UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
For the quarterly period ended
or
For the transition period from to
Commission file number
NewLake Capital Partners, Inc.
(Exact name of registrant as specified in its charter)
| |
(State or other jurisdiction of | (I.R.S. Employer Identification No.) |
incorporation or organization) | |
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(Address of principal executive offices) | (Registrants Telephone number) |
Securities registered pursuant to Section 12(b) of the Act:
Title of each class | Trading Symbol(s) | Name of each exchange on which registered |
None | None | None |
Securities registered pursuant to section 12(g) of the Act:
Common Stock, par value $0.01 per share
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer ☐ | Accelerated filer ☐ | | Smaller reporting company |
Emerging Growth Company |
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.
Yes
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act).
Yes
The number of shares of the registrant’s Common Stock, par value $0.01 per share, outstanding as of August 9, 2022 was
NewLake Capital Partners, Inc.
FORM 10-Q
June 30, 2022
TABLE OF CONTENTS
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Item 1. |
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Item 2. |
Management’s Discussion and Analysis of Financial Condition and Results of Operations |
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Special Note Regarding Forward Looking Information | ||
Item 3. |
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Item 4. |
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Item 1. |
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Item 1A. |
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Item 2. |
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Item 3. |
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Item 4. |
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Item 5. |
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Item 6. |
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PART I - FINANCIAL INFORMATION
Item 1. Financial Statements.
NEWLAKE CAPITAL PARTNERS, INC.
CONSOLIDATED BALANCE SHEETS
(In thousands, except share and per share amounts)
June 30, 2022 | December 31, 2021 | |||||||
Assets: | (Unaudited) | (Audited) | ||||||
Real Estate | ||||||||
Land | $ | $ | ||||||
Building and Improvements | ||||||||
Total Real Estate | ||||||||
Less Accumulated Depreciation | ( | ) | ( | ) | ||||
Net Real Estate | ||||||||
Cash and Cash Equivalents | ||||||||
Loans Receivable | ||||||||
In-Place Lease Intangible Assets, net | ||||||||
Other Assets | ||||||||
Total Assets | $ | $ | ||||||
Liabilities and Equity: | ||||||||
Liabilities: | ||||||||
Accounts Payable and Accrued Expenses | $ | $ | ||||||
Revolving Credit Facility | ||||||||
Loan Payable, net | ||||||||
Dividends and Distributions Payable | ||||||||
Security Deposits Payable | ||||||||
Interest Reserve | ||||||||
Rent Received in Advance | ||||||||
Other Liabilities | ||||||||
Total Liabilities | ||||||||
Commitments and Contingencies (Note 13) | ||||||||
Equity: | ||||||||
Preferred Stock, $ | Par Value, Shares Authorized, % Series A Redeemable Cumulative Preferred Stock, and Shares Issued and Outstanding, Respectively- | |||||||
Common Stock, $ Par Value, Shares Authorized, and Shares Issuedand Outstanding, Respectively | ||||||||
Additional Paid-In Capital | ||||||||
Accumulated Deficit | ( | ) | ( | ) | ||||
Total Stockholders' Equity | ||||||||
Noncontrolling Interests | ||||||||
Total Equity | ||||||||
Total Liabilities and Equity | $ | $ |
The accompanying notes are an integral part of the consolidated financial statements
CONSOLIDATED STATEMENTS OF OPERATIONS |
(Unaudited) |
(In thousands, except share and per share amounts) |
For the Three Months Ended | For the Six Months Ended | |||||||||||||||
June 30, | June 30, | |||||||||||||||
2022 | 2021 | 2022 | 2021 | |||||||||||||
Revenue: | ||||||||||||||||
Rental Income | $ | $ | $ | $ | ||||||||||||
Interest Income from Loans | ||||||||||||||||
Total Revenue | ||||||||||||||||
Expenses: | ||||||||||||||||
Depreciation and Amortization Expense | ||||||||||||||||
General and Administrative Expenses: | ||||||||||||||||
Compensation Expense | ||||||||||||||||
Stock-Based Compensation | ||||||||||||||||
Professional Fees | ||||||||||||||||
Other General and Administrative Expenses | ||||||||||||||||
Total General and Administrative Expenses | ||||||||||||||||
Total Expenses | ||||||||||||||||
Loss on Sale of Real Estate | ( | ) | ||||||||||||||
Income From Operations | ||||||||||||||||
Other Income (Expenses): | ||||||||||||||||
Interest Income | ||||||||||||||||
