A class action has been filed against Innovative Industrial Properties, a cannabis REIT company, for "failing to disclose that the value of the Company's properties are significantly lower than represented and that the Company's focus is to be a cannabis company lender rather than a REIT."
The class action lawsuit filed by Bragar Eagel & Squire, P.C., on behalf of IIP shareholders, stems from a report released by market researcher Blue Orca Capital, which reads that the Company worked as "a cannabis bank masquerading as a REIT. IIPR's model is to conduct sale-leaseback transactions with cannabis producers who are otherwise prohibited from borrowing money because of federal regulations." The report further noted that, "unlike with other REITs, IIPR cannot expect to recover the lost income from defaulting tenants because it appears that the actual value of its properties are substantially below their carrying value on the IIPR's balance sheet."
On this news, the Company's share price fell $13.76 per share, or 7.5%, to close at $169.68 per share on April 14, 2022.
According to the complaint, during the class period, defendants touted its rigorous underwriting standards and extensive experience in the cannabis industry. They also stated that the Company's organization and operations qualify it to be taxed as a REIT for U.S federal income tax purposes. "Notwithstanding, defendants failed to disclose that the value of the Company's properties are significantly lower than represented and that the Company's focus is to be a cannabis company lender rather than a REIT. Further, Innovative Industrial Properties' top customers may not be able to continue making payments, and the Company would face significant issues replacing those customers."
For more information:
Bragar Eagel & Squire, P.C.