Newlake Capital Partners Inc.
03/06/2026 | Press release | Distributed by Public on 03/06/2026 05:03
Annual Report for Fiscal Year Ending December 31, 2025 (Form 10-K)
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.
The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our audited consolidated financial statements and related notes appearing elsewhere in this Annual Report on Form 10-K.
This discussion, particularly information with respect to our future results of operations or financial condition, business strategy and plans, and objectives of management for future operations, includes forward-looking statements that involve risks and uncertainties as described under the heading "Cautionary Statement Regarding Forward-Looking Statements" in this Annual Report on Form 10-K. You should review the disclosure under the heading "Risk Factors" in this Annual Report on Form 10-K for a discussion of important factors that could cause our actual results to differ materially from those anticipated in these forward-looking statements.
Overview
NewLake Capital Partners, Inc., (the "Company," "we," "our," "us,") is an internally managed REIT and a leading provider of real estate capital to state-licensed cannabis operators primarily through sale-leaseback transactions, third-party purchases and funding for build-to-suit projects. Our properties are leased to single tenants on a long-term, triple-net basis, which obligates the tenant for the ongoing expenses of the leased property, in addition to its rent obligations.
We were incorporated in Maryland on April 9, 2019. We conduct our business through a traditional umbrella partnership REIT structure, in which properties are owned by an operating partnership, directly or through subsidiaries. We are the sole general partner of our operating partnership and currently own approximately 98% of the Limited Partnership Interest ("LPI Units"). We have elected to be taxed as a REIT for U.S. federal income tax purposes beginning with our short taxable year ended December 31, 2019 and intend to operate our business so as to continue to qualify as a REIT.
As of December 31, 2025, we owned 34 properties across 12 states, consisting of 19 dispensaries and 15 cultivation facilities. The 34 properties included 31 properties leased to 11 state-licensed operators and 3 properties which were vacant.
Emerging Growth Company
We have elected to be an emerging growth company, as defined in the JOBS Act. An emerging growth company may take advantage of specified reduced reporting requirements and is relieved of certain other significant requirements that are otherwise generally applicable to public companies. As an emerging growth company, among other things:
•We are exempt from the requirement to obtain an attestation and report from our auditors on the assessment of our internal control over financial reporting pursuant to the Sarbanes-Oxley Act;
•We are permitted to provide less extensive disclosure about our executive compensation arrangements; and
•We are not required to give our stockholders non-binding advisory votes on executive compensation or golden parachute arrangements.
We have elected to use an extended transition period for complying with new or revised accounting standards.
We may take advantage of the other provisions for up to five years or such earlier time that we are no longer an emerging growth company. We will cease to be an emerging growth company upon the earliest to occur of: (i) the last day of the first fiscal year in which our annual gross revenues exceed $1.2 billion (subject to adjustment for inflation), (ii) the date that we become a "large accelerated filer" as defined in Rule 12b-2 under the Exchange Act, which would occur if the market value of our common stock that is held by non-affiliates exceeds $700 million as of the last business day of our most recently completed second fiscal quarter, (iii) the date on which we have issued more than $1 billion in non-convertible debt during the preceding three-year period or (iv) the last day of the fiscal year ending December 31, 2026, following the fifth anniversary of our initial public offering.
Factors Impacting Our Operating Results
Our results of operations are affected by a number of factors and depend on the rental revenue we receive from the properties that we own, interest income we receive from the loans we originate, the timing of lease expirations, general market conditions, the regulatory environment in the cannabis industry, and the competitive environment for real estate assets that support the cannabis industry.
Additionally, our results are impacted by the financial condition of our tenants. While our portfolio is anchored by several large multi-state operators, the broader cannabis sector is navigating an environment with significant upcoming debt maturities. This industry-wide liquidity stress may impact the financial flexibility of certain of our tenants, potentially affecting their ability to meet lease obligations and leading to payment defaults or the necessity for lease restructurings. Refer to Item 1A. Risk Factors for risks associated with our tenants.
Rental Income
We generate rental income from real estate properties we own and from properties we may acquire in the future. The level and stability of rental income are influenced by a number of factors, including:Leasing activity and terms. Our ability to enter into new leases at market rents, including annual rent increases, and to renew or re-lease properties at expiration.
•Tenant performance and rent collection. Collections primarily relate to tenants' and guarantors' financial condition and their ability to make rent payments on time.
•Industry and regulatory conditions. Our tenants operate in the cannabis industry. Changes in state or local laws, or in their interpretation or enforcement, may impair our ability to renew or re-lease properties and tenants' ability to fulfill lease obligations, which could adversely affect our ability to maintain or increase rental rates.
•Tenant operating history. Certain tenants have limited operating histories and may be more susceptible to payment or other lease defaults. Accordingly, our operating results may be influenced by the financial performance and creditworthiness of our tenants.
For the year ended December 31, 2025, all rental income was derived from triple-net leases. Under these leases, tenants are generally responsible for real estate taxes, insurance, maintenance and utilities, and most leases include a parent or affiliate
guaranty. During 2025, we had rental agreements with 13 tenants. Two tenants defaulted on their lease agreements, which resulted in three properties being vacated prior to year-end. At December 31, 2025, we had 11 tenants. We are actively pursuing re-lease of the three properties vacated by two tenants in default.
