Company: IIPR
Filing Date: 2025-02-26
Form Type: 424B5
Source: 0001104659-25-017454
Chunk: 117

Company: INNOVATIVE INDUSTRIAL PROPERTIES INC
Filing Date: 2025-02-26
Form: 424B5
Chunk 117
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 would not become aware of such action in time to dispose of our interest
in the partnership or limited liability company or take other corrective action on a timely basis. In that case, we could fail to qualify
as a REIT unless we were entitled to relief, as described below.

Taxable REIT Subsidiaries (“TRSs”). A REIT is permitted to own, directly or indirectly, up to 100%
of the stock of one or more TRSs. The subsidiary and the REIT generally must jointly elect to treat the subsidiary as a TRS. However,
a corporation of which a TRS directly or indirectly owns more than 35% of the voting power or value of the securities is automatically
treated as a TRS without an election. We generally may not own more than 10%, as measured by voting power or value, of the securities
of a corporation that is not a qualified REIT subsidiary or a REIT unless we and such corporation elect to treat such corporation as
a TRS. Generally, no more than 20% of the value of a REIT’s assets may consist of stock or securities of one or more TRSs.

Unlike a qualified REIT subsidiary, the separate
existence of a TRS is not ignored for U.S. federal income tax purposes and a TRS is a fully taxable corporation subject to U.S. federal
corporate income tax on its earnings. We will not be treated as holding the assets of any TRS or as receiving the income earned by any
TRS. Rather, we will treat the stock issued by any TRS as an asset and will treat any dividends paid to us from any TRS as income. This
treatment may affect our compliance with the gross income tests and asset tests.

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Restrictions imposed on REITs and their TRSs
are intended to ensure that TRSs will be subject to appropriate levels of U.S. federal income taxation. These restrictions limit the
deductibility of interest paid or accrued by a TRS to its parent REIT and impose a 100% excise tax on transactions between a TRS and
its parent REIT or the REIT’s tenants that are not conducted on an arm’s-length basis, such as any redetermined rents, redetermined
deductions, excess interest or redetermined TRS service income. In general, redetermined rents are rents from real property that are
overstated as a result of any services furnished