Scott Fortune: Yeah. Good morning. First, a little housekeeping item around kind of litigation expenses there and the movement or potential timing of potentially again in quarter and kind of the litigation side of things. If you can give an update on that, that would be great.
Paul Smithers: Sure. Hey, Scott. It’s Paul. As we mentioned, we were — we concluded the litigation in Pennsylvania with a judgment in our favor of $15.5 million. We also got — recovered the property effective this week. So that litigation is done. Ongoing litigation remains in some areas. But we continue to pursue vigorously our options against the defaulting tenants. So that was a good win in Pennsylvania and we just continue to pursue aggressively all our legal remedies.
Scott Fortune: Perfect. And Paul, while I have you on the call there, can you expand a little bit more on the recent filed lawsuit by influential law firm and some of your MSO partners, potentially they are seeking kind of the block the federal government from enforcing prohibition against the state and legal cannabis activity. Although likely they take a few years to play out potentially going to the Supreme Court there, but kind of thoughts or protection from the state — for the states and your business model with MSO tenants and kind of facilities in these vertical operations in these key states. Any kind of thoughts on kind of the justice side of moving cannabis reform progress forward since?
Paul Smithers: Yeah. Scott, it’s a really interesting lawsuit, and of course, they retained David Weiss, who’s one of the top U.S. Supreme Court litigators in the country. So that gives instant credibility, I think, to get the case before the Supreme Court. The case is filed in Massachusetts. It’s basically challenging the right of the Federal Government to regulate state-operated cannabis businesses, because you go back to the Gonzales case in 2005, it gave the federal government right to regulate interstate commerce. But of course, the way the states are operating now, it’s intrastate commerce. So the challenge is saying that the federal government does not have jurisdiction to regulate businesses that operate solely within the state’s own borders.
The second part of the case is also interesting from a legal analysis is it’s a nullification theory and that is basically saying that the Federal Government has allowed the states to violate Federal Government for 12 years, 13 years, 14 years now. So it’s kind of a waiver argument that says the state, the Federal Government is not allowed to continue to have this prohibition when it’s refused to enforce its rights. So you are right, it’s going to be a long-haul, but I do think it will get before the Supreme Court. I think we will probably have rescheduling before it hits the Supreme Court. So we will see, but it’s probably a two-year to three-year process. But it’s nice to see a legitimate case now and now we are looking really at three fronts.
We are looking at activity at the judicial level. We are looking certainly activity at the executive level through rescheduling, and of course, SAFE Banking, SAFER Banking is trying to wind its way through Congress. So it’s a three front attack that we think is very healthy for the industry.
Scott Fortune: I appreciate that color. And if I can slip one more in, probably, to Ben, but can you provide color on your private tenants, as we are seeing similar actions by your private or kind of single-state operators there following the trends by many of the public companies to significantly reduce cost, CapEx and those with debt, we are seeing extending or equitizing that kind of debt maturities out to generate cash flow seems to be positive for the tenants and health in this tough environment. And obviously, they are improving their operations in the current environment without expecting kind of beneficial cash flow from the elimination really. Can you just put a little bit of color on your larger private side of tenant interactions as far as kind of what the public fund is doing?
Ben Regin: Yeah. Sure. Hey, Scott. This is Ben. Happy to provide some color there. I’d say we are really seeing similar initiatives taken by the private companies as we are seeing with the public companies and they are all experiencing the same market dynamics as the public groups in terms of capital raising, in terms of operations. We have single-state private companies, we have multistate private companies and I think it’s been very healthy. A lot of the things that you noted for the industry in terms of focusing on efficiencies of operations, addressing any sort of balance sheet challenges that they might have. It’s been great to see that a lot of the publics have been able to extend loan maturities, refinance, restructure some of the debt and really push out some of that debt concerns that some investors might have had for some of the public MSOs. So, again, I think, it’s very healthy overall for the industry.
They are taking the same steps. They have been — we are pleased to continue to report the strong rent collection. They are staying current on rent. They are continuing to occupy and operate out of our facilities and improve their operations and really focus on their financial health, which again, I think, is really a benefit to the industry overall.
Scott Fortune: Thank you for the detail. I will jump back in the queue.
Alan Gold: Thanks, Scott.
Operator: The next question comes from Alexander Goldfarb with Piper Sandler. Please go ahead.
Alexander Goldfarb: Hey. Good morning out there. Always interesting whenever an earnings call gets into constitutional law. So thank you for that, Paul. So two questions here. The first is maybe going along the legality part. Dave, you mentioned the bank that you guys got the letter of credit from was over $60 billion. So, certainly, one of the — I would assume a big bank that would be subject theoretically to federal prohibitions on lending, but clearly not enforced. So we all discussed SAFE Banking, but it almost seems like in practicality, given cannabis has access at the community bank level and it looks like all the way up to the $60 billion level. What benefit would SAFE Banking provide that the industry doesn’t seem to already have, and obviously, banks underwrite the credit.
So a bad operator or a credit unworthy potential borrower clearly is not going to get credit. So from a good sponsorship basis, what’s the difference from right now to if we had SAFE Banking?
Paul Smithers: Well, Alex, this is Paul. So I think the short answer is, it would encourage more banks to get into the space because right now, FinCEN regulations do make it expensive for banks and borrowers and customers to have accounts, because of the extensive reporting requirements, basically the SARs. So if we have SAFE Banking in, that theory would go away, which I think would encourage more banks to get in. But to your point, there still are the credit issues of these operators. So we have been consistent, I think, since we have been talking about this for six years, seven years is even with SAFE Banking or SAFER Banking now, we don’t think that the large money banks, the Wells, the Chases are going to come into the space.
