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): September 24, 2019

 

 

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.)

 

11440 West Bernardo Court, Suite 220

San Diego, California 92127

(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 x

 

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 September 24, 2019, 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 (the “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 Second Amendment”) to the development agreement (the “Development Agreement”) by and among Landlord, the Operating Partnership and Tenant.

 

The Development Agreement Second Amendment provides for funding to Tenant of up to an additional $8.0 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 $26.5 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 Lease Amendment also extends the initial term of the Lease to September 24, 2034.

 

Landlord, the Operating Partnership and Tenant previously entered into a first amendment to the Development Agreement (the “Development Agreement First Amendment”) to make certain minor clarifications to the recitals of the Development Agreement, including an update to the description of the Property to include the new Property address.

 

The foregoing descriptions of the Lease Amendment, the Development Agreement First Amendment and the Development Agreement Second Amendment do not purport to be complete and are qualified in their entirety by reference to the complete text of the Lease Amendment, the Development Agreement First Amendment and the Development Agreement Second 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   Second Amendment dated September 24, 2019 to Lease Agreement dated May 31, 2018 between IIP-MA 1 LLC and PharmaCannis Massachusetts Inc.
10.2   First Amendment dated July 26, 2019 to Development Agreement dated May 31, 2018 between IIP-MA 1 LLC, IIP Operating Partnership, LP and PharmaCannis Massachusetts Inc.
10.3   Second Amendment dated September 24, 2019 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: September 25, 2019 INNOVATIVE INDUSTRIAL PROPERTIES, INC.
     
     
  By:

/s/ Catherine Hastings 

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

 

 

 

 

Exhibit 10.1

 

SECOND AMENDMENT TO LEASE AGREEMENT

 

THIS SECOND AMENDMENT TO LEASE AGREEMENT (this “Amendment”) is entered into as of this 24th day of September, 2019, 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 (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 as of the date hereof shall be equal to Three Hundred Twenty-Seven Thousand Four Hundred Seventy-Three and 44/100 Dollars ($327,473.44), 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”: Nine Hundred Sixty Thousand Six Hundred Twenty-Five and no/100 Dollars ($960,625.00). The parties acknowledge that Five Hundred Sixty-Three Thousand Three Hundred Twenty-Five Dollars ($563,325.00) 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 $26,500,000, 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 $5,300,000 (i.e. 20% of $26,500,000), then Tenant shall be required to pay an amount equal to $192,125.00 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. Term. Section 3.1 of the Existing Lease is hereby amended and restated in its entirety as follows:

 

“3.1. Term. The actual term of this Lease (as the same may be extended or earlier terminated in accordance with this Lease, the “Term”) commenced on May 31, 2018 (the “Commencement Date”) and shall end on September 24, 2034, subject to extension or earlier termination of this Lease as provided herein.”

 

5. Options to Extend Term. The first sentence of Section 3.2 of the Existing Lease is hereby amended and restated in its entirety as follows:

 

“Tenant shall have two (2) options (each an “Extension Option”) to extend the Term of this Lease for a period of five (5) years each (each an “Extension Period”), on the same terms and conditions in effect under this Lease immediately prior to the commencement of the Extension Period, except that Tenant shall have no further right to extend the Term of this Lease after the second Extension Period.”

 

6. 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 Ninety-Six Thousand Six Hundred Sixty-Six and 67/100 Dollars ($96,666.67) 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.”

 

7. 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.

 

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8. 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.

 

9. 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.

 

10. 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.

 

11. 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.

 

12. 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.

 

13. 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/ Catherine Hastings  
Name: Catherine Hastings  
Title: CFO, CAO & Treasurer  

 

 

TENANT:

 

PHARMACANNIS MASSACHUSETTS, INC.

 

 

By: /s/ Brett Novey  
Name: Brett Novey  
Title: CEO  

 

 

 

Exhibit 10.2

 

FIRST AMENDMENT TO DEVELOPMENT AGREEMENT

 

This First Amendment to the Development Agreement (“Amendment”) is made and entered into effective as of July 26, 2019, by and between IIP-MA 1 LLC (“Landlord”), IIP Operating Partnership, LP (“Parent Company”), and Pharmacannis Massachusetts Inc. (“Tenant”), together the (“Parties”).

