What changed in INNOVATIVE INDUSTRIAL PROPERTIES INC's MD&A (Item 7) in 2023?

Item 7 Management's Discussion & Analysis shows 126 new/edited paragraphs and 116 removed paragraphs year-over-year. Read the side-by-side diff to see exactly which revenue, margin, and outlook commentary was rewritten.

Did INNOVATIVE INDUSTRIAL PROPERTIES INC's Legal Proceedings (Item 3) change in 2023?

Item 3 shows 1 added/edited paragraphs and 1 removed paragraphs — usually indicating new litigation disclosed or settled cases removed.

Where does this IIPR 10-K diff come from?

The source filings are INNOVATIVE INDUSTRIAL PROPERTIES INC's official 2022 and 2023 Form 10-K annual reports from SEC EDGAR. 10q10k.net parses each filing, aligns paragraphs by section (Item 1, 1A, 1C, 2, 3, 7, 7A), and highlights every added, removed and edited sentence side-by-side.

What changed in INNOVATIVE INDUSTRIAL PROPERTIES INC's 10-K — 2022 vs 2023

Q: What changed in INNOVATIVE INDUSTRIAL PROPERTIES INC's 2023 10-K compared to 2022?

Across the narrative sections we track, INNOVATIVE INDUSTRIAL PROPERTIES INC (IIPR) added 356 paragraphs, removed 340, and edited 277 between the 2022 and 2023 10-K filings. The biggest movers are Item 1. Business (+223/−217), Item 7. Management's Discussion & Analysis (+126/−116), Item 5. Market for Registrant's Common Equity (+4/−4).

Paragraph-level year-over-year comparison of INNOVATIVE INDUSTRIAL PROPERTIES INC's 2022 and 2023 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2023 report.

+356 added−340 removedSource: 10-K (2024-02-27) vs 10-K (2023-02-28)

Top changes in INNOVATIVE INDUSTRIAL PROPERTIES INC's 2023 10-K

356 paragraphs added · 340 removed · 277 edited across 6 sections

Item 1. Business+223 / −217 · 178 edited
Item 7. Management's Discussion & Analysis+126 / −116 · 92 edited
Item 5. Market for Registrant's Common Equity+4 / −4 · 4 edited
Item 3. Legal Proceedings+1 / −1 · 1 edited
Item 4. Mine Safety Disclosures+1 / −1 · 1 edited

Item 1. Business

Business — how the company describes what it does

178 edited+45 added−39 removed447 unchanged

2022 filing

2023 filing

Biggest changeIf not remediated, this material weakness could result in material misstatements in our consolidated financial statements. ● We face significant risks associated with the development and redevelopment of properties that we acquire. 21 Table of Contents ● We are currently subject to securities lawsuits and we may be subject to litigation in the future, which may divert management’s attention and have a material adverse effect on us. ● Inflation may adversely affect our business and our tenants’ financial condition and results of operations. ● Competition for the acquisition of properties suitable for regulated cannabis operations and alternative financing sources for licensed operators may make new acquisitions difficult or less economically attractive. ● Our growth will depend upon future acquisitions of regulated cannabis facilities. ● There may only be a limited number of cannabis facilities operated by suitable tenants available for acquisition. ● Our and our tenants’ businesses may be materially and adversely affected by global pandemics. ● Our tenants may be unable to renew or otherwise maintain their licenses for their cannabis operations. ● We acquire our properties “as-is,” which increases the risk of costs to remedy defects without recourse. ● Our property portfolio is and will be geographically concentrated in certain states. ● Some of our tenants could be susceptible to bankruptcy. ● Our tenants may be subject to Section 280E of the Internal Revenue Code of 1986, as amended (the “Code”). ● We have acquired and may continue to acquire and lease cannabis retail stores and dispensaries, which present additional risks in comparison to properties for the cultivation and production of regulated cannabis. ● We are exposed to the potential impacts of future climate change. ● Liability for uninsured losses could adversely affect our financial condition. ● Our properties’ access to adequate water and power supplies could be interrupted. ● We may have a difficult time obtaining the insurance policies with our focus on the regulated cannabis industry. ● Construction loans involve an increased risk of loss and other risks that are different from owning properties. ● We may purchase properties subject to ground leases or engage in other transactions involving ground leases.

Biggest changeThese principal risk and uncertainties relate to, among other things: Risks Related to Our Business ● Many of our tenants are, and we expect that many of our future tenants will be, companies with limited histories of operations and may be unable to pay rent with funds from operations or at all. ● The inability of any single tenant to make its lease payments could adversely affect our business. ● We are focused on properties leased to licensed cannabis operators, and a decrease in demand for these types of facilities would have a greater impact on us than if we had a more diversified property portfolio. 22 Table of Contents ● Our real estate investments consist of primarily properties suitable for cultivation and production of cannabis, which may be difficult to sell or re-lease upon tenant defaults or lease terminations. ● We have a limited operating history and may not be able to continue to operate our business successfully. ● The assets we acquire may be subject to impairment charges. ● We face significant risks associated with the development and redevelopment of properties that we acquire. ● We are currently subject to securities lawsuits and we may be subject to litigation in the future, which may divert management’s attention and have a material adverse effect on us. ● Inflation may adversely affect our business and our tenants’ financial condition and results of operations. ● Competition for the acquisition of properties suitable for regulated cannabis operations and alternative financing sources for licensed operators may make new acquisitions difficult or less economically attractive. ● Our growth will depend upon future acquisitions of regulated cannabis facilities. ● There may only be a limited number of cannabis facilities operated by suitable tenants available for acquisition. ● Our and our tenants’ businesses may be materially and adversely affected by global pandemics. ● Our tenants may be unable to renew or otherwise maintain their licenses for their cannabis operations. ● We acquire our properties “as-is,” which increases the risk of costs to remedy defects without recourse. ● Our property portfolio is and will be geographically concentrated in certain states. ● Some of our tenants could be susceptible to bankruptcy. ● Our tenants may be subject to Section 280E of the Internal Revenue Code of 1986, as amended (the “Code”). ● We have acquired and may continue to acquire and lease cannabis retail stores and dispensaries, which present additional risks in comparison to properties for the cultivation and production of regulated cannabis. ● We are exposed to the potential impacts of future climate change. ● Liability for uninsured losses could adversely affect our financial condition. ● Our properties’ access to adequate water and power supplies could be interrupted. ● We may have a difficult time obtaining the insurance policies with our focus on the regulated cannabis industry. ● Construction loans involve an increased risk of loss and other risks that are different from owning properties. ● We may purchase properties subject to ground leases or engage in other transactions involving ground leases. Risks Related to Regulation ● Cannabis remains illegal under federal law, and therefore, strict enforcement of federal laws regarding cannabis would likely result in our inability and the inability of our tenants to execute our respective business plans. ● Certain of our tenants engage in operations for the adult-use cannabis industry, which may subject us and our properties to additional risks associated with such adult-use cannabis operations. ● New laws adverse to the business of our tenants may be enacted, and current favorable national, state or local laws or enforcement guidelines relating to cannabis operations may be modified or eliminated in the future. ● Our ability to grow our business depends on state laws pertaining to the cannabis industry. ● FDA regulation of cannabis facilities could negatively affect the regulated cannabis industry. ● We and our tenants may have difficulty accessing the service of banks and other financial institutions. ● Property owners located in close proximity to our properties may assert claims against our cannabis facilities. ● Laws and regulations affecting the regulated cannabis industry are constantly changing, which could materially adversely affect our operations, and we cannot predict the impact that future regulations may have on us. ● Assets leased to cannabis businesses may be forfeited to the federal government. ● We may have difficulty accessing bankruptcy courts. ● The properties that we acquire are subject to extensive regulations, which may result in significant costs. ● Compliance with environmental laws could materially increase our operating expenses. Risks Related to Financing Our Business ● Our growth depends on external sources of capital, which may not be available on favorable terms or at all. ● Our existing and future indebtedness could reduce our distributable cash and expose us to default risk. ● A downgrade in our investment grade credit rating could adversely affect our business and financial condition. ● Our Notes due 2026 include restrictive covenants that limit our operational flexibility. 23 Table of Contents Risks Related to Our Organization and Structure ● Our senior management team manages our portfolio subject to very broad investment guidelines. ● Our board of directors may change our investment objectives and strategies without stockholder consent. ● Certain provisions of Maryland law could inhibit changes in control. ● Our authorized but unissued shares of common and preferred stock may prevent a change in our control. ● Severance agreements with our executive officers could be costly and prevent a change in our control. ● We depend on our Operating Partnership for cash flow and are structurally subordinated in right of payment. ● Our Operating Partnership may issue additional limited partnership interests to third parties without the consent of our stockholders, which would reduce the distributions we can make to our stockholders. ● If we issue limited partnership interests in our Operating Partnership in exchange for property, the value placed on such partnership interests may not accurately reflect their market value, which may dilute your interest in us. ● Our rights and the rights of our stockholders to take action against our directors and officers are limited. ● Our charter provisions make it difficult to remove directors, and to effect changes in management as a result. ● Ownership limitations may restrict change in control or business combination opportunities in which our stockholders might receive a premium for their shares. ● We plan to continue to operate our business so as not to require registration under the Investment Company Act. Risks Related to Our Securities ● The market prices and trading volumes of our capital stock have been and may continue to be volatile. ● Capital stock eligible for future sale may have material and adverse effects on our share price. ● We cannot assure you of our ability to make distributions in the future. ● Our charter permits us to pay distributions from any source and, as a result, the amount of distributions paid at any time may not reflect the performance of our properties or as cash flow from operations. ● The market price of our capital stock could be materially, adversely affected by our level of cash distributions. Risks Related to Our Taxation as a REIT ● Our failure to qualify as a REIT would reduce our distributable cash and negatively impact us. ● The REIT distribution requirements could adversely affect our ability to execute our business plan, and require us to make unfavorable borrowing decisions or subject us to tax. ● If Section 280E of the Code applies to us, tax deductions may be disallowed, resulting in federal income tax and potentially jeopardizing our REIT status. ● Complying with REIT requirements may cause us to forego attractive business opportunities or asset sales. ● The tax on prohibited transactions could limit what transactions we make or subject us to a 100% penalty tax. ● Our board of directors has the ability to revoke our REIT election without stockholder approval. ● Dividends payable by REITs do not qualify for the reduced tax rates on dividends from regular corporations. ● REIT requirements may limit our ability to hedge our liabilities effectively and result in tax liabilities. ● Re-characterization of sale-leaseback transactions may cause us to lose our REIT status. ● Non-U.S. stockholders will generally be subject to withholding tax with respect to our ordinary dividends. ● Legislative, regulatory or administrative changes could adversely affect us or our stockholders. General Risk Factors ● We are dependent on our key personnel for our success. ● The occurrence of cyber incidents or cyberattacks could disrupt our operations and damage our business. ● Contingent or unknown liabilities could materially and adversely affect our business. 24 Table of Contents Risks Related to Our Business Many of our existing tenants are, and we expect that many of our future tenants will be, companies with limited histories of operations and may be unable to pay rent with funds from operations or at all, which could adversely affect our cash available to make distributions to our stockholders or otherwise impair the value of our common stock.

Our competitors may have greater financial and operational resources than we do and may be willing to pay more for certain assets or may be willing to accept more risk than we believe can be prudently managed.

In particular, larger companies may enjoy significant competitive advantages that result from, among other things, a lower cost of capital and enhanced operating efficiencies. Our competitors may also adopt transaction structures similar to ours, which would decrease our competitive advantage in offering flexible transaction terms.

Furthermore, changes in federal regulations pertaining to cannabis could also lead to increased access to U.S. capital markets for our competitors and for regulated cannabis operators (including but not limited to access to the Nasdaq Stock Market and/or the New York Stock Exchange).

Any lease payment defaults by a tenant could adversely affect our cash flows and cause us to reduce the amount of distributions to stockholders.

These cannabis-related SARs are divided into three categories - cannabis limited, cannabis priority, and cannabis terminated - based on the financial institution’s belief that the business in question follows state law, is operating outside of compliance with state law, or where the banking relationship has been terminated, respectively.

The DOJ continues to have the right and power to prosecute crimes committed by banks and financial institutions, such as money laundering and violations of the Bank Secrecy Act, that occur in any state including states that have in some form legalized the sale of cannabis.

Further, the conduct of the DOJ’s enforcement priorities could change for any number of reasons. A change in the DOJ’s priorities could result in the DOJ’s prosecuting banks and financial institutions for crimes that were not previously prosecuted.

Furthermore, following any such change in the federal government’s enforcement position, we could be subject to criminal prosecution, which could lead to imprisonment and/or the imposition of penalties, fines, or forfeiture.

In addition, for our tenants that are publicly traded companies, securities clearing firms may refuse to accept deposits of securities of those tenants, which may negatively impact the trading and valuations of such tenants and have a material adverse impact on our tenants’ ability to finance their operations and growth through the capital markets.

Section 280E of the Code provides that, with respect to any taxpayer, no deduction or credit is allowed for expenses incurred during a taxable year “in carrying on any trade or business if such trade or business (or the activities which comprise such trade or business) consists of trafficking in controlled substances (within the meaning of Schedule I and II of the CSA) which is prohibited by federal law or the law of any State in which such trade or business is conducted.” Because cannabis is a Schedule I controlled substance under the CSA, Section 280E by its terms applies to the purchase and sale of cannabis products.

We cannot predict the extent to which global pandemics may impact our business and operating results and those of our tenants, but their impact may include the following: ● a complete or partial closure of, or other operational issues at, one or more of our properties resulting from government or tenant actions; ● the temporary inability of consumers and patients to purchase our tenant’s cannabis products due to a number of factors, including but limited to illness, dispensary closures or limitations on operations (including but not limited to shortened operating hours, social distancing requirements and mandated “curbside only” pickup), quarantine, financial hardship, and “stay at home” orders, could severely impact our tenants’ businesses, 31 Table of Contents financial condition and liquidity and may cause one or more of our tenants to be unable to meet their obligations to us in full, or at all, or to otherwise seek modifications of such obligations; ● difficulty accessing equity and debt capital on attractive terms, or at all, and a severe disruption and instability in the global financial markets or deteriorations in credit and financing conditions may affect our access to capital necessary to fund business operations and our tenants’ ability to fund their business operations and meet their obligations to us; ● workforce disruptions for our tenants, as a result of infections, quarantines, stay at home orders or other factors, could result in a material reduction in our tenants’ cannabis cultivation, manufacturing, distribution and/or sales capacity; ● because of the federal regulatory uncertainty relating to the regulated cannabis industry, our tenants may not be eligible for financial relief available to other businesses, including federal assistance programs; ● restrictions on public events for the regulated cannabis industry limit the opportunity for our tenants to market and sell their products and promote their brands; ● delays in construction at our properties may adversely impact our tenants’ ability to commence operations and generate revenues from projects, including but not limited to delays caused by: o construction moratoriums by local, state or federal government authorities; o delays by applicable governmental authorities in providing the necessary authorizations to continue construction or commence operations; o reductions in construction team sizes to effectuate social distancing and other requirements; o infection by one or more members of a construction team necessitating a partial or full shutdown of construction; and o manufacturing and supply chain disruptions for materials sourced from other geographies which may be experiencing shutdowns and/or restrictions on transportation of such materials; ● a general decline in business activity in the regulated cannabis industry would adversely affect our ability to grow our portfolio of regulated cannabis properties; and ● the potential negative impact on the health of our personnel, particularly if a significant number of them are impacted, would result in a deterioration in our ability to ensure business continuity during a disruption.

