UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549

 

SCHEDULE 14A

Proxy Statement Pursuant to Section 14(a)
of the Securities Exchange Act of 1934

 

Check the appropriate box:

INNOVATIVE INDUSTRIAL PROPERTIES, INC.

(Name of Registrant as Specified In Its Charter)

Not Applicable

(Name of Person(s) Filing Proxy Statement, if other than the Registrant)

Payment of Filing Fee (Check the appropriate box):

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Innovative Industrial Properties, Inc.
11440 West Bernardo Court, Suite 220
San Diego, CA 92127

NOTICE OF ANNUAL MEETING OF STOCKHOLDERS

DATE & TIME		8:00 a.m., Pacific Time, on May 23, 2018
PLACE		Innovative Industrial Properties, Inc. 11440 West Bernardo Court, Suite 220 San Diego, CA 92127
ITEMS OF BUSINESS		1. To elect five directors, each to serve until the 2019 annual meeting of stockholders and until his successor is duly elected and qualified.    2. To ratify the appointment of BDO USA, LLP as our independent registered public accounting firm for the year ending December 31, 2018.    3. To transact such other business as may be properly presented at the annual meeting or any postponement or adjournment of the meeting.
RECORD DATE		You are entitled to vote at the annual meeting if you were a stockholder of record as of the close of business on March 29, 2018.
PROXY MATERIALS		This notice of meeting, the proxy statement, the proxy card, and our 2017 annual report to stockholders, which is not part of the proxy solicitation materials, are available at www.envisionreports.com/IIPR .
PROXY VOTING		If you received a Notice of Internet Availability of Proxy Materials by mail, you will not receive a printed copy of the proxy materials in the mail. Instead, the Notice of Internet Availability of Proxy Materials instructs you on how to access and review this proxy statement and our 2017 annual report and how to authorize your proxy online or by telephone. If you received a Notice of Internet Availability of Proxy Materials by mail and would like to receive a printed copy of our proxy materials, you should follow the instructions for requesting such materials included in the Notice of Internet Availability of Proxy Materials. We are also sending a paper copy of the proxy materials to any stockholder who has elected to receive its proxy materials by mail. Your proxy is important. Whether or not you plan to attend the annual meeting, please authorize your proxy by Internet or telephone, or, if you received a paper copy of the materials by mail, please mark, sign, date and return your proxy card, so that your shares will be represented at the annual meeting. If you plan to attend the annual meeting and wish to vote your shares personally, you may withdraw your proxy and vote in person at any time before the proxy is voted.

By Order of the Board of Directors,

Alan Gold
Executive Chairman of the Board
April 11, 2018

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INNOVATIVE INDUSTRIAL PROPERTIES, INC.
 
Proxy Statement Table of Contents

QUESTIONS AND ANSWERS REGARDING THE 2018 ANNUAL MEETING OF STOCKHOLDERS			2
PROPOSAL 1 ELECTION OF DIRECTORS			4
Recommendation of the Board			4
Information Regarding Nominees			4
Additional Information Regarding the Board			5
PROPOSAL 2 RATIFICATION OF APPOINTMENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM			10
Recommendation of the Board			11
AUDIT COMMITTEE REPORT			11
RELATED PARTY TRANSACTIONS			12
EXECUTIVE OFFICERS			14
EXECUTIVE COMPENSATION			15
Executive Compensation Objectives			15
Determination of Executive Compensation			15
Compensation Components			16
Severance and Change of Control Agreements			17
COMPENSATION TABLES			20
Summary Compensation Table			20
Outstanding Equity Awards at December 31, 2017			21
EQUITY COMPENSATION PLAN INFORMATION			22
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT			23
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE			23
OTHER MATTERS			24
STOCKHOLDER PROPOSALS			24
AVAILABILITY OF ANNUAL REPORT ON FORM 10-K			24
DELIVERY OF PROXY MATERIALS TO HOUSEHOLDS			25

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QUESTIONS AND ANSWERS REGARDING THE 2018 ANNUAL MEETING OF STOCKHOLDERS

Who is soliciting proxies from the stockholders?

Our Board is soliciting your proxy. The proxy provides you with the opportunity to vote on the proposals presented at the annual meeting, whether or not you attend the meeting.

What will be voted on at the annual meeting?

Our stockholders will vote on two proposals at the annual meeting:

Your proxy will also give the proxy holders discretionary authority to vote the shares represented by the proxy on any matter, other than the above proposals, that is properly presented for action at the annual meeting.

How will we solicit proxies, and who bears the cost of proxy solicitation?

Our directors, officers and employees may solicit proxies by telephone, mail, facsimile, via the Internet or by overnight delivery service. These individuals do not receive separate compensation for these services. Finally, in accordance with regulations of the Securities and Exchange Commission (the “SEC”), we will reimburse brokerage firms and other persons representing beneficial owners of our common stock for their reasonable expenses in forwarding solicitation materials to such beneficial owners.

Who can vote at the annual meeting?

Our Board has fixed the close of business on March 29, 2018, as the record date for our annual meeting. Only stockholders of record on that date are entitled to receive notice of and vote at the annual meeting. As of March 29, 2018, our only outstanding class of voting securities was common stock, $0.001 par value per share. On that date, we had 50,000,000 shares of common stock authorized, of which 6,782,079 shares were outstanding.

If you (and not your broker) are the record holder of our stock, you can vote either in person at the annual meeting or by proxy, whether or not you attend the annual meeting. You may vote your shares on the Internet, via telephone, or, to the extent you request written proxy materials, by signing, dating and mailing the accompanying proxy card in the envelope provided. Instructions regarding the three methods of voting by proxy are contained on the Notice and the proxy card.

How many votes must be present to hold the annual meeting?

A “quorum” must be present to hold our annual meeting. The presence, in person or by proxy, of a majority of the votes entitled to be cast at the annual meeting constitutes a quorum. Your shares, once represented for any purpose at the annual meeting, are deemed present for purposes of determining a quorum for the remainder of the meeting and for any adjournment, unless a new record date is set for the adjourned meeting. This is true even if you abstain from voting with respect to any matter brought before the annual meeting. As of March 29, 2018, we had 6,782,079 shares of common stock outstanding; thus, we anticipate that the quorum for our annual meeting will be 3,391,040 shares.

