(Photo Credit - Nick Youngson)
Overall, the value of real estate in the U.S. has been on the rise in 2017. The Dow Jones U.S. Real Estate Total Return Index is up 4.99% year-to-date at the time this was written. Green states where cannabis has been legalized are experiencing rises in home prices and values far beyond 4.99%. According to Zillow, Home prices and values in California are up 7.1% over the last year, with Massachusetts not far behind with a 6.9% increase.
Surely this recent rise in prices and values in the green states must have some correlation with the blossoming cannabis industries popping up in these states. The legal cannabis industry can be extremely lucrative, and companies are moving to snap up properly zoned real estate to get in on the action.
Back in 2007, Boston Beer Co. bought a 52-acre parcel of land in Freetown, MA for $6 million. Regardless of what Boston Beer planned on doing with the land, they ended up selling the land at a loss for $4,475,000 in cash to AmeriCann, Inc. This land is now going to be the site of a 1 million square foot Massachusetts Medical Cannabis Center.
For investors who don't have $4.5 million in cash sitting around to deploy into the cannabis real estate market, there are other options. Today's chart of the day compares Innovative Industrial Properties (NYSE:IIPR), the publicly listed cannabis-focused REIT, with the Dow Jones U.S. Industrial & Office REITs Index on a one month basis.
As you can see in the chart above, Innovative Industrial Properties has been crushing the U.S. Industrial and Office REITs Index over the last month. Shares of IIPR are up just over 8% in the last month, compared to a nearly 2% gain for the benchmark index. With marijuana sales expected to reach $20 billion by 2021 according to Arcview, there's no sign of slowing down.
Innovative Industrial Properties gives investors exposure to cannabis real estate through its "acquisition, ownership and management of specialized industrial properties leased to experienced, state-licensed operators for their regulated medical-use cannabis facilities."
According to IIPR's most recent financial results, the company "acquired a 127,000 square foot industrial property in a sale-leaseback transaction with PharmaCann LLC." Beyond this transaction, IIPR announced that they had "identified and was in various stages of reviewing approximately $120 million of additional potential properties for acquisition."
If cannabis consumption keeps rising as expected, it's only natural that more real estate will be required to keep up with demand. Real estate is a major component of the cannabis investment landscape, and we'll certainly be watching this trend going forward. Be sure to subscribe to our Cannabis Real Estate Newsletter below so you never miss an update!
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