Shareholders are suing Innovative Industrial Properties, a REIT focused on providing real estate to cannabis companies, alleging that the company did not properly disclose tenant rent payment issues to its investors and did not adequately address the risk posed by unpaid rent.

Two separate complaints have been filed against IIPR by individual shareholders, Bloomberg Law reported. They both name the company and individual executives, including Executive Chairman Alan Gold, CEO Paul Smithers and Chief Financial Officer David Smith.

Both complaints allege the company and its leaders breached their fiduciary duties to investors last year and presented a misleading picture of the company’s financial performance that was rosier than reality.

IIPR did not immediately respond to requests for comment.

The complaints point to third-quarter 2024 earnings for IIPR that showed funds from operations and revenue lower than expectations. The complaints allege that the declines were actually because of issues with a single large tenant, PharmaCann Inc. PharmaCann’s rent should have accounted for 17% of the company’s total rent revenue in 2024 through the third quarter.

PharmaCann failed to pay rent in December 2024 on six of its eleven leases with IIPR. The company’s rent was worth $4.2M. IIPR announced the defaults the same month. Additionally, although PharmaCann had paid rent on the remaining five leases it had with IIPR, “PharmaCann was in default under the five Leases due to its non-payment of rent on the other six Leases,” the lawsuits say.

In January 2025, IIPR announced an agreement with PharmaCann to reduce its overall base rent from $2.8M per month to $2.6M per month as well as issue it a loan secured by all of PharmaCann’s assets.

The Damage had already been done, the complaints say. News of the unpaid rent caused IIPR stock to drop notably, as did the lower-than-expected earnings numbers.

Shareholders should have been made aware of the struggles of this major tenant and the effects that its likely rent nonpayment would have on the company’s financial health, but they were not, the complaints say. As a result of misleading statements made by the company and its leadership, investors weren’t given a complete picture of IIPR’s leasing operations.

Both complaints ask for jury trials and are seeking damages and changes to IIPR’s corporate governance procedures to avoid future similar issues, including “strengthening the company’s internal reporting and financial disclosure controls [and] developing and implementing procedures for greater shareholder input into the policies and guidelines of the Board.”