Company: IIPR
Filing Date: 2025-11-04
Form Type: 10-Q
Source: 0001677576-25-000005
Chunk: 247

Company: INNOVATIVE INDUSTRIAL PROPERTIES INC
Filing Date: 2025-11-04
Form: 10-Q
Item: Part I, Item 2
Chunk 247
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 are inherently illiquid and subordinate to all debt obligations of the issuer. While preferred equity may confer certain negotiated rights, such as consent or approval rights over specified actions and redemption provisions, such rights are generally more limited in scope than the legal remedies and enforcement mechanisms available to secured lenders. In the event of a default, liquidation, or restructuring, our ability to recover invested capital may be limited, delayed, or entirely impaired, particularly where IQHQ REIT’s obligations to senior creditors remain unsatisfied. These structural and contractual limitations may adversely affect the value of our investment and our ability to realize expected returns.

Furthermore, the payment of dividends on the IQHQ Preferred Stock is not guaranteed and is subject to the financial condition and performance of IQHQ REIT. If IQHQ REIT fails to generate sufficient cash flows, experiences project delays, faces cost overruns, or encounters disruptions in the life science real estate market, it may be unable to meet its dividend or redemption obligations. These risks are heightened given the capital-intensive nature of life science development projects and the sector’s exposure to shifting demand, tenant concentration, and regulatory risk. In addition, 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