Quarterly report pursuant to Section 13 or 15(d)

DEFERRED RENTS RECEIVABLE

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DEFERRED RENTS RECEIVABLE
9 Months Ended
Sep. 30, 2021
Deferred Rents Receivable  
DEFERRED RENTS RECEIVABLE

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 September 30, 2021 and December 31, 2020, cumulative fixed rental receipts under such leases approximated $17.5 million and $13.9 million, respectively, compared to revenue recognized on a straight-line basis of approximately $19.2 million and $15.8 million, respectively. Accordingly, the deferred rents receivable balance approximated $1.7 million and $1.9 million at September 30, 2021 and December 31, 2020, respectively.

 

Future minimum rental receipts for non-cancelable leases and subleases as of September 30, 2021 were:

 

         
2021   $ 1,207,136  
2022     4,740,130  
2023     4,446,410  
2024     4,506,585  
2025     4,574,023  
Thereafter     39,591,553  
Total   $ 59,065,837