We cannot predict the extent to which global pandemics may impact our business and operating results and those of our tenants, but their impact may include the following: ● a complete or partial closure of, or other operational issues at, one or more of our properties resulting from government or tenant actions; ● the temporary inability of consumers and patients to purchase our tenant’s cannabis products due to a number of factors, including but limited to illness, dispensary closures or limitations on operations (including but not limited to shortened operating hours, social distancing requirements and mandated “curbside only” pickup), quarantine, financial hardship, and “stay at home” orders, could severely impact our tenants’ businesses, financial condition and liquidity and may cause one or more of our tenants to be unable to meet their obligations to us in full, or at all, or to otherwise seek modifications of such obligations; ● difficulty accessing equity and debt capital on attractive terms, or at all, and a severe disruption and instability in the global financial markets or deteriorations in credit and financing conditions may affect our access to capital necessary to fund business operations and our tenants’ ability to fund their business operations and meet their obligations to us; ● workforce disruptions for our tenants, as a result of infections, quarantines, stay at home orders or other factors, could result in a material reduction in our tenants’ cannabis cultivation, manufacturing, distribution and/or sales capacity; 32 Table of Contents ● because of the federal regulatory uncertainty relating to the regulated cannabis industry, our tenants may not be eligible for financial relief available to other businesses, including federal assistance programs; ● restrictions on public events for the regulated cannabis industry limit the opportunity for our tenants to market and sell their products and promote their brands; ● delays in construction at our properties may adversely impact our tenants’ ability to commence operations and generate revenues from projects, including but not limited to delays caused by: o construction moratoriums by local, state or federal government authorities; o delays by applicable governmental authorities in providing the necessary authorizations to continue construction or commence operations; o reductions in construction team sizes to effectuate social distancing and other requirements; o infection by one or more members of a construction team necessitating a partial or full shutdown of construction; and o manufacturing and supply chain disruptions for materials sourced from other geographies which may be experiencing shutdowns and/or restrictions on transportation of such materials; ● a general decline in business activity in the regulated cannabis industry would adversely affect our ability to grow our portfolio of regulated cannabis properties; and ● the potential negative impact on the health of our personnel, particularly if a significant number of them are impacted, would result in a deterioration in our ability to ensure business continuity during a disruption.

To that end, we believe we offer a highly competitive compensation (including salary, bonuses and equity) and benefits package for each member of our team, which include the following: ● Comprehensive health insurance, including medical, dental and vision, to each employee and every member of his or her immediate family at no cost to the employee, with the same benefits to every employee, regardless of title; ● Four weeks of paid time off each year for each employee (increasing to five weeks after five years of service and to six weeks after ten years of service), which are in addition to Company holidays; ● A severance plan applicable to all non-executive employees that assists with each employee’s financial security in the event his or her employment is terminated without cause or he or she resigns for good reason; ● A 401(k) plan with matching contributions from the Company; ● Disability insurance; 20 Table of Contents ● Company sponsorship of continuing education courses related to our Company’s business, including commercial real estate, cannabis, property management, legal and accounting courses; ● Company reimbursement of up to $200 per year for each employee’s health and wellness activities, materials, equipment and/or classes; and ● Matching contribution by the Company, dollar-for-dollar, up to $2,500 per year per employee for donations to qualifying educational institutions.

To that end, we believe we offer a highly competitive compensation (including salary, bonuses and equity) and benefits package for each member of our team, which include the following: ● Comprehensive health insurance, including medical, dental and vision, to each employee and every member of his or her immediate family at no cost to the employee, with the same benefits to every employee, regardless of title; ● Four weeks of paid time off each year for each employee (increasing to five weeks after five years of service and to six weeks after ten years of service), which are in addition to Company holidays; 21 Table of Contents ● A severance plan applicable to all non-executive employees that assists with each employee’s financial security in the event his or her employment is terminated without cause or he or she resigns for good reason; ● A 401(k) plan with matching contributions from the Company; ● Disability insurance; ● Company sponsorship of continuing education courses related to our Company’s business, including commercial real estate, cannabis, property management, legal and accounting courses; ● Company reimbursement of up to $200 per year for each employee’s health and wellness activities, materials, equipment and/or classes; and ● Matching contribution by the Company, dollar-for-dollar, up to $2,500 per year per employee for donations to qualifying educational institutions.

Construction loans involve an increased risk of loss and other risks that are different from owning and leasing properties, including the following risks: ● If we fail to fund our entire commitment on a construction loan or if a borrower otherwise fails to complete the construction of a project, there could be adverse consequences associated with the loan, including, but not limited to: a loss of the value of the property securing the loan, especially if the borrower is unable to raise funds to complete it from other sources; a borrower’s claim against us for failure to perform under the loan documents; increased costs to the borrower that the borrower is unable to pay; a bankruptcy or receivership filing by the borrower; and abandonment by the borrower of the collateral for the loan; 36 Table of Contents ● We are subject to the risk that a borrower may make business decisions with which we disagree and the management of such company may take risks or otherwise act in ways that do not serve our interests; ● A borrower may not be able to realize the value anticipated from the project and otherwise not have the resources to repay the amount owed under the construction loan at maturity; ● We may incur significant costs and assume significant liabilities in foreclosing on any property subject to a construction loan, in addition to costs and risks associated with completing construction of the property if construction was not completed; and ● If we foreclose on the property and take ownership, we may incur a significant loss on disposing of the property or, in the alternative, we may not be able to lease the property at all or on terms reasonably acceptable to us if we determine to continue to own the property.

Construction loans involve an increased risk of loss and other risks that are different from owning and leasing properties, including the following risks: ● If we fail to fund our entire commitment on a construction loan or if a borrower otherwise fails to complete the construction of a project, there could be adverse consequences associated with the loan, including, but not limited to: a loss of the value of the property securing the loan, especially if the borrower is unable to raise funds to complete it from other sources; a borrower’s claim against us for failure to perform under the loan documents; increased costs to the borrower that the borrower is unable to pay; a bankruptcy or receivership filing by the borrower; and abandonment by the borrower of the collateral for the loan; 37 Table of Contents ● We are subject to the risk that a borrower may make business decisions with which we disagree and the management of such company may take risks or otherwise act in ways that do not serve our interests; ● A borrower may not be able to realize the value anticipated from the project and otherwise not have the resources to repay the amount owed under the construction loan at maturity; ● We may incur significant costs and assume significant liabilities in foreclosing on any property subject to a construction loan, in addition to costs and risks associated with completing construction of the property if construction was not completed; and ● If we foreclose on the property and take ownership, we may incur a significant loss on disposing of the property or, in the alternative, we may not be able to lease the property at all or on terms reasonably acceptable to us if we determine to continue to own the property.

Available Information We make available to the public free of charge through our internet website our Definitive Proxy Statement, Annual Report on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K, and amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Exchange as soon as reasonably practicable after we electronically file such reports with, or furnish such reports to, the SEC.

Available Information We make available to the public free of charge through our website our Definitive Proxy Statement, Annual Report on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K, and amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Exchange as soon as reasonably practicable after we electronically file such reports with, or furnish such reports to, the SEC.

Development and redevelopment activities entail risks that could adversely impact our financial condition and results of operations, including: ● construction costs, which may exceed our or our tenant’s original estimates due to increases in materials, labor or other costs, which could make the project less profitable for our tenant, require us or our tenant to commit additional funds to complete the project and adversely impact our tenant’s business and prospects as a result; ● permitting or construction delays, which may result in increased project costs, as well as deferred revenue and delayed commencement of operations by our tenant; ● unavailability of raw materials when needed, which may result in project delays, stoppages or interruptions, which could make the project less profitable; ● claims for warranty, product liability and construction defects after a property has been built; ● health and safety incidents and site accidents; ● poor performance or nonperformance by, or disputes with, any of our contractors, subcontractors or other third parties on whom we rely; ● a contractor, subcontractor or other third party on whom we rely files for bankruptcy or commits fraud before completing a project that we have funded in part or in full; ● unforeseen engineering, environmental or geological problems, which may result in delays or increased costs; ● changes in local zoning, permitting and other requirements which may impact the permitted use or scope of a project; ● labor stoppages, slowdowns or interruptions; ● a default on an existing lease of a property under development or redevelopment by the tenant, exposing us to potential vacancy for a property that is not ready for its intended use; ● liabilities, expenses or project delays, stoppages or interruptions as a result of challenges by third parties in legal proceedings; and ● weather-related and geological interference, including hurricanes, landslides, earthquakes, floods, drought, wildfires and other events, which may result in delays or increased costs.

Development and redevelopment activities entail risks that could adversely impact our financial condition and results of operations, including: 28 Table of Contents ● construction costs, which may exceed our or our tenant’s original estimates due to increases in materials, labor or other costs, which could make the project less profitable for our tenant, require us or our tenant to commit additional funds to complete the project and adversely impact our tenant’s business and prospects as a result; ● permitting or construction delays, which may result in increased project costs, as well as deferred revenue and delayed commencement of operations by our tenant; ● unavailability of raw materials when needed, which may result in project delays, stoppages or interruptions, which could make the project less profitable; ● claims for warranty, product liability and construction defects after a property has been built; ● health and safety incidents and site accidents; ● poor performance or nonperformance by, or disputes with, any of our contractors, subcontractors or other third parties on whom we rely; ● a contractor, subcontractor or other third party on whom we rely files for bankruptcy or commits fraud before completing a project that we have funded in part or in full; ● unforeseen engineering, environmental or geological problems, which may result in delays or increased costs; ● changes in local zoning, permitting and other requirements which may impact the permitted use or scope of a project; ● labor stoppages, slowdowns or interruptions; ● a default on an existing lease of a property under development or redevelopment by the tenant, exposing us to potential vacancy for a property that is not ready for its intended use; ● liabilities, expenses or project delays, stoppages or interruptions as a result of challenges by third parties in legal proceedings; and ● weather-related and geological interference, including hurricanes, landslides, earthquakes, floods, drought, wildfires and other events, which may result in delays or increased costs.

In July 2022, Kings Garden defaulted on its obligations to pay rent at all of the properties it leases with us, and pursuant to a confidential, conditional settlement agreement executed on September 11, 2022 between us and Kings Garden, we terminated the leases for two properties that were in development or redevelopment as of December 31, 2022 and regained possession of those properties.

Circumstances and developments related to operations in these markets that could negatively affect our business, financial condition, liquidity and results of operations include, but are not limited to, the following factors: ● the state regulated cannabis market fails to develop and grow in ways that we or our tenants projected; ● the responsibility of complying with multiple and, in some respects, conflicting state and federal laws in the United States, including with respect to cultivation and distribution of cannabis, licensing, banking and insurance; ● access to capital may be more restricted, or unavailable on favorable terms or at all in certain locations; ● difficulties and costs of staffing and managing operations; 33 Table of Contents ● unexpected changes in regulatory requirements and other laws; ● the impact of national, regional or state specific business cycles and economic instability; and ● potentially adverse tax consequences.

Circumstances and developments related to operations in these markets that could negatively affect our business, financial condition, liquidity and results of operations include, but are not limited to, the following factors: ● the state regulated cannabis market fails to develop and grow in ways that we or our tenants projected; ● the responsibility of complying with multiple and, in some respects, conflicting state and federal laws in the United States, including with respect to cultivation and distribution of cannabis, licensing, banking and insurance; ● access to capital may be more restricted, or unavailable on favorable terms or at all in certain locations; ● difficulties and costs of staffing and managing operations; 34 Table of Contents ● unexpected changes in regulatory requirements and other laws; ● the impact of national, regional or state specific business cycles and economic instability; and ● potentially adverse tax consequences.

(3) Number of properties and rentable square feet include one property acquired in January 2022 which did not satisfy the requirements for sale-leaseback accounting and therefore, the transaction is recognized as a note receivable and is included in other assets, net on our consolidated balance sheet. See discussion under Item 1A, “Risk Factors,” under the caption “Our properties are, and are expected to continue to be, geographically concentrated in states that permit licensed cannabis operations, and we will be subject to social, political and economic risks of doing business in these states and any other state in which we may own property.” The regulated cannabis market is in its early stages; is generally subject to strict regulations providing for, among other things, comprehensive product testing and tracking systems, limited medical conditions for treatment with medical-use cannabis, limitations on the form in which medical cannabis can be consumed and enhanced registration requirements for patients and physicians; is subject in many instances to significant taxation burdens at the federal, state and local levels; competes in many instances with non-licensed cannabis operators due in part to limited enforcement by state and local authorities; and may face opposition from local municipalities within a state, any of which may contribute to a particular market not growing and developing in the way that we or our tenants projected.

(4) Number of properties and rentable square feet include one property acquired in January 2022 which did not satisfy the requirements for sale-leaseback accounting and therefore, the investment is recognized as a note receivable and is included in other assets, net on our consolidated balance sheet. See discussion under Item 1A, “Risk Factors,” under the caption “Our properties are, and are expected to continue to be, geographically concentrated in states that permit licensed cannabis operations, and we will be subject to social, political and economic risks of doing business in these states and any other state in which we may own property.” The regulated cannabis market is in its early stages; is generally subject to strict regulations providing for, among other things, comprehensive product testing and tracking systems, limited medical conditions for treatment with medical-use cannabis, limitations on the form in which medical cannabis can be consumed and enhanced registration requirements for patients and physicians; is subject in many instances to significant taxation burdens at the federal, state and local levels; competes in many instances with non-licensed cannabis operators due in part to limited enforcement by state and local authorities; and may face opposition from local municipalities within a state, any of which may contribute to a particular market not growing and developing in the way that we or our tenants projected.

Labor shortages and global supply chain issues also continue to adversely impact costs and timing for completion of these development and redevelopment projects, which are resulting in cost overruns and delays in commencing operations on certain of our tenants’ projects.

Our ability to acquire these real estate assets on favorable terms is subject to the following risks: ● competition from other potential acquirers or increased availability of alternative debt and equity financing sources for tenants may significantly increase the purchase price of a desired property and/or negatively impact the lease terms we are able to secure with our tenants; ● we may not successfully purchase and lease our properties to meet our expectations; ● we may be unable to obtain the necessary equity or debt financing to consummate an acquisition on satisfactory terms or at all; ● agreements for the acquisition of properties are typically subject to closing conditions, including satisfactory completion of due diligence investigations, and we may spend significant time and money and divert management attention on potential acquisitions that we do not consummate; and ● we may acquire properties without any recourse, or with only limited recourse, for liabilities, whether known or unknown, against the former owners of the properties.

Our ability to acquire these real estate assets on favorable terms is subject to the following risks: ● competition from other potential acquirers or increased availability of alternative debt and equity financing sources for tenants may significantly increase the purchase price of a desired property and/or negatively impact the lease terms we are able to secure with our tenants; 31 Table of Contents ● we may not successfully purchase and lease our properties to meet our expectations; ● we may be unable to obtain the necessary equity or debt financing to consummate an acquisition on satisfactory terms or at all; ● agreements for the acquisition of properties are typically subject to closing conditions, including satisfactory completion of due diligence investigations, and we may spend significant time and money and divert management attention on potential acquisitions that we do not consummate; and ● we may acquire properties without any recourse, or with only limited recourse, for liabilities, whether known or unknown, against the former owners of the properties.

