Innovative Industrial Properties, Inc.

Please refer to the documents filed by the company with the SEC, specifically the most recent reports on Forms 10-K and 10-Q, which identify important risk factors that could cause actual results to differ from those contained in the forward-looking statements. We are not obligated to publicly update or revise any forward-looking statements, whether as a result of new information, future events, or otherwise. In addition, on today's call, we will discuss certain non-GAAP financial information, such as FFO, normalized FFO, and adjusted FFO. 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 AK filed with the SEC. I'll now hand the call over to Alan. Alan?

Thank you, Brian, and welcome everyone. We are pleased to report our financial results for the quarter, which I believe reflect our team's continued dedication and hard work in the execution of our day to day operations. As I've noted in the past calls, we are pleased with our company's position as the broader macro economy and the regulated cannabis industry continue to experience challenges that have impacted operator fundamentals in a number of respects. We have one of the strongest and most experienced teams of real estate professionals in the cannabis industry, a high quality portfolio, and arguably a conservative and flexible balance sheet. with a 12% debt to total gross assets, no variable rate debt, no meaningful debt maturities until May 2026. And as noted in our earnings press release issued yesterday, we furthered and enhanced our liquidity position by obtaining a revolving credit facility, which David will touch on in his prepared remarks. To recap the quarter, we generated total revenues of $78 million in Q3 and adjusted funds from operations of $65 million. Rank collection for IIP's operating portfolio was 97% for the quarter. The financial performance continued to drive dividend returns to our investors, with $7.20 of dividends declared per share in the past 12 months, an increase of 6% over the prior 12-month period. The Q3 dividend payout ratio was at 79% of AFFO, modestly below the midpoint of our targeted ratio of 75% to 85% of AFFO. This quarter was another quiet one for us in terms of additional acquisitions and investment activity. As we noted for several quarters, we expected a significantly slower pace of investment activity, given the ongoing macroeconomic uncertainty and significant adjustments to cost of capital since the Fed began aggressively raising rates last year. We did commit additional funding to complete the development of one of our newer properties, which Ben will discuss. From a regulatory perspective, we are certainly following closely the developments stemming from the Department of Health and Human Services recommendation to the DEA that cannabis be rescheduled from Schedule 1 to Schedule 3 under the CSA. Of course, there are significant benefits to this, including a potential lifting of the confiscatory 280E federal taxes imposed on regulated cannabis operators, and Paul will discuss our thoughts in more detail. While the vast majority of our tenant base continues to perform, we have previously discussed, we have taken back certain properties from Parallels, Green Peak, and Kings Garden, and Ben and Paul will provide updates on those properties. As always, we are here to answer any questions you have, to the extent we can. I will now turn the call over to Paul to discuss regulatory and industry dynamics. Paul?

Thanks, Alan. Before discussing overall market developments, I'd like to provide an update on the properties leased or previously leased to Parallel, Green Peak, and Kings Garden. As we noted then, and I think it is worth repeating here, we are of course first and foremost focused on maximizing the value of each of our properties and having tenants with strong teams that can manage their businesses successfully through the inevitable ups and downs of this industry. We have engaged local council and other advisors in these situations, commenced legal proceedings for damages and possession, and are in discussions with applicable regulatory agencies. As we noted in our call last quarter, Green Peak was placed into receivership in March, and in mid-March, we regained possession of the Summit Building, a cultivation and processing facility under redevelopment. In addition, in May, we regained possession of two small retail locations in Michigan, previously leased to Green Peak. for which our total investment is less than $3 million, and expect to regain possession of one more retail location at the end of November. The receiver is paying rent on all other remaining properties leased to Green Peak, including the Harvest Park Cultivation and Processing Facility and the remaining retail locations. The court approved the sale of Green Peak's assets to a buyer in October, with the buyer assuming the Harvest Peak lease and leases for the remaining three retail locations with no changes to terms. As noted on our prior calls, we also filed actions against parallel for possession and damages at our Pennsylvania property and our Texas property. We regained possession of the Texas property in March, which is in the early stages of development, and the Pennsylvania property just earlier this week. We are actively exploring all options for these properties. As we noted previously, Parallel continues to be current on their obligations for the other two properties we leased to them in Florida. In late September, as we previously disclosed, we regained possession of the remaining four properties previously occupied by Kings Garden, and Ben will discuss our marketing activity on those properties as well as for the Summit Building in Michigan. Market Developments As we have noted for some time now, the regulated cannabis industry continues to experience a set of challenging circumstances, but I would like to note that even during this macroeconomic environment, growth of the overall cannabis industry in the U.S. continues to remain strong, with BDSA projecting cannabis sales of $29.5 billion in 2023, representing approximately a 12% growth from 2022. Additionally, BDSA estimates that approximately 60% of U.S. adults could have access to adult-use cannabis by 2026, with new state programs coming online. Unit pricing for regulated cannabis products has been under pressure in certain states at the wholesale level, reflective of what we believe to be a number of factors, including basic supply-demand dynamics, lack of meaningful enforcement in certain states on illicit non-licensed cannabis sales by state and local law enforcement authorities, taxation, and general macroeconomic conditions. That dynamic continued through Q3 as a general matter, though of course with some state-specific variations, and we have seen an uptick in national spot wholesale pricing since mid-September. Capital availability. Another continuing theme from our prior calls is the impact that the tightening of financial conditions has had on capital availability for the cannabis industry. As with other industries, the cost of capital and capital availability have fundamentally changed for cannabis operators over the course of the past year plus. With Veridian Capital Advisors reporting that both U.S. operator capital raising and mergers and acquisitions activity year-to-date were at their lowest levels since before 2018, the funding environment continues to be significantly challenged right now. Federal Legislation On the federal legislation front, there were a few noteworthy developments. In late September, the SAFER Act was passed by the Senate Banking Committee, marking the first time that cannabis banking legislation advanced through this committee. While a symbolic victory, SAFER was also supported by a bipartisan coalition of 22 states' attorneys general in a letter sent to congressional leaders and with Senate Majority Leader Chuck Schumer vowing to bring the act to the floor, quote, as quickly as possible, end quote. There remain numerous obstacles in getting the act through Congress and into law, so we are tempered in our enthusiasm as we have been with prior SAFE Act introductions starting 10 years ago. Of course, the other significant development during the quarter was that in August, the Department of Health and Human Services recommended to the DEA that cannabis be reclassified from a Schedule I drug to a Schedule III drug under the Controlled Substances Act. HHS based this recommendation on an FDA review of cannabis' classification pursuant to President Biden's executive order in October of 2022. The process for reclassification will require DEA approval and likely complex administrative rulemaking proceedings, and it remains unclear how long this process will take and the scope of any final decisions on rules. That said, such a reclassification is expected to end the 280e tax treatment, which has imposed an extreme tax burden on regulated operators, which would be a great win for the industry and immediately provide for a significant improvement in many operator financials. We will, of course, be monitoring progress in this area closely in coming months. I'd like to now turn the call over to Ben to discuss our portfolio and leasing activity in the third quarter. Ben?