What changed in this filing

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Item 2. Management’s Discussion and Analysis

2026-08-04 compared with 2026-05-05 · 206 added, 155 removed, 309 unchanged (54% 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 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);

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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;

war and other hostilities, including the conflicts in Ukraine and Iran;

our business and investment strategy;

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the timing, scope and impact of the April 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;

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

availability of suitable investment opportunities in the regulated cannabis industry;

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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 investments in the life science industry.

We are an internally-managed real estate investment trust (“REIT”) focused on the acquisition, ownership and management of specialized industrial properties 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 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 of June 30, 2026, we had 24 full-time employees.

As of June 30, 2026, we owned 108 properties comprising 8.4 million square feet (including 240,000 rentable square feet under development/redevelopment) in 19 states.

As of June 30, 2026, we had invested $2.4 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 $6.3 million to fund draws to certain tenants and vendors for improvements at our properties.

Of the $6.3 million committed to fund draws to certain tenants and vendors for improvements at our properties, $0.8 million was incurred but not funded as of June 30, 2026.

Of these 108 properties, we include 107 properties in our operating portfolio, which were 95.8% leased as of June 30, 2026, with a weighted-average remaining lease term of 11.9 years.

We do not include in our operating portfolio the property in San Bernardino, California (which was under redevelopment as of June 30, 2026, and is expected to comprise 192,000 rentable square feet upon completion of redevelopment).

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%

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.

("PharmaCann") and its affiliates for eleven properties.

On March 14, 2025, PharmaCann defaulted on its obligations to pay rent for the month of March under nine of those leases, covering properties located in Colorado, Illinois, New York, Ohio and Pennsylvania.

The remaining two leases, relating to cultivation facilities in Michigan and Massachusetts, were amended in January 2025 to provide full rent abatement effective February 1, 2025.

Both of these properties were subsequently re-leased in 2025, with the Michigan property re-leased to Berry Green and the Massachusetts property re-leased to another operator.

Of the nine leases on which PharmaCann defaulted in March 2025, PharmaCann has paid, and continues to pay, full rent on the four retail properties in Colorado.

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

In December 2025, we also obtained a judgment in our favor in an eviction action relating to the Dwight, Illinois facility, regained possession of that property and subsequently re-leased it to Grown Rogue in March 2026.

Our efforts to resolve the remaining three defaulted leases, relating to the properties in New York, Ohio and Pennsylvania, culminated in the settlement agreement described below.

On February 26, 2026, the Company entered into a settlement agreement (as amended, the “PharmaCann Settlement Agreement”) with PharmaCann to resolve pending litigation relating to rent defaults under leases for three properties owned by the Company located in New York, Ohio and Pennsylvania.

In connection with the PharmaCann Settlement

Agreement, the parties also entered into consent orders, stipulations of judgment and stipulations of settlement with the respective courts in New York, Ohio and Pennsylvania, which were fully executed on March 13, 2026, and provide for judgments in favor of the Company's subsidiaries for possession of the premises and monetary damages, subject to dollar-for-dollar reduction for escrowed rent funds released to the Company.

Pursuant to the PharmaCann Settlement Agreement, PharmaCann agreed to wind down operations and surrender the Ohio, Pennsylvania and New York premises by May 20, 2026, May 26, 2026 and June 20, 2026, respectively, at which time the applicable leases would terminate.

In April 2026, PharmaCann surrendered the Ohio premises, the applicable lease was terminated and the Company immediately entered into a new lease with Curaleaf.

PharmaCann has remained in possession of the the New York and Pennsylvania properties past the applicable surrender dates with the Company's consent, as the parties work to transfer the existing licenses for those facilities to new tenants.

The Company retains all rights to enforce the eviction judgments and PharmaCann's surrender of possession at those locations.

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.

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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.

As of June 30, 2026, we have terminated all three leases with affiliates of Gold Flora.

