Company: IIPR
Filing Date: 2025-08-07
Form Type: 10-Q
Source: 0001628280-25-038972
Chunk: 22

Company: INNOVATIVE INDUSTRIAL PROPERTIES INC
Filing Date: 2025-08-07
Form: 10-Q
Item: Part I, Item 1
Chunk 22
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 asset, including, if necessary, a probability-weighted approach if multiple outcomes are under consideration. Upon determination that an impairment has occurred, a write-down is recognized to reduce the carrying amount to its estimated fair value. We may adjust depreciation of properties that are expected to be disposed of or redeveloped prior to the end of their useful lives. During the three months ended March 31, 2025, we recognized an impairment loss on real estate of $3.5 million related to one of our properties in Palm Springs, California which was under contract for sale and sold in June 2025. No impairment losses were recognized during the three months ended June 30, 2025, or during the three and six months ended June 30, 2024.Revenue Recognition. Our leases are triple-net leases, an arrangement under which the tenant maintains the property while paying us rent. We recognize revenue for each of the leases at our properties that are classified as operating leases on a cash basis due to the uncertain regulatory environment in the United States pertaining to the regulated cannabis industry, the limited operating history of certain tenants and the resulting uncertainty of collectability of lease payments from each tenant over the duration of the lease term. We evaluate a number of factors in our initial and ongoing assessments of collectability of lease payments for each tenant on a lease-by-lease basis, including evaluations of each tenant’s financial performance, liquidity and overall credit profile, availability and terms of capital for each tenant needed to conduct operations or refinance existing obligations, utilization rates by property and lease duration. We also consider current market conditions, impact of federal, state and local taxation and regulatory burdens and reasonable and supportable forecasts of future economic conditions. Additionally, for operating leases, contractually obligated reimbursements from tenants for recoverable real estate taxes, insurance and operating expenses are included in rental revenues in the period when such costs are reimbursed by the tenants. Contractually obligated real estate taxes that are paid directly by the tenant to the tax authorities are not reflected in our consolidated financial statements.

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For the three and six months ended June 30, 2025, rental revenue recognized included the application of $18,000 and $5.8 million of security deposits for rent, respectively. For both the three and six months ended June 30, 2024, rental revenue recognized included the application of $0.6 million of security deposits for rent.Construction Loan. In June 2021, we executed a construction loan agreement with a developer, pursuant to which (as