UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

 

 

  

FORM 8-K

 

 

 

CURRENT REPORT

Pursuant to Section 13 or 15(d)

of the Securities Exchange Act of 1934

 

Date of Report (Date of earliest event reported): February 24, 2020

 

 

 

Innovative Industrial Properties, Inc.

(Exact name of registrant as specified in its charter)

 

 

 

Maryland   001-37949   81-2963381

(State or Other Jurisdiction

of Incorporation)

 

(Commission

File No.)

 

(I.R.S. Employer

Identification No.)

 

1389 Center Drive, Suite 200

Park City, UT 84098

(Address of principal executive offices, including zip code)

 

Registrant’s telephone number, including area code: (858) 997-3332

 

 

 

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):

 

¨ Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

 

¨ Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

 

¨ Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

 

¨ Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

 

Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).

Emerging growth company ¨

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ¨

 

Securities Registered pursuant to Section 12(b) of the Act:

 
Title of each class   Trading Symbol(s)   Name of each exchange on which registered
Common Stock, par value $0.001 per share   IIPR   New York Stock Exchange
Series A Preferred Stock, par value $0.001 per share   IIPR-PA   New York Stock Exchange

 

 

 

 

 

Item 1.01. Entry into a Material Definitive Agreement.

 

On February 24, 2020, IIP-MA 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 an amendment (the “Lease Amendment”) to its lease with Pharmacannis Massachusetts Inc. (“Tenant”), a subsidiary of PharmaCann LLC, for the property located at 465 Hopping Brook Road, Holliston, Massachusetts (the “Property”), and entered into an amendment (the “Development Agreement Amendment”) to the development agreement by and among Landlord, the Operating Partnership and Tenant.

 

The Development Agreement Amendment provides for funding to Tenant of up to an additional $4.0 million for additional development at the Property (the “Additional Funding”). If the Company funds the full amount of the Additional Funding, the Company’s total investment in the Property is expected to be $30.5 million.

 

The provision of the Additional Funding resulted in a corresponding adjustment of the base rent and the security deposit under the Lease Amendment.

 

The foregoing descriptions of the Lease Amendment and the Development Agreement Amendment do not purport to be complete and are qualified in their entirety by reference to the complete text of the Lease Amendment and the Development Agreement Amendment, which are filed as exhibits to this report and incorporated herein by reference.

 

Item 9.01. Financial Statements and Exhibits.

 

(d) Exhibits.

 

Exhibit   Description of Exhibit  
10.1   Third Amendment dated February 24, 2020 to Lease Agreement dated May 31, 2018 between IIP-MA 1 LLC and PharmaCannis Massachusetts Inc.
10.2   Third Amendment dated February 24, 2020 to Development Agreement dated May 31, 2018 between IIP-MA 1 LLC, IIP Operating Partnership, LP and PharmaCannis Massachusetts Inc.

 

 

 

 

SIGNATURES

 

Pursuant 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: February 25, 2020 INNOVATIVE INDUSTRIAL PROPERTIES, INC.
     
  By:

/s/ Catherine Hastings

  Name:   Catherine Hastings
  Title: Chief Financial Officer, Chief Accounting Officer and Treasurer

 

 

Exhibit 10.1

 

THIRD AMENDMENT TO LEASE AGREEMENT

 

THIS THIRD AMENDMENT TO LEASE AGREEMENT (this “Amendment”) is entered into and made effective as of this 24th day of February, 2020 (the “Amendment Effective Date”), by and between IIP-MA 1 LLC, a Delaware limited liability company (“Landlord”), and PharmaCannis Massachusetts Inc., a Massachusetts corporation (“Tenant”).

