The hot topic at the Institutional Cannabis & Capital Conference in San Jose this week was real estate. While institutional investors are unlikely to invest directly in cannabis production or sale given federal illegality and are somewhat averse to investing in companies operating to support the industry, it was clear that owning real estate and leasing it to operators in the industry is gaining appeal with this group.
The New York Times today ran a story about how demand for industrial warehouses from cannabis cultivators is fueling a boom in real estate across the country, driven by the premium to be earned by landlords willing to serve the industry:
Commercial real estate developers say they have never seen a change so swift in so many places at once. From Monterey, Calif., to Portland, Me., the new industry is reshaping once-blighted neighborhoods and sending property values soaring. In some Denver neighborhoods, the average asking lease price for warehouse space jumped by more than 50 percent from 2010 to 2015, according to an industry report. In the city over all, there are five times as many retail pot stores as stand-alone Starbucks shops.
Last year’s NYSE IPO by cannabis REIT Innovative Industrial Properties (NYSE: IIPR) was perhaps a tipping point. Not surprisingly, CEO Paul Smothers was in attendance along with several others who are building portfolios of real estate leased to cannabis operators, including George Stone and Potter Polk of Kalyx Development, who are rumored to be considering going public.
There’s capital that is starting to stack up on the sidelines. They’re looking for how to participate, and they’re looking for institutional-grade projects.
The difference with investing in real estate leased to Cannabis growers is that you can remain anonymous as a investor comparative to investing in growers you have to be listed as a investor on their lease.
Take a look at Altmore Capital with their Cannabis Real Estate Fund that has a experienced team led by Patrick Kim and Steve Ham.