Cannabis Real Estate Goldmine: The Top Marijuana REITs to Consider

Leading REITs in the Cannabis Industry

The United States cannabis industry and top marijuana stocks are experiencing an unprecedented boom, leading to lucrative opportunities for long-term investors. In general, Cannabis Real Estate Investment Trusts (REITs) have emerged as a key player in this expanding market. These trusts, specializing in acquiring and managing properties related to cannabis operations, offer a unique blend of growth and income. They expose investors to the burgeoning cannabis sector through high dividend yields.

Recent projections underscore the vast potential of the US cannabis industry. By 2025, it’s expected to exceed $30 billion in annual sales, a significant increase from current levels. In addition, this growth trajectory is driven by the gradual legalization across states and increasing social acceptance. As a result, Cannabis REITs are strategically positioning to capitalize on this trend. In general, they are expanding their portfolios to include more properties, which drives revenue growth and attractive dividends for shareholders.

Looking ahead, the future of Cannabis REITs appears promising. Analysts predict a steady increase in the market value of these REITs, aligned with the expansion of the cannabis industry. Also, long-term capital appreciation and high dividend payouts make them an appealing option for investors. With a focus on sustainable growth and robust income streams, Cannabis REITs stand out as a compelling investment in the ever-evolving landscape of the US cannabis market.

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Cannabis REIT Leaders for November 2023

  1. Innovative Industrial Properties, Inc. (NYSE: IIPR)
  2. AFC Gamma, Inc. (NASDAQ: AFCG)
  3. Chicago Atlantic Real Estate Finance, Inc. (NASDAQ: REFI)

Innovative Industrial Properties, Inc.

In the US, Innovative Industrial Properties, Inc. specializes in real estate investments related to the cannabis industry. After obtaining an additional 2.5 million square feet, the corporation will soon have 8.7 million square feet of lettable space. In addition, most of these properties are entirely leased, with an average lease term of 16.4 years. Currently, the group has properties throughout 19 states and 111 locations. By April, IIP had already invested $2.4 billion in property upgrades on top of the projected $227.1 million in rent. Also, the company anticipates that its ongoing real estate acquisitions in Massachusetts and Pennsylvania will result in a large increase in the size of its portfolio in 2022.

Third Quarter 2023 and Subsequent Events

Financial Results

  • Generated total revenues of approximately $77.8 million in the quarter, representing a 10% increase from the prior year’s quarter.
  • Recorded net income attributable to common stockholders of approximately $41.3 million for the quarter, or $1.45 per share (all per share amounts in this press release are reported on a diluted basis unless otherwise noted).
  • Recorded adjusted funds from operations (AFFO) of approximately $64.8 million, or $2.29 per share, increases of 7.8% and 7.5% from the prior year’s quarter, respectively.
  • Paid a quarterly dividend of $1.80 per common share on October 13, 2023 to stockholders of record as of September 29, 2023. The common stock dividends declared for the twelve months ended September 30, 2023 of $7.20 per common share represent an increase of $0.40, or 6%, over dividends declared for the twelve months ended September 30, 2022.

IIPR Stock Performance

On November 16th, IIPR stock closed at $78.18, up 4.06% in the last week of trading. In this case, the stock is trading in a 52-week price range of $63.36-$125.38, down 22.86% year to date.

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AFC Gamma, Inc.

Renowned cannabis ancillary AFC Gamma, Inc. manages its financial flow and capacity effectively. The business was established in 2020 and focuses on markets for real estate security, supply and demand theories, and other types of collateral. In general, AFCG’s specialties are first-lien loans, mortgage loans, construction loans, bridge financings, and other odd forms of financing. Lately, AFC Gamma has focused its marketing efforts on the quickly growing cannabis industry. Verano Holdings Inc. was given a $100 million option and a $250 million credit line by the corporation. In addition, Daniel Neville will become the company’s new CEO, taking effect on November 13, 2023, the company said on October 30. Most recently, Mr. Neville served as the Chief Financial Officer for Ascend Wellness Holdings, Inc. (“AWH”), a leading multi-state, vertically integrated cannabis operator.


