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Operator: Hello, and thank you for standing by. My name is Tiffany, and I will be your conference operator today. At this time, I would like to welcome everyone to the Innovative Industrial Properties, Inc. First Quarter 2026 Earnings Call. [Operator Instructions]. I would now like to turn the call over to Eli Kanter, Director of Finance. Eli, please go ahead.

Eli Kanter: Thank you for joining the call. Presenting today are Alan Gold, Executive Chairman; Paul Smithers, President and Chief Executive Officer; David Smith, Chief Financial Officer; and Ben Regin, Chief Investment Officer. Before we begin, I’d like to remind everyone that some of the statements made during today’s conference call, including statements regarding our capital raising activities and those regarding potential lease transactions that are subject to letters of intent are forward-looking statements within the meaning of the safe harbor of the Private Securities Litigation Reform Act of 1995 and subject to risks and uncertainties. Actual results may differ materially, and we refer you to our SEC filings, specifically our most recent report on Forms 10-K and 10-Q for a full discussion of risk factors that could cause actual results to differ materially from those contained in forward-looking statements.

We are not obligated to update or revise any forward-looking statements, whether due to new information, future events, or otherwise, except as required by law. In addition, on today’s call, we will discuss certain non-GAAP financial information such as FFO, normalized FFO and AFFO. You can find this information together with reconciliations to the most directly comparable GAAP financial measure in our earnings release issued yesterday as well as in our 8-K filed with the SEC. I’ll now hand the call over to Alan. Alan?

Alan Gold: Thanks, Eli. Good morning, everyone, and thank you for joining our first quarter 2026 earnings call. First, I’d like to touch on the rescheduling of cannabis from Schedule 1 to 3, a significant regulatory development impacting the cannabis industry. In our view, the administration’s recent action with respect to the medical cannabis market represents a major milestone for the industry and a clear sign of continued progress at the federal level. Although it does not yet extend to the broader adult-use market, it reinforces momentum toward a rational regulatory environment. Against that backdrop, the first quarter represented a strong start to the year, and our team remained focused on disciplined execution across the business.

While persistent inflation, elevated interest rates and broader macroeconomic headwinds continue to challenge the operating environment, our team has worked tirelessly to optimize our portfolio, allocate capital thoughtfully and maintain a strong and flexible balance sheet. Now we have been active on the debt and equity capital raising front, raising $128 million of gross proceeds year-to-date. In addition, we are working on several secured and unsecured financing transactions that have not yet closed totaling nearly $130 million. including a $56.5 million financing at a rate of 8.75% that we expect to be funded today. If completed, we expect to use the net proceeds of these financings to address our unsecured bond maturity this month and to provide additional capital to support future growth and the execution of our strategic priorities.

This approach reflects our continued focus on disciplined capital management and maintaining balance sheet flexibility. As for the quarter, we generated total revenues of $69 million and AFFO of $53.4 million or $1.88 per share, which was the same as last quarter. Operationally, we made meaningful progress across our portfolio as we continue to execute on our leasing strategy. During the quarter, we signed new leases at 4 properties totaling approximately 331,000 square feet, underscoring the progress we are building across the portfolio and the demand for our high-quality mission-critical facilities. Turning to IQHQ. We continue to view this investment as a compelling strategic opportunity and an important extension of our platform. To date, we have funded $175 million of our $270 million commitment and continue to believe our entry point and timing of this investment will prove attractive over the long term.

At the same time, we remain focused on executing across the business, driving performance in our existing portfolio, pursuing attractive opportunities in cannabis and allocating capital where we see the strongest risk-adjusted returns. With a diversified platform spanning cannabis and life science, a strong balance sheet with demonstrated access to capital and an experienced management team, we believe we are well positioned to build on our momentum and progress to deliver long-term value for our shareholders. With that, I’ll turn the call over to Paul.

