Company: IIPR
Filing Date: 2025-04-29
Form Type: DEF 14A
Source: 0001104659-25-041241
Chunk: 38

Company: INNOVATIVE INDUSTRIAL PROPERTIES INC
Filing Date: 2025-04-29
Form: DEF 14A
Chunk 38
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 ​ | 140% | ​ | ​ |

As previously discussed, the compensation committee does not benchmark executive compensation opportunities to a “peer group,” because there are no other publicly-traded equity REITs in our unique industry. Therefore, the compensation committee determined these target opportunities by considering the significant risks that the regulatory uncertainty of the regulated cannabis industry at the federal level brings, which are generally not risks faced by management teams at other publicly-traded REITs. Actual earned annual incentive amounts could be zero if performance is below threshold on all measures, or could range from 50% to 150% of each executive’s target amount. To determine earned amounts, the compensation committee evaluated the Company’s overall performance in 2024 based on the following metrics, which were established by the compensation committee at the beginning of 2024: 1) Achieve AFFO per Diluted Share (Weighted 12.5%) The committee established the following AFFO per diluted share goals for 2024:

| ​ | Threshold Achievement | ​ | ​ | ​ | $ | 8.35 | ​ | ​ |
| ​ | Target Achievement    | ​ | ​ | ​ | $ | 8.79 | ​ | ​ |
| ​ | Maximum Achievement   | ​ | ​ | ​ | $ | 9.23 | ​ | ​ |

We believe that AFFO per diluted share, a non-GAAP financial measure, provides useful information to investors because it is a widely accepted industry measure of the operating performance of REITs that is used by industry analysts and investors who evaluate and compare those companies. In particular, AFFO per share is included in the compensation program because it provides an additional measure to compare the operating performance of REITs without having to account for differing depreciation assumptions and other unique revenue and expense items, which we believe are not pertinent to measuring a particular company’s on-going operating performance. Therefore, we determined that AFFO per share is an appropriate performance metric, and that the most appropriate GAAP performance metric to which AFFO per share should be reconciled is net income available to common stockholders per share. Our AFFO per share target was set at 3% below our 2023 AFFO per share in light of the continued challenges facing the cannabis industry, including continued wholesale pricing pressures, lack of enforcement of the illicit market and a challenging tax structure for our tenants due to Internal Revenue Code Section 280E. In addition, we took possession of multiple properties from defaulted tenants in 2023, which