Innovative Industrial Properties, Inc. Q4 FY2025 earnings call

• 2025 was marked by disciplined execution, strong balance sheet, and strategic repositioning. Returned $1.1 billion to shareholders since 2016. Invested $275 million in 2025. Executed new leases at 4 properties totaling ~339,000 square feet. In 2026, raised over $40 million of preferred stock. Discussed positive trends in the life science sector at the JPMorgan Healthcare Conference. Tracked regulatory developments in the cannabis industry, including rescheduling and hemp-derived THC product restrictions. Made progress with nonperforming tenants, with signed leases and LOIs for over 900,000 square feet of leasing activity related to certain assets. Signed an LOI in February for a 71,000 square foot vacancy in North Adams, Massachusetts. Pursued selective asset sales, selling 3 assets in 2025 and a dispensary in Phoenix in early 2026. Strategic investment in IQHQ with $150 million funded to date, and a new $100 million revolving credit facility secured by IQHQ investment.

For the full year 2025, the diversified platform with over $2.5 billion in gross assets generated approximately $200 million in cash flows from operations. Total revenues for the year were $266 million and AFFO was $205 million. In 2025, $275 million was invested across the real estate portfolio and strategic investment in IQHQ. For the fourth quarter of 2025, total revenues were $66.7 million and AFFO was $53.3 million or $1.88 per share. In 2026, over $40 million of preferred stock was raised at an attractive yield of just over 9.5%. The balance sheet is strong with over $2 billion of unencumbered real estate, debt service coverage ratio exceeding 10x, and net debt to adjusted EBITDA of 1.4x. Ended 2025 with total liquidity exceeding $105 million and ended 2025 Q4 with over $107 million in total liquidity.

• Continue to access capital markets opportunistically in 2026. Actively evaluating alternatives to address the bond maturity at the end of May, including potential refinancing and other capital sources. Expect continued improvement in the life science real estate market conditions as supply moderates and demand gradually improves.

• Forward-looking statements subject to risks and uncertainties as per SEC filings. Uncertainty in the timing and implementation of cannabis rescheduling and hemp-derived THC product restrictions. Challenges in the cannabis industry despite some green shoots. Uncertainty in the outcome of legal proceedings with defaulted tenants. Uncertainty in estimating legal costs due to ongoing legal matters.

Q: William Catherwood inquired about leasing progress, cannabis operators' expansion, and approach in different markets.

A: Alan Gold and Ben Regin talked about the experienced management team executing the business plan, rescheduling news being positive for operators, and similar approach in different markets.

Q: John (on behalf of Aaron Grey) asked about LOIs for 4Front assets and rental rates.

A: Ben Regin stated rental rates vary by deal, some below prior rates, some close, and minimal capital expenditure on re-leasing.

Q: William Kirk asked about tenant health, willingness to pay, and intoxicating hemp ban.

A: Alan Gold and Paul Smithers discussed the positive vibe from the cannabis rescheduling executive order and incremental improvements helping tenant health.

Q: Alexander Goldfarb asked about the opportunity set, IQHQ leasing, and legal costs.

A: Alan Gold spoke about diversification to life science for various reasons, IQHQ leasing activity in certain markets, and uncertainty in estimating legal costs