Financial Performance and Condition of Our Tenants
Condition of Our Tenants
Tenant Defaults
Pottsville, PA and Sparks, NV Cultivation Facilities
On July 30, 2025, AYR Wellness, Inc. ("AYR"), which operated at two of our properties located in Pottsville, PA and Sparks, NV, announced that it had entered into a restructuring support agreement with its senior noteholders. Under the restructuring support agreement, certain AYR assets and operations will be acquired by the senior noteholders, while the remaining assets and operations, including those at our leased properties, are to be sold or wound down.
The cultivation properties leased to AYR accounted for approximately 5.3% of our rental income for the year ended December 31, 2025. AYR satisfied its rent obligations through July 2025; however, beginning in August 2025 through the end of the year, no rent was received for our Pottsville, PA and Sparks, NV cultivation properties, which AYR vacated during the third quarter of 2025. We applied AYR's security deposits totaling approximately $913.5 thousand toward unpaid rent for the Pottsville and Sparks properties during the third and fourth quarters of 2025. As of December 31, 2025, the security deposits had been fully applied across both properties. We are actively working to re-lease the properties.
Fitchburg, MA Cultivation Facility
Revolutionary Clinics, Inc. ("Revolutionary Clinics") which leased the Company's Fitchburg, MA cultivation property, experienced operational challenges that impaired its ability to meet contractual rent obligations. Beginning in June 2024 through December 2024, Revolutionary Clinics remitted approximately 50% of rent due. On December 13, 2024, Revolutionary Clinic entered into receivership. In the first quarter of 2025, we entered into a stipulation agreement with the court-appointed receiver to receive 50% of contractual monthly rent on a weekly basis, along with weekly reimbursements for certain delinquent real estate taxes and utilities previously paid by us until the property was vacated and operations ceased. In July 2025, Revolutionary Clinics vacated the property, and rental payments ceased. We have engaged a broker and are actively working to re-lease property.
Lease Modification
In October 2025, we amended our lease agreements with C3 Industries ("C3"). Under the amended Hartford, CT lease, we agreed to pursue a sale of the Hartford, CT property. In connection with that agreement, C3 is required to reimburse us for any shortfall if sale proceeds are less than our investment basis. Conversely, if sale proceeds exceed our basis, a portion of the excess will be paid to C3 as reimbursement for its investment in the property. C3 will continue to pay monthly base rent through the sale date. Upon completion of the sale, a portion of the rent previously allocated to the Hartford, CT property will be reallocated to the Missouri lease to compensate us for a portion of the income no longer received from Hartford, CT property. C3 will continue to pay incremental rent under the Missouri lease until we invest in new properties with C3 pursuant to our right-of-first-refusal agreement.
See Item 1A. "Risk Factors" of this Annual Report on Form 10-K for additional factors that may impact our operating results.
2025 Financial Markets Update
During the year ended December 31, 2025, financial markets continued to experience volatility amid persistent macroeconomic uncertainty. Early-year optimism around potential monetary easing gave way to renewed concerns over inflation, trade policy instability, and geopolitical tensions. Equity indices delivered mixed performance, and credit markets remained contained.
Following a cumulative 100 basis point reduction in interest rates during the second half of 2024, recessionary concerns intensified during 2025, driven by declining consumer confidence, persistent inflationary pressures, and unpredictable trade
and tariff developments. These headwinds prompted businesses and investors to adopt more conservative financial strategies, with increased emphasis on liquidity and risk management. In response to signs of labor market softening, moderating inflation, and tightening credit conditions, the Federal Reserve implemented a cumulative 75 basis point reduction during the second half of 2025. The prime lending rate remained elevated for most of 2025, which provided limited relief to borrowers. Capital availability remains tight particularly for emerging and specialized sectors such as cannabis. Many operators across the industry continue to face margin compression and debt strain, with billions in loans maturing by 2026 and limited access to refinancing options.
As a REIT focused on leasing properties to cannabis tenants, we remain vigilant in monitoring these evolving market dynamics. Prudent financial oversight and proactive tenant engagement remain central to our strategy as we navigate an operating environment shaped by elevated interest rates, cautious investor sentiment, and sector-specific risks. We believe broader financial challenges within the cannabis industry including debt strain and refinancing difficulties highlight the importance of disciplined tenant underwriting and portfolio management.
Regulatory Environment - Industry Impacts
As discussed in "Item 1 Business", the federal rescheduling process remained pending at year-end 2025. Within this environment, capital-markets conditions for state-regulated operators were mixed. Several large public MSOs completed significant refinancings or maturity extensions during 2025 and early 2026, including transactions extending maturities to 2029-2030, indicating selective access to credit despite elevated coupons. At the same time, industry coverage highlighted ongoing credit stress among certain operators and a wave of maturities through 2026 that has pressured parts of the sector. We continue to monitor tenant credit conditions and capital-market dynamics for potential effects on our tenants and rent collections.
Inflation and Supply Chain Constraints
During the year ended December 31, 2025, inflation showed signs of easing but remained elevated, with the Consumer Price Index increasing approximately 2.68% for the year. While this reflects a slight decrease from the 2.89% increase recorded in 2024, inflation continued to exceed the Federal Reserve's long-term 2% target, contributing to higher costs across labor, materials and services.
Inflation has increased operating costs for state-regulated cannabis operators, including higher wages and rising prices for cultivation inputs such as fertilizers, nutrients and specialized equipment. Development and redevelopment projects have remained capital-intensive due to elevated material costs and evolving regulatory requirements. Although global supply chains have generally stabilized, operators continue to experience delays in accessing specialized equipment required for cultivation and processing facilities.