Our level of debt and the limitations imposed on us by these debt agreements could have significant material and adverse consequences, including the following: ● our cash flow may be insufficient to meet our required principal and interest payments; ● we may be unable to borrow additional funds as needed or on favorable terms, or at all; ● we may be unable to refinance our indebtedness at maturity or the refinancing terms may be less favorable than the terms of our original indebtedness; ● to the extent we borrow debt that bears interest at variable rates, increases in interest rates could materially increase our interest expense; 43 Table of Contents ● we may be forced to dispose of one or more of the properties that we expect to acquire, possibly on disadvantageous terms; ● we may default on our obligations or violate restrictive covenants, in which case the lenders may accelerate these debt obligations; and ● our default under any loan with cross default provisions could result in a default on other indebtedness.

Our level of debt and the limitations imposed on us by these debt agreements could have significant material and adverse consequences, including the following: ● our cash flow may be insufficient to meet our required principal and interest payments; ● we may be unable to borrow additional funds as needed or on favorable terms, or at all; ● we may be unable to refinance our indebtedness at maturity or the refinancing terms may be less favorable than the terms of our original indebtedness; ● to the extent we borrow debt that bears interest at variable rates, increases in interest rates could materially increase our interest expense; ● we may be forced to dispose of one or more of the properties that we expect to acquire, possibly on disadvantageous terms; ● we may default on our obligations or violate restrictive covenants, in which case the lenders may accelerate these debt obligations; and ● our default under any loan with cross default provisions could result in a default on other indebtedness.

In addition, if the Service were to disallow certain of our deductions, such as employee salaries, depreciation or interest expense, by alleging that we, through our rental agreements with our state-licensed medical cannabis tenants, are primarily or vicariously liable for “trafficking” a Schedule 1 substance (cannabis) under Section 280E of the Code or otherwise, we would be unable to meet the distribution requirements and would fail to qualify as a REIT.

In addition, if the Service were to disallow certain of our deductions, such as employee salaries, depreciation or interest expense, by alleging that we, through our rental agreements with our state-licensed medical cannabis tenants, are primarily or vicariously liable for “trafficking” a Schedule I substance (cannabis) under Section 280E of the Code or otherwise, we would be unable to meet the distribution requirements and would fail to qualify as a REIT.

Any lease payment defaults by a tenant could adversely affect our results of operations and cash flows, and cause us to reduce the amount of distributions to our stockholders. 34 Table of Contents We have acquired and may continue to acquire cannabis retail stores and dispensaries and enter into leases with licensed operators for those properties, which present additional risks and challenges in comparison to properties for the cultivation and production of cannabis.

Any lease payment defaults by a tenant could adversely affect our results of operations and cash flows, and cause us to reduce the amount of distributions to our stockholders. 35 Table of Contents We have acquired and may continue to acquire cannabis retail stores and dispensaries and enter into leases with licensed operators for those properties, which present additional risks and challenges in comparison to properties for the cultivation and production of cannabis.

If the Service were to take the position that, through our rental agreements with our state-licensed cannabis tenants, we are primarily or vicariously liable under federal law for “trafficking” a Schedule 1 substance (cannabis) under Section 280E of the Code or for any other violations of the CSA, the Service may apply the provisions of Section 280E of the Code to our company and disallow certain tax deductions, including for employee salaries, depreciation or interest expense.

If the Service were to take the position that, through our rental agreements with our state-licensed cannabis tenants, we are primarily or vicariously liable under federal law for “trafficking” a Schedule I substance (cannabis) under Section 280E of the Code or for any other violations of the CSA, the Service may apply the provisions of Section 280E of the Code to our company and disallow certain tax deductions, including for employee salaries, depreciation or interest expense.

Any change in the federal government’s enforcement posture with respect to state-licensed cannabis operations, including the enforcement postures of individual federal prosecutors in judicial districts where we purchase properties, would result in our inability to execute our business plan, and we would likely suffer significant losses with 38 Table of Contents respect to our investment in cannabis facilities in the United States, which would adversely affect the trading price of our securities.

Any change in the federal government’s enforcement posture with respect to state-licensed cannabis operations, including the enforcement postures of individual federal prosecutors in judicial districts where we purchase properties, would result in our inability to execute our business plan, and we would likely suffer significant losses with respect to our investment in cannabis facilities in the United States, which would adversely affect the trading price of our 39 Table of Contents securities.

Should an uninsured loss occur, we could lose our capital investment or anticipated profits and cash flows from one or more properties. 35 Table of Contents If our properties’ access to adequate water and power supplies is interrupted, it could harm our ability to lease the properties for cannabis cultivation and production, thereby adversely affecting our ability to generate returns on our properties.

Should an uninsured loss occur, we could lose our capital investment or anticipated profits and cash flows from one or more properties. 36 Table of Contents If our properties’ access to adequate water and power supplies is interrupted, it could harm our ability to lease the properties for cannabis cultivation and production, thereby adversely affecting our ability to generate returns on our properties.

Under our charter and Maryland General Corporation Law (the “MGCL”), our stockholders generally have a right to vote only on the following matters: 44 Table of Contents ● the election or removal of directors; ● the amendment of our charter, except that our board of directors may amend our charter without stockholder approval to: o change our name; o change the name or other designation or the par value of any class or series of stock and the aggregate par value of our stock; o increase or decrease the aggregate number of shares of stock that we have the authority to issue; o increase or decrease the number of our shares of any class or series of stock that we have the authority to issue; and o effect certain reverse stock splits; ● our liquidation and dissolution; and ● our being a party to a merger, consolidation, sale or other disposition of all or substantially all of our assets or statutory share exchange.

Under our charter and Maryland General Corporation Law (the “MGCL”), our stockholders generally have a right to vote only on the following matters: ● the election or removal of directors; ● the amendment of our charter, except that our board of directors may amend our charter without stockholder approval to: o change our name; o change the name or other designation or the par value of any class or series of stock and the aggregate par value of our stock; o increase or decrease the aggregate number of shares of stock that we have the authority to issue; o increase or decrease the number of our shares of any class or series of stock that we have the authority to issue; and o effect certain reverse stock splits; ● our liquidation and dissolution; and ● our being a party to a merger, consolidation, sale or other disposition of all or substantially all of our assets or statutory share exchange.

For some or all of 2023, we expect that many of our tenants will continue to incur losses as their expenses increase in connection with the expansion of their operations and the current operating environment, and that they have made and will continue to make rent payments to us from proceeds from the sale of the applicable property or cash on hand, and not funds from operations.

For some or all of 2024, we expect that many of our tenants will continue to incur losses as their expenses increase in connection with the expansion of their operations and the current operating environment, and that they have made and will continue to make rent payments to us from proceeds from the sale of the applicable property or cash on hand, and not funds from operations.

Among the changes made by the TCJA are permanently reducing the generally applicable corporate tax rate, generally reducing the tax rate applicable to individuals and other non-corporate taxpayers for tax years beginning after December 31, 2017 and before January 1, 2026, eliminating or modifying certain previously allowed deductions (including substantially limiting interest deductibility and, for individuals, the deduction for non-business state and local taxes), and, for taxable years beginning after December 31, 2017 and before January 1, 2026, providing for preferential rates of taxation through a deduction of up to 20% (subject to certain limitations) on 55 Table of Contents most ordinary REIT dividends and certain trade or business income of non-corporate taxpayers.

Among the changes made by the TCJA are permanently reducing the generally applicable corporate tax rate, generally reducing the tax rate applicable to individuals and other non-corporate taxpayers for tax years beginning after December 31, 2017 and before January 1, 2026, eliminating or modifying certain previously allowed deductions (including substantially limiting interest deductibility and, for individuals, the deduction for non-business state and local taxes), and, for taxable years beginning after December 31, 2017 and before January 1, 2026, providing for preferential rates of taxation through a deduction of up to 20% (subject to certain limitations) on most ordinary REIT dividends and certain trade or business income of non-corporate taxpayers.

We may not be in a position to take advantage of attractive investment opportunities for growth if we are unable, due to global or regional economic uncertainty, changes in the state or federal regulatory environment relating to the 42 Table of Contents cannabis industry, restrictions that potential investors may have to own our equity or debt due to our tenant’s operations in the regulated cannabis industry, changes in market conditions for the regulated cannabis industry, our own operating or financial performance or otherwise, to access capital markets on a timely basis and on favorable terms or at all.

We may not be in a position to take advantage of attractive investment opportunities for growth if we are unable, due to global or regional economic uncertainty, changes in the state or federal regulatory environment relating to the cannabis industry, restrictions that potential investors may have to own our equity or debt due to our tenant’s operations in the regulated cannabis industry, changes in market conditions for the regulated cannabis industry, our own operating or financial performance or otherwise, to access capital markets on a timely basis and on favorable terms or at all.

Some of the factors that could negatively affect the share price or result in fluctuations in the price or trading volume of our common stock and preferred stock include: ● our actual or projected operating results, financial condition, cash flows and liquidity or changes in business strategy or prospects; ● changes in government policies, regulations or laws; ● the performance of our current properties and additional properties that we acquire; ● our ability to make acquisitions on preferable terms or at all; ● equity issuances by us, including issuances by us of shares of common stock in connection with exchanges of our Exchangeable Senior Notes or under our ATM Program, or share resales by our stockholders, or the perception that such issuances or resales may occur; ● actual or anticipated accounting problems; ● publication of research reports about us, the real estate industry or the cannabis industry; ● changes in market valuations of similar companies; ● adverse market reaction to any increased indebtedness we may incur in the future; ● interest rate changes; ● additions to or departures of our senior management team; ● speculation in the press or investment community or negative press in general; ● our failure to meet, or the lowering of, our earnings estimates or those of any securities analysts; ● failure to maintain our qualification as a REIT; ● refusal of securities clearing firms to accept deposits of our securities; ● a delisting of our common stock or preferred stock from the New York Stock Exchange (“NYSE”); ● the realization of any of the other risk factors presented in this report; ● actions by institutional stockholders; ● price and volume fluctuations in the stock market generally; and 49 Table of Contents ● market and economic conditions generally, including the current state of the credit and capital markets and the market and economic conditions.

Some of the factors that could negatively affect the share price or result in fluctuations in the price or trading volume of our common stock and preferred stock include: ● our actual or projected operating results, financial condition, cash flows and liquidity or changes in business strategy or prospects; ● changes in government policies, regulations or laws; ● the performance of our current properties and additional properties that we acquire; ● our ability to make acquisitions on preferable terms or at all; ● equity issuances by us, including issuances by us of shares of common stock under our ATM Program, or share resales by our stockholders, or the perception that such issuances or resales may occur; ● actual or anticipated accounting problems; ● publication of research reports about us, the real estate industry or the cannabis industry; ● changes in market valuations of similar companies; ● adverse market reaction to any increased indebtedness we may incur in the future; ● interest rate changes; ● additions to or departures of our senior management team; ● speculation in the press or investment community or negative press in general; ● our failure to meet, or the lowering of, our earnings estimates or those of any securities analysts; ● failure to maintain our qualification as a REIT; 50 Table of Contents ● refusal of securities clearing firms to accept deposits of our securities; ● a delisting of our common stock or preferred stock from the New York Stock Exchange (“NYSE”); ● the realization of any of the other risk factors presented in this report; ● actions by institutional stockholders; ● price and volume fluctuations in the stock market generally; and ● market and economic conditions generally, including the current state of the credit and capital markets and the market and economic conditions.

As a result, certain regulated cannabis operators have announced that they are consolidating operations or shuttering certain operations to reduce costs, which if prolonged, could have a material negative impact on operators’ demand for regulated cannabis facilities, including our existing tenants. 39 Table of Contents New laws that are adverse to the business of our tenants may be enacted, and current favorable national, state or local laws or enforcement guidelines relating to cannabis operations may be modified or eliminated in the future.

As a result, certain regulated cannabis operators have announced that they are consolidating operations or shuttering certain operations to reduce costs, which if prolonged, could have a material negative impact on operators’ demand for regulated cannabis facilities, including our existing tenants. New laws that are adverse to the business of our tenants may be enacted, and current favorable national, state or local laws or enforcement guidelines relating to cannabis operations may be modified or eliminated in the future.

As of December 31, 2022, we owned properties in 19 states, and we expect that our acquisition opportunities will continue to expand as additional states establish regulated cannabis programs and license new operators. ● Providing Expansion Capital to Existing Tenants as an Additional Source of Income.

As of December 31, 2023, we owned properties in 19 states, and we expect that our acquisition opportunities will continue to expand as additional states establish regulated cannabis programs and license new operators. ● Providing Expansion Capital to Existing Tenants as an Additional Source of Income.

For example, during the COVID-19 pandemic, our tenants were generally not able to access federal assistance programs that were available to companies in other industries, due to cannabis being a Schedule 1 controlled substance under the CSA.

We have provided expansion capital for many of our existing tenant operators as they expand operations in additional states and locations within a state, as well as capital for continued enhancements of production capacity at existing facilities that these operators lease from us, which correspond to adjustments in rent under the applicable leases and other provisions in certain cases.

We have provided expansion capital for many of our existing tenant operators as they expand operations in additional states and 8 Table of Contents locations within a state, as well as capital for continued enhancements of production capacity at existing facilities that these operators lease from us, which correspond to adjustments in rent under the applicable leases and other provisions in certain cases.

In addition, although we may require in our leases that tenants operate in compliance with all applicable laws and indemnify us against any environmental liabilities arising from a tenant’s activities on the property, we could nonetheless be subject to liability by virtue of our ownership interest and we cannot be sure that our tenants would satisfy their indemnification obligations to us.

In addition, although we may require in our leases that tenants operate in compliance with all applicable laws and indemnify us against any environmental liabilities arising from a tenant’s activities on the property, we could nonetheless be subject to liability by virtue of our ownership interest and we cannot 43 Table of Contents be sure that our tenants would satisfy their indemnification obligations to us.

We face significant competition from a diverse mix of market participants, including but not limited to, other companies with similar business models, independent investors, hedge funds and other real estate investors, hard money 14 Table of Contents lenders, and cannabis operators themselves, all of whom may compete with us in our efforts to acquire real estate zoned for regulated cannabis facilities.

We face significant competition from a diverse mix of market participants, including but not limited to, other companies with similar business models, independent investors, hedge funds and other real estate investors, hard money lenders, and cannabis operators themselves, all of whom may compete with us in our efforts to acquire real estate zoned for regulated cannabis facilities.

Attorney General on March 10, 2021, has not provided a clear policy directive for the United States as it pertains to state-legal cannabis-related activities, and there can be no assurances that DOJ or other law enforcement authorities will not seek to vigorously enforce current U.S. federal laws.

Instead, the Cole Memo directed U.S. Attorney’s Offices discretion not to investigate or prosecute state law compliant participants in the medical cannabis industry who did not implicate one or more specifically identified federal government priorities, including preventing interstate diversion or distribution of cannabis to minors. On January 4, 2018, then-U.S.

Our inability to maintain our current bank accounts would make it difficult for us to operate our business, increase our operating costs, and pose additional operational, logistical and security challenges and could result in our inability to implement our business plan. The terms of our leases require that our tenants make rental payments via check or wire transfer.

