Company: IIPR
Filing Date: 2025-11-04
Form Type: 10-Q
Source: 0001677576-25-000005
Chunk: 24

Company: INNOVATIVE INDUSTRIAL PROPERTIES INC
Filing Date: 2025-11-04
Form: 10-Q
Item: Part II, Item 1A
Chunk 24
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 although the IQHQ Preferred Stock includes a fixed cash dividend and PIK component, the dividend rate may be reduced by up to 3.0% in the event we fail to meet our funding obligations to purchase additional IQHQ Preferred Stock under the Securities Purchase Agreement, regardless of the performance of the underlying real estate assets. 

There is no public market for the IQHQ Preferred Stock, and any ability to monetize this investment may be limited to contractual redemption rights or a liquidity event involving IQHQ REIT, neither of which is assured or within our control. As a result, the timing and amount of any returns on this investment are inherently uncertain and may not meet our expectations.  Any adverse developments related to IQHQ REIT, its projects, capital structure, or operating performance 

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could result in reduced income, impaired recoverability of our investment, or other negative impacts on our results of operations and financial condition.

Further, in connection with our IQHQ Preferred Stock investment we received warrants to purchase units in IQHQ Holdings, LP, a limited partnership that owns substantial equity in IQHQ REIT.  These warrants have a nominal exercise price and as such are treated as deemed exercised for federal income tax purposes, with the consequence that we are treated as holding equity units in IQHQ Holdings, L.P. and may receive allocations of taxable income and gains from this entity even though we do not receive any current distributions.  This may require us to increase our distributions to continue to qualify as a REIT and to eliminate any entity level taxation or alternatively, we may need to pay tax upon allocation of such income to us.  We may need to raise or borrow funds to make these distributions or pay these taxes.

We may invest in the equity of private company REITs and real estate-related companies, which subjects us to additional risks, including limited liquidity, valuation uncertainty and operational risk.

As part of our investment strategy, we may invest in the equity of private REITs, such as our investment in IQHQ Preferred Stock, and other private real estate-related companies. These investments may subject us to risks that are different from, or in addition to, those associated with our directly owned real estate portfolio or investments in publicly traded securities.

Private REITs and similar entities are generally not subject to the same disclosure, governance, or liquidity standards as publicly traded REITs. As a result, we may have limited access to financial and operational information and may be unable to monitor these investments with the same degree of transparency. Furthermore,