How many votes does a stockholder have per share?

Our stockholders are entitled to one vote for each share held.

What is the required vote on each proposal?

Directors are elected by a plurality vote; the candidates up for election who receive the highest number of votes cast, up to the number of directors to be elected, are elected. Stockholders do not have the right to cumulate their votes.

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The proposal to ratify our appointment of BDO USA, LLP as our independent registered public accounting firm for the year ending December 31, 2018, will be approved by our stockholders if the votes cast favoring the ratification exceed the votes cast opposing the ratification.

How will the proxy be voted, and how are votes counted?

If you vote by proxy (either voting on the Internet, by telephone or by properly completing and returning a paper proxy card that you receive upon requesting written proxy materials), the shares represented by your proxy will be voted at the annual meeting as you instruct, including any adjournments or postponements of the meeting. If you return a signed proxy card but no voting instructions are given, the proxy holders will exercise their discretionary authority to vote the shares represented by the proxy at the annual meeting and any adjournments or postponements as follows:

If you hold your shares in your broker’s name (sometimes called “street name” or “nominee name”), you must provide voting instructions to your broker. If you do not provide instructions to your broker, your shares will not be voted in any matter on which your broker does not have discretionary authority to vote, which generally includes non-routine matters. A vote that is not cast for this reason is called a “broker non-vote”. Broker non-votes will be treated as shares present for the purpose of determining whether a quorum is present at the meeting, but they will not be considered present for purposes of calculating the vote on a particular matter, nor will they be counted as a vote FOR or AGAINST a matter or as an abstention on the matter. Under the rules of the New York Stock Exchange (“NYSE”), which is the stock exchange on which our common stock is listed, the ratification of our appointment of our independent registered public accounting firm is considered a routine matter for broker voting purposes, but the election of directors is not considered a routine matter. It is important that you instruct your broker as to how you wish to have your shares voted, even if you wish to vote as recommended by the Board.

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PROPOSAL 1
 
ELECTION OF DIRECTORS

Our Board has nominated and recommends for election as directors the five individuals named herein to serve until the 2019 annual meeting of stockholders and until their respective successors are duly elected and qualified. All of the nominees are presently directors of the Company and following the annual meeting, there will be no vacancies on the Board. Directors are elected by a plurality of all of the votes cast at the annual meeting. Cumulative voting is not permitted. If any of the nominees should be unable to serve or should decline to do so, the discretionary authority provided in the proxy will be exercised by the proxy holders to vote for a substitute nominated by the Board on the recommendation of the nominating and corporate governance committee. The Board does not believe at this time that any substitute nominees will be required. There are no family relationships between any of our directors or executive officers. We believe that all of our current Board members possess the professional and personal qualifications necessary for Board service, and have highlighted particularly noteworthy attributes for each Board member in the individual biographies below.

Recommendation of the Board

Our Board recommends that stockholders vote FOR each of the nominees set forth below.

Information Regarding Nominees

The table below sets forth the name, position with the Company and age of each nominee for director as of March 29, 2018.

Name		Position		Age
Alan Gold		Executive Chairman		57
Gary Kreitzer		Vice Chairman		63
Scott Shoemaker		Director		51
Paul Smithers		President, Chief Executive Officer and Director		61
David Stecher		Director		57

Alan Gold is a co-founder and has served as executive chairman of our Board since our formation in June 2016. Mr. Gold served as chairman, president and chief executive officer of BioMed Realty Trust, Inc. (formerly NYSE: BMR) (“BioMed Realty”), a real estate investment trust (“REIT”) specializing in acquiring, leasing, developing and managing laboratory and office space for the life science industry, from its inception in 2004 through the sale of the company to affiliates of Blackstone Real Estate Partners VIII L.P. in January 2016. Mr. Gold also served as chairman, president and chief executive officer of BioMed Realty’s privately-held predecessor, Bernardo Property Advisors, Inc., from August 1998 until August 2004. In addition, Mr. Gold was a co-founder and served as president and a director of Alexandria Real Estate Equities, Inc. (NYSE: ARE) (“Alexandria Real Estate”), an urban office REIT, from its predecessor’s inception in 1994 until August 1998. Mr. Gold served as managing partner of GoldStone Real Estate Finance and Investments, a partnership engaged in the real estate and mortgage business, from 1989 to 1994. He also served as assistant vice president of commercial real estate for Northland Financial Company, a full service commercial property mortgage banker, from 1989 to 1990 and as real estate investment officer of commercial real estate for John Burnham Company, a regional full service real estate company, from 1985 to 1989. From December 2013 to June 2016, Mr. Gold served on the board of directors and as a member of the nominating and compensation committees of CatchMark Timber Trust, Inc. (NYSE: CTT), a REIT focused on timberland ownership. From August 2011 to March 2013, Mr. Gold also served on the board of directors and as a member of the audit committee of American Assets Trust, Inc. (NYSE: AAT), a REIT focused on acquiring, developing and managing retail, office, multifamily and mixed-use properties. Mr. Gold currently serves as a member of the board of trustees for the Salk Institute for Biological Studies, a research organization dedicated to fundamental research in biology and its relation to health, and as a member of the board of directors of the Campanile Foundation, a philanthropic foundation that supports San Diego State University. Mr. Gold received his Bachelor of Science Degree in Business Administration and his Master of Business Administration from

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San Diego State University. We believe that Mr. Gold’s 30 years of experience in the real estate industry, expertise in NYSE-listed REITs, and extensive management experience make him qualified to serve as executive chairman of our Board.

