Innovative Industrial Properties (NYSE:IIPR) used its fourth-quarter 2025 earnings call to highlight what executives described as a year of “disciplined execution” and improving momentum in efforts to address previously non-performing tenants, while also continuing to broaden the company’s platform through its life science investment in IQHQ.
Executive Chairman Alan Gold said the company’s diversified platform of more than $2.5 billion of gross assets generated roughly $200 million of cash flows from operations in 2025. For the full year, management reported total revenues of $266 million and adjusted funds from operations (AFFO) of $205 million. Gold also noted that since inception in 2016, the company has returned $1.1 billion to shareholders through dividends.
Portfolio activity and re-leasing progress
A major theme of the call was the company’s work to resolve tenant defaults through receiverships and litigation. President and CEO Paul Smithers said legal proceedings and receiverships have been ongoing for 4Front Ventures, PharmaCann, and Gold Flora. He said the company has signed leases and letters of intent (LOIs), and is in “various stages of review,” for more than 900,000 square feet of leasing activity related to those assets.
Regin provided property-level updates across these situations:
- Gold Flora: After Gold Flora filed for voluntary receivership in March 2025, the company re-leased multiple properties. Regin said IIPR executed a lease for a 70,000-square-foot Palm Springs asset in the fourth quarter, executed a lease for a 204,000-square-foot Desert Hot Springs asset last month, and has received multiple offers for a 56,000-square-foot Palm Springs asset.
- 4Front: For four assets previously leased to 4Front, Regin said the company reached a tentative agreement to lease a 114,000-square-foot Washington property, executed an LOI for the full 250,000-square-foot Illinois facility expected to become effective at the closing of receivership proceedings, and agreed to lease terms with a stalking horse bidder for a 67,000-square-foot Georgetown, Massachusetts property. For a 57,000-square-foot Holliston, Massachusetts property, Regin said multiple lease offers are under review.
- PharmaCann: Regin said IIPR regained possession of a 205,000-square-foot Michigan cultivation asset in early 2025 and executed a new lease in April, regained possession of a 58,000-square-foot Massachusetts cultivation asset and executed a new lease in November, and regained possession of a 66,000-square-foot Illinois cultivation property in late December after a favorable court ruling, subsequently signing an LOI with a new tenant in January. He said the company expects similar court rulings in Pennsylvania, Ohio, and New York and cited inbound interest for those assets.
Separately, Regin said the company signed an LOI in February with a new tenant for a 71,000-square-foot vacancy in North Adams, Massachusetts.
Regulatory backdrop and state catalysts
Executives repeatedly pointed to federal and state developments as potential tailwinds. Gold and Smithers discussed President Trump’s executive order directing the rescheduling of cannabis to Schedule III, calling it a significant regulatory development while noting uncertainty around timing and implementation.
Smithers said that if rescheduling is enacted, it “may eliminate the punitive impact of 280E” for tenants, which he believes could improve operator cash flows and strengthen credit profiles. He also referenced concerns about hemp-derived THC products and said recent legislation closing certain loopholes under the 2018 Farm Bill is expected to restrict hemp-derived THC products beginning in November 2026.
At the state level, Smithers said the company is tracking possible adult-use catalysts in Virginia, Pennsylvania, and Florida. He said IIPR owns 16 properties totaling about 2.6 million square feet in those states, representing approximately 26% of annualized base rent.
Fourth-quarter results and rent recoveries
Chief Financial Officer David Smith reported fourth-quarter total revenues of $66.7 million and AFFO of $53.3 million, or $1.88 per share, which he said was a 10% improvement from the third quarter’s $1.71 per share. He attributed the quarter-over-quarter increase primarily to $3.7 million (or $0.13 per share) of payments received for unpaid rent due during the Gold Flora receivership, as well as a full quarter of earnings accretion from the initial investment in IQHQ.
Smith also said that in the first quarter of 2026, the company has so far received an additional $3 million (or $0.10 per share) related to Gold Flora and PharmaCann properties as it continues efforts to recover unpaid rent.
Smithers also noted a legal update: the company received a $7 million judgment for unpaid rent and damages from former tenant Temescal Wellness tied to a Massachusetts property.
Capital markets activity, liquidity, and leverage
Management emphasized liquidity and capital access. Gold said the company strengthened liquidity in 2025 by raising $100 million under a new revolving credit facility in October and issuing about $25 million of preferred stock through its at-the-market (ATM) program. He added that in 2026, the company has raised more than $40 million of preferred stock at a yield of just over 9.5%.
Smith said the company has raised over $145 million of attractively priced debt and preferred equity since October 2025. He highlighted a new $100 million revolving credit facility secured by the IQHQ investment with a 6.1% rate, which he said supports a conservative balance sheet and provides flexible capital.
On leverage, Smith said the balance sheet is supported by more than $2 billion of unencumbered real estate, with debt service coverage exceeding 10 times and net debt to adjusted EBITDA of 1.4 times. He reported quarter-end total liquidity of more than $107 million, including cash and availability under revolving credit facilities.
Smith also addressed a bond maturity at the end of May, saying the company is evaluating alternatives including refinancing and other capital sources, citing the unencumbered asset base and credit profile as supportive factors.
IQHQ investment and life science market commentary
Executives framed the IQHQ investment as part of a broader diversification strategy. Gold said the company remains confident in long-term fundamentals supporting life science real estate, referencing discussions at the J.P. Morgan Healthcare Conference that he said reinforced conviction about “early signs of renewed momentum” in the sector.
Regin said IIPR believes the life science real estate market is stabilizing after elevated supply, citing a construction pipeline of roughly 6 million square feet that he said is the lowest since early 2019 and down from a 2023 peak of more than 37 million square feet. He also referenced third-party market reports indicating improving demand in Boston and a decline in vacancy on the San Francisco Peninsula in the fourth quarter of 2025.
Asked about leasing progress at IQHQ, management said IQHQ is a private organization and has not publicly disclosed updated figures, though executives said they are seeing increased leasing activity in key markets.
On the call’s Q&A, executives also discussed leasing dynamics in cannabis, noting improved sentiment tied to rescheduling headlines and capital raises by major operators. They said re-leasing economics can vary widely across properties; Regin said the company has seen outcomes ranging from around 50% below prior contract rent to roughly in line with prior rates, depending on circumstances. He also said re-leasing capital expenditures have often been lower than anticipated, typically around $10 to $15 per square foot and below, with some incoming tenants investing their own funds for additional improvements.
Regarding legal expense and reserves, Smith said the company has not recorded a legal reserve and that auditors have not required one, pointing to disclosures in the company’s 10-K and noting it is difficult to estimate costs at this point. Smithers added that legal costs tied to tenant defaults and receiverships have been significant but could decline as matters are resolved over the next couple of quarters.
About Innovative Industrial Properties (NYSE:IIPR)
Innovative Industrial Properties, Inc is a real estate investment trust (REIT) focused on the acquisition, ownership and management of specialized industrial properties leased to state-licensed operators in the regulated U.S. cannabis industry. The company’s portfolio includes greenhouse facilities, indoor cultivation sites, processing and distribution centers, and other purpose-built properties designed to meet stringent regulatory and operational requirements. By structuring long-term net leases, Innovative Industrial Properties provides its tenants with capital to expand and modernize their operations while maintaining stable, predictable rental income streams.
Founded in 2016 and headquartered in San Diego, California, Innovative Industrial Properties was the first publicly traded REIT in the medical-cannabis sector.