These pressures have been compounded by geopolitical tensions and shifting trade policies, which have contributed to uncertainty in input pricing and the timing of capital projects. As a result, many cannabis businesses continue to experience higher capital requirements and delays in project starts or completions. We continue to monitor inflationary and supply-chain conditions and their potential effects on our tenants and investment commitments.
Competitive Environment
We face competition from a diverse mix of market participants, including but not limited to, other companies with similar business models, independent investors, hedge funds and other real estate investors, mortgage REITs, hard money lenders, as well as would-be tenants and cannabis operators themselves, all of whom may compete with us in our efforts to acquire real estate zoned for cannabis cultivation, production or dispensary operations. Competition from others may diminish our opportunities to acquire a desired property on favorable terms or at all. In addition, this competition may put pressure on us to reduce the rental rates below those that we expect to charge for the properties that we own and expect to acquire, which would adversely affect our financial results.
Critical Accounting Estimates
In accordance with GAAP, our consolidated financial statements require the use of estimates and assumptions that involve the exercise of judgment and use of assumptions. Our most critical accounting estimates will involve decisions and assessments that could affect our reported assets and liabilities, as well as our reported revenues and expenses. Actual results could differ materially from those estimates and assumptions.
We believe that all of the decisions and assessments upon which our consolidated financial statements have been based were reasonable at the time made and based upon information available to us at that time. Below is a summary of our critical accounting estimates that involve a significant level of estimation uncertainty or subjectivity and have had or are reasonably likely to have a material impact on our financial condition or results of operations. This discussion of our critical accounting estimates is intended to supplement the description of our accounting policies in the footnotes to our consolidated financial statements and to provide additional insight into the information used by management when evaluating significant estimates and assumptions. For further discussion of our significant accounting policies, refer to Note
2 "Basis of Presentation and Summary of Significant Accounting Policies" to our consolidated financial statements included in this Form 10-K.
Investments in Real Estate
Investments in real estate are presented at historical cost, less accumulated depreciation. Costs directly related to the properties' acquisition, development, or redevelopment of the properties are capitalized. Repairs and maintenance costs incurred, if any, on the properties are expensed. Major replacements and betterments, which improve or extend the life of the asset, are capitalized and depreciated over their estimated useful lives.
We capitalize costs associated with building and tenant improvement when it is considered the accounting owner of such improvements. These improvements generally consist of building additions or significant upgrades to existing facilities. The improvements are classified under Buildings and Improvements in the consolidated balance sheet and are considered construction in progress until placed in service. Such improvements are considered placed in service when they are ready and available for their intended use.
Upon acquisition of a property, we allocate the purchase price of the real estate to land, building and improvements, site improvements and if applicable, determined intangibles, such as the value of above and below market leases and origination costs associated with the in-place lease. The tangible and intangible assets acquired and liabilities assumed are initially measured based upon their relative fair values. We estimate the fair value of land by reviewing comparable sales within the same submarket and/or region, the fair value of buildings on an as-if vacant basis and may engage third-party valuation specialists. Acquisition costs for asset acquisitions are capitalized as incurred. All of our real estate investments to date were recorded as asset acquisitions.
We depreciate the amount allocated to building and improvements on a straight-line basis over their estimated useful lives, which generally range from 20 to 35 years. Site improvements at our buildings, if any, are depreciated over the estimated useful lives, generally range from 8 to 15 years. Tenant improvements are depreciated on a straight-line basis over the lease term and intangibles related to in-place leases are amortized over the remaining lease term.
Impairment of Real Estate
We review current activities and changes in the business condition of all of our properties to identify any triggering events or impairment indicators. Each real estate asset is evaluated for impairment on a property-by-property basis. If triggering events or impairment indicators are identified, we assess the carrying value of the real estate for potential impairment. Indicators of impairment may include but are not limited to, deterioration in rent rates for a property, decline in projected rental rates, evidence of material physical damage to the property, holding period, and tenant defaults.
An impairment provision is recorded if estimated future operating cash flows (undiscounted and without interest charges) plus estimated disposition proceeds (undiscounted) are less than the current book value of the property. Key inputs that we utilize in this analysis include projected rental rates, estimated holding periods, capital expenditures and property sales capitalization rates. Our undiscounted cash flow and fair value calculations contain uncertainties because they require management to make assumptions and to apply judgment to estimate future cash flow and property fair values, including determining our estimated holding period and selecting the discount or capitalization rate that reflects the risk inherent in future cash flow. If the actual net cash flow or actual market capitalization rates significantly differ from our estimates, the impairment evaluation for an individual asset could be materially affected. The amount of the impairment recorded is based on the fair market value of the real estate asset.
Lease Classification
Lease classification for leases under which we are the lessor are evaluated at lease commencement and leases not classified as sales-type leases or direct financing leases are classified as operating leases. Leases qualify as sales-type leases if the
contract includes transfer of ownership clauses, certain purchase options, a lease term representing a major part of the economic life of the asset, or the present value of the lease payments and residual guarantees provided by the lessee exceeds substantially all of the fair value of the asset. Additionally, leasing an asset so specialized that it is not deemed to have any value to us at the end of the lease term may also result in classification as a sales-type lease. Leases qualify as direct financing leases when the present value of the lease payments and residual value guarantees provided by the lessee and unrelated third parties exceeds substantially all of the fair value of the asset and collection of the payments is probable. The determination of lease classification requires the calculation of the rate implicit in the lease or the use of an appropriate capitalization rate which requires significant judgment.