Gary Kreitzer has served as one of our directors since our formation in June 2016. Mr. Kreitzer is a co-founder of BioMed Realty and served as its general counsel from the company’s formation in 2004 until August 2012, as BioMed Realty’s director until January 2016 and as BioMed Realty’s executive vice president until February 2017. Mr. Kreitzer also served in the same roles with Bernardo Property Advisors from December 1998 to August 2004. Mr. Kreitzer was a co-founder and served as senior vice president and in-house counsel of Alexandria Real Estate from its predecessor’s inception in 1994 until December 1998. From 1990 to 1994, Mr. Kreitzer was in-house counsel and vice president for Seawest Energy Corporation, an alternative energy facilities development company. Mr. Kreitzer also served The Christiana Companies, Inc., a publicly traded investment and real estate development company, in a number of roles from 1982 to 1989, including as in-house counsel, secretary and vice president. Mr. Kreitzer is a member of the California Bar. We believe that Mr. Kreitzer’s 35 years of experience in the real estate industry, expertise in NYSE-listed REITs, and legal expertise are valuable to our Board.

Scott Shoemaker, MD has served as one of our directors since November 2016. Mr. Shoemaker is a practicing orthopedic surgeon specializing in pediatrics and trauma for Kaiser Permanente, an integrated managed care consortium, since 1999. He is also an inventor, assists in the development of medical devices and is on a patent for a spine deformity system developed by NuVasive, Inc. for which he receives royalties. Mr. Shoemaker is also a founder of BOSS Logic, LLC, a company designed to generate ideas for the intellectual property and biotechnology sectors. BOSS Logic, LLC holds multiple patents relating to how mobile devices share and distribute contact information. He is part owner and developer of Aztek Paddles, a carbon fiber company. In this role, he assisted in designing paddles, writing patents and testing paddles. We believe that Mr. Shoemaker’s management experience and medical expertise are valuable to our Board.

Paul Smithers is a co-founder and has served as our president and chief executive officer since our formation in June 2016 and as a director since November 2016. From August 2013 to July 2015, Paul Smithers served as co-founder and chief legal officer of Iso Nano International, LLC, a designer and manufacturer of advanced materials for use in the aerospace, consumer goods, electronics and safety industries. Prior to his time at Iso Nano, Mr. Smithers was the managing partner of Smithers & Player, Attorneys at Law from September 1989 to July 2013. Mr. Smithers is a member of the California Bar. We believe that Mr. Smithers’ management expertise and over 30 years of legal and regulatory experience are valuable to our Board.

David Stecher has served as one of our directors since November 2016. Mr. Stecher has led the executive benefits practice at both NFP Retirement and its sister company, Retirement Plan Advisory Group, since December of 2009. NFP Retirement and Retirement Plan Advisory Group are companies that specialize in corporate retirement plans. Previously, Mr. Stecher served, from April 2004 to September 2009, as executive vice president for Retirement Capital Group, a company that provides employee compensation and benefits advisory services; from January 1984 to September 1986, as tax and auditing accountant for KPMG Peat Marwick; and from June 1997 to April 2004, as executive vice president and head of West Coast operations for AXA Advisors’ executive benefits group, a group that designs and implements corporate executive benefits and provides individual planning for asset accumulation and preservation. Mr. Stecher holds a wide range of certifications, including Certified Public Accountant (inactive), Certified Financial Planner, Chartered Life Underwriter and Chartered Financial Consultant, as well as his Series 6, 7, 63, 65 and 24 licenses. We believe that Mr. Stecher’s expertise in employee compensation and benefits as well as his accounting background and experience are valuable to our Board.

Additional Information Regarding the Board

Board Independence

Our Board has determined that each of our current directors, except for Messrs. Gold and Smithers, has no material relationship with our Company (either directly or as a partner, stockholder or officer of an organization that has a relationship with our Company) and is “independent” within the meaning of our director independence standards, which include the NYSE director independence standards, as currently in

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effect. Furthermore, our Board has determined that each of the members of each of the audit committee, the compensation committee and the nominating and corporate governance committee has no material relationship with our Company (either directly or as a partner, stockholder or officer of an organization that has a relationship with our Company) and is “independent” within the meaning of our director independence standards.

Board Meetings

Our Board held seven meetings during fiscal 2017, for which all Board members were in attendance. No director attended fewer than 100% of the aggregate of the total number of meetings of our Board and the total number of meetings of committees of our Board on which he served during the period for which he was a member.

To ensure free and open discussion among the independent directors of the Board, regularly scheduled executive sessions are held, at which only independent directors are present. The person nominated by the independent directors serves as the presiding director at each such executive session.

Board Leadership Structure and Role in Risk Oversight

Our Board does not have a policy on whether the same person should serve as both the chief executive officer and chairman of the Board or, if the roles are separate, whether the chairman should be selected from the independent directors. Our Board understands that there is no single, generally accepted approach to providing Board leadership and believes that it should have the flexibility to periodically determine the leadership structure that is best for our Company. Consistent with this understanding, our independent directors consider the Board’s leadership structure on an annual basis.

The Board believes that its current leadership structure, with Mr. Gold serving as executive chairman and Mr. Smithers serving as president, chief executive officer and director, is appropriate. Mr. Gold is involved in both our day-to-day operations and the strategic decision making at the Board level. We believe our current leadership structure is the optimal structure for us because it provides our Company with strong, effective and consistent leadership.

Our Board plays an active role in overseeing the management of our risks. The committees of our Board assist our full Board in risk oversight by addressing specific matters within the purview of each committee. The audit committee focuses on oversight of financial risks; the compensation committee focuses primarily on risks relating to executive compensation plans and arrangements; and the nominating and corporate governance committee focuses on reputational and corporate governance risks, including the independence of our Board. While each committee is responsible for evaluating certain risks and overseeing the management of such risks, our full Board keeps itself regularly informed regarding such risks, including through committee reports.

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group that can best perpetuate the success of the business and represent stockholder interests through the exercise of sound judgment using its diversity of experience in these various areas. In determining whether to recommend a director for re-election, the nominating and corporate governance committee also considers the director’s past attendance at meetings and participation in and contributions to the activities of the Board. Nominees are not evaluated on the basis of race, gender, religion, national origin, sexual orientation, disability or any other basis prohibited by law. Our directors, qualification criteria and the effectiveness of our nomination policies are reviewed annually by the nominating and corporate governance committee.

