Newlake Capital Q3 earnings are extra optimistic than they first seem
NewLake Capital Companions, one of many largest cannabis-focused actual property funding trusts within the US, posted its Q3 monetary figures earlier this month. Whereas uninspiring at first look, its success in sustaining a stability sheet ‘among the many strongest within the sector’ amid such market instability shouldn’t be missed.
For the three months to September 30, 2025, Newlake reported complete revenues of $12.59m and internet earnings $6.67m, up from $12.55m and $6.42m, respectively.
The corporate’s key money circulate measures, FFO and AFFO, elevated by 3.8% and a pair of.4%, respectively, pointing to a constant revenue amid its core portfolio even because the broader market stays uneven.
It additionally maintained a quarterly dividend at 43 cents per share, equal to an annualised 13%-plus yield at current buying and selling ranges. Primarily based on NewLake’s annualised AFFO, the payout ratio sits at about 81 to 82 p.c, effectively inside its long-term goal vary of 80 to 90%.
Each income and EPS exceeded forecasts for the reporting interval, with income coming some $250,000 above expectations, whereas its EPS of $0.32 additionally got here comfortably above forecasts of $0.2733.
NewLake Capital’s EPS of $0.32 exceeded the forecast of $0.2733, leading to a 17.09% shock. Income additionally surpassed expectations, coming in at $12.6 million towards the projected $12.34 million. This efficiency highlights the corporate’s means to navigate a difficult market atmosphere successfully.
Throughout its quarterly earnings name, Chief Monetary Officer Lisa Meyer attributed the marginal income progress to 2 Cresco dispensaries acquired earlier within the yr, rental revenue from beforehand funded enhancements, and built-in lease escalators throughout the portfolio.
One notable exception was the dramatic collapse of its tenant AYR Wellness, which vacated two cultivation websites in Pennsylvania and Nevada as a part of a restructuring, eradicating roughly 6% of rental revenue from the quarter.
AYR’s collapse and failure to pay lease on the cultivation amenities from August was mitigated by Newlakes’ withdrawal of $505k from AYR’s safety deposits, which was then used to cowl the lease. As AYR is now transferring to dump its remaining property, Newlake says each its vacated websites at the moment are again available on the market.
Meyer additionally quantified the impression of AYR on future earnings, telling analysts that if each properties stay vacant, the drag on first quarter 2026 outcomes could be ‘somewhat over 0.035 {dollars}, possibly 0.036 {dollars}’ per share.
Elsewhere, Newlake highlighted that tenants representing round 50% of annual lease reported strong efficiency in Q3, together with Curaleaf, Inexperienced Thumb, Trulieve and Cresco Labs. Nonetheless, with these tenants representing such a big share of Newlakes’ revenue (Curaleaf accounting for twenty-four% alone), analysts word that any main disruption to those operators might be a danger for the REIT.
Meyer reiterated that the stability sheet ‘stays among the many strongest within the sector’, pointing to $432m of gross actual property property, $106m of liquidity and ‘a really conservative debt profile of simply 1.6 per cent debt to complete gross property, with no maturities till Might 2027’.
Notably, Chief Govt Anthony Coniglio urged throughout the earnings name that Newlake might look exterior of the hashish trade sooner or later.
“It’s our fiduciary duty to judge all avenues for creating long-term worth for shareholders, and that does embody contemplating alternatives past hashish,” he mentioned, including that the corporate is monitoring the broader actual property panorama for alternatives in different extremely regulated, special-purpose properties, and would take any appropriate concepts to the board.
Current evaluation from IWA Analysis argues NewLake’s fairness worth could also be considerably larger than present ranges, citing the corporate’s 34 owned properties, lengthy lease phrases averaging 12.3 years, and common 13% yield on its leases. The report suggests an intrinsic worth above $24 per share underneath conservative assumptions, in contrast with a market cap beneath $300m.
