April’s Harvest: Top Cannabis REITs for Long-Term Growth

April’s Cannabis Real Estate Boom

The U.S. cannabis industry is witnessing remarkable growth. With legalization expanding, projections are bullish. Sales may reach $30 billion by 2025. This surge underpins the potential of Cannabis Real Estate Investment Trusts (REITs). These entities own or finance income-producing real estate, specifically in the cannabis sector. They offer investors exposure to this booming market. Plus, they provide dividends from rental income. This week, certain Cannabis REITs stand out. They’re noteworthy for their strategic acquisitions and robust financial health. Investors and analysts are keeping a close eye. These REITs might redefine industry benchmarks. They’re becoming essential in portfolios. Their performance could signal broader industry trends.

Technical analysis and risk management are pivotal. They guide investment in Cannabis REITs. Technical analysis helps spot trends and patterns. It uses historical price data and volume. Risk management limits potential losses. It involves setting stop-loss orders and diversifying. Investors should not overlook these strategies. They enhance the chances of successful investments, especially in volatile sectors like cannabis. The industry’s growth trajectory looks promising. Yet, it’s marked by regulatory changes and market dynamics. Prudent investors use these tools. They navigate the market’s complexities. This approach balances the pursuit of growth with the need for security.

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Top Cannabis REITs of April 2024

1. Innovative Industrial Properties, Inc. (NYSE: IIPR)
2. NewLake Capital Partners, Inc. (OTC: NLCP)
3. AFC Gamma, Inc. (NASDAQ: AFCG)

Innovative Industrial Properties, Inc.

Among cannabis REITs, Innovative Industrial Properties, Inc. (IIP) is unique. It was established in 2016 with a focus on companies offering medical marijuana. We purchase, own, and manage specialty industrial properties on behalf of IIP. Operators with prior experience and state permits are leased to these sites. As of 2023, IIP had 111 properties spread throughout 19 states. Most of them reside in California, Michigan, and Pennsylvania. These states have substantial medical cannabis markets. IIP’s presence in several domains demonstrates its approach to strategy.

Triple-net leasing agreements are part of IIP’s business plan. Under these arrangements, the tenant bears the majority of the property’s expenses. As a result of this partnership, IIP will have a consistent and trustworthy funding source. Their financial stability depends on it. The company’s growth is keeping up with the explosive growth of the US cannabis market. IIP has gradually increased the range of services it offers since its founding. This growth is a reflection of the growing demand for cannabis-related real estate. Investors can purchase real estate associated with cannabis at a reduced regulatory risk through Innovative Industrial Properties. This is because it highlights characteristics that may be used in the medical field.

Full Year 2023 Highlights

In 2023, Innovative Industrial Properties (IIP) experienced significant financial success as it was a major year for growth and expansion. The company’s $309.5 million in total revenue, representing a 12% increase from 2022, demonstrates its leadership position in the cannabis real estate industry. With a solid 5% growth over the previous year, common investors received a net income of almost $164.2 million, or $5.77 per share. Additionally, advances of 10% and 9%, respectively, in adjusted funds from operations (AFFO) and normalized funds from operations (Normalized FFO), indicated the operational efficiency and profitability of IIP. Dividend disbursements continued their upward trajectory with a declared dividend payout of $7.22 per share, highlighting IIP’s commitment to creating shareholder value. Strategic investments, including property acquisitions and lease amendments, alongside a notable sale of a California property portfolio, further emphasized IIP’s dynamic and growth-oriented operational strategy.

The company has shown its dedication to sustainability, community involvement, and good governance by publishing its third annual Sustainability Report. IIP’s purposeful expansion and presence in the cannabis industry is demonstrated by its property portfolio, having grown to 108 sites, totaling 8.9 million rentable square feet across 19 states. For the fourth quarter of 2023, IIP reported a 12% increase in total revenues over the same period the previous year and a net income for common stockholders of approximately $41.3 million. At the end of the year, a Loan Agreement was also signed, which increased IIP’s financial flexibility and liquidity. This comprehensive performance across financial metrics, strategic acquisitions, and commitment to sustainability positions IIP strongly as it navigates the growing cannabis sector, with a clear focus on leveraging opportunities for expansion and maximizing shareholder returns.

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AFC Gamma, Inc.

AFC Gamma, Inc., a well-known auxiliary cannabis company, skillfully manages its capacity and cash flow. Founded in 2020, the company specializes in supply and demand theories, collateral markets, and real estate security markets. Moreover, AFCG specializes in various financing types, including first-lien loans, mortgage loans, construction loans, bridge financing, and other unique financing choices. Recently, AFC Gamma has shifted its focus towards the rapidly expanding cannabis industry.

