Company: IIPR
Filing Date: 2025-11-04
Form Type: 10-Q
Source: 0001677576-25-000005
Chunk: 6

Company: INNOVATIVE INDUSTRIAL PROPERTIES INC
Filing Date: 2025-11-04
Form: 10-Q
Item: Part I, Item 3
Chunk 6
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 qualify for favorable tax treatment applicable to qualified dividends.

Accordingly, while investments in private REITs and similar entities may offer opportunities for portfolio diversification and enhanced returns, they also introduce structural, operational, tax, and liquidity risks that could adversely affect our financial condition, results of operations, or ability to make distributions to our shareholders.

Some of our investments in real estate-related equity securities may become distressed, which could result in a high risk of loss, increased volatility, and limited liquidity.

Although our investment strategy generally focuses on non-distressed real estate-related assets, certain of our equity investments, such as our investment in IQHQ Preferred Stock, may be adversely affected by changing market conditions or negative developments impacting the issuer. The life sciences sector, in particular, has experienced financial stress in recent years, including limited access to capital, rising financing costs, broad valuation declines, and industry consolidation. These pressures have affected both public and private life sciences companies, those in earlier stages of development or with limited cash flow visibility. See “Investments in Life Science Properties” below for a discussion of risks associated with investments in the life sciences sector.

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Equity securities of companies operating in financially or operationally challenged sectors tend to be highly illiquid, more volatile, harder to trade, and may decline significantly in value. In the event of issuer distress, including potential bankruptcy or restructuring, equity holders are subordinate to creditors and may experience a partial or total loss of capital. Recovery prospects are typically more uncertain for equity investments than for debt, and any reorganization process may result in receipt of securities of reduced value, diminished voting rights, or other unfavorable terms.  As a result, our exposure to real estate-related equity securities, particularly in stressed sectors like life sciences, involves a higher degree of risk and could materially adversely affect our financial condition, results of operations, and our ability to make distributions to our shareholders.

Investments in real estate-related assets may be subject to risks including various creditor risks and early redemption features which may materially adversely affect our results of operations and financial condition.

The real estate-related assets in which we invest may include secured or unsecured debt at various levels of an issuer’s capital structure. The real estate-related assets in which we invest may not be protected by financial covenants or limitations upon additional indebtedness, may be illiquid or have limited liquidity, and may not be rated by a credit rating agency. Debt securities are also subject to other creditor risks, including (1) the possible invalidation of an investment transaction as a “fraud