Innovative Industrial Properties Acquires California Property and Enters Into Long-Term Lease with Experienced Operator

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 property in Sacramento, California, which comprises
approximately 43,000 square feet of industrial space. This acquisition
marks IIP’s first investment in California and expands its portfolio to
ten U.S. states.

The purchase price for the Sacramento property was approximately $6.7
million (excluding transaction costs). Concurrent with the closing of
the purchase, IIP entered into a long-term, triple-net lease agreement
with an experienced operator, which intends to operate the property as a
licensed cannabis cultivation facility in accordance with California
regulations. The seller of the property is expected to complete
redevelopment of the building, for which IIP has agreed to provide
reimbursement of up to $4.8 million. Assuming full reimbursement for the
redevelopment, IIP’s total investment in the property will be
approximately $11.5 million.

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 add California to our portfolio," said Paul Smithers,
President and Chief Executive Officer of Innovative Industrial
Properties, Inc. "The tenant has a long track record of success serving
patients in need in California, and we look forward to completing the
redevelopment of the property with their team, which will enable them to
significantly expand their reach."

The tenant has operated in the California cannabis industry for ten
years, including seven years at the property, having received its
permanent adult-use and medical-use cannabis retailer license for its
dispensary in Sacramento, as well as temporary licenses for distribution
and cultivation. The tenant expects to be issued its permanent cannabis
cultivation license at the property upon completion of the property
redevelopment.

California, with nearly 40 million residents, was the first state to
permit the use of cannabis for medicinal purposes, adopting the
Compassion Care Act in 1996. In November 2016, California voters
approved the Adult Use of Marijuana Act (Proposition 64), which permits
the sale of cannabis for adult-use, with first licenses issued in 2018.
ArcView Market Research estimates that California regulated cannabis
spending will grow from approximately $2.5 billion in 2018 to $5.6
billion in 2022, just modestly below Canada's total estimated regulated
cannabis spending in that year of $5.9 billion.

As of February 8, 2019, IIP owned twelve properties located in Arizona,
California, Colorado, Illinois, Maryland, Massachusetts, Michigan,
Minnesota, New York and Pennsylvania, totaling approximately 1,070,000
rentable square feet (including approximately 101,000 rentable square
feet under development/redevelopment), which were 100% leased with a
weighted-average remaining lease term of approximately 14.3 years. As of
February 8, 2019, IIP had invested approximately $156.3 million in the
aggregate (excluding transaction costs) and had committed an additional
approximately $22.6 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 15.2%
for these twelve 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 $22.6 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 California property, 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.

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