Declaration Date Security Class Amount Per Share Record Date Dividend Paid Date Dividend Amount (In thousands) March 13, 2026 Common stock $ 1.90 March 31, 2026 April 15, 2026 $ 54,446 March 13, 2026 Series A preferred stock $ 0.5625 March 31, 2026 April 15, 2026 $ 2,654 Contractual Debt Obligations The following table summarizes our contractual debt obligations as of March 31, 2026 (in thousands): Payments Due 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 2028 — 75,000 3,517 78,517 Total $ 291,215 $ 75,000 $ 14,082 $ 380,297 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. Non-GAAP Financial Information In addition to the required GAAP presentations, we use certain non-GAAP performance measures as we believe these measures improve the understanding of our operational results. We continually evaluate the usefulness, relevance, limitations, and calculation of our reported non-GAAP performance measures to determine how best to provide relevant information to the public and thus such reported measures could change. Funds from Operations, Normalized Funds from Operations and Adjusted Funds from Operations Funds from operations (“FFO”) and FFO per share are operating performance measures adopted by the National Association of Real Estate Investment Trusts, Inc. (“NAREIT”). 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), 35 Table of Contents 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. However, management believes FFO and FFO per share to be supplemental measures of a REIT’s performance because they provide an understanding of the operating performance of our properties without giving effect to certain significant non-cash items, primarily depreciation expense. Historical cost accounting for real estate assets in accordance with GAAP assumes that the value of real estate assets diminishes predictably over time. However, real estate values instead have historically risen or fallen with market conditions. We believe that by excluding the effect of depreciation, FFO and FFO per share can facilitate comparisons of operating performance between periods. We report FFO and FFO per share because these measures are observed by management to also be the predominant measures used by the REIT industry and by industry analysts to evaluate REITs and because FFO per share is consistently reported, discussed, and compared by research analysts in their notes and publications about REITs. For these reasons, management has deemed it appropriate to disclose and discuss FFO and FFO per share. We compute normalized funds from operations (“Normalized FFO”) by adjusting FFO, as defined by NAREIT, to exclude certain GAAP income and expense amounts that we believe are infrequent and unusual in nature and/or not related to our core real estate operations. Exclusion of these items from similar FFO-type metrics is common within the equity REIT industry, and management believes that presentation of Normalized FFO and Normalized FFO per share provides investors with a metric to assist in their evaluation of our operating performance across multiple periods and in comparison to the operating performance of other companies, because it removes the effect of unusual items that are not expected to impact our operating performance on an ongoing basis. Normalized FFO is used by management in evaluating the performance of our core business operations. 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. 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. 36 Table of Contents 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 March 31, 2026 2025 Net income attributable to common stockholders $ 30,155 $ 30,296 Real estate depreciation and amortization 18,584 18,391 Impairment loss on real estate — 3,527 Loss (gain) on sale of real estate (422) — FFO attributable to common stockholders (basic and diluted) 48,317 52,214 Litigation-related expense 1,870 406 Loss (gain) on partial repayment of Notes due 2026 — (32) Income on seller-financed notes (1) 223 153 Deferred lease payments received on sales-type leases (2) 175 20 Normalized FFO attributable to common stockholders (diluted) 50,585 52,761 Stock-based compensation 2,584 2,078 Non-cash interest expense 576 470 Non-cash accretion of life science investments (334) — Above-market lease amortization 23 23 AFFO attributable to common stockholders (diluted) $ 53,434 $ 55,332 FFO per common share – diluted $ 1.70 $ 1.83 Normalized FFO per common share – diluted $ 1.78 $ 1.85 AFFO per common share – diluted $ 1.88 $ 1.94 Weighted average common shares outstanding – basic 27,991,910 28,275,549 Restricted stock and RSUs 475,274 312,473 Weighted average common shares outstanding – diluted 28,467,184 28,588,022 (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 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 In the commercial real estate market, property prices generally continue to fluctuate. Likewise, during certain periods, the U.S. credit markets have experienced significant price volatility, dislocations, and liquidity disruptions, which may impact our access to and cost of capital. We continually monitor the commercial real estate and U.S. credit markets carefully and, if required, will make decisions to adjust our business strategy accordingly. 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. 37 Table of Contents Interest Rate Risk 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. See “Item 3. Quantitative and Qualitative Disclosures About Market Risk” for additional information regarding our interest rate sensitivity. Impact of Inflation The U.S. economy has experienced a period of increased inflation in recent years. We enter into leases that generally provide for fixed increases in rent. During times when inflation is greater than the fixed increases in rent, as provided for in the leases, rent increases may not keep up with the rate of inflation. Seasonality Our business has not been, and we do not expect our business in the future to be, subject to material seasonal fluctuations.