NewLake Capital Partners (NLCP) Status update summary

Business overview and performance

• Operates as a net lease REIT focused on cannabis real estate, with 34 properties across 12 states and a 12-year weighted average lease term.

• Portfolio yield is approximately 13%, significantly higher than non-cannabis REITs, reflecting sector risk.

• Top three tenants (Curaleaf, Cresco, Trulieve) account for about half of annualized base rent.

• Dividend has grown about 80% since IPO in 2021, though growth has recently leveled off due to a softer cannabis environment.

• Maintains a net cash position with low leverage and an 82% AFFO payout ratio in Q3.

Market positioning and comparison

• Sale-leaseback REITs offer higher yields and longer duration compared to mortgage REITs and BDCs, with different risk and return profiles.

• Non-cannabis REITs typically have lower yields (6-7%) and trade near NAV, while cannabis REITs trade at higher yields and discounts to NAV.

• High dividend yield is attributed to OTC listing and limited institutional demand, not leverage or unsustainable payout.

• Focuses exclusively on cannabis, unlike some peers who have diversified outside the sector.

Investment rationale and risk factors

• Provides current income with lower volatility than plant-touching stocks, but less upside potential.

• Discount to NAV is driven by stock price, not asset volatility; properties are valued at acquisition cost and depreciated over time.

• Well-covered dividend and low leverage distinguish it from competitors with higher payout ratios.

• Concentration risk exists, with 24% of revenue from a single tenant, but properties are diversified and focus is on long-term winners.