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For several years, Innovative Industrial Properties was the only publicly traded REIT to specialize in the operation and leasing of real estate in medical marijuana properties.
IIPR’s explosive growth has left some investors feeling they missed their chance to invest in this budding sector, but IIPR has new competition.
This investing model offers liquidity for the operator, which can be quite challenging, given marijuana is still illegal at the federal level, while providing NewLake with long-term cash flow secured by real estate.
At the start of 2022, NewLake had 29 properties in its portfolio located in 11 states, for a total of 1.5 million square feet of leasable space.
The companies are very similar in that their business models and portfolios operate in many of the same states and markets and derive income in the same manner.
When IIPR went public in late 2016, it had just one property in its portfolio and $30 million in committed capital.
NewLake Capital also has the benefit of having zero debt and $168 million of cash on hand — putting it in a solid position for expansion using a proven business model for growth.
Right now, it appears NewLake Capital is very much on its way to following the footsteps of IIPR.
Fourth-quarter 2021 and full-year earnings will provide more color on its performance, but its earnings in the new year, without major acquisitions in its recent history, will better indicate if it can maintain this accelerated growth.
NewLake offers growth potential, but with a lot of risks and unknowns through into the mix — a far cry from the stability IIPR offers.
Growth opportunities in the cannabis industry may not be as big as they were five years ago but are definitely still there.
Part of this is poor timing, given the volatility in the market right now.
Meaning both are trading at a notable discount.