Navigating Cannabis REITs: Top Picks for Investors in Early 2024
As we step into mid-January 2024, the world of Cannabis Real Estate Investment Trusts (REITs) offers a fascinating opportunity for investors. In general, these trusts specialize in owning and managing properties designed for the thriving cannabis industry. With the U.S. cannabis market expanding rapidly, these REITs stand out for those looking for high-yield dividend stocks. In the past year, the U.S. cannabis industry hit a remarkable $30 billion in market size, and it’s expected to keep growing at a rate of 21% annually until 2030. Also, this booming growth makes cannabis REITs an attractive choice for long-term investment, especially with their dividends often being more generous compared to traditional REITs.
When diving into cannabis REITs, it’s wise to use technical analysis and sound risk management. Technical analysis helps in understanding market trends and guiding when to buy or sell these stocks. Given the cannabis industry’s ever-changing legal and regulatory landscape, being aware of these factors is crucial in reducing investment risks. For those thinking long-term, spreading investments across different properties and areas within the cannabis REIT sector can help manage risks better. This approach can safeguard your investment against market ups and downs and unexpected regulatory changes. Plus, keeping an eye on the latest industry trends and legal updates is always a smart move for making well-informed decisions, whether you’re in it for the short haul or the long run.
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High Returns: Leading Cannabis REITs Poised for Growth in Early 2024
- Innovative Industrial Properties, Inc. (NYSE: IIPR)
- NewLake Capital Partners, Inc. (OTC: NLCP)
- Chicago Atlantic Real Estate Finance, Inc. (NASDAQ: REFI)
Innovative Industrial Properties, Inc.
Innovative Industrial Properties, Inc. (IIP) is a cannabis REIT that stands apart. It was founded in 2016 and specializes in cannabis facilities for medical usage. IIP is a company that buys, holds, and operates specialty industrial assets. These assets are leased to operators with state licenses and experience. IIP owned 111 properties in 19 states as of 2023. Michigan, Pennsylvania, and California are home to the majority. There are sizable medical cannabis markets in these states. IIP’s strategic stance is highlighted by its presence in several domains.
Triple-net leasing contracts are a part of IIP’s business strategy. Most property costs are borne by the renter under these arrangements. IIP receives a steady, predictable cash stream from this arrangement. The company’s expansion is in line with the growing cannabis market in the US. Since its founding, IIP’s portfolio has continuously increased. The rising demand for real estate associated with cannabis is reflected in this growth. Investors can access cannabis real estate through Innovative Industrial Properties with a lower regulatory risk. Its emphasis on qualities for medicinal application is the cause of this.
Third Quarter 2023 Highlights
Innovative Industrial Properties, Inc. (IIP) announced notable financial growth in the third quarter of 2023. From $70.9 million in 2022 to roughly $77.8 million in total revenues, there was a 10% rise. New property acquisitions and increased tenant reimbursements were the main drivers of this expansion. The amount given by tenants toward property taxes and insurance premiums increased to $6.2 million in 2023 from $2.7 million in 2022. In addition, $2.2 million in security deposits applied for rent was reflected in rental income. These came from Temescal, 4Front, and Holistic Leasing. Additionally, Kings Garden paid the $1.7 million in agreed-upon rent until September 20, 2023. This applied to assets that IIP took back in late September 2023.
Outlook and Dividend
IIP has strong financial results in the first nine months of 2023. The net income of $122.9 million, or $4.32 per share, was attributable to common investors. While Normalized FFO came to $175.5 million ($6.21 per share), Funds from Operations (FFO) was $173.2 million ($6.13 per share). The $192.2 million in Adjusted Funds from Operations (AFFO) translates to $6.80 per share. IIP stuck to its strict dividend policy. On October 13, 2023, a quarterly dividend of $1.80 per common share was distributed. This indicated an AFFO payout ratio of 79%. For the calendar year that concluded on September 30, 2023, the annual dividend rose by 6% to $7.20 per common share.
IIP signed an important finance deal in October 2023. IIP’s subsidiary, The Operating Partnership, obtained a $30 million Revolving Credit Facility. October 23, 2026, is when this matures. The credit facility is built upon a basis of qualifying real estate held by Subsidiary Guarantors that is available for borrowing. Real estate, equity interests, and lease payments are among the assets used to finance the loan. Interest rates fluctuate and are dependent on the prime rate as well as any relevant margin. Standard covenants are included in the agreement, and under certain circumstances, extra loan obligations are permitted. IIP may have more operational flexibility and liquidity as a result of this calculated financial move.
IIPR Stock Performance
On January 12th, IIPR stock closed at $93.21, up 5.99% in the last month of trading. In this case, the stock is currently trading in a 52-week price range of $63.36-$115.55, down 7.55% year to date.
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NewLake Capital Partners, Inc.
NewLake Capital Partners, Inc. is a specialized real estate investment trust (REIT). Founded in 2019, it provides real estate capital to state-licensed cannabis operators. NewLake focuses on acquiring industrial and retail properties. These are used for sale-leaseback transactions, third-party purchases, and build-to-suit projects. Their approach emphasizes triple-net leases, ensuring steady income streams from tenants.