Revenue Recognition
Our triple-net leases are accounted for as operating leases. Operating leases that have fixed and determinable rent increases are recognized on a straight-line basis over the lease term, unless the collectability of minimum lease payments is not reasonably predictable. Rental increases based upon changes in the consumer price index are recognized only after the changes in the indexes have occurred and are then applied according to the lease agreements. Contractually obligated expenses as defined by the lease agreement that are paid directly by the tenant are not reflected in our consolidated financial statements.
Operating leases where the minimum lease payments are not reasonably predictable are recognized on a cash basis. The collectability criteria for our operating leases is assessed quarterly on an individual basis, incorporating several financial metrics, which include but are not limited to, free cash flow, profitability, debt profile and federal tax liability. In our assessment, we also consider the impact of federal regulatory uncertainty and state regulatory challenges in the cannabis industry, including the fact that cannabis remains illegal under federal law. These environmental factors are significant in our assessment of collectability of lease payments given the pervasive impacts on our tenants' financial performance and ability to continue as a going concern. Based on this assessment, we determined collectability of rent for each of our tenants is uncertain and rental income was recorded on a cash basis. We will continue to assess quarterly the collectability of lease payments for each tenant as required by ASC 842.
Financial Instruments - Credit Losses
We adopted ASC 326, Financial Instruments - Credit Losses ("CECL") on January 1, 2023. The CECL expected loss model requires an allowance for all expected credit losses for the life of a loan be recognized when the loan is either originated or acquired. The allowance for credit losses is a valuation account that is deducted from, or added to, the amortized cost basis of the financial asset(s) to present the net amount expected to be collected on the financial asset(s). At each reporting period, we will update the estimate and adjust the allowance for credit losses accordingly. Increases in the allowance are recorded through net income as credit loss expense. Decreases in the allowance are recorded through net income as a reversal of credit loss expense. This standard does not specify a specific measurement technique for estimating expected credit losses and the approach used to estimate credit losses requires judgment. We generally use a discounted cash flow model approach to determine the credit loss. Determining the appropriate discount rate that reflects the risk inherent in future cash flow requires significant judgment. If the discount rates differ significantly from our estimates, the provision for current credit loss could be materially affected.
Stock-Based Compensation
We record our compensation cost for all stock awards at fair value at the grant date and amortize the cost over the service period (generally equal to the vesting period) which is included in "Compensation Expense" on our consolidated statement of operations. The compensation cost for stock option grants is determined using option pricing models, intended to estimate the fair value of the awards at the grant date less estimated forfeitures. We used the Black-Scholes option pricing model to estimate the fair value of options awards at the time of their grant, which required input of assumptions, including judgments to estimate expected stock price volatility, expected life, and forfeiture rate. The fair value of performance stock awards is determined using a Monte Carlo simulation for our future stock price and the corresponding peer group. There is significant uncertainty in the estimation of the valuation of our performance stock awards and there is additional uncertainty around forfeitures as we cannot determine if or when forfeitures will happen. The valuation of units can vary significantly since units are based upon target amounts that may or may not be met. If target metrics are not met upon vesting, the performance stock units are subject to cancellation. Cancellation of performance stock units has no impact on estimated or previously recognized expense.
2025 Highlights
Investment Activity
Real Estate Acquisitions
During the year ended December 31, 2025, we acquired three dispensaries for approximately $1.7 million and committed to fund approximately $1.1 million in improvements (refer to the 2025 Improvement Allowancestable below for details).
The following table presents our investment activity for the year ended December 31, 2025 (in thousands):
| Tenant | Market | Site Type | Closing Date | Real Estate Acquisition Costs | |||||||||||||||||||||||||
| Cresco Labs | Ohio | Dispensary | February 19, 2025 | $ | 285 | ||||||||||||||||||||||||
| Cresco Labs | Ohio | Dispensary | April 25, 2025 | 500 | |||||||||||||||||||||||||
| Curaleaf | (1) | Pennsylvania | Dispensary | June 12, 2025 | 950 |
'(3)
|
|||||||||||||||||||||||
| Total | $ | 1,735 | |||||||||||||||||||||||||||
(1) This dispensary was acquired through a like-kind exchange and was recorded at its fair value. For further details, refer to the "2025 Disposition" section below.
Improvements Allowances
During the year ended December 31, 2025, we funded approximately $0.7 million towards our committed improvement allowance at a dispensary in Ohio.
The following table presents the funded commitments and the remaining unfunded commitments for the year ended December 31, 2025 (in thousands):
| Tenant | Market | Site Type | Closing Date | Funded Commitments | Unfunded Commitments | ||||||||||||||||||||||||||||||
| Cresco Labs | Ohio | Dispensary | February 19, 2025 | $ | 705 | $ | - | ||||||||||||||||||||||||||||
| Cresco Labs | Ohio | Dispensary | April 25, 2025 | - | 375 | ||||||||||||||||||||||||||||||
| Total | $ | 705 | $ | 375 | |||||||||||||||||||||||||||||||
Disposal of Real Estate
On June 12, 2025 we completed a deed-for-deed like-kind exchange with Curaleaf, involving the transfer of its dispensary located in Mokena, IL for a dispensary located in Brookville, PA. The transaction was structured as a nonmonetary exchange with no cash consideration. Upon completion of the exchange, the Brookville property we received was leased to an existing tenant under a new operating lease. The Brookville dispensary was recorded at its fair value of $950 thousand and we recognized a de minimis loss on the exchange. For additional details, refer to the acquisition summary in the table above.
