Top Cannabis REITs to Watch in 2024
The U.S. cannabis industry and top marijuana stocks are rapidly evolving. In 2023, legal sales hit a record high. Growth is expected to continue in 2024. Additionally, this makes cannabis-related Real Estate Investment Trusts (REITs) a unique investment opportunity.
Cannabis REITs focus on properties used for cannabis cultivation and sales. In general, they provide a way to invest in real estate within the growing cannabis sector. This sector’s expansion is fueled by increasing legalization and societal acceptance.
Statistics show a clear upward trend in cannabis sales. In 2023, U.S. sales were estimated at $25 billion. This represents significant growth from previous years. In addition, the industry’s compound annual growth rate (CAGR) is impressive.
Long-term investing in dividend stocks offers stability and income. Cannabis REITs combine these benefits with exposure to a high-growth industry. Also, their dividends are often higher than traditional REITs. This makes them attractive for income-focused investors.
The cannabis industry’s potential is tied to legislative developments. More states are moving towards legalization. Overall, this creates more opportunities for cannabis REITs. Investors should consider the industry’s regulatory landscape.
In summary, cannabis REITs in 2024 present a unique investment proposition. They offer exposure to a growing industry and attractive dividends. They are worth watching for long-term, income-focused investors.
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Cannabis Real Estate Investment Trusts: Top Picks for 2024
- Innovative Industrial Properties, Inc. (NYSE: IIPR)
- Chicago Atlantic Real Estate Finance, Inc. (NASDAQ: REFI)
Innovative Industrial Properties, Inc.
Innovative Industrial Properties, Inc. (IIP) stands out in the cannabis REIT sector. Established in 2016, it focuses on medical-use cannabis facilities. IIP acquires, owns, and manages specialized industrial properties. In general, these properties are leased to experienced, state-licensed operators.
As of 2023, IIP owns 111 properties across 19 states. The majority are in California, Pennsylvania, and Michigan. Additionally, these states have significant medical cannabis markets. IIP’s presence in these areas highlights its strategic positioning.
IIP’s business model involves triple-net lease agreements. These agreements place most property expenses on the tenant. This structure provides IIP with a stable, predictable income stream. It’s a key aspect of their financial stability.
The company’s growth aligns with the expanding U.S. cannabis industry. IIP’s portfolio has grown consistently since its inception. Also, this growth reflects the increasing demand for cannabis-related real estate. Overall, Innovative Industrial Properties offers investors exposure to cannabis real estate with less regulatory risk. This is due to its focus on medical-use properties.
Third Quarter 2023 Results
In the third quarter of 2023, Innovative Industrial Properties, Inc. (IIP) reported significant financial growth. In general, total revenues reached approximately $77.8 million, a 10% increase from $70.9 million in 2022. This growth was driven by higher tenant reimbursements and new property acquisitions. Tenant reimbursements for property insurance premiums and property taxes contributed $6.2 million in 2023, up from $2.7 million in 2022. Additionally, rental revenues included $2.2 million from security deposits applied for rent. These were from leases with Holistic, Temescal, and 4Front. Moreover, $1.7 million in stipulated rent was paid by Kings Garden until September 20, 2023. This was for properties IIP regained possession of in late September 2023.
IIP’s financial performance in the first nine months of 2023 was robust. Net income attributable to common stockholders was $122.9 million or $4.32 per share. Funds from Operations (FFO) stood at $173.2 million ($6.13 per share), while Normalized FFO reached $175.5 million ($6.21 per share). Adjusted Funds from Operations (AFFO) totaled $192.2 million, equating to $6.80 per share. IIP maintained a strong dividend policy. A quarterly dividend of $1.80 per common share was paid on October 13, 2023. This represented a 79% AFFO payout ratio. Also, the annual dividend for the twelve months ending September 30, 2023, increased by 6% to $7.20 per common share.
IIPR Stock Performance
On January 2nd, IIPR stock closed at $101.19, up 20.56% 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 0.37% year to date.
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Chicago Atlantic Real Estate Finance, Inc. (REFI)
Chicago Atlantic Real Estate Finance, Inc., a notable player in the cannabis financing sector, offers a unique investment perspective. Established as a commercial real estate finance company, it specializes in lending to state-licensed cannabis operators. In general, their focus is on providing senior secured loans, a vital resource for growing cannabis businesses. In addition, Chicago Atlantic operates across various states, tailoring its services to the evolving cannabis market.
As of 2023, Chicago Atlantic has built a substantial portfolio. It includes loans spread across key cannabis markets in the United States. The company has a significant presence in states like California, Colorado, and Illinois. In general, these states are known for their robust and mature cannabis industries. Chicago Atlantic’s strategic positioning in these areas demonstrates its commitment to supporting and capitalizing on the growing cannabis sector.
Third Quarter 2023 Financial Results
In the third quarter of 2023, Chicago Atlantic Real Estate Finance, Inc. reported steady financial results. Net interest income remained consistent at approximately $13.7 million, mirroring the second quarter of 2023. In general, this stability was influenced by an increase in interest income. Approximately $0.7 million came from prepayment fees and acceleration of original issue discounts. The 25-basis-point prime rate hike in July 2023 also contributed positively. However, these gains were balanced by increased interest expenses. This was due to higher average borrowings on their revolving credit facility, rising by about $0.5 million.
Total expenses for the quarter were around $3.9 million, excluding provisions for expected credit losses. This figure aligns with the previous quarter’s expenses. The slight decrease in net management and incentive fees, by $0.2 million, was offset by a $0.3 million rise in stock-based compensation. The reserve for expected credit losses decreased slightly to $5.1 million. In fact, this represents about 1.5% of the total portfolio balance of $341.8 million. The company’s distributable earnings increased by 3.6% to $10.5 million or $0.57 per share. The book value per common share rose to $15.17, due to earnings exceeding the regular dividend.
Looking ahead to the end of 2023, Chicago Atlantic provided an optimistic outlook. The company expects to maintain a dividend payout ratio of 90% to 100% based on Distributable Earnings per share. The regular quarterly dividend is anticipated to be at least $0.47 per share. If necessary, Chicago Atlantic is prepared to issue a special dividend in the fourth quarter. In general, this would ensure compliance with 2023 taxable income distribution requirements. This forward-looking approach reflects the company’s commitment to shareholder returns and financial stability.
REFI Stock Performance
On January 2nd, REFI stock closed at $15.99, up 3.83% 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, down 1.17% year to date.
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Sustainable Growth: Leading Cannabis REITs to Invest in for 2024
As 2024 approaches, cannabis REITs continue to present intriguing investment opportunities. Overall, legalization trends and societal acceptance are fueling this expansion. Innovative Industrial Properties, and Chicago Atlantic, are key players to watch. They each offer unique approaches to cannabis-related real estate. In addition, these REITs provide investors exposure to an industry with high growth potential. Yet, they mitigate direct regulatory and market risks associated with cannabis production and sales.
Investors should consider the diversity and stability these REITs offer. Additionally, they blend traditional real estate investment benefits with exposure to a burgeoning sector. Their focus ranges from medical-use properties to sustainable real estate practices. In general, this variety caters to different investment preferences and risk appetites. As the cannabis market matures, these REITs are capitalizing on emerging opportunities. In conclusion, they offer a compelling mix of income generation and growth potential, making them the top cannabis REITs to watch in 2024.
MAPH Enterprises, LLC | (305) 414-0128 | 1501 Venera Ave, Coral Gables, FL 33146 | new@marijuanastocks.com