Furthermore, the company granted Verano Holdings Inc $100 million in options and a $250 million credit line. Additionally, on October 30, it was announced that Daniel Neville will assume the role of CEO, effective November 13, 2023. Most importantly, Mr. Neville brings valuable experience from his previous position as the Chief Financial Officer for Ascend Wellness Holdings, Inc. (“AWH”), a leading multi-state, vertically integrated cannabis operator.

Fourth Quarter 2023 and Full Year Financial Highlights

AFC Gamma reported a GAAP net loss of $9.2 million, or $0.45 per share, for Q4 2023. Distributable Earnings were $10.0 million, or $0.49 per share. For the entire year, the company saw a GAAP net income of $21.0 million, equating to $1.02 per share. Furthermore, Distributable Earnings for 2023 totaled $41.4 million, or $2.04 per share. These figures highlight a mixed financial performance. Especially when considering the broader cannabis sector’s challenges. However, the company has declared a regular dividend. This indicates confidence in its financial health and future prospects.

Daniel Neville, the CEO, expressed optimism about the company’s direction. Despite the tough cannabis market, AFC Gamma aims to focus solely on cannabis lending after spinning off its commercial real estate portfolio. The emergence of Cannabis 3.0 operators presents new lending opportunities. AFC Gamma is well-placed to capitalize on these. The company confirmed its dividend payouts for Q4 2023 and Q1 2024. Each quarter’s dividend is set at $0.48 per share. This commitment to returning value to shareholders underscores AFC Gamma’s robust position in the cannabis lending space.

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NewLake Capital Partners, Inc.

NewLake Capital Partners, Inc. specializes in real estate for the cannabis business. They buy the land and then lease it back to state-licensed operators. In addition to cultivation centers, they run retail stores. This arrangement guarantees NewLake will always receive rental income and gives operators access to funds.

When I last checked, NewLake owned a sizable real estate portfolio in several states. Pennsylvania, Illinois, and California have the highest prevalence. These regions in the US have sizable cannabis markets. Several of the largest operators in the industry benefit from their advantageous positions.

Fourth Quarter 2023 And Full Year 2023 Financial Highlights

The corporation had significant success in the fourth quarter of 2023, capping a year of consistent operational and financial development. A robust 6.4% year-over-year rise in revenue, or $13.0 million, was recorded. Increases in net income and funds from operations also indicate solid financial health. The corporation announced a dividend increase despite a minor decline in adjusted cash from operations. This indicates faith in the company’s financial standing and prospects. Achieving 100% rent collection and strategically investing in property growth and renovations were among the operational successes. These actions demonstrate the company’s dedication to expansion and operational effectiveness.

For 2023, the company continued its upward trajectory, with revenue and net income increasing significantly. The total revenue jumped to $47.3 million, up by 5.1% from the previous year. The company’s strategic investments, including land acquisitions and tenant improvements, have laid a solid foundation for future expansion. The stock repurchase program and dividend increases demonstrate the company’s strong financial position and commitment to returning value to shareholders. Operational milestones, like the lease amendments and successful real estate sales, highlight its adaptability and strategic foresight in navigating the market’s complexities.

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Key Cannabis REITs Flourishing in April 2024

Investing in high-yielding dividend stocks is a strategy favored by those looking for steady income, particularly over the long term. These stocks offer regular income through dividends and the potential for capital appreciation. For long-term investors, this dual benefit is compelling. It’s especially attractive in sectors like real estate, where companies often structure as REITs to distribute the majority of their taxable income as dividends to shareholders. Long-term investing in these stocks requires a keen eye for companies with a strong track record of dividend payments and the potential for sustained growth.

Moreover, dividend yield isn’t the only factor to consider. The stability and sustainability of the dividend payout are crucial. Companies with a consistent dividend history and a business model that can weather economic downturns are preferable. Investors should also look at the payout ratio, which indicates how much of its earnings a company pays out as dividends. A too high ratio might not be sustainable in the long run. Technical analysis can help identify entry points, but fundamental analysis provides insights into the company’s financial health and future growth prospects. Proper risk management, through diversification across sectors and understanding the impact of market conditions on high-yielding stocks, is vital. This approach can help mitigate risks associated with market volatility and ensure a steady income stream, making it a valuable strategy for long-term financial planning.