NEW CANAAN, Conn. — NewLake Capital Partners, Inc. (OCTQX: NLCP) (the “Company” or “NewLake”), a leading provider of real estate capital to state-licensed
cannabis operators, today announced its financial results for the
third quarter ended September 30, 2023.
Anthony Coniglio, President and Chief Executive Officer, said, “Our financial results quarter-over-quarter were consistent and in line
with our expectations. Through the first nine months of 2023, we have maintained our quarterly dividend of $0.39 per share and repurchased 713,831 shares in the open market. Our team has worked hard to create value for shareholders by executing on our share
repurchase program, amending our lease with Revolutionary Clinics and working with a tenant to dispose of a Massachusetts property at our original cost.”
Third Quarter 2023 Financial Highlights
Quarter-over-quarter revenue, net income, Funds from Operations (“FFO”), and Adjusted Funds from Operations (“AFFO”) were relatively flat.
As a result, presented below are only the third quarter financial highlights.
◦
Revenue totaled
$11.5 million.
◦
Net income attributable to common stockholders totaled
$6.0 million.
◦
FFO(1) totaled
$9.6 million.
◦
AFFO(1) totaled
$10.1 million.
◦
Cash and cash equivalents as of
September 30, 2023, were
$31.1 million, with $20.2 million committed to fund Tenant Improvements (“TIs”).
Comparison to the third quarter ended September 30, 2022:
Quarterly
year-over-year financial results were impacted by the non-payment of contractual rent from one tenant in 2023.
◦
Revenue totaled
$11.5 million as compared to
$12.1 million, a decrease of
4.9% year-over-year.
◦
Net income attributable to common stockholders totaled
$6.0 million, as compared to
$6.5 million.
◦
FFO totaled
$9.6 million, as compared to
$10.3 million, a decrease of 6.0% year-over-year.
◦
AFFO totaled
$10.1 million compared to
$10.6 million, a decrease of 5.1% year-over-year.
Nine Months Ended September 30, 2023 Financial Highlights
Comparison to the nine months ended September 30, 2022:
◦
Revenue totaled
$34.3 million as compared to
$32.8 million, an increase of
4.7% year-over-year.
◦
Net income attributable to common stockholders totaled
$17.6 million, as compared to
$15.3 million.
◦
FFO totaled
$28.6 million, as compared to
$24.7 million, an increase of 15.8% year-over-year.
◦
AFFO totaled
$29.9 million compared to
$27.8 million, an increase of 7.7% year-over-year.
Third Quarter
2023 Operational Highlights and Recent Developments
◦
For the
three months ended September 30, 2023, the Company acquired, pursuant to its
repurchase program, 608,152 shares of its common stock at an average price, including commissions, of
$13.02.
◦
Declared a third quarter dividend of
$0.39 per common share, equivalent to an annualized dividend of $1.56 per common share, paid on October 13, 2023 to stockholders of record on the close of business on
September 29, 2023.
◦
For the
three months ended September 30, 2023, the Company funded approximately
$2.6 million of TIs across three properties.
◦
In October 2023, the Company entered into a lease amendment and forbearance agreement
with Revolutionary Clinics for the Company’s cultivation facility in Massachusetts.
◦
In October 2023, the Company closed on the sale of its cultivation facility located in Palmer, Massachusetts.
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(1) FFO and AFFO are presented on a dilutive basis.
Financing Activity
Revolving Credit Facility
As of September 30, 2023, the Company had approximately
$1.0 million in borrowings under the Revolving Credit Facility and
$89.0 million in funds available to be drawn, subject to sufficient collateral in the borrowing base. The facility bears a fixed rate of
5.65% for the first three years and thereafter a variable rate based upon the greater of (a) the Prime Rate quoted in the Wall Street Journal (Western Edition) (“Base Rate”) plus an applicable margin of
1.0% or (b) 4.75%.
The facility is subject to certain liquidity and operating covenants and includes customary representations and warranties, affirmative and negative covenants, and events of default. As of
September 30, 2023, the Company is compliant with the covenants in the facility.
Seller Financing
In
January 2023, the Company made its annual principal payment of
$1.0 million. The loan’s outstanding principal balance as of
September 30, 2023 was
$1.0 million. The loan bears interest at a rate of
4.00% per annum with annual principal payments. The remaining principal payment of
$1.0 million is due in
January 2024.
