Pobytov
Introduction
When companies are steady and the cash flow is predictable, fundamental analysis by just using metrics like (Adjusted) Funds From Operations could go a long way in analyzing whether a REIT is a good investment or not. But my
Innovative Industrial Properties Vs. NewLake Capital Partners: Operating In A Sector Clouded With Uncertainty
Summary
- Analyzing troubled REITs requires looking beyond superficial metrics like dividend yield and payout ratio.
- Despite positive trends in Cannabis adoption, both IIPR and NLCP face significant risks due to regulatory uncertainties and financial headwinds in the cannabis sector, necessitating a thorough analysis.
- Regulatory issues and questionable rental rates seem to be impacting tenant stability and financial performance. Schedule III status could eliminate most of the sector-specific risks.
- Comparing both companies from a fundamental perspective, I rate IIPR a 'hold' and NLCP a 'speculative buy' for investors seeking to capitalize on potential (future) regulatory tailwinds.
I'm Luuk Wierenga, an economics teacher from the Netherlands with a strong focus on income investing. My investment journey began during COVID-19, and since then, I've specialized in identifying high-yield Real Estate Investment Trusts (REITS) that provide stable passive income and/or a possible mean reversion. As an educator, I apply fundamental economic insights to assess market trends, and I prioritize REITS that align with value and income-focused strategies.
Analyst’s Disclosure:I/we have no stock, option or similar derivative position in any of the companies mentioned, and no plans to initiate any such positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.
Current sector specific risks as well as tenants struggling, together make watch from the sidelines. When more positive news hits the market from the regulation front, I might initiate a position.
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