8-K: NewLake Capital Partners Reports Solid 2023 Results and Increases Dividend

NewLake Capital Partners announced a 6.4% year-over-year revenue increase for the fourth quarter of 2023 and raised its first quarter 2024 dividend to $0.41 per share.

Summary

• NewLake Capital Partners reported a 6.4% increase in revenue for the fourth quarter of 2023, reaching $13.0 million, compared to $12.2 million in the same period of 2022.
• Full-year 2023 revenue totaled $47.3 million, a 5.1% increase from $45.0 million in 2022.
• Net income attributable to common stockholders for Q4 2023 was $7.0 million, up from $6.7 million in Q4 2022.
• Full-year 2023 net income attributable to common stockholders was $24.6 million, compared to $22.0 million in the previous year.
• Funds From Operations (FFO) for Q4 2023 totaled $10.7 million, a 1.3% increase year-over-year, while Adjusted Funds From Operations (AFFO) was $10.8 million, a slight decrease of 1.2%.
• For the full year 2023, FFO reached $39.3 million, an 11.5% increase, and AFFO was $40.7 million, a 5.2% increase year-over-year.
• The company repurchased 194,563 shares of common stock in Q4 2023, bringing the total to 908,394 shares for the year.
• NewLake increased its first quarter 2024 dividend to $0.41 per share, a 2.5% sequential increase and a 5.1% year-over-year increase.
• The company collected 100% of contractual rent during the fourth quarter of 2023.
• As of December 31, 2023, the company had $25.8 million in cash and cash equivalents, with $14.4 million committed to fund tenant improvements.

Sentiment

Score: 8

Explanation: The document presents a positive outlook with strong financial results, dividend increases, and a solid balance sheet. The company is well-positioned in a growing industry, and the management commentary is optimistic. The company is undervalued compared to peers.

Positives

• NewLake achieved record revenue and AFFO in 2023.
• The company increased its dividend payout by 9.0% year-over-year in 2023.
• The company has a strong balance sheet with low debt and significant available credit.
• The company has a high-quality portfolio of assets with a 14.3 year weighted average remaining lease term.
• The company is undervalued compared to its REIT peers.
• The company has a low general and administrative expense ratio of 1.3%.

Negatives

• Adjusted Funds From Operations (AFFO) for the fourth quarter of 2023 decreased slightly by 1.2% year-over-year.
• The company had a loss on sale of real estate of $60 thousand in 2022.
• The company has $14.4 million committed to fund tenant improvements.

Risks

• The company operates in the cannabis industry, which is subject to regulatory and market risks.
• The company's tenants may face financial difficulties, impacting rental income.
• Changes in federal or state laws could affect the cannabis industry and the company's operations.
• The company's forward-looking statements are subject to uncertainties and risks that could cause actual results to differ materially.

Future Outlook

The company believes it has a portfolio of high-quality assets, strong operating results and cash flow, an unencumbered balance sheet, and a growing pipeline of opportunities to invest in. The company is focused on a high-growth industry with meaningful demand for real estate capital, positioning it for continued growth in AFFO and dividends.

Management Comments

• Anthony Coniglio, President and Chief Executive Officer, stated that they are pleased to deliver solid fourth quarter and full year financial results.
• Mr. Coniglio also highlighted the company's record revenue and AFFO in 2023, as well as the 9.0% year-over-year growth in dividend distributions.
• Management believes they have a portfolio of high-quality assets, strong operating results and cash flow, an unencumbered balance sheet and a growing pipeline of opportunities to invest in.

Industry Context

NewLake operates in the cannabis real estate sector, which is experiencing growth due to increasing legalization and acceptance of cannabis. The company's focus on limited-license jurisdictions and triple-net leases positions it to benefit from the industry's expansion. The company is the second largest owner of cannabis real estate in the U.S.

Comparison to Industry Standards

• NewLake's AFFO multiple of 7.9x is lower than the average of non-cannabis REIT peers at 13.8x and cannabis mortgage REIT peers at 6.5x.
• NewLake's dividend yield of 10.2% is higher than the average of non-cannabis REIT peers at 5.5% and cannabis mortgage REIT peers at 13.9%.
• NewLake's price to book ratio of 0.8x is lower than the average of non-cannabis REIT peers at 1.4x and cannabis mortgage REIT peers at 0.9x.
• NewLake's debt to equity ratio of 0.5% is significantly lower than non-cannabis REIT peers at 73.9% and cannabis mortgage REIT peers at 31.7%.
• Compared to Innovative Industrial Properties (IIPR), a major competitor, NewLake has a lower AFFO multiple, a higher dividend yield, and a lower price to book ratio.

Stakeholder Impact

• Shareholders will benefit from increased dividends and potential capital appreciation.
• Tenants will benefit from the company's continued investment in their facilities.
• Employees will benefit from the company's continued growth and success.

Next Steps

• The company will continue to execute its strategy of investing in cannabis real estate.
• The company will continue to evaluate opportunities to grow its portfolio and increase shareholder value.
• The company will host a conference call and webcast on March 11, 2024, to discuss its results.

Key Dates

Keywords

cannabis, real estate, REIT, dividends, AFFO, FFO, revenue, lease, tenant, investment