Paul Smithers
About Paul Smithers
Paul Smithers, age 68, is a co-founder of Innovative Industrial Properties (IIPR) and has served as President, CEO, and Director since formation (CEO since June 2016; Director since November 2016). He brings 35 years of legal/regulatory experience, including as a member of the California Bar (inactive) and prior executive/legal roles, and has led IIPR through a challenging cannabis real estate cycle with a long-term TSR of 389% from IPO through 12/31/2024, significantly outperforming MSCI US REIT Index (64%) and S&P 500 (207%). In 2024, IIPR delivered $308.5M in total revenue, $256.1M AFFO, 96.6% occupancy, and $7.52/share in dividends despite sector headwinds.
Past Roles
| Organization | Role | Years | Strategic Impact |
|---|---|---|---|
| Innovative Industrial Properties (NYSE: IIPR) | Co-founder; President & CEO; Director | CEO since Jun 2016; Director since Nov 2016 | Co-founded the only US exchange-listed equity REIT focused on regulated cannabis real estate; led growth, liquidity and dividend increases annually since inception. |
| Iso Nano International, LLC | Co-founder & Chief Legal Officer | Aug 2013 – Jul 2015 | Legal and regulatory leadership for advanced materials company; informed risk/compliance mindset. |
| Smithers & Player, Attorneys at Law | Managing Partner | Sep 1989 – Jul 2013 | Built legal practice; deep regulatory and contract expertise relevant to REIT tenant/transaction structuring. |
External Roles
| Organization | Role | Years | Strategic Impact |
|---|---|---|---|
| — | — | — | No additional public company directorships or external board roles disclosed for Smithers. |
Fixed Compensation
| Metric | FY 2022 | FY 2023 | FY 2024 |
|---|---|---|---|
| Base Salary ($) | 924,000 | 1,016,400 | 1,067,000 |
| Target Annual Incentive (% of Salary) | — | — | 140% |
| Non-Equity Incentive Earned ($) | — | — | 1,421,845 |
Notes:
- 2024 base salary up 5% YoY based on performance and inflation context.
Performance Compensation
Annual Cash Incentive Plan (2024)
| Metric | Weight | Target | Actual | Payout vs Target | Comments |
|---|---|---|---|---|---|
| AFFO per diluted share | 12.5% | $8.79 | $8.98 | 122% | Faster-than-expected re-leasing drove outperformance. |
| New Investments | 12.5% | $75M | $73.2M | 96% | Includes acquisitions, lease amendment funding and loans. |
| Line of Credit Capacity | 12.5% | $45M | $87.5M | 150% | Strengthened liquidity; facility upsized. |
| Occupancy Percentage | 12.5% | 92% | 96.6% | 150% | High utilization of portfolio assets. |
| Individual/Strategic | 50.0% | — | — | ~30% | Below target due to reduced shareholder returns from a significant tenant default in Dec 2024. |
| Total Payout | — | — | — | 95% | Aggregate 2024 plan payout level. |
Equity Awards
| Grant | Type | Grant Date | Shares/Units | Grant Date Fair Value ($) | Vesting |
|---|---|---|---|---|---|
| 2024 LTI | Restricted Stock | Jan 17, 2024 | 27,231 | 2,500,078 | Vest 1/3 on 1/1/2025, 1/3 on 1/1/2026, 1/3 on 1/1/2027 (continuous service). |
| 2022 PSUs | Performance Share Units (TSR vs peers & FTSE NAREIT All Equity REIT Index) | Jan 2022 | — | 6,000,129 (grant-date value) | Performance thresholds not met; forfeited in full as of 12/31/2024. |
Program design notes:
- 2024 annual incentive shifted from 100% discretionary to 50% formulaic metrics/50% individual to strengthen pay-for-performance alignment.
- Committee evaluating re-introduction of PSUs for 2025+ to increase performance-based LTI.
Equity Ownership & Alignment
| Item | As of 12/31/2024 | As of 4/14/2025 |
|---|---|---|
| Beneficial Ownership (shares) | — | 125,740 |
| Ownership as % of shares outstanding | — | <1% |
| Unvested Equity (shares/units) | 46,124 | — |
| Vested RSUs in NQDC Plan (shares) | — | 17,307 |
| Insider Transactions / Section 16 | — | 2024 filings timely |
| Hedging/Pledging | Prohibited | Prohibited |
| Ownership Guidelines | Directors: 5x cash retainer | Directors: 5x cash retainer |
Implications:
- Annual vesting on January 1 (2025–2027) represents potential supply; NQDC deferrals of vested RSUs and anti-pledging reduce near-term selling pressure risk.
Employment Terms
| Provision | Key Terms |
|---|---|
| Agreement Term | Severance/CoC agreements through Dec 31, 2025; auto-renew for rolling 3-year terms unless notice given 90 days prior to term end. |
| Severance (Non-CoC Qualifying Termination) | Cash: 3x (salary + 3-year avg bonus) for Smithers; Medical: 18 months COBRA premiums; Pro-rata vesting of time-based awards and pro-rata performance-based based on actual performance. |
| Severance (Within 2 Years After CoC + Qualifying Termination) | Cash: as above; Equity: immediate vesting of time-based; performance awards vest at greater of actual or target. |
| Non-solicit | 1-year post-termination non-solicitation of employees/prospective hires. |
| Post-termination Consulting | Up to 20 hours/month for 6 months post-termination. |
| Clawback | NYSE/SEC-compliant clawback policy for incentive-based compensation on restatement. |
| Tax Gross-Ups | None (no excise tax gross-ups). |
Termination economics (assuming 12/31/2024 event; estimates):
- Qualifying Termination (non-CoC): Total $9,754,563 = $7,533,445 severance + $39,035 medical + $2,182,083 pro-rata equity.
