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 25, 2017
Innovative Industrial Properties, Inc.
(Einnxact 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. ¨
Item 1.01. Entry into a Material Definitive Agreement.
On September 25, 2017, IIP-MD 1 LLC ("Landlord"), a wholly owned subsidiary of IIP Operating Partnership, LP, the operating partnership subsidiary of Innovative Industrial Properties, Inc. (the “Company”), entered into an amendment (the “Lease Amendment”) to its lease (the “Lease”) with Holistic Industries LLC (“Holistic”) for the property located at 9220 Alaking Court in Capitol Heights, Maryland (the “Property”). The Lease Amendment rescinded the $1.9 million rent reserve funded by the Landlord for the estimated base rent and property management fee payable from month four through month twelve under the Lease, and in lieu thereof, provides that Landlord will reimburse Holistic for up to an additional $1.9 million of tenant improvements at the Property, such that a total of $5.9 million is reimbursable by the Landlord to Holistic for tenant improvements (collectively, the “TI Allowance”). Pursuant to the Lease Amendment, Holistic requested reimbursement of the entire TI Allowance, and Holistic and Landlord agreed to exercise commercially reasonable efforts to satisfy the conditions under the Lease such that Landlord shall disburse the full TI Allowance to Holistic by October 2, 2017. Provided that such TI Allowance is disbursed in full on or before October 31, 2017, the monthly base rent and property management fee owed by Holistic to Landlord for the initial term of the Lease is as set forth in an exhibit to the Lease Amendment.
Pursuant to the Lease Amendment, Holistic shall pay the monthly base rent and property management fee directly to the Landlord, commencing retroactively as of August 26, 2017. Concurrent with the execution of the Lease Amendment, Holistic paid to the Landlord $205,000, a stipulated amount on account of the base rent and the property management fees payable from August 26, 2017 (the expiration of the rent abatement period) through September 30, 2017. Holistic shall continue to pay additional base rent of $26,259.74 per month, commencing on August 26, 2017, which represented the payment by Holistic to the Landlord of the rent reserve amount amortized over the remaining initial term of the Lease.
Also on September 25, 2017, in consideration for the elimination of the rent reserve, Richard Cohen, a principal of Holistic, executed an amendment to his limited guaranty with respect to Holistic's obligations under the Lease, which was attached as an exhibit to the Lease Amendment and which provides that, in addition to Mr. Cohen's existing guaranty of Holistic's obligations under the Lease of up to $3 million, Mr. Cohen shall guaranty the payment of the base rent and property management fee obligations due under the Lease from September 1, 2017 through May 31, 2018.
The foregoing description of the Lease Amendment does not purport to be complete and is qualified in its entirety by reference to the complete text of the Lease Amendment, which is filed as an exhibit to this report and incorporated herein by reference.
Item 9.01 Financial Statements and Exhibits.
| (d) | Exhibits. |
Exhibit |
Description of Exhibit |
||
| 10.1 | First Amendment dated September 25, 2017 to Lease Agreement dated May 26, 2017 between IIP-MD 1 LLC and Holistic Industries LLC. | ||
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 Amendment, 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.
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, 2017 | INNOVATIVE INDUSTRIAL PROPERTIES, INC. | |
| By: | /s/ Catherine Hastings | |
| Name: | Catherine Hastings | |
| Title: | Chief Financial Officer, Chief Accounting Officer and Treasurer | |
EXHIBIT INDEX
Exhibit |
Description of Exhibit |
||
| 10.1 | First Amendment dated September 25, 2017 to Lease Agreement dated May 26, 2017 between IIP-MD 1 LLC and Holistic Industries LLC. | ||
Exhibit 10.1
FIRST Amendment TO LEASE AGREEMENT
THIS FIRST Amendment TO LEASE AGREEMENT (this “First Amendment”) is made this 25th day of September, 2017 by and between IIP-MD 1 LLC, a Delaware limited liability company (“Landlord”), and HOLISTIC INDUSTRIES LLC, a Maryland limited liability company (“Tenant”).