Paul Smithers: Thanks, Alan. Last month, the DOJ and acting Attorney General issued a final order moving FDA-approved cannabis products and cannabis produced by state licensed medical operators to Schedule III, a landmark development and in our view, the most significant development affecting our business since our founding in 2016. This action eliminates the burden of 280E for qualifying medical operators, may create opportunity for retrospective tax relief and establishes an expedited DEA registration process for medical operators. Just as importantly, the DEA has now restarted the broader hearing process on whether marijuana as a category should move to Schedule III, with hearing set to begin on June 29 under an expedited time line.

Taken together, we believe these developments mark a major step forward for the industry and powerful catalyst for improving operator economics, expanding access to capital and supporting a healthier environment for longer-term growth and investment. At the state level, we are monitoring the expansion of existing medical programs, particularly in Texas. In April, the Texas Compassionate Use Program awarded conditional licenses to our tenant partners, Green Thumb Industries and Cresco Labs, joining Texas Original, Trulieve, Verano and others in the market. We are encouraged by this progress and look forward to the continued expansion of the program and the opportunities it creates for our tenants. Regarding our current portfolio, as we highlighted in our March press release, we reached a resolution with PharmaCann on all pending litigation related to its lease defaults, and we are actively working to retenant the properties being returned to us later this month.

Across the portfolio, we have now executed leases for the former Gold Flora assets, made substantial progress on the former PharmaCann assets and reached tentative agreements with prospective new tenants for all 4 former 4Front properties, subject to diligence and licensing approvals. I want to thank our team and all parties involved for their hard work in helping us navigate these challenges. The actions we have taken leave us better positioned to drive portfolio performance going forward. With that, I’d like to now turn the call over to Ben to provide additional details on our leasing activity and discuss our other investment activities.

Ben Regin: Thanks, Paul. Year-to-date, we have executed new leases totaling 389,000 square feet across 5 properties located in California, Illinois and Ohio and completed the sale of a dispensary in Arizona. As Paul described, we are pleased with the progress we have made stabilizing our portfolio and bringing Revolution to the former 4Front, PharmaCann and Gold Flora assets. All 3 former Gold Flora properties comprising 330,000 square feet are now leased. We executed lease agreements for our 70,000 square foot Palm Springs property in November 2025, our 204,000 square foot Desert Hot Springs property in January 2026 and our 56,000 square foot Palm Springs property in March 2026. For 4Front, we have reached tentative agreements with prospective new tenants for all 4 properties, representing approximately 488,000 square feet across Illinois, Washington and Massachusetts.

These tentative agreements remain subject to customary diligence and licensing approvals and are expected to take effect following the conclusion of the receivership proceedings, which we currently expect later this year. With respect to the former PharmaCann assets, we executed a lease agreement in March for our 66,000 square foot property in Dwight, Illinois with Grown Rogue, a publicly traded multistate operator new to our tenant roster. In April, we executed a lease agreement for our 58,000 square foot property in Ohio with Curaleaf, a public multistate operator and long-time tenant partner of ours. In addition to these executed leases, we executed a nonbinding LOI for our 234,000 square foot facility in New York and are currently in lease negotiations subject to customary due diligence, including licensing and regulatory approvals.

We also continue to work through diligence and are in negotiations with a prospective tenant for our 71,000 square foot property in North Adams, Massachusetts. With respect to our 270,000 square foot property in Pennsylvania leased to the cannabis company as of quarter end, we regained possession of that property on April 15 and are in active discussions with a potential new tenant. While there can be no assurance that any of these discussions or negotiations will result in the execution of a definitive lease, we are very pleased with the demand we are seeing for our assets. For our 157,000 square foot property in Columbus, Ohio, remains leased to Battle Green, which defaulted on its lease obligations in March. We are actively enforcing our rights under the lease, including commencing eviction proceedings and pursuing available remedies under applicable guarantees.

