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.
According to a Securities and Exchange Commission filing, PharmaCann failed to pay $2.7 million in March rent covering properties in Colorado, Illinois, New York, Ohio and Pennsylvania. The cannabis-focused real estate investment trust said the total includes base rent, property management fees and estimated tax and insurance payments.
The default comes just weeks after the companies announced a resolution to earlier payment issues. In late January, IIP reported it entered into a restructured agreement with PharmaCann that reduced monthly base rent from $2.8 million to $2.6 million for nine properties while working to transition two cultivation facilities in Michigan and Massachusetts to new tenants.
“The company is in continuing discussions with PharmaCann regarding the leases and expects to enforce its rights under the leases aggressively, which may include, but is not limited to, commencing eviction proceedings as the company deems necessary,” IIP stated in the newest filing.
PharmaCann’s operations represent approximately 17% of IIP’s total rental revenues for 2024, according to the company.
The earlier January agreement had appeared to stabilize the relationship after PharmaCann defaulted on December and January payments. IIP covered those using security deposits, Green Market Report previously reported. As part of that arrangement, monthly base rent of $1.3 million for two cultivation properties in Michigan and Massachusetts was “previously abated in full effective February 1, 2025,” the filing said.
Company executives also took a hard line on tenant defaults during a February earnings call.
“If they do default, we will meet them with the same swiftness that we did with PharmaCann, with immediately filing default notices on all those properties, proceeding to eviction,” IIP President and CEO Paul Smithers said at the time.
Smithers emphasized that rent reductions would only come with significant concessions from tenants.
“PharmaCann has committed to some substantial policy changes and financial commitments by their investors, of course, the note that we take and other commitments such as not taking any more debt,” Smithers said in February. “We’re not open for business just to cut rents.”
The latest default follows other concerning developments for PharmaCann. Last month, the company announced plans to close its 207,000-square-foot cultivation facility in Warren, Michigan, affecting approximately 170 workers, according to Crain’s Detroit.
IIP’s nine properties actively leased to PharmaCann represent about $223 million in invested capital, based on prior company statements.
A new shareholder lawsuit filed against IIP in Maryland federal court last month also alleged the company misled investors about tenant problems, claiming IIP downplayed issues with PharmaCann while continuing to paint a positive picture of business prospects.
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