Innovative Industrial Properties Acquires California Property Portfolio and Enters into Long-Term Leases with Licensed Operator

Acquisition Represents IIP’s Second Investment in California,
Expanding Footprint to 18 Properties in 11 States

SAN DIEGO–(BUSINESS WIRE)–Innovative Industrial Properties, Inc. (IIP), the first and only real
estate company on the New York Stock Exchange (NYSE: IIPR) focused on
the regulated U.S. cannabis industry, announced today that it closed on
the acquisition of a five-property portfolio in southern California,
which comprises approximately 102,000 square feet of industrial space.
This acquisition marks IIP’s second investment in California, following
on IIP’s acquisition in Sacramento earlier this year.

The purchase price for the southern California portfolio was
approximately $27.1 million in the aggregate (excluding transaction
costs). Concurrent with the closing of the purchase, IIP entered into a
long-term, triple-net lease at each property with a licensed operator,
which intends to continue to operate the properties as licensed cannabis
cultivation, manufacturing, processing and distribution facilities in
accordance with California regulations.

As the pioneering real estate investment trust (REIT) for the
medical-use cannabis industry, IIP partners with experienced medical-use
cannabis operators and serves as a source of capital by acquiring and
leasing back their real estate assets, in addition to offering other
creative real estate-based capital solutions.

“We are excited to forge this new tenant relationship with one of the
preeminent licensed operators in southern California,” said Paul
Smithers, President and Chief Executive Officer of IIP. “This operator
is a true innovator in the industry, developing a strong brand that is
recognized for its consistent high quality, and we are thrilled to team
with them as their long-term real estate partner. The California
regulated cannabis market is poised for explosive growth in the coming
years, as the regulated program continues to roll out and a focus is
made on transitioning illicit sales to the regulated marketplace.”

The operator is licensed for cannabis cultivation, nursery,
manufacturing, processing, delivery and distribution. With its advanced
growing techniques, state-of-the-art facilities and research and
development for the creation of new proprietary genetics, the tenant has
developed a distinguishing brand in the southern California market,
including botanicals, concentrates and accessories.

As of April 16, 2019, IIP owned 18 properties located in Arizona,
California, Colorado, Illinois, Maryland, Massachusetts, Michigan,
Minnesota, New York, Ohio and Pennsylvania, totaling approximately
1,230,000 rentable square feet (including approximately 159,000 rentable
square feet under development/redevelopment), which were 100% leased
with a weighted-average remaining lease term of approximately 14.9
years. As of April 16, 2019, IIP had invested approximately $191.3
million in the aggregate (excluding transaction costs) and had committed
an additional approximately $34.7 million to reimburse certain tenants
and sellers for completion of construction and tenant improvements at
IIP’s properties. IIP’s average current yield on invested capital is
approximately 14.9% for these 18 properties, calculated as (a) the sum
of the current base rents, supplemental rent (with respect to the lease
with PharmaCann LLC at one of IIP’s New York properties) and property
management fees, divided by (b) IIP’s aggregate investment in these
properties (excluding transaction costs and including aggregate
potential development/redevelopment funding and tenant reimbursements of
approximately $34.7 million).

About Innovative Industrial Properties

Innovative Industrial Properties, Inc. is a self-advised Maryland
corporation focused on the acquisition, ownership and management of
specialized industrial properties leased to experienced, state-licensed
operators for their regulated medical-use cannabis facilities.
Innovative Industrial Properties, Inc. has elected to be taxed as a real
estate investment trust, commencing with the year ended December 31,
2017. Additional information is available at www.innovativeindustrialproperties.com.

Innovative Industrial Properties
Forward-Looking Statements

This press release contains statements that IIP believes to be
“forward-looking statements” within the meaning of the safe harbor
provisions of the Private Securities Litigation Reform Act of 1995. All
statements other than historical facts, including, without limitation,
statements regarding the lease of the southern California property
portfolio, the tenant and the California regulated cannabis market, are
forward-looking statements. When used in this press release, words such
as we “expect,” “intend,” “plan,” “estimate,” “anticipate,” “believe” or
“should” or the negative thereof or similar terminology are generally
intended to identify forward-looking statements. Such forward-looking
statements are subject to risks and uncertainties that could cause
actual results to differ materially from those expressed in, or implied
by, such statements.
Investors should not place undue reliance
upon forward-looking statements.
IIP disclaims any obligation to
update or revise any forward-looking statements, whether as a result of
new information, future events or otherwise.

Contacts

Catherine Hastings
Chief Financial Officer, Chief Accounting
Officer and Treasurer
Innovative Industrial Properties, Inc.
(858)
997-3332