Innovative Industrial Properties, Inc. (NYSE:IIPR) Files An 8-K Entry into a Material Definitive Agreement
Item1.01.Entry into a Material Definitive Agreement.
In connection with the acquisition of the property from
PharmaCann LLC (PharmaCann) described below in Item 2.01, on
December 19, 2016, IIP-NY 1 LLC, 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
with PharmaCann for the entire property. The lease provides that
PharmaCann, as tenant, is responsible for paying all structural
repairs, maintenance expenses, insurance and taxes related to the
property. The lease term is 15 years, with two options to extend
the term of the lease for two additional five-year periods.
The initial base rent of the PharmaCann lease is approximately
$319,580 per month, subject to annual increases at a rate based
on the higher of (i) 4% or (ii) 75% of the consumer price index.
The lease also provides that IIP-NY 1 LLC will receive a property
management fee equal to 1.5% of the then-current base rent
throughout the term, and supplemental base rent for the first
five years of the term of the lease at a rate of $105,477 per
month. Together, the annualized initial base rent, property
management fee and supplemental base rent equate to approximately
17.2% of the purchase price of the property.
The foregoing description of the PharmaCann lease does not
purport to be complete and is qualified in its entirety by
reference to the complete text of the lease, which is filed as an
exhibit to this report and incorporated herein by reference.
Item2.01 Completion of Acquisition or Disposition of
Assets.
On December 19, 2016, the Company, through IIP-NY 1 LLC,
completed the acquisition of PharmaCann’s medical-use cannabis
cultivation and processing facility in New York to the terms of a
Purchase Agreement dated as of August 22, 2016 between the
Operating Partnership and PharmaCann LLC, as amended (the
Purchase Agreement). The Purchase Agreement was assigned by the
Operating Partnership to IIP-NY 1 LLC prior to completion of the
acquisition. The execution of the Purchase Agreement was
previously disclosed in the Companys final prospectus dated
November 30, 2016 filed with the Securities and Exchange
Commission on December 2, 2016 to Rule 424(b)(4) of the
Securities Act of 1933, as amended (the Securities Act).
The property consists of approximately 37 acres of usable land,
which includes three buildings comprising approximately 127,000
square feet. Consistent with the previously disclosed terms of
the Purchase Agreement, the purchase price for the property was
$30.0million, excluding closing costs. The Company funded the
acquisition of the property using the proceeds of its recently
completed common stock offering, which generated net proceeds of
approximately $60.8million.
The foregoing description of the Purchase Agreement is not
complete and is subject to, and qualified in its entirety by, the
full text of the Purchase Agreement, which is filed as an exhibit
to this report and incorporated herein by reference. The Purchase
Agreement contains representations and warranties made by the
parties as of specific dates and solely for their benefit. The
representations and warranties reflect negotiations between the
parties and are not intended as statements of fact to be relied
upon by the Companys stockholders or any other person or entity
other than the parties to the Purchase Agreement and, in certain
cases, represent allocation decisions among the parties and may
be subject to important qualifications and limitations agreed to
by the parties in connection with the negotiation of the Purchase
Agreement (which disclosures are not reflected in the Purchase
Agreement itself, may not be true as of any date other than the
date made, or may apply standards of materiality in a way that is
different from what may be viewed as material by stockholders).
Accordingly, the representations and warranties may not describe
the actual state of affairs at the date they were made or at any
other time, and stockholders should not rely on them as
statements of fact. Moreover, information concerning the subject
matter of the representations and warranties may change after the
date of the Purchase Agreement.
In connection with the closing of the acquisition, the Company
issued a press release, which is attached as Exhibit99.1 hereto.
Item7.01 RegulationFD Disclosure.
On December 19, 2016, the Company issued a press release
regarding the acquisition of the PharmaCann property. A copy of
the press release is attached hereto as Exhibit99.1. The
information contained in Item 7.01 of this report, including
Exhibit99.1, is being furnished and shall not be deemed filed for
purposes of Section18 of the Securities Exchange Act of 1934, as
amended, or otherwise subject to the liabilities of that section.
Such information shall not be incorporated by reference into any
filing of the Company, whether made before or after the date
hereof, regardless of any general incorporation language in such
filing.