Turning to our life science portfolio. We have funded $175 million of our $270 million IQHQ commitment to date, with the remaining $95 million expected to be funded over time. The broader life science real estate market continues to show signs of stabilization and improving momentum as we move through 2026. Recent reports from CBRE and Colliers indicate that demand has held near pre-pandemic levels, while stronger equity performance and venture funding are supporting a more constructive backdrop for growth. At the same time, the market is still working through elevated vacancy from the prior supply wave, but new development has fallen sharply and the pipeline is at historically low levels, which should support a healthier supply-demand balance going forward.

We also continue to see favorable long-term demand drivers in areas like manufacturing, onshoring and AI-enabled research, which we believe will position the sector for continued improvement over time. With that, I’ll turn the call over to David.

David Smith: Thank you, Ben. Before diving into our quarterly results, I want to begin with our bond maturity that we have this month, which, as we discussed on prior calls, has been a key focus for the company. During and subsequent to quarter end, we have undertaken a series of capital raising actions to address this maturity. Year-to-date, we have raised $128 million of gross capital comprised of $72 million of preferred equity, $36 million of common equity and $20 million of secured debt through a 3-year secured term loan with a fixed rate of 9% that we recently closed on. As Alan mentioned, we are also currently pursuing multiple secured and unsecured financing transactions totaling nearly $130 million, including a $56.5 million financing that we expect to be funded today.

Based on the terms currently under discussion, these financings would carry an attractive blended rate of just over 8%. We are encouraged by the level of interest from multiple new lenders and by the opportunity to access attractively priced capital to address this maturity and provide additional capital to support future growth. These potential financings remain subject to a number of contingencies, and there can be no assurance that they will be completed on the terms currently contemplated or at all. Turning to our results. For the first quarter, we generated total revenues of $69 million, a 3.5% increase compared to the fourth quarter. This increase was primarily driven by payments received from PharmaCann totaling $3.2 million. In addition, as previously disclosed, we received $1.5 million in the first quarter in settlement of all remaining unpaid administrative rents due from the Gold Flora receivership.

Adjusted funds from operations, or AFFO, for the quarter totaled $53.4 million or $1.88 per share, which was in line with our results for the fourth quarter of 2025. Turning to the balance sheet. As of March 31, we had total liquidity of approximately $177 million, consisting of $89 million of cash on hand and $87.5 million of availability under our revolving credit facilities. Once again, our balance sheet credit metrics remained excellent this quarter with a debt service coverage ratio exceeding 11x and net debt to adjusted EBITDA of 1.1x. And with our recent capital raising activity, we continue to maintain very strong credit metrics with a balance sheet positioned for growth in 2026. With that, operator, could you please open the call for questions?

Operator: [Operator Instructions] Your first question comes from the line of Tom Catherwood with BTIG.

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William Catherwood: Ben, I just want to start with you. If my math is right, I think you have 8 leases that you’ve signed that have not yet commenced. And with the agreements for the 4Front assets, that could go to 12 properties. I know each deal is different and you don’t control every aspect of commencement. But is there a way to bucket those 12 leases as to how many you expect to contribute in 2026 versus 2027 or even beyond that?

Ben Regin: Tom, I guess I think the way I would think about it is just what we see in a typical deal from lease execution there’s usually some sort of regulatory approval, license transfer. And after that, once the lease goes into effect, you could have a free rent period. So we’ve seen that average anywhere from 3 months to 12 to 18 months on the outside. I appreciate you mentioning the leasing activity. We’ve been very pleased with the demand we’re continuing to see really across the portfolio. When you think about some of the previous tenant issues, PharmaCann, 4Fronts, Gold Flora, we’ve now addressed well north of 90% of those assets through LOIs, executed leases and lease discussions that we’re currently having. And I would also add, when we think about the modeling is there can be the free rent period, there can be a license transfer period.

But typically, the triple net expenses will be transferred over to the tenants upon lease execution. which is another pickup for our earnings.

