Company: IIPR
Filing Date: 2025-05-08
Form Type: 10-Q
Source: 0001628280-25-023920
Chunk: 112

Company: INNOVATIVE INDUSTRIAL PROPERTIES INC
Filing Date: 2025-05-08
Form: 10-Q
Item: Part I, Item 8
Chunk 112
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 industry, which already faces higher compliance and regulatory burdens compared to other sectors. In addition, escalating geopolitical tensions and retaliatory trade measures have disrupted global supply chains, which may lead to sourcing challenges, extended lead times, and increased costs for capital projects, including the development and redevelopment of our properties. These factors may also contribute to cost overruns and delays in commencing operations on certain of our tenants’ projects.  

Reduced Capital Availability for Tenants and the Company

In recent years, financial markets have experienced heightened volatility, reflecting increased geopolitical risks and significant tightening of financial conditions. These factors have contributed to a substantial decline in capital availability for regulated cannabis operators. Compounding these challenges, recent U.S. trade policy shifts, including the imposition of tariffs on imports from Canada, Mexico and China, have further strained the industry's financial landscape. These tariffs are expected to lead to increased costs for essential inputs such as cultivation equipment and packaging, which historically have been predominantly sourced from overseas.

As many regulated cannabis operators face significant debt maturities in the coming years, these compounded financial pressures are expected to pose substantial challenges in refinancing or extending those debt obligations. The elevated costs resulting from trade policy shifts, coupled with limited access to capital, may hinder operators' ability to secure favorable refinancing terms, potentially impacting their financial stability and operational viability.

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Significant Tenants and Concentrations of Risk

As of March 31, 2025, we owned 110 properties located in 19 states leased to 31 tenants (not including five non-cannabis tenants in three properties). Many of our tenants are tenants at multiple properties. We seek to manage our portfolio-level risk through geographic diversification and by minimizing dependence on any single property or tenant. At March 31, 2025, our largest property was located in New York and accounted for 5.5% of our net real estate held for investment. No other properties accounted for more than 5% of our net real estate held for investment at March 31, 2025. See Note 2 “Concentration of Credit Risk” in the notes to our condensed consolidated financial statements for further information regarding the tenants in our portfolio that represented the largest percentage of our total rental revenues for the three months ended March 31, 2025. 

Competitive Environment

We face competition from a diverse mix of market participants, including but not limited to, other companies with similar business models, independent investors, hedge funds, lenders and other real estate investors, as well as potential tenants