Newlake Cap Partners Inc

Good morning. I'll be your conference operator today. At this time, I'd like to welcome everyone to the New Lake Capital Partners Second Quarter 2023 Earnings 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.

Thank you, operator. Good morning and welcome everyone to the New Lake Capital Partners Second Quarter 2023 Earnings Conference Call. I'm joined today by Anthony Coniglio, President and Chief Executive Officer, Lisa Meyer, Chief Financial Officer, and Jared Annenberg, Senior Vice President and Head of Investments. Before we begin, I'd like to remind everyone that statements made during today's conference call may be deemed forward-looking statements within the meaning of the safe harbor of the Private Securities Litigation Reform Act of 1995. And actual results may differ materially due to a variety of risks and uncertainties and other factors. For a detailed discussion of some of the ongoing risks and uncertainties in the company's business, I refer you to the press release issued yesterday and filed with the SEC on form AK, as well as the company's 10-K, 10-Q, and other reports filed periodically with the SEC. The company disclaims any intention or obligation to update or revise any forward-looking statements, whether as a result of new information, future events, or otherwise. FFO and AFFO are supplemental non-GAAP financial measures using the real estate industry to measure and compare the operating performance of real estate companies. A complete reconciliation containing adjustments from GAAP net income attributable to common shareholders to FFO and AFFO and definitions of terms are included at the end of our press release. Please refer to the release for more information. The company's guidance is based on current plans and assumptions and subject to the risks and uncertainties more fully described in the company's filings with the SEC. This outlook reflects management's view of current and future market conditions, including assumptions such as the pace of future acquisitions and dispositions, rental rates, occupancy levels, leasing activity, uncollectible rents, operating and general and administrative expenses, weighted average of those shares outstanding in interest rates. And with that, it's my pleasure to turn the call over to Mr. Anthony Coniglio. Anthony, please go ahead.

Thank you, Volker. And thank you, everyone, for joining our call today. are pleased with our 2023 second quarter results which were in line with the guidance provided last quarter our second quarter dividend of 39 cents per share was well covered with a payout ratio of 85 percent for the quarter even after accounting for the rent collection issue that persisted at revolutionary clinics one of our larger massachusetts cultivation facilities importantly in regard to that tenant our team made significant progress resolving the situation and we're providing full-year AFFO guidance, anticipating resolution later this quarter. While no portfolio is immune to tenant credit risk, our team was prepared and has worked diligently with the tenant on a potential resolution that we believe provides the best long-term value for our shareholders. I expect many of you will have questions about what a potential resolution could look like. However, nothing is done until it's done. And so we will not discuss it today, but we certainly will provide additional information if and when details are finalized. Aside from revolutionary clinics, we received 100% of rent during the quarter. We believe our focus on properties and limited license jurisdictions with quality property level cash flows has resulted in one of the best credit quality portfolios in the industry. This isn't to say we will never have an issue, but these dynamics are important to resolving issues when they inevitably arise. As we look to the future, the environment for cannabis operators is showing some signs of stabilization. Marginal capacity is coming out of certain markets, prices are firming in some markets, and the benefits of cost cutting and business rationalization will begin to improve operators' operating cash flow. At the same time, legalization continues to expand. Maryland recently launched adult use sales and similar ballot initiatives are underway in Florida and Ohio. which if they pass, could add over 30 million people to the adult use market in these states. With virtually no debt and $89 million available to us under our attractively priced credit facility, we're in a very good position to weather the current macro headwinds and deploy capital into quality transactions. As you saw in our press release, we repurchased over 50,000 shares during the second quarter. While it's great to buy back stock at accretive levels, we would all prefer to have our stock price more accurately reflect the value of our quality portfolio. With an above-market weighted average yield, 14.5 years of remaining lease term, and only $2 million of debt, we believe that our stock is well undervalued, and we continue to focus our efforts on broadening our investor base to drive demand for our stock. The most impactful catalyst for this would be acceptance of New Lake's stock by institutional custody agents or uplisting to a major exchange. That continues to be a focus for us, and we will be relentless in our pursuit of the objective. We've been watching TerraCent's recent uplisting to the Toronto Stock Exchange, or TSX, and have been encouraged to see the institutional custody agents begin accepting their stock. We will continue to monitor that progress and we will evaluate whether a restructure to comply with PSX rules would be beneficial for our shareholders. Additionally, there are regulatory reform initiatives that may also provide catalysts to broaden institutional focus on cannabis and ancillary businesses such as New Lake. These include the passing of safe banking, the Coal Memo 2.0 if it comes out, rescheduling of cannabis away from being a Schedule 1 controlled substance, rescinding 280E and of course, federal legalization. Each of these catalysts will have varying degrees of impact, but changes to one or more of these could set in motion increased demand for cannabis, acceptance of the industry as a whole, and drive the value of cannabis stocks. Aside from positively impacting new late, higher equity prices across the sector would allow operators the opportunity to recapitalize their balance sheets where necessary and improve their credit profiles. And all that would be a positive for the industry overall, thus further driving institutional demand. We're very, very cautious in predicting when any or if, if or any of these might occur. But the topic of cannabis has seen significantly more discussion in Washington, D.C. over the past 12 months. And as the 2024 election cycle heats up, we would not be surprised to see increased conversation and forward progress on any of these issues. similarly to what we saw with the Biden administration just prior to the midterm elections last year. For now, we will continue to be focused on the fundamentals of our business, executing our strategy, and working hard to deliver attractive long-term returns for our investors. Lastly, before I turn it over to Jarrett, I want to say that as we celebrate the two-year anniversary of our IPO in a couple of days, we're reminded of and take pride in the company's accomplishments. Since our IPO, ASFO is up 66%. Dividends are up 63%. And we secured a $90 million credit facility at an attractive fixed rate. In fact, we have paid out nearly $58 million in dividends over the past two years. In addition, we have secured a leadership transition, bolstered our executive management team, and positioned New Lake as one of the leading capital providers to the cannabis industry. There's a lot to be proud of and build upon as we celebrate these milestones and look forward to the future. With that, I'll turn the call over to Jarrett.