Stock Repurchase Program
On
September 15, 2023, the board of directors authorized an amendment to the stock repurchase program for the repurchase of up to an additional
$10.0 million of the Company’s outstanding common stock and extended the program through
December 31, 2024. For the
nine months ended September 30, 2023, pursuant to the repurchase plan, the Company acquired
713,831 shares of common stock at an average price, including commissions, of
$12.96, totaling approximately
$9.3 million. The remaining availability under the program as of
September 30, 2023, was approximately $10.7 million.
Dividend
On
September 15, 2023, the Company declared a
third quarter
2023 cash dividend of
$0.39 per share of common stock, equivalent to an annualized dividend of
$1.56 per share of common stock. The dividend was paid on
October 13, 2023, to stockholders of record at the close of business on
September 29, 2023 and represents an AFFO payout ratio of 81.6%.
Recent Developments
Leases
Revolutionary Clinics
In October 2023, the Company entered into a lease amendment and forbearance agreement (the “Agreements”) for its existing lease agreement with Revolutionary Clinics
on its cultivation facility in Massachusetts, where Revolutionary Clinics is the sole tenant. Under the terms of the Agreements, the lease term was extended by
five years. The Company received
$480 thousand of unpaid rent and applied the remaining
$315 thousand of security deposit; these amounts will be recognized as income in the fourth quarter of 2023. Additionally, the Company has received October and November contractual rent payments pursuant to the amended lease. The new reduced rental payments
will represent approximately 6.1% of estimated fourth quarter portfolio contractual rental income. The rental payments may escalate as the tenant’s business achieves certain gross revenue metrics. Under the forbearance agreement,
the Company provided forbearance for approximately $2.0 million of back rental income.
Lastly, the Company received 9.95% of equity in Revolutionary Clinics in the form of warrants.
Calypso
Calypso did not make its weekly October rent payments. However, it has resumed its weekly rent payments in November. Calypso continues to work towards a sale of its
business.
Disposition of Real Estate
In October 2023, the Company closed on the sale of its cultivation facility in Palmer, Massachusetts, for $2.0 million, which was leased to Mint. The Company’s investment
in the property was $1.9 million. Upon closing, Mint’s lease agreement was terminated and they paid a portion of the closing costs, resulting in a break-even sale of the property.
Outlook for 2023
NewLake Capital is reaffirming AFFO guidance for full year 2023 of $39.8 to $40.8 million, an increase of 4.1% over AFFO for the same period the prior
year, assuming the midpoint of that range.
About NewLake Capital Partners, Inc.
NewLake Capital Partners, Inc. is an internally managed real estate investment trust that provides real estate capital to state-licensed cannabis operators through
sale-leaseback transactions and third-party purchases and funding for build-to-suit projects. NewLake owns a portfolio of 31 cultivation facilities and dispensaries that are leased to single tenants on a triple-net basis. For more information, please visit
www.newlake.com.
Forward-Looking Statements
This press release contains “forward-looking statements.” Forward-looking statements can be identified by words like “may,” “will,” “likely,” “should,” “expect,” “anticipate,”
“future,” “plan,” “believe,” “intend,” “goal,” “project,” “continue” and similar expressions. Forward-looking statements are neither historical facts nor assurances of future performance. Instead, they are based only on our current beliefs and expectations.
Forward-looking statements are based on the Company’s current expectations and assumptions regarding capital market conditions, the Company’s business, the economy and other future conditions. All of our statements regarding anticipated growth in our funds
from operations, adjusted funds from operations, anticipated market conditions, and results of operations are forward-looking statements. Because forward-looking statements relate to the future, they are subject to inherent uncertainties, risks and changes
in circumstances that are difficult to predict and many of which are outside of our control. Our actual results may differ materially from those indicated in the forward-looking statements. Therefore, you should not rely on any of these forward-looking statements
For a discussion of the risks and uncertainties which could cause actual results to differ from those contained in the forward-looking statements, see “Risk Factors” in our most recent Annual Report on Form 10-K and any subsequent Quarterly Reports on Form
10-Q. The Company does not undertake, and specifically disclaims any obligation, to publicly release the result of any revisions which may be made to any forward-looking statements to reflect the occurrence of anticipated or unanticipated events or circumstances
after the date of such statements, except as required by law.
Use of Non-GAAP Financial Information
FFO and AFFO are supplemental non-GAAP financial measures used in the real estate industry to measure and compare the operating performance of real estate companies.
