Select cannabis companies continue to flourish amid market downtrend

The cannabis market continues to grow into a giant particularly with the massive demand in the still developing, yet open legal market in Canada.

Analysts have long regarded the cannabis industry to dominate the market in the coming years. Last 2017, the cannabis sector was worth $9.5 billion and those numbers are expected to hit $32 billion by 2020. That’s a whopping 230 percent increase in valuation.

Of that massive share, the U.S. is projected to represent a major chunk, with $23.4 billion contribution as states take an increasingly tolerant stance on the still federally criminal substance. The U.S. used to have nine states allowing for recreational use of cannabis while another 31 have signed off on medicinal cannabis. But during the last midterm elections, Michigan voted for full recreational use while Utah, Missouri and North Dakota voted for legalizing medical weed, adding more to the already growing number of cannabis supporters.

California alone is projected to reach $5.1 billion in 2019, so it seems that cannabis will reach new heights in the U.S. and around the globe in the near future. This has led to a wide variety of cannabis businesses that have seen strong financial performances, particularly as they ramp up their capabilities to meet the incessant demand for legalized cannabis in Canada.

Rising stars

Shrouded by uncertainty on the part of investors due to murky regulations and outcomes, not to mention the risk of getting involved in a cannabis business, cannabis stocks saw some fluctuations and were all down at the start of 2018. Despite the figures, many brands made a strong recovery due to some landmark moments in the sector that saw increasing acceptance by major organizations of the schedule 1 substance.

With the market showing some stabilization due to these historical decisions (Canada’s full legalization and FDA’s approval of the first cannabis-based drug among others) that have impacted regulations now and in the future, this has fueled the rise of new and established presences in the cannabis market that possesses unique business models to help them capitalize on a wide range of revenue.

Innovative Industrial Properties, Inc. (IIPR), for example, is a real estate investment trust and the first NYSE-traded company to provide real estate capital for medicinal cannabis ventures. It helps combine the efforts of investors in order to secure real estate that can generate solid income on their behalf.

IIPR provides cultivation grounds such as industrial and greenhouse facilities which are leased to licensed growers for the production of medical cannabis. IIPR currently has 875,000 of rentable square feet housed in nine cultivation centers in seven states and seeks to expand its fully owned grounds to provide an additional real estate opportunity for cannabis growers.

Through the acquisition of these state-licensed growth spaces, IIPR can effectively lease the facilities back to cannabis growers to generate capital which can be used to fuel additional company ventures and expand its operations. These resources can then be used to produce a greater amount of quality medicinal cannabis for patients and maximize profits.

The sole proprietor of a cannabis-centered REIT has seen strong returns through their consistent cash flow through the purchase and leasing out of real estate property for cannabis purposes, while also managing to avoid income tax rates through the creative method of sending a majority of benefits as a dividend to shareholders.

With an average initial yield of 15.8 percent at the end of 2017, IIPR’s favorable long-term yield and $1 annual dividend provision to shareholders can provide a healthy 3.2 percent yield. Its greenhouse leases also help maintain steady revenue and have made it an attractive option for investors and cultivators alike.

Innovation in growth

Smart Cannabis Corp. (OTCMKTS:SCNA) is a cannabis cultivation equipment provider that is characterized by its flagship smart greenhouse, which was developed by subsidiary Next Generation Farming Inc. Its greenhouse utilizes space-saving features to help cultivators maximize their harvests while also providing a variety of essential equipment needed to bring about the ideal conditions for growth.

While the greenhouse serves as the housing unit for precious cannabis crops, this is supported by the Geo-Thermal Air Recirculation System that helps eliminate terpenes and the various odors caused by cannabis cultivation. Lighting is provided by the Multi-Spectrum Grow Light Fixtures which incorporate highly efficient LED lights that can be adjusted to a pair of unique settings.

The Smart Micro Boiler helps maintain warm temperatures to promote growth and maintain the integrity of the roots for those growing in colder climates. Finally, all these critical elements are constantly maintained and can be adjusted at the grower’s convenience through the automated Smart App, which ensures that the proper conditions are set no matter where the operator is.

Subsidiary SAP Investments can also help provide these services as professional cannabis consultants to build professional relationships with others seeking their expertise in the industry. SAP was developed to provide full spectrum cannabis cultivation knowledge and help businesses from start to finish with the construction of an effective and well-planned infrastructure.

Smart Cannabis has seen strong results of over $2.4 million with its various contracts, highlighted by its development of the Salinas cultivation center that features 18 smart greenhouses alongside the geothermal exchange system. The $1.8 million-project is progressing rapidly and will take advantage of its innovative gutter connect system to make efficient use of the land.

Around 126,340 square feet of greenhouse space is being developed in several locations throughout Northern California and up until the first quarter of 2019 while the company continues to see strong demand for its maintenance products. So far, it has managed to sell 800 Multi-Spectrum Grow Light Fixtures as well as eight subscriptions for its automated Smart App which includes the software, automated equipment, cameras, and servers to provide up to date tracking services and safety features.

The Smart App is capable of transforming SCNA’s trademark greenhouse into an automated and self-maintained cannabis cultivation center, which provides efficient cultivation grounds for growing purposes.

These two names are just a sample size of the increasing number of successful cannabis businesses in the market. As with any developing sector, there is still room for growth as cultivators, in particular, have been very active in an effort to capitalize on the demand for fully legal cannabis in Canada’s developing market.

The healthy competition will drive further innovation in the various supply chains as business owners continue to flock over to the ripe and seemingly firmly entrenched sector.

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