As of June 30, 2026, 4Front Ventures Corp and TILT Holdings Inc.

collectively represented approximately 9.3% of our annualized contractual rent and owed $32.3 million and $7.6 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 ("Cannabist") 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.

As of June 30, 2026, these leases represented, in the aggregate, 6.0% of our annualized contractual rent.

Cannabist previously announced agreements to sell certain of its cannabis operations and assets in Ohio and Delaware, as well as a memorandum of understanding for the sale of additional operations located in Illinois, New Jersey, Colorado, Massachusetts, Maryland and West Virginia.

In connection with these transactions, Cannabist and an affiliate announced their commencement of voluntary proceedings under the Companies’ Creditors Arrangement Act (Canada) and announced their intention to seek recognition of those proceedings under Chapter 15 of the U.S.

Bankruptcy Code.

We continue to monitor these developments and their potential impact on Cannabist’s ability to satisfy its obligations under its leases with us.

As of June 30, 2026, we leased 19 properties to Cannabist and its affiliates, comprising approximately 236,000 square feet in 2 states and representing approximately 3.2% of our annualized contractual rent as of June 30, 2026.

Subsequent to quarter end, on July 20, 2026, affiliates of SH Parent, Inc., together with SH Parent, Inc.

as guarantor (collectively, “Parallel”), defaulted under two leases with us for properties located in Florida.

These leases represented approximately 6.1% of our annualized contractual rent as of June 30, 2026.

Following the expiration of applicable cure periods, Parallel failed to pay July 2026 rent due under these leases, including base rent, reimbursements for estimated tax and insurance payments, default interest and late charges, totaling approximately $1.6 million.

We are holding security deposits pursuant to these leases, which may be applied to cover payment in full of the defaulted rent and estimated tax and insurance payments, in addition to late charges and interest.

We are continuing discussions with Parallel regarding the leases and intend to enforce our rights thereunder, which may include commencing eviction proceedings, as we deem necessary.

During the three months ended June 30, 2026, we took several actions to strengthen our balance sheet and liquidity.

In April 2026, we made early partial repayments at a discount totaling $9.1 million on the Notes due 2026, reducing the principal balance by $9.1 million from $291.2 million to $282.1 million.

In May 2026, we repaid in full the $282.1 million outstanding principal balance of our Notes due 2026 at maturity.

During the three months ended June 30, 2026, certain of our subsidiaries entered into an aggregate of $148.7 million of new secured term loans with various lenders.

In addition, on June 15, 2026, our Operating Partnership issued $402.5 million aggregate principal amount of 6.00% Exchangeable Notes, including the full exercise of the initial purchasers’ option to purchase additional notes.

See “—Liquidity and Capital Resources” below for further discussion of these financing activities.

Factors Impacting Our Operating Results

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• 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.

The properties that we have acquired primarily consist of real estate assets that support the regulated cannabis industry.

Most states where we own properties issue licenses for cannabis operations for a limited period.

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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.

See “—Results of Operations—Comparison of the three and six months ended June 30, 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 extent and duration of these impacts depend on developments in the regulated cannabis markets in which we operate and remain subject to significant uncertainty.

In April 2026, the U.S.

Department of Justice (“DOJ”) and the 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.

Separately, the DEA held an administrative hearing on the broader rescheduling of marijuana, including adult-use marijuana, from Schedule I to Schedule III, which began on June 29, 2026, and concluded on July 15, 2026, without a

The presiding administrative law judge directed participating parties to submit post-hearing briefs and proposed corrections to the hearing transcript by August 17, 2026, following which the judge will issue a recommendation to the DEA Administrator, who retains sole authority to determine whether to issue a final rule rescheduling marijuana.

No timeline has been established for either the judge’s recommendation or the DEA Administrator’s final decision.

In addition, the April 2026 final order remains subject to pending legal challenges before the U.S.

Court of Appeals for the D.C.

Accordingly, 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 ultimate outcome and timing of the broader rescheduling process, and no retrospective tax relief or guidance has been issued to date.

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.

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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.

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.