Our inability to maintain our current bank accounts would make it difficult for us to operate our business, increase our operating costs, and pose additional operational, logistical and security challenges and could result in our inability to implement our business plan. 41 Table of Contents The terms of our leases require that our tenants make rental payments via check or wire transfer.

Over the long term, we intend that no single property will exceed 20% of our total assets and that properties leased to a single tenant (individually or together with its affiliates) will not exceed 20% of our total assets.

Over the long term, we expect that no single property will exceed 20% of our total assets and that properties leased to a single tenant (individually or together with its affiliates) will not exceed 20% of our total assets.

In July 2017, the DOJ issued a new policy directive regarding asset forfeiture, referred to as the “equitable sharing program.” Under this new policy directive, federal authorities may adopt state and local 41 Table of Contents forfeiture cases and prosecute them at the federal level, allowing for state and local agencies to keep up to 80% of any forfeiture revenue.

In July 2017, the DOJ issued a new policy directive regarding asset forfeiture, referred to as the “equitable sharing program.” Under this new policy directive, federal authorities may adopt state and local forfeiture cases and prosecute them at the federal level, allowing for state and local agencies to keep up to 80% of any forfeiture revenue.

See Item 1A, “Risk Factors – Risks Relating to Regulation.” 16 Table of Contents State Laws Applicable to the Regulated Cannabis Industry In most states that have legalized cannabis in some form, the growing, processing and/or dispensing of cannabis generally requires that the operator obtain one or more licenses in accordance with applicable state requirements.

See Item 1A, “Risk Factors – Risks Relating to Regulation.” State Laws Applicable to the Regulated Cannabis Industry In most states that have legalized cannabis in some form, the growing, processing and/or dispensing of cannabis generally requires that the operator obtain one or more licenses in accordance with applicable state requirements.

In addition, we believe finding properties that are appropriate for the specific use of allowing regulated cannabis operators may be limited as more competitors enter the market, and as regulated cannabis operators obtain greater access to alternative financing sources, including but not limited to equity and debt financing sources.

In addition, we believe finding properties that are appropriate for the specific use of allowing regulated cannabis operators may be limited as more 15 Table of Contents competitors enter the market, and as regulated cannabis operators obtain greater access to alternative financing sources, including but not limited to equity and debt financing sources.

While we currently maintain banking relationships, our inability to maintain those accounts or the lack of 17 Table of Contents access to bank accounts or other banking services in the future, would make it difficult for us to operate our business, increase our operating costs, and pose additional operational, logistical and security challenges.

While we currently maintain banking relationships, our inability to maintain those accounts or the lack of access to bank accounts or other banking services in the future, would make it difficult for us to operate our business, increase our operating costs, and pose additional operational, logistical and security challenges.

These ownership limits and other restrictions could have the effect of discouraging a takeover or other transaction in which holders of our common stock might receive a premium for their shares over the then prevailing market price or which holders might believe to be otherwise in their best interests.

These ownership limits and other restrictions could have the effect of discouraging a takeover or other transaction in which 49 Table of Contents holders of our common stock might receive a premium for their shares over the then prevailing market price or which holders might believe to be otherwise in their best interests.

Failure to comply with laws, 18 Table of Contents ordinances and regulations, to obtain required licenses, permits and approvals or to comply with the terms of such licenses, permits and approvals could result in fines, penalties and/or imprisonment. The use of land for agricultural purposes in certain jurisdictions is also subject to regulations governing the protection of endangered species.

Failure to comply with laws, ordinances and regulations, to obtain required licenses, permits and approvals or to comply with the terms of such licenses, permits and approvals could result in fines, penalties and/or imprisonment. The use of land for agricultural purposes in certain jurisdictions is also subject to regulations governing the protection of endangered species.

In addition, our board of directors may, without stockholder approval, amend our charter to increase the aggregate number of our shares of stock or the number of shares of stock of any class or series that we have the authority to issue and classify or reclassify any unissued shares of common or preferred stock and set the terms of the classified or reclassified shares.

In addition, our board of directors may, without stockholder approval, amend our charter to 47 Table of Contents increase the aggregate number of our shares of stock or the number of shares of stock of any class or series that we have the authority to issue and classify or reclassify any unissued shares of common or preferred stock and set the terms of the classified or reclassified shares.

If we issue limited partnership interests in our Operating Partnership in exchange for property, the per unit value attributable to such interests will be determined based on negotiations with the property seller and, therefore, may not reflect the fair market value of such limited partnership interests if a public market for such limited partnership interests existed.

Likewise, if any governmental entity were to impose fines on us for our business involvement in state-licensed cannabis, such fines would not be deductible and the inability to deduct such fines could also cause us to be unable to satisfy the distribution requirement. 52 Table of Contents We may also generate less cash flow than taxable income in a particular year.

Likewise, if any governmental entity were to impose fines on us for our business involvement in state-licensed cannabis, such fines would not be deductible and the inability to deduct such fines could also cause us to be unable to satisfy the distribution requirement. We may also generate less cash flow than taxable income in a particular year.

This could increase the cost of our 54 Table of Contents hedging activities because our TRSs would be subject to tax on gains or expose us to greater risks associated with changes in interest rates than we would otherwise want to bear.

This could increase the cost of our hedging activities because our TRSs would be subject to tax on gains or expose us to greater risks associated with changes in interest rates than we would otherwise want to bear.

The Sessions Memo instructed federal prosecutors to enforce the laws enacted by Congress and to follow well-established principles that govern all federal prosecutors when deciding whether to pursue prosecutions related to cannabis activities. As a result, federal prosecutors could, and still can, use their prosecutorial discretion to 15 Table of Contents decide to prosecute actors compliant with their state laws.

The Sessions Memo instructed federal prosecutors to enforce the laws enacted by Congress and to follow well-established principles that govern all federal prosecutors when deciding whether to pursue prosecutions related to cannabis activities. As a result, federal prosecutors could, and still can, use their prosecutorial discretion to decide to prosecute actors compliant with their state laws.

We intend to distribute our net income to our stockholders in a manner intended to satisfy the REIT 90% distribution requirement and to avoid U.S. federal income tax and the 4% nondeductible excise tax. However, we can provide no assurances that we will have sufficient cash or other liquid assets to meet these requirements.

We intend to distribute our net income to our stockholders in a manner intended to satisfy the REIT 90% distribution requirement and to avoid U.S. federal income tax and the 4% nondeductible excise tax. However, we can 53 Table of Contents provide no assurances that we will have sufficient cash or other liquid assets to meet these requirements.

Through our sale-leaseback strategy, we serve as a source of capital to these licensed regulated cannabis operators, allowing them to redeploy their sale proceeds into their core operations to grow 6 Table of Contents their business and achieve higher returns.

If one or more of our tenants are unable to renew or otherwise maintain its licenses or other state and 32 Table of Contents local authorizations necessary to continue its cannabis operations, such tenants may default on their lease payments to us.

If one or more of our tenants are unable to renew or otherwise maintain its licenses or other state and local authorizations necessary to continue its cannabis operations, such tenants may default on their lease payments to us.

Likewise, even though net leases reduce our exposure to rising property expenses due to inflation, substantial inflationary pressures and increased costs may have an adverse impact on our tenants if increases in their operating expenses exceed increases in their revenues, which may adversely affect our tenants’ ability to pay rent.

Likewise, even though net leases reduce our exposure to rising property expenses due to inflation, 30 Table of Contents substantial inflationary pressures and increased costs may have an adverse impact on our tenants if increases in their operating expenses exceed increases in their revenues, which may adversely affect our tenants’ ability to pay rent.

As of February 28, 2023, we owned properties in 19 states, and we expect that the properties that we acquire will be geographically concentrated in these states and other states that have established cannabis programs. See “Geographic Concentration” under Item 1, “Business” for a table of properties owned by us and organized by state as of December 31, 2022.

As of February 27, 2024, we owned properties in 19 states, and we expect that the properties that we acquire will be geographically concentrated in these states and other states that have established cannabis programs. See “Geographic Concentration” under Item 1, “Business” for a table of properties owned by us and organized by state as of December 31, 2023.

Our 13 Table of Contents investment guidelines provide that our aggregate borrowings (secured and unsecured) will not exceed 50% of the cost of our tangible assets at the time of any new borrowing, subject to our board of directors’ discretion.

Our investment guidelines provide that our aggregate borrowings (secured and unsecured) will not exceed 50% of the cost of our tangible assets at the time of any new borrowing, subject to our board of directors’ discretion.

Compliance with ADA requirements may require 19 Table of Contents removal of access barriers, and noncompliance may result in imposition of fines by the U.S. government or an award of damages to private litigants, or both.

Compliance with ADA requirements may require removal of access barriers, and noncompliance may result in imposition of fines by the U.S. government or an award of damages to private litigants, or both.

See each of the discussions under Item 1A, “Risk Factors,” under the captions “Many of our existing tenants are, and we expect that many of our future tenants will be, companies with limited histories of operations and may be unable to pay rent with funds from operations or at all, which could adversely affect our cash available to make distributions to our stockholders or otherwise impair the value of our common stock,” and “Because we lease our properties to a limited number of tenants, and to the extent we depend on a limited number of tenants in the future, the inability of any single tenant to make its lease payments could adversely affect our business and our ability to make distributions to our stockholders.” 12 Table of Contents Geographic Concentration The following table sets forth certain state-by-state information regarding our property portfolio for the year ended and as of December 31, 2022 (dollars in thousands): Rental Revenue Percentage for of Number of Rentable the Year Ended Rental State Properties Sq.

See each of the discussions under Item 1A, “Risk Factors,” under the captions “Many of our existing tenants are, and we expect that many of our future tenants will be, companies with limited histories of operations and may be unable to pay rent with funds from operations or at all, which could adversely affect our cash available to make distributions to our stockholders or otherwise impair the value of our common stock,” and “Because we lease our properties to a limited number of tenants, and to the extent we depend on a limited number of tenants in the future, the inability of any single tenant to make its lease payments could adversely affect our business and our ability to make distributions to our stockholders.” 13 Table of Contents Geographic Concentration The following table sets forth certain state-by-state information regarding our property portfolio for the year ended and as of December 31, 2023 (dollars in thousands): Contractual Rent Collected for Percentage Number of Rentable Total Invested and the Year Ended of State Properties Sq.

The FinCEN Memorandum sets forth extensive requirements for financial institutions to meet if they want to offer bank accounts to cannabis-related businesses and echoed the enforcement priorities of the Cole Memo.

The FinCEN Memorandum sets forth extensive requirements for financial institutions to meet if they want to offer bank accounts to 18 Table of Contents cannabis-related businesses and echoed the enforcement priorities of the Cole Memo.

The ultimate outcome of litigation could have a material adverse effect on our business and the trading price for our securities. 29 Table of Contents Inflation may adversely affect our business and our tenants’ financial condition and results of operations.

The ultimate outcome of litigation could have a material adverse effect on our business and the trading price for our securities. Inflation may adversely affect our business and our tenants’ financial condition and results of operations.

Because we lease our properties to a limited number of tenants, and to the extent we depend on a limited number of tenants in the future, the inability of any single tenant to make its lease payments could adversely affect our business and our ability to make distributions to our stockholders. As of December 31, 2022, we owned 110 properties.

We have acquired and are targeting for acquisition properties that are owned by state-licensed cannabis operators. Relevant state or local laws may be amended or repealed, or new laws may be enacted in the future to eliminate existing laws permitting cannabis operations.

The indenture governing the Notes due 2026 contains financial and operating covenants that, among other things, restrict our ability to take specific actions, even if we believe them to be in our best interest, including restrictions on our ability to (1) consummate a merger, consolidation or sale of all or substantially all of our assets and (2) incur additional secured and unsecured indebtedness.

The indenture governing the Notes due 2026 and the Loan Agreement governing the Revolving Credit Facility each contains financial and operating covenants that, among other things, restrict our ability to take specific actions, even if we believe them to be in our best interest, including restrictions on our ability to (1) consummate a merger, consolidation or sale of all or substantially all of our assets and (2) incur additional secured and unsecured indebtedness.

To meet these tests, we may be required to take or forgo taking actions that we would otherwise consider advantageous. For instance, in order to satisfy the gross income or asset tests applicable to REITs under the Code, we 53 Table of Contents may be required to forego investments that we otherwise would make.

To meet these tests, we may be required to take or forgo taking actions that we would otherwise consider advantageous. For instance, in order to satisfy the gross income or asset tests applicable to REITs under the Code, we may be required to forego investments that we otherwise would make.

If such tax deductions are disallowed, we would be unable to meet the distribution requirements applicable to REITs under the Code, which could cause us to incur U.S. federal income tax and fail to qualify as a REIT.

If 56 Table of Contents such tax deductions are disallowed, we would be unable to meet the distribution requirements applicable to REITs under the Code, which could cause us to incur U.S. federal income tax and fail to qualify as a REIT.

The terms governing our Notes due 2026 include restrictive covenants relating to our operations, which could limit our ability to respond to changing market conditions and our ability to make distributions to our stockholders.

The terms governing our Notes due 2026 and the Revolving Credit Facility include restrictive covenants relating to our operations, which could limit our ability to respond to changing market conditions and our ability to make distributions to our stockholders.

For example, Arizona, California, Colorado, Illinois, Maryland, Massachusetts, Michigan, Missouri, Nevada, New Jersey, New York, Virginia and Washington permit licensed adult-use cannabis operations, and our leases with tenants in those states allow for adult-use cannabis operations to be conducted at the properties in compliance with state and local laws.

We are subject to many of the business risks and uncertainties associated with any new business enterprise. Furthermore, our properties are concentrated in the regulated cannabis industry, an industry in its very early stages of development, and we cannot predict how tenant demand and competition for these properties will change over time.

We are subject to many of the business risks and uncertainties associated with any business enterprise with a limited operating history. Furthermore, our properties are concentrated in the regulated cannabis industry, an industry in its very early stages of development, and we cannot predict how tenant demand and competition for these properties will change over time.

Furthermore, we cannot assure you that we will be able to re-lease that property for the rent we currently receive, or at all, or that a lease termination would not result in our having to sell the property at a loss.

Furthermore, we cannot assure you that 26 Table of Contents we will be able to re-lease that property for the rent we currently receive, or at all, or that a lease termination would not result in our having to sell the property at a loss.

As of December 31, 2022, we had 19 full-time employees. Our corporate office is located at 1389 Center Drive, Suite 200, Park City, Utah 84098. Our telephone number is (858) 997-3332. 2022 Business Update Investments During 2022, we acquired nine new properties and made additional investments into existing properties under development or redevelopment.

As of December 31, 2023, we had 21 full-time employees. Our corporate office is located at 1389 Center Drive, Suite 200, Park City, Utah 84098. Our telephone number is (858) 997-3332. 2023 Business Update Investments During 2023, we acquired two new properties and made additional investments into existing properties under development or redevelopment.

Our extensive experience and relationships in the real estate and regulated cannabis industry enable us to identify, negotiate and close on acquisitions and leases with established operators and other operators which meet our criteria. 7 Table of Contents ● Regulated Cannabis Industry Growth Trends.

In addition, in the event we are forced to sell or re-lease the property, we may have difficulty finding qualified purchasers who are willing to buy the property or tenants who are willing to lease the property on terms that we expect, or at all.

