NewLake Capital Partners, Inc.

NewLake Capital Partners, Inc. ("the Company," "we," "our," "us,") makes statements in this Quarterly Report on Form 10-Q (“Form 10-Q”) that are forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. In particular, statements pertaining to our capital resources, property performance, leasing rental rates, future dividends and results of operations contain forward-looking statements. Likewise, all of our statements regarding anticipated growth in our funds from operations, adjusted funds from operations, anticipated market conditions, demographics, and results of operations are forward-looking statements. You can identify forward-looking statements by the use of forward-looking terminology such as “believe,” “continue,” "remain," “could,” “expect,” “may,” “will,” “should,” “would,” “seek,” “approximately,” “intend,” “plan,” “pro forma,” “estimates,” “forecast,” “project,” or “anticipate” or the negative of these words and phrases or similar words or phrases which are predictions of or indicate future events or trends and which do not relate solely to historical matters. You can also identify forward-looking statements by discussions of strategy, plans or intentions.

•actions and initiatives of the U.S. or state governments and changes to government policies and the execution and impact of these actions, initiatives and policies, including the fact that cannabis remains illegal under federal law;

•reduced liquidity of our common stock resulting from limited availability of clearing firms that will settle our securities and settle our securities in secondary offerings;

•general economic conditions, including changes in the financial condition of our tenants resulting from uncertainties or changes in fiscal, monetary and regulatory policies, such as with respect to tariffs;

•increase in interest rates and operating costs;

•the impact of inflation;

•financial market fluctuations;

•the competitive environment in which we operate;

•the estimated growth in and evolving market dynamics of the regulated cannabis market;

•adverse economic effects on the cannabis market;

•the expected medical-use or adult-use cannabis legalization in certain states;

•shifts in public opinion regarding regulated cannabis;

•the additional risks that may be associated with certain of our tenants cultivating adult-use cannabis in our cultivation facilities;

•the risks associated with the development of cultivation centers and dispensaries;

•our ability to successfully identify opportunities in target markets;

•the lack of tenant security deposits will impact our ability to recover rents should our tenants default under their respective lease agreement;

•our status as an emerging growth company and a smaller reporting company;

•our lack of an extensive operating history;

•the concentration of our tenants in certain geographical areas;

•our failure to generate sufficient cash flows to service any outstanding indebtedness;

•rates of defaults on, early terminations of, or non-renewal of leases by tenants, including significant tenants;

•our failure to acquire the properties in our identified pipeline successfully, on the anticipated timeline or at the anticipated costs;

•our failure to properly assess employment growth or other trends in target markets and other markets in which we seek to invest;

•lack or insufficient amounts of insurance;

•bankruptcy or insolvency of a significant tenant or a substantial number of smaller tenants;

•our access to certain financial resources, including banks and other financial institutions;

•our failure to successfully operate acquired properties;

•our ability to operate successfully as a public company;

•our dependence on key personnel and ability to identify, hire and retain qualified personnel in the future;

•conflicts of interests with our officers and/or directors stemming from their fiduciary duties to other entities, including our operating partnership;

•our failure to obtain necessary outside financing on favorable terms or at all;

•general volatility of the market price of our common stock;

•changes in U.S. generally accepted accounting principles ("GAAP");

•our failure to maintain our qualification as a REIT for federal income tax purposes; and

•changes in governmental regulations or interpretations thereof, such as real estate and zoning laws and increases in real property tax rates and taxation of REITs.

While forward-looking statements reflect our good faith beliefs, they are not guarantees of future performance. We disclaim any obligation to publicly update or revise any forward-looking statement to reflect changes in underlying assumptions or factors, of new information, data or methods, future events or other changes after the date of this report, except as required by applicable law. You should not place undue reliance on any forward-looking statements that are based on information currently available to us or the third parties making the forward-looking statements.

The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our unaudited consolidated financial statements and related notes appearing elsewhere in this Quarterly Report on Form 10-Q and our audited consolidated financial statements and the related notes and the discussion under the heading "Management's Discussion and Analysis of Financial Condition and Results of Operations" for the fiscal year ended

December 31, 2024 included in our most recent Annual Report on Form 10-K and our subsequent Quarterly Reports on Form 10-Q.

