NLCP - Earnings call transcript Q4 2023 | NewLake Capital Partners, Inc.

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Operator

Good morning. I'll be your conference operator today. At this time, I'd like to welcome everyone to NewLake Capital Partners 2023 Year-end Conference Call. Today's call is being recorded. I will now turn the call over to Valter Pinto, Managing Director of KCSA Strategic Communications. Please go ahead.

Valter Pinto

operator. you, Thank welcome, and and NewLake Partners Capital Good Year everyone, XXXX Quarter Full Earnings Fourth morning, to Conference Call. by Officer; Financial I'm and Head of Senior today Gordon Anthony and Chairman, joined Coniglio; Vice Chief President Executive and Lisa Officer; Chief Investments. Meyer, Jarrett Annenberg, DuGan, President

Act statements Securities safe deemed of XXXX, we within forward-looking to of Before that the I'd Litigation harbor conference may today's meaning due and to like during begin, the of risks other statements Private the call Reform everyone of results materially actual remind made may uncertainties and and be factors. differ variety a

revise weighted and reconciliation or otherwise. FFO administrative GAAP acquisitions operating whether or current the the the of companies. events this measures and Gordon are and the non-GAAP based dispositions, For company supplemental more estate included to information, update AFFO and income leasing general used common complete call for that, Form other the as plans the Securities from business, morning ongoing in with over measure real XX-K assumptions a management's the the please of X-K This company's my rates. With of information. The Gordon, SEC. as with the turn Please of to to The release outlook financial and refer to uncollectible new to FFO performance Exchange and company's company's industry intention Mr. future any Commission. A shareholders compare such a current the of and obligation States I containing of at detailed future any some risks more and real the outstanding reflects subject ahead. refer described as and result issued the rates, well filings and reports rents, activity, end SEC discussion the diluted to fully adjustments to including filed on release. and press market periodically operating shares or to occupancy statements, in uncertainties is average rental net you estate forward-looking attributable disclaims guidance filed and release that press assumptions definitions the interest with and go conditions view risks and expenses, future it's of as terms United and of uncertainties are our to of and company's press levels, on DuGan. pleasure pace AFFO

Gordon DuGan

for you, thank you, call. our and Thank Valter, joining everyone,

our year net across despite key difficult cannabis metrics financial very backdrop, and record income AFFO. as outperformed NewLake record company and revenue, generally. record a well XXXX, growth challenging this industry year-over-year delivered During REITs the as for Against the

another for we fourth our Additionally, announced we the today, the And dividend raised of in quarter quarter. our dividend XXXX. first in increase

few year. items We the Since per [ in XXXX, setting have XX%, in this paying to dividend I'd over or our raised dividend to the share XXXX. company's shareholders. There $X.XX are has dividends our every its company year a million in ] from out increased $XX since past highlight like IPO

we at occur our experienced portfolio. the XXXX, As expect tenant issue first it some point to in in we

ended for build to our investors XXXX was the for XXX% issue. and team a continued to foundation prepared solid returns upon our generating collection embark we XXXX as and is the diligently invested drive This growth. Our fourth well resolve XXX% quarter. worked We capital for with and on of rent

upside for share. at nicely see price the of a and price million of future low which advantage repurchased today stock $XX where price an of accretive, common buying we was took stock also investors. and we shares, per what aggressively ] our $XX back stock sits nearly XXXX, During [ as our particularly a average

our stewards this apply evaluate focused return-oriented buyback we capital, as approach keenly opportunities. shareholders' maximizing we As and future will returns, of to continue on are we

free significant demonstrated for for to QX to is potential generates as our payout growth dividend as business goal and our our an There we cash significant by ratio flow Lastly, XX% a our cushion of XXXX XX%. manage ratio. payout of XX%

we growth. attractive future, available we not to interest mature facility, see does us and and under rate As our $XX has to look until virtually handful the XXXX. debt an credit no for opportunities with million which

our into very a accomplished I'm opportunities call over bullish I'll turn capital have We quality position excited closing, CEO, ahead. our continue lie are to prospects strengths XXXX. the long-term company, and in be what I'm on we Anthony. transactions. In With and for on to good very the that proud to the our in capitalize of deploy I for that,

