UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): January 11, 2022
Innovative Industrial Properties, Inc.
(Exact name of registrant as specified in its charter)
| Maryland | | 001-37949 | | 81-2963381 |
(State or Other Jurisdiction of Incorporation) | | (Commission File No.) | | (I.R.S. Employer Identification No.) |
1389 Center Drive, Suite 200
Park City, UT 84098
(Address of principal executive offices, including zip code)
Registrant’s telephone number, including area code: (858) 997-3332
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):
| ¨ | Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) |
| ¨ | Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) |
| ¨ | Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) |
| ¨ | Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) |
Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter). Emerging growth company ¨
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ¨
Securities Registered pursuant to Section 12(b) of the Act:
| Title of each class | | Trading Symbol(s) | | Name of each exchange on
which registered |
| Common Stock, par value $0.001 per share | | IIPR | | New York Stock Exchange |
| Series A Preferred Stock, par value $0.001 per share | | IIPR-PA | | New York Stock Exchange |
Item 5.02 Departure of Directors or Certain Officers; Election of Directors; Appointment of Certain Officers; Compensatory Arrangements of Certain Officers.
Approval of Form of 2022 Performance Share Unit Award Agreement
On January 11, 2022, the Compensation Committee (the “Compensation Committee”) of the Board of Directors (the “Board”) of Innovative Industrial Properties, Inc. (the “Company”) adopted a form of 2022 Performance Share Unit Award Agreement (the “2022 PSU Agreement”) under the Company’s 2016 Omnibus Incentive Plan (the “Incentive Plan”).
The 2022 PSU Agreement provides for the issuance of target performance share units (“PSUs”). The ultimate value of the PSUs depends on the Company’s total stockholder return (“TSR”) over a period commencing January 11, 2022 and ending on December 31, 2024 (the “Performance Period”). At the end of the Performance Period, the PSUs vest and are settled in shares of common stock (the “Award Shares”) at a rate depending on the Company’s TSR over the Performance Period as compared to two different comparator groups, as certified by the Compensation Committee: i) 26 real estate companies; and ii) the companies in the FTSE NAREIT All Equity REIT Index. A recipient of PSUs may receive as few as zero Award Shares or as many as 150% of the number of target PSUs in Award Shares, plus deemed dividends (as described below).
The chart below sets forth the vesting schedule as a percentage of the target PSUs that applies at the end of the Performance Period. However, the number of Award Shares that may be earned at vesting of the PSUs will be reduced as necessary so the total value at the vesting date does not exceed 800% of the grant date PSU price. In addition, if the Company’s absolute TSR during the Performance Period is negative, the payout of Award Shares will be capped at the target number of PSUs, notwithstanding the Company’s outperformance of the comparator groups.
| The Company’s TSR Ranking within the Two Comparator Groups | | PSU Payout
(as a % of Target) |
| At or above 80th percentile TSR | | 150% |
| Between the 80th percentile TSR and 55th percentile TSR | | Determined by linear interpolation(1) |
| At the 55th percentile TSR | | 100% |
| Between the 25th percentile TSR and 55th percentile TSR | | Determined by linear interpolation(2) |
| At or below the 25th percentile TSR | | 0% |
| (1) | Determined by linear interpolation between the comparator group’s 80th and 55th percentile TSRs. |
| (2) | Determined by linear interpolation between the comparator group’s 25th and 55th percentile TSRs. |
No dividends are paid to the recipient during the Performance Period. At the end of the Performance Period, if the Company’s TSR is such that the recipient earns Award Shares, the recipient will receive additional shares of common stock relating to dividends deemed to have been paid and reinvested on the Award Shares. The recipient of the Award Shares may not sell, transfer or otherwise dispose of the Award Shares for a one-year period following the vesting date of the Award Shares.
The terms of the 2022 PSU Agreement supersede any conflicting terms of any severance agreement or plan applicable to the recipient, including each executive officer’s Change of Control and Severance Agreement with the Company and IIP Operating Partnership, LP, the Company’s operating partnership subsidiary.
The 2022 PSU Agreement provides that upon the recipient’s (a) death; (b) “disability”; (c) termination of employment or service by the Company without “cause” or by the recipient for “good reason”; or (d) “qualifying retirement” (each a “Qualifying Event”) prior to a change of control of the Company, the PSUs will continue to vest, except that if the PSUs were granted less than twelve months prior to the date of the Qualifying Event, then the potential payout of Award Shares is prorated based on the number of months that the recipient was employed or provided service to the Company since the date of grant through the date of the Qualifying Event, divided by twelve months. After a change of control, the PSUs (as adjusted as a result of the change of control) continue to vest in full regardless of the date of grant, upon the occurrence of a Qualifying Event.
For any other termination of employment or service to the Company by the recipient other than a Qualifying Event, any unvested PSUs are forfeited in their entirety.
Executive Compensation Decisions
On January 11, 2022, the Compensation Committee adjusted the annual base salaries of the Company’s executive officers for 2022, determined the executive officers’ year-end 2021 cash bonuses and granted executive officers awards of restricted stock units (“RSUs”), restricted shares of common stock and PSUs pursuant to the 2022 PSU Agreement. These salaries, bonuses and grants of restricted stock, RSUs and PSUs are summarized in the following table:
| Name and Position | | 2022 Base
Salary(1) | | | 2021 Year-End
Cash Bonus | | | RSU
Awards(2) | | | Restricted
Stock
Awards(3) | | | Target
PSU
Awards | |
| Alan Gold | | | | | | | | | | | | | | | | | | | | |
| Executive Chairman | | $ | 1,126,000 | | | $ | 1,535,625 | | | | 16,218 | | | | — | | | | 46,188 | |
| | | | | | | | | | | | | | | | | | | | | |
| Paul Smithers | | | | | | | | | | | | | | | | | | | | |
| President and Chief Executive Officer | | | 924,000 | | | | 840,000 | | | | — | | | | 11,583 | | | | 30,792 | |
| | | | | | | | | | | | | | | | | | | | | |
| Catherine Hastings | | | | | | | | | | | | | | | | | | | | |
| Chief Financial Officer and Treasurer | | | 400,000 | | | | 308,500 | | | | 4,635 | | | | — | | | | 12,317 | |
| | | | | | | | | | | | | | | | | | | | | |
| Brian Wolfe | | | | | | | | | | | | | | | | | | | | |
| Vice President, General Counsel and Secretary | | | 350,000 | | | | 295,000 | | | | — | | | | 4,170 | | | | 10,264 | |
| (1) | Adjustments to the executive officers’ base salaries are effective as of January 1, 2022. |
| (2) | The RSUs vest ratably on each of January 1, 2023, January 1, 2024 and January 1, 2025 for Mr. Gold 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. The RSUs were issued to Mr. Gold and Ms. Hastings pursuant to a Restricted Stock Unit Award Agreement (“RSU Agreement”) under the Company’s Incentive Plan. |
| (3) | The restricted stock award vests ratably on each of January 1, 2023, January 1, 2024 and January 1, 2025 for Messrs. Smithers and Wolfe, provided that he continues to be an employee of the Company or a non-employee member of the Board on each such date. The restricted stock awards were issued to Messrs. Smithers and Wolfe pursuant to a Restricted Stock Award Agreement (“Restricted Stock Award Agreement”) under the Company’s Incentive Plan. |
Copies of the RSU Agreement, Restricted Stock Award Agreement and 2022 PSU Agreement are filed as Exhibits 10.1, 10.2 and 10.3, respectively, and are incorporated herein by reference. The foregoing descriptions of the RSU Agreement, Restricted Stock Award Agreement and 2022 PSU Agreement are qualified in their entirety by reference to the full texts of the RSU Agreement, Restricted Stock Award Agreement and 2022 PSU Agreement.
Item 9.01 Financial Statements and Exhibits.
| * | Filed herewith. |
| + | Indicates management contract or compensatory plan. |
| (1) | Incorporated by reference to Exhibit 10.1 to Innovative Industrial Properties, Inc.’s Current Report on Form 8-K, filed with the Securities and Exchange Commission on January 6, 2020. |
| (2) | Incorporated by reference to Exhibit 10.2 to Innovative Industrial Properties, Inc.’s Registration Statement on Form S-8 (File No. 333-214919), filed with the Securities and Exchange Commission on December 6, 2016. |
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
| Date: January 12, 2022 | INNOVATIVE INDUSTRIAL PROPERTIES, INC. |
| | |
| | |
| | By: | /s/ Catherine Hastings |
| | Name: | Catherine Hastings |
| | Title: | Chief Financial Officer |
