Long-term Cananbis RE Leases with NewLake Capital

Highly Objective

Introduction to NewLake Capital Partners and Business Model. NewLake Capital Partners, a sale-leaseback REIT, is focused on the cannabis industry, owning 32 properties across 12 states.Jarrett Annenberg, SVP and Head of Investments at NewLake, explains that NewLake primarily purchases real estate from cannabis operators and leases it back to them, providing a capital infusion for the operators. The company owns a mix of dispensaries and cultivation facilities, emphasizing experienced operators in limited license states to mitigate risk and enhance property values.

Comparison with Competitors and Strategic Approach. NewLake differs from mortgage REITs like Chicago Atlantic and AFC Gamma by directly owning real estate and offering long-term leases.Unlike its mortgage REIT counterparts, which typically focus on shorter-term, secured loans with real estate as collateral, NewLake adopts a long-term lease model, providing stability and predictability for both the company and its tenants. This approach allows NewLake to build deeper relationships with tenants and tailor their offerings to suit individual business needs.

Focus on Limited License States and Experienced Operators. NewLake targets experienced operators in limited license states, which can provide a higher property value and lower vacancy risk.The company’s strategy focuses on areas where licenses are directly tied to properties, creating a moat around their investments. This approach ensures that in case of tenant turnover, the limited availability of licenses makes it easier to find replacement tenants, thus maintaining the property’s occupancy and value.

Underwriting and Risk Management Practices. NewLake employs a conservative underwriting process that includes evaluating tenant management teams, financial health, state market dynamics, and alternative use values for properties.By focusing on these critical areas, NewLake ensures that their investments are aligned with long-term profitability. The company’s conservative approach is further supported by proprietary market research, allowing them to make informed investment decisions. They emphasize quality over quantity, choosing to partner only with operators who demonstrate solid financial performance and alignment with NewLake’s strategic objectives.

Recent Transactions and Future Market Expansion. Recent transactions highlight NewLake’s cautious expansion, such as the C3 deal in Connecticut, while remaining open to new opportunities in states like New Jersey and Ohio.Annenberg discusses the company's conservative capital deployment strategy, including maintaining significant liquidity for opportunistic deals. Despite the challenging economic environment, NewLake remains selective, seeking to enter markets with strong growth potential and favorable regulatory frameworks. Their recent transaction in Connecticut reflects their approach to finding high-value deals even in smaller, overlooked markets.

Jarrett Annenberg, Senior Vice President, Head of Investments. In addition to acquisitions, he assists in NewLake’s operations, portfolio management and capital raising efforts. Prior to founding NewLake, he spent ten years at CBRE where he was a Senior Vice President in CBRE’s Transactions and Advisory Services Group managing global real estate portfolios for high-growth companies. At the time of his promotion, he was CBRE’s youngest SVP outside of New York City, specializing in HQ transactions. During his tenure at CBRE, Mr. Annenberg worked on over seven million square feet of transactions with total value consideration in excess of $1 billion. Mr. Annenberg was a trusted advisor to fast growing companies such as GrubHub and Paylocity as well as established corporations like Caterpillar and AmTrust Financial. Mr. Annenberg received a B.S. from the Marshall School of Business at the University of Southern California with a concentration in real estate finance.