Item9.01 Financial Statements and Exhibits.
| (a) | Financial Statements of Businesses Acquired. |
|
The following financial statements are incorporated by reference to the audited financial statements of PharmaCann and the related independent auditors’ reports included in the Companys final prospectus dated November 30, 2016 filed with the Securities and Exchange Commission on December 2, 2016 to Rule 424(b)(4) of the Securities Act (File No. 333-214148): |
| PharmaCann | LLC |
| Independent | Auditor’s Report |
| Audited Balance Sheets as of December 31, 2015 and 2014 |
|
Audited Statements of Income for the year ended December 31, 2015 and the period from Inception (March 19, 2014) through December 31, 2014 |
|
Audited Statements of Members’ Equity for the year ended December 31, 2015 and the period from Inception (March 19, 2014) through December 31, 2014 |
|
Audited Statements of Cash Flows for the year ended December 31, 2015 and the period from Inception (March 19, 2014) through December 31, 2014 |
||
| Notes to Audited Financial Statements |
|
The Company requested and was granted permission by the Securities and Exchange Commission to omit the unaudited interim financial statements of PharmaCann LLC as of and for the three and nine months ended September 30, 2016 and 2015. |
| (b) | Pro Forma Financial Information. |
|
The following pro forma financial information is incorporated by reference to the unaudited pro forma financial information included in the Companys final prospectus dated November 30, 2016 filed with the Securities and Exchange Commission on December 2, 2016 to Rule 424(b)(4) of the Securities Act (File No. 333-214148): |
Innovative Industrial Properties, Inc.
| Unaudited | Pro Forma Consolidated Balance Sheet as of September 30, 2016 |
| Unaudited |
Pro Forma Consolidated Statement of Operations for the Year Ended December 31, 2015 |
| Unaudited |
Pro Forma Consolidated Statement of Operations for the Nine Months Ended September 30, 2016 |
|
|
Notes to Unaudited Pro Forma Consolidated Financial Statements |
| (d) | Exhibits. |
| Exhibit | Description of Exhibit | |
| 10.1 |
Lease Agreement, dated as of December 19, 2016, between IIP-NY 1 LLC and PharmaCann LLC. |
|
| 10.2(1) |
Purchase Agreement dated as of August 22, 2016 between IIP Operating Partnership, LP and PharmaCann LLC. |
|
| 10.3(2) |
Amendment No. 1 dated September 16, 2016 to Purchase Agreement dated as of August 22, 2016 between IIP Operating Partnership, LP and PharmaCann LLC. |
|
| 10.4(3) |
Amendment No. 2 dated November 23, 2016 to Purchase Agreement dated as of August 22, 2016, as amended, between IIP Operating Partnership, LP and PharmaCann LLC. |
|
| 23.1 | Consent of Martin, Hood, Friese Associates, LLC. | |
| 99.1 |
Press release issued by Innovative Industrial Properties, Inc. on December 19, 2016. |
|
| 99.2(4) |
PharmaCann LLC Independent Auditor’s Report Audited Balance Sheets as of December 31, 2015 and 2014
Audited Statements of Income for the year ended December
Audited Statements of Members’ Equity for the year ended
Audited Statements of Cash Flows for the year ended Notes to Audited Financial Statements |
|
| 99.3(5) |
Innovative Industrial Properties, Inc.
Unaudited Pro Forma Consolidated Balance Sheet as of
Unaudited Pro Forma Consolidated Statement of Operations
Unaudited Pro Forma Consolidated Statement of Operations
Notes to Unaudited Pro Forma Consolidated Financial |
| (1) |
Incorporated by reference to Exhibit 10.12 to Innovative Industrial Properties, Inc.’s Registration Statement on Form S-11, as amended (File No. 333-214148), filed with the Securities and Exchange Commission on October 17, 2016. |
| (2) |
Incorporated by reference to Exhibit 10.13 to Innovative Industrial Properties, Inc.’s Registration Statement on Form S-11, as amended (File No. 333-214148), filed with the Securities and Exchange Commission on October 17, 2016. |
| (3) |
Incorporated by reference to Exhibit 10.14 to Innovative Industrial Properties, Inc.’s Registration Statement on Form S-11, as amended (File No. 333-214148), filed with the Securities and Exchange Commission on November 25, 2016. |
| (4) |
Incorporated by reference to the audited financial statements of PharmaCann LLC and the related independent auditors reports included in Innovative Industrial Properties, Inc.s final prospectus dated November 30, 2016 filed with the Securities and Exchange Commission on December 2, 2016 to Rule 424(b)(4) of the Securities Act (File No. 333-214148). |
| (5) |
Incorporated by reference to the unaudited pro forma financial statements of Innovative Industrial Properties, Inc. in the Innovative Industrial Properties, Inc.s final prospectus dated November 30, 2016 filed with the Securities and Exchange Commission on December 2, 2016 to Rule 424(b)(4) of the Securities Act (File No. 333-214148). |
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 lease with
PharmaCann, are forward looking statements. When used in this
press release, 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.