Anthony Coniglio

Thank you, you, call thank everyone, Gordon, for today. our and joining

As was and the work hard during a team Gordon NewLake for solid year thank said, want for results to XXXX shareholders. our record their for I our delivering year,

cannabis a stated the for potential and NewLake. discuss [indiscernible] during specifically, catalysts have So look look and we mention Biden's at let's Union interested mean many to many to recently these federal catalysts of investors catalysts. number address, in As potential There I'd understand and forward, for last week's has of cannabis industry headlines been state his policy legislative President for like XXXX what these

tenant This and improve flow profile at I with improvement REIT's our their for [ the credit excited III credit specifically program cannabis base III. XXXE to such to potential as this move in regarding opportunities and -- from move state Department to the reduce the our Section expected year. operator recapitalize reschedule further Health allowing cash the meaningful sheet Not free only balance and increase Human from this million result box paying well them and recommendation greater investment awaiting base. At XX this credit significant and in profile a to to overnight approved but as onerous flow sheet of cash yet acreage, Furthermore, There operations by a expect of to industry III. risk to Cresco, the interest ], eliminate the Schedule balance issuing industry, their has Services the the taxation improved positive flows. our including the in would would in equity foremost, Schedule from tenant ballot single in and their impact cannabis decision Such [ the in of health, adult-use the First by Ohio valuations, a cash to an examples the ] state recreational as are and a believe would a and be base down in Schedule debt. improvement our PharmaCann tenants for such expense will Many within financial we're another an air, Trulia incremental performance level, tenants. DEA's entire sales also rescheduling catalyst their tenant later launch and the where November, risk on is a have have nearly improvement benefit the opportunity expected few and we in experience increase in state. Ohio, anticipated about as people. We're cannabis, potential we Schedule

market was to back and potential to program, approved operations well and legislation to with our as [ another the excuse X.X our benefit Curaleaf, increase allow Most scale in bell. Court adult-use Court's other proceed. only me, profitability. we over million the is to the million in serving adult-use launch legislation ] the serving to Mount base the adult-use incumbents have launch. XX there weeks state, With to The program opportunity as the Additionally, expect state lead XXXX. in tenant ballot Air, for cannabis Virginia's XXXX. ago, decision have Supreme people, program our cannabis, adult-use this regarding creating State observers Governor's the awaiting with opportunity with initiative Florida the people Florida Curaleaf -- operators will the in that yet Dora which for legislature Florida the Two approved an on tenants We in await signature the implement Supreme Florida is notably Cresco with an and X state the tenant adult-use

Our not potential for cannabis mention opportunities. XX and dispensaries XX to this benefit Virginia operational from of tenant to owns poised conversion investment additional the use, is adult to the in to

York. Casting last Safer dialogue. for also back benefit cannabis, Pharma from to With the market banking York bill Committee September, becoming we Banking operators choke New is participate allowing Banking investments is market, finally known potential of tenants original vehicle significant the as cap now Section the in ]. now that legislation, XX point the Senate We're hearing Cresco, our New anti-operation the medical in the safer that the to [ Act. begin again this adult-use acreage, of their and to state. the turn should as Let's into see some Such Curaleaf

access federal that While have around participants we certainly all financial at rooting Congress continues legislative and are safer. bill, market predicting notable action cautious of the better services we're it's to to benefits passage about for dialogue level, this

[indiscernible] does oriented all were at cannabis with potential XX% ] cannabis. mean? action is resides and legislation, level what our to this in banking according rescheduling. of Pew adult-use the in in Research, more there's the [ a around legislative branch with action than for administrative So There the population other brands safer country's and state state

which start I'll XXXX it think realizing inevitable ultimately, year of that, investors. With path the Jarrett. to remains industry turn to on over could tenants, our catalysts, normalization that the and, portfolio should it benefit we our of our legalization. cannabis strongly While to and those some confirms be course,

