Quarterly report pursuant to Section 13 or 15(d)

Note 3 - Real Estate

v3.22.2
Note 3 - Real Estate
6 Months Ended
Jun. 30, 2022
Notes to Financial Statements  
Real Estate Disclosure [Text Block]

Note 3 - Real Estate

 

Real Estate Acquisitions 

 

During the six months ended June 30, 2022, the Company invested approximately $35.4 million to acquire three cultivation facilities. The following table presents the real estate acquisitions for the six months ended June 30, 2022 (in thousands):

 

             

Tenant

Market

Site Type

Closing Date

Real Estate Acquisition Costs

 

Bloom Medicinal

Missouri

Cultivation

April 1, 2022

  7,301 (1)

Ayr Wellness, Inc.

Pennsylvania

Cultivation

June 30, 2022

  14,529  

Ayr Wellness, Inc.

Nevada

Cultivation

June 30, 2022

  13,579  

Total

$ 35,409  
       
(1) Includes $5,004 of TI funded at closing of the property.      

 

 

Tenant Improvements Funded

 

During the six months ended June 30, 2022, the Company funded approximately $38.8 million of tenant improvements. The following table presents the tenant improvements funded for the six months ended June 30, 2022 (in thousands):

 

                 

Tenant

Market

Site Type

Acquisition Closing Date

 

TI Funded during six months ended June 30, 2022

 

Unfunded Commitments (1)

 

Curaleaf

Florida

Cultivation

August 4, 2020

    20,983  (2)   -  

Mint

Massachusetts

Cultivation

April 1, 2021

    349     2,651  

Mint

Arizona

Cultivation

June 24, 2021

    2,505     6,462  

PharmaCann

Massachusetts

Dispensary

March 17, 2021

    25     -  

Trulieve

Pennsylvania

Cultivation

March 17, 2021

    7,046     -  

Organic Remedies

Missouri

Cultivation

December 20, 2021

    4,271     757  

Bloom Medicinal

Missouri

Cultivation

April 1, 2022

    3,613     1,603  
Ayr Wellness, Inc. Pennsylvania Cultivation June 30, 2022     -     750  

Total

  $ 38,792   $ 12,223  
                     

(1) The $12.2 million of unfunded commitments does not include a $16.5 million option but not obligation to acquire an adjacent property from an existing tenant.

(2) On June 16, 2022, the Company funded the expansion of an existing property.

Disposal of Real Estate

On March 21, 2022, we sold one of our PharmaCann Massachusetts properties for approximately $0.8 million. We recognized a loss on sale of the property of $60,113. We continue to collect the rent that would have been received from the PharmaCann Massachusetts property through increased lease payments from each of the remaining properties operated by PharmaCann in our portfolio.

 
Construction in Progress

 

Construction in progress was $21.0 million and $13.1 million on June 30, 2022 and December 31, 2021, respectively, and is included in "Buildings and Improvements" on the accompanying consolidated balance sheet.

 

Depreciation and Amortization

 

Depreciation expense for the three and the six months ended June 30, 2022 and 2021, was $2.3 million and $1.5 million and $4.5 million and $2.6 million, respectively. 

 

Amortization of the Company’s acquired in-place lease intangible assets for the three months ended June 30, 2022 and 2021 were approximately $0.5 million and $0.5 million, respectively and $1.0 million and $0.6 million, respectively, for the six months ended June 30, 2022 and 2021. The acquired in-place lease intangible assets have a weighted average remaining amortization period of 11.6 years.

 

The following table presents the future amortization of the Company’s acquired in-place leases as of June 30, 2022  (in thousands):

 

   

Amortization

 

Year

 

Expense

 

2022 (six months ending balance at December 31, 2022)

  $ 1,006  

2023

    2,013  

2024

    2,013  

2025

    2,013  

2026

    2,013  

Thereafter

    13,937  

Total

  $ 22,995  

 

The following table presents the future contractual minimum rent under the Company’s operating leases as of June 30, 2022  (in thousands):

 

   

Contractual

 
   

Minimum

 

Year

 

Rent

 

2022 (six months ending balance at December 31, 2022)

  $ 22,144  

2023

    45,361  

2024

    46,583  

2025

    47,779  

2026

    49,007  

Thereafter

    536,181  

Total

  $ 747,055  

 

Concentration of Credit Risk

 

As of June 30, 2022, we owned 30 properties located in Arizona, Arkansas, California, Connecticut, Florida, Illinois, Massachusetts, Missouri, Nevada, North Dakota, Ohio, and Pennsylvania. The ability of any of our tenants to honor the terms of its lease are dependent upon the economic, regulatory, competitive, natural and social factors affecting the community in which that tenant operates.

 

The following table sets forth the tenants in our portfolio that represented the largest percentage of our total rental income for each of the periods presented:

 

   

For the Six Months Ended June 30,

 
   

2022

   

2021

 
                                 
   

Number

   

Percentage of

   

Number

   

Percentage of

 
   

of

   

Rental

   

of

   

Rental

 
   

Leases

   

Income

   

Leases

   

Income

 

Curaleaf

    11       25 %     11       38 %

Cresco Labs

    1       17 %     1       28 %

Trulieve

    1       14 %     1     9 %      
Revolutionary Clinics     1       13 %     1       - %

Columbia Care

    5       11 %     5       10 %

Acreage

    3       8 %     3       13 %

Organic Remedies

    1       6 %     -       - %

 

 

   

For the Three Months Ended June 30,

 
   

2022

   

2021

 
                                 
   

Number

   

Percentage of

   

Number

   

Percentage of

 
   

of

   

Rental

   

of

   

Rental

 
   

Leases

   

Income

   

Leases

   

Income

 

Curaleaf

    11       25 %     11       35 %

Cresco Labs

    1       17 %     1       23 %

Trulieve

    1       14 %     1       13 %

Revolutionary Clinics

    1       13 %     1       - %

Columbia Care

    5       10 %     5       15 %

Acreage

    3       8 %     3       10 %

Organic Remedies

    1       6 %     -       - %

 

Impairment

 

We review current activities and changes in the business condition of all of our properties to determine the existence of any triggering events or impairment indicators. If triggering events or impairment indicators are identified, we analyze the carrying value of our real estate for any impairment. A provision is made for impairment if estimated future operating cash flows (undiscounted and without interest charges) plus estimated disposition proceeds (undiscounted) are less than the current book value of the property. Key inputs that we utilize in this analysis include projected rental rates, estimated holding periods, capital expenditures, and property sales capitalization rates. As of June 30, 2022 and December 31, 2021 no impairment losses were recognized.