|
NOTE
5 – DEFERRED RENTS RECEIVABLE
The
Company is the lessor under 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.
The
Company leases 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 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 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. |
The
Company subleases the following properties:
| |
● |
Delaware
– 4,000 square feet of retail space in a multi-use building space 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 December 2021 with a five-year option to
extend. |
| |
|
|
| |
● |
Delaware
– a 100,000 square foot warehouse which the Company is developing into a cultivation and processing facility to be subleased
to its cannabis-licensed client. The lease expires in March 2030, with an option to extend the term for three additional five-year
periods. |
| |
|
|
| |
● |
Delaware
– a 12,000 square foot premises which the Company developed into a cannabis production facility with offices, and is subleased
to its cannabis-licensed client. The lease expires in January 2026 and contains an option to negotiate an extension at the end of
the lease term. |
As
of June 30, 2021 and December 31, 2020, cumulative fixed rental receipts under such leases approximated $16.3
million and $13.9
million, respectively, compared to revenue recognized
on a straight-line basis of approximately $18.1
million and $15.8
million, respectively.
Accordingly, the deferred rents receivable balance approximated $1.8
million and
$1.9 million
at June 30, 2021 and December 31, 2020, respectively.
Future
minimum rental receipts for non-cancelable leases and subleases as of June 30, 2021 were:
SCHEDULE OF FUTURE MINIMUM RENTAL RECEIPTS FOR NON-CANCELABLE LEASES AND SUBLEASES
| |
|
|
2021 |
|
| 2021 |
|
$ |
2,411,711 |
|
| 2022 |
|
|
4,740,130 |
|
| 2023 |
|
|
4,446,410 |
|
| 2024 |
|
|
4,506,585 |
|
| 2025 |
|
|
4,574,023 |
|
| Thereafter |
|
|
39,591,553 |
|
| Total |
|
$ |
60,270,412 |
|
|