 

RECITALS

 

A.                WHEREAS, Landlord and Tenant are parties to that certain Lease Agreement dated as of May 31, 2018, as amended by that certain First Amendment to Lease Agreement dated as of November 13, 2018 and as amended by that certain Second Amendment to Lease Agreement dated as of September 24, 2019 (as so amended, the “Existing Lease”), whereby Tenant leases the premises from Landlord located at 465 Hopping Brook Road, Holliston, Massachusetts 01746;

 

B.                 WHEREAS, concurrently with the execution of this Amendment, Tenant and Landlord shall execute an amendment to the Development Agreement; and

 

C.                 WHEREAS, Landlord and Tenant desire to modify and amend the Existing Lease only in the respects and on the conditions hereinafter stated.

 

AGREEMENT

 

NOW, THEREFORE, Landlord and Tenant, in consideration of the mutual promises contained herein and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, and intending to be legally bound, agree as follows:

 

1.                  Definitions. For purposes of this Amendment, capitalized terms shall have the meanings ascribed to them in the Existing Lease unless otherwise defined herein. The Existing Lease, as amended by this Amendment, is referred to collectively herein as the “Lease.” From and after the date hereof, the term “Lease,” as used in the Existing Lease, shall mean the Existing Lease, as amended by this Amendment.

 

2.                  Base Rent. Section 2.1 of the Existing Lease is hereby amended and restated in its entirety as follows:

 

“2.1.             The monthly Base Rent shall be equal to Three Hundred Seventy-Five Thousand Eight Hundred Six and 78/100 Dollars ($375,806.78), subject to subsequent adjustment under this Lease (as may be adjusted, the “Monthly Base Rent Amount”).”

 

3.                  Security Deposit. Section 2.2 of the Existing Lease is hereby amended and restated in its entirety as follows:

 

Security Deposit”: One Million One Hundred Five Thousand Six Hundred Twenty-Five Dollars ($1,105,625.00). The parties acknowledge that Nine Hundred Forty-One Thousand Two Hundred Thirty-Five Dollars ($941,235.00) of the Security Deposit have been funded as of the date hereof, and the remaining portion shall be paid by Tenant (using its own funds) in installments in accordance with this Section 2.2. Within two (2) Business Days following the date that Landlord makes any Construction Payment (as defined in the Development Agreement) to Tenant, Tenant shall deliver to Landlord a proportionate amount of the Security Deposit as determined based upon the percentage derived from dividing the amount of such Construction Payment by $30,500,000, until such time as the Security Deposit has been fully funded. As an example, if the amount of the Construction Payment made to Tenant under the Development Agreement is equal to $6,100,000 (i.e. 20% of $30,500,000), then Tenant shall be required to pay an amount equal to $221,125.00 within such two (2) Business Day time period, which amount shall be retained by Landlord as part of the Security Deposit. Notwithstanding the foregoing (and regardless of the amount of Construction Payments then requested to be funded by Tenant), the full Security Deposit shall be funded by Tenant no later than March 31, 2020.

 

 

 

 

4.                  Annual Escalation. Section 5.2.2 of the Existing Lease is hereby amended and restated in its entirety as follows:

 

Annual Escalation. Base Rent payable under this Lease shall be subject to an annual upward adjustment of the greater of (a) 75% of CPI or (b) three and one-quarter percent (3.25%) of the then-current Base Rent. The next annual adjustment with respect to Two Hundred Thirty Thousand Eight Hundred Six and 77/100 Dollars ($230,806.77) of the current Base Rent shall be May 31, 2020 (“Tranche One Adjustment Date”), and the next annual adjustment with respect to the remaining One Hundred Forty-Five Thousand and 01/100 Dollars ($145,000.01) of the current Base Rent shall be September 24, 2020 (“Tranche Two Adjustment Date”). Thereafter, subsequent adjustments for each tranche of Base Rent shall become effective on every successive annual anniversary of the Tranche One Adjustment Date or Tranche Two Adjustment Date, as applicable, during the Term, including any Extension Periods.”