William Catherwood: And then I think last quarter, you mentioned, obviously, as I said, before each deal being different, but you had a range in execution as far as the rents that you achieved on those. I can’t remember the exact numbers that you gave, you gave everything from nearly in line to down 50% in some cases. For those that you’ve executed this quarter, how have they come in compared to prior rents?

Ben Regin: I still think that’s the right way to think about it. I think that range applies across the board. And I think the other aspect of that to keep in mind is just the minimal capital outlay that we’ve seen really across the board. I mean these are I would say, on average, $5 to $10 a foot, sometimes as is deals, which is very unique, I think, in the real estate industry to be able to re-tenant these assets and really the volume of leasing that we’ve achieved really minimal cost to us.

William Catherwood: Got it. Got it. And then this one might kind of seem a bit out there at the moment. But we’ve seen this increase in M&A activity come across the cannabis space, kind of early stages of it. But like, for example, what’s happening with cannabis with — they announced your tenant Holistic is taking over their operations in Ohio. As we see more resolutions and workouts like that, is there an opportunity for IIPR to get involved and provide the next wave of operators with capital for assets that had previously been owner-occupied? Or are we kind of thinking too far ahead?

Ben Regin: No. I mean I don’t think that we’re thinking too far or anybody is thinking too far ahead. I think that the — with the first phase of the rescheduling, and I know there’s a lot more to go with that, we do see the strengthening of our — of the tenants in general in the industry. And we do see, I think, an increased interest in the industry and potential growth opportunities in the cannabis industry. Now whether that’s 6 months or 12 months or 36 months out there, it’s an evolving story.

William Catherwood: Got it. And then just last one for me, Paul, on the rescheduling. I know you mentioned the June 29 administrative hearings starting back up again. And what we’re wrestling with is there’s obviously the legalization on the medical cannabis side with the DOJ’s final order. It sounds like there’s a potential for the administrative hearings to expand that order. And it’s obviously too early to tell, but what are the chances we might end up with kind of a split outcome where medical is exempt from 280E, but adult use still remains subject to more stricter taxation.

Paul Smithers: Yes, Tom, I think that’s a fair question. I think in the short run, and by short run, I mean the next 30 days, that’s somewhat unclear. But what the executive order did state was an expedited hearing, and that means within 30 days. So once the June 29 process starts, they expect to have that wrapped up with 30 days and compare that to what we had under the Biden administration, much different. So I think there will be a clear resolution of how cannabis is treated across the board, including medical and adult use at the conclusion of that hearing. So we are very excited about where this is going, as you can imagine. We’ve talked in the past about rescheduling what we think this is going to do for the industry and our operators.

And I think we are thrilled that it’s on this expedited time line. And I think we’re going to see certainly more capital to the bottom line for these operators. And we’ve had discussions, and we do expect that there will be much more interest in growth once the 280E tax situation is resolved and operators have a clear idea of where to go, and we think that’s going to happen pretty quick. But we think that, that capital will be used to expand and they’ll come to us for that expansion, we believe. We also see, of course, other advantages of rescheduling. We think that there’s certain states that have maybe been kind of on the fence for a medical program or converting medical to adult use. We think that this rescheduling will really help those states make the move towards new programs.

And lastly, I think rescheduling is wonderful for R&D there’s a lot of companies going to be very interested in testing a plant and coming into particularly medical uses for the plant. So we are thrilled as these developments and the expedited time line.

Operator: Your next question comes from the line of Alexander Goldfarb with Piper Sandler.

Alexander Goldfarb: Just wanted to — Paul, I just want to continue that same line of questioning. As we look at the — certainly, the present on this is a bit confusing because there’s a war on drugs and yet there’s a promotion of medical use. So the — what exactly happened is that medical use was downgraded to Schedule III, but adult use is still Schedule I. Is that what’s happened? Or like what is technically in place right now? We know where ultimately, you can see where this path is sort of ending up. But what does it stand technically as of today?

