More debt financing is now available! Cannabis companies that were forced to purchase their real estate are now able to free up cash by accessing their property's equity. NewLake Capital Partners (OTCQX Marketplace: NLCP) recently announced that they have 90 million dollars available for cannabis real estate. CEO and Founder, Anthony Coniglio joins Dan Humiston to explain what this means for the industry today and in the future. Produced by PodConx MJBulls - https://podconx.com/podcasts/raising-cannabis-capital Dan Humiston - https://podconx.com/guests/dan-humiston NewLake Capital Partners - https://newlake.com/ Anthony Coniglio - https://podconx.com/guests/anthony-colignio Recorded on Squadcast
More debt financing is now available!
Cannabis companies that were forced to purchase their real estate are now able to free up cash by accessing their property's equity. NewLake Capital Partners (OTCQX Marketplace: NLCP) recently announced that they have 90 million dollars available for cannabis real estate. CEO and Founder, Anthony Coniglio joins Dan Humiston to explain what this means for the industry today and in the future.
MJBulls - https://podconx.com/podcasts/raising-cannabis-capital
Dan Humiston - https://podconx.com/guests/dan-humiston
NewLake Capital Partners - https://newlake.com/
Anthony Coniglio - https://podconx.com/guests/anthony-colignio
Dan Humiston: [00:00:00] Today at MJ bulls, we are joined by Anthony Coniglio, the founder and CEO of new lake capital partners. Anthony, welcome back to the show.
Anthony Coniglio: thank you for having me back. I appreciate being here.
Dan Humiston: Well, I'm glad to have you back. We don't normally have guests back on the show so frequently, but it seems like every time I turn around new lay capitalists, something in the news , you're making a lot of big moves and. I know our listeners are just interested in , what you're doing and for the people that haven't heard any of your previous episodes, new lake capital is an internally managed real estate investment trust provides real estate capital to state licensed cannabis operators.
I think maybe just to give a little background for everybody, . . Anthony, why is it a disadvantage for a cannabis company to own their own building?
Anthony Coniglio: It really goes beyond the cannabis companies in general. And it's why sale leaseback transactions are so prevalent across the business community. It's because it's not always a [00:01:00] great use of a company's precious capital to invest in a hard asset, such as real estate. So if you were to look at federal express or Starbucks or Walgreens, or even home Depot, , those companies all utilize.
Sale leaseback transaction so that they could unburden their balance sheet from hard asset real estate. And they could use that capital to focus on growing sales and growing EBITDA.
Dan Humiston: It
makes a lot of sense because especially for cannabis companies the early days they had no other option, but to buy their own real estate because a lot of lenders would not. Their mortgage holders rent to a cannabis company. they had to go this route.
They had to buy it themselves and talk about the sale, lease back. How does that work?
Anthony Coniglio: Yeah, it's really a very, very simple process for the operator. It's not disruptive to their operations at all. It's really more of a financing transaction. What we do in situations where the operator is operating at the location is [00:02:00] we acquire the property. We lease it back to them on an immediate basis.
All happens at one time, we lease it back to them on over a 15 to 20 year basis. And it's triple net, which means the operator continues to provide all the services. Or contract for all the services at the property, to the extent that it's a build to suit. And we've done a number of these. If the operator has a property in mind, we will acquire it for them and we'll provide the construction dollars to do a ground up construction.
And then they step in and they operate the property. It really is more of a financing than it is anything.
Dan Humiston: that's an interesting piece that I don't think I've connected in our previous interview is Not only , would you provide the financing for the building, but basically the capital improvements , or the build-out the interior of the building, also going to be able to provide financing for that.
Anthony Coniglio: yes, we've done that. A number of times where we will acquire a property and we will provide the financing or provide the capital for the entire building. The [00:03:00] way to think about what we don't provide financing for is if you took the building and you turned it upside down, if anything fell out, we wouldn't pay for it.
So think lights, racks, benches, items like that we don't necessarily pay for, but walls, drywall, doors, HVAC, like all of the equipment that would be in a standard building, both industrial and retail, because we do both types of properties. , we provide capital.
Dan Humiston: Now the cannabis company , they wouldn't have to this . In their financials as a loan, it was just become up as rent. Is that
Anthony Coniglio: He's an operating lease, right? It comes up.
Dan Humiston: Wow. That's that's great. Well, historically with cannabis. Companies have a very, very difficult time if almost impossible time getting a loan or acquiring any type of debt whatsoever because of the banking laws. So they can't go to the bank, they can't go to their traditional sources of debt funding, which is.
Made it difficult for companies to [00:04:00] expand or to grow their organizations. You figured out a way to solve this problem. And this is one where really what I wanted to talk to you about. to us about how you're able to provide debt funding for cannabis companies.
Anthony Coniglio: Yeah, we're really excited that we were able to raise a $90 million credit facility , from a group of banks. , and we think that this is. Illustrative of the way the banking community in general will focus on the cannabis sector. I think the banks will be reluctant as a general matter.
