Cannabis REIT Infusing $270M Into Life Sciences Developer IQHQ
Less than a year after raising $900M in equity, life sciences developer IQHQ has taken on new debt and preferred equity as it navigates a drastic slowdown in demand for lab space.
Innovative Industrial Properties, a publicly traded REIT that had previously only invested in cannabis real estate, is funding a $100M revolving line of credit to IQHQ, which will be fully funded up front upon closing, the companies announced. IIP also committed to purchase $170M in preferred stock in IQHQ, funded in multiple tranches between the third quarter of this year and the second quarter of 2027.
The preferred stock will sit senior to all the common equity invested in IQHQ, “and at a material discount to replacement cost of the underlying assets,” IIP said in the release.
The credit facility will have an initial three-year term with the possibility to extend it by a year with payment of an extension fee. IQHQ also granted IIP warrants for future preferred stock acquisitions.
“While we remain committed to the cannabis industry, this transaction leverages our team’s deep historical experience in the life science industry, which we believe will benefit IIP shareholders via earnings growth and as participants in the life science secular recovery that I believe is underfoot,” IIP CEO Alan Gold said in the release.
Gold was a co-founder of life sciences pioneer Alexandria Real Estate Equities and founded BioMed Realty Trust before the firm was sold to Blackstone in 2016 for $8B.
IIP’s liquidity injection comes after IQHQ raised $900M last year from six firms — including NexPoint and CenterSquare Investment Management — and amid a sharp slowdown in life sciences leasing activity across the U.S.
In the first half of 2025, life sciences tenants vacated 1.2M SF more than they leased, driving the nationwide vacancy rate up 520 basis points to 23.9%, according to Cushman & Wakefield. Asking rents fell 3.3% year-over-year.
At the same time, developers added 6.4M SF of new lab and office space with another 7.7M SF in the pipeline.
The industry's challenges, which have hit some of IQHQ's highest-profile projects, have already dinged IQHQ's investors.
Multifamily REIT Aimco invested $50M into IQHQ in 2020, when life sciences were one of the hottest real estate asset classes. Last August, it slashed its internal valuation of that investment to $3M. Aimco cited several factors for taking the impairment charge, including "adverse capital market conditions, increased real estate development costs, and IQHQ's financial condition."
IQHQ declined to comment for this story. The firm's portfolio spans some 10M SF in San Diego, San Francisco, Boston and the Golden Triangle in the United Kingdom.
IQHQ struggled through 2024 to find tenants for its massive 1.7M SF Research and Development District life sciences mixed-use project in San Diego, which was delivered vacant.
Taylor DeBerry, a vice president at JLL, told Bisnow in January that the structure of the $900M investment “would likely allow them to keep [RaDD] afloat, rather than getting stuck into a position where maybe their lenders wouldn’t allow capital to be invested into tenant improvements.”
“If that happens, especially in a market like this, you end up with a ghost building where you’re really kind of stuck,” DeBerry said.
While IQHQ has leased about half of the 200K SF of RaDD's retail space, according to Axios, its life sciences offices remain largely empty. In May, genomics research organization the J. Craig Venter Institute announced that it would move its West Coast operations from the University of California San Diego to 50K SF at RaDD’s campus. It is the first office and lab tenant to commit to space there.
The $1.6B RaDD’s leasing struggles have affected Bank OZK, which originated a $915M mortgage to IQHQ in 2022 to finish construction of the campus. With the loan maturing in 2026, Citibank analysts listed it as one of the reasons they downgraded the bank’s rating from “buy” to “sell” in June 2024.
The downgrade caused Bank OZK’s stock to tumble 14% that month. The bank's share price has since largely recovered, but only after it told investors it would no longer originate loans larger than $500M.
IIP said IQHQ will fund its preferred stock investments with cash on hand, draws from the credit facility and potential proceeds from future financing activities, according to the press release. The deal is expected to close in the third quarter.
“The transaction is structured with key tenets that include strong current income over the life of the investment, paired with future upside opportunities via warrants and the potential to acquire life science real estate facilities directly from IQHQ,” Gold said in a statement.