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 "Special Note Regarding Forward-Looking Information" in this Quarterly Report on Form 10-Q. You should review the disclosure under the heading "Risk Factors" in our most recent 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 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 March 31, 2025, we owned a geographically diversified portfolio consisting of 33 properties across 12 states with 12 tenants, comprised of 18 dispensaries and 15 cultivation facilities.

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 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.

Rental Income

We generate rental income from our real estate properties that we own and from any real estate properties that we expect to acquire in the future. The amount of rental income depends upon a number of factors, including:

•Our ability to enter into new leases at market value rents inclusive of annual rent increases; and

•Rent collection, which primarily relates to each of our current and future tenant’s or guarantor’s financial condition and ability to make rent payments to us on time.

For the three months ended March 31, 2025, all of our rental income was derived from triple-net leases to 12 tenants. Our leases include a parent or other affiliate guarantee and obligate the tenant for all the ongoing expenses of a property, including real estate taxes, insurance, maintenance and utilities. Our rental income is, therefore, dependent on our tenants (and related guarantors) ability to meet their respective obligations to us. Our tenants operate in the cannabis industry. Changes in current state or local laws in the cannabis industry may impair our ability to renew or re-lease properties and the ability of our tenants to fulfill their lease obligations which could materially and adversely affect our ability to maintain or increase rental rates for our properties. Further, some of our existing tenants have limited operating histories and may be more susceptible to payment and other lease defaults. Thus, our operating results will be significantly impacted by the ability of our tenants to achieve and sustain positive financial results.

Financial Performance and Condition of Our Tenants

We own 33 properties, leased to 12 tenants. As of March 31, 2025, all of our tenants are performing under their lease agreement with the exception of two tenants discussed below.

Condition of Our Tenants

During the fourth quarter of 2023, we amended our leases with: a) Revolutionary Clinics, Inc. ("Revolutionary Clinics"), as part of a restructuring of their business, their receipt of new third-party capital and new management, and b) Calypso Enterprises ("Calypso") in connection with their sale to Canvas Acquisition Corporation. Both tenants experienced operating challenges beginning in the latter half of 2024, impacting their ability to pay rent as described below.

Revolutionary Clinics

From June 2024 to March 2025, Revolutionary Clinics paid approximately 50% of its contractual rent. On December 13, 2024, Revolutionary Clinics entered receivership. In the first quarter of 2025, we reached a stipulation agreement with the court appointed receiver to receive 50% of the contractual rent paid weekly, along with weekly payments for the reimbursement of certain delinquent real estate taxes and utilities paid by us. We have reserved all our rights under the lease agreement. The receiver is working to either liquidate or sell the tenant's business. Additionally, in April 2025 we hired a broker to assist in leasing the property.

Calypso Enterprises

From September 2024 through February 2025, Calypso did not pay the contractual rent due under its lease agreement. We held an escrow deposit equivalent to approximately six months of rent and a security deposit of approximately $43 thousand. From September 2024 through December 2024, we applied four months of escrow deposits to satisfy contractual rent. At December 31, 2024, we held the remaining escrow and security deposits of approximately $490 thousand, which were applied to satisfy contractual rent due for January 2025 and a portion of February 2025. At March 31, 2025 there were no remaining security or escrow deposits.

In connection with a financial restructuring of Calypso to raise new third-party capital, we received the remaining outstanding rent for the first quarter of 2025. This payment received during the first quarter covered the remaining portion of February and March contractual rent, resulting in the collection of all rent due for the three months ended March 31, 2025.

Additionally, as of September 2024, in accordance with the lease agreement, we suspended our obligation to fund the remaining improvement allowance of approximately $987 thousand until all outstanding rent is paid and the escrow deposit is replenished.

2025 Financial Markets Update

During the first quarter of 2025, financial markets experienced renewed volatility, with major indices posting modest declines. Investor optimism early in the year, driven by expectations for pro-growth policies and interest rate cuts, was tempered by growing uncertainty surrounding U.S. trade and tariff actions.

In September 2024, the U.S. Federal Reserve cut interest rates by 50 basis points, followed by additional cuts of 25 basis points in November and December, totaling a full percentage point decrease during the second half of 2024. We believe these rate cuts reflect the central bank’s commitment to balancing its dual mandate of price stability and maximum employment. Despite these cuts, interest rates remain relatively high compared to historical standards. However, as of January 2025, the prime lending rate has come down to 7.5%, providing some relief to businesses by lowering borrowing costs. However, challenges persist due to the overall high-interest rate environment, which continues to constrain access to capital. During the first quarter of 2025, the Federal Reserve opted to maintain interest rates at their current levels, citing elevated inflation and a resilient labor market.