 

RECITALS

 

A. Landlord and Tenant entered into a Lease Agreement (the “Lease”) dated May 31, 2018 concerning the lease of certain premises located at Lot 1, Hopping Brook Road, Holliston, MA, 01746, as further defined in the Lease.

 

B. Landlord and Tenant desire to amend the Lease as set forth herein to correct certain drafting errors.

 

AGREEMENT

 

1. Paragraph A of the Development Agreement Recitals is hereby amended and replaced in its entirety to read as follows:

 

“WHEREAS, concurrent with the execution of this Agreement, Landlord acquired certain real property located at 465 Hopping Brook Road, Holliston, Massachusetts, 01746, as more particularly described on Exhibit A attached hereto and incorporated herein by reference (the “Land”);.”

 

2. Paragraph C of the Development Agreement Recitals is hereby amended to strike the word “medical” from the description of Tenant’s intended use.

 

3. All other provisions of the Lease, including those incorporated by prior amendment or agreement, shall remain in full force and are hereby ratified and affirmed. In the event of any conflict between the terms and provisions contained in this Amendment and those contained in the Lease or any prior amendment or agreement, the terms and provisions contained herein will supersede and control any obligations and liabilities of the Parties.

 

4. This Amendment may be executed in any number of counterparts with the same effect as if all signing parties had signed the same document. All counterparts will be construed together and constitute the same document. Signature pages may be detached from the counterparts and attached to a single copy to physically form one document.

 

[SIGNATURE PAGE TO FOLLOW]

 

 

 

 

DEVELOPMENT AGREEMENT AMENDMENT SIGNATURE PAGE

 

IN WITNESS WHEREOF, the parties hereto have executed this Amendment as of the date first written below.

 

LANDLORD:

IIP-MA 1 LLC

 

 

By: /s/ Brian Wolfe  
Name: Brian Wolfe  
Title: Vice President, General Counsel and Secretary  

 

 

PARENT COMPANY:

IIP OPERATING PARTNERSHIP, LP

 

 

By: /s/ Brian Wolfe  
Name: Brian Wolfe  
Title: Vice President, General Counsel and Secretary  

 

 

TENANT:

PHARMACANNIS MASSACHUSETTS, INC.

 

 

By: /s/ Teddy Scott  
Name: Teddy Scott  
Title: President  

 

 

 

Exhibit 10.3

 

SECOND AMENDMENT TO DEVELOPMENT AGREEMENT

 

THIS SECOND AMENDMENT TO DEVELOPMENT AGREEMENT (this “Amendment”) is entered into as of this 24th day of September, 2019, 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. “Construction Contribution Amount” is hereby amended and restated in its entirety as follows:

 

““Construction Contribution Amount” shall mean an amount not to exceed Twenty-Three Million Five Hundred Thousand Dollars ($23,500,000).”

 

3. General Requirements. The second sentence of Section 2.2 is hereby amended and restated in its entirety as follows:

 

 

 

 

“Without limiting the foregoing, Tenant shall use commercially reasonable and diligent efforts to cause the Completion Date to occur no later than March 31, 2020, provided that the Completion Date shall be subject to a day-for-day extension for any actual delays resulting from events of force majeure beyond the reasonable control of Tenant.”

 

4. 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.

 

5. 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.

 

6. 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.

 

7. 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.

 

8. 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.

 

9. 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/ Catherine Hastings  
Name: Catherine Hastings  
Title: CFO, CAO & Treasurer  

 

 

TENANT:

 

PHARMACANNIS MASSACHUSETTS, INC.

 

 

By: /s/ Brett Novey  
Name: Brett Novey  
Title: CEO  

 

 

PARENT COMPANY:

 

IIP OPERATING PARTNERSHIP, LP

 

 

By: /s/ Catherine Hastings  
Name: Catherine Hastings  
Title: CFO, CAO & Treasurer