 

5.                  Broker. Each of Tenant and Landlord represents and warrants that it has not dealt with any broker or agent in the negotiation for or the obtaining of this Amendment and agrees to reimburse, indemnify, save, defend (at the other party’s option and with counsel reasonably acceptable to other party, at the indemnifying party’s sole cost and expense) and hold harmless the indemnifying party for, from and against any and all cost or liability for compensation claimed by any such broker or agent employed or engaged by it or claiming to have been employed or engaged by it.

 

6.                  No Default. Each of Tenant and Landlord represents, warrants and covenants that, to the best of its knowledge, Landlord and Tenant are not in default of any of their respective obligations under the Existing Lease and no event has occurred that, with the passage of time or the giving of notice (or both) would constitute a default by either Landlord or Tenant thereunder.

 

7.                  Effect of Amendment. Except as modified by this Amendment, the Existing Lease and all the covenants, agreements, terms, provisions and conditions thereof shall remain in full force and effect and are hereby ratified and affirmed. In the event of any conflict between the terms contained in this Amendment and the Existing Lease, the terms herein contained shall supersede and control the obligations and liabilities of the parties.

 

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8.                  Successors and Assigns. Each of the covenants, conditions and agreements contained in this Amendment shall inure to the benefit of and shall apply to and be binding upon the parties hereto and their respective heirs, legatees, devisees, executors, administrators and permitted successors and assigns and sublessees. Nothing in this section shall in any way alter the provisions of the Lease restricting assignment or subletting.

 

9.                  Miscellaneous. This Amendment becomes effective only upon execution and delivery hereof by Landlord and Tenant. The captions of the paragraphs and subparagraphs in this Amendment are inserted and included solely for convenience and shall not be considered or given any effect in construing the provisions hereof. All exhibits hereto are incorporated herein by reference. Submission of this instrument for examination or signature by Tenant does not constitute a reservation of or option for a lease, and shall not be effective as a lease, lease amendment or otherwise until execution by and delivery to both Landlord and Tenant.

 

10.              Authority. Tenant guarantees, warrants and represents that the individual or individuals signing this Amendment have the power, authority and legal capacity to sign this Amendment on behalf of and to bind all entities, corporations, partnerships, limited liability companies, joint venturers or other organizations and entities on whose behalf such individual or individuals have signed.

 

11.              Counterparts; Facsimile and PDF Signatures. This Amendment may be executed in one or more counterparts, each of which, when taken together, shall constitute one and the same document. A facsimile or portable document format (PDF) signature on this Amendment shall be equivalent to, and have the same force and effect as, an original signature.

 

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IN WITNESS WHEREOF, Landlord and Tenant have executed this Amendment as of the date and year first above written.

 

LANDLORD:
       
IIP-MA 1 LLC  
       
       
By:   /s/ Brian Wolfe  
Name:   Brian Wolfe  
Title:   Vice President, General Counsel and Secretary  
       
       
       
TENANT:  
       
PHARMACANNIS MASSACHUSETTS, INC.  
       
       
By:   /s/ Brett Novey  
Name:   Brett Novey  
Title:   President  

 

 

Exhibit 10.2

 

THIRD AMENDMENT TO DEVELOPMENT AGREEMENT

 

THIS THIRD AMENDMENT TO DEVELOPMENT AGREEMENT (this “Amendment”) is entered into as of this 24th day of February, 2020, by and between IIP-MA 1 LLC, a Delaware limited liability company (“Landlord”), PharmaCannis Massachusetts Inc., a Massachusetts corporation (“Tenant”), and IIP Operating Partnership, LP, a Delaware limited partnership (“Parent Company”).

 

RECITALS

 

A.                WHEREAS, Landlord, Tenant and Parent Company are parties to that certain Development Agreement dated May 31, 2018, as amended (as so amended, the “Existing Development Agreement”), providing for Tenant’s construction and development of certain industrial and greenhouse Improvements on the Land and for Landlord’s payment or reimbursement to Tenant for the costs of completing the Improvements up to the Construction Contribution Amount, subject to and in accordance with the terms of the Existing Development Agreement and the Lease, for the property located at 465 Hopping Brook Road, Holliston, Massachusetts 01746;

 

B.                 WHEREAS, concurrently with the execution of this Amendment, Tenant and Landlord shall execute an amendment to the Lease; and

 

C.                 WHEREAS, Landlord, Tenant and Parent Company desire to modify and amend the Existing Development Agreement only in the respects and on the conditions hereinafter stated.

