New Lake Capital Companions NLCP, an actual property firm centered on hashish properties, provides a lovely funding with a 9.1% dividend yield, nicely above the return on 10-year authorities bonds.
This yield, mixed with a cautious strategy to debt and disciplined portfolio development, positions NLCP as a lovely various to different hashish REITs like IIPR IIPR and broader industrial REITs. Buying and selling close to par worth, NLCP’s conservative technique highlights its potential for secure, long-term returns, as famous by Pablo Zuanic of Zuanic & Associates.
- Get Benzinga’s unique evaluation and the highest information concerning the hashish business and markets every day in your inbox at no cost. Subscribe to our e-newsletter right here. You’ll be able to’t afford to overlook out if you happen to’re severe concerning the enterprise.
Engaging Valuation And Dividend Yield
Certainly one of NLCP’s standout options is its 9.1% dividend yield, which is sort of 500 foundation factors (bp) greater than 10-year Treasury payments—the benchmark for low-risk investments.
By comparability, IIPR provides a 6.7% dividend yield however trades at a 57% premium to ebook worth, whereas NLCP trades at par, reflecting a extra conservative strategy to valuation.
Zuanic notes this discrepancy – partly as a result of IIPR’s NYSE itemizing versus NLCP’s OTC market standing -suggests NLCP could also be undervalued, with the potential for its valuation to extend as its market recognition grows.
The corporate’s dividend protection stands at 120%, demonstrating the sustainability of its payouts. NLCP’s rental yield is roughly 13%, which, in accordance with Zuanic, is notably greater than its debt price of 5.65%, making certain that it generates ample revenue to cowl its dividends.
Learn Additionally: Higher Than The Financial institution: Weed Actual Property Funding Firm’s 14% Yield Beats Conventional Financial savings
Prudent Portfolio Administration And Progress
NLCP operates with a low debt-to-equity ratio of lower than 2%, sustaining an unleveraged steadiness sheet. This technique underscores its cautious strategy to capital administration, significantly in an business vulnerable to greater volatility.
As of September 2024, NLCP’s portfolio consists of 32 properties—together with 17 dispensaries and 15 cultivation amenities—unfold throughout 12 states. Zuanic famous these properties are totally rented, with a median lease time period of 13.8 years, making certain long-term revenue stability.
The corporate has demonstrated development, with a 4% improve in its actual property ebook year-to-date, funded by $2.6 million in new investments in Q3 2024.
This development fee outpaces IIPR, which reported solely 2% development over the identical interval.
Challenges With Tenants And Lease Amendments
Like several funding, NLCP has confronted challenges with just a few tenants. Revolutionary Clinics in Massachusetts and Calypso Enterprises in Pennsylvania have struggled with hire funds. The corporate has amended leases with these tenants and utilized escrow deposits to handle hire shortfalls.
Learn Additionally: Are You Lacking Out On This NASDAQ-Listed Weed Inventory? Low-Price Mannequin Meets European Demand
Progress Outlook And Acquisition Technique
As leisure hashish markets increase in states like New York, New Jersey, Ohio, and Connecticut, NLCP is positioned for development. Moreover, massive medical markets corresponding to Pennsylvania and Virginia may transition to leisure gross sales throughout the subsequent two years, creating new development alternatives.
In 2024, NLCP made a $4 million acquisition of a cultivation facility in Connecticut (C3 Industries), with $12 million dedicated to constructing enhancements. As of September 2024, the corporate has $21.2 million in construction-in-progress, primarily in Arizona and Connecticut, indicating continued growth of its portfolio.
Inventory Efficiency And Sector Comparability
Over the previous 90 days, NLCP’s inventory has been comparatively secure, down 3%, in comparison with the broader industrial REIT sector, which declined 13%.
NLCP trades at par, with a ebook worth per share (BVPS) of $19.48 as of Q3 2024, nicely beneath the 57% premium at which IIPR trades. Based on Zuanic, NLCP’s inventory is priced near its precise worth of $19.48 per share, whereas IIPR is buying and selling at a a lot greater value above its ebook worth.
Regardless of this, NLCP’s superior dividend yield and low debt price make it a doubtlessly extra engaging funding for income-focused buyers.
“5 operators (4 public) accounted for 65% of complete rental revenue as of 3Q24 (Curaleaf CURLF 23%; Cresco Labs CRLBF 14%; Trulieve TCNNF 11%; Cannabist 9%; C3 8%); this in contrast with 68% in 3Q23. At IIPR, 5 operators accounted for 50% of rental revenue in 3Q24 (PharmaCann 17%; Ascend Wellness AAWH 11%; Inexperienced Thumb Industries GTBIF 8%; Curaleaf 7%; Trulieve 7%),” Zuanic wrote.
Learn Subsequent: Pharma-Grade Hashish May Hit Walgreens & CVS—However Can The Trade Survive The FDA?
© 2024 Benzinga.com. Benzinga doesn’t present funding recommendation. All rights reserved.
