Innovative Industrial Properties, Inc. (NYSE:IIPR) Files An 8-K Entry into a Material Definitive Agreement
Item 1.01.
On March 13, 2019, in connection with the acquisition of the property located at 10767 Mill Dam Road, Buckeye Lake Village, Ohio (the “Property”) from PharmaCann Ohio LLC (“Tenant”), an affiliate of PharmaCann LLC (“PharmaCann”), described below in Item 2.01, IIP-OH 1 LLC (“Landlord”), a wholly owned subsidiary of IIP Operating Partnership, LP (the “Operating Partnership”), the operating partnership subsidiary of Innovative Industrial Properties, Inc. (the “Company”), entered into a triple-net lease (the “Lease”) with Tenant for the entire Property. The Lease provides that Tenant is responsible for paying all structural repairs, maintenance expenses, insurance and taxes related to the Property. The initial Lease term expires on May 15, 2034, with two options to extend the term of the Lease for two additional five-year periods. Tenant intends to operate the Property as a medical-use cannabis cultivation and processing facility upon completion of development.
Also on March 13, 2019, Tenant, Landlord and the Operating Partnership entered into a Development Agreement (the “Development Agreement”), to which Tenant is responsible for the development of an approximately 32,000 square foot greenhouse facility and an approximately 26,000 square foot industrial facility on the Property. to the Development Agreement, Landlord is obligated to reimburse Tenant for costs of development of up to $19.3 million (the “Construction Funding”), subject to the satisfaction of certain conditions contained therein.
The initial annualized base rent (the “Base Rent”) under the Lease is $2,650,000, payable monthly. The Base Rent will be abated until May 15, 2019 and is subject to annual increases of 3.25% during the Lease term. Tenant is also responsible for paying the Company a property management fee equal to 1.5% of the then-current Base Rent under the Lease.
to the Lease, Tenant delivered to Landlord an initial security deposit of $23,187.50 in cash at the execution of the Lease. The security deposit shall increase for each draw of the Construction Funding in an amount equal to three months of the corresponding increase in Base Rent, and the full security deposit of $662,500 shall be funded no later than the date that is 15 months following the commencement date of the Lease.
In addition, any entity affiliated with Tenant and operating in the cannabis industry, including any entity formed during the term of the Lease, shall enter into a full guaranty with respect to Tenant’s obligations under the Lease, subject to adjustment to the Multi-Party Agreement described below.
Also to the Lease, Tenant has the option, at its discretion during the first four years of the term of the Lease, to sell or otherwise transfer its interests in the government approvals and licenses required to conduct medical-use cannabis cultivation and processing at the Property (the “Required Approvals”). If Tenant elects to make such a transfer of the Required Approvals, Landlord, in its sole discretion, can elect to either a) consent to having the transferee of the Required Approvals replace Tenant and the guarantors in connection with the Lease; or b) require that Tenant repurchase the Property from Landlord at a price equal to the greater of a) the appraised value of the Property and b) the quotient of (i) the total Base Rent payable during the calendar year in which the notice for the transfer of the Required Approvals is delivered, divided by (ii) 9.75%, less any unfunded Construction Funding at the time of closing of the repurchase of the Property. Upon the receipt of the Required Approvals and Tenant becoming a majority-owned subsidiary of MedMen ParentCo (as defined below), the Lease provisions described in this paragraph shall automatically terminate.
Also on March 13, 2019, Landlord, IIP-NY 1 LLC, a wholly owned subsidiary of the Company, IIP-MA 1 LLC, a wholly owned subsidiary of the Company, PharmaCann, Tenant, PharmaCannis Massachusetts Inc., a subsidiary of PharmaCann, and MedMen Enterprises Inc. (“MedMen”) entered into a Multi-Party Agreement Regarding Leases and Amendment to Leases (the “Multi-Party Agreement”), to which, among other things, effective on the date of the closing and consummation of the business combination transaction contemplated by the Business Combination Agreement dated December 23, 2018 between PharmaCann and MedMen, the surviving parent company (“MedMen ParentCo”) of PharmaCann and MedMen shall execute a guaranty with respect to PharmaCann’s and its subsidiaries’ obligations under the Lease, the Lease Agreement dated as of December 19, 2016 by and between IIP-NY 1 LLC and PharmaCann and the Lease Agreement dated as of May 31, 2018 by and between IIP-MA 1 LLC and PharmaCannis Massachusetts Inc., as amended.
The foregoing descriptions of the Lease, the Development Agreement and the Multi-Party Agreement do not purport to be complete and are qualified in their entirety by reference to the complete text of the Lease, the Development Agreement and the Multi-Party Agreement, which are filed as exhibits to this report and incorporated herein by reference.
| Item 2.01 | Completion of Acquisition or Disposition of Assets. |
On March 13, 2019, the Company, through Landlord, completed the acquisition of the Property for $700,000. If the Company funds the full amount of the Construction Funding under the Development Agreement as described above, the Company’s total investment in the Property is expected to be $20.0 million (excluding closing costs).
| Item 9.01 | Financial Statements and Exhibits. |
|
Exhibit |
Description of Exhibit |
| 10.1 | Lease Agreement, dated as of March 13, 2019, between IIP-OH 1 LLC and PharmaCann Ohio LLC. |
| 10.2 | Development Agreement, dated as of March 13, 2019, between PharmaCann Ohio LLC, IIP-OH 1 LLC and IIP Operating Partnership, LP. |
| 10.3 | Multi-Party Agreement Regarding Leases and Amendment to Leases, dated as of March 13, 2019, between and among IIP-NY 1 LLC, PharmaCann LLC, IIP-MA 1 LLC, PharmaCannis Massachusetts Inc., IIP-OH 1 LLC, PharmaCann Ohio LLC and MedMen Enterprises, Inc. |
Forward-Looking Statements
This report contains statements that the Company believes to be “forward-looking statements” within the meaning of the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. All statements other than historical facts, including, without limitation, statements regarding the Property, the Lease, the Development Agreement, the Multi-Party Agreement, PharmaCann and its subsidiaries and the proposed transaction between PharmaCann and MedMen, are forward looking statements. When used in this report, words such as the Company “expects,” “intends,” “plans,” “estimates,” “anticipates,” “believes” or “should” or the negative thereof or similar terminology are generally intended to identify forward-looking statements. Such forward-looking statements are subject to risks and uncertainties that could cause actual results to differ materially from those expressed in, or implied by, such statements. Investors should not place undue reliance upon forward-looking statements.
INNOVATIVE INDUSTRIAL PROPERTIES INC Exhibit
EX-10.1 2 tv516010_ex10-1.htm EXHIBIT 10.1 Exhibit 10.1 LEASE DATED March 13,…
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About Innovative Industrial Properties, Inc. (NYSE:IIPR)
Innovative Industrial Properties, Inc. is focused on the acquisition, ownership and management of specialized industrial properties leased to state-licensed operators for their regulated medical-use cannabis facilities. The Company intends to acquire its properties through sale-leaseback transactions and third-party purchases. It is focused on leasing its properties on a triple-net lease basis, where the tenant is responsible for all aspects of and costs related to the property and its operation during the lease term, including maintenance, taxes and insurance. The Company intends to conduct business in an umbrella partnership real estate investment trust (UPREIT), structure through its operating partnership. The Company’s real estate investments will consist of primarily properties suitable for cultivation and production of medical-use cannabis.