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Green Real Estate Boom: Must-See Cannabis REITs for Q3 2024

Your Top Marijuana REITs For Dividend Investors

Cannabis REITs on the Rise: Key Players Before Q3 2024

The U.S. cannabis industry is on the brink of something big, drawing attention from investors far and wide. As laws evolve, this market gears up for an impressive leap forward in top marijuana stocks. Enter Cannabis REITs – these are your golden tickets to dip your toes into the cannabis pool without the wild ride of direct stock investments. Also, they lend a helping hand to cannabis companies by providing much-needed real estate capital, crucial for their growth and operations. This week, a handful of top Cannabis REITs are making waves thanks to their solid portfolios and intelligent market moves. They’re worth watching for anyone interested in tapping into the industry’s potential without getting too caught up in its volatility.

Diving into Cannabis REITs isn’t just about picking names out of a hat; it involves sharpening your technical analysis skills and doubling down on risk management. Through technical analysis, you can decipher price patterns and find the right moments to jump in or out, using past performance as your guide. And let’s not forget about risk management – it’s your safety net. Setting stop-loss limits and only betting on what you’re okay with losing can save you from heartache. These strategies offer a way to embrace the high-reward prospects of the cannabis sector while keeping your feet firmly on the ground. So, do your homework and tread carefully; you might find yourself in a promising position.

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Top Cannabis REITs to Watch Before Q3 2024

  1. Innovative Industrial Properties, Inc. (NYSE: IIPR)
  2. NewLake Capital Partners, Inc. (OTC: NLCP)
  3. Chicago Atlantic Real Estate Finance, Inc. (NASDAQ: REFI)

Innovative Industrial Properties, Inc.

Innovative Industrial Properties, Inc. (IIP) stands out among cannabis REITs. It was founded in 2016 with an emphasis on businesses that provide medical marijuana. Specialty industrial properties are bought, held, and managed by IIP.  In general, these properties are leased to operators who have state permissions and experience. IIP had 111 properties dispersed throughout 19 states as of 2023. The majority of them live in Pennsylvania, Michigan, and California. There are sizable medical cannabis markets in these states. IIP’s presence across multiple domains is indicative of its strategic approach.

Triple-net leasing contracts are part of IIP’s business plan. The tenant pays most of the costs associated with the property under these agreements. Through this collaboration, IIP will have a steady and reliable funding source. It is essential to their financial security. The company’s expansion is keeping pace with the US cannabis market’s surge. Since its founding, IIP has progressively expanded its offering. The increasing demand for real estate associated with cannabis is reflected in this growth. Through Innovative Industrial Properties, investors can buy cannabis-related real estate with a lower regulatory risk. This is because it emphasizes traits that have potential applications in medicine.

Full Year 2023 Highlights

Innovative Industrial Properties (IIP) had a very successful year financially in 2023, which was a big year for growth and expansion. The business’s $309.5 million in overall revenue, up 12% from 2022, highlights its dominant position in the cannabis real estate market. Common investors received a net income of approximately $164.2 million, or $5.77 per share, which is a strong 5% gain over the prior year. Furthermore, IIP’s operational efficiency and profitability were demonstrated by gains of 10% and 9%, respectively, in adjusted funds from operations (AFFO) and normalized funds from operations (Normalized FFO). With a declared dividend payout of $7.22 per share, dividend disbursements continued to rise, underscoring IIP’s dedication to generating 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 release of the company’s third annual Sustainability Report demonstrated its commitment to sustainability, community involvement, and good governance. IIP’s property portfolio grew to 108 properties, totaling 8.9 million rentable square feet across 19 states, which is evidence of its deliberate growth and presence in the cannabis sector. IIP reported a 12% rise in total revenues for the fourth quarter of 2023 compared to the same time the year before and a net income of about $41.3 million for common stockholders. Additionally, a Loan Agreement was executed after the year, which improved IIP’s financial flexibility and liquidity. Overall, 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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NewLake Capital Partners, Inc.

NewLake Capital Partners, Inc. specializes in real estate for the cannabis industry. After purchasing a property, they lease it back to state-licensed operators. These operators operate cultivation centers and retail businesses. This agreement provides operators with access to funding and ensures NewLake will always receive rental money.