Identifying and Evaluating Nominees for Directors

The nominating and corporate governance committee identifies nominees by first evaluating the current members of our Board willing to continue in service. Current members with qualifications and skills that are consistent with the nominating and corporate governance committee’s criteria for Board service are re-nominated. As to new candidates, the nominating and corporate governance committee will generally poll Board members and members of management for their recommendations. The nominating and corporate governance committee may also hire a search firm if deemed appropriate to identify and perform background due diligence on potential candidates. An initial slate of candidates will be presented to the chair of the nominating and corporate governance committee, who will then make an initial determination as to the qualification and fit of each candidate. Candidates will be interviewed by the executive chairman and independent Board members. The nominating and corporate governance committee will then approve final director candidates and, after review and deliberation of all feedback and data, will make its recommendation to our Board. Recommendations received from stockholders will be considered and processed and are subject to the same criteria as are candidates nominated by the nominating and corporate governance committee.

The foregoing notwithstanding, if we are legally required by contract or otherwise to permit a third party to designate one or more of the directors to be elected or appointed (for example, pursuant to articles supplementary designating the rights of a class of preferred stock to elect one or more directors upon a dividend default), then the nomination or appointment of such directors shall be governed by such requirements.

Each of the nominees for election as director at the annual meeting is recommended by the nominating and corporate governance committee to stand for reelection.

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The table below summarizes the compensation paid by the Company to non-employee directors for the fiscal year ended December 31, 2017.

Name (1)		Fees Earned or Paid in Cash				Stock Awards (2)				Total
Gary Kreitzer		$	41,505			$	30,002			$	71,507
Gary Malino (3)			9,946				—				9,946
Scott Shoemaker, M.D.			22,500				30,002				52,502
David Stecher			24,005				30,002				54,007

Policy Governing Stockholder Communications with the Board

Our Board welcomes communications from our stockholders. Any stockholder or other interested party who wishes to communicate with the Board or one or more members of the Board should do so in writing in care of the General Counsel of Innovative Industrial Properties, Inc., at our principal office, 11440 West Bernardo Court, Suite 220, San Diego, California 92127. The General Counsel is directed to forward each appropriate communication to the director or directors for whom it is intended.

Policy Governing Director Attendance at Annual Meetings of Stockholders

We encourage, but do not require, our Board members to attend the annual meeting of stockholders. All of our Board members attended our 2017 annual meeting of stockholders, other than David Stecher.

Code of Business Conduct and Ethics and Corporate Governance Guidelines

We have adopted a Code of Business Conduct and Ethics that applies to our officers, employees, agents and directors. In addition, our Board has adopted Corporate Governance Guidelines to assist the Board in the exercise of its responsibilities and to serve the interests of the Company and its stockholders. The Code of Business Conduct and Ethics and Corporate Governance Guidelines are posted on our website at www.innovativeindustrialproperties.com .

Current Committee Membership ⁽¹⁾

Audit Committee

Compensation Committee

Nominating and Corporate Governance Committee

Gary Kreitzer

X

Chair

X

Scott Shoemaker, M.D.

X

X

Chair

David Stecher

Chair

X

X

Number of Meetings in 2017

4

3

2

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Audit Committee

The audit committee is composed of Messrs. Kreitzer, Shoemaker and Stecher, each of whom is an independent director for purpose of service on the audit committee and “financially literate” under the rules of the NYSE. Mr. Stecher serves as chair of the audit committee and as the “audit committee financial expert” as that term is defined by the SEC. The audit committee assists the Board in overseeing:

The audit committee is also responsible for engaging an independent registered public accounting firm, reviewing with the independent registered public accounting firm the plans and results of the audit engagement, reviewing the appointment of the internal auditor, approving professional services provided by the independent registered public accounting firm and the related audit and non-audit fees.

Compensation Committee

The compensation committee is composed of Messrs. Kreitzer, Shoemaker and Stecher, each of whom is an independent director under the rules of the NYSE. Mr. Kreitzer serves as chair of the compensation committee, which is responsible for:

The compensation committee is primarily responsible for establishing and implementing our compensation program and policies. To fulfill its responsibilities, the compensation committee may engage, oversee and provide appropriate funding for advisors and consultants to advise the committee on executive compensation matters.

Nominating and Corporate Governance Committee

The nominating and corporate governance committee is composed of Messrs. Kreitzer, Shoemaker and Stecher, each of whom is an independent director under the rules of the NYSE. Mr. Shoemaker serves as chair of the nominating and corporate governance committee, which is responsible for:

The nominating and corporate governance committee operates under a written charter adopted by the nominating and corporate governance committee and approved by the Board. The charter is available in the investor relations section of our website ( www.innovativeindustrialproperties.com ).

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PROPOSAL 2
 
RATIFICATION OF APPOINTMENT OF
INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

The audit committee of our Board has appointed BDO USA, LLP to serve as our independent registered public accounting firm for the year ending December 31, 2018, and our Board has directed that management submit the appointment of the independent registered public accounting firm for ratification by our stockholders at the annual meeting. BDO USA, LLP has audited our financial statements since our inception in 2016. Representatives of BDO USA, LLP are expected to be present at the annual meeting. Such representatives will have the opportunity to make a statement if they desire to do so and are expected to be available to respond to appropriate questions.

Audit and Non-Audit Fees.   The aggregate fees billed to us by BDO USA, LLP, our independent registered public accounting firm, for the indicated services for the years ended December 31, 2017 and 2016 were as follows (dollars in thousands):

		2017				2016
Audit Fees (1)		$	183			$	234
Audit Related Fees			—				—
Tax Fees (2)			—				—
All Other Fees			—				—
Total		$	183			$	234

(1)

Audit fees consist of fees for professional services performed by BDO USA, LLP for the audits of our annual financial statements, reviews of our interim financial statements, and services that are normally provided in connection with statutory and regulatory filings or engagements. For the year ended December 31, 2017, audit fees also include fees for professional services performed by BDO USA, LLP in connection with our public offering of shares of Series A Preferred Stock of $44,000. For the year ended December 31, 2016, audit fees also include fees for professional services performed by BDO USA, LLP in connection with our initial public offering of $184,000.