The existence of operating partnership units, Exchangeable Senior 50 Table of Contents Notes, shares of Series A Preferred Stock, shares of our common stock reserved for issuance under our 2016 Plan and shares available for future issuance under the ATM Program may adversely affect the terms upon which we may be able to obtain additional capital through the sale of equity securities.

The existence of operating partnership units, shares of Series A Preferred Stock, shares of our common stock reserved for issuance under our 2016 Plan and shares available for future issuance under the ATM Program may adversely affect the terms upon which we may be able to obtain additional capital through the sale of equity securities.

There can be no assurance that 26 Table of Contents we will be able to continue to generate sufficient revenue from operations to pay our operating expenses and make distributions to stockholders.

There can be no assurance that we will be able to continue to generate sufficient revenue from operations to pay our operating expenses and make distributions to stockholders.

Congress previously enacted an omnibus spending bill that includes the Rohrabacher-Blumenauer Amendment prohibiting the DOJ (which includes the DEA) from using funds appropriated by that bill to prevent states from implementing their medical-use cannabis laws. This provision will expire on September 30, 2023.

The following table sets forth certain information regarding the top ten tenants in our property portfolio that represented the largest total invested and committed capital as of and for the year ended December 31, 2022 (dollars in thousands): Rental Revenue Percentage Total Invested for of Number of and Committed the Year Ended Rental Tenant (1) Properties Capital (2) December 31, 2022 (3) Revenue PharmaCann Inc.

The following table sets forth certain information regarding the top ten tenants in our property portfolio that represented the largest total invested and committed capital as of and for the year ended December 31, 2023 (dollars in thousands): Contractual Rent Total Invested Collected for Percentage Number of and Committed the Year Ended of Tenant (1) Properties Capital (2) December 31, 2023 (3) Total PharmaCann Inc.

Attorney General on March 10, 2021, has not provided a clear policy directive for the United States as it pertains to state-legal cannabis-related activities, and there can be no assurance that DOJ or other law enforcement authorities will not seek to vigorously enforce existing laws.

Current Attorney General Merrick Garland has not provided a clear policy directive for the United States as it pertains to state-legal cannabis-related activities, and there can be no assurance that DOJ or other law enforcement authorities will not seek to vigorously enforce existing laws.

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Item 3. Legal Proceedings

Legal Proceedings — active lawsuits and investigations

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Biggest changeITEM 3. LEGAL PROCEEDINGS For a description of our legal proceedings, see Note 11 “Commitments and Contingencies — Litigation” to our consolidated financial statements, which is hereby incorporated by reference. ITEM 4. MINE SAFETY DISCLOSURES Not applicable. 58 Table of Contents PART II

Item 4. Mine Safety Disclosures

Mine Safety Disclosures — required of mining issuers

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Biggest changeItem 4. Mine Safety Disclosures 58 PART II Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities 59 Item 6. [Reserved] 60 Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations 61 Item 7A. Quantitative and Qualitative Disclosures About Market Risk 77 Item 8.

Biggest changeItem 4. Mine Safety Disclosures 59 PART II Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities 60 Item 6. [Reserved] 61 Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations 62 Item 7A. Quantitative and Qualitative Disclosures About Market Risk 79 Item 8.

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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Biggest changeSource: SNL Financial Recent Sales of Unregistered Securities During the year ended December 31, 2022, we issued 413,166 shares of our common stock upon exchange by holders of approximately $26.9 million of outstanding principal amount of our Exchangeable Senior Notes.

Biggest changeSource: SNL Financial Recent Sales of Unregistered Securities During the year ended December 31, 2023, we issued 32,200 shares of our common stock upon exchange by holders of $2.0 million of outstanding principal amount of our Exchangeable Senior Notes.

Such shares of our common stock were issued in reliance on Section 3(a)(9) of the Securities Act of 1933, as amended. For information regarding our outstanding indebtedness, which includes our Notes due 2026 and our Exchangeable Senior Notes, see Note 7 in the notes to our consolidated financial statements.

Such shares of our common stock were issued in reliance on Section 3(a)(9) of the Securities Act of 1933, as amended. For information regarding our outstanding indebtedness, which includes our Notes due 2026 and our Exchangeable Senior Notes, see Note 7 “Debt” in the notes to our consolidated financial statements.

Information about our equity compensation plans and other related stockholder matters is incorporated by reference in Item 12 of Part III of this Annual Report on Form 10-K. 59 Table of Contents Stock Performance Graph The following graph shows a comparison from January 1, 2018 to December 31, 2022 of cumulative total stockholder return, calculated on a dividends reinvested basis, for Innovative Industrial Properties, Inc., the S&P 500 Stock Index, or the S&P 500, and the MSCI US REIT Index, which includes all tax-qualified equity REITs listed in the United States.

Information about our equity compensation plans and other related stockholder matters is incorporated by reference in Item 12 of Part III of this Annual Report on Form 10-K. 60 Table of Contents Stock Performance Graph The following graph shows a comparison from January 1, 2019 to December 31, 2023 of cumulative total stockholder return, calculated on a dividends reinvested basis, for Innovative Industrial Properties, Inc., the S&P 500 Stock Index, or the S&P 500, and the MSCI US REIT Index, which includes all tax-qualified equity REITs listed in the United States.

ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES Our common stock is traded on the NYSE under the symbol “IIPR.” As of February 28, 2023, there were 30 holders of record of our common shares. This number excludes our common shares owned by stockholders holding under nominee security position listings.

ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES Our common stock is traded on the NYSE under the symbol “IIPR.” As of February 27, 2024, there were 32 holders of record of our common shares. This number excludes our common shares owned by stockholders holding under nominee security position listings.

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

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Biggest changeFFO, Normalized FFO and AFFO should be considered only as supplements to net income computed in accordance with GAAP as measures of operations. 71 Table of Contents The table below is a reconciliation of net income attributable to common stockholders to FFO, Normalized FFO and AFFO for the years ended December 31, 2022, 2021 and 2020 (in thousands, except share and per share amounts): Years Ended December 31, 2022 2021 2020 Net income attributable to common stockholders $ 153,034 $ 112,638 $ 64,378 Real estate depreciation and amortization 61,303 41,776 28,025 Gain on sale of real estate (3,601) — — FFO attributable to common stockholders (basic) $ 210,736 $ 154,414 $ 92,403 Cash and non-cash interest expense on Exchangeable Senior Notes 546 7,517 — FFO attributable to common stockholders (diluted) $ 211,282 $ 161,931 $ 92,403 Acquisition-related expense 110 26 94 Financing expense 367 — 211 Litigation-related expense 3,010 — — Loss on exchange of Exchangeable Senior Notes 125 3,692 — Normalized FFO attributable to common stockholders (diluted) 214,894 165,649 92,708 Stock-based compensation 17,507 8,616 3,330 Non-cash interest expense 1,255 715 2,040 Above-market lease amortization 92 4 — AFFO attributable to common stockholders (diluted) $ 233,748 $ 174,984 $ 98,078 FFO per common share – diluted $ 7.64 $ 6.17 $ 4.72 Normalized FFO per common share – diluted $ 7.77 $ 6.31 $ 4.74 AFFO per common share – diluted $ 8.45 $ 6.66 $ 5.01 Weighted average common shares outstanding – basic 27,345,047 23,903,017 19,443,602 Restricted stock and RSUs 116,046 96,174 114,017 PSUs — 81,414 — Dilutive effect of Exchangeable Senior Notes 202,076 2,180,550 — Weighted average common shares outstanding – diluted 27,663,169 26,261,155 19,557,619 72 Table of Contents The table below is a reconciliation of quarterly net income attributable to common stockholders to FFO, Normalized FFO and AFFO for the years ended December 31, 2022 and 2021 (in thousands, except share and per share amounts): Three Months Ended (1) December 31, 2022 September 30, 2022 June 30, 2022 March 31, 2022 Net income attributable to common stockholders $ 41,168 $ 37,278 $ 39,876 $ 34,712 Real estate depreciation and amortization 16,302 15,900 15,233 13,868 Gain on sale of real estate (3,601) — — — FFO attributable to common stockholders (basic) $ 53,869 $ 53,178 $ 55,109 $ 48,580 Cash and non-cash interest expense on Exchangeable Senior Notes 72 72 68 334 FFO attributable to common stockholders (diluted) $ 53,941 $ 53,250 $ 55,177 $ 48,914 Acquisition-related expense — 15 — 95 Financing expense 249 14 104 — Litigation-related expense 779 2,112 119 — Loss on exchange of Exchangeable Senior Notes — — 7 118 Normalized FFO attributable to common stockholders (diluted) $ 54,969 $ 55,391 $ 55,407 $ 49,127 Stock-based compensation 4,312 4,379 4,437 4,379 Non-cash interest expense 321 316 311 307 Above-market lease amortization 23 23 23 23 AFFO attributable to common stockholders (diluted) $ 59,625 $ 60,109 $ 60,178 $ 53,836 FFO per common share – diluted $ 1.92 $ 1.89 $ 1.97 $ 1.86 Normalized FFO per common share – diluted $ 1.95 $ 1.97 $ 1.98 $ 1.87 AFFO per common share – diluted $ 2.12 $ 2.13 $ 2.15 $ 2.04 Weighted-average common shares outstanding – basic 27,938,804 27,938,568 27,850,561 25,620,253 Restricted stock and RSUs 117,831 118,567 82,387 110,457 PSUs — — — 102,333 Dilutive effect of Exchangeable Senior Notes 103,626 100,799 103,742 507,181 Weighted-average common shares outstanding – diluted 28,160,261 28,157,934 28,036,690 26,340,224 73 Table of Contents Three Months Ended (1) December 31, 2021 September 30, 2021 June 30, 2021 March 31, 2021 Net income attributable to common stockholders $ 28,292 $ 29,756 $ 29,001 $ 25,589 Real estate depreciation and amortization 12,205 10,891 9,841 8,839 FFO attributable to common stockholders (basic) $ 40,497 $ 40,647 $ 38,842 $ 34,428 Cash and non-cash interest expense 1,880 1,885 1,879 1,873 FFO attributable to common stockholders (diluted) $ 42,377 $ 42,532 $ 40,721 $ 36,301 Acquisition-related expense 7 — 11 8 Loss on exchange of Exchangeable Senior Notes 3,692 — — — Normalized FFO attributable to common stockholders (diluted) $ 46,076 $ 42,532 $ 40,732 $ 36,309 Stock-based compensation 2,192 2,191 2,132 2,101 Non-cash interest expense 298 299 118 — Above-market lease amortization 4 — — — AFFO attributable to common stockholders (diluted) $ 48,570 $ 45,022 $ 42,982 $ 38,410 FFO per common share – diluted $ 1.61 $ 1.62 $ 1.56 $ 1.39 Normalized FFO per common share – diluted $ 1.75 $ 1.62 $ 1.56 $ 1.39 AFFO per common share – diluted $ 1.85 $ 1.71 $ 1.64 $ 1.47 Weighted-average common shares outstanding – basic 23,941,930 23,890,537 23,889,761 23,889,398 Restricted stock and RSUs 98,093 98,093 96,230 92,194 PSUs 81,414 78,582 — — Dilutive effect of Exchangeable Senior Notes 2,142,148 2,193,492 2,182,691 2,170,959 Weighted-average common shares outstanding – diluted 26,263,585 26,260,704 26,168,682 26,152,551 (1) The sum of quarterly financial data may vary from annual data due to rounding and differences in the dilutive effect of potentially issuable shares of each reporting period.

Biggest changeThe table below is a reconciliation of net income attributable to common stockholders to FFO, Normalized FFO and AFFO for the years ended December 31, 2023, 2022 and 2021 (in thousands, except share and per share amounts): Years Ended December 31, 2023 2022 2021 Net income attributable to common stockholders $ 164,236 $ 153,034 $ 112,638 Real estate depreciation and amortization 67,194 61,303 41,776 Gain on sale of real estate — (3,601) — FFO attributable to common stockholders (basic) 231,430 210,736 154,414 Cash and non-cash interest expense on Exchangeable Senior Notes 219 546 7,517 FFO attributable to common stockholders (diluted) 231,649 211,282 161,931 Financing expense — 367 — Litigation-related expense 2,480 3,010 — Loss (gain) on exchange of Exchangeable Senior Notes (22) 125 3,692 Normalized FFO attributable to common stockholders (diluted) 234,107 214,784 165,623 Interest income on seller-financed note (1) 1,342 — — Stock-based compensation 19,581 17,507 8,616 Non-cash interest expense 1,375 1,255 715 Above-market lease amortization 92 91 4 AFFO attributable to common stockholders (diluted) $ 256,497 $ 233,637 $ 174,958 FFO per common share – diluted $ 8.20 $ 7.64 $ 6.17 Normalized FFO per common share – diluted $ 8.29 $ 7.76 $ 6.31 AFFO per common share – diluted $ 9.08 $ 8.45 $ 6.66 Weighted average common shares outstanding – basic 27,977,807 27,345,047 23,903,017 Restricted stock and RSUs 196,821 116,046 96,174 PSUs — — 81,414 Dilutive effect of Exchangeable Senior Notes 81,169 202,076 2,180,550 Weighted average common shares outstanding – diluted 28,255,797 27,663,169 26,261,155 (1) Amount reflects the non-refundable interest paid on the seller-financed note issued to us by the buyer in connection with our disposition of a portfolio of four properties in southern California previously leased to affiliates of Vertical, which is recognized as a deposit liability and is included in other liabilities in our consolidated balance sheet as of December 31, 2023, as the transaction did not qualify for recognition as a completed sale. 74 Table of Contents The tables below are reconciliations of quarterly net income attributable to common stockholders to FFO, Normalized FFO and AFFO for the years ended December 31, 2023 and 2022 (in thousands, except share and per share amounts): Three Months Ended (1) December 31, 2023 September 30, 2023 June 30, 2023 March 31, 2023 Net income attributable to common stockholders $ 41,295 $ 41,256 $ 40,931 $ 40,754 Real estate depreciation and amortization 17,098 16,678 16,704 16,714 FFO attributable to common stockholders (basic) 58,393 57,934 57,635 57,468 Cash and non-cash interest expense on Exchangeable Senior Notes 50 50 50 69 FFO attributable to common stockholders (diluted) 58,443 57,984 57,685 57,537 Litigation-related expense 152 1,112 670 546 Loss (gain) on exchange of Exchangeable Senior Notes — — — (22) Normalized FFO attributable to common stockholders (diluted) 58,595 59,096 58,355 58,061 Interest income on seller-financed note (2) 403 402 403 134 Stock-based compensation 4,934 4,934 4,884 4,829 Non-cash interest expense 383 335 331 326 Above-market lease amortization 23 23 23 23 AFFO attributable to common stockholders (diluted) $ 64,338 $ 64,790 $ 63,996 $ 63,373 FFO per common share – diluted $ 2.07 $ 2.05 $ 2.04 $ 2.04 Normalized FFO per common share – diluted $ 2.07 $ 2.09 $ 2.07 $ 2.06 AFFO per common share – diluted $ 2.28 $ 2.29 $ 2.26 $ 2.25 Weighted-average common shares outstanding – basic 27,996,393 27,983,004 27,981,517 27,949,747 Restricted stock and RSUs 206,667 206,919 201,462 171,741 Dilutive effect of Exchangeable Senior Notes 76,774 75,682 74,260 102,210 Weighted-average common shares outstanding – diluted 28,279,834 28,265,605 28,257,239 28,223,698 75 Table of Contents Three Months Ended (1) December 31, 2022 September 30, 2022 June 30, 2022 March 31, 2022 Net income attributable to common stockholders $ 41,168 $ 37,278 $ 39,876 $ 34,712 Real estate depreciation and amortization 16,302 15,900 15,233 13,868 Gain on sale of real estate (3,601) — — — FFO attributable to common stockholders (basic) 53,869 53,178 55,109 48,580 Cash and non-cash interest expense 72 72 68 334 FFO attributable to common stockholders (diluted) 53,941 53,250 55,177 48,914 Financing expense 249 14 104 — Litigation-related expense 779 2,112 119 — Loss (gain) on exchange of Exchangeable Senior Notes — — 7 118 Normalized FFO attributable to common stockholders (diluted) 54,969 55,376 55,407 49,032 Stock-based compensation 4,312 4,379 4,437 4,379 Non-cash interest expense 321 316 311 307 Above-market lease amortization 23 23 23 23 AFFO attributable to common stockholders (diluted) $ 59,625 $ 60,094 $ 60,178 $ 53,741 FFO per common share – diluted $ 1.92 $ 1.89 $ 1.97 $ 1.86 Normalized FFO per common share – diluted $ 1.95 $ 1.97 $ 1.98 $ 1.86 AFFO per common share – diluted $ 2.12 $ 2.13 $ 2.15 $ 2.04 Weighted-average common shares outstanding – basic 27,938,804 27,938,568 27,850,561 25,620,253 Restricted stock and RSUs 117,831 118,567 82,387 110,457 PSUs — — — 102,333 Dilutive effect of Exchangeable Senior Notes 103,626 100,799 103,742 507,181 Weighted-average common shares outstanding – diluted 28,160,261 28,157,934 28,036,690 26,340,224 (1) The sum of quarterly financial data may vary from annual data due to rounding and differences in the dilutive effect of potentially issuable shares of each reporting period.

