An investor group is suing
Innovative Industrial Properties
(IIP) (NYSE: IIPR) for not doing proper due diligence in its
Kings Garden
investment.
Investor Michael Mallozzi originally sued IIP in April 2022, when the Blue Orca Capital report came out. He was then joined by investors Alejandro Handal and Stephen Forrester.
They are claiming IIP mislead investors, was incompetent, and broke securities laws.
In December, IIP asked the court to dismiss the case, but the latest brief asks the court to deny that request to dismiss because IIP was aware that Kings Garden was a Ponzi scheme while telling investors everything was OK.
Kings Garden Deal
In April 2019, IIP entered into a sale-leaseback transaction with California-based Kings Garden, led by its CEO and Chairman Michael King. Between 2019-2021, IIPR purchased six properties from Kings Garden at prices far higher than Kings Garden had paid for the properties.
In total, IIP invested approximately $150 million into Kings Garden cannabis farms, which accounted for up to 10% of IIP’s rental revenues. The company also spent money to build out the facilities for Kings Garden.
Due Diligence?
At the heart of the lawsuit, the investors claim that IIP didn’t do the due diligence that it claimed it had. Specifically, the case states that a simple background check would have uncovered…