As of June 30, 2022, NewLake owned a portfolio of 31 cultivation facilities and dispensaries. These properties were leased to single tenants on a triple-net basis. NewLake also provided two loans aggregating $35 million. They have recently invested $50 million across three properties. These include a 38,000-square-foot facility in Pennsylvania and a 56,500-square-foot facility in Nevada. Another investment funded a 50,000-square-foot expansion in an existing operational cultivation facility. This expansion demonstrates NewLake’s commitment to growth in the U.S. cannabis industry.
Third Quarter 2023 Financial Highlights
In the third quarter of 2023, NewLake Capital Partners reported steady financials. Revenue was $11.5 million, mirroring the previous quarter. Net income for common stockholders was $6.0 million. Funds from Operations (FFO) and Adjusted Funds from Operations (AFFO) were $9.6 million and $10.1 million, respectively. Cash and equivalents stood at $31.1 million by September end, with $20.2 million allocated for Tenant Improvements (TIs). Compared to the same quarter in 2022, there was a slight decline. Revenue decreased by 4.9% to $11.5 million. Net income, FFO, and AFFO also saw decreases of 7.7%, 6.8%, and 5.1% respectively. This was primarily due to a tenant’s non-payment of contractual rent in 2023.
Operational highlights included the repurchase of 608,152 shares at an average price of $13.02. A dividend of $0.39 per common share was declared, equating to an annualized $1.56, paid on October 13, 2023. About $2.6 million was funded for TIs across three properties. Notable developments in October 2023 included a lease amendment with Revolutionary Clinics in Massachusetts and the sale of a cultivation facility in Palmer, Massachusetts. The company’s investment activity included a $350,000 acquisition in Missouri and funding TIs totaling $5.6 million with $20.2 million in unfunded commitments. Financial activities showed a $1.0 million borrowing under the Revolving Credit Facility and a seller financing payment of $1.0 million. The board authorized an additional $10.0 million for stock repurchases, extending the program through December 31, 2024. NewLake reaffirmed its full-year 2023 AFFO guidance at $39.8 to $40.8 million.
NLCP Stock Performance
NLCP stock closed at $16.79 on January 12th, up 20.77% in the past month of trading. Additionally, the stock has a price range of $11.80-$19.50 and is up 4.85% year to date.
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Chicago Atlantic Real Estate Finance, Inc.
Chicago Atlantic Real Estate Finance, Inc., known as REFI on NASDAQ, is a significant player in real estate finance. They focus on providing capital solutions to the cannabis industry. Their approach includes lending to state-licensed cannabis operators. It’s important to note that REFI caters primarily to the cannabis sector. This specialization marks them as a unique entity in the real estate finance landscape.
The company has attracted attention for its growth in short interest. As of December 2023, short interest in REFI’s shares rose significantly. This indicates increased market interest or speculation in the company’s stock performance. Institutional investors, like BlackRock and Vanguard Group, have notably increased their holdings in REFI. This shows growing investor confidence or strategic interest in REFI’s business model and market position. The company’s stock performance, as observed through trading volumes and market capitalization, reflects its evolving role in the niche market of cannabis-related real estate finance.
Third Quarter 2023 Financial Results
In Q3 2023, Chicago Atlantic Real Estate Finance (REFI) reported a net income of $9.97 million. Earnings per common share were $0.55 (basic) and $0.54 (diluted). Interest income rose to $15.18 million, up from $13.79 million year-over-year. Net interest income, after expenses, was $13.73 million. Total assets grew to $352.31 million, with loans held for investment at $322.51 million. Cash equivalents stood at $8.70 million. The company’s liabilities were $76.52 million, including a revolving loan balance of $63 million. Stockholders’ equity increased to $275.78 million, indicating a strong financial position.
REFI continues to focus on shareholder value through dividends and strategic investments. They reaffirmed their 2023 financial outlook, previously issued on March 9, 2023. This demonstrates confidence in meeting financial targets. With expertise in cannabis financing, REFI maintains a conservative leverage position and substantial liquidity. This positions them well to capitalize on new opportunities and adapt to the cannabis industry’s changing landscape.
REFI Stock Performance
On January 12th, REFI stock closed at $16.27, up 5.38% in the last month of trading. In this case, the stock is currently trading in a 52-week price range of $12.91-$17.65, up 0.56% year to date.
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Cannabis Industry’s REITs For 2024
As of mid-January 2024, the top cannabis REITs present an intriguing opportunity for long-term investors. Overall, these REITs offer exposure to the burgeoning cannabis industry. This sector’s growth could potentially enhance portfolio diversification. High-yielding dividend stocks in these REITs are attractive for building long-term portfolios. They offer a dual advantage of regular income and potential capital appreciation. However, investors should be aware of the regulatory landscapes that impact this industry. These factors can influence the long-term sustainability and growth of these investments.
When considering investments in cannabis REITs, employing technical analysis and proper risk management is crucial. Technical analysis can help identify trends and potential entry or exit points in these stocks. In general, risk management, including diversifying investments and setting stop-loss orders, is vital. In addition, this helps mitigate potential losses in this volatile sector. The cannabis industry’s growth prospects are promising. Yet, investors should remain vigilant about legal and market changes. These could significantly impact the performance of cannabis REITs. Overall, a balanced approach, blending dividend yield potential and careful market analysis, is key for long-term investment in this sector.
MAPH Enterprises, LLC | (305) 414-0128 | 1501 Venera Ave, Coral Gables, FL 33146 | new@marijuanastocks.com