(2)

In January 2018, we engaged BDO USA, LLP to provide tax services related to our fiscal year ended December 31, 2017.

Our audit committee has established a policy that requires all audit and permissible non-audit services provided by our independent registered public accounting firm be pre-approved by the audit committee or a designated audit committee member. These services may include audit services, audit related services, tax services and other services. There were no non-audit services provided by our independent registered public accounting firm during the year ended December 31, 2017. Our audit committee considers whether the provision of non-audit services is compatible with maintaining the accountants’ independence and determined that it is consistent with such independence. Our audit committee pre-approved our engagement with BDO USA, LLP in January 2018 to provide tax services for our fiscal year ended December 31, 2017.

Stockholder ratification of the appointment of BDO USA, LLP as our independent registered public accounting firm is not required by our bylaws or otherwise. However, the Board is submitting the appointment of BDO USA, LLP to the stockholders for ratification as a matter of good corporate practice. If the stockholders fail to ratify the appointment, the audit committee will reconsider whether or not to retain that firm and may decide to retain the firm, even in the absence of stockholder ratification. Even if the appointment is ratified, the audit committee in its discretion may direct the appointment of a different independent registered public accounting firm at any time during the year if the audit committee determines that such a change would be in the best interests of the Company.

The affirmative vote of a majority of the votes cast on the proposal at the annual meeting is required for the ratification of the appointment of BDO USA, LLP as our independent registered public accounting firm.

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Recommendation of the Board

Our Board recommends that stockholders vote FOR the ratification of the appointment of BDO USA, LLP as the Company’s independent registered public accounting firm for the year ending December 31, 2018.

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RELATED PARTY TRANSACTIONS

We have adopted a written policy regarding the review, approval and ratification of any related party transaction. Under this policy, our audit committee will review the relevant facts and circumstances of each related party transaction, including if the transaction is on terms comparable to those that could be obtained in arm’s-length dealings with an unrelated third party and the extent of the related party’s interest in the transaction, and either approve or disapprove the related party transaction. Any related party transaction shall be consummated and shall continue only if the audit committee has approved or ratified the transaction in accordance with the guidelines set forth in the policy. For purposes of our policy, a “Related Party Transaction” is a transaction, arrangement or relationship (or any series of similar transactions, arrangements or relationships) requiring disclosure under Item 404(a) of Regulation S-K promulgated by the SEC, or any successor provision, as then in effect, except that the $120,000 threshold stated therein shall be deemed to be $60,000.

Founder Shares

In connection with the initial issuance of shares of our Class B common stock, we entered into restricted stock purchase agreements with each of our founding stockholders, Messrs. Gold, Smithers and Kreitzer, Gregory Fahey, our former Chief Accounting Officer and Treasurer, and Andrew Fenton, a consultant. Pursuant to the restricted stock agreements, we issued an aggregate of 508,065 shares of our Class B common stock for a total purchase price of $508. Each of our founders subsequently entered into a redemption agreement with us pursuant to which such shares of Class B common stock were redeemed by us in their entirety for $0.001 per share and cancelled immediately before the closing of our initial public offering. As a result, none of the founders received any value from the issuance and subsequent redemption of all of the shares of our Class B common stock.

Reimbursement of IGP Advisers

A portion of the net proceeds from our initial public offering were used to reimburse IGP Advisers LLC, a company that was owned by Messrs. Gold (76.5%), Smithers (18.5%) and Fahey (5%), for out-of-pocket expenses it incurred in connection with the formation of our Company and initial public offering. In addition, we entered into a consulting agreement with IGP Advisers LLC that provided for, upon the completion of the initial public offering, a consulting fee of $566,000 to IGP Advisers LLC for services rendered to assist us in completing the initial public offering. We also used $375,000 of the net proceeds of the initial public offering to reimburse IGP Advisers LLC for an earnest money deposit that IGP Advisers LLC funded on our behalf, as required by the purchase agreement for a property that we acquired in December 2016 in a sale-leaseback transaction after the completion of our initial public offering. Following the completion of our initial public offering, our agreements with IGP Advisers LLC terminated, IGP Advisers LLC was dissolved, and all of our employees were employed directly by us.

The amounts reimbursed to IGP Advisers LLC were as follows (dollars in thousands):

Offering Costs		$	338
Organizational Costs			34
Corporate Assets			52
Transaction Costs			8
Earnest Money Deposit			375
Consulting Fee (1)			566
Total		$	1,373

Until the completion of our initial public offering in December 2016, each of our executive officers, other than Mr. Gold, was a consultant to IGP Advisers LLC and was paid by IGP Advisers LLC for such consulting service. Following the completion of the initial public offering, these consulting arrangements terminated and all of our executive officers became employed directly by us. Such executive officers were paid the following

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amounts from IGP Advisers LLC in connection with their services rendered to IGP Advisers LLC as consultants on our behalf in connection with our initial public offering:

Name		Consulting Fees
Paul Smithers		$	246,372
Robert Sistek (1)			50,296
Gregory Fahey (2)			126,705
Brian Wolfe			53,661

Private Airplane Reimbursement

Mr. Gold utilizes a private airplane from time to time for company business travel purposes, which airplane is owned by an entity controlled by Mr. Gold, our executive chairman. We reimburse Mr. Gold for the Company-related use of the airplane by Mr. Gold, including out-of-pocket operating costs, on terms we believe are comparable to those we could secure from an independent third party. As approved by our audit committee, $30,000 and $49,780 were paid to Mr. Gold on account of such expenses for the year ended December 31, 2017 and period from January 1, 2018 through March 29, 2018, respectively. No amounts were paid on account of such expenses for the period from June 15, 2016 (date of incorporation) through December 31, 2016. Our audit committee has also approved such reimbursements by the Company to Mr. Gold for utilization of Mr. Gold’s private airplane for business travel purposes on an ongoing basis, for an amount not to exceed $250,000 for the year ending December 31, 2018.