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: December 21, 2016 | INNOVATIVE INDUSTRIAL PROPERTIES, INC. | |
| By: | /s/ Robert M. Sistek | |
| Name: | Robert M. Sistek | |
| Title: |
Chief Financial Officer and Executive Vice President, Investments |
EXHIBIT INDEX
| Exhibit | Description of Exhibit | |
| 10.1 |
Lease Agreement, dated as of December 19, 2016, between IIP-NY 1 LLC and PharmaCann LLC. |
|
| 10.2(1) |
Purchase Agreement dated as of August 22, 2016 between IIP Operating Partnership, LP and PharmaCann LLC. |
|
| 10.3(2) |
Amendment No. 1 dated September 16, 2016 to Purchase Agreement dated as of August 22, 2016 between IIP Operating Partnership, LP and PharmaCann LLC. |
|
| 10.4(3) |
Amendment No. 2 dated November 23, 2016 to Purchase Agreement dated as of August 22, 2016, as amended, between IIP Operating Partnership, LP and PharmaCann LLC. |
|
| 23.1 | Consent of Martin, Hood, Friese Associates, LLC. | |
| 99.1 |
Press release issued by Innovative Industrial Properties, Inc. on December 19, 2016. |
|
| 99.2(4) |
PharmaCann LLC Independent Auditor’s Report Audited Balance Sheets as of December 31, 2015 and 2014
Audited Statements of Income for the year ended December
Audited Statements of Members’ Equity for the year ended
Audited Statements of Cash Flows for the year ended Notes to Audited Financial Statements |
|
| 99.3(5) |
Innovative Industrial Properties, Inc.
Unaudited Pro Forma Consolidated Balance Sheet as of
Unaudited Pro Forma Consolidated Statement of Operations
Unaudited Pro Forma Consolidated Statement of Operations
Notes to Unaudited Pro Forma Consolidated Financial |
| (1) |
Incorporated by reference to Exhibit 10.12 to Innovative Industrial Properties, Inc.’s Registration Statement on Form S-11, as amended (File No. 333-214148), filed with the Securities and Exchange Commission on October 17, 2016. |
| (2) |
Incorporated by reference to Exhibit 10.13 to Innovative Industrial Properties, Inc.’s Registration Statement on Form S-11, as amended (File No. 333-214148), filed with the Securities and Exchange Commission on October 17, 2016. |
| (3) |
Incorporated by reference to Exhibit 10.14 to Innovative Industrial Properties, Inc.’s Registration Statement on Form S-11, as amended (File No. 333-214148), filed with the Securities and Exchange Commission on November 25, 2016. |
| (4) |
Incorporated by reference to the audited financial statements of PharmaCann LLC and the related independent auditors reports included in Innovative Industrial Properties, Inc.s final prospectus dated November 30, 2016 filed with the Securities and Exchange Commission on December 2, 2016 to Rule 424(b)(4) of the Securities Act (File No. 333-214148). |
| (5) |
Incorporated by reference to the unaudited pro forma financial statements of Innovative Industrial Properties, Inc. in the Innovative Industrial Properties, Inc.s final prospectus dated November 30, 2016 filed with the Securities and Exchange Commission on December 2, 2016 |
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. Innovative Industrial Properties, Inc. (NYSE:IIPR) Recent Trading Information
Innovative Industrial Properties, Inc. (NYSE:IIPR) closed its last trading session up +0.38 at 18.06 with 103,310 shares trading hands.