Certainly you'll have a couple that are willing to go to, to go directly to cannabis operators. But as a general matter, we think We'll want to know that they're putting their capital behind a , professionally managed portfolio of diversified real estate. , and they're going to feel that that's a better credit risk rather than providing a property loan to one operator that quite frankly, in many cases has eliminated operating history.
When I say limited operating in. It could be [00:05:00] five or seven years is limited in terms of the way banks think about it. And so when people ask me about the CIF banking, this is why I say if safe passes, it's a benefit to us because we'll have increased access to capital faster than the cannabis operators.
And I think the fact that we're able to raise $90 million over the last few months, , amongst a group of banks is a demonstrative of, , that improved access to capital for.
Dan Humiston: What could a cannabis company used this debt for?
Anthony Coniglio: so we're using the debt in order to have investment capacity to provide our sale leaseback transactions. So if operators have their properties or they're eyeing a property, both retail and industrial, , we would be able to tap into our credit facility to fund those acquisitions.
Dan Humiston: Okay. thing I failed to mention earlier that I think is really important that. If I remember correctly, all of the deals that you do are with state licensed operators. you have the licenses, a [00:06:00] backdrop and the whole thing. And I know sometimes the license follows the facility I'm going to, am I not correct in saying
Anthony Coniglio: Yeah, it's you, you are some are, you are so much, so we focus on limited license jurisdictions where the license and the property are typically connected, but they're connected , in the state that the property is located, that property itself may be on the license.
Then they actually write the license on the property. And so, , we don't necessarily take licenses as collateral. We own the property. So that is our collateral. If you will, we don't take additional collateral. We take security deposit and we own the property, but it's good for us to know that the property is located in an area with.
That property is licensed for cannabis, and it's very difficult to get other properties licensed for cannabis that creates value for us, in terms of the property itself. But it's also a better operating environment for the operator.
Dan Humiston: Sure. , it is really hard to find. location a cannabis [00:07:00] business in most jurisdictions, just because of all the rules, a thousand feet away from this and 1500 feet away from this. And you can't have this and you can't have this to find a location that you can open up and actually have a cannabis business , is sometimes a real task.
your, all of your locations have already gone through that process. So they're very valid.
Anthony Coniglio: yes, you're absolutely right down. And then if you take it a step further and think about these limited license jurisdictions, where there's just a limited number of licenses. That are provided into the marketplace, which creates a really positive operating environment makes those licenses actually fairly valuable because they're providing the operator, the access to that particular market.
, it means that those licenses will be, have intrinsic value and will be very marketable. Should an operator not be able to operate their business, maybe to the financial successes that. And so if they need to monetize [00:08:00] that, we'll find that a healthy operator would step in and want to operate that license location versus say a retail location in Colorado.
And I hope I don't offend any of your listeners where there are hundreds of those. And if one shuts down, it's not going to be missed out of the marketplace. But if you shut down one of the few dispensaries in Illinois, as an example, the marketplace would miss that. Hence, it's very valuable.
Dan Humiston: I know, I know a lot of. I'm still on the fence on cannabis investments. I think just based on , some of the things that we've just talked about and the fact that it's a real estate investment, which has. Considered more conservative and most for Invos investors mind because you always have the property , to fall back on, if something were to wrong, , with the other information that we just talked about, . All things considered more conservative cannabis investment. What are some of the other advantages for investors that would be considering working with [00:09:00] new lake capital or investing in new lake capital? What are some of the other things that we may have not discussed?
Anthony Coniglio: I think when you look at new lake capital, we are structured as a REIT, a real estate investment trust, and we pay a quarterly dividend. And so while we have significant upside for our investors, , as more states legalize, as our portfolio grows, as the industry legalizes at the federal level, into the future, we're going to benefit from all of that.
And while our investors wait for. They get paid a quarterly dividend. And so if you think of it this way, we've raised our dividend five quarters in a row. As a public company, we keep raising our dividend because we keep growing our earnings and our, what we call an AFO available funds from operations.
, and if you looked at the current stock price versus where our last dividend was, even without increasing it further, we're paying over an 8% dividend yield. So what I'm hearing constantly from investors is with. You're going to pay me an 8% dividend yield while I wait for that big [00:10:00] upside and move up in the stock price as more states legalize as you grow your net income and as a federal legalization approaches.
And I think that's a big differentiator. And I think a lot of folks are starting to pay attention to us because we're providing that current return, not just the future.
Dan Humiston: Wow. That is really exciting. It's and it's. I think it's unique in this space. I haven't talked to anybody else that are providing dividends so well done. Well done. We'll have all of new lake capital partners info in the show notes, including their stock information. So a company looking to unlock some capital or you're an investor looking for a real estate investment, just click the links in the show notes.
But remember that there's an element of risk in all investments. So please do your own research before making an investment. Anthony, this is always fun to have you on the show. I appreciate you doing this. Thanks to.
Anthony Coniglio: Dan. It's been a pleasure. Thank you so much for having me.