Company: IIPR
Filing Date: 2025-11-04
Form Type: 10-Q
Source: 0001677576-25-000005
Chunk: 26

Company: INNOVATIVE INDUSTRIAL PROPERTIES INC
Filing Date: 2025-11-04
Form: 10-Q
Item: Part II, Item 1A
Chunk 26
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 valuation declines, and industry consolidation. These pressures have affected both public and private life sciences companies, those in earlier stages of development or with limited cash flow visibility. See “Investments in Life Science Properties” below for a discussion of risks associated with investments in the life sciences sector.

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Equity securities of companies operating in financially or operationally challenged sectors tend to be highly illiquid, more volatile, harder to trade, and may decline significantly in value. In the event of issuer distress, including potential bankruptcy or restructuring, equity holders are subordinate to creditors and may experience a partial or total loss of capital. Recovery prospects are typically more uncertain for equity investments than for debt, and any reorganization process may result in receipt of securities of reduced value, diminished voting rights, or other unfavorable terms.  As a result, our exposure to real estate-related equity securities, particularly in stressed sectors like life sciences, involves a higher degree of risk and could materially adversely affect our financial condition, results of operations, and our ability to make distributions to our shareholders.

Investments in real estate-related assets may be subject to risks including various creditor risks and early redemption features which may materially adversely affect our results of operations and financial condition.

The real estate-related assets in which we invest may include secured or unsecured debt at various levels of an issuer’s capital structure. The real estate-related assets in which we invest may not be protected by financial covenants or limitations upon additional indebtedness, may be illiquid or have limited liquidity, and may not be rated by a credit rating agency. Debt securities are also subject to other creditor risks, including (1) the possible invalidation of an investment transaction as a “fraudulent conveyance,” (2) lender liability claims by the issuer of the obligation and (3) environmental liabilities. Our investments may be subject to early redemption features, refinancing options, prepayment options or similar provisions which, in each case, could result in the issuer or borrower repaying the principal on an obligation held by us earlier than expected, resulting in a lower return to us than anticipated or reinvesting in a new obligation at a lower return to us.

Risks Related to Debt Financing

Rising interest rates could increase our cost of capital, reduce investment returns, and adversely affect our ability to make distributions to our shareholders.

We may fund our real estate-related investments, including our commitments under the IQHQ Credit Facility and purchases of IQHQ Preferred Stock, using borrowings under variable-rate debt instruments or other interest-sensitive liabilities. In a rising