In just 6 years, it’s estimated that the legal cannabis market will triple from $55 billion today to about $150 billion.
With astronomical numbers like these, it can be easy to get caught up in the “hype” and how attractive the returns might be. But when opportunity is bountiful, so is risk — and you need to be careful how you play the coming boom.
One underrated way to capitalize on the coming boom is to forgo production and cultivation altogether. Instead, focus on the real estate.
The Top-Guns in Cannabis Real Estate Stocks
Real estate companies in the cannabis industry are the ones that own or lease properties to other companies that grow cannabis. Some have their own grow operations. But others forgo the production and cannabis supply/demand risk and stick to just being landlords. Here are four companies to look at:
MJ Holdings Inc. (OTC: MJNE)
MJ Holdings Inc., headquartered in Las Vegas, provides real estate, management, and consulting services to the cannabis industry. Their operations include a 3-acre cannabis cultivation facility in Nevada, a licensed indoor cannabis tourism facility (called the Highland Show-Grow), and their own cannabis products, including pre-rolls, edibles and other products for the Nevada market.
Their main claim to fame is successfully petitioning the State of Nevada in 2018 to develop a 3-acre testing ground for growing cannabis in the arid dessert climate of Nevada. Here, they deployed their exclusive and advanced mesh system to provide protection against UV rays, heat, pests, and insects. So far, they have used this to grow 8,000 cannabis plants of thirteen unique strains. This mesh system gives them a competitive edge by reducing expenses.
Moreover, MJ Holdings is now starting their industrial hemp operations to expand their business even further. Hemp is growing in demand in the U.S. cannabis industry because its CBD isolate is used in a diverse variety of products, including dietary supplements, beverages, pet products, and cosmetics. Finally, MJ expects to triple operations by 2020 and expand to Europe. These moves could double or triple their stock in less than two years.
Grow Capital Inc. (OTC: GRWC)
Grow Capital (formerly Grow Condos) is a real estate purchaser, developer and manager of industrial properties. It provides turnkey facilities and properties for U.S. cannabis growers, including management services, facility design, licensing support, and operational management, and plans to add consulting, equipment, and supplies as part of its offerings as well. They are currently seeking more potential properties in Oregon, Colorado, Washington, California, and Nevada.
The cannabis-related business market, including real estate and fintech, is Grow Capital’s new focus. These guys want to run the show and their strategy is simple: “identify companies with a clear niche & need with strong leadership. Acquire them. Help them grow. Watch our shareholder value increase.” Of course, not everyone can pull this off, but Grow Capital Inc. has 20 years of experience to bring to the industry.
Two Rivers Water & Farming Co. (OTC: TURV)
Two Rivers, headquartered in Denver, Colorado, is a leader in acquiring and developing irrigated farmland and attaining the associated water rights, particularly in arid environments in the southwestern United States. It is expanding to the cannabis industry by developing and leasing greenhouses to companies. Its area of focus is the Huerfano-Cucharas river basin in Colorado and its long-term strategy is on how to increase value from water assets for stakeholders.
Recently, Two Rivers acquired three cannabis businesses. This adds to its control of substantial water rights in south central Colorado, which allow it to dominate cannabis businesses who require the scarce water controlled by Two Rivers in the region.
Two Rivers has a genius plan in place. They combine two high-growth industries, water and cannabis, to deliver a unique business model. This strategy could triple its stock value in several years.
Innovative Industrial Properties Inc. (NYSE: IIPR)
Innovative Industrial Properties Inc., headquartered in San Diego, is a real estate investment trust (REIT) focusing solely on the cannabis industry. REITs buy and rent commercial real estate. Rent or lease payments drive their income, which they then transfer through dividend payments to investors. In fact, management stated in a recent presentation that the goal is to pay out 75% to 85% of their adjusted funds from operations (AFFO) to shareholders.
IIPR’s current dividend yield is 2.25%, an 80% increase from last September. And with IIPR being an REIT, they provide the opportunity for income and growth. But what sets IIPR apart from other REITs is that it’s the only publicly traded REIT in the cannabis industry.
And that’s only the beginning considering their unique position in the industry.
Operators of medical marijuana facilities rely on IIPR. You see, banks are reluctant to provide the cannabis operators with the capital they need. IIPR will come in, buy the operators’ property and lease it back to them. Operators can then use their capital for other operations. And because IIPR is dominant in this deal, it can charge relatively high rates and earn 15% return on what it spends in buying cannabis buildings.
Right now, IIPR owns properties across 11 states, including those with large legal cannabis markets, such as Colorado. All of its 18 properties are leased to cannabis companies with an average of 15 years left on their lease terms. In a volatile stock market, it’s refreshing to have a company that promises to offer the steady dividends for more than a decade to come.
IIPR is also sitting on a $130 million cash war chest. It plans to use this for expansion and to acquire more properties. Just last week, IIPR acquired a five-property portfolio in Southern California worth $27.1 million.
We’ve already seen IIPR’s revenue rise a tremendous 130.37% year-over-year, and with new acquisitions you can expect strong growth to continue.
Since last year October, its stock has nearly doubled, but there could be more upside to be had. The consensus among Wall Street analysts is that IIPR is a buy and analysts can see it going to a high of $101.00, a 21% increase from its current price.
-Investing Insider Magazine