Essential Cannabis REITs to Follow Pre-March 2024
This week, interest in Cannabis Real Estate Investment Trusts (REITs) is growing. They provide a distinctive way to enter the cannabis industry. These REITs support the expanding real estate sector by providing infrastructure. Retailers, processors, and cultivators rent space from them. With this arrangement, investors may learn about cannabis without having to get hands-on experience with growing or selling it. In general, these REITs may profit from higher demand for specialist properties as the industry grows.
The cannabis market in the United States is expanding. Sales are expected to reach $45 billion by 2025 after reaching $25 billion in 2021. Growing acceptability and legalization tendencies are the driving forces behind this expansion. Also, technical analysis is being used by investors to find entry points and trends in this erratic market. Effective risk management is essential. In this market that offers great returns but considerable risk, it helps reduce possible losses. In general, understanding market dynamics and risk considerations is essential to making wise investment decisions as interest in cannabis REITs rises.
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March 2024 Watchlist: Leading Cannabis REITs Poised for Growth
- 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) stands out among cannabis REITs. It was founded in 2016 with an emphasis on facilities that provide medical cannabis. Specialty industrial assets are bought, held, and managed by the company IIP. In general, these assets are leased to operators who possess state permits and experience. IIP had 111 properties dispersed throughout 19 states as of 2023. The majority of them live in Pennsylvania, Michigan, and California. In addition, there are sizable medical cannabis markets in these states. IIP’s multi-domain presence highlights its approach to strategy.
Triple-net leasing contracts are part of IIP’s business plan. The tenant is responsible for paying the majority of the property costs under these arrangements. IIP receives a steady, predictable funding stream from this arrangement. Also, it is essential to their financial security. The company’s expansion is in line with the expansion of the US cannabis market. Since its founding, IIP’s portfolio has consistently increased. The increasing demand for real estate associated with cannabis is reflected in this growth. Real estate for cannabis can be purchased by investors at a lower regulatory risk through Innovative Industrial Properties. In general, its emphasis on qualities for application in medicine is the cause of this.
Third Quarter 2023 Results
Innovative Industrial Properties, Inc. (IIP) announced notable financial growth in the third quarter of 2023. The overall revenue increased by 10% from $70.9 million in 2022 to around $77.8 million. The principal drivers of this growth were the procurement of additional properties and increased rent reimbursements to renters. In addition, the amount that tenants paid in property taxes and insurance premiums increased from $2.7 million in 2022 to $6.2 million in 2023. In addition, $2.2 million in requested security deposits was included in the rental income. These were acquired through Temescal, 4Front, and Holistic leasing. Furthermore, Kings Garden paid the $1.7 million agreed-upon rent until September 20, 2023. Additionally, this applied to the assets that IIP reclaimed in late September 2023.
IIP has had a strong financial year in the first nine months of 2023. $122.9 million, or $4.32 per share, of the net gains, went to common investors. Normalized Funds from Operations (FFO) was $175.5 million ($6.21 per share) compared to $173.2 million ($6.13 per share) for Funds from Operations (FFO). $192.2 million in Adjusted Funds from Operations (AFFO) translates to $6.80 per share. IIP followed its dividend policy to the letter. On October 13, 2023, a quarterly dividend of $1.80 per common share was distributed. This implied an AFFO payout ratio of 79%. For the calendar year that concluded on September 30, 2023, the annual dividend was boosted by 6% to $7.20 per common share.
New Finance Contract
In October 2023, IIP signed a big finance contract. A thirty-million-dollar revolving credit facility was extended to the Operating Partnership, an IIP subsidiary. October 23, 2026, is when this matures. The credit facility is based on the loanable qualifying real estate of the Subsidiary Guarantors. Lease payments, equity holdings, and real estate are some of the assets utilized to fund the loan. The prime rate and any relevant margin have an impact on interest rates, which are prone to fluctuate. Standard covenants are included in the agreement, and under some circumstances, extra loan requirements are permitted. This financial strategic decision could potentially increase IIP’s operating flexibility and liquidity.
IIPR Stock Performance
On February 16th, IIPR stock closed at $92.00, down 0.51% in the last month of trading. In this case, the stock is currently trading in a 52-week price range of $63.36-$105.07, down 8.75% year to date.
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NewLake Capital Partners, Inc.
NewLake Capital Partners, Inc. specializes in the cannabis industry’s real estate sector. They invest in and leaseback properties to state-licensed operators. Their portfolio includes cultivation centers and retail locations. This model provides operators with capital while ensuring NewLake’s steady rental income.