Real Estate Held for Sale
In November 2025, we entered into an agreement with a broker to market our Hartford, Connecticut property for sale which is leased to C3 Industries ("C3"). The property has a carrying amount of approximately $4.8 million and is available for immediate sale in its present condition. Management has committed to a plan to sell the asset and expects the sale to be completed within one year. Accordingly, the property meets the criteria for held-for-sale classification and is presented as "Real Estate Held for Sale" in the accompanying consolidated balance sheet.
In accordance with ASC 360, long-lived assets classified as held for sale are measured at the lower of their carrying amount or fair value less costs to sell. In connection with the planned sale, we are entitled to receive make-whole protection under the terms of the tenant's lease arrangement. If the ultimate sale proceeds are less than our investment basis, the tenant is required to reimburse us for the shortfall. Any such reimbursement, if realized, will be recognized when the sale is completed and the amount becomes determinable. Based on the make-whole protection and management's current estimate of fair value less costs to sell, we are reporting the property at its carrying amount, and therefore no impairment loss has been recognized.
Capital Markets Activity
Dividends
During the year ended December 31, 2025, the Company's board of directors declared cash dividends totaling $1.72 per share of common stock.
Results of Operations
General
During the year ended December 31, 2025, we derived substantially all our revenue from rents received from single tenants at each of our 34 properties, all of which are under triple-net leases. As of December 31, 2025, our portfolio remains conservatively leveraged, with only $7.6 million outstanding under our Revolving Credit Facility. Additionally, we maintained low general and administrative expenses with an annual expense ratio of 1.4% of total assets.
Comparison of the Year Ended December 31, 2025 and 2024 (dollars in thousands):
| For the Year Ended December 31, | Increase/(Decrease) | |||||||||||||||||||
| 2025 | 2024 | 2025 vs 2024 | ||||||||||||||||||
| Revenue: | ||||||||||||||||||||
| Rental Income | $ | 49,537 | $ | 48,926 | $ | 611 | ||||||||||||||
| Interest Income from Loans | 545 | 533 | 12 | |||||||||||||||||
| Fees and Reimbursables | 989 | 672 | 317 | |||||||||||||||||
| Total Revenue | 51,071 | 50,131 | 940 | |||||||||||||||||
| Expenses: | ||||||||||||||||||||
| Reimbursable Property Expenses | 811 | 239 | 572 | |||||||||||||||||
| Property Carrying Costs | 379 | - | 379 | |||||||||||||||||
| Depreciation and Amortization Expense | 15,520 | 14,713 | 807 | |||||||||||||||||
| General and Administrative Expenses: | ||||||||||||||||||||
| Compensation Expense | 3,768 | 4,675 | (907) | |||||||||||||||||
| Professional Fees | 1,424 | 1,506 | (82) | |||||||||||||||||
| Other General and Administrative Expenses | 1,929 | 1,733 | 196 | |||||||||||||||||
| Total General and Administrative Expenses | 7,121 | 7,914 | (793) | |||||||||||||||||
| Total Expenses | 23,831 | 22,866 | 965 | |||||||||||||||||
| Loss on Sale of Real Estate | (34) | - | (34) | |||||||||||||||||
| Provision for Current Expected Credit Loss | 45 | 51 | (6) | |||||||||||||||||
| Impairment Loss on Warrants | - | (522) | 522 | |||||||||||||||||
| Income From Operations | 27,251 | 26,794 | 457 | |||||||||||||||||
| Other Income (Expense): | ||||||||||||||||||||
| Other Income | 357 | 354 | 3 | |||||||||||||||||
| Interest Expense | (839) | (565) | (274) | |||||||||||||||||
| Total Other Income (Expense) | (482) | (211) | (271) | |||||||||||||||||
| Net Income | 26,769 | 26,583 | 186 | |||||||||||||||||
| Net Income Attributable to Noncontrolling Interests | (451) | (468) | 17 | |||||||||||||||||
| Net Income Attributable to Common Stockholders | $ | 26,318 | $ | 26,115 | $ | 203 | ||||||||||||||
Revenues
Rental Income
Rental income for the year ended December 31, 2025 increased by approximately $0.6 million, to approximately $49.5 million, compared to approximately $48.9 million for the year ended December 31, 2024. The increase in rental income was primarily attributable to:
•A full year of rental income in 2025 from the purchase of a cultivation facility in Connecticut in May 2024, which generated an increase of approximately $0.2 million of rental income during the year ended December 31, 2025.
•Approximately $0.1 million of rental income from the acquisition of two dispensaries in Ohio that we purchased during the year ended December 31, 2025.
•Funding of improvement allowances at our Arizona, Connecticut, Missouri and Pennsylvania cultivation facilities, which generated approximately $0.6 million of additional rental income during the year ended December 31, 2025.
•Annual rent escalations on our portfolio, which generated an increase of approximately $1.1 million in rental income during the year ended December 31, 2025.
The increases in rental income during 2025 described above were offset by a decline in rental income primarily attributable to:
•Revolutionary Clinics vacated the Fitchburg property in July 2025 after paying only 50% of its contractual rent from June 2024 through the date of vacancy. This resulted in an approximate decline of $1.1 million in rental revenue compared to 2024. Beginning in June 2024, the tenant experienced significant operational challenges that impaired its ability to meet its full rent obligations. These challenges escalated, and in December 2024 the tenant entered receivership, which ultimately led to its departure from the property in 2025. For further information refer to Note 4 - "Leases."of the accompanying consolidated financial statements.
