Shorting IIPR; Innovative Industrial Properties, Inc.
Assemble Tard Team Ten for a story about the mob of cannabis finance and how unsustainable it is going forward as cannabis reform happens
Some Basic Information on the Company
We are an internally-managed REIT focused on the acquisition, ownership and management of specialized industrial properties leased to experienced, state-licensed operators for their regulated state-licensed cannabis facilities. We have acquired and intend to continue to acquire our properties through sale-leaseback transactions and third-party purchases. We have leased and expect to continue to lease our 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 structural repairs, maintenance, real estate taxes and insurance.
Market CAP: 5.31 Billion
In Tard Terms:
They will buy a property owned by a cannabis company and fund the construction and buildout or expansion. A long term lease is then created with the Tenant who pays an annual rent that returns IIPR about 15% on their money with annual increases
Cannabis REIT makes $56.4 million deal to acquire Florida property
By MJBizDaily Staff
September 21, 2020 – Updated December 17, 2021
· Pay $19.6 million for an existing 65,000-square-foot building.
· Invest up to roughly $36.8 million in the industrial and greenhouse indoor cultivation and production space currently in operation and add approximately 155,000 square feet of space. That will bring the facility’s total footprint to roughly 220,000 square feet.
· Have a total investment, assuming full reimbursement, of $56.4 million.
IIPR helped fund the industry when no banks would lend (still most don’t) and Institutions would not participate either. It served an important function in the early days of legal cannabis in the United States. And they were able to get extortion level returns because of it.
As the United States moves to a legal framework, this type of financing structure is going to become obsolete. Very simply stated, why would you “borrow” at 15% from IIPR when you can get a bank or institution to come in for 8-10%
The REAL problem
I could spend hours being a fucking nerd and analyzing every property and telling you how investing in these deals is going to backfire once Banking and Interstate Commerce come ( why the fuck would you grow weed in FL if you didn’t have to) but I know you tards can’t even read.
The concentration of leases/revenue is what you need to know for now.
SH Holdings is on the door to BK and is embroiled in a horrific lawsuit. They are going to be deleted from existence in the very near future.
PharmaCann Inc: 12%
SH Parent Inc (Parallel) 10%
Cresco Labs: 8%
Parallel Cannabis’ Lawsuit Exposes ETF’s iShares, YOLO
Parallel’s default could bring problems for the cannabis REIT (real estate investment trust) Innovative Industrial Properties
10% of IIPR rental revenues in 2021 came from Parallel.
“These properties are located in some of the largest and strongest growth markets (PA and FL), in addition to TX, one of the largest states by population and estimated illicit cannabis consumption, where there continue to be significant inroads toward expansion of the existing program,” a spokesperson from IIP told Green Market.
Excerpts from the unredacted lawsuit credit to Green Market Report
One of the details that had been redacted in the original documents was the amount of debt at Parallel. The unredacted version states that Parallel had $300 million in debt. “By the end of June 2021, as discussed above, the Company had incurred more than $350 million in debt, a portion of which—the PE Fund Note—constituted an undisclosed default under $300 million of its Senior and Junior Note.”
- The Senior notes account for $165 million with 10% interest.
- The Junior notes are $145 million and are owned by the SAF Group in Canada. The company used the Junior Note to refinance seller financing provided by the sellers of New England Treatment Access (“NETA”). NETA is a cannabis facility that Parallel acquired in 2019. The Junior Note carries an annual non-default interest rate of 14.25%
- The company also appears to owe approximately $54 million on $44.3 million of certain convertible secured notes issued to Green Health. The Green Health Notes accrue interest at a rate of 16% per year, and carried a prepayment penalty of 25%
The case alleges that by September 2021, Parallel “was on the precipice of (i) covenant and payment defaults on $145 million of recently issued junior debt, (ii) cross-defaults on $165 million of senior debt, and (iii) defaulting on a $13.5 million promissory note issued by Wrigley’s “family office,” Defendant PE Fund (PE Fund also held $91.2 million of the Company’s $165 million in senior debt); b. That as of September 27, 2021, the company also was already in payment default on approximately $44 million of notes issued by Defendant Green Health – a different Wrigley family office”
The complaint says that Parallel actually began defaulting on the debt as early as June 2021 because the company began issuing new debt to pay its other obligations. The investors say that their debt agreements specifically stated that Parallel couldn’t incur any more debt, but did so anyway. Essentially raising more money to pay off the previous debts due, which is why the complaint called Parallel a Ponzi scheme.
Merging with Columbia Care and will create many redundant facilities that need to be sold off per state requirements. While Cresco still remains liable for these Lease obligations, its not realistic for them to pay rent on facilities they aren’t using forever. Something will have to give int his situation.
Chicago-based Cresco agrees to buy Columbia Care in all-stock cannabis merger valued at $2 billion
By ROBERT CHANNICK
CHICAGO TRIBUNE |
MAR 23, 2022 AT 9:50 AM
The cannabis industry is going to begin moving away from Soprano style deals that IIPR offers and 10% of IIPR revenue comes from a company that is being litigated into oblivion for a ponzi debt scheme and isn’t likely to survive much longer. Further obsolete and unnecessary facilities will be shed as the Country moves towards a regulated cannabis market with interstate commerce.
Some smart Lawyers are going to start working on attacking these obligations and unraveling as many as possible and the stronger cannabis co’s will no longer need this deal structure as new financing becomes available.
IIPR is fucked. Later or Sooner