Jarrett Annenberg

Thanks, Anthony.

our be quarter, industry For about portfolio, my with activity for remarks, Starting and tenant portfolio. I will our current current the insights expectations. and talking

square we in X.X and of with XX, total December facilities XX committed million covered. of million XX tenants, As states, approximately XX feet representing cultivation across had a dispensaries XX $XXX

current is metrics a in the foot from costs. each properties, XX% the dispensaries the in integrated $XXX tenant use for estimates vertically for Please XX% was properties well slight retail level we and for previous and company per a foot. per state. EBITDA is decrease for X.Xx is traded basis. coverage XX.Xx square and increase are available on appropriate, from dispensaries, reports property in in cultivation slight is given it's the note, of square which rent quarter. slightly cultivation Both for basis cost quarter our operators properties where Our below publicly cultivation $XXX differently and from replacement latest

finalized plan. in the the in in discussed management revolutionary on their agreement and As call, we quarter, clinics I Massachusetts last lease executing team fourth is the with new our transition

[ provide new the ago weeks connection X has Pennsylvania terms the lease team. a to Additionally, in tenant revised Calypso November, X-month meet and sale the agreement, ] escrow. rent Acquisition has facility NewLake the million in visited $X improvement a up agreed with received allowance new and to to Canvas sold We industry. In the tenant were entrant under of the the into Corp., our with

were with the strains the allowing a Pennsylvania for independent New processes passed the dispensaries, integration vertical state, such in In in December, and being sales X state both new bill and implemented. Calypso in in will ground as that provide for margins. are potential increase cultivators the and ] [

Pennsylvania's development, together state's we put adult-use adult-use That under deployed $XX.X XXXX. as the to drawn X quarter cannabis Mint of properties projects for we total Missouri. down in the cannabis in legislature weeks for $XX.X our budget TI majority by million for of the million to team enact allowance CX's fourth and in and to in is state. included bordering outstanding to TI in having a of Mint of projects pressure million year, adult-use Additionally, own from full on ago, the CX's had be touring and legislation. In states the sales the The $X.X completed. the the Missouri went of majority quarter which X year-end, expected few both regard the and Governor end in in our we the the was to his Phoenix we expect in taxes action, with properties sales, X as expansion second are

the team growing Construction see plants proceeding CX's ground to were Specifically, state. is the for we've well, put and that we demand expansion the to in the excited is the year. in excited to been meet past funding

been financial focus across of the maintain operational we've able the as and effect Looking continue the with increasing revenue combined few quarter to top XX% broadly have have efficiencies Compared seeing base, tenants at take average last to tenant stabilization the improvements past see XX.X% of over the our with many margin we wholesale started quarters. line our gross EBITDA on to average an to same been while from with XX%, year, portfolio. on pricing

of in and ] with Air we equity The a extended XXXX. [ a estimate on $XXX their restructured These the with of over of an debt save Additionally, aggregate and tenant debt ADE annually XX% shore for our impact conversion. greater million up tenants improvements will of balance credit federal we announced event runway. debt are taxes until reduction. Trulieve a operators could relief, million have And about in as profits. annual their our X end rescheduling sheets provide a the cannabis seeing themselves additional gross announced $XXX

we in optimistic operators year about start online. as deal an III uptick As becoming forward, of seen since the more look we've potential programs and new state coming the are Schedule activity

that, the always, As it that operators when turn with in success. With profiles, deploying to I'll management financial over we provide states discipline on opportunity regulatory frameworks quality and Lisa. maintain additional focusing will strong with long-term teams capital, for best

Lisa Meyer

you, Thank Jarrett.