WITNESSETH:
WHEREAS, by that certain Lease Agreement dated May 26, 2017 (the “Lease”), Landlord leased unto Tenant certain premises (the “Premises”) which are located in that certain building known by street address as 9220 Alaking Court, Capitol Heights, Maryland, as more particularly set forth in the Lease; and
WHEREAS, Landlord and Tenant have agreed to modify the Lease to accommodate the parties’ agreement to (i) rescind in its entirety the Rent Reserve, (ii) increase the TI Allowance and (iii) confirm the date that the Second Base Rent and additional Base Rent periods commenced.
NOW, THEREFORE, in consideration of the premises, and such other good and valuable consideration, the receipt and sufficiency of which being hereby acknowledged, the parties do hereby agree as follows:
1. Rescission of Rent Reserve. Landlord and Tenant agree that Landlord’s obligation to fund the Rent Reserve in the amount One Million Nine Hundred Thousand Dollars ($1,900,000.00) as set forth in the first sentence of Section 6.2.4 of the Lease is hereby rescinded in its entirety. Consequently, all references in the Lease to the Rent Reserve shall be and are hereby made null and void ab initio and Landlord’s prior receipt of payment of $202,870.49 on account thereof shall similarly be deemed null and void ab initio.
2. Base Rent. Notwithstanding anything contained in the Lease to the contrary, the parties agree and acknowledge the following: (i) that the Second Base Rent Period commenced on August 1, 2017; (ii) the Tenant shall commence payments to Landlord of additional Base Rent for the Premises on August 26, 2017 as set forth in Section 6.2.4. of the Lease of $26,259.74 per month through and including September 30, 2017; (iii) concurrent with execution of this First Amendment, Tenant shall remit to Landlord, and Landlord hereby accepts as timely payment thereof, a stipulated amount of $205,000.00 on account of management fees and Base Rent currently due and payable by Tenant through and including September 30, 2017; and (iv) effective as of October 1, 2017, provided that Landlord has funded the TI Allowance in full as described below on or prior to October 31, 2017, the monthly aggregate Base Rent and Property Management Fee for the initial Term of the Lease shall be as set forth in Exhibit A attached hereto.
3. Insurance. Landlord and Tenant hereby agree and acknowledge that Tenant shall be permitted to provide claims-made coverage with respect to its commercial general liability insurance.
4. TI Allowance. In consideration of the foregoing, the parties agree that the TI Allowance provided by Landlord for the construction of the Tenant Improvements within the Premises pursuant to Section 5.1 of the Lease shall be increased by the sum of One Million Nine Hundred Thousand Dollars ($1,900,000.00), resulting in a TI Allowance not to exceed Five Million Nine Hundred Thousand Dollars ($5,900,000.00). Tenant hereby requests disbursement of the TI Allowance in the full amount of Five Million Nine Hundred Thousand Dollars ($5,900,000.00), and the parties shall exercise commercially reasonable efforts to provide and review the deliverables required under the Lease for the disbursement of the TI Allowance to allow Landlord to release the TI Allowance to Tenant by October 2, 2017.
5. Limited Guaranty. In further consideration of the foregoing, Richard Cohen shall execute as of the date hereof an amendment to the Limited Guaranty, in the form attached hereto as Exhibit B.
6. Second Sentence of Section 6.2.3. of Lease. The second sentence of Section 6.2.3. of the Lease is hereby amended and restated as follows: "For purposes of clarity, assuming the sum of the Purchase Price, the Additional Purchase Price and the disbursed TI Allowance is Fifteen Million Dollars ($15,000,000.00), Base Rent during the Third Base Rent Period would be equal to One Hundred Eighty-Seven Thousand Five Hundred Dollars ($187,500.00) per month."
7. Ratification. As amended hereby, the Lease shall continue in full force and effect under the terms, provisions, and conditions thereof. All other terms, covenants, and conditions of the Lease not herein expressly modified are hereby confirmed and ratified and remain in full force and effect.
8. Capitalized Terms. All capitalized terms shall have the meaning as defined in the Lease unless otherwise defined herein.
9. Miscellaneous. This First Amendment may be executed in multiple counterparts, each of which shall constitute an original and all of which shall constitute one and the same agreement and it shall not be necessary in making proof of this First Amendment or any counterpart hereof to produce or account for any of the other counterparts. This First Amendment contains and embodies the entire agreement of the parties hereto with respect to the matters set forth herein, and supersedes and revokes any and all negotiations, arrangements, letters of intent, representations, inducements or other agreements, oral or in writing with respect to such matters. No representations, inducements or agreements, oral or in writing, between the parties with respect to such matters, unless contained in this First Amendment, shall be of any force or effect.
