Constellation Energy and Vistra stock surge after PJM capacity auction results
Introduction & Market Context
NewLake Capital Partners (WA:CPAP) (OTCQX:NLCP), a real estate investment trust focused on providing capital to state-licensed cannabis operators, presented its May 2025 investor deck highlighting the company’s financial performance and strategic positioning in the evolving cannabis market. The presentation, dated May 8, 2025, emphasizes NewLake’s role as the second-largest cannabis property owner in the United States.
The company operates in a cannabis industry projected to grow from $31.4 billion in 2024 to $44.4 billion by 2029, representing a 7.2% CAGR according to BDSA data. Despite this growth trajectory, NewLake’s recent earnings results suggest a more complex reality, with Q4 2024 showing misses on both EPS and revenue expectations.
As shown in the following overview of NewLake’s key metrics, the company has established a significant presence in the cannabis real estate sector since its founding in 2019:
Quarterly Performance Highlights
NewLake reported Q1 2025 revenue of $13.2 million, representing a 4.8% increase from $12.6 million in Q1 2024. However, income from operations decreased to $6.5 million from $7.0 million in the same period last year, primarily due to higher depreciation and general administrative expenses.
The company’s financial performance shows mixed signals when compared to its Q4 2024 results, which missed analyst expectations with EPS of $0.29 against a forecasted $0.36 and revenue of $12.5 million versus an expected $12.75 million. Despite these misses, NewLake has maintained its dividend growth trajectory.
The following quarterly performance summary illustrates the company’s recent financial trends:
NewLake’s balance sheet remains strong with total assets of $427.5 million as of March 31, 2025. The company maintains minimal leverage with just $7.6 million in debt on its revolving credit facility, resulting in a debt-to-EBITDA ratio below 0.2x. This conservative financial approach provides flexibility in a challenging industry environment.
Portfolio and Growth Strategy
NewLake’s portfolio spans 34 properties across 12 states, encompassing 1.7 million square feet of real estate primarily in limited-license jurisdictions. The company reports a 98% rent collection rate, though recent earnings discussions revealed challenges with specific tenants including Revolutionary Clinics and Calypso.
The portfolio is diversified across major cannabis operators, with Curaleaf (TSX:CURA) representing the largest tenant at 22.4% of annualized base rent, followed by Cresco Labs (OTC:CRLBF) (13.1%) and Trulieve (10.8%). This tenant mix provides exposure to both public (67%) and private (33%) cannabis companies, with a strong emphasis on multi-state operators (87%).
As illustrated in the following portfolio overview, NewLake has established a national footprint with concentration in key cannabis markets:
The company’s tenant composition reveals its focus on established cannabis operators with significant market presence:
NewLake’s underwriting approach emphasizes tenant quality, market selection, and real estate fundamentals. The company focuses on limited-license jurisdictions which typically offer better operating environments for tenants and greater real estate value preservation.
Detailed Financial Analysis
NewLake has demonstrated consistent dividend growth, increasing its quarterly dividend by 79% since its IPO in 2021. The current annualized dividend of $1.72 per share represents an 11.9% yield based on the May 6, 2025 stock price of $14.44.
The company maintains an 84% AFFO payout ratio, which falls within its target range of 80-90%. This provides reasonable dividend coverage while allowing for continued investment in portfolio growth.
The following financial overview highlights NewLake’s key metrics and dividend growth trajectory:
A notable aspect of NewLake’s investment thesis is its valuation relative to peers. The company trades at 7.1x AFFO multiple compared to 13.6x for non-cannabis REIT peers, and at 0.7x price-to-book versus 1.5x for non-cannabis REITs. This valuation gap exists despite NewLake’s significantly lower leverage (1.9% debt-to-equity ratio) compared to peers.
The following comparison illustrates NewLake’s valuation metrics relative to peers:
Forward-Looking Statements
While NewLake’s presentation projects optimism about the cannabis industry’s growth trajectory, the company’s recent earnings call suggested a more cautious outlook. CEO Anthony Coniglio noted, "It’s hard for us to be anything but cautious right now around the industry," highlighting the challenges faced by the sector.
The company identifies several potential catalysts that could drive industry growth, including federal-level developments such as the proposed rescheduling of cannabis from Schedule 1 to Schedule 3, the SAFER Banking Act, and ongoing legal challenges to cannabis restrictions.
As shown in the following slide, NewLake sees significant growth potential in the cannabis industry despite current headwinds:
The company also highlights the increasing acceptance of cannabis nationally, with 92% of the U.S. population residing in medical cannabis markets and 52% in adult-use markets:
Despite these positive long-term trends, NewLake faces near-term challenges including regulatory uncertainty, tenant-specific issues, and competitive pressures in the cannabis sector. The company’s conservative financial approach, with minimal debt and strong liquidity, positions it to navigate these challenges while maintaining its dividend program.
NewLake’s investment highlights emphasize its experienced management team, growth-oriented focus, and strong financial position:
While NewLake’s presentation paints an optimistic picture, investors should consider both the long-term growth potential of the cannabis real estate sector and the near-term challenges facing the industry. The company’s strong balance sheet and conservative financial management provide a foundation for navigating the evolving cannabis landscape, but its performance will ultimately depend on the success of its tenants in an increasingly competitive market.
Full presentation:
This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.