•Rental income from our two cultivation facilities leased to AYR declined by approximately $0.3 million compared to 2024. AYR remained current on its rent obligations through July 2025; however, beginning in August 2025 and continuing through year-end, the Company did not receive rent for the Pottsville, PA or Sparks, NV properties. AYR vacated both properties during the third quarter of 2025. In accordance with the lease terms, the Company applied AYR's security deposits of approximately $0.9 million, which covered rent for August through October 2025 and partially covered rent for November 2025.
Interest Income from Loans
Interest income from loans increased slightly due to the annual rate adjustment on our one $5.0 million loan receivable.
Fees and Reimbursables
Fees and reimbursables for the year ended December 31, 2025 increased by approximately $0.3 million, to approximately $1.0 million, compared to approximately $0.7 million for the year ended December 31, 2024, due to timing of revenue reimbursements year over year.
Expenses
Reimbursable Property Expenses
During the year ended December 31, 2025, reimbursable property expenses increased by approximately $0.6 million to approximately $0.8 million, compared to $0.2 million for the year ended December 31, 2024. Reimbursable property expenses is mainly attributable to real estate taxes, insurance and utility payments primarily made on behalf of three tenants. In certain circumstances we will pay for certain expenses on behalf of the tenant with the tenant being obligated to
reimburse us. However, timing differences may cause the recognition of expenses and corresponding reimbursement income to vary between periods.
Property Carrying Costs
Property carrying costs represent expenses incurred to maintain vacant or partially vacant properties in a condition suitable for re-leasing. These costs generally include real estate taxes, utilities, property management fees, security, and other operating expenses necessary to keep the properties functional and marketable. The Company did not incur any property carrying costs in 2024, as all properties were fully leased during that period. For the year ended December 31, 2025, the Company incurred approximately $0.4 million in property carrying costs across three properties that were vacated during 2025: (i) our Fitchburg, Massachusetts property, which was vacated by Revolutionary Clinics in July 2025; (ii) our Pottsville, Pennsylvania property, which was vacated by AYR in August 2025; and (iii) our Sparks, Nevada property, which was also vacated by AYR in August 2025.
Depreciation and Amortization Expense
Depreciation and amortization expense for the year ended December 31, 2025, increased by approximately $0.8 million to approximately $15.5 million, compared to $14.7 million for the year ended December 31, 2024. The increase in depreciation was primarily attributable to: (i) a full year of depreciation in 2025 on improvements placed into service during 2024 totaling approximately $37.3 million related to four cultivation facilities; (ii) approximately $2.7 million of improvements placed into service during 2025 related to two cultivation facilities and one dispensary; (iii) 2025 acquisitions of two dispensaries, contributing approximately $0.5 million in depreciable assets; and (iv) a full year of depreciation in 2025 on a 2024 acquisition of a cultivation facility, contributing approximately $3.7 million in depreciable assets. These depreciation increases were partially offset by a decrease of approximately $0.2 million in depreciable assets, which became fully depreciated during the year ended December 31, 2025.
General and Administrative Expenses
Total general and administrative expenses for the year ended December 31, 2025 decreased by approximately $0.8 million, to approximately $7.1 million, compared to approximately $7.9 million for the year ended December 31, 2024. The decrease in general and administrative expense is described below by category.
Compensation Expense
Compensation expense includes salaries for directors, employees and officers, as well as stock-based compensation. For the year ended December 31, 2025, compensation expense decreased by approximately $0.9 million to approximately $3.8 million, compared to approximately $4.7 million for the year ended December 31, 2024. The decrease was primarily driven by an employee resignation, resulting in reduced salary, bonus accruals and stock-based compensation.
Professional Fees
Total professional fees were relatively consistent year over year, decreasing slightly by approximately $0.1 million to $1.4 million for the year ended December 31, 2025, compared to $1.5 million for the prior year. The modest decline reflects ordinary period-to-period fluctuations in legal and audit fees.
Other General and Administrative Expenses
Other general and administrative expenses remained relatively flat year over year. These expenses are primarily comprised of director and officer insurance, information technology fees, public relations fees, filing and regulatory fees, public reporting fees, corporate rent and various other expenses.
Loss on Sale of Real Estate
The loss on sale of real estate during 2025 was recognized in connection with the Mokena/Brookville like-kind exchange, reflecting the difference between the carrying value of the Mokena property and the fair value of the Brookville property received.
Provision for Current Expected Credit Loss
Provision for current expected credit loss remained relatively flat year over year.
Impairment Loss on Warrants
On December 13, 2024, Revolutionary Clinics entered into receivership. Based on our impairment assessments, we determined that the investment in warrants was impaired due to the significant concerns about Revolutionary Clinics' ability to continue as a going concern raised by the receivership (See "Note 10 - Warrants" for further information). As a result, we recorded an impairment loss on warrants of $522 thousand for the year ended December 31, 2024.
Other Income (Expense)
Other Income
Other income, which is primarily comprised of interest income remained relatively flat year over year.
Interest Expense
Interest expense for the year ended December 31, 2025, increased by approximately $0.2 million, to approximately $0.8 million compared to approximately $0.6 million for the year ended December 31, 2024. This increase primarily reflects higher borrowing costs under our Revolving Credit Facility which transitioned from a fixed rate of 5.65% to a variable interest rate of Prime plus 1% effective May 6, 2025. The interest rate on the Revolving Credit Facility as of December 31, 2025 was 7.75%.
