Now that legalization is spreading, marijuana is now trading like a commodity.
If that wasn’t enough to make the burgeoning legality of cannabis a very real thing, REIT’s, or real estate investment trusts, have been setting their sights on the “green” that marijuana cultivation can bring in. “Green” being money, that is.
Real estate pros have been setting up REITs for marijuana, thinking they will make good money by establishing growing facilities, bringing in companies to actually cultivate cannabis, and therefore the REITs reap rent profit.
This is a relatively sound strategy, of course. Those heading up the REITs don’t want to get in trouble with the law, so bringing in companies that are already growing and cultivating cannabis–or at least aim to do so–is a wise move.
But there is a somewhat iffy aspect about this new area of investing at this point in time: while marijuana is being traded like a commodity, supply has clearly outgrown demand, so trading prices are low.
That isn’t stopping cannabis-related REITs from continuing on, despite struggling markets in certain areas. Innovative Industrial Properties (IIP), who was the first company to list on the NYSE, is the “landlord” as it were, for both PharmaCann from the New York market, and Holistic Industries, from Maryland. Despite New York’s marijuana market struggling a bit, and Holistic Industries only just starting growing plants, IIP stands to make more than a tidy profit from these two “tenants.”
This said, the Trump administration and Jeff Sessions are very unfriendly towards the marijuana industry in general, so cannabis-based real estate may seem like a risky bet.
However, marijuana-based REITs could gain a fairly strong foothold in places where medical cannabis has been made legal, but have economically-challenged areas that would willingly play host to a cultivation plant.