‘Much more stable’ marijuana landscape in 2024, CEO of NewLake REIT says

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This year is “a much more stable landscape” for the marijuana sector than in 2023, the CEO of cannabis industry real estate investment trust (REIT) NewLake Capital Partners said as the company reported its fourth-quarter earnings.

NewLake Chief Executive Anthony Coniglio acknowledged during a Monday earnings call that NewLake had been “a little bit gun-shy” in 2023.

“Really, what we were doing in 2023 is, we were watching the landscape evolve, we wanted to make sure that we understood how the (cannabis) operators were going to respond and react to the difficult operating environment,” Coniglio said, responding to an analyst.

“We also wanted to understand what was happening from (an interest) rates perspective. … As we’re sitting here in 2024, I think there’s a much more stable landscape that allows us to make better-informed decisions for our shareholders.”

NewLake Senior Vice President and Head of Investments Jarrett Annenberg said that NewLake is “seeing more deal activity, I think, in the past few months than we had seen in the majority of 2023, as operators are looking forward, and I think they’re feeling more bullish – not only on Schedule 3 and new states coming online – but as you can see in financial reports that are coming out, the operators are on better financial footing.”

CEO Coniglio looked forward to potential cannabis-sector policy catalysts in 2024, in particular the possibility of federal marijuana rescheduling.

“There are few examples where a REIT’s entire tenant base has an opportunity to experience a meaningful improvement in credit risk profile, and significant increase in cash flow overnight from a single catalyst such as this expected move to Schedule 3,” Coniglio said during his prepared remarks.

New Canaan, Connecticut-based NewLake reported net income of $7.1 million for the quarter ended Dec. 31, up 4.1% from the same quarter last year.

Quarterly revenue was $13 million, compared with $12.2 million in the fourth quarter of 2022.

Board Chair Gordon DuGan said NewLake “experienced our first tenant issue in the portfolio” in 2023.

Newlake Chief Financial Officer Lisa Meyer said fourth-quarter rental revenue growth “was partially offset by reduced rent collections from (Massachusetts cannabis company) Revolutionary Clinics and (Pennsylvania marijuana operator) Calypso (Enterprises), for which we executed lease amendments in the fourth quarter of 2023.”

Last week, the CEO of NewLake competitor AFC Gamma said that company was interested in financing cannabis operators that are “unburdened with debt.”

For the full 2023 fiscal year, NewLake reported net income of $25 million (up 11.9% from 2022) on revenue of $47.3 million (up 5.1% year-over-year).

NewLake paid a dividend of 40 cents per share to common shareholders during the fourth quarter, increasing that dividend to 41 cents for the current quarter.

The REIT reported $25.8 million in cash on hand as of the end of 2023, with $14.4 earmarked for tenant improvements.

Total assets were $433.3 million, compared with total liabilities of $21.3 million.

Solomon Israel can be reached at solomon.israel@mjbizdaily.com.