Non-GAAP Financial Information and Other Metrics
Funds from Operations and Adjusted Funds from Operations
Funds from Operations ("FFO") and Adjusted Funds from Operations ("AFFO") are non-GAAP financial measures and should not be viewed as alternatives to net income calculated in accordance with GAAP as a measurement of our operating performance. We believe that FFO and AFFO are useful to investors because they are widely accepted industry measures used by analysts and investors to compare the operating performance of REITs.
We calculate FFO in accordance with the current National Association of Real Estate Investment Trusts ("NAREIT") definition. NAREIT currently defines FFO as follows: net income (loss) (computed in accordance with GAAP) excluding depreciation and amortization related to real estate, gains and losses from the sale of certain real estate assets, and impairment write-downs of certain real estate assets and investments in entities when the impairment is directly attributable to decreases in the value of depreciable real estate held by an entity. Other REITs may not define FFO in accordance with the NAREIT definition or may interpret the current NAREIT definition differently than we do and therefore our computation of FFO may not be comparable to such other REITs.
We calculate AFFO by starting with FFO and adjusting for non-cash and certain non-recurring transactions, including non-cash components of compensation expense and the effect of provisions for credit losses. Other REITs may not define AFFO in the same manner as we do and therefore our calculation of AFFO may not be comparable to such other REITs. You should not consider FFO and AFFO to be alternatives to net income as a reliable measure of our operating performance; nor should you consider FFO and AFFO to be alternatives to cash flows from operating, investing or financing activities (as defined by GAAP) as measures of liquidity.
The table below is a reconciliation of net income attributable to common stockholders to FFO and AFFO for the year ended December 31, 2025 and 2024 (in thousands):
|
For the Year Ended December 31, |
||||||||||||||
| 2025 | 2024 | |||||||||||||
| Net Income Attributable to Common Stockholders | $ | 26,318 | $ | 26,115 | ||||||||||
| Net Income Attributable to Noncontrolling Interests | 451 | 468 | ||||||||||||
| Net Income | 26,769 | 26,583 | ||||||||||||
| Adjustments: | ||||||||||||||
| Real Estate Depreciation and Amortization | 15,502 | 14,695 | ||||||||||||
| Loss on Sale of Real Estate | 34 | - | ||||||||||||
| FFO Attributable to Common Stockholders - Diluted | 42,305 | 41,278 | ||||||||||||
| Impairment Loss on Warrants | - | 522 | ||||||||||||
| Non-cash Write-off of Deferred Offering Costs | 233 | - | ||||||||||||
| Provision for current expected credit loss | (45) | (51) | ||||||||||||
| Stock-Based Compensation | 1,066 | 1,674 | ||||||||||||
| Non-Cash Interest Expense | 269 | 269 | ||||||||||||
| Amortization of Straight-Line Rent Expense | (5) | (3) | ||||||||||||
| AFFO Attributable to Common Stockholders - Diluted | $ | 43,823 | $ | 43,689 | ||||||||||
Liquidity and Capital Resources
Our primary liquidity requirements include the payment of dividends to our shareholders, distributions to holders of LPI Units ("LPI Unitholders"), general and administrative expenses, debt service obligations, capital expenditures related to our existing portfolio, and funding for acquisitions and unfunded improvement commitments. We expect to meet these obligations through a combination of cash flows generated from operations, borrowings under our Revolving Credit Facility, and access to the capital markets, including issuances under our at-the-market ("ATM") equity program, subject to market conditions. Where appropriate, we may also issue LPI Units as consideration for property acquisitions to facilitate tax-deferred transactions for sellers.
As of December 31, 2025, our liquidity totaled $23.9 million of cash and cash equivalents and $82.4 million available on our Revolving Credit Facility, subject to sufficient collateral in the borrowing base. Additionally, the ATM Program allows us to raise capital up to $50.0 million. While we believe these sources of liquidity are adequate to support our near-term needs, there can be no assurance that such sources will remain available to us on terms acceptable or in amounts sufficient to meet our future requirements.
In May 2025, the interest rate on our Revolving Credit Facility transitioned from a fixed rate of 5.65% to a variable rate of prime plus 1.00%. As of December 31, 2025, we had $7.6 million outstanding under the facility. Given the relatively low outstanding balance, the impact of the rate change on our interest expense and liquidity during the year was not significant. Based on our current level of borrowings and the absence of any near-term debt maturities, we do not expect changes in market interest rates to materially affect our liquidity position in the near term.
Based on our current projections, we believe that cash flows from continuing operations over the next twelve months, together with existing cash on hand and available borrowing capacity, will be sufficient to fund our operating activities, pay dividends to shareholders, make required distributions to LPI Unitholders, and service our debt obligations. Acquisitions and unfunded improvement allowance costs may require funding from borrowings, equity issuance and/or issuances of LPI Units. We may utilize a combination of these sources depending on market conditions and capital availability.
Summary of Cash Flows
The following summary discussion of our cash flows is based on the consolidated statements of cash flows in our consolidated financial statements and is not meant to be an all-inclusive discussion of the changes in our cash flows for the periods presented below (in thousands):
| For the Year Ended | |||||||||||
| December 31, | |||||||||||
| 2025 | 2024 | ||||||||||
| Net Cash Provided by Operating Activities | $ | 42,461 | $ | 43,349 | |||||||
| Net Cash Used in Investing Activities | $ | (1,490) | $ | (19,135) | |||||||
| Net Cash Used in Financing Activities | $ | (37,247) | $ | (29,844) | |||||||
| Cash and Cash Equivalents - End of Year | $ | 23,937 | $ | 20,213 | |||||||
Net Cash Provided by Operating Activities:
Net cash provided by operating activities for the years ended December 31, 2025 and 2024 were approximately $42.5 million and approximately $43.3 million, respectively. Net cash flows provided by operating activities for the years ended December 31, 2025 and 2024 were primarily related to contractual rent received from our properties, partially offset by our general and administrative expenses and property carrying costs.