[Signature Page Follows]
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IN WITNESS WHEREOF, Landlord and Tenant have executed this instrument under seal as of the day and year first above written.
| LANDLORD: | ||
| IIP-MD 1 LLC, | ||
| a Delaware limited liability company | ||
| By: | /s/ Catherine Hastings | |
| Name: Catherine Hastings | ||
| Title: CFO, CAO and Treasurer | ||
| TENANT: | ||
| HOLISTIC INDUSTRIES LLC, | ||
| a Maryland limited liability company | ||
| By: | /s/ Josh Genderson | |
| Name: Josh Genderson | ||
| Title: CEO | ||
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Exhibit A
Base Rent and Property Management Fee Schedule
| Period | Base Rent | Property Management Fee | Monthly Amount | |||||||||
| 10/1/17 to 6/30/18 | $ | 213,759.74 | $ | 2,812.50 | $ | 216,572.24 | ||||||
| 7/1/18 to 6/30/19 | $ | 219,853.49 | $ | 2,903.91 | $ | 222,757.40 | ||||||
| 7/1/19 to 6/30/20 | $ | 226,145.29 | $ | 2,998.28 | $ | 229,143.57 | ||||||
| 7/1/20 to 6/30/21 | $ | 232,641.57 | $ | 3,095.73 | $ | 235,737.30 | ||||||
| 7/1/21 to 6/30/22 | $ | 239,348.98 | $ | 3,196.34 | $ | 242,545.32 | ||||||
| 7/1/22 to 6/30/23 | $ | 246,274.38 | $ | 3,300.22 | $ | 249,574.60 | ||||||
| 7/1/23 to 6/30/24 | $ | 253,424.85 | $ | 3,407.48 | $ | 256,832.33 | ||||||
| 7/1/24 to 6/30/25 | $ | 260,807.72 | $ | 3,518.22 | $ | 264,325.94 | ||||||
| 7/1/25 to 6/30/26 | $ | 268,430.53 | $ | 3,632.56 | $ | 272,063.09 | ||||||
| 7/1/26 to 6/30/27 | $ | 276,301.08 | $ | 3,750.62 | $ | 280,051.70 | ||||||
| 7/1/27 to 6/30/28 | $ | 284,427.42 | $ | 3,872.52 | $ | 288,299.94 | ||||||
| 7/1/28 to 6/30/29 | $ | 292,817.87 | $ | 3,998.37 | $ | 296,816.24 | ||||||
| 7/1/29 to 6/30/30 | $ | 301,481.01 | $ | 4,128.32 | $ | 305,609.33 | ||||||
| 7/1/30 to 6/30/31 | $ | 310,425.70 | $ | 4,262.49 | $ | 314,688.19 | ||||||
| 7/1/31 to 6/30/32 | $ | 319,661.10 | $ | 4,401.02 | $ | 324,062.12 | ||||||
| 7/1/32 to 5/31/33 | $ | 329,196.64 | $ | 4,544.05 | $ | 333,740.69 | ||||||
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Exhibit B
FIRST Amendment TO LIMITED GUARANTY OF LEASE
THIS FIRST Amendment TO LIMITED GUARANTY OF LEASE (this “Guaranty Amendment”) is made this 25th day of September, 2017 by and between IIP-MD 1 LLC, a Delaware limited liability company (“Landlord”), and RICHARD COHEN (“Guarantor”).
WITNESSETH:
WHEREAS, by that certain Lease Agreement dated May 26, 2017 (the “Original Lease”), as amended by that certain First Amendment to Lease Agreement dated as of the date hereof (the “Lease Amendment”; and the Original Lease and Lease Amendment are hereinafter collectively referred to as the “Lease”), Landlord leased unto Tenant certain premises which are located in that certain building known by street address as 9220 Alaking Court, Capitol Heights, Maryland, as more particularly set forth in the Lease; and
WHEREAS, pursuant to the Original Lease, Guarantor executed and delivered to Landlord, that certain Limited Guaranty of Lease dated June 7, 2017 (the “Original Guaranty”; and together with this Guaranty Amendment, the “Guaranty”).