As of the last time I looked, NewLake had a substantial property portfolio spanning multiple states. The states with the highest prevalence are Illinois, California, and Pennsylvania. In the US, these areas have significant cannabis markets. Their favorable locations help some of the biggest operators in the industry.

Fourth Quarter 2023 And Full Year 2023 Financial Highlights

The fourth quarter of 2023 showcased notable achievements for the company, marking a year of steady financial growth and operational success. In general, revenue saw a healthy increase of 6.4% year-over-year, totaling $13.0 million. Net income and funds from operations also rose, signaling robust financial health. Despite a slight decrease in adjusted funds from operations, the company declared a dividend increase. This reflects confidence in its financial stability and future prospects. Operational highlights included 100% rent collection and strategic investments in property expansion and improvements. These moves underscore the company’s commitment to growth and operational efficiency.

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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Chicago Atlantic Real Estate Finance, Inc. (REFI)

Chicago Atlantic Real Estate Financing, Inc. plays a key role in the cannabis market’s finances. In general, they focus on real estate financing and credit solutions. Their services support business owners at various company stages. They are a link between funding needs and growth in the cannabis industry.

Furthermore, the company owns many properties across significant states. These include Michigan, Illinois, and California. Their focus on thriving legal marijuana markets is intentional. Thus, they are committed to aiding the growth of the cannabis industry.

Fourth Quarter 2023 Financial Highlights

In a recent update, Tony Cappell, now Co-Chief Executive Officer of Chicago Atlantic, shared insights into the company’s performance and strategic moves. The firm saw significant growth in gross loan originations and an uptick in the weighted average yield to maturity, now at 19.4%. This progress, alongside the improvement in the credit quality of their operators, is a testament to their meticulous underwriting process and dedicated team. Moreover, extending and expanding their credit facility until June 2026, now with an increased accordion feature of up to $150 million, sets the stage for seizing more opportunities. Also noteworthy are the promotions within the senior management team, with Peter Sack stepping up as Co-Chief Executive Officer and Phil Silverman as Chief Financial Officer, effective March 7, 2024.

The company’s portfolio performance remained strong as of December 31, 2023, with total loan commitments reaching approximately $378.8 million across 27 investments. The weighted average yield to maturity held steady at about 19.4%, showcasing stable returns. During the fourth quarter, investment activities included gross originations totaling $24.7 million, balanced by principal repayments and bolstered by non-recurring fee income from early repayments. On the capital front, Chicago Atlantic amended its secured revolving credit facility, extending its maturity to June 2026 and enhancing its borrowing capacity. The company also declared a regular quarterly cash dividend and a special cash dividend in January 2024, reflecting its solid financial standing and commitment to shareholder returns.

Cannabis REITs Shaping Up for Q3 2024

As we wrap up this week’s focus on Cannabis REITs, it’s clear that we’re standing at the cusp of an exciting era for the U.S. cannabis industry. With the wind of legalization blowing stronger, there’s a buzz about the sector’s growth prospects, and rightfully so. These REITs are not just bystanders but vital players, fueling the industry’s expansion by providing much-needed real estate capital to burgeoning cannabis ventures. Their role? It’s crucial to offer investors a chance to tap into the industry’s growth while softening the ride’s bumps. Watching how these REITs navigate the evolving landscape offers us a sneak peek into the broader sector’s future, hinting at both growth and the opportunities it might unfold.

But let’s not forget that diving into this green wave with eyes wide open means marrying technical analysis with solid risk management. Through technical analysis, we can catch the market’s rhythm, spotting when to make our move or sit tight. Meanwhile, risk management is our trusty guardrail, keeping our ambitions in check with reality. It reminds us to only play with what we’re prepared to lose, ensuring we stay in the game for the long haul. By embracing both, investors can stride confidently into the cannabis sector, poised to capitalize on its growth while keeping potential pitfalls at bay. Overall, the journey ahead is promising, peppered with challenges and rewards, making it an exciting time for those ready to explore the cannabis market with care and strategy.

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