Company: IIPR
Filing Date: 2025-05-08
Form Type: 10-Q
Source: 0001628280-25-023920
Chunk: 95

Company: INNOVATIVE INDUSTRIAL PROPERTIES INC
Filing Date: 2025-05-08
Form: 10-Q
Item: Part I, Item 8
Chunk 95
---
 market fund that invests 100% in U.S. government securities, which is stated at cost and valued using level 1 inputs. (3)The fair value is determined based upon Level 2 inputs as the Notes due 2026 were not traded in an active market. (4)The construction loan receivable is categorized as Level 3 and was valued using a yield analysis, which is typically performed for non-credit impaired loans. To determine fair value using a yield analysis, a current price is imputed for the loan based upon an assessment of the expected market yield for a similarly structured loan with a similar level of risk. In the yield analysis, the Company considers the current contractual interest rate, the maturity and other terms of the loan relative to risk of the company and the specific loan. At each of March 31, 2025 and December 31, 2024, the expected market yield used to determine fair value was 16.25%. Changes in market yields may change the fair value of the construction loan. Generally, an increase in market yields may result in a decrease in the fair value of the construction loan. Due to the inherent uncertainty of determining the fair value of a loan that does not have a readily available market value, the fair value of the construction loan may fluctuate from period to period. Additionally, the fair value of the construction loan may differ significantly from the value that would have been used had a readily available market existed for such loan and may differ materially from the value that the Company may ultimately realize.(5)Notes receivable relate to certain acquisitions of real estate which did not satisfy the requirements for sale-leaseback accounting (see Note 2 “Acquisition of Real Estate Properties” to our condensed consolidated financial statements for more information). The notes receivable are categorized as Level 3 and were also valued using a yield analysis. At March 31, 2025 and December 31, 2024, the weighted average expected market yields used to determine fair values were 21.6% and 20.6%, respectively.  The carrying amounts of cash equivalents, accounts payable, accrued expenses and other liabilities approximate their fair values.Nonrecurring Fair Value MeasurementsAs of March 31, 2025, assets measured at fair value on a nonrecurring basis consist of one real estate asset for which we recorded an impairment and was written down to its estimated fair value. Our estimate of fair value was determined using the stated price within the purchase and sale agreement for this asset, net of