Third Quarter 2023 Financial Highlights

AFC Gamma reported generally accepted accounting principles (“GAAP”) net income of $8.0 million or $0.39 per basic weighted average common share and Distributable Earnings of $9.9 million or $0.49 per basic weighted average common share for the third quarter of 2023.

Common Stock Dividend

On October 13, 2023, the Company paid a regular cash dividend of $0.48 per common share for the third quarter of 2023. For the third quarter of 2023, AFC Gamma distributed $9.8 million in dividends, or $0.48 per common share, compared to Distributable Earnings of $0.49 per basic weighted average common share for such period.

AFCG Stock Performance

On November 16th, AFCG shares closed at $11.06, a 4.33% decrease from the previous trading month. In this case, the stock, which has a price range of $9.91 to $17.72, is down 29.69% year to date.

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Chicago Atlantic Real Estate Finance, Inc. (REFI)

Leading commercial mortgage REIT Chicago Atlantic Real Estate Finance, Inc. mostly arranges senior secured loans for state-licensed cannabis operators in states with limited licenses in the US. As a member of the Chicago Atlantic platform, REFI has disbursed more than $1.8 billion in loans and employs over 50 people.


Third Quarter 2023 Financial Results

The net interest income is approximately $13.7 million, consistent with the second quarter 2023. Interest income included approximately $0.7 million of interest income from prepayment fees, the acceleration of original issue discounts, and the effect of the 25-basis-point prime rate increase in July 2023. These increases were offset by an increase in weighted average borrowings on the revolving credit facility, contributing to an increase in interest expense of approximately $0.5 million.

Total expenses of approximately $3.9 million before provision for current expected credit losses, which is consistent with the second quarter of 2023, primarily attributable to the $0.2 million decrease in net management and incentive fees offset by a $0.3 million increase in stock-based compensation.

The total reserve for current expected credit losses of $5.1 million decreased sequentially by $0.1 million and amounts to approximately 1.5% of the portfolio principal balance of $341.8 million as of September 30, 2023.

Distributable Earnings

Distributable Earnings of approximately $10.5 million, or $0.57 per weighted average diluted common share, representing a sequential increase of 3.6%.

Book value per common share increased sequentially by 0.7% to $15.17 as of September 30, 2023, compared with $15.06 as of June 30, 2023, primarily due to third quarter distributable earnings in excess of the regular quarterly dividend of $0.47.

As of September 30, 2023, the Company had $63.0 million outstanding on its $100.0 million secured credit facility, resulting in a leverage ratio (debt to book equity) of approximately 23%.

2023 Outlook

Chicago Atlantic offered the following outlook for the full year 2023:

The Company expects to maintain a dividend payout ratio (based on Distributable Earnings per weighted average diluted share) of approximately 90% to 100% on a full-year basis.

The regular quarterly common dividend is expected to be a minimum of $0.47 per weighted average diluted share.

If its Net Income requires additional dividends over and above the regular quarterly dividend amount to meet its 2023 taxable income distribution requirements, the Company expects to meet that requirement with a special dividend in the fourth quarter of 2023.

REFI Stock Performance

On November 16th, REFI stock closed at $15.00, down 1.01% in the last week of trading. In this case, the stock is trading in a 52-week price range of $12.91-$16.50, down 0.46% year to date.

Top Cannabis REITs Revolutionizing the Market

In conclusion, Cannabis REITs represent a unique and promising investment opportunity in the burgeoning US cannabis industry. Their focus on owning and managing cannabis-related real estate allows investors to capitalize on the sector’s growth while mitigating some of the risks associated with direct cannabis production and sales. The impressive growth projections for the cannabis market, coupled with the stability and high dividend yields offered by REITs, make them an attractive proposition for those seeking to diversify their portfolios with an eye on long-term gains.

As the industry continues to evolve with changing regulations and growing social acceptance, Cannabis REITs are to benefit significantly. In general, their role in supporting the infrastructure of the cannabis industry places them at the forefront of this expansion. For investors, keeping a close eye on these top Cannabis REITs could lead to rewarding investment opportunities. With their unique position in a rapidly growing market and their potential for high dividends and capital appreciation, Cannabis REITs are undoubtedly a sector to watch in the coming years.

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