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Significant Tenants and Concentrations of Risk

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

As of June 30, 2026, we owned 108 properties located in 19 states leased to 37 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.

At June 30, 2026, our largest property was located in New York and accounted for 5.7% 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 June 30, 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 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.

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

See Note 6 “Investments 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 six months ended June 30, 2026.

Investments 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 six months ended June 30, 2026.

Comparison of the Three and Six Months Ended June 30, 2026 and 2025

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

For the Three Months Ended

2026 2025 Change

For the Three Months Ended For the Six Months Ended

June 30, June 30,

2026 2025 2026 2025

Cannabis Portfolio Segment:

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

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

Gain (loss) on sale of real estate, net 11,847 — 12,269 —

Interest and other income 1,429 770 1,871 1,370

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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.

Rental revenues for the three months ended June 30, 2026 and 2025 remained consistent at $62.9 million.

Increases in rental revenue generated from new leases on existing properties and annual contractual rent escalations on certain properties were substantially offset by decreases in rental revenue resulting from the sale of certain properties, tenant defaults and lease terminations.

During the three months ended June 30, 2026, we applied $1.2 million of security deposits for payment of rent on properties leased to Battle Green and Cannabist.

During the three months ended June 30, 2025, we applied $18,000 of security deposits for payment of rent on a property leased to Emerald Growth, which was sold in April 2025.

Rental revenues for the six months ended June 30, 2026 decreased by $2.8 million, or 2%, to $131.8 million, compared to $134.6 million for the six months ended June 30, 2025.

The decrease was primarily driven by a $12.6 million reduction in rental revenue resulting from the sale of four properties, tenant defaults and lease terminations.

These decreases were partially offset by a $9.8 million increase in rental revenue attributable to annual contractual rent escalations on multiple properties, new leases executed on existing properties, and collections from court settlements related to certain defaulted tenants.

For the six months ended June 30, 2026, we applied $2.4 million of security deposits for payment of rent on properties leased to Battle Green and Cannabist.

For the six months ended June 30, 2025, we applied $5.8 million of security deposits for payment of rent on properties leased to PharmaCann, Gold Flora, TILT, Sozo and Emerald Growth.

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.

Property expenses for the three months ended June 30, 2026 increased by $0.3 million to $7.2 million, compared to $6.9 million for the three months ended June 30, 2025.

Property expenses for the six months ended June 30, 2026 increased by $0.6 million to $14.8 million, compared to $14.2 million for the six months ended June 30, 2025.

The increase was primarily due to higher property taxes on certain properties, which was partially offset by lower insurance expense resulting from reduced insurance premiums under our master insurance policy and lower other property-related expenses.

Property expenses related to leased properties are generally reimbursable to us 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.

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.

Depreciation and amortization expense for the three months ended June 30, 2026 increased by $0.3 million to $18.8 million, compared to $18.5 million for the three months ended June 30, 2025.

Depreciation and amortization expense for the six months ended June 30, 2026 increased by $0.5 million to $37.4 million, compared to $36.9 million for the six months ended June 30, 2025.

The increase was primarily due to the full amortization of in-place lease intangible assets upon the early termination of certain leases, partially offset by lower depreciation expense resulting from the sale of certain properties.

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.

We recognized an impairment loss on real estate of $3.5 million during the three months ended March 31, 2025 related to one of our properties in Palm Springs, California.

The property was under contract to be sold for less than its carrying value and was subsequently sold in June 2025.

No other impairment loss on real estate was recognized during the three and six months ended June 30, 2026 and 2025.

Gain on Sale of Real Estate, Net .

Gain on sale of real estate, net was $11.8 million for the three months ended June 30, 2026, consisting of a $16.7 million gain recognized on the sale of our property located in New York, partially offset by a $4.9 million loss recognized on the sale of our property located in Texas.

Gain on sale of real estate, net was $12.3 million for the six months ended June 30, 2026, which also included a $0.5 million gain recognized on the sale of our property located in Arizona.

