Company: IIPR
Filing Date: 2025-08-07
Form Type: 10-Q
Source: 0001628280-25-038972
Chunk: 24

Company: INNOVATIVE INDUSTRIAL PROPERTIES INC
Filing Date: 2025-08-07
Form: 10-Q
Item: Part I, Item 1
Chunk 24
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 are recognized as incurred. Certain equity awards are subject to vesting based upon the satisfaction of various market conditions. Forfeiture of share awards with market-based restrictions does not result in a reversal of previously recognized share-based compensation expense.Lease Accounting. We account for our leases under ASC 842, Leases, and have elected the practical expedient not to separate certain non-lease components from the lease component if the timing and pattern of transfer are the same for the non-lease component and associated lease component, and the lease component would be classified as an operating lease if accounted for separately. We also elected the short-term lease exception for lessees for leases that are less than 12 months. As lessee, we recognized a liability to account for our future obligations and a corresponding right-of-use asset related to our corporate office lease, which ends in January 2027 and contains annual escalations. We measured the lease liability based on the present value of the future lease payments (excluding the extension option that we are not reasonably certain to exercise), discounted using the estimated incremental borrowing rates of 7.25% and 5.5%, which were the interest rates that we estimated we would have to pay to borrow on a collateralized basis over a similar term for an amount equal to the lease payments at initial commencement in December 2019 and upon an amendment in November 2021, respectively. Subsequently, the lease liability is accreted by applying a discount rate established at the lease commencement date to the lease liability balance as of the beginning of the period and is reduced by the payments made during the period.The right-of-use asset is measured based on the corresponding lease liability. We did not incur any initial direct leasing costs or exchange any other consideration with the landlord prior to the commencement of the lease. Subsequently, the right-of-use asset is amortized on a straight-line basis during the lease term. In each of the three and six months ended June 30, 2025 and 2024, we recognized office lease expense of $0.1 million and $0.2 million, respectively, which is included in general and administrative expenses in our consolidated statements of income. In both the six months ended June 30, 2025 and 2024, amounts paid and classified as operating activities in our consolidated statements of cash flows for the office lease were $0.2 million.

11

As lessor, for each of our real estate transactions involving the leaseback of the related property to the seller or affiliates of the seller