Paul Smithers: As of today, and the acting Attorney General Blanche is very clear, I think, Alex, in where it stands today. Licensed medical use operators have the benefit of Schedule III. And that’s 100% medical licenses. And as you know, our operators all hold medical licenses. So that accounts for 100% of our operators in our portfolio. I think it’s clear too of the decision they made as far as other use cannabis, they put it on expedited schedule starting June 29 and to have that resolved within 30 days. So we don’t expect any extended period like we saw in the past. So I think it’s pretty darn clear about the decision to bifurcate, that’s fine. But in the interim, where we are today is great because it’s 100% covers our medical license holders, and that’s in our portfolio.

Alexander Goldfarb: Okay. So as far as the 280E exemption goes then, so even though — so 100% of your tenants are covered because they’re medical, which is the way I understood it, so that’s good. But as far as the 280E, those same tenants through their operating businesses get the full deduction? Or does the IRS sort of split out their sales?

Paul Smithers: So what the DOJ order suggested was retroactive tax relief available for all qualifying medical operators. So that should be 100% for the medical operators. And as mentioned, that’s our portfolio. I think what we will see through Treasury and the order does also request Treasury to give an opinion sooner than later as to what the retroactive effect of 280E will be for both medical and adult use. But in the short term, it’s clear 280E relief, 100% for medical license holders.

Alexander Goldfarb: Okay. So basically, it doesn’t matter whether they sell rep or not, they’re medical, and then we’ll find out how long this retroactive is. In your view, and then as you guys look at your credit, as your tenants who have had credit issues, and this has been a few years from now, I mean, ongoing, is it your view that once the 280E relief comes in, that will basically eliminate any future pending credit issues? Or is your view that we’re still going to have potential for credit issues even though there’s this 280E relief? I guess that’s — as you know, that’s what we’ve been focused on is just this continued sort of whack-a-mole and it’d be great to move past it and have everyone be in a stronger position. But I’m just curious if the 280E relief on its own and the retroactivity sort of solves that?

Or if those credit issues are still going to be there because the tenants just — the ones who have issues or debt refinancing, whatever, still have that and the 280E isn’t really going to help in that front.

Paul Smithers: Alex, businesses run all the same. They all have risks. All of them have — all industries have tenants that — or companies that grow, shrink, disappear. This 280E allows these businesses to have better operating environments and better operating statistics, but they’re still businesses. And they all go through — they all have good management, okay, management that needs to refocus on their business. So we’re going to experience what all industries experience and just like any other real estate company out there that leases space to any business.

Alexander Goldfarb: Okay. And then just final question. You mentioned the IQHQ and more doing life science, your deck indicated that. Alan, as you look over the company, let’s call it, the next 5 years, do you think it’s more like 50-50 or 25-75 as far as life science contribution? Or I’m just trying to think is life science going to be heading towards 50% or will still be a small sliver of the company over the next, call it, 5 years? And I’m not going to hold you to that. It’s just trying to understand where you guys see the best investment path forward over the next several years.

Alan Gold: I think that that’s a very difficult question to answer. But what we can say is that we’re now in a situation where we have a strengthening cannabis industry. And if you see the level of activity that’s going on in the life science industry, we — our entry point was, I think, at one of the lowest parts of the industry over a long period of time. And we’re seeing a very strong and resurging life science industry. So we have positioned ourselves to be very opportunistic with 2, I think, growing industries that will help us drive growth for our shareholders in the future.

Operator: Your next question comes from the line of Aaron Grey with Alliance Global Partners.

Aaron Grey: Kind of piggybacking off that last one a bit, more specifically on IQHQ and incremental investments. I know in the filings, you talked about commencing more investments 2Q ’26. Just want to — sure, is that still the case? And maybe just give us some more color in terms of those incremental investments on IQHQ preferred stocks and the timing of it through the near to medium term.