There were no gains or losses on the sale of real estate during the three or six months ended June 30, 2025.

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.

Interest and other income for the three months ended June 30, 2026 increased by $0.7 million to $1.4 million, compared to $0.8 million for the three months ended June 30, 2025.

Interest and other income for the six months ended June 30, 2026 increased by $0.5 million to $1.9 million, compared to $1.4 million for the six months ended June 30, 2025.

The increase was primarily due to $0.7 million of interest income recognized on the seller-financed note associated with the sale of a property in New York, partially offset by a $0.2 million decrease in interest income from our construction loan related to 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.

Interest and other income for the three and six months ended June 30, 2026 was $8.5 million and $14.0 million, respectively, and consisted of interest and dividend income earned on our investments in the IQHQ Credit Facility and IQHQ Preferred Stock.

These investments were made starting in September 2025 and, accordingly, did not have comparable income during the three and six months ended June 30, 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.

General and administrative expenses for the three months ended June 30, 2026 decreased by $0.9 million to $7.7 million from $8.6 million for the three months ended June 30, 2025.

The decrease was primarily driven by lower compensation expense, primarily due to lower bonus expense, as well as lower consulting expenses.

These decreases were partially offset by higher non-capitalizable financing expenses and legal expenses related to various litigation matters.

General and administrative expenses for the six months ended June 30, 2026 increased by $1.0 million to $18.1 million, compared to $17.1 million for the six months ended June 30, 2025.

The increase was primarily driven by higher legal expenses related to various litigation matters and higher non-capitalizable financing expenses.

These increases were partially offset by lower compensation expense, primarily due to lower bonus expense, as well as lower consulting expenses.

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 and other income for the three months ended June 30, 2026 increased slightly to $0.9 million from $0.8 million for the three months ended June 30, 2025.

Interest and other income for the six months ended June 30, 2026 decreased to $1.2 million from $1.8 million for the six months ended June 30, 2025.

Interest and other income is primarily affected by prevailing market interest rates and the balance of our interest-bearing 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.

Interest expense for the three months ended June 30, 2026 increased by $3.9 million to $8.3 million from $4.4 million for the three months ended June 30, 2025.

Interest expense for the six months ended June 30, 2026 increased by $5.9 million to $14.8 million from $8.9 million for the six months ended June 30, 2025.

The increase was primarily due to interest expense recognized on the Exchangeable Notes and new term loans, partially offset by lower interest expense on the Notes due 2026 following their maturity in May 2026.

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,

Preferred stock dividends for the three months ended June 30, 2026 increased by $2.3 million to $3.2 million from $0.9 million for the three months ended June 30, 2025.

Preferred stock dividends for the six months ended June 30, 2026 increased by $4.1 million to $5.8 million from $1.7 million for the six months ended June 30, 2025.

The increases were primarily due to the issuance of additional shares of Series A Preferred Stock subsequent to June 30, 2025.

Comparison of the Six Months Ended June 30, 2026 and 2025 (in thousands)

Six Months Ended June 30,

2026 2025 Change

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Net cash provided by (used in) financing activities 137,491 (126,358) 263,849

Ending cash and cash equivalents 89,117 128,010 (38,893)

Ending cash, cash equivalents and restricted cash 207,637 99,666 107,971

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 for the six months ended June 30, 2026 and 2025 were $100.9 million and $102.7 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

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.

For the six months ended June 30, 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 decrease in cash flows provided by operating activities for the six months ended June 30, 2026 compared to the six months ended June 30, 2025 was primarily due to lower rental revenue and timing differences in working capital and application of tenant security deposits, partially offset by interest and dividend income earned on our investments in the IQHQ Credit Facility and IQHQ Preferred Stock.

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.

For the six months ended June 30, 2026, cash flows used in investing activities consisted of a $120.0 million investment in life science financial instruments and $3.6 million in funding of draws for improvements and construction, partially offset by $45.2 million in proceeds from the sale of real estate assets.