of for offset X.X% quarter from with valuation totaled $XXX,XXX noncash deposit, revenue revenue which Calypso driven rental quarter growth was for XXXX. revenue reduced The $XX for million of valuation of or TI to income forbearance included increasing and the quarter fundings, we portfolio the X of million of in prior December of rent our delinquent generated year-over-year. agreements. associated security of income ended The lease per revenue by for of $X.X Clinics received the attributable periods escalators common $XX For $X.X acquisitions, an amendment approximately to amendments Revolutionary million, XX, increase annual by in fourth and rents $XXX,XXX million and warrants. the executed a to the fourth revenue partially The lease captured rent collections clinics, related months we XXXX, share. where of warrants fourth shareholders related $X.XX Net XXXX, fourth base nonrecurring and mainly increase total the to the $XXX,XXX revolutionary was with quarter of the the rent,

$X.XX the compared increased created the XXXX, repurchase in of our by fourth million, to prior shareholders XXXX Driven X.X% fourth quarter the a was per our value by quarter per the period $XX.X same $X.XX AFFO a While decrease in on of program. to AFFO through basis, share to compared share share year. for

million end. During ended $XX.X invested tenant improvements December million with the XX, in we in quarter commitments $X.X months X unfunded XXXX, at

Moving financial to XXXX year the full results.

XXXX for $XX.X generated million year-over-year. $XX.X XXXX. portfolio of for common million, an year full Our income increase year compared full revenue X.X% million to the total of shareholders $XX Net of of attributable totaled to the

[ totaled the loss, to full the the credit line The an ] of million recorded credit $XX.X increase Instruments AFFO XXX For of year-over-year. share, ] In $X.XX CECL. year an or [ expected was defined amount commonly X.X% guidance. per XXXX, as required We of ASC loss XXXX, by we called were $XXX,XXX. credit Financial adopted record

record March on common XXXX. XXXX. of company's XX, of an business quarter XXXX The of dividend of this this to to instrument As share cash XXXX, is the loan. per of raised $X.XX stock, of declared unaware information stock million payable stock. March quarter any April holds to December the per fourth the lead XX, in of is XXXX January is share $X.XX on receivable investment on a dividend us that would the dividend million XXXX, financial X, company recover at per stockholders note XX, only XXXX, paid to December we falls of On that Directors equivalent common was the share company that that under not fully of $X common that $X The cash close dividend annualized the $X.XX company of will XX, Board our believe On XX, first guidance. the

price with a an XX, million revolving to At at million and ending year XXXX, estate $XX of assets our December real gross of shares continued on sheet the we XXX,XXX balance debt $X average million repurchased we have share. strong $XX per credit outstanding of common For stock in only $XXX.X facility.

credit remaining under to availability turn grow the like $XXX approximately business our I have positioned cash execute the now facility. capital. And for comprised deploy of the as strategy and Q&A. investors to we believe for million operator the company call would earnings We is our to to We of back well liquidity

Operator

comes [Operator of Zuanic first with Our the Associates. question from line Pablo Instructions] and Zuanic

Pablo Zuanic

to guess, guess that the that there's fact commentaries that you, outlook terms It to you deals. words a But million forward want gun shy the in the been The right? quarter bit put based XXXX, your me past and $X fourth the months, comments -- it. I mouth, ramp, on I you more becoming of you Anthony, in XX made, for seems don't improving the way that in apparently funded new I a -- but all I you'd of $XX think, a made allowances million you are more of now be see over is bit of active.

if know terms or in but pipeline what proactive. commitments shy, the bit you that in a see a you've about I And can right gun next don't talk funded I the saying tell am X So you becoming pipeline, but months. been more over there us of now bit just

Anthony Coniglio

XXXX question. say thank and bit you how make was want environment. little hand wanted and rate's about [ agreeing cost the make difficult to ] to we I to and we of indeed, our to. couple Jarrett is the the pipeline. about watching that were what a when Pablo, perspective transactions And bit understand operators were think the -- the to I'll that, and respond we to Yes. evolve. Really a putting gun during what it operating also from understood a of with going sure We out react happening over talk were for we little we we shy. XXXX, comments to would then were doing a in landscape capital

here more allows And bit seeing much think a landscape so shareholders. Jarrett, better informed make little we're in don't there's for why stable I XXXX, pipeline on us the talk sitting what about decisions we're you a as to that our section.