WHEREAS, Landlord would not have entered into the Lease Amendment with Tenant without having received this Guaranty Amendment as an inducement to Landlord, and Guarantor is receiving a material benefit in connection with the Lease Amendment.
NOW, THEREFORE, in consideration of the Lease Amendment, and such other good and valuable consideration, the receipt and sufficiency of which being hereby acknowledged, the parties do hereby agree as follows:
1. Amendments to Guaranty. Effective as of the date hereof, Landlord and Guarantor hereby agree that the Original Guaranty is hereby amended as set forth below:
| a. | Section 1(d) is hereby amended by adding the following provision at the end of the enumerated Guaranteed Obligations: |
“; and (iv) from September 1, 2017 through and including May 31, 2018 (the “Initial Guaranty Period”), the payment by Tenant during the Initial Guaranty Period of: (A) Base Rent due and owing pursuant to Sections 6.2.1 through 6.2.4 or the Base Rent and Property Management Fee due and owing as set forth in Exhibit A of the Lease Amendment, if applicable (such Guaranteed Obligations set forth in this subsection (iv) shall be referred to as the “Initial Rent Payment Guaranty Obligations”).”
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| b. | Section 3 is hereby amended by adding the following sentence at the end thereof: |
“Notwithstanding anything to the contrary set forth in this Guaranty, Landlord and Guarantor hereby agree and acknowledge that solely with respect to the Initial Rent Payment Guaranty Obligations, Guarantor’s liability under this Guaranty (a) shall not exceed One Million Nine Hundred Thousand Dollars ($1,900,000) in the aggregate (the “Initial Rent Guaranty Cap”), and (b) such Initial Rent Guaranty Cap shall be automatically reduced upon each payment by Tenant of the Initial Rent Payment Guaranty Obligations by the aggregate amount of all such payments in respect thereof. By way of example only, if the monthly Initial Rent Payment Guaranty Obligations are $216,572.24, upon Tenant’s payment thereof on October 1, 2017, the Initial Rent Guaranty Cap shall be automatically reduced to $1,683,427.76; and upon Tenant’s payment of the Initial Rent Payment Guaranty Obligations on November 1, 2017 of $216,572.24, the Initial Rent Guaranty Cap shall be automatically reduced to $1,466,855.52. For purposes of clarification, the Initial Rent Guaranty Cap is a Guarantor liability that is in addition to the Cap or Lower Cap, as the case may be, under Section 3 of this Guaranty.”
2. Ratification. As amended hereby, the Guaranty shall continue in full force and effect under the terms, provisions, and conditions thereof. All other terms, covenants, and conditions of the Guaranty not herein expressly modified are hereby confirmed and ratified and remain in full force and effect. Guarantor further acknowledges its consent to the Lease Amendment and hereby confirms and ratifies the terms, covenants and conditions of the Lease.
3. Capitalized Terms. All capitalized terms shall have the meaning as defined in the Original Guaranty and the Lease unless otherwise defined herein.
4. Miscellaneous. This Guaranty Amendment may be executed in multiple counterparts, each of which shall constitute an original and all of which shall constitute one and the same agreement and it shall not be necessary in making proof of this Guaranty Amendment or any counterpart hereof to produce or account for any of the other counterparts. This Guaranty Amendment contains and embodies the entire agreement of the parties hereto with respect to the matters set forth herein, and supersedes and revokes any and all negotiations, arrangements, letters of intent, representations, inducements or other agreements, oral or in writing with respect to such matters. No representations, inducements or agreements, oral or in writing, between the parties with respect to such matters, unless contained in this Guaranty Amendment, shall be of any force or effect.
[Signature Page Follows]
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IN WITNESS WHEREOF, Landlord and Guarantor have executed this instrument under seal as of the day and year first above written.
| LANDLORD: | ||
| IIP-MD 1 LLC, | ||
| a Delaware limited liability company | ||
| By: | ||
| Name: Catherine Hastings | ||
| Title: CFO, CAO and Treasurer | ||
| GUARANTOR: | ||
| By: | ||
| Name: Richard S. Cohen | ||
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