For the six months ended June 30, 2025, net cash used in investing activities was $22.9 million, which was primarily driven by $24.4 million used for investments in real estate and funding of draws for improvement and construction funding at our properties, partially offset by $1.8 million in proceeds related to the sale of our Palm Springs, California property.

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.

Net cash provided by financing activities of $137.5 million during the six months ended June 30, 2026 was driven by $535.8 million of net proceeds from the issuance of the Exchangeable Notes and term loans, $81.2 million of net proceeds from the issuance of Series A Preferred Stock, and $44.0 million of net proceeds from the issuance of common stock.

These amounts were partially offset by dividend payments of $112.0 million to common and preferred stockholders, $89.0

million related to the repurchase of our common stock, net decrease in borrowings under our revolving credit facilities of $10.0 million, principal repayments of $311.3 million on our term loans and Notes due 2026, and $1.3 million related to the net share settlement of equity awards to satisfy employee withholding taxes upon the vesting of restricted stock.

Net cash used in financing activities of $126.4 million during the six months ended June 30, 2025 was due to dividend payments of $110.1 million to common and preferred stockholders, partial principal payment on the Notes due 2026 of $8.7 million, $0.7 million related to net share settlement of equity awards to pay the required withholding taxes upon vesting of restricted stock for certain employees, and $20.1 million related to repurchase of common stock, partially offset by $13.2 million in net proceeds from the issuance of our Series A Preferred Stock pursuant to our ATM Program.

Liquidity and Capital Resources

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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.

Our principal future uses of cash and cash equivalents include the acquisition of additional properties and other investments, 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 June 30, 2026, we had cash and cash equivalents of $204.7 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.

These sources of income represent our primary source of liquidity to fund the acquisition of additional properties, the development and redevelopment of existing properties, dividends to our stockholders, 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.

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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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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.

On October 31, 2025, the Company purchased an additional 45,000 shares of IQHQ Preferred Stock for $45.0 million.

During the three months ended June 30, 2026, the Company funded the remaining $120.0 million of its commitment to purchase shares of IQHQ Preferred Stock, resulting in a total investment of 170,000 shares of IQHQ Preferred Stock having an aggregate purchase price of $170.0 million.

In connection with the initial closing of our investment in IQHQ Preferred Stock, we also became a lender under the IQHQ 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

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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

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.

The Notes due 2026 were the Operating Partnership’s general unsecured and unsubordinated obligations, and ranked equally in right of payment with all of the Operating Partnership’s future senior unsecured indebtedness.

In April 2026, we made early partial repayments at a discount totaling $9.1 million on the Notes due 2026, reducing the principal balance by $9.1 million from $291.2 million to $282.1 million.

In May 2026, we paid off the remaining principal balance of $282.1 million and accrued interest obligations related to the Notes due 2026.

As of June 30, 2026, no amounts remained outstanding on the Notes due 2026.

Exchangeable Notes

On June 15, 2026, our Operating Partnership issued $402.5 million of the Exchangeable Notes in a private offering, including the exercise in full of the initial purchasers' option to purchase additional notes.

The Exchangeable Notes are senior unsecured obligations of our Operating Partnership, are fully and unconditionally guaranteed by us and are exchangeable for cash, shares of our common stock, or a combination of cash and shares of our common stock, at our Operating Partnership's option, at any time prior to the close of business on the second scheduled trading day immediately preceding the stated maturity date.

The initial exchange rate for the Exchangeable Notes is 14.4113 shares of our common stock per $1,000 principal amount of Exchangeable Notes and the initial exchange price is $69.39 per share of our common stock.

The initial exchange rate and initial exchange price are subject to adjustment in certain circumstances.

The Exchangeable Notes bear interest at a rate of 6.00% per annum, payable semi-annually in arrears on June 15 and December 15 of each year, beginning December 15, 2026 until maturity on June 15, 2029.

Our Operating Partnership does not have the right to redeem the Exchangeable Notes prior to maturity, but may be required to repurchase the Exchangeable Notes from holders under certain circumstances.

