Tempting opportunities beckon real estate investors looking to capitalize on new markets for legalized marijuana, yet many have held back.
They’re stirred by earnings estimates, like the one from the Oakland, California-based ArcView Group that claims the U.S. market for legal pot could increase to $11 billion over the next few years. To revive a timeworn phrase: “There’s gold in them thar hills!”
So far, though, investors have hovered at the toe-dipping stage in this neonate market. It’s likely because of the nontraditional risk. Marijuana is still illegal under federal law. Security and transportation present unique hurdles, and the cash-heavy aspect of the business gives bankers and accountants pause.
Well, grab your capital and get ready to be a “ganjapreneur”! The first real estate investment trust (REIT) with medical cannabis property investments has been listed on the New York Stock Exchange (NYSE).
Marijuana REIT IPOs
San Diego-based Innovative Industrial Properties will focus on lease-back arrangements with long-term, triple net agreements. Anyone with capital to spare and a penchant for getting behind a budding industry can let the professionals at this handle the frontline risks.
The company’s first reported purchase was for 37 acres in Orange County, NY from owner PharmaCann. The property hosts a 127,000-square-foot facility already occupied PharmaCann, according to CNN Money, is licensed to grow and dispense medical marijuana and which will lease back the property.
Innovative works only with state-licensed medical marijuana growers. (No word yet whether agreements could someday expand to growers licensed to produce recreational marijuana.)
Innovative’s stock (IIPR) began trading at $20 a share on Dec. 1 with an IPO of 3.35 million shares. Principals are well-versed in real estate acquisition, and among them, have previously raised capital and financial real estate for REITs with a total capitalization of more than $30 billion. Executive Chairman Alan Gold was president, executive chairman, and CEO at the former BioMed Realty Trust, Inc. from 2004-16. Three other former BioMed execs are now on Innovative’s team.
Will the Pot Trend Continue to Grow?
Of course, the investor who welcomes the strength of an REIT must still be willing to ride out any controversy that could impact stock, but signs are pointing to wide acceptance of medical marijuana.
The IPO came just weeks after the Nov. 8 general election, in which voters in numerous states approved new measures for medical and recreational marijuana use. Medical marijuana is now legal in 28 states and the District of Columbia.
Innovative Industrial Properties is betting on that trend to continue, and it wants to be a big player in the market. Anyone looking to get in on the action now has an investment vehicle that comes with the blessing of the venerable NYSE.
[Disclosure: Author has purchased stock in IIPR but is receiving no compensation to promote the company.]
Investors: Would you put your money into marijuana-focused REITs (or other real estate investments)? Why or why not?
Let’s discuss in the comments section!