 

AGREEMENT

 

NOW, THEREFORE, Landlord, Tenant and Parent Company, in consideration of the mutual promises contained herein and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, and intending to be legally bound, agree as follows:

 

1.                  Definitions. For purposes of this Amendment, capitalized terms shall have the meanings ascribed to them in the Existing Development Agreement unless otherwise defined herein. The Existing Development Agreement, as amended by this Amendment, is referred to collectively herein as the “Development Agreement.” From and after the date hereof, the term “Development Agreement,” as used in the Existing Development Agreement and Lease, shall mean the Existing Development Agreement, as amended by this Amendment.

 

2.                  Definitions. The definition of “Construction Contribution Amount” is hereby amended and restated in its entirety as follows:

 

““Construction Contribution Amount” shall mean an amount not to exceed Twenty-Seven Million Five Hundred Thousand Dollars ($27,500,000).”

 

3.                  No Default. Each of Tenant and Landlord represents, warrants and covenants that, to the best of its knowledge, Landlord and Tenant are not in default of any of their respective obligations under the Existing Development Agreement and no event has occurred that, with the passage of time or the giving of notice (or both) would constitute a default by either Landlord or Tenant thereunder.

 

     

 

 

4.                  Effect of Amendment. Except as modified by this Amendment, the Existing Development Agreement and all the covenants, agreements, terms, provisions and conditions thereof shall remain in full force and effect and are hereby ratified and affirmed. In the event of any conflict between the terms contained in this Amendment and the Existing Development Agreement, the terms herein contained shall supersede and control the obligations and liabilities of the parties.

 

5.                  Successors and Assigns. Each of the covenants, conditions and agreements contained in this Amendment shall inure to the benefit of and shall apply to and be binding upon the parties hereto and their respective heirs, legatees, devisees, executors, administrators and permitted successors and assigns and sublessees. Nothing in this section shall in any way alter the provisions of the Development Agreement restricting assignment or subletting.

 

6.                  Miscellaneous. This Amendment becomes effective only upon execution and delivery hereof by Landlord and Tenant. The captions of the paragraphs and subparagraphs in this Amendment are inserted and included solely for convenience and shall not be considered or given any effect in construing the provisions hereof.

 

7.                  Authority. Tenant guarantees, warrants and represents that the individual or individuals signing this Amendment have the power, authority and legal capacity to sign this Amendment on behalf of and to bind all entities, corporations, partnerships, limited liability companies, joint venturers or other organizations and entities on whose behalf such individual or individuals have signed.

 

8.                  Counterparts; Facsimile and PDF Signatures. This Amendment may be executed in one or more counterparts, each of which, when taken together, shall constitute one and the same document. A facsimile or portable document format (PDF) signature on this Amendment shall be equivalent to, and have the same force and effect as, an original signature.

 

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IN WITNESS WHEREOF, Landlord, Tenant and Parent Company have executed this Amendment as of the date and year first above written.

 

LANDLORD:
       
IIP-MA 1 LLC  
       
       
By:   /s/ Brian Wolfe  
Name:   Brian Wolfe  
Title:   Vice President, General Counsel and Secretary  
       
       
       
TENANT:  
       
PHARMACANNIS MASSACHUSETTS, INC.
       
       
By:   /s/ Brett Novey  
Name:   Brett Novey  
Title:   President  
       
       
       
PARENT COMPANY:  
       
IIP OPERATING PARTNERSHIP, LP  
       
       
By:   /s/ Brian Wolfe  
Name:   Brian Wolfe  
Title:   Vice President, General Counsel and Secretary