We received net proceeds of approximately $391.0 million from the offering of Exchangeable Notes, after deducting the initial purchasers’ discounts and estimated offering expenses, reflecting the increased offering size resulting from the full exercise of the initial purchasers’ option.

We used approximately $80.5 million of the net proceeds to fund the concurrent repurchase of 1,334,466 shares of our common stock from certain purchasers of the Exchangeable Notes in privately negotiated transactions, and intend to use the remaining net proceeds for working capital and general corporate purposes, which may include the repayment of indebtedness, including amounts outstanding under our credit facilities and the term loans described below, and funding investments consistent with our investment strategy.

During the six months ended June 30, 2026, we entered into several new secured term loan facilities with various lenders for an aggregate principal amount of $148.7 million and received net proceeds of $144.8 million after deducting issuance costs.

The proceeds from the term loans were used to pay off the Notes due 2026 in May 2026.

In June 2026, we fully repaid one of the term loans with an original principal amount of $20.0 million prior to maturity.

The remaining term loans are secured by, among other things, certain mortgages and security interests in the real and personal properties, certain assignments of leases and rents, and certain deposit accounts maintained with the lenders.

The remaining term loans have maturities ranging from April 2029 to June 2031, have fixed interest rates ranging from 6.67% to 9.0% and one term loan has a variable interest rate at one-month SOFR, subject to a floor of 3.75%, plus 5.0%.

See Note 9 "Debt - Term Loans" to our consolidated financial statements for more information.

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.

During the three months ended June 30, 2026, we sold 948,034 shares of our Series A Preferred Stock for net proceeds of $20.9 million.

During the three months ended June 30, 2026, we sold 680,842 shares of common stock for net proceeds of $34.7 million.

As of June 30, 2026, shares of the Company’s common stock and Series A Preferred Stock having an aggregate offering price of up to $336.9 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%.

At June 30, 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”).

Management believes the Company was in compliance with these covenants as of June 30, 2026.

As of June 30, 2026, there were no amounts outstanding under the Revolving Credit Facility.

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.

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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%.

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

At June 30, 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.

Management believes the Company was in compliance with these covenants as of June 30, 2026.

As of June 30, 2026, the outstanding borrowings under our IIP Life Science Credit Facility were $92.5 million.

Share Repurchase Program

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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.

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 previous or the current share repurchase plan during the three months ended March 31, 2026.

Repurchases under the share repurchase program 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.

During the three months ended June 30, 2026, we repurchased 1,468,542 shares of our common stock under the current share repurchase program for $89.0 million, including the shares repurchased in connection with our Exchangeable Notes.

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.

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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:

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 Exchangeable Notes, term loans, borrowings under our credit facilities, and make accretive new investments.

The following table describes the dividends declared by the Company during the six months ended June 30, 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 15, 2026 Common stock $ 1.90 June 30, 2026 July 15, 2026 $ 53,127

June 15, 2026 Series A preferred stock $ 0.5625 June 30, 2026 July 15, 2026 $ 3,187

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

The following table summarizes our contractual debt obligations as of June 30, 2026 (in thousands):

by Year Exchangeable Notes Credit Facilities Term Loans Interest Total

2026 (six months ending December 31) $ — $ — $ 623 $ 20,377 $ 21,000

2027 — — 1,242 40,193 41,435

2028 — 92,500 1,325 38,741 132,566

2029 402,500 — 76,415 16,720 495,635

2030 — — 1,041 3,332 4,373

Thereafter — — 47,955 1,441 49,396

Total $ 402,500 $ 92,500 $ 128,601 $ 120,804 $ 744,405

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.

Additionally, as of June 30, 2026, we had $6.3 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.

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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For these reasons, management has deemed it appropriate to disclose and discuss FFO and FFO per share.

The Exchangeable Notes were dilutive for purposes of calculating earnings per diluted share for the three and six months ended June 30, 2026, as GAAP requires convertible notes that can be settled in cash and/or shares at the Company’s discretion to be evaluated under the if-converted method.