As of my last update, NewLake boasted a significant number of properties across various states. The states with the most presence include California, Illinois, and Pennsylvania. These areas are key markets in the U.S. cannabis industry. Their strategic locations support some of the largest operators in the sector.
Third Quarter 2023 Financial Highlights
In the third quarter of 2023, NewLake Capital Partners, Inc. reported financial results with flat quarter-over-quarter performance in key metrics. Revenue remained steady at $11.5 million, while net income for common stockholders was $6.0 million. Funds from Operations (FFO) and Adjusted Funds from Operations (AFFO) were reported at $9.6 million and $10.1 million, respectively. The company’s liquidity was highlighted by its cash and cash equivalents totaling $31.1 million, despite $20.2 million committed to funding Tenant Improvements (TIs). Year-over-year comparisons revealed slight decreases across the board due to the non-payment of rent by one tenant, affecting revenue, net income, FFO, and AFFO negatively.
Operational highlights for the quarter included the repurchase of 608,152 shares under the company’s stock repurchase program at an average price of $13.02, alongside declaring a dividend of $0.39 per common share. Notable developments involved a lease amendment with Revolutionary Clinics in Massachusetts and the sale of a cultivation facility in Palmer, Massachusetts. Additionally, NewLake funded approximately $2.6 million in TIs across three properties. Also, investment activity for the nine months ended September 30, 2023, featured acquisitions and funded TIs, with notable transactions including the expansion of a cultivation facility in Missouri. The company also provided an outlook for 2023, reaffirming AFFO guidance reflecting a modest increase over the previous year.
NLCP Stock Performance
NLCP stock closed at $16.44 on February 16th, down 2.72% in the past month of trading. Additionally, the stock has a price range of $11.80-$18.85 and is up 2.69% year to date.
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Chicago Atlantic Real Estate Finance, Inc.
One significant participant in the financial aspect of the cannabis market is Chicago Atlantic Real Estate Finance, Inc. Their areas of expertise are capital for real estate and credit solutions. In addition, their services assist cannabis business owners at different phases of their company life cycle. Chicago Atlantic serves as a liaison between the cannabis market’s growth prospects and finance requirements.
The business has a huge portfolio, with many locations financed in important states. They are positioning places with thriving legal marijuana markets. These comprise, among other states, Michigan, Illinois, and California. Their deliberate attention to these areas shows that they are fostering the expansion of the cannabis sector.
Third Quarter 2023 Financial Results
As of September 30, 2023, Chicago Atlantic reported a portfolio with total loan commitments of approximately $355.9 million. This includes $344.7 million already funded and $11.2 million planned for future funding across 27 investments. The portfolio’s weighted average yield to maturity slightly increased to 19.3%. Real estate collateral coverage remained steady at 1.5 times. The loan-to-enterprise value ratio saw a minor uptick to 42.5%. Loans bearing a variable interest rate decreased to 81% from 88%.
During the third quarter, Chicago Atlantic had gross originations totaling $35.4 million, with $32.8 million funded to new borrowers. Also, this was offset by principal repayments of $10.9 million. The company paid a quarterly cash dividend of $0.47 per share on October 13, 2023. Net interest income stood at $13.7 million, with total expenses before credit loss provisions at $3.9 million. Distributable earnings increased to $10.5 million, or $0.57 per share. The book value per share rose to $15.17, attributed to earnings surpassing the dividend payout. In addition, the company maintains a leverage ratio of approximately 23% and reaffirmed its 2023 financial outlook.
REFI Stock Performance
On February 16th, REFI stock closed at $16.00, down 0.76% 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 1.11% year to date.
Premier Cannabis REITs to Eye Before March 2024
Top Cannabis REITs are emerging as a significant investment opportunity this week. Their role in supporting the cannabis industry’s infrastructure is pivotal. In addition, with the U.S. cannabis market projected to grow substantially, these REITs offer a unique blend of real estate stability and sector growth. Overall, they cater to a burgeoning industry, leasing facilities to growers, manufacturers, and retailers. As legalization expands, so does the demand for specialized real estate. Investors should watch these REITs closely. In general, their performance could reflect the broader industry’s trajectory.
Investing in Cannabis REITs requires careful analysis. Technical analysis can help identify trends and potential entry or exit points. However, the cannabis market’s volatility demands robust risk management strategies. Also, diversifying investments and setting stop-loss orders are prudent measures. With the U.S. cannabis industry expected to continue its growth, these REITs hold promise. Yet, investors must navigate this opportunity with caution. Also, understanding market dynamics and maintaining a balanced portfolio is essential for capitalizing on this emerging market.
MAPH Enterprises, LLC | (305) 414-0128 | 1501 Venera Ave, Coral Gables, FL 33146 | new@marijuanastocks.com
