Company: IIPR
Filing Date: 2025-02-26
Form Type: 424B5
Source: 0001104659-25-017454
Chunk: 124

Company: INNOVATIVE INDUSTRIAL PROPERTIES INC
Filing Date: 2025-02-26
Form: 424B5
Chunk 124
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 and the resulting imposition of the 100% prohibited
transactions tax is available, however, if the following requirements are met:

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| · | either (1) during the year in question, the REIT                                                                                   
 did not make more than seven property sales other than sales of foreclosure property or sales to which Section 1033 of the Code    
 applies, (2) the aggregate adjusted bases of all such properties sold by the REIT during the year did not exceed 10% of the        
 aggregate bases of all of the assets of the REIT at the beginning of the year, (3) the aggregate fair market value of all such     
 properties sold by the REIT during the year did not exceed 10% of the aggregate fair market value of all of the assets of the REIT 
 at the beginning of the year or (4) either, (a) the REIT satisfies the requirements of clause (2) applied by substituting          
 “20%” for “10%” and the “3-year average adjusted bases percentage” (as defined in the Code) for                                    
 the taxable year does not exceed 10%, or (b) the REIT satisfies the requirements of clause (3) applied by substituting             
 “20%” for “10%” and the “3-year average fair market value percentage” (as defined in the Code)                                     
 for the taxable year does not exceed 10%;                                                                                          |
| · | in the case of property not acquired through foreclosure                                                                           
 or lease termination, the REIT has held the property for at least two years for the production of rental income; and               |
| · | if the REIT has made more than seven property sales                                                                                
 (excluding sales of foreclosure property) during the taxable year, substantially all of the marketing and development expenditures 
 with respect to the property were made through an independent contractor from whom the REIT or a TRS derives no income.            |

We will attempt to comply with the terms of the
safe-harbor provisions in the federal income tax laws prescribing when an asset sale will not be characterized as a prohibited transaction.
We cannot assure you, however, that we will be able to comply with the safe-harbor provisions or that we will avoid owning property that
may be characterized as property held “primarily for sale to customers in the ordinary course of a trade or business.” We
may hold and dispose of certain properties through a taxable REIT subsidiary if we conclude that the sale