However, for the purposes of calculating FFO, Normalized FFO and AFFO per diluted share, the Company excludes the dilutive impact of the Exchangeable Notes under the if-converted method as management believes the evaluation of operating performance based on actual diluted shares outstanding is more appropriate to facilitate consistent comparisons between reporting periods and reflects the actual shares that are entitled to common stock dividends each period.

Accordingly, for the three months ended June 30, 2026, cash interest expense of $1.0 million relating to the Exchangeable Notes was included and 1,019,877 weighted-average shares potentially issuable upon exchange of the Exchangeable Notes under the if-converted method were excluded from the calculation of FFO, Normalized FFO and AFFO per diluted share.

For the six months ended June 30, 2026, cash interest expense of $1.0 million relating to the Exchangeable Notes was included and 512,756 weighted-average shares potentially issuable upon exchange of the Exchangeable Notes under the if-converted method were excluded from the calculation of FFO, Normalized FFO and AFFO per diluted 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.

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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 months ended March 31, 2026 and 2025 (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 and six months ended June 30, 2026 and 2025 (in thousands, except share and per share amounts):

For the Three Months Ended

June 30, For the Six Months Ended

2026 2025 2026 2025

Net income attributable to common stockholders $ 40,665 $ 25,146 $ 70,820 $ 55,442

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Impairment loss on real estate — — — 3,527

Loss (gain) on sale of real estate

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

Loss (gain) on sale of real estate, net

(11,847) — (12,269) —

FFO attributable to common stockholders 47,617 43,646 95,934 95,860

Litigation-related expense 1,312 413 3,182 819

Loss (gain) on partial repayment of Notes due 2026 — (32)

Income on seller-financed notes (1)

223 1,164 446 1,317

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

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

Transaction costs and other (3)

(463) — (463) (32)

Normalized FFO attributable to common stockholders 49,214 45,228 99,799 97,989

Stock-based compensation 2,826 2,672 5,410 4,750

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Above-market lease amortization 23 23 46 46

AFFO attributable to common stockholders (diluted) $ 53,434 $ 55,332

AFFO attributable to common stockholders $ 53,009 $ 48,399 $ 106,443 $ 103,731

FFO per common share – diluted $ 1.64 $ 1.54 $ 3.34 $ 3.37

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AFFO per common share – diluted $ 1.83 $ 1.71 $ 3.71 $ 3.65

Weighted average common shares outstanding – basic 27,991,910 28,275,549

Weighted average common shares used for FFO, Normalized FFO, and AFFO:

Basic 28,443,143 27,924,092 28,218,773 28,098,850

Restricted stock and RSUs 529,228 393,601 502,400 353,261

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.

28,972,371 28,317,693 28,721,173 28,452,111

(1) Amount 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.

(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 June 30, 2026, as the transaction did not qualify for recognition as a completed sale.

(3) Amount reflects other items that are considered to be infrequent and unusual in nature and/or not related to our core real estate operation.

For the three and six months ended June 30, 2026, amount reflects certain financing costs that were not capitalizable and write-off of certain liabilities.

(4) For the three and six months ended June 30, 2026, amounts exclude 1,019,877 and 512,756 weighted-average shares potentially issuable upon exchange of the Exchangeable Notes under the if-converted method, respectively.

See the Non-GAAP Financial Information section above for more detail.

Critical Accounting Estimates

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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.

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

Borrowings under these credit facilities bear interest at variable rates based on the greater of prime rate or SOFR, as applicable, plus an applicable margin and stipulated rate and one of our term loans bears interest at a rate per annum equal to the one-month SOFR, subject to a floor of 3.75%, plus 5.0%.

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 Exchangeable Notes bear interest at a fixed rate of 6.0% per annum and are not directly exposed to changes in prevailing market interest rates.

However, changes in market interest rates may affect the trading value of the Exchangeable Notes.

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.

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

What changed 10-Q

Item 2. Management’s Discussion and Analysis