Jarrett Annenberg

not seeing in past And you coming operators better XXXX But financial states floating that Sure. had seen and we III months deal of and the I can they're feeling new in see we as mentioned, more in activity, think are more operators on as looking few the than financial [ bullish are are I ]. majority as the on forward, reports I online. out, the coming think, only are Schedule

for in limited license quality right and transactions can finding both accretive we operators are that us, capital that operators states the us rates really with the sense and forward. that at So the for it's deploy that's make [indiscernible]

Pablo Zuanic

Understood. And follow-up just a on that.

the can of terms are have the options competitive you mean that that know X know shorter-term I operators leaseback sale terms mortgages, I the about loans, I right, environment in years. options. of out there, talk your In

of tie period the level, terms such But at time, leaseback, more. long to the time, operators it's that. at So operators hear about want in if there, sales of the of hear is about First up but the me not on potential by sale I'm correct be one on coming of assets credit to for hand, years or same the terms we for [indiscernible] Bank. to same my Citizens federal understand be have reform there seem hear XX they options a wrong, leaseback, interpretation I some there to seems don't in feedback front we from given that we more the

competition demand So to of sale and because the Or interpretation? the outlook, context, of less again, because say for that wrong is maybe the maybe in that that leaseback? it is fair

Anthony Coniglio

outlook And by, operators years seen XXX, say We on only by that of in have would dropped today XXXX, we believed up. conversations and depends many Pablo, cost would has XXX capital with the they future. points. -- organization's who I cases, basis sit the here had their some that for gone cost of capital X that ago it

in the is cost to the So that a believe of operators capital their occur. yes, there just going in significant will always be corner, sector drop that around

to ] these the because available funded operators to think sale [indiscernible] I want want market come in a for is capital positive little their come structure see capital all [ their very relatively because has financial more flexibility very, of options capital leaseback. more a that important some note additional options significant an do the extent may them of options also of shorter-term a tenant also to that in portion providers to it's a in base these opinion funded want our to with coexist have structure debt that have portion with somebody the will and we

or in serve notably, always a advance So discount provides I rate and facility leaseback. usually Most bank at where we it's think a relative you'd the to because different it's not purposes. an get sale

on this may our allows bank specifically, the estate our add industry to for a provide class whereas noncannabis to value given value and you or history to lend transactions, of $X.XX us So those real asset $X.XX estate fair want X-year assets. Jarrett, this real understand underwriting anything ability that? to

Jarrett Annenberg

operator No, really in it as thing well. I belt. view We've you mortgages for LTV expansion. happened sale look be years. an been only tool started lower doing seeing think same them leasebacks bank with future. that for is X with and covered I been We think fund competing in the thing seeing we've since shouldn't And these been a And think of always the to we inception. 'XX the when It It it. April goes the as at years. business having operators We've the debt optimistic shorter-term I X of tool

Pablo Zuanic

cash Any front more to. Or stock? can right, more the is under control technical that of in help. investors is of you last What to terms in color uplisting attract right regard more it now? the just to would One terms being on one, and wait the share still having in having for able stock, your more into

Anthony Coniglio

important. the you very for Thank Yes. question. is This

investors couple to have of effort institutional Number I a the significant we of amount week institutional side. outreach mention. things a for on our want later with participating few spent have are a a greater the We're this So conference as we investor have investors. retail one, quite set to a to visible be -- as and up side in well the community, one-on-one to more both

to have approach And build so our about of the end execution. day, try the up a But to base. investor it's we at dual-pronged

that spend really of mouthpiece on focused most results business And letting the the for so the to note important lot our investor trading and be our look a included -- we most little company. I bit bit, the a time as for comparison for delivering not discount for plan, that us, more value recent investors executing would presentation, significant direct you at little included we've more a we investors is at. think NewLake