Determining whether expenditures meet the criteria for capitalization and the assignment of depreciable lives requires management to exercise significant judgment. The determination of whether we are or the tenant is the owner of tenant improvements for accounting purposes is subject to significant judgment. In making that determination, we consider numerous factors and perform a detailed evaluation of each individual lease.

Determining whether expenditures meet the criteria for capitalization and the assignment of depreciable lives requires management to exercise significant judgment. The determination of whether we are or the tenant is the owner of improvements for accounting purposes is subject to significant judgment. In making that determination, we consider numerous factors and perform a detailed evaluation of each individual lease.

The factors we evaluate include but are not limited to the following: ● whether the lease agreement requires landlord approval of how the tenant improvement allowance is spent prior to installation of the tenant improvements; ● whether the lease agreement requires the tenant to provide evidence to the landlord supporting the cost and what the tenant improvement allowance was spent on prior to payment by the landlord for such tenant improvements; ● whether the tenant improvements are unique to the tenant or reusable by other tenants; ● whether the tenant is permitted to alter or remove the tenant improvements without the consent of the landlord or without compensating the landlord for any lost utility or diminution in fair value; and ● whether the ownership of the tenant improvements remains with the landlord or remains with the tenant at the end of the lease term.

The factors we evaluate include but are not limited to the following: ● whether the lease agreement requires landlord approval of how the improvement allowance is spent prior to installation of the improvements; ● whether the lease agreement requires the tenant to provide evidence to the landlord supporting the cost and what the improvement allowance was spent on prior to payment by the landlord for such improvements; ● whether the improvements are unique to the tenant or reusable by other tenants; ● whether the tenant is permitted to alter or remove the improvements without the consent of the landlord or without compensating the landlord for any lost utility or diminution in fair value; and ● whether the ownership of the improvements remains with the landlord or remains with the tenant at the end of the lease term.

The use of different assumptions can affect the amount of consideration allocated to the acquired depreciable/amortizable asset, which in turn can impact our net income due to the recognition of the related depreciation/amortization expense in our consolidated statements of operations. We depreciate buildings and improvements and tenant improvements where we are considered the owner for accounting purposes based on our evaluation of the estimated useful life of each specific asset, not to exceed 40 years.

The use of different assumptions can affect the amount of consideration allocated to the acquired depreciable/amortizable asset, which in turn can impact our net income due to the recognition of the related depreciation/amortization expense in our consolidated statements of operations. We depreciate buildings and improvements where we are considered the owner for accounting purposes based on our evaluation of the estimated useful life of each specific asset, not to exceed 40 years.

After completing this process, we determined that for each of the operating properties evaluated, undiscounted cash flows over the holding period were in excess of carrying value and, therefore, we did not record any impairment losses for these properties for the years ended December 31, 2022 and 2021.

The Notes due 2026 are the Operating Partnership’s general unsecured and unsubordinated obligations, are fully and unconditionally guaranteed by us and all of the direct and indirect subsidiaries of the Operating Partnership, and rank equally in right of payment with all of the Operating Partnership’s existing and future senior unsecured indebtedness, including the Exchangeable Senior Notes.

The Notes due 2026 are the Operating Partnership’s general unsecured obligations, are fully and unconditionally guaranteed by us and all of the direct and indirect subsidiaries of the Operating Partnership, and rank equally in right of payment with all of the Operating Partnership’s existing and future senior unsecured indebtedness, including the Exchangeable Senior Notes.

The Exchangeable Senior Notes were anti-dilutive for purposes of calculating earnings per diluted share for all other periods presented, and as such, were treated as anti-dilutive for purposes of calculating FFO, Normalized FFO, AFFO and FFO, Normalized FFO and AFFO per diluted share for such periods.

The Exchangeable Senior Notes were anti-dilutive for purposes of calculating earnings per diluted share for all periods presented, and as such, were treated as anti-dilutive for purposes of calculating FFO, Normalized FFO, AFFO and FFO, Normalized FFO and AFFO per diluted share for such periods.

Indicators we use to determine whether an impairment evaluation is necessary include: ● deterioration in rental rates for a specific property; ● deterioration of a given rental submarket; 75 Table of Contents ● significant change in strategy or use of a specific property or any other event that could result in a decreased holding period, including classifying a property as held for sale, or significant development delay; ● evidence of material physical damage to the property; and ● default by a significant tenant when any of the other indicators above are present. When we evaluate for potential impairment our real estate assets to be held and used, we first evaluate whether there are any indicators of impairment.

Indicators we use to determine whether an impairment evaluation is necessary include: ● deterioration in rental rates for a specific property; ● deterioration of a given rental submarket; ● significant change in strategy or use of a specific property or any other event that could result in a decreased holding period, including classifying a property as held for sale, or significant development delay; ● evidence of material physical damage to the property; and ● default by a significant tenant when any of the other indicators above are present. When we evaluate for potential impairment our real estate assets to be held and used, we first evaluate whether there are any indicators of impairment.

See Note 7 in the notes to our consolidated financial statements for a description of certain terms of our Notes due 2026.

See Note 7 “Debt” in the notes to our consolidated financial statements for a description of certain terms of our Notes due 2026.

Our Notes due 2026 and our Exchangeable Senior Notes are the unsecured senior obligations of our Operating Partnership and are fully and unconditionally guaranteed on an unsecured basis, jointly and severally, by us and all of our direct and indirect wholly-owned subsidiaries, which are listed on Exhibit 22.1 hereto and which we refer to collectively as “Subsidiary Guarantors.” Only the Notes due 2026 and the related guarantees are registered securities under the Securities Act.

Supplemental Guarantor Information Our Notes due 2026 and our Exchangeable Senior Notes are the unsecured senior obligations of our Operating Partnership and are fully and unconditionally guaranteed on an unsecured basis, jointly and severally, by us and all of our direct and indirect wholly-owned subsidiaries, which are listed on Exhibit 22.1 hereto and which we refer to collectively as “Subsidiary Guarantors.” Only the Notes due 2026 and the related guarantees are registered securities under the Securities Act.

See Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Results of Operations” in our Annual Report on Form 10-K for the year ended December 31, 2021 for a comparison of the years ended December 31, 2021 and December 31, 2020.

See Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Results of Operations” in our Annual Report on Form 10-K for the year ended December 31, 2022 for a comparison of the years ended December 31, 2022 and December 31, 2021.

If sustained, this would have a material adverse effect on our business, financial condition and results of operations, including our ability to continue to make acquisitions of new properties and fund investments for improvements at existing properties.

If sustained, this could have a material adverse effect on our business, financial condition and results of operations, including our ability to continue to make acquisitions of new properties and fund investments for improvements at existing properties.

Management believes that it was in compliance with those covenants as of December 31, 2022. Subject to the terms of the indenture, any new subsidiary of the Operating Partnership will also guarantee the Notes due 2026 .

Management believes that it was in compliance with those covenants as of December 31, 2023. Subject to the terms of the indenture, any new subsidiary of the Operating Partnership will also guarantee the Notes due 2026 .

Our investment guidelines also provide that our aggregate borrowings (secured and unsecured) will not exceed 50% of the cost of our tangible assets at the time of any new borrowing, subject to our board of directors’ discretion. Recently, financial markets have been volatile in general, which has also significantly reduced our access to capital.

Our investment guidelines also provide that our aggregate borrowings (secured and unsecured) will not exceed 50% of the cost of our tangible assets at the time of any new borrowing, subject to our board of directors’ discretion. In recent years, financial markets have been volatile in general, which has also significantly reduced our access to capital.

Sources and Uses of Cash We derive substantially all of our revenues from the leasing of our properties, collecting rental income and operating expense reimbursements based on contractual arrangements with our tenants.

Sources and Uses of Cash We derive substantially all of our revenues from the leasing of our properties and collecting rental income, which includes operating expense reimbursements, based on contractual arrangements with our tenants.

Changes in current favorable state or local laws in the cannabis industry may impair our ability to renew or re-lease properties and the ability of our tenants to fulfill their lease obligations and could materially and adversely affect our ability to maintain or increase rental rates for our properties.

Furthermore, changes in federal law and current favorable state or local laws in the cannabis industry may impair our ability to renew or re-lease properties and the ability of our tenants to fulfill their lease obligations and could materially and adversely affect our ability to maintain or increase rental rates for our properties.

Our computation of FFO, Normalized FFO and AFFO may differ from the methodology for calculating FFO, Normalized FFO and AFFO utilized by other equity REITs and, accordingly, may not be comparable to such REITs. Further, FFO, Normalized FFO and AFFO do not represent cash flow available for management’s discretionary use.

Our computation of FFO, Normalized FFO and AFFO may differ from the methodology for calculating FFO, Normalized FFO and AFFO utilized by other equity REITs and, accordingly, may not be comparable to such REITs. 73 Table of Contents Further, FFO, Normalized FFO and AFFO do not represent cash flow available for management’s discretionary use.

When we conclude that we are the owner of tenant improvements for accounting purposes using the factors discussed above, we record the cost to construct the tenant improvements as our capital asset. We evaluate our real estate assets for potential impairment whenever events or changes in circumstances indicate that the carrying amount of a given asset may not be recoverable.

When we conclude that we are the owner of improvements for accounting purposes using the factors discussed above, we record the cost to construct the improvements as our capital asset. 77 Table of Contents We evaluate our real estate assets for potential impairment whenever events or changes in circumstances indicate that the carrying amount of a given asset may not be recoverable.

The offer and sale of the Exchangeable Senior Notes and the related guarantees were not and will not be registered under the Securities Act or the securities laws of any other jurisdiction and instead were issued in reliance upon an 69 Table of Contents exemption from such registration.

As a result of this distribution requirement, our Operating Partnership cannot rely on retained earnings to fund its ongoing operations to the same extent that other companies whose parent 68 Table of Contents companies are not REITs can.

This discussion of our critical accounting estimates is intended to supplement the description of our accounting policies in the footnotes to our consolidated financial statements and to provide additional insight into the information used by management when evaluating significant estimates and assumptions.

This discussion of our critical accounting estimates is intended to supplement the description of our accounting policies in the footnotes to our consolidated financial statements and to provide additional 76 Table of Contents insight into the information used by management when evaluating significant estimates and assumptions.

If a tenant defaults on one of our leases or the lease term expires with no tenant renewal, we would incur the property costs not paid by the tenant during the time it takes to re-lease or sell the property. As of December 31, 2022, we owned 110 properties.

If a tenant defaults on one of our leases or the lease term expires with no tenant renewal, we would incur property costs not paid by the tenant during the time it takes to re-lease or sell the property. As of December 31, 2023, we owned 108 properties.

Increases or decreases in such operating expenses will impact our overall financial performance. 63 Table of Contents Our Qualification as a REIT We have been organized and operate our business so as to qualify, to be taxed as a REIT for U.S. federal income tax purposes.

Increases or decreases in such operating expenses will impact our overall financial performance. Our Qualification as a REIT We have been organized and operate our business so as to qualify, to be taxed as a REIT for U.S. federal income tax purposes.

For the three months ended March 31, 2022, 102,333 shares issuable upon vesting of the performance share units (“PSUs”) were dilutive, as the performance thresholds for vesting of these PSUs were met as measured as of March 31, 2022.

For the three months ended March 31, 2022, 102,333 shares issuable upon vesting of the PSUs were dilutive, as the performance thresholds for vesting of these PSUs were met as measured as of March 31, 2022.

Our ability to continue to pay dividends is dependent upon our ability to continue to generate cash flows, service any debt obligations we have, including our Exchangeable Senior Notes, and make accretive new investments. Year Ended December 31, 2022 2021 2020 Ordinary income distributions $ 6.929636 $ 5.340000 $ 3.940000 Long-term capital gain distributions (1) 0.100364 — — Total $ 7.030000 $ 5.340000 $ 3.940000 (1) Unrecaptured Section 1250 Gain of $0.058864 represents additional characterization of and is part of long-term capital gain distributions for the year ended December 31, 2022. The common stock distribution with a record date of December 30, 2022 was a split-year distribution, with $0.33 allocable to 2022 for federal income tax purposes and $1.47 allocable to 2023 for federal income tax purposes.

Our ability to continue to pay dividends is dependent upon our ability to continue to generate cash flows, service any debt obligations we have, including our Exchangeable Senior Notes, and make accretive new investments. Year Ended December 31, 2023 2022 2021 Ordinary income distributions $ 7.700000 $ 6.929636 $ 5.340000 Long-term capital gain distributions (1) — 0.100364 — Total $ 7.700000 $ 7.030000 $ 5.340000 (1) Unrecaptured Section 1250 Gain of $0.058864 represents additional characterization of and is part of long-term capital gain distributions for the year ended December 31, 2022. The common stock distribution with a record date of December 29, 2023 was a split-year distribution, with $0.83 allocable to 2023 for federal income tax purposes and $0.99 allocable to 2024 for federal income tax purposes.

The accounting model for asset acquisitions requires that the acquisition consideration (including acquisition costs) be allocated to the individual assets acquired and liabilities assumed on a relative fair value basis. We exercise judgement to determine key assumptions used in each valuation technique.

