Beleagured cannabis company Lowell Farms Inc. (CSE: LOWL)(OTCQX: LOWLF) has walked away from its cultivation facility of approximately 10 acres of real property at 139 Zabala Road, Salinas, California referred to as the “Zabala Road Property”. It was leased in 2017 by its wholly owned subsidiary Cypress Holding from its landlord Tinhouse, LLC. Lowell Farms left the property on January 12, 2024, but before that, it had operated a cultivation facility, which includes four greenhouses totaling approximately 255,000 square feet at the site.
Last year, Lowell Farms hit a rough patch and decided to seek strategic and financial alternatives. One of the plans involved restructuring the terms of the Zabala Road Lease, which would’ve expired in December 2027. Lowell claims it reached an agreement with Tinhouse to amend the terms of the lease and had an agreement on rent-related issues.
According to a statement by Lowell, “The Landlord terminated the Zabala Road Lease via a letter dated October 6, 2023, which was served by its counsel on the Company on October 10, 2023. In October 2023, the Company filed a lawsuit for breach of contract and specific performance against the Landlord to enforce the settlement terms.”
It seems the two are embroiled in a legal battle. Tinhouse has filed counterclaims and an unlawful detainer action against Lowell Farms, claiming damages of more than $36 million, which the landlord claims are based on an analysis of accelerated rent due through the end of the term of the Zabala Road Lease, along with attorney’s fees, improvements, and other undefined costs.
Lowell says it will fight the case, but can’t assure investors it will win and could be “required to pay significant monetary damages.” Lowell did not mention the litigation in its November 2023 filings for its quarter ending September 2023.
In Lowell’s last MD&A, the company said it expected to harvest roughly 28,000 pounds of cannabis from the location in 2023. The company said it had spent roughly $8.1 million in renovations for the space.