Alan Gold: Yes. I mean I think that we have scheduled the investment in the IQHQ organization out through 2027, mid-2027. And we have been able to opportunistically bring forward a couple of those scheduled investments for our benefit because they’re a very accretive transaction. If you recall, it’s on average, north of 14% and we have a cost of capital with our credit facility associated with making those investments in the 6% range. So extremely accretive investments, and we have been able to bring some of that forward. We continue to believe that the industry, the life science industry, of which IQHQ is involved with is doing really well. And we think that our investments will — we will continue to look at opportunistically making the investments at the appropriate time.

Aaron Grey: Okay. Great. Really appreciate the color there. Second question for me on cannabis. Great to see some of the progress you’re making on new leases of the previously defaulted tenants. As we talk about Schedule III creating more opportunities for you, can you talk about maybe some of the near to more medium-term opportunities? You seem to have alluded to your ability to get more aggressive on acquisitions, bringing on more new — net new tenants. Where would you see those in the near term, would it strictly be medical given the clarity that we have there and maybe markets like Texas, Kentucky or Georgia? Just giving more color and granular in terms of where you might be able to see some opportunities in the near term where we have clarity on just medical only versus more longer opportunities as we wait for the second phase of rescheduling.

Alan Gold: I appreciate that question. We do — we are looking at all acquisition opportunities and for growth in the second half of 2026 and certainly into 2027. But our #1 priority and focus is right now making sure that we complete the refinancing of our unsecured debt, which we have done — the team has had tremendous success, and we’re highly confident. And once we complete that and complete our commitment to IQHQ, I think we can then look at additional opportunities going forward.

Operator: Your next question comes from the line of Bill Kirk with ROTH Capital Partners.

William Kirk: I wanted to keep going on rescheduling and try to get some perspective on whether you think the possibility of interstate commerce exists out of rescheduling? And if it did, would you consider the cultivation assets you have an opportunity in that environment? Or would there be a risk in that environment? How do you prepare, I guess, for the scenario or the possibility of interstate commerce?

Paul Smithers: Bill, it’s Paul. So I think there’s 2 questions there. And I’ll address the first part of the question is the answer is no that rescheduling does not address interstate commerce. It does not address banking. And those are 2 things that some people were looking for some clarity on and that the Attorney General was clear that interstate commerce and banking and uplisting were issues that were not addressed in this piece. But your further question about interstate commerce is really, I think, something we’ve talked about over the years. And we don’t really see that happening until there is a complete legalization of cannabis across the board. And we believe that is many years out. But as we’ve discussed in the past, even if we do have some type of interstate commerce, we believe that our assets and our operators will do fine because what we have are indoor growth for the most part and medical, highly specialized product.

And that’s probably not going to be what’s going to go rolling across some trucks across the country. So even if we are in interstate commerce situation, we think we’re well positioned. But again, we don’t see that for many years out.

William Kirk: Okay. And then there is a possible demand unlock that would benefit your tenants in November unless something changes intoxicating hemp basis a federal ban. I imagine most of your properties aren’t growing much of it. So I wanted to get your perspective here on what intoxicating hemp going away could mean for your tenants and the demand for the products that they are growing.

Paul Smithers: Yes. I think that’s accurate, Bill, that our tenants do not grow hemp. They are cannabis growers. And we’ve been watching that the whole litigation issue with the hemp really just kind of by standards in the sense that we don’t believe hemp one way or the other is really going to affect our operators’ business. But that being said, I think if there is a ban on intoxicating hemp products, that does put some clarity into the issue, and it will take away some of the Delta 8 stores that we see popping up in nonmedical states. So I think it’s a good thing for the cannabis industry to get clarity in the intoxicating hemp legislation.

Operator: That concludes our question-and-answer session. I will now turn the call back over to Alan Gold for closing remarks.

Alan Gold: Thank you, and thank you all for joining today. I’d certainly like to thank the team for all their hard work, great work and our stockholders for their continued support. That ends the call.

Operator: Ladies and gentlemen, this concludes today’s call. Thank you all for joining. You may now disconnect.

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