NewLake Capital Meets Expectations, Looks For 'Quality Over Quantity'

Cannabis REIT NewLake Capital Partners, Inc. (OCTQX: NLCP) posted positive results on Wednesday as it continues to inject capital into the cannabis real estate landscape. The real estate trust released results for the second quarter ending June 30, 2022.

NewLake met expectations as it delivered total revenues of approximately $10.5 million during the period, a 59% gain from $6.7 million for the same quarter last year — eking out past Yahoo Finance Average analyst estimate for revenues of $10.2 million.

“We continue to be pleased with our AFFO growth, which has allowed us to increase our dividend for the fifth consecutive quarter,” newly-minted CEO Anthony Coniglio said. “While our pipeline is as robust as we have seen in our company history, we remain disciplined in our underwriting approach and focus on quality over quantity.”

NewLake posted net income of $3.8 million for the quarter at $0.18 per diluted share, versus $2.7 million in the previous year’s second quarter. The company also posted an AFFO of $8.7 million, or $0.41 cents a share, versus $4.8 million in the same quarter last year.

The company said that net income and FFO were impacted by one-time severance costs of $1.6 million in connection with certain executive separation agreements. Such agreements were contemplated as part of the succession plan at the time of the company merger in March last year, it said.

NewLake posted a FFO of $6.5 million or $0.31 per basic and $0.30 per diluted share. The company said it had cash and cash equivalents of $49.6 million. Around $12.2 million was committed to funding tenant improvements.

The company also paid a quarterly dividend of $0.35 per common share on July 15 to stockholders — versus two cents per common share in the prior quarter — equal to an annualized dividend of $1.40 per share.

Rental income for the second quarter increased by $2.9 million from the prior year to total $9.6 million. The increase in rental revenue was due to the acquisition of several properties — around 23 — over the past two years, in addition to $20,000 from raising rent.

In April, NewLake said it signed a $34 million aggregate three-part commitment for a cultivation property in Missouri consisting of $7.3 million to purchase a 40,000 square foot cultivation facility, a commitment to fund additional $5.2 million to finish construction, $16.5 million to expand the facility by purchasing an adjacent parcel of land and fund construction and an interest-only four-year $5 million loan that can be drawn over the next year.

Once fully built, the combined property will be a state-of-the-art 105,000 square foot cultivation facility.

NewLake also entered into a revolving credit facility in May with a $30.0 million initial commitment, which was expanded to $90.0 million in July, maturing in May, 2027 with a fixed interest rate of 5.65% for the first three years and a floating rate thereafter.

“Subsequent to the quarter, we successfully increased our credit facility from $30 million to $90 million, which will allow us to continue investing in high quality assets,” said Coniglio. “We believe our ability to consistently evaluate high quality transactions with the best operators in the space and have access to capital from banking partners that believe in our ability to execute is a testament to our team, model and disciplined approach.”

Last month, NewLake said it had acquired two properties from a leading publicly-traded U.S. multi-state cannabis operator (MSO) for $28 million and amended its existing lease with another leading publicly-traded U.S. MSO to fund an already completed expansion.

The two properties NewLake acquired include an approximately 38,000 square-foot operational cultivation facility in Pennsylvania for $14.5 million and an approximately 56,500 square-foot operational cultivation facility in Nevada, a new market for NewLake, for $13.6 million.

NewLake’s stock was trading at $17.48 in pre-trading Thursday morning, a slight uptick from $16.75 in the previous day.

Adam Jackson

Adam Jackson covers the cannabis industry for The Green Market Report. He previously covered the Missouri statehouse for The Columbia Missourian and freelanced for The Missouri Independent. He most recently covered retail, restaurants, and other consumer companies for Bloomberg Business News. You can find him on Twitter @adam_sjackson and email him at adam.jackson@crain.com.


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