|
NOTE
5 – DEFERRED RENTS RECEIVABLE
The
Company is the lessor under several operating leases which contain rent holidays, escalating rents over time, options to renew,
requirements to pay property taxes, insurance and/or maintenance costs, and contingent rental payments based on a percentage of
monthly tenant revenues. The Company is not the lessor under any finance leases.
The
Company recognizes fixed rental receipts from such lease agreements on a straight-line basis over the expected lease term. Differences
between amounts received and amounts recognized are recorded under Deferred Rents Receivable on the balance sheet. Contingent
rentals are recognized only after tenants’ revenues are finalized and if such revenues exceed certain minimum levels.
During
the reporting periods, the Company leased to third parties the following owned properties:
| |
● |
Delaware
– a 45,000 square foot facility purchased in September 2016 and developed into a cannabis cultivation, processing, and
dispensary facility which is leased to a cannabis-licensed client occupying 100% of the space under a triple net lease that
commenced in 2017 and expires in 2035. |
| |
|
|
| |
● |
Maryland
– a 180,000
square foot former manufacturing facility
purchased in January 2017 and developed by the Company into a cultivation and processing facility which is leased to a licensed
cannabis client under a triple net lease that commenced
in 2018 and expires
in 2037.
|
| |
|
|
| |
● |
Massachusetts
– a 138,000 square foot industrial property of which approximately half of the available square footage is leased to
a non-cannabis manufacturing company under a lease that commenced in 2017 and expires in 2022. |
| |
|
|
| |
● |
Illinois
– two 3,400 square foot free-standing retail dispensaries in the cities of Anna and Harrisburg and leased to the KPGs,
each under a 20-year lease that commenced in 2018. With the acquisition of the KPGs as disclosed in Note 3 – Acquisitions,
this lease was eliminated upon the consolidation of the KPGs in October 2019. Accordingly, the rental receipts on such leases
have been removed from the table of future minimum rental receipts below. |
During
the reporting periods, the Company subleased to a third party the following property:
| |
● |
Delaware
– 4,000
square feet of retail space in a multi-use
building which the Company developed into a cannabis dispensary and is subleased to its cannabis-licensed client under
a under a triple net lease
expiring in 2021 with a five-year option to extend.
|
As
of September 30, 2020 and December 31, 2019, cumulative fixed rental receipts under such leases approximated $12.8 million and
$9.5 million, respectively, compared to revenue recognized on a straight-line basis of approximately $14.8 million and $11.3 million.
Accordingly, the deferred rents receivable balances at September 30, 2020 and December 31, 2019 approximated $2.0 million and
$1.8 million, respectively.
Future
minimum rental receipts for non-cancelable leases and subleases as of September 30, 2020 were:
SCHEDULE OF FUTURE MINIMUM RENTAL RECEIPTS FOR NON-CANCELABLE LEASES AND SUBLEASES
| 2020 |
|
$ |
1,130,989 |
|
| 2021 |
|
|
4,667,497 |
|
| 2022 |
|
|
4,590,656 |
|
| 2023 |
|
|
4,292,769 |
|
| 2024 |
|
|
4,348,027 |
|
| Thereafter |
|
|
43,995,612 |
|
| Total |
|
$ |
63,025,550 |
|
|