- Qualifying Termination (within 2 years post-CoC): Total $10,646,183 = $7,533,445 severance + $39,035 medical + $3,073,703 equity.
- Qualifying Retirement/Death/Disability: Unvested time-based equity fully vests; performance awards per plan.
Board Governance
- Role: CEO and Director; not independent. Board comprises Executive Chairman (Alan Gold), CEO (Smithers), and three independent directors; all committees are fully independent.
- Committees: None (executives do not serve on committees). Audit, Compensation, and Nominating/Governance committees are independent; Vice Chairman (independent) acts as liaison and presides when Executive Chair absent.
- Attendance: All directors attended 100% of Board and committee meetings in 2024 (six Board meetings).
- Executive Sessions: Regular executive sessions of independent directors.
- Director Compensation: Employee directors (Gold and Smithers) do not receive additional director pay.
Director Compensation (for completeness; Smithers as employee receives none)
| Component | Typical Non-Employee Director Amount (2024) |
|---|---|
| Cash Retainer | $75,000; Vice Chair $150,000 |
| Equity Retainer (RSUs/Restricted) | $160,079; Vice Chair $200,099; 1-year vest |
| Chair Fees | Audit $10,000; Other committee chairs $5,000 |
| Deferrals | RSU and cash deferral available via NQDC plan |
| Employee Directors | No additional compensation |
Performance & Track Record
| Metric | 2020 | 2021 | 2022 | 2023 | 2024 |
|---|---|---|---|---|---|
| Net Income ($) | 64,378,000 | 112,638,000 | 153,034,000 | 164,236,000 | 159,857,000 |
| AFFO per Share ($) | 5.01 | 6.66 | 8.45 | 9.08 | 8.98 |
| Cumulative TSR (Value of $100) | 251 | 371 | 152 | 165 | 118 |
Additional 2024 operating results:
- Total revenues $308.5M, AFFO $256.1M; dividends declared $7.52/share; occupancy 96.6%; credit facility upsized to $87.5M.
- 2022 PSUs failed to vest (performance thresholds not met), aligning realized pay outcomes with multi-year TSR.
- 2024 incentive individual/strategic component below target due to reduced shareholder returns from a significant tenant default in December 2024.
Say-on-Pay & Shareholder Feedback
- Support history: Average >93% “FOR” from 2020–2023; 2024 support declined to 73%.
- Response: Instituted 2024 annual incentive with 50% formulaic goals (AFFO/share, investments, LOC capacity, occupancy) and 50% individual performance; evaluating more performance-based LTI (PSUs) for 2025+.
- Engagement: Reached out to holders representing ~60% of shares; calls with holders representing ~20% of shares; Board participation in discussions.
Compensation Committee & Peer Group
- Committee: Independent members; chaired by Vice Chairman Gary Kreitzer; retains FW Cook as independent consultant (no conflicts identified).
- Peer Benchmarking: No formal peer group used due to IIPR’s unique positioning as only US exchange-listed cannabis-focused equity REIT; committee may revisit in future.
Related Party Transactions
- No related party transactions disclosed for Smithers. Company policy mandates audit committee review/approval; a reimbursed aircraft arrangement exists with Executive Chairman Alan Gold’s entity (approx. $87k in 2024; cap $200k in 2025), approved by the audit committee.
Multi-Year Executive Pay (Summary)
| Component ($) | 2022 | 2023 | 2024 |
|---|---|---|---|
| Salary | 924,000 | 1,016,400 | 1,067,000 |
| Bonus | 1,386,000 | 1,524,600 | — |
| Stock Awards (grant-date fair value) | 8,500,204 | 2,500,122 | 2,500,078 |
| Non-Equity Incentive (Paid following year) | — | — | 1,421,845 |
| All Other Compensation | 9,150 | 9,900 | 10,350 |
| Total | 10,819,354 | 5,051,022 | 4,999,273 |
Risk Indicators & Controls
- Clawback policy in place; no tax gross-ups; robust anti-hedging/anti-pledging; fully independent committees; regular independent executive sessions; 100% meeting attendance in 2024.
- 2022 PSUs forfeiture and 2024 individual metric haircut indicate outcome-based pay discipline.
- Section 16 compliance timely in 2024.
Investment Implications
- Alignment and retention: High at-risk mix (49% equity; 79% variable for CEO) with formulaic KPIs and anti-hedge/pledge policy suggests better pay-performance alignment and reduced forced-selling risk. January 1 vesting cadence through 2027 and NQDC deferrals are key near-term supply/timing markers.
- Change-in-control: 3x salary+bonus severance for CEO and full double-trigger vesting raise transaction costs but also reduce entrenchment risk via defined triggers and no gross-ups.
- Governance quality: Separation of CEO and Executive Chair, independent Vice Chair leadership, 100% independent committees, and strong shareholder engagement mitigates dual-role concerns; no director pay to employee directors avoids additional conflicts.
- Performance execution: Core 2024 operating metrics (AFFO/share, occupancy, liquidity) met/exceeded targets despite tenant stress; however, TSR variability and 2022 PSU forfeiture highlight sector risk and the importance of careful underwriting and tenant concentration monitoring.