Cannabis REITs: When They Go Low, We Get High

Summary

  • High on Growth: Cannabis REITs are far-and-away the best-performing REIT sector of the past half-decade as the budding industry thrives in the murky and often contradictory regulatory framework of legalized marijuana.
  • Joining Innovative Industrial, Power REIT, and AFC Gamma, a pair of newcomers will soon enter the pot party - Chicago Atlantic Real Estate Finance and Freehold Properties - both operating as mortgage REITs.
  • The ongoing federal prohibition - and the resulting limit on access to traditional banking - has forced cultivators and distributors to turn to alternative sources for capital, particularly cannabis REITs.
  • Critically, states have adopted tax and regulatory frameworks in which marijuana cultivation licenses are "attached" to the real estate asset - and limited in quantity - an ideal structure for these REITs.
  • Legalized marijuana production is set to grow 25% annually this decade. Risks are plentiful and valuations are persistently sky-high, but these REITs have established a genuine competitive moat and a track record that can't be ignored, and we see opportunity in the recent pullback.
  • This idea was discussed in more depth with members of my private investing community, Hoya Capital Income Builder. Learn More »

A man using an magnify glass to inspect a marijuana plant ready for harvest.

Jordan Siemens/DigitalVision via Getty Images

REIT Rankings: Cannabis

cannabis REITs

High on Growth: Riding a seemingly never-ending 'high' since emerging onto the scene in the mid-2010s, Cannabis REITs are far-and-away the best-performing REIT sector of the past half-decade as the budding industry thrives in the murky and often contradictory regulatory framework

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Hoya Capital Real Estate ("Hoya Capital") is a research-focused Registered Investment Advisor headquartered in Rowayton, Connecticut. Founded with a mission to make real estate more accessible to all investors, Hoya Capital specializes in managing institutional and individual portfolios of publicly traded real estate securities, focused on delivering sustainable income, diversification, and attractive total returns. A complete discussion of important disclosures is available on our website (www.HoyaCapital.com) and on Hoya Capital's Seeking Alpha Profile Page.

Nothing on this site nor any published commentary by Hoya Capital is intended to be investment, tax, or legal advice or an offer to buy or sell securities. Information presented is believed to be factual and up-to-date, but we do not guarantee its accuracy and should not be considered a complete discussion of all factors and risks. Data quoted represents past performance, which is no guarantee of future results. It is not possible to invest directly in an index. Index performance cited in this commentary does not reflect the performance of any fund or other account managed or serviced by Hoya Capital Real Estate.

Investing involves risk. Loss of principal is possible. Investments in companies involved in the real estate and housing industries involve unique risks, as do investments in ETFs, mutual funds, and other securities. Please consult with your investment, tax, or legal adviser regarding your individual circumstances before investing. Hoya Capital, its affiliate, and/or its clients and/or its employees may hold positions in securities or funds discussed on this website and our published commentary. A complete list of holdings is available and updated at www.HoyaCapital.com.

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