Company: IIPR
Filing Date: 2025-11-04
Form Type: 10-Q
Source: 0001677576-25-000005
Chunk: 129

Company: INNOVATIVE INDUSTRIAL PROPERTIES INC
Filing Date: 2025-11-04
Form: 10-Q
Item: Part I, Item 8
Chunk 129
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 the property while paying us rent. We recognize revenue for each of the cannabis 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.For the three and nine months ended September 30, 2025, rental revenue recognized included the application of $0.8 million and $6.6 million of security deposits for rent, respectively. For the three and nine months ended September 30, 

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2024, rental revenue recognized included the application of $1.4 million and $2.0 million of security deposits for rent, respectively.Life Science Investments. Life science investments consist of an investment in the IQHQ Preferred Stock (as defined in Note 7 "Life Science Investments"), which also includes the IQHQ Warrant (as defined in Note 7). The Company does not have significant influence over IQHQ (as defined in Note 7), and the investments in the equity securities of IQHQ do not have a readily determinable fair value. As such, the investments in the equity securities of IQHQ are carried under the measurement alternative of ASC 321, Investments - Equity Securities, which is cost less impairment and adjusted for observable price changes in orderly transactions for identical or similar investment of the same issuer. As of September 30, 2025, there were no impairments or adjustments to the carrying value of the investments in the equity securities of IQHQ as a result of observable price changes.Life science investments also consist of an investment in the IQHQ Credit Facility