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Innovative Industrial Properties (NYSE: IIPR) said it reached an agreement with multistate operator PharmaCann to resolve defaults on leases for 11 properties, as the cannabis real estate investment trust faces more scrutiny over its tenant disclosures.

The deal, which became effective Tuesday, includes rent reductions and property transitions in key markets, according to a news release. Privately owned PharmaCann represents about 17% of IIP’s rental income.

Under the agreement, PharmaCann’s monthly base rent will drop from $2.8 million to $2.6 million for nine properties across Colorado, Illinois, New York, Ohio and Pennsylvania, the company said.

The REIT will also work to transition two cultivation facilities in Michigan and Massachusetts to new tenants, with PharmaCann agreeing to contribute licenses. Monthly rent of $1.3 million for these properties will be suspended starting Feb. 1.

The restructuring comes after PharmaCann defaulted on December and January rent payments, which IIP covered using security deposits. The default was first disclosed by IIP in December, triggering a new shareholder lawsuit that claimed the company downplayed tenant risks while providing PharmaCann additional construction funding earlier in 2024.

Warning signs emerged in recent quarters, with Cronos Group (Nasdaq: CRON) recording a C$25.7 million write-down on its PharmaCann investment option. PharmaCann has also relied heavily on external financing, including a $30 million facility from XS Financial in 2022.

As part of the deal, PharmaCann issued a secured promissory note to IIP, which will mature in 2035, and will receive additional equity investment from existing investors.

However, the agreement hinges on PharmaCann’s ability to refinance its senior secured credit facility due June 30. If unsuccessful, the lease modifications will be voided and terms will revert to those in place as of Jan. 1, IIP said.

Last month, PharmaCann announced plans to close its 207,000-square-foot cultivation facility in Warren, Michigan, affecting around 170 workers, according to Crain’s Detroit.

Excluding the Michigan and Massachusetts properties being transitioned, IIP leases nine properties totaling 434,000 square feet to PharmaCann across five states, representing about $223 million in invested capital.