NewLake Capital Partners Advances Revenue Strategy Amid Nascent U.S. Cannabis Sector

LOS ANGELES- The U.S. cannabis industry, which is in its nascent stages of development, has been shadowed by a perception of elusive profitability, regarded by investors as a distant goal rather than a current reality. This view, however, is steadily being challenged by a select group of non-plant touching public entities which have not only achieved profitability but are also rewarding shareholders with dividends. A prime example of such a company is NewLake Capital Partners Inc., a real estate investment trust (REIT) that caters to state-licensed cannabis operators, fostering a stable and profitable business model.

NewLake Capital has crafted a niche for itself, much like the acclaimed cannabis-specialty REIT, Innovative Industrial Properties. The company has been successful in carving out consistent profits, recording a net income of $5.8 million in the last quarter, alongside $9.5 million in Funds From Operations. This profitability is orchestrated through a trifecta of strategies: sale-leaseback transactions, third-party purchases, and build-to-suit project funding, facilitating a regular influx of revenue while effectively managing expenses and tax deductions.

Harvesting Sustainable Dividends

Mirroring the practices of most REITs, NewLake Capital has established a pattern of disbursing stable quarterly dividends to its common equity holders. Recently, the firm announced a second-quarter dividend of $0.39 per common share, culminating to an annual yield of $1.56 per share, marking an 11.4% YoY growth. Notably, this dividend history has been unblemished, with no reductions recorded since the company’s debut in the public market.

With the cannabis industry projected to witness substantial growth, market analysts anticipate a sustained, if not escalated, dividend payout rhythm in the coming years.

Building Synergies with Leading U.S. Cannabis Enterprises

NewLake Capital’s portfolio is predominantly peppered with collaborations with the upper echelons of the U.S. cannabis sector, fostering a rich network of reliable lease payments, given the substantial capitalization of most of its client base. The firm boasts affiliations with at least six exchange-listed multi-state operators (MSO), including renowned entities such as Ayr Wellness, Curaleaf Holdings, and Trulieve Cannabis. Furthermore, its association with Acreage Holdings connects it indirectly with Canadian powerhouse, Canopy Growth.

Strategically spreading its footprint across 12 states with a staggering 1.7 million square feet of real estate assets, NewLake has positioned itself prominently within limited-license jurisdictions, safeguarding itself from undue competition and default risks. This meticulous selection strategy, combined with a flawless 100% lease rate across all properties, propels confidence in the company’s operational efficacy.

A Closer Look at NewLake’s Revenue Generating Blueprint

1. Sale-Leaseback Transactions: This strategy revolves around property owners selling their assets to an investor and leasing it back, a tactic allowing businesses to free up capital otherwise tied in property while maintaining operational continuity.

2. Third-Party Purchases: NewLake often acquires properties directly from third-party sellers to lease them to tenants, a move that curtails multiple transaction costs and real estate transfer taxes, consequently preserving the tenant’s cash reserves.

3. Funding for Build-to-Suit Projects: In this approach, NewLake provides the capital for the development of properties that cater specifically to a tenant’s requirements, offering businesses tailor-made real estate solutions without hefty upfront costs.

As the cannabis industry in the U.S. continues to blossom, companies like NewLake Capital are defying investor misconceptions, steering ahead with stable and scalable business models that promise not only growth but also shareholder returns in the form of consistent dividends. Their collaborative approach with leading operators and diverse revenue streams forecast a stable trajectory in the evolving landscape of the cannabis sector.