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EXECUTIVE OFFICERS

Our executive officers as of March 29, 2018 are as follows:

Name		Position
Alan Gold		Executive Chairman
Paul Smithers		President and Chief Executive Officer
Catherine Hastings		Chief Financial Officer, Chief Accounting Officer and Treasurer
Brian Wolfe		Vice President, General Counsel and Secretary

Biographical information for Ms. Hastings and Mr. Wolfe is set forth below. In January 2017, Mr. Fahey, the Company’s former chief accounting officer and treasurer, retired from the Company, and Ms. Hastings joined the Company as chief accounting officer and treasurer. In June 2017, Robert Sistek stepped down from his position as chief financial officer and executive vice president, investments of the Company, and Ms. Hastings was promoted to chief financial officer of the Company, while continuing to serve as the Company’s chief accounting officer and treasurer. Biographical information with respect to Messrs. Gold and Smithers is set forth above under “Election of Directors — Information Regarding Nominees.”

Catherine Hastings , age 48, has served as our chief financial officer since June 2017 and as our chief accounting officer and treasurer since January 2017. Until December 2016, Ms. Hastings served as vice president, internal audit of BioMed Realty, having joined BioMed Realty in 2009. Prior to that, Ms. Hastings was director of financial accounting and audit for Corky McMillin Companies, a privately held real estate land developer and homebuilder, from 2004 to 2009. Prior to her role at Corky McMillin Companies, Ms. Hastings was a senior manager with KPMG LLP, where she audited the financial statements for public and private companies in a broad range of industries, with a focus on real estate. Ms. Hastings received her Master of Science in Accountancy from San Diego State University and her Bachelor of Arts in Economics and minor in Management from the University of California, Irvine. She is a Certified Public Accountant, Certified Internal Auditor and a member of the American Institute of Certified Public Accountants, CalCPA and the Institute of Internal Auditors.

Brian Wolfe , age 42, has served as our vice president, general counsel and secretary since September 2016. Until March 2016, Mr. Wolfe served as vice president, corporate legal and assistant secretary of BioMed Realty, having joined BioMed Realty in 2007. Prior to that, Mr. Wolfe was an attorney with Latham & Watkins LLP, where he represented public and private companies in a broad range of industries with a focus on corporate finance, mergers and acquisitions, securities law compliance and corporate governance. Mr. Wolfe received his Juris Doctor Degree with honors from the University of Virginia School of Law and his A.B. in Economics with honors from Harvard College. Mr. Wolfe is a member of the California State Bar and San Diego County Bar Association.

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Compensation Components

Our compensation program consists of three elements:

Base Salary

Adjustments to base salary are determined by the compensation committee in its discretion and are based upon a review of a variety of factors, including the following:

The ending annual base salaries for Messrs. Gold, Smithers and Wolfe and Ms. Hastings, our named executive officers, were $600,000, $350,000, $200,000 and $200,000, respectively. In connection with the annual review of their performance, in January 2018, the compensation committee approved changes to the annual base salaries of our named executive officers, effective January 1, 2018: Mr. Gold’s annual salary remained unchanged at $600,000; Mr. Smithers’ annual base salary increased 3% to $360,000, Mr. Wolfe’s annual base salary increased 5% to $210,000, and Ms. Hastings’ annual base salary increased 5% to $210,000.

Equity Awards

We have adopted the Incentive Plan under which awards may be made in the form of restricted stock or cash. The purposes of the Incentive Plan are to attract and retain qualified persons upon whom, in large measure, our sustained progress, growth and profitability depend, to motivate the participants to achieve long-term Company goals and to more closely align the participants’ interests with those of our other stockholders by providing them with a proprietary interest in our growth and performance. Our executive officers, officers, employees, consultants and non-employee directors are eligible to participate in the Incentive Plan.

The Incentive Plan is administered by our compensation committee, which interprets the Incentive Plan and has broad discretion to select the eligible persons to whom awards will be granted, as well as the type, size and terms and conditions of each award, including the amount of cash or number of shares subject to awards and the expiration date of, and the vesting schedule or other restrictions (including, without limitation, restrictive covenants) applicable to, awards. However, during a calendar year, no participant may receive awards intended to comply with the performance-based compensation requirements of Section 162(m) of the Internal Revenue Code of 1986, as amended, which exceed 200,000 shares of common stock.

Unless the Incentive Plan is earlier terminated by our Board, the Incentive Plan will automatically terminate on the date which is ten years following the effective date of the Incentive Plan. Awards granted before the termination of the Incentive Plan may extend beyond that date in accordance with their terms.

In January 2017, Messrs. Gold, Smithers and Wolfe and Ms. Hastings were granted 64,239, 16,863, 8,565 and 6,825 shares of restricted stock, respectively. These shares vest ratably on January 1, 2018, January 1, 2019 and January 1, 2020 for each of Messrs. Gold, Smithers and Wolfe and Ms. Hastings, provided that he or she continues to be an employee of the Company or a non-employee member of the Board on each such date.

In January 2018, Messrs. Gold, Smithers and Wolfe and Ms. Hastings were granted 40,749, 11,886, 6,792 and 6,792 shares of restricted stock, respectively. These shares vest ratably on January 1, 2019, January 1, 2020 and January 1, 2021 for each of Messrs. Gold, Smithers and Wolfe and Ms. Hastings, provided that he or she continues to be an employee of the Company or a non-employee member of the Board on each such date.

Incentive Awards

Our annual executive bonus program is intended to reward our executive officers for individual achievement in supporting the fulfillment of corporate objectives. Our goal is to have a significant portion of the executive officers’ compensation consist of performance-based bonuses.

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The compensation committee, with input from our executive chairman with respect to the other executive officers, uses its discretion in determining actual bonus amounts, based on its review of the performance of the Company, careful evaluation of each executive officer’s performance, and the level of pay of each executive officer compared to other executives with similar backgrounds and experience.