Cash Used in Investing Activities:
Net cash used in investing activities for the years ended December 31, 2025 and 2024 were approximately $1.5 million and approximately $19.1 million, respectively. Net cash used in investing activities for the year ended December 31, 2025 related to approximately $0.8 million used to purchase two dispensaries in Ohio and approximately $0.7 million used to fund improvements at a dispensary in Ohio. Net cash used in investing activities for the year ended December 31, 2024 related to approximately $4.0 million used to purchase a cultivation facility in Connecticut and approximately $15.1 million used to fund improvement at our cultivation facilities in Arizona, Connecticut, Missouri and Pennsylvania.
Net Cash Used in Financing Activities:
Cash used in financing activities for the years ended December 31, 2025 and 2024 was approximately $37.2 million and approximately $29.8 million, respectively. Cash used in financing activities for the year ended December 31, 2025, related to approximately $35.8 million in dividend payments to holders of our common stock and vested RSUs and PSUs, approximately $0.6 million in distributions on our LPI Units, approximately $0.4 million of cash paid for taxes in lieu of issuance of common stock on vested RSUs and PSUs, approximately $0.3 million paid to redeem 15,198 LPI Units in cash, and approximately $0.3 million to issue PSUs in cash. Net cash used in financing activities for the year ended December 31, 2024, was mainly related to approximately $34.4 million in dividend payments to holders of our common stock and vested RSUs, approximately $0.6 million in distributions on our LPI Units, $1.0 million to pay down our loan payable, approximately $0.3 million of deferred offering costs incurred in connection with our ATM Program and approximately $84 thousand of cash paid for taxes in lieu of issuance of common stock on vested RSUs. These cash flows were offset by $6.6 million drawn on our Revolving Credit Facility.
Dividends
To maintain our qualification as a REIT, U.S. federal income tax law generally requires that we distribute at least 90% of our REIT taxable income annually, determined without regard to the deduction for dividends paid and excluding net capital gains. We must pay tax at regular corporate rates to the extent that we annually distribute less than 100% of our taxable income. We evaluate each quarter to determine our ability to pay dividends to our stockholders based on our net taxable income if and to the extent authorized by our board of directors. Before we pay any dividend, whether for U.S. federal income tax purposes or otherwise, we must first meet both our operating requirements and debt service payments. If our cash available for distribution is less than our net taxable income, we could be required to sell assets or borrow funds to make cash distributions or we may make a portion of the required distribution in the form of a taxable stock distribution.
As a result of this distribution requirement, our Operating Partnership cannot rely on retained earnings to fund its ongoing operations to the same extent that other companies whose parent companies are not REITs can. During the year ended December 31, 2025, we declared and our board of directors approved, cash dividends on our common stock and restricted stock units and in our capacity as general partner of the Operating Partnership, we authorized distributions on our LPI Units totaling $1.72 per share.
During the year ended December 31, 2024, we declared and our board of directors approved, cash dividends on our common stock and restricted stock units and in our capacity as general partner of the Operating Partnership, authorized distributions on our LPI Units totaling $1.70 per share.
Contractual Obligations and Commitments
Unfunded Commitments
As of December 31, 2025, we had aggregate unfunded commitments to invest approximately $0.4 million to develop and improve our dispensary in Ohio.
Corporate Office Lease
As of December 31, 2025, we are the lessee under one office lease for an initial term of four years, subject to annual escalations. The lease agreement was amended on November 20, 2025 to extend the initial term for one year, ending August 31, 2027. The annual rent payments range from approximately $72 thousand in year one to $85 thousand in year five. The office lease has a weighted average remaining lease term of approximately 1.67 years.
Revolving Credit Facility
The Revolving credit facility accrued interested at a fixed rate of 5.65% through May 5, 2025. Effective May 6, 2025, the Revolving Credit Facility transitioned to a variable interest rate structure, bearing interest at a variable rate based upon the greater of (a) the Prime Rate quoted in the Wall Street Journal (Western Edition) ("Base Rate") plus an applicable margin of 1.0% or (b) 4.75%. As of December 31, 2025, the interest rate was 7.75% and we had $7.6 million outstanding under the facility. See Note 6 - "Financings" for more details.
Adoption of New or Revised Accounting Standards
We are an emerging growth company, as defined in the JOBS Act. Under the JOBS Act, emerging growth companies can delay adopting new or revised accounting standards issued subsequent to the enactment of the JOBS Act until such time as those standards apply to private companies. We elected to use this extended transition period for complying with new or revised accounting standards that have different effective dates for public and private companies until the earlier of the date that we (i) are no longer an emerging growth company or (ii) affirmatively and irrevocably opt out of the extended transition period provided in the JOBS Act. As a result, our consolidated financial statements may not be comparable to companies that comply with the new or revised accounting pronouncements as of public company effective dates.
Recent Accounting Pronouncements
Refer to Note 2 - "Basis of Presentation and Summary of Significant Accounting Policies" for recent accounting pronouncements.
Newlake Capital Partners Inc. published this content on March 06, 2026, and is solely responsible for the information contained herein. Distributed via EDGAR on March 06, 2026 at 11:03 UTC. If you believe the information included in the content is inaccurate or outdated and requires editing or removal, please contact us at [email protected]