The accounting model for asset acquisitions requires that the acquisition consideration (including acquisition costs) be allocated to the individual assets acquired and liabilities assumed on a relative fair value basis. We exercise judgment to determine key assumptions used in each valuation technique (cost, income, and sales approaches).

For further discussion of our significant accounting policies, see Note 2 “Summary of Significant Accounting Policies and Procedures and Recent Accounting Pronouncements” to our consolidated financial statements included in this report. 74 Table of Contents Lease Accounting We account for our leases under ASC 842 “Leases”, which requires significant estimates and judgments by management in its application.

For further discussion of our significant accounting policies, see Note 2 “Summary of Significant Accounting Policies and Procedures and Recent Accounting Pronouncements” to our consolidated financial statements included in this report. Lease Accounting We account for our leases under Accounting Standards Codification 842, Leases, which requires significant estimates and judgments by management in its application.

During 2022, we declared cash dividends on our common stock totaling $7.10 per share, and cash dividends on our Series A Preferred Stock totaling $2.25 per share.

During 2023, we declared cash dividends on our common stock totaling $7.22 per share, and cash dividends on our Series A Preferred Stock totaling $2.25 per share.

It is possible that a property we acquire in the future would be subject to a mortgage, which we may assume. Impact of Inflation The U.S. economy is experiencing a sustained increase in inflation rates. We enter into leases that generally provide for fixed increases in rent.

It is possible that a property we acquire in the future would be subject to a mortgage, which we may assume. 78 Table of Contents Impact of Inflation The U.S. economy has experienced a sustained increase in inflation rates in recent years. We enter into leases that generally provide for fixed increases in rent.

This source of revenue represents our primary source of liquidity to fund our dividends, Exchangeable Senior Notes and Notes due 2026 interest payments, general and administrative expenses, property development and redevelopment activities, property operating expenses and other expenses incurred related to managing our existing portfolio and investing in additional properties.

This source of revenue represents our primary source of liquidity to fund our dividends, Notes due 2026 interest payments, repayments of borrowings and interest payments under our Revolving Credit Facility, general and administrative expenses, property development and redevelopment activities, property operating expenses and other expenses incurred related to managing our existing portfolio and investing in additional properties.

The commitments discussed in this paragraph are excluded from the table of contractual obligations above, as improvement allowances generally may be requested by the tenants at any time up until a date that is near the expiration of the initial term of the applicable lease and construction loan funding generally may be requested by the borrower from time to time, subject to satisfaction of certain conditions.

The commitments discussed in this paragraph are excluded from the table of contractual obligations above, as improvement allowances generally may be requested by the tenants at any time up until a date that is near the expiration of the initial term of the applicable lease, there is no explicit time frame for incurring the obligations related to our contracts with vendors, and construction loan funding generally may be requested by the borrower from time to time, subject to satisfaction of certain conditions.

As of December 31, 2022, we had invested approximately $2.2 billion in the aggregate (consisting of purchase price and funding of draws for construction funding and improvements submitted by tenants, if any, but excluding transaction costs) and had committed an additional approximately $125.5 million to fund draws to certain tenants and sellers for construction and improvements at our properties.

As of December 31, 2023, we had invested approximately $2.4 billion in the aggregate (consisting of purchase price and funding of draws for improvements submitted by tenants, if any, but excluding transaction costs) and had committed an additional approximately $40.1 million to fund draws to certain tenants and vendors for improvements at our properties.

These statistics do not include an $18.5 million loan commitment from us to a developer for construction of a regulated cannabis cultivation and processing facility in California, of which we have funded approximately $18.0 million as of December 31, 2022.

These statistics do not include a $23.0 million loan commitment from us to a developer for construction of a regulated cannabis cultivation and processing facility in California, of which we have funded $22.0 million as of December 31, 2023.

Rent collection for our operating portfolio (including approximately $541,000 of security deposits applied for payment of rent for our lease with Sozo) was approximately 94% for the three months ended December 31, 2022. In July 2022, Kings Garden defaulted on its obligations to pay rent at all of the properties that Kings Garden leases from us.

Rent collection for our operating portfolio (including approximately $767,000 of security deposits applied for payment of rent from our lease with one tenant) was 100% for the three months ended December 31, 2023. 69 Table of Contents In July 2022, Kings Garden defaulted on its obligations to pay rent at all of the properties that Kings Garden leases from us.

Rent collection for our operating portfolio (calculated as base rent and property management fees collected as a percentage of contractually due base rent and property management fees, including an aggregate of approximately $2.7 million of security deposits applied for payment of rent for our leases with Kings Garden and Sozo) was approximately 97% for the year ended December 31, 2022.

Rent collection for our operating portfolio (calculated as base rent and property management fees collected as a percentage of contractually due base rent and property management fees, including an aggregate of approximately $8.7 million of security deposits applied for payment of rent for our leases with five tenants) was approximately 98% for the year ended December 31, 2023.

Furthermore, as permitted under Rule 13-01(a)(4)(vi) of Regulation S-X, we have excluded the summarized financial information for the Operating Partnership and the Subsidiary Guarantors because the combined assets, liabilities, and results of operations of the Operating Partnership and the Subsidiary Guarantors are not materially different than the corresponding amounts in our consolidated financial statements, and management believes such summarized financial information would be repetitive and would not provide incremental value to investors. 72 Table of Contents Non-GAAP Financial Information and Other Metrics In addition to the required GAAP presentations, we use certain non-GAAP performance measures as we believe these measures improve the understanding of our operational results.

As of December 31, 2022, we had 19 full-time employees. As of December 31, 2022, we owned 110 properties comprising approximately 8.7 million square feet (including approximately 1.6 million rentable square feet under development/redevelopment) in 19 states.

As of December 31, 2023, we had 21 full-time employees. As of December 31, 2023, we owned 108 properties comprising approximately 8.9 million square feet (including approximately 1.4 million rentable square feet under development/redevelopment) in 19 states.

Of the approximately $125.5 million committed to fund draws to certain tenants and sellers for construction and improvements at our properties, approximately $28.9 million was incurred but not funded as of December 31, 2022.

Of the approximately $40.1 million committed to fund draws to certain tenants and vendors for improvements at our properties, approximately $9.6 million was incurred but not funded as of December 31, 2023.

Other revenues for the year ended December 31, 2022 consists of interest revenue related to leases for property acquisitions that did not satisfy the requirements for sale-leaseback accounting. Expenses Property Expenses . Property expenses for the year ended December 31, 2022 increased by approximately $6.1 million, compared to 2021.

Other Revenues. Other revenues for the year ended December 31, 2023 consists of interest revenue related to leases for property acquisitions that did not satisfy the requirements for sale-leaseback accounting.

Cash flows provided by financing activities for the year ended December 31, 2022 were approximately $164.2 million, primarily related to approximately $352.0 million in net proceeds from the issuance of our common stock, partially offset by dividend payments of approximately $185.3 million to common and preferred stockholders and approximately $2.5 million related to net share settlement of equity awards to pay the required withholding taxes upon vesting of restricted stock for certain employees. 66 Table of Contents Cash flows provided by financing activities for the year ended December 31, 2021 were approximately $155.8 million, primarily related to approximately $293.2 million in net proceeds from the issuance of our Notes due 2026, partially offset by dividend payments of approximately $132.3 million to common and preferred stockholders, approximately $3.4 million related to net share settlement of equity awards to pay the required withholding taxes upon vesting of restricted stock for certain employees, and approximately $1.7 million related to the induced exchange of Exchangeable Senior Notes pursuant to the Exchange Transactions.

Cash flows provided by financing activities for the year ended December 31, 2022 were approximately $164.2 million, primarily related to approximately $351.9 million in net proceeds from the issuance of our common stock, partially offset by dividend payments of approximately $185.3 million to common and preferred stockholders and approximately $2.4 million related to net share settlement of equity awards to pay the required withholding taxes upon vesting of restricted stock for certain employees.

We generally expect to structure our leases so that the tenant is responsible for real estate taxes, maintenance, insurance, and structural repairs with respect to the premises throughout the lease term.

Our operating expenses also include costs that we incur for properties, including taxes, insurance, maintenance, security, utilities and other property-specific costs. We generally expect to structure our leases so that the tenant is responsible for real estate taxes, maintenance, insurance, and structural repairs with respect to the premises throughout the lease term.

Contractual Obligations The following table summarizes our contractual obligations as of December 31, 2022 (in thousands): Payments Due Exchangeable by Year Notes due 2026 Senior Notes Interest Office Rent Total 2023 $ — $ — $ 16,742 $ 496 $ 17,238 2024 — 6,436 16,534 511 23,481 2025 — — 16,500 526 17,026 2026 300,000 — 6,646 543 307,189 2027 — — — 45 45 Total $ 300,000 $ 6,436 $ 56,422 $ 2,121 $ 364,979 As of December 31, 2022, we had (1) approximately $96.6 million outstanding in commitments related to improvement allowances, which generally may be requested by the tenants at any time up until a date that is near the expiration of the initial term of the applicable lease; and (2) approximately $479,000 outstanding in commitments to fund a construction loan.

Contractual Obligations The following table summarizes our contractual obligations as of December 31, 2023 (in thousands): Payments Due Exchangeable by Year Notes due 2026 Senior Notes Interest Office Rent Total 2024 $ — $ 4,436 $ 16,523 $ 511 $ 21,470 2025 — — 16,500 526 17,026 2026 300,000 — 6,646 543 307,189 2027 — — — 45 45 2028 — — — — — Total $ 300,000 $ 4,436 $ 39,669 $ 1,625 $ 345,730 As of December 31, 2023, we had (1) approximately $18.7 million outstanding in commitments related to improvement allowances, which generally may be requested by the tenants at any time up until a date that is near the expiration of the initial term of the applicable lease; (2) approximately $11.8 million outstanding in commitments related to contracts with vendors for improvements at our properties, which are expected to be incurred by December 31, 2024; and (3) $1.0 million outstanding in commitments to fund a construction loan.

(“Sozo”)) was approximately 97% for the year ended December 31, 2022. Rent collection for our operating portfolio (including approximately $541,000 of security deposits applied for payment of rent from our lease with Sozo) was approximately 94% for the three months ended December 31, 2022.

For the three and twelve months ended December 31, 2021, 81,414 shares issuable upon vesting of PSUs granted to certain employees in January 2021 were dilutive, as the performance thresholds for vesting of these PSUs were met as measured as of December 31, 2021.

For the year ended December 31, 2021, 81,414 shares issuable upon vesting of the PSUs were dilutive, as the performance thresholds for vesting of these PSUs were met as measured as of December 31, 2021.

Cash Flows The following summary discussion of our cash flows is based on the consolidated statements of cash flows in Item 8, “Financial Statements and Supplementary Data” and is not meant to be an all-inclusive discussion of the changes in our cash flows for the periods presented below (in thousands): Year Ended December 31, 2022 2021 Change Net cash provided by operating activities $ 234,130 $ 188,747 $ 45,383 Net cash used in investing activities (396,201) (384,093) (12,108) Net cash provided by financing activities 164,224 155,759 8,465 Ending cash, cash equivalents and restricted cash 88,572 86,419 2,153 Cash flows provided by operating activities for the years ended December 31, 2022 and 2021 were approximately $234.1 million and $188.7 million, respectively.

Cash Flows The following summary discussion of our cash flows is based on the consolidated statements of cash flows in Item 8, “Financial Statements and Supplementary Data” and is not meant to be an all-inclusive discussion of the changes in our cash flows for the periods presented below (in thousands): Year Ended December 31, 2023 2022 Change Net cash provided by (used in) operating activities $ 255,543 $ 234,130 $ 21,413 Net cash provided by (used in) investing activities (6,788) (396,201) 389,413 Net cash provided by (used in) financing activities (195,628) 164,224 (359,852) Ending cash, cash equivalents and restricted cash 141,699 88,572 53,127 Operating Activities Cash flows provided by operating activities for the years ended December 31, 2023 and 2022 were approximately $255.5 million and $234.1 million, respectively.

In order for us to qualify as a REIT under the Code, the relevant sections of our charter provide that, subject to certain exceptions, no person or entity may own, or be deemed to own, by virtue of the applicable constructive ownership provisions of the Code, more than 9.8% (in value or number of shares, whichever is more restrictive) of the aggregate of our outstanding shares of stock or Series A Preferred Stock or more than 9.8% (in value or number of shares, whichever is more restrictive) of our outstanding common stock or any class or series of our outstanding preferred stock. 65 Table of Contents Results of Operations Investments See Note 6 “Investments in Real Estate” in the notes to the consolidated financial statements for information regarding our investments in real estate and property portfolio activity during the year ended December 31, 2023.

Rent collection for our operating portfolio (calculated as base rent and property management fees collected as a percentage of contractually due base rent and property management fees, including an aggregate of approximately $8.7 million of security deposits applied for payment of rent for our leases with five tenants) was approximately 98% for the year ended December 31, 2023.

The common stock distribution with a record date of December 31, 2020 was a split-year distribution, with $0.22 allocable to 2020 for federal income tax purposes and $1.02 allocable to 2021 for federal income.

The common stock distribution with a record date of December 30, 2022 was a split-year distribution, with $0.33 allocable to 71 Table of Contents 2022 for federal income tax purposes and $1.47 allocable to 2023 for federal income tax purposes.

Cash flows provided by operating activities primarily related to contractual rent and security deposits from our properties, partially offset by general and administrative expenses.

Cash flows provided by operating activities primarily related to contractual rent and security deposits from our properties, partially offset by general and administrative expense, interest expense, property expense in excess of tenant reimbursements and property expenses at properties that were not leased.

Likewise, during certain periods, the U.S. credit markets have experienced significant price volatility, dislocations, and liquidity disruptions, which may impact our access to and cost of capital.

Likewise, during certain periods, the U.S. credit markets have experienced significant price volatility, dislocations, and liquidity disruptions, which may impact our access to and cost of capital. We continually monitor the commercial real estate and U.S. credit markets carefully and, if required, will make decisions to adjust our business strategy accordingly.

No shares were issuable upon vesting of the PSUs for the three months ended June 30, 2021 and March 31, 2021, as the performance thresholds for vesting of the PSUs were not met as measured as of the end of those respective periods.

No shares were issuable upon vesting of the PSUs for all other periods presented, as the performance thresholds for vesting of the PSUs were not met as measured as of the end of those respective periods.

Rental revenues for the year ended December 31, 2022 increased by approximately $69.8 million, or 34%, to approximately $274.4 million, compared to approximately $204.6 million for the year ended December 31, 2021.

Rental revenues for the year ended December 31, 2023 increased by approximately $33.0 million, or 12%, to approximately $307.4 million, compared to approximately $274.4 million for the year ended December 31, 2022.

We have filed an automatic shelf registration statement, which may permit us, from time to time, to offer and sell common stock, preferred stock, warrants, debt securities of our Operating Partnership and other securities to the extent necessary or advisable to meet our liquidity needs.

During the year ended December 31, 2023, we sold 101,061 shares of our common stock under the ATM Program for net proceeds of approximately $9.6 million. 70 Table of Contents We have filed an automatic shelf registration statement, which may permit us, from time to time, to offer and sell common stock, preferred stock, warrants, debt securities of our Operating Partnership and other securities to the extent necessary or advisable to meet our liquidity needs.