The specific amounts of the bonuses awarded to our named executive officers for the 2017 fiscal year are reflected in the Summary Compensation Table. Bonuses were approved by the compensation committee and paid in January 2018.

Other Benefits

We provide benefits such as a 401(k) plan, medical, dental and life insurance and disability coverage for all of our employees, including our executive officers. We also provide personal paid time off and other paid holidays to all employees, including the executive officers, which are similar to those provided at comparable companies. We believe that our employee benefit plans are an appropriate element of compensation and are necessary to attract and retain employees.

Corporate Goals for Year-End 2017 Executive Compensation Decisions

The compensation committee evaluated the Company’s overall performance in 2017 based on the following metrics:

Severance and Change of Control Agreements

We entered into severance and change of control agreements with Messrs. Gold, Smithers and Wolfe that became effective on January 18, 2017. We also entered into a severance and change of control agreement with Ms. Hastings that became effective on June 7, 2017. Except as provided below, each of the severance and change of control agreements with the named executive officers contains substantially similar terms.

The severance and change of control agreements expire on December 31, 2019, but will automatically renew for successive three-year terms unless either party gives written notice of non-renewal within 90 days before the end of the current term.

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The severance and change of control agreements provide that, if a named executive officer’s employment is terminated by the Company without “cause” or by the named executive officer for “good reason” (each as defined in the applicable severance and change of control agreement) (a “Qualifying Termination”), the executive will be entitled to severance payments and certain benefits, subject to certain conditions specified below.

If the named executive officer experiences a Qualifying Termination, other than within two years of a “change of control” (as defined in the applicable severance and change of control agreement), (a) the executive will receive (i) a cash payment equal to the sum of his annual base salary and his average annual cash bonus during the past three years, multiplied by three, with respect to Messrs. Gold and Smithers, and two, with respect to Mr. Wolfe and Ms. Hastings, and (ii) 18 months of premiums the executive would be required to pay to continue health plan coverage under the Company’s health plans; and (b) the executive’s unvested equity awards subject to time-based vesting will vest on a pro-rated basis and the executive’s performance-based equity awards will be earned on a pro-rated basis based on the level of achievement as of such date of termination. Each severance and change of control agreement provides for a “phase-in” over a three-year period ending on December 31, 2019 of severance amounts payable under (a) above and equity awards vesting under (b) above, where the executive is entitled to a percentage of such severance and a percentage of such equity awards vest based on a schedule set forth in the severance and change of control agreement.

In the event of a Qualifying Termination of the executive within two years after a change of control of the Company, in addition to the compensation set forth above, all unvested equity awards subject to time-based vesting will vest immediately, and all unearned performance-based equity awards will vest at the greater of actual performance or target. A Qualifying Termination of the executive within two years after a change of control of the Company is not subject to the “phase in” for payment of severance and vesting of equity awards described above for a Qualifying Termination not within two years after a change of control.

The severance and change of control agreements require each executive to sign a general release of claims against the Company as a condition of receiving the severance payment. In addition, for one year after termination of employment for any reason, the executive is prohibited from directly or indirectly soliciting (a) any of the Company’s employees to leave the Company or (b) any prospective employees negotiating with the Company on the date of termination to cease negotiations. The executive is also required to provide consulting services to the Company for up to 20 hours per month during the six months after any termination of employment and requires the executive to maintain the confidentiality of the Company’s confidential information.

If the executive retires for other than good reason and gives the Company a specified advance notice before retiring, or if the executive dies or terminates employment because of disability, all unvested stock rights awards that vest based on continued employment will vest immediately on the date of such retirement or termination. The executive will remain eligible to receive performance shares awarded under the Company’s equity incentive plans before his termination if the Company achieves the stated performance goals during the remainder of the performance period, as if the executive’s employment had not terminated. To qualify for these benefits on retirement, the executive must retire after a specified age or with a combination of age plus years of service, depending on the benefit in question, as well as give the Company the required number of years of advance notice of retirement.

The severance and change of control agreements also provide that severance payments are subject to recoupment as required by any recoupment policy approved by the Board.

If an executive’s employment is terminated by the Company for cause or by the executive without good reason (and other than for death, disability or a qualifying retirement), the executive will not be entitled to any severance payment or benefits under the severance and change of control agreement.

None of the severance and change of control agreements provide for tax gross-up payments to the executive if any amounts paid or payable to the executive would be subject to the excise tax imposed on certain so-called “excess parachute payments” under Section 4999 of the Internal Revenue Code of 1986, as amended.

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As previously disclosed in the Company’s Current Report on Form 8-K filed with the SEC on July 3, 2017, the Company entered into an Employment Transition Agreement with Mr. Sistek, the Company’s former chief financial officer and executive vice president, investments, effective June 30, 2017, pursuant to which Mr. Sistek received a lump sum cash payment in the amount of $113,000 in connection with Mr. Sistek’s cessation of employment with the Company, which amount was in lieu of any amounts that may have been owed to Mr. Sistek pursuant to the severance and change of control agreement that we previously entered into with Mr. Sistek.

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COMPENSATION TABLES

Summary Compensation Table

The table below sets forth the compensation paid to or earned by to our principal executive officer, our two most highly compensated executive officers in fiscal year 2017 and Ms. Hastings, our chief financial officer, chief accounting officer and treasurer. The four executive officers are referred to in this proxy statement as our named executive officers. We did not pay any compensation to any of our named executive officers prior to the completion of our initial public offering on December 1, 2016. The amounts set forth in the table below for 2016 exclude the consulting fees paid by IGP Advisers LLC to Messrs. Smithers and Wolfe in connection with services rendered to us prior to completion of our initial public offering, which are described in the section “Related Party Transactions.”

