Item 1.01. Entry into
a Material Definitive Agreement.
On
December 11, 2020, IIP-NY 1 LLC (“Landlord”), a wholly owned subsidiary of IIP Operating Partnership, LP (the “Operating
Partnership”), the operating partnership subsidiary of Innovative Industrial Properties, Inc. (the “Company”),
entered into an amended and restated lease (the “Amended Lease”) with PharmaCann Inc. (“PharmaCann”), as
tenant, for the property located at 14 Hudson Crossing Drive in Hamptonburgh, New York (the “Property”).
The
Amended Lease, among other things, (i) extends the term to December 31, 2040, with two options to extend the term of the Amended
Lease for two additional five-year periods; (ii) adjusts the base rent as set forth in Exhibit F of the Amended Lease; and (iii)
increases the security deposit from $2,112,474 to $2,151,875, subject to phase in based on reimbursements of costs under the Development
Agreement (as defined below). The Amended Lease also terminates the guaranties previously executed by subsidiaries of PharmaCann
and eliminates the obligation that any affiliate entities of PharmaCann execute additional guaranties during the term of the Amended
Lease; provided however, that in connection with any “permitted transfer” (as defined in the Amended Lease) of the
Amended Lease, the ultimate parent company of the “permitted transferee” (as defined in the Amended Lease) shall be
required to execute a guaranty of the Amended Lease. The Amended Lease continues to provide that Tenant is responsible for
paying all structural repairs and replacements, maintenance expenses, insurance and taxes related to the Property.
Also on December
11, 2020, PharmaCann, Landlord and the Operating Partnership entered into a Development Agreement (the “Development Agreement”),
pursuant to which Tenant is responsible for the construction of certain improvements for the cultivation and processing facility
on the Property. Pursuant to the Development Agreement, Landlord is obligated to reimburse Tenant for costs of the improvements
of up to $31.0 million, subject to the satisfaction of certain conditions contained therein.
Also
on December 11, 2020, each of IIP-IL 3 LLC, IIP-MA 1 LLC, IIP-OH 1 LLC and IIP-PA 4 LLC, as landlord and a wholly owned subsidiary
of the Operating Partnership, entered into an amendment of the lease with PharmaCann or a subsidiary of PharmaCann, as tenant,
for certain properties located in Illinois, Massachusetts, Ohio and Pennsylvania, respectively (collectively, the “Lease
Amendments”). Pursuant to each of the Lease Amendments, (i) PharmaCann continues to be a guarantor of the lease where PharmaCann
is not the tenant; and (ii) the guaranties previously executed by subsidiaries of PharmaCann are terminated and the obligation
that any affiliate entities of PharmaCann execute additional guaranties during the term of the lease is eliminated; provided however,
that in connection with any “permitted transfer” (as defined in the lease) of the applicable lease, the ultimate parent
company of the “permitted transferee” (as defined in the lease) shall be required to execute a guaranty of the lease.
The
foregoing descriptions of the Amended Lease, the Development Agreement and the Lease Amendments do not purport to be complete and
are qualified in their entirety by reference to the complete text of the Amended Lease, the Development Agreement and the Lease
Amendments, which are filed as exhibits to this report and incorporated herein by reference.