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 June 30, 2025, we owned a geographically diversified portfolio consisting of 34 properties across 12 states with 13 tenants, comprised of 19 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, which would be December 31, 2026.

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.

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 six months ended June 30, 2025, all of our rental income was derived from triple-net leases to 13 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 34 properties, leased to 13 tenants. As of June 30, 2025, all of our tenants are performing under their lease agreement with the exception of one tenant discussed below.

Condition of Our Tenants

During the fourth quarter of 2023, we amended our lease with Revolutionary Clinics, Inc. (“Revolutionary Clinics”) in connection with a business restructuring, the infusion of new third-party capital, and the appointment of new management. Despite these efforts, the tenant began experiencing operational difficulties in the second half of 2024, which materially impacted its ability to meet rent obligations.

Revolutionary Clinics

From June 2024 to June 2025, Revolutionary Clinics paid approximately 50% of its contractual rent. On December 13, 2024, the tenant entered receivership, and since then, the court-appointed receiver has been actively pursuing liquidation of the tenant’s business. In the first quarter of 2025, we executed a stipulation agreement with the receiver to receive weekly payments equivalent to 50% of contractual rent, along with reimbursement for delinquent real estate taxes and utilities previously advanced by us. In April 2025, we retained a commercial real estate broker to facilitate the leasing process and began actively marketing the property. The tenant vacated the premises in July 2025, and leasing efforts remain ongoing.

AYR Wellness Inc.

On July 30, 2025, AYR Wellness Inc. (“AYR”), which operates at two of our properties, announced that it had entered into a restructuring support agreement with its senior noteholders. Under the proposed plan, certain AYR assets and operations will be acquired by the senior noteholders, while the remaining assets and operations are expected to be sold or wound down. AYR properties represented approximately 5.9% of rental revenue for the six months ended June 30, 2025. AYR has paid its rent payments through July 2025; however, as of August 6, 2025, we have not received rent payments for August. Based on currently available information, we do not expect the operations associated with the two leased properties to be included in the transaction with AYR’s senior noteholders. We hold security deposits equal to approximately 3.5 months of rent for each of the two properties. We intend to enforce all our rights under the lease agreements.

Financial Markets Update

During the six months ended June 30, 2025, financial markets remained volatile amid persistent macroeconomic uncertainty. While early-year investor sentiment was driven by expectations of continued monetary easing, optimism was tempered by concerns over inflation, trade policy instability, and geopolitical tensions. Major equity indices posted mixed results, and credit markets remained tight. Following a cumulative 100 basis point reduction in interest rates during the second half of 2024, the U.S. Federal Reserve maintained its policy stance throughout the first half of 2025. The prime lending rate stabilized at 7.5% as of January, offering modest relief to borrowers. However, interest rates remain elevated relative to historical norms. Even with rate cuts, capital remains scarce for emerging and specialized industries such as cannabis and many operators are experiencing margin compression and debt strain, with billions in loans maturing by 2026.

Recessionary fears intensified during the period, driven by declining consumer confidence, persistent inflationary pressures, and unpredictable trade and tariff developments. These headwinds have prompted businesses and investors to adopt more conservative financial strategies, with a heightened focus on liquidity and risk mitigation. As a REIT focused on leasing properties to cannabis tenants, we remain vigilant in monitoring these evolving market dynamics. Prudent financial management and proactive tenant engagement remain central to our strategy, as we navigate a complex operating environment marked by elevated interest rates, cautious investor sentiment, and sector specific risks.

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.

In response, the DEA Administrator granted a hearing and appointed an Administrative Law Judge ("ALJ") to oversee the proceedings. A procedural hearing was held in December 2024, and oral arguments were initially scheduled to begin in January 2025. However, proceedings were delayed by at least 90 days following a motion by several parties seeking to remove the DEA from its adjudicatory role. Chief DEA ALJ John Mulrooney granted the motion, citing potential violations of the Administrative Procedures Act.

Throughout the first half of 2025, the cannabis rescheduling process experienced continued gridlock. The DEA failed to establish a briefing schedule, and an interlocutory appeal regarding its role in the proceedings remained unresolved. No new hearing dates were set, leaving the regulatory timeline in limbo. Compounding these delays, the Department of Justice announced it would no longer defend certain legal protections for DEA administrative law judges—potentially opening the door to litigation that could reshape how cannabis-related research applications are processed.

In July, Terrance Cole was confirmed as the new DEA Administrator. His current stance on marijuana reform remains publicly undefined, though industry analysts expect his decision-making to reflect executive branch priorities. His appointment adds a layer of uncertainty to an already slow-moving regulatory process. Additionally, shortly after Administrator Cole's confirmation, ALJ John Mulrooney announced his retirement, effective August 1, 2025. With no other ALJ's on staff at the DEA, the rescheduling process in now entirely in Administrator Cole's hands.

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 six months ended June 30, 2025, inflation showed signs of easing but remained elevated, with the inflation rate at 2.7% as of the end of the period. While this marks a continued decline from peak inflation levels seen in 2022, it remains above the Federal Reserve’s long-term 2% target, signaling ongoing price pressure across labor, materials, and services.

This persistent inflation continues to exert pressure across key operational areas, driving up costs for labor, production inputs, and construction. Regulated cannabis operators have faced rising expenses for cultivation supplies such as fertilizers and equipment, as well as increased wage expectations amid ongoing labor shortages. Additionally, development and redevelopment projects have become more capital intensive due to higher material costs and greater regulatory compliance burdens.

Compounding these challenges are global supply chain disruptions, geopolitical tensions, and increased regulatory compliance burdens—all of which have negatively impacted development and redevelopment timelines. These pressures have led to higher capital requirements, cost overruns, and delayed project starts for several tenant operations. In addition, the prospect of renewed trade tensions and tariff policies introduces further uncertainty around future inflation and economic growth.

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.

Second Quarter 2025 Highlights

Investment Activity

In April 2025 we purchased a dispensary in Ohio for approximately $500 thousand and committed to fund an improvement allowance of $375 thousand. The property was simultaneously leased to a related entity of an existing tenant.

On June 12, 2025, we completed a deed-for-deed like-kind exchange with Curaleaf, involving the transfer of our dispensary located in Mokena, IL for a dispensary located in Brookville, PA. No cash consideration was involved in the transaction. The Brookville dispensary received by the Company was leased to Curaleaf upon completion of the exchange. The fair value of the Brookville dispensary was $950 thousand and we recognized a de minimis loss on the exchange of approximately $34 thousand.

Capital Market Activity

On June 16, 2025, the Company’s Board of Directors declared a second 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 July 15, 2025, to stockholders of record at the close of business on June 30, 2025.