Innovative Industrial Properties, Inc. (IIP), a real estate investment trust specializing in the regulated cannabis industry, has announced a strategic tenant replacement and renewal initiative aimed at enhancing the performance of its real estate portfolio. The company declared defaults by tenants and a borrower due to challenges in the regulated cannabis industry, which have negatively impacted the ability of certain tenants to make their lease payments.
The company declared defaults on leases with 4Front Ventures Corp., Gold Flora, LLC, Tilt Holdings Inc., and a borrower of four properties previously leased to affiliates of Medical Investor Holdings, LLC. The total amount owed for these defaults as of March 28, 2025, amounted to $9.0 million for 4Front leases, $1.7 million for Gold Flora leases, $2.4 million for Tilt leases, and approximately $0.8 million of interest and reimbursement for taxes for the borrower of four properties.
As a result of these defaults, the company intends to take aggressive action to pursue its rights under the leases and the loan agreement, which may include commencing eviction proceedings and foreclosing on its security interest in the properties.
The company highlighted the extremely challenging market dynamics in the regulated cannabis industry, including federal, state, and local taxation burdens, declines in unit pricing for regulated cannabis products, limited access to capital, and inflation and supply chain constraints. These challenges have led the company to proactively seek more financially viable long-term tenants to better position itself for sustainable growth and improved financial performance.
As of December 31, 2024, leases with 4Front, Gold Flora, and Tilt represented 5.7%, 2.9%, and 2.2% of the company's contractual rent, respectively. The company's initiative to refresh a substantial portion of its tenant base reflects its commitment to optimizing occupancy of its properties in line with evolving market demands.
Innovative Industrial Properties, Inc. emphasized its focus on the acquisition, ownership, and management of specialized industrial properties leased to experienced, state-licensed operators for their regulated cannabis facilities. For additional information, the company's website can be accessed at www.innovativeindustrialproperties.com. The market has reacted to these announcements by moving the company's shares -2.1% to a price of $63.75. If you want to know more, read the company's complete 8-K report here.
