For cannabis curators, real estate remains one of the biggest challenges. Locations in legal markets are often highly restricted, and many landlords don’t wish to rent to marijuana businesses, making matters even more difficult. Finding the right location is possible – and real estate investment trusts (REITs) have recently stepped in to help cannabis businesses overcome these hurdles.
Three REITs dominate the cannabis industry, according to data from Cannabiz Media. Based on deal value, one company comes out far ahead: Innovative Industrial Properties (NYSE: IIPR), which clocks in at $2.2 billion in deal values.
NewLake Capital Partners (OTC: NLCP) follows, with $400 million in booked deals.
In a distant third is AFC Gamma (NASDAQ: AFCG), with $100 million in deal value.
IIP also leads in the number of deals, coming in with 65. NewLake Partners keeps its second place with 25 deals, while Power REIT jumps ahead of AFC Gamma with 15 deals versus AFC Gamma’s five.
Cannabiz Media showed that zero deals happened in the fourth quarter of 2023 and the first quarter of 2024.
NewLake Capital Partners broke that drought in the second quarter of 2024 with a deal valued at $16 million. In August, AFC Gamma announced it had closed a new senior secured credit facility for a private company.
Innovative Industrial Properties
IIP boasts 30 clients across 19 states and is the first – and only – REIT publicly traded on the New York Stock Exchange that provides real estate capital to cannabis companies. The company’s top three states are Michigan (14 properties), Massachusetts (10 properties), and Pennsylvania (10 properties).
Its largest tenant is PharmaCann, which leases 697,000 square feet for $48 million in annualized base rent (ABR). Ascend Wellness contracts for 624,000 square feet at $30 million in ABR, while Green Thumb Industries provides $21 million in ABR on 664,000 square feet.
Despite the favorable statistics, IIP told investors in its last earnings announcement that its clients weren’t immune to the pressures in the industry, such as a robust illicit market, increased labor costs, and the decline of cannabis prices. Drilling down into the rental income, IIP reported an increase in rental revenues this past quarter but also noted that it lost rent on a property that it had to take back.
NewLake Capital Partners
According to its latest investor presentation, NewLake Capital Partners has 32 properties in 12 states and is 100% leased. Its top three states are Pennsylvania, Florida, and Illinois.
Its top three clients are Curaleaf (23.8%), which has 462,000 square feet leased; Cresco Labs (13.6%), with one lease for 222,455 square feet; and Trulieve (11.6%), with one lease covering 144,602 square feet. The Cannbist, another NewLake client, has five leases but only claims 83,188 square feet.
AFC Gamma
AFC Gamma, also known as Advanced Flower Capital, operates in 15 states with 12 loans out to clients. The company is highly selective about its client base and has rejected 795 deals but has not revealed why.
The company does not disclose its customer base; instead, it refers to them with generic descriptions such as Private Company A. In addition, AFC Gamma does not provide AFFO data.
In August, AFC Gamma closed a new senior secured credit facility for a Georgia-based operator it calls Private Company Q. AFC told investors it had committed $11 million, with $4.3 million funded at closing, in a senior secured credit facility to the company, which holds a Class 2 cannabis license.
Together, these three REITs are making all the difference for marijuana businesses, helping them to get acclimated and implemented into a legalized system that is still very new to them.
