REITs Expect To See Their Money Grow Along With Marijuana

Ron Strider

Well-Known Member
Marijuana industry insiders agree that it isn't easy to make money on the cultivation side of the business anymore, but that isn't stopping the money that is flooding into the real estate side of the business. According to New Frontier Data, cultivation and retail was the top sector for capital raises with $478 million of private cannabis investment.

Marijuana REITs are multiplying as real estate professionals believe it is easy money to build a grow facility, use the latest technology to make the crop yield as efficient as possible, bring in someone else to actually grow the marijuana (so they don't run afoul of the law) and then collect a nice rent from the cultivator that is selling tons of pot.

The problem with this equation is that marijuana is now trading like a commodity with prices mostly falling as supply has outpaced demand. Indoor grow facilities are expensive to operate compared to greenhouses (a combination of indoor and outdoor) or outdoor grows. However, in some local markets, the weather doesn't cooperate and indoor grows are the only solution.

Innovative Industrial Properties (IIP) was first to list on the NYSE and the stock is down 7% year-to-date since going public in December. Shares were priced at $20 and have pretty much stayed below that price since then and were recently trading at $16.89. The stock does pay a dividend and is currently yielding 1.7%. Part of the reason for this success is that IIP had already signed its first client as a part of the deal. PharmaCann is paying IIP $319,580 a month in rent and a property management fee of $105,477 per month. Yet, they are located in the challenging New York market where the program is growing but still struggling.

They also made an acquisition in the Maryland market in May for $8 million, with an additional $3 million owed upon completion of certain milestones. The tenant, Holistic Industries, will pay $1.2 million per month to lease the facility and has only just started to grow its plants. IIP now has a market cap of $58 million.


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Full Article: REITs Expect To See Their Money Grow Along With Marijuana
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