Adding to the uncertainty, fears of a potential recession have intensified, driven by declining consumer confidence, persistent inflation, and unpredictable trade policies. These factors have prompted businesses and investors, including those within the cannabis industry, to adopt cautious and conservative financial strategies to mitigate economic risks. Prudent financial management remains critical for both our organization and our tenants, particularly as constrained capital availability and elevated borrowing costs continue to pose challenges. Although the cannabis industry itself, still in its early stages of development, it faces unique hurdles that compound these difficulties. While the cannabis industry has shown signs of resilience, its performance during economic downturns remains uncertain due to evolving market dynamics and complex regulatory conditions.

Regulatory Update

On May 21, 2024, the Justice Department published a Notice of Proposed Rulemaking in the Federal Register for the Drug Enforcement Administration (“DEA”) to reschedule marijuana from Schedule I of the Controlled Substances Act (“CSA”), a list of completely prohibited drugs, to Schedule III, which includes prescription medications such as ketamine, Tylenol with codeine, and anabolic steroids. The proposed rule is based on an August 2023 recommendation by the Department of Health and Human Services (“HHS”). The comment period concluded on July 22, 2024. After reviewing over 43,000 comments to the proposed rule, including numerous requests for a hearing, the DEA Administrator granted a hearing and appointed an Administrative Law Judge ("ALJ") to preside over the proceedings.

The ALJ held a procedural hearing in December 2024 and scheduled oral arguments to commence in January 2025. However, the hearing was delayed by at least 90 days due to a motion filed by parties in the proceedings to remove the DEA from hearings. This motion was granted by Chief DEA ALJ, John Mulrooney, who cited evidence suggesting that the DEA may have violated certain rules within the Administrative Procedures Act.

During the first quarter of 2025, progress on the cannabis rescheduling process remained at a standstill. The DEA has yet to establish a briefing schedule for the hearings, and the interlocutory appeal regarding the motion to reconsider the DEA’s role in the proceedings remains unresolved. With no new hearing date scheduled, the process faces indefinite delays, leaving the timeline for potential rescheduling uncertain.

If cannabis rescheduling were to occur, it would represent a pivotal milestone for the industry. We believe rescheduling would lift current restrictions under IRS Section 280E, which currently prevents cannabis operators from claiming certain tax deductions, resulting in excessively high effective tax rates for state-legal cannabis businesses. Furthermore, rescheduling could pave the way for expanded medical research and clinical trials, enabling a deeper understanding of cannabis’s efficacy in treating various medical conditions.

Inflation and Supply Chain Constraints

During the three months ended March 31, 2025, inflation showed signs of easing but remained elevated, with the inflation rate at 2.4% as of the end of the period. This persistent inflation has driven up costs for labor and production inputs for regulated cannabis operators, as well as increased construction expenses for development and redevelopment projects.

Additionally, ongoing labor shortages, global supply chain disruptions, and geopolitical tensions continue to adversely impact costs and timelines for the completion of development and redevelopment projects. These challenges may lead to cost overruns and delays in commencing operations for some of our tenants' projects. Further contributing to the uncertainty is the potential for higher inflation and slower economic growth driven by potential tariffs and trade tensions with partners.

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. There have been no changes to the Company's critical accounting estimates included in Management’s Discussion and Analysis of Financial Condition and Results of Operations section of the Company's Annual Report on Form 10-K for the year ended December 31, 2024.

First Quarter 2025 Highlights

Investment Activity

Acquisition

In February 2025 we purchased a dispensary in Ohio for approximately $285 thousand and committed to fund an improvement allowance of $705 thousand. The property was simultaneously leased to a related entity of an existing tenant.

Capital Market Activity

On March 4, 2025, the Company’s Board of Directors declared a first quarter 2025 cash dividend of $0.43 per share of common stock, equivalent to an annualized dividend of $1.72 per share of common stock. The dividend was paid on April 15, 2025, to stockholders of record at the close of business on March 31, 2025.