Quarterly report pursuant to Section 13 or 15(d)

DEFERRED RENTS RECEIVABLE

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DEFERRED RENTS RECEIVABLE
 6 Months Ended
Jun. 30, 2022
Deferred Rents Receivable  
DEFERRED RENTS RECEIVABLE

(4) DEFERRED RENTS RECEIVABLE

 

The Company is the lessor under operating leases which contain escalating rents over time, rent holidays, 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 in Deferred rents receivable in the condensed consolidated balance sheets. 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 cannabis cultivation, processing, and dispensary facility which is leased to its cannabis-licensed client under a triple net lease that expires in 2035.
     
  ● Maryland – a 180,000 square foot cultivation and processing facility that expires in 2037. This facility had been leased to Kind prior to the Kind Acquisition Date.
     
  ● 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 expires in October 2022.

 

The Company subleases the following properties:

 

  ● Delaware – a 4,000 square foot cannabis dispensary which is subleased to its cannabis-licensed client under a sublease expiring in April 2027.
     
  ● Delaware – a 100,000 square foot warehouse, of which the Company developed 60,000 square feet into a cultivation facility that is subleased to its cannabis-licensed client. The sublease expires in March 2030, with an option to extend the term for three additional five-year periods. The Company intends to develop the remaining space into a processing facility.
     
  ● Delaware – a 12,000 square foot cannabis production facility with offices which is subleased to its cannabis-licensed client. The sublease expires in January 2026 and contains an option to negotiate an extension at the end of the lease term.

 

 

The Company received rental payments aggregating $0.8 million and $2.0 million in the three and six months ended June 30, 2022, respectively, and $1.2 million and $2.4 million in the three and six months ended June 30, 2021, respectively. Revenue from these rental receipts was recognized on a straight-line basis and aggregated $0.8 million and $1.9 million in the three and six months ended June 30, 2022, respectively, and $1.1 million and $2.3 million in the six months ended June 30, 2021, respectively.

 

Future minimum rental receipts for non-cancellable leases and subleases as of June 30, 2022 were as follows (in thousands):

 

Year ending December 31,      
Remainder of 2022   $ 1,085  
2023     1,911  
2024     1,925  
2025     1,946  
2026     1,868  
Thereafter     11,366  
Total   $ 20,101