AFCG and Schumer’s SAFE banking ActHi Travis,
Do you have any thoughts on how this proposed legislation would impact the business model of AFCG and IIPR? My gut feel is that this could open up more financing opportunities for Pot companies and thus put a cap on the pricing power that AFCG/IIPR currently enjoy. But the price action has been pretty good over the last month while the SAFE banking act seems to also be picking up steam.
As always, any thoughts would be appreciated.
Regards,
mike spielman
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Improved access to banking and the end of pot as a schedule 1 drug are both good and bad — good because it makes it much easier and a little more profitable to run a marijuana business, which means their tenants are in better shape, bad because their tenants will have more choices in lenders so the net margin that the landlord/financier makes is likely to tighten.
Personally, I think defaulting tenants is the scariest risk, not competition… so I think any banking change that helps the pot companies will be good for our REITs in the end. But it’s a judgement call, and it’s certainly also true that this is a widely-discussed risk for
Investors in The marijuana REITs, so investors might sell if banking is liberalized just because of the fear that it
Will be bad.
More competition is bad in the long term, but less bad for IIPR because they have much longer leases (10-20 yrs vs 3-5 yrs for AFCG’s loans). AFCG, on the other hand, Has less inflation risk because of those shorter terms. Defaults are rally the looming potential crisis for both.
Thanks for the timely response Travis. It will be interesting to see how it plays out.