Exclusive Interview with NewLake Capital Partners Anthony Coniglio
Since forming last year, cannabis real estate company NewLake Capital Partners has raised approximately $100 million in capital to help build its diversified portfolio. CEO Anthony Coniglio spoke with New Cannabis Ventures about the current portfolio, competing in the cannabis space and what the future looks like for NewLake. The audio of the entire conversation is available at the end of this written summary.
Cannabis, Real Estate and Finance Expertise
Coniglio has a background in startups and investment banking. When putting together NewLake, he and his partners saw the opportunity to bring a diverse skill set to real estate capital in the cannabis industry. The company’s team is made up of leaders with experience in cannabis, real estate and financial services.
Board member Pete Kadens, a co-founder of Green Thumb Industries, brings a strong background in the cannabis industry and has helped NewLake to understand how cannabis companies and facilities work. Peter Martay, Stephen Quazzo and Rob Sistek bring their experience in commercial real estate to the NewLake team. Board member Martay is CEO of Pangea Properties, and Quazzo, also a member of the board, is the co-founder and CEO of private equity real estate investment firm Pearlmark. Interim CFO Sistek has more than 30 years of experience in commercial real estate, including time spent at Innovative Industrial Properties. Coniglio brings more than 30 years of experience in financial services to the table.
NewLake Portfolio
NewLake currently owns 20 properties (17 dispensaries and three cultivation facilities) across eight states. Its tenants include Grassroots, PharmaCann, Columbia Care and PurePenn. Thus far, the company has deployed approximately 80 percent of the $100 million it has raised. Some of that deployed capital has gone toward acquiring buildings upfront and some has been used for tenant improvement dollars that will be distributed over the next few quarters, according to Coniglio.
Portfolio Expansion
The company has $15 to $20 million of dry powder, and it is looking for opportunities to continue expanding its portfolio. NewLake focuses on limited license markets, seeing more value and less potential risk there. It is looking to expand to its position in some of its current states and add more tenants to its portfolio. Markets it has yet to enter, such as Florida, New Jersey and Maryland, are also of interest.
When vetting potential opportunities, NewLake takes a thorough approach to understanding the facilities and the companies entering 10-year, 15-year or longer leases. It examines balance sheets, works to understand cash flow and aims to see how the sale-leaseback transactions fit into companies’ overall strategic plans. NewLake wants to work with companies that are either cash flow positive or will be in the near future, according to Coniglio. A management team’s ability to navigate changing regulatory environments is also an important consideration. NewLake also factors in the potential impact regulatory changes could have on operations at its locations.
The company is taking a broad approach to the kinds of operators it serves. It sees opportunity in MSOs, single-state operators and regional players that are scaling up their presence.
The Competition
NewLake is not the only company operating in the cannabis real estate space. Coniglio sees many competitors opting for a niche approach, focusing on either industrial or retail properties. NewLake is aiming to maintain a diverse approach. It will consider retail, cultivation, processing and manufacturing facilities for its portfolio. The cannabis industry is going to continue to need access to capital as it grows. Similar to other sub-sets of the real estate industry, like data centers, cannabis will likely be served by a few well-run real estate businesses, according to Coniglio. He expects NewLake to be one of those few.
Innovative Industrial Properties, the largest cannabis-focused REIT, is traded on the NYSE. Coniglio sees the value of accessing capital via the public markets. To continue serving its tenants and doing more business with them, he foresees the need to access capital as efficiently as the competition. That may not mean listing on the NYSE immediately, but the company’s leadership is evaluating its options. When the time is right for its tenants and shareholders, it will pursue a public market strategy.
NewLake Investors
More than 170 investors, mostly family offices and high-net-worth individuals, have backed NewLake. Over the past 14 months, the company has also been having discussions with institutional investors. It has also spent that time educating potential investors on the value of investing in a cannabis-focused real estate business. Cannabis is expected to perform well even during a recession, and real estate offers a safe haven for investors in the current climate, according to Coniglio.
COVID-19
NewLake’s team is operating as normal during the COVID-19 pandemic, and Coniglio is cautiously optimistic that the company’s tenants will continue to cash flow. Cannabis buying patterns are beginning to normalize, and during the pandemic, cannabis companies have demonstrated how valuable they can be to the communities in which they operate.
Cannabis Industry Growth
More states will open the door to cannabis, and Coniglio sees the industry at just the start of a significant growth cycle that will continue for the next five to 10 years. As the industry grows, so will the opportunities for NewLake to expand its portfolio.
To learn more, visit the NewLake website. Listen to the entire interview:
