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Innovative industrial properties of REIT cannabis face financial hurdles as tenant miss rent payment

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This year has been a buzz for cannabis REIT Innovative industrial properties.

The San Diego-based company’s stock is down 58% this year as of July 14, Motley Fool mentioned. The latest sharp drop came after news that IIP’s tenant, Kings Garden, had defaulted on his July rent and insurance payments. In all, the Kings Garden default added up to $2.2 million to the IIP problem, including $1.8 million in unpaid base rent and property management payments.

The IIP was still in the process of recovering from a so-called short report prepared by an active investment firm called Blue Orca Capital. The report explained why the company was short selling investments, or betting that its shares would fall.

“IIPR is less than a traditional REIT, and more than a marijuana bank,” the report said. The IIP business model involved entering into sale and leaseback operations with cannabis companies That due to federal regulations about cannabis, it is not possible to just go to a conventional bank and get a loan.

This model only works well as long as tenants keep paying rent, and the report focused on tenants who might not be able to delay the end of this deal any longer. One of them was the Garden of Kings.

IIP replied To the report, which he said contained a number of “false and misleading” statements about the company, but the report itself caused the company’s stock to fall 6.6%. pointed.

Innovative industrial properties may have more problems on the horizon as one of their tenants has trouble. Parallel tenant Named in a lawsuit Presented in Florida and New York.

Both complaints claim that the company’s financial position and debt burden have been misrepresented to investors, Green Market Report mentioned in March. The complaints included accusations of a “Ponzi scheme”. In parallel, it was the second largest IIP tenant last year, accounting for 9.7% of IIP revenue generated, to me Motley Fool.

The new cannabis law pending in Congress could also expand the range of capital sources available to cannabis companies and potentially create more competition for IIPs. The Capital Lending and Investment in Marijuana Business Act, or CLIMB, would eliminate hurdles for banks and government agencies seeking to do business with cannabis companies, the Motley Fool mentioned.

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