Name and Principal Position		Year				Salary (1)				Bonus				Stock Awards				All Other Compensation (5)				Total
Alan Gold Executive Chairman			2017			$	600,000			$	400,000			$	1,199,985	(3)		$	8,100			$	2,208,085
			2016				25,880				—				275,000	(2)			—				300,880
Paul Smithers President and Chief Executive Officer			2017				350,000				210,000				315,000	(3)			8,100				883,100
			2016				29,167				—				275,000	(2)			—				304,167
Catherine Hastings Chief Financial Officer, Chief Accounting Officer and Treasurer (4)			2017				187,000				120,000				127,491	(3)			5,671				440,162
			2016				—				—				—				—				—
Brian Wolfe Vice President, General Counsel and Secretary			2017				200,000				120,000				159,994	(3)			8,100				488,094
			2016				16,667				—				275,000	(2)			—				291,667

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Outstanding Equity Awards at December 31, 2017

The table below provides information about outstanding equity awards for each of our named executive officers as of December 31, 2017.

		Stock Awards
Name		Number of Shares or Units of Stock That Have Not Vested (#) (1)				Market Value of Shares or Units of Stock That Have Not Vested ($) (1)
Alan Gold			64,239	(2)		$	2,075,562
Paul Smithers			16,863	(2)			544,844
Catherine Hastings			6,825	(2)			220,516
Brian Wolfe			8,565	(2)			276,735

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EQUITY COMPENSATION PLAN INFORMATION

The following table gives information about shares of our common stock that may be issued under our Incentive Plan as of December 31, 2017.

Plan Category		Number of Securities to be Issued Upon Exercise of Outstanding Options, Warrants and Rights				Weighted Average Exercise Price of Outstanding Options, Warrants and Rights				Number of Securities Remaining Available for Future Issuance Under Equity Compensation Plans (Excluding Securities Reflected in First Column)
Equity compensation plans approved by stockholders (1)			—				—				848,853
Equity compensation plans not approved by stockholders			—				—				—
Total			—				—				848,853

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SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

The following table sets forth the beneficial ownership of our common stock as of March 29, 2018 for each person or group that holds more than 5% of our common stock, for each director and named executive officer and for our directors and executive officers as a group. Each person named in the table has sole voting and investment power with respect to all of the shares of common stock shown as beneficially owned by such person, except as otherwise set forth in the footnotes to the table. Unless otherwise indicated, the address of each named person is c/o Innovative Industrial Properties, Inc., 11440 West Bernardo Court, Suite 220, San Diego, California 92127. We are not aware of any arrangements, including any pledge of our common stock, that could result in a change in control of the Company.

Name of Beneficial Owner		Number of Shares Beneficially Owned				Percent of All Shares (1)
Alan Gold (2)			315,467				4.7	%
Paul Smithers (3)			39,688					*
Gary Kreitzer (4)			28,499					*
Brian Wolfe (5)			18,515					*
Catherine Hastings (6)			12,619					*
Scott Shoemaker (4)			3,499					*
David Stecher (4)			3,499					*
All directors and officers as a group (seven persons)			421,786				6.2	%
HG Vora Capital Management, LLC (7)			1,000,000				14.7	%

*

less than 1%.

(1)

Based on a total of 6,782,079 shares of our common stock outstanding as of March 29, 2018.

(2)

Includes 83,575 shares of restricted stock held by Mr. Gold directly.

(3)

Includes 23,128 shares of restricted stock held by Mr. Smithers directly.

(4)

Includes 2,899 shares of restricted stock held directly.

(5)

Includes 12,502 shares of restricted stock held by Mr. Wolfe directly.

(6)

Includes 11,342 shares of restricted stock held by Ms. Hastings directly.

(7)

The shares are owned directly by HG Vora Special Opportunities Master Fund, Ltd. (“HG Vora Special Opportunities”). HG Vora Capital Management, LLC (“HG Vora Capital”) is a registered investment adviser under the Investment Advisers Act of 1940, as amended, and acts as an investment adviser to certain investment entities. HG Vora Capital, as investment manager of HG Vora Special Opportunities, may be deemed to beneficially own the securities owned directly by HG Vora Special Opportunities. HG Vora Capital’s address is 330 Madison Avenue, 20 th Floor, New York, NY 10017. The foregoing information is based on HG Vora Capital’s Form 3 filed with the SEC on January 28, 2018.

SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE

Section 16(a) of the Exchange Act requires our executive officers and directors and persons who own more than 10% of a registered class of our equity securities to file with the SEC and the NYSE reports of ownership of our securities and changes in their ownership on Forms 3, 4 and 5. Executive officers, directors and greater than 10% stockholders are required by SEC rules to furnish us with copies of all Section 16(a) reports that they file.

Based solely upon a review of the reports on Forms 3 and 4 and amendments thereto furnished to us in 2017 and Forms 5 and amendments thereto furnished to us with respect to 2016, or written representations from reporting persons that no Form 5 filing was required, we believe that in 2017 our executive officers, directors and greater than 10% owners timely filed all reports they were required to file under Section 16(a) of the Exchange Act.

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DELIVERY OF PROXY MATERIALS TO HOUSEHOLDS

Some banks, brokers and other nominee record holders may be participating in the practice of “householding” proxy statements and annual reports. This means that only one copy of our proxy statement and annual report to stockholders may have been sent to multiple stockholders in your household. The Company will promptly deliver a separate copy of any of these documents to you if you contact us at the following address: 11440 West Bernardo Court, Suite 220, San Diego, CA 92127, Attention: Brian Wolfe, Corporate Secretary, or telephone number: 858-997-3332. If you want to receive separate copies of the proxy statement or annual report to stockholders in the future, or if you are receiving multiple copies and would like to receive only one copy per household, you should contact your bank, broker, or other nominee record holder, or you may contact the Company at the above address or telephone number.

REGARDLESS OF THE NUMBER OF SHARES YOU OWN, YOUR VOTE IS IMPORTANT TO THE COMPANY. PLEASE SUBMIT A PROXY BY INTERNET OR TELEPHONE OR, IF YOU REQUEST WRITTEN PROXY MATERIALS, BY RETURNING A COMPLETED, SIGNED AND DATED PROXY CARD OR VOTING INSTRUCTION FORM.

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