Company: IIPR
Filing Date: 2025-11-04
Form Type: 10-Q
Source: 0001677576-25-000005
Chunk: 28

Company: INNOVATIVE INDUSTRIAL PROPERTIES INC
Filing Date: 2025-11-04
Form: 10-Q
Item: Part II, Item 1A
Chunk 28
---
 may expose us to risks that differ from those associated with our regulated cannabis industry portfolio. Properties leased to life science tenants are subject to a variety of industry-specific risks. If any of these risks were to materialize, they could adversely impact our financial condition, results of operations, and cash flows. For example, tenants in the life sciences sector may face heightened regulatory scrutiny, including evolving healthcare regulations, increased government-imposed price controls, and other cost-containment measures. In addition, the success of life science companies often depends on the safety and efficacy of their products, the availability of substantial capital to fund ongoing research and development, and their ability to maintain intellectual property protection. Adverse developments in any of these areas could impair the financial condition of our potential tenants in the life science industry and their ability to meet their lease obligations, which in turn could negatively affect the revenue generated by such properties and their valuation.

In addition, life science properties typically require more capital-intensive improvements than traditional commercial or office space. These may include enhanced structural loads, increased floor-to-ceiling heights, specialized HVAC systems, advanced environmental controls, upgraded plumbing and electrical infrastructure, and buildouts such as laboratories and clean rooms. The cost and complexity of these improvements may limit the pool of replacement tenants and increase re-leasing costs, particularly if space must be reconfigured for a non-life science use.

If we acquire life science properties in the future, such properties may be used by tenants that handle hazardous materials, chemicals, or biological and radioactive substances as part of their operations. As a result, we and any future tenants of such properties would be subject to federal, state, and local environmental laws and regulations governing the use, storage, handling, and disposal of these materials. In the event of contamination or injury arising from such activities, we could, under certain circumstances, be held liable for damages, remediation costs, or regulatory penalties, even if caused solely by a tenant’s actions. Such liabilities could exceed our available insurance coverage or financial resources and could have a material adverse effect on our business, financial condition, or ability to make distributions to our shareholders. Accordingly, while investments in life science properties represent a key component of our growth strategy, they also introduce unique operational, regulatory, and environmental risks that may differ from those associated with our current portfolio.

Changes in the life science industry could adversely affect the performance of any future investments we make in lab properties.

As part of our growth strategy, we may pursue investments in life science properties, including lab space, either directly or through other investment structures