And you there's opportunity for by our getting on investors. there's a for in so only under appears, NewLake basis. have that believe investors real think at exists a we think when real price a today valuation quarterly we stock dividend a to compared that not quality look opportunity But we paid

uplifting, prime And sector, able very we so been we respect that as TerrAscend we're Pershing, to going continue to what has custody one of be dialogue. and focusing opportunity are in largest vis-a-vis the York is the company. specifically the of which to in brokers folks aware and on bank With accomplish New Curaleaf and more more

to energy a critical a component for understand We NewLake. that And valuation that spending it And gap. time we're that mean would closing and lot out. to try a so of that's we're figure to value

Operator

the Our Anderson Nick Instructions] question next line comes MKM. with of [Operator from Roth

Unknown Analyst

evaluate profitable how catalyst space? the commentary appreciate capital the change rescheduling the less I the First way me, underwriting in view the you operators in you the your smaller, scheduling. one to deployment Just this around sense for Does maybe on your on regard process. opportunities? just

Jarrett Annenberg

Nick. Thanks,

is III. the really we think, and Schedule So conservatively, I always I any wouldn't -- the differently of in underwriting underwritten, answer so aren't we've more face quick

taxes unprofitable doesn't perspective, upside private. whether need paid a point to operators profiles is that's the it's focus they the at in if from sector, profitable assumption really or be of our operators this operator on the flow most public do cash is immediately. smaller Our Obviously, and change an

are larger after towards attention operators, are of out both lot portfolio there a public taxes. think paid obviously operators but money and the that in I probably private our is making

where think energy that's I is focused. our

Anthony Coniglio

points well us it this has EBITDAR delivered the for that XX very, performance the industry. how difficult over very the coverages, out during focus think on I portfolio of last served very also And us our for months has time the period in

we're So property continue to flows. cash level focused on going to stay

Unknown Analyst

for that. just the here. me, U.S. on Okay. in uplifting I one appreciate second And then

but could TSX, just kind the U.S. lay escalating just exchange you get out there? discussions think here, be to with the a to if listing rescheduling you discussed You will and Wondering of needed pathway major potential what

Anthony Coniglio

We operate company -- first with to I say Yes. and the NASDAQ to Stock want Thank you. listing qualify thing we York operate the Exchange New is to qualify all requirements.

will lobbying am I have the will it, do III a rule So doubtful predict ready to will on company exchanges. Do it posture. I Do change believe we will there safe can based I NASDAQ are itself, uplift Schedule safe it is going doubtful to they that a occurring running I it alone be certainly I'm by once when to would without think a us believe banking do not safe their effort harbor But predict for significant to a get is can a change. safer safer It that that very banking Do get happen. is? and harbor, harbor would. I hard, it

it hard their hard we're X.X but does as to I coal margin available company the predict of that the and change Again, focus continue do all soon mind? to on to another these table, the we predict. better, its also Can own, So at we looking on that to, it memo so hence, we run so as you can know, and but alternatives all won't. But uplift for who all [indiscernible] ] run -- get that TSX. strategy, if of a as the it. Would together [ doubt we're

Gordon DuGan

and want a list we're I and that listed that let listed continues we're everything reason to raise And add bit Exchange no identical. are not personal are. we're capital the a -- businesses IIPR of just that do It's good single really Stock it not they to Gordon they're there York good isn't a not. there's The and is a that DuGan. that doing. I frustration single mean reason New

continued So frustration. a it is

thank me So businesses. to there's our no allowing for you difference vent absolutely because in

Operator

it other I'd to to Coniglio the closing like are remarks. in There for questions Anthony no hand back queue.

Anthony Coniglio

Have for an Thank to hopefully exciting forward XXXX. week. you, our look and great today. everybody, joining call We positive a

Operator

Ladies does for you and Thank conclude gentlemen, teleconference. your this today's participation.

disconnect You a at day. lines and wonderful time, your this may have

NewLake Capital Partners (NLCP) 11 Mar 242023 Q4 Earnings call transcript