Innovative Industrial Properties (NYSE: IIPR) reported in a regulatory filing on Friday that cannabis operator PharmaCann defaulted on rent payments for nine of its 11 leased properties – another setback in what had appeared to be an improving landlord-tenant relationship.
A Securities and Exchange Commission (SEC) filing shows that PharmaCann has failed to pay $2.7 Million in rent for properties located in Colorado, Illinois New York Ohio and Pennsylvania. The cannabis-focused trust for real estate investments said that the total included base rent, estimated taxes and insurance and property management fees.
It is only a few weeks since the two companies had announced that they resolved their payment disputes. IIP said that in late January it had entered a restructuring agreement with PharmaCann, which reduced the base monthly rent for nine properties from $2.8million to $2.6million. It was also working on transitioning two cultivation centers located in Michigan and Massachusetts into new tenants.
IIP said in its latest filing that the company was in “continuing discussions” with PharmaCann in regards to the leases. It also stated it would enforce their rights aggressively.
According to IIP, the operations of PharmaCann will represent 17% or more of IIP’s rental revenue in 2024.
PharmaCann had defaulted in January and December payments. IIP was for those who used security deposits. Green Market Report Previously reported The filing stated that as part of the agreement, the monthly base rent for two properties located in Michigan and Massachusetts of $1.3million was “previously reduced in full” effective February 1, 2020.
In a call with investors in February, company executives took a tough stance on tenants defaulting.
Paul Smithers was the President and CEO at IIP. He said, “If they default, we’ll respond the same way we responded to PharmaCann. This means filing default notices immediately on those properties. Then we can proceed with an eviction.”
Smithers stressed that tenants would have to make significant concessions if they wanted rents reduced.
Smithers, in February, said that PharmaCann had committed to various policy changes, financial commitments from their investors and, of course the note we took, as well as other commitments like not taking more debt. “We are not in business to just cut rents.”
PharmaCann has experienced other worrying developments. The company had announced last month that it would close its 207,000 square-foot cultivation plant in Warren, Michigan. This will affect approximately 170 employees. Crain’s Detroit.
IIP has nine properties which are actively leased out to PharmaCann. This represents an investment capital of about $223 Million, according to prior statements by the company.
The lawsuit also said that IIP had misled its investors by downplaying tenant problems. It claimed IIP continued to present a positive view of the business.