Rental revenues for the year ended December 31, 2022 were negatively impacted by non-collection of rent during the period totaling approximately $8.6 million (consisting of approximately $8.2 million of contractual base rents and property management fees from four tenants, Kings Garden, Medical Investor Holdings, LLC (“Vertical”), Green Peak and Parallel, and approximately $440,000 for tenant reimbursements for property insurance premiums and property taxes from two tenants, Kings Garden and Vertical). Other Revenues.

Rental revenues for the year ended December 31, 2023 were negatively impacted by non-collection of rent during the period from properties in our operating portfolio totaling approximately $4.8 million (consisting of approximately $4.5 million of contractual base rents and property management fees from three tenants and approximately $289,000 for tenant reimbursements for property insurance premiums and property taxes from three tenants), and the termination of certain leases with Green Peak, Kings Garden and Parallel.

We calculate AFFO by adjusting Normalized FFO for certain non-cash items. For all periods presented (other than the twelve months ended December 31, 2020), FFO (diluted), Normalized FFO, AFFO and FFO, Normalized FFO and AFFO per diluted share include the dilutive impact of the assumed full exchange of the Exchangeable Senior Notes for shares of common stock.

For all periods presented FFO (diluted), Normalized FFO, AFFO and FFO, Normalized FFO and AFFO per diluted share include the dilutive impact of the assumed full exchange of the Exchangeable Senior Notes for shares of common stock.

We continually monitor the commercial real estate and U.S. credit markets carefully and, if required, will make decisions to adjust our business strategy accordingly. 76 Table of Contents Interest Rate Risk As of December 31, 2022, we had $300.0 million principal amount of Notes due 2026 and approximately $6.4 million principal amount of Exchangeable Senior Notes outstanding at fixed interest rates, and therefore, if interest rates decline, our required payments may exceed those based on current market rates.

Interest Rate Risk As of December 31, 2023, we had $300.0 million principal amount of Notes due 2026 and approximately $4.4 million principal amount of Exchangeable Senior Notes outstanding at fixed interest rates, and therefore, if interest rates decline, our required payments may exceed those based on current market rates.

The increase was primarily due to new property acquisitions and additional investment in existing properties which resulted in higher property insurance premiums and property taxes that we paid for our properties. Property expenses are generally reimbursable to us by the tenants under the terms of the leases.

The increase was primarily due to the recognition of property taxes incurred and paid or to be paid by us starting in January 2023, as described above. The increase was also due to new property acquisitions and additional investment in existing properties which resulted in higher property insurance premiums and property taxes that we paid for our properties.

Of these properties, we include 108 properties in our operating portfolio, which were 100% leased to state-licensed cannabis operators as of December 31, 2022, with a weighted-average remaining lease term of approximately 15.3 years.

Of these properties, we include 103 properties in our operating portfolio, which were 95.8% leased as of December 31, 2023, with a weighted-average remaining lease term of approximately 14.6 years.

Of these properties, we include 108 properties in our operating portfolio, which were 100% leased to state-licensed cannabis operators, with a weighted-average remaining lease term of approximately 15.3 years.

Of these properties, we include 103 properties in our operating portfolio, which were 95.8% leased, with a weighted-average remaining lease term of approximately 14.6 years.

At December 31, 2022, none of our properties accounted for 5% or more of our net real estate held for investment. See Note 2 in the notes to the consolidated financial statements for further information regarding the tenants in our portfolio that represented the largest percentage of our total rental revenues for the year ended December 31, 2022.

See Note 2 “Summary of Significant Accounting Policies and Procedures” in the notes to the consolidated financial statements for further information regarding the tenants in our portfolio that represented the largest percentage of our total rental revenues for the year ended December 31, 2023.

We sought to obtain an investment grade rating to facilitate access to the investment grade unsecured debt market as part of our overall strategy to maximize our financial flexibility and manage our overall cost of capital. On May 25, 2021, our Operating Partnership issued $300.0 million aggregate principal amount of Notes due 2026.

In May 2021, we received an investment grade rating from a ratings agency. We sought to obtain an investment grade rating to facilitate access to the investment grade unsecured debt market as part of our overall strategy to maximize our financial flexibility and manage our overall cost of capital.

Cash flows provided by operating activities increased from 2021 to 2022 primarily due to leases for properties we acquired during these time periods, annual escalations of base rent on our leases, and amendments to existing leases to increase improvement allowances at those properties, which resulted in a corresponding increase in base rents, partially offset by rent payment defaults by certain tenants, higher cash compensation to employees, higher public company, travel and occupancy costs and increased litigation expenses.

Cash flows provided by operating activities increased from 2022 to 2023 primarily due to leases for properties we acquired during these time periods, annual escalations of base rent on our leases, and amendments to existing leases to increase improvement allowances at those properties, which resulted in a corresponding increase in base rents, partially offset by rent payment defaults by certain tenants, higher cash compensation to employees and higher public company costs. 68 Table of Contents Investing Activities Cash flows used in investing activities for the year ended December 31, 2023 included approximately $189.0 million of purchases of investments in real estate, funding of draws for improvements and construction, and funding of construction loan and other investments in the aggregate, partially offset by approximately $182.2 million of net maturities of short-term investments.

Ongoing labor shortages and global supply chain issues also continue to adversely impact costs and timing for completion of these development and redevelopment projects, which are resulting in cost overruns and delays in commencing operations on certain of our tenants’ projects. 62 Table of Contents Reduced Capital Availability for Tenants and the Company Recently, financial markets have been volatile, reflecting heightened geopolitical risks and material tightening of financial conditions since the U.S.

Significant Tenants and Concentrations of Risk As of December 31, 2022, we owned 110 properties located in 19 states. Many of our tenants are tenants at multiple properties. We seek to manage our portfolio-level risk through geographic diversification and by minimizing dependence on any single property or tenant.

Many of our tenants are tenants at multiple properties. We seek to manage our portfolio-level risk through geographic diversification and by minimizing dependence on any single property or tenant. At December 31, 2023, our largest property was located in New York and accounted for approximately 5.4% of our net real estate held for investment.

As a result, certain regulated cannabis operators have announced that they are consolidating operations or shuttering certain operations to reduce costs, which if prolonged, could have a material negative impact on operators’ demand for regulated cannabis facilities, including our existing tenants. 63 Table of Contents Inflation and Supply Chain Constraints The U.S. economy has experienced a sustained increase in inflation rates in recent years, which we believe is negatively impacting our tenants.

See Part I, Item 3. Legal Proceedings and Note 11 “Commitments and Contingencies — Litigation” to our consolidated financial statements for more information regarding Kings Garden, Parallel and Green Peak.

See Note 11 “Commitments and Contingencies — Litigation” to our consolidated financial statements for more information regarding Kings Garden, Parallel and Green Peak, which defaulted on their obligations under certain leases with us.

The properties that we acquire consist of real estate assets that support the regulated cannabis industry.

The properties that we acquire consist of real estate assets that support the regulated cannabis industry. Most states where we own properties issue licenses for cannabis operations for a limited period.

Our undiscounted cash flow and fair value calculations contain uncertainties because they require management to make assumptions and to apply judgment to estimate future cash flow and property fair values, including determining our estimated holding period and selecting the discount or capitalization rate that reflects the risk inherent in future cash flow.

Our undiscounted cash flow and fair value calculations contain uncertainties because they require management to make assumptions and to apply judgment to estimate future cash flow and property fair values, including determining our estimated holding period. We are also required to make a number of assumptions relating to future economic and market events and prospective operating trends.

Items included in calculating FFO that may be excluded in calculating Normalized FFO include certain transaction-related gains, losses, income or expense or other non-core amounts as they occur. 70 Table of Contents Management believes that adjusted funds from operations (“AFFO”) and AFFO per share are also appropriate supplemental measures of a REIT’s operating performance.

Normalized FFO is used by management in evaluating the performance of our core business operations. Items included in calculating FFO that may be excluded in calculating Normalized FFO include certain transaction-related gains, losses, income or expense or other non-core amounts as they occur.

Inflation and Supply Chain Constraints The U.S. economy is experiencing a sustained increase in inflation rates, which we believe is negatively impacting our tenants. This inflation has impacted costs for labor and production inputs for regulated cannabis operators, in addition to increasing costs of construction for development and redevelopment projects.

This inflation has impacted costs for labor and production inputs for regulated cannabis operators, in addition to increasing costs of construction for development and redevelopment projects.

For the year ended December 31, 2022, interest expense increased by approximately $215,000, or 1%, to approximately $18.3 million, compared to $18.1 million for the year ended December 31, 2021.

Other revenues for the year ended December 31, 2023 increased by approximately $175,000, or 9%, to approximately $2.2 million, compared to approximately $2.0 million for the year ended December 31, 2022.

Operating Expenses Our operating expenses include general and administrative expenses, including personnel costs, stock-based compensation, and legal, accounting and other expenses related to corporate governance, public reporting and compliance with the various provisions of U.S. securities laws.

In addition, this competition may put pressure on us to reduce the rental rates below those that we expect to charge for the properties that we acquire, which would adversely affect our financial results. 64 Table of Contents Operating Expenses Our operating expenses include general and administrative expenses, including personnel costs, stock-based compensation, and legal, accounting and other expenses related to corporate governance, public reporting and compliance with the various provisions of U.S. securities laws.

Compensation expense for the years ended December 31, 2022 and 2021 included approximately $17.5 million and $8.6 million, respectively, of non-cash stock-based compensation. Depreciation and Amortization Expense.

The increase in general and administrative expense was primarily due to higher compensation expense to employees, the hiring of additional employees, and higher public company costs. Compensation expense for the years ended December 31, 2023 and 2022 included approximately $19.6 million and $17.5 million, respectively, of non-cash stock-based compensation.

Cash flows used in investing activities increased from 2021 to 2022 primarily due to less net maturities of short-term investments, partially offset by a decrease in purchases of new properties, a decrease in funding of improvement allowances and construction funding, and receipt of the proceeds from sale of one of our Pennsylvania properties previously leased to Maitri.

Cash flows used in investing activities for the year ended December 31, 2022 included approximately $545.9 million of purchases of investments in real estate, funding of draws for improvements and construction, and funding of construction loan and other investments in the aggregate, partially offset by approximately $126.2 million of net maturities of short-term investments and receipt of $23.5 million of proceeds from sale of one of our Pennsylvania properties previously leased to a subsidiary of Maitri Holdings, LLC.

Comparison of the Years Ended December 31, 2022 and 2021 (in thousands) Years Ended December 31, 2022 2021 Change Revenues: Rental (including tenant reimbursements) $ 274,377 $ 204,551 $ 69,826 Other 1,982 — 1,982 Total revenues 276,359 204,551 71,808 Expenses: Property expenses 10,520 4,443 6,077 General and administrative expense 38,520 22,961 15,559 Depreciation and amortization expense 61,303 41,776 19,527 Total expenses 110,343 69,180 41,163 Gain on sale of real estate 3,601 — 3,601 Income from operations 169,617 135,371 34,246 Interest and other income 3,195 397 2,798 Interest expense (18,301) (18,086) (215) Loss on exchange of Exchangeable Senior Notes (125) (3,692) 3,567 Net income 154,386 113,990 40,396 Preferred stock dividends (1,352) (1,352) — Net income attributable to common stockholders $ 153,034 $ 112,638 $ 40,396 Revenues Rental Revenues.

Comparison of the Years Ended December 31, 2023 and 2022 (in thousands) Years Ended December 31, 2023 2022 Change Revenues: Rental (including tenant reimbursements) $ 307,349 $ 274,377 $ 32,972 Other 2,157 1,982 175 Total revenues 309,506 276,359 33,147 Expenses: Property expenses 24,893 10,520 14,373 General and administrative expense 42,832 38,520 4,312 Depreciation and amortization expense 67,194 61,303 5,891 Total expenses 134,919 110,343 24,576 Gain on sale of real estate — 3,601 (3,601) Income from operations 174,587 169,617 4,970 Interest and other income 8,446 3,195 5,251 Interest expense (17,467) (18,301) 834 Gain (loss) on exchange of Exchangeable Senior Notes 22 (125) 147 Net income 165,588 154,386 11,202 Preferred stock dividends (1,352) (1,352) — Net income attributable to common stockholders $ 164,236 $ 153,034 $ 11,202 Revenues Rental Revenues.

General and administrative expense for the year ended December 31, 2022 increased by approximately $15.5 million, or 68%, to approximately $38.5 million, compared to approximately $23.0 million for the year ended December 31, 2021.

Depreciation and amortization expense for the year ended December 31, 2023 increased by approximately $5.9 million, or 10%, to approximately $67.2 million, compared to approximately $61.3 million for the year ended December 31, 2022.

Rental revenues for the year ended December 31, 2022 also included an aggregate of approximately $3.3 million of security deposits applied for payment of rent (including tenant reimbursements) for our leases with Kings Garden and Sozo.

Rental revenues for the year ended December 31, 2023 included the application of approximately $8.7 million of security deposits applied for rent for our leases with five tenants and approximately $888,000 of security deposits applied for tenant reimbursements for property insurance premiums and property taxes for our leases with three tenants.

The increase in interest and other income was primarily due to higher interest bearing investments. Interest Expense . Interest expense related to our Exchangeable Senior Notes issued in February 2019 and Notes due 2026 issued in May 2021.

The remaining increase of approximately $1.0 million was related to interest received on our construction loan during the year ended December 31, 2023. Interest Expense . Interest expense is primarily related to our Exchangeable Senior Notes issued in February 2019 and Notes due 2026 issued in May 2021.

Legal Proceedings and Note 11 “Commitments and Contingencies — Litigation” to our consolidated financial statements for more information regarding Kings Garden, Parallel and Green Peak. We expect to incur some property-level operating costs from time to time in periods during which properties that become vacant are being remarketed.

We expect to incur some property-level operating costs from time to time in periods during which properties that become vacant are being remarketed or re-positioned.

In January 2023, we terminated the Prior ATM Program and entered into new equity distribution agreements for the ATM Program, pursuant to which we may offer and sell from time to time up to $500.0 million of shares of our common stock. As of February 28, 2023, we had not issued any shares of common stock under this ATM Program.

During the year ended December 31, 2023, we issued 32,200 shares of our common stock upon exchange by holders of $2.0 million of outstanding principal amount of our Exchangeable Senior Notes. In January 2023, we terminated the previously existing “at-the-market” offering program and entered into new equity distribution agreements with four sales agents, pursuant to which we may offer and sell from time to time through the ATM Program up to $500.0 million in shares of our common stock.

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

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2022 filing

2023 filing

Biggest changeITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK Our Exchangeable Senior Notes bear interest at a fixed rate of 3.75% per annum until maturity, and our Notes due 2026 bear interest at a fixed rate of 5.50% per annum until maturity, and collectively are the only debt we have outstanding.

Biggest changeITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK Our Notes due 2026 bear interest at a fixed rate of 5.50% per annum until maturity, and is the only debt we have outstanding (the remaining principal amount of our Exchangeable Senior Notes was exchanged or paid off in full in February 2024).

Top changes in INNOVATIVE INDUSTRIAL PROPERTIES INC's 2023 10-K

Item 1. Business

Item 3. Legal Proceedings

Item 4. Mine Safety Disclosures

Item 5. Market for Registrant's Common Equity

Item 7. Management's Discussion & Analysis

Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Other IIPR 10-K year-over-year comparisons