Interest Expense | ( | ) | ( | ) | ||||||||||||
Total Other Income | ||||||||||||||||
Net Income | ||||||||||||||||
Preferred Stock Dividends | ( | ) | ||||||||||||||
Net Income Attributable to Noncontrolling Interests | ( | ) | ( | ) | ( | ) | ( | ) | ||||||||
Net Income Attributable to Common Stockholders | $ | $ | $ | $ | ||||||||||||
Net Income Attributable to Common Stockholders Per Share - Basic | $ | $ | $ | $ | ||||||||||||
Net Income Attributable to Common Stockholders Per Share - Diluted | $ | $ | $ | $ | ||||||||||||
Weighted Average Shares of Common Stock Outstanding - Basic | ||||||||||||||||
Weighted Average Shares of Common Stock Outstanding - Diluted |
The accompanying notes are an integral part of the consolidated financial statements
CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY |
(Unaudited) |
(In thousands, except share amounts) |
Common Stock | ||||||||||||||||||||||||
Shares | Par | Additional Paid-in Capital | Accumulated Deficit | Noncontrolling Interest | Total Equity | |||||||||||||||||||
Balance as of December 31, 2021 | $ | $ | $ | ( | ) | $ | $ | |||||||||||||||||
Conversion of Vested RSUs to Common Stock | ( | ) | ||||||||||||||||||||||
Conversion of OP Units to Common Stock | ( | ) | ||||||||||||||||||||||
Stock-Based Compensation | - | |||||||||||||||||||||||
Dividends to Common Stock | - | ( | ) | ( | ) | |||||||||||||||||||
Dividend Equivalents to Restricted Stock Units | - | ( | ) | ( | ) | |||||||||||||||||||
Distributions to OP Unit Holders | - | ( | ) | ( | ) | |||||||||||||||||||
Adjustment for Noncontrolling Interest Ownership in Operating Partnership | - | ( | ) | |||||||||||||||||||||
Net Income | - | |||||||||||||||||||||||
Balance as of June 30, 2022 | $ | $ | $ | ( | ) | $ | $ |
The accompanying notes are an integral part of the consolidated financial statements
NEWLAKE CAPITAL PARTNERS, INC. |
CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY |
(Unaudited) |
(In thousands, except share amounts) |
| Common Stock | |||||||||||||||||||||||||||
Series A Preferred Stock | Shares | Par | Additional Paid-in Capital | Accumulated Deficit | Noncontrolling Interest | Total Equity | ||||||||||||||||||||||
Balance as of December 31, 2020 | $ | $ | $ | $ | ( | ) | $ | $ | ||||||||||||||||||||
Net Proceeds from the Issuance of Common Stock | ||||||||||||||||||||||||||||
Issuance of Common Stock for Merger Transaction | ||||||||||||||||||||||||||||
Issuance of Warrants for Merger Transaction | - | |||||||||||||||||||||||||||
Redemption of Series A Preferred Stock | ( | ) | - | ( | ) | ( | ) | |||||||||||||||||||||
Issuance of OP Units for Property Acquisition | - | |||||||||||||||||||||||||||
Stock-Based Compensation | - | |||||||||||||||||||||||||||
Dividends to Preferred Stock | - | ( | ) | ( | ) | |||||||||||||||||||||||
Dividends to Common Stock | - | ( | ) | ( | ) | |||||||||||||||||||||||
Dividend Equivalents to Restricted Stock Units | - | ( | ) | ( | ) | |||||||||||||||||||||||
Distributions to OP Unit Holders | - | ( | ) | ( | ) | |||||||||||||||||||||||
Adjustment for Noncontrolling Interest Ownership in Operating Partnership | - | ( | ) | |||||||||||||||||||||||||
Net Income | - | |||||||||||||||||||||||||||
Balance as of June 30, 2021 | $ | $ | $ | $ | ( | ) | $ | $ |
The accompanying notes are an integral part of the consolidated financial statements
NEWLAKE CAPITAL PARTNERS, INC. |
CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY |
(Unaudited) |
(In thousands, except share amounts) |
Common Stock | ||||||||||||||||||||||||
Shares | Par | Additional Paid-in Capital | Accumulated Deficit | Noncontrolling Interest | Total Equity | |||||||||||||||||||
Balance as of March 31, 2022 | $ | $ | $ | ( | ) | $ | $ | |||||||||||||||||
Conversion of OP Units to Common Stock | ( | ) | ||||||||||||||||||||||
Stock-Based Compensation | - | |||||||||||||||||||||||
Dividends to Common Stock | - | ( | ) | ( | ) | |||||||||||||||||||
Dividend Equivalents to Restricted Stock Units | - | ( | ) | ( | ) | |||||||||||||||||||
Distributions to OP Unit Holders | - | ( | ) | ( | ) | |||||||||||||||||||
Adjustment for Noncontrolling Interest Ownership in Operating Partnership | - | ( | ) | |||||||||||||||||||||
Net Income | - | |||||||||||||||||||||||
Balance as of June 30, 2022 | $ | $ | $ | ( | ) | $ | $ |
| Common Stock | |||||||||||||||||||||||||||
Series A Preferred Stock | Shares | Par | Additional Paid-in Capital | Accumulated Deficit | Noncontrolling Interest | Total Equity | ||||||||||||||||||||||
Balance as of March 31, 2021 | $ | $ | $ | $ | ( | ) | $ | $ | ||||||||||||||||||||
Redemption of Series A Preferred Stock | ( | ) | - | ( | ) | ( | ) | |||||||||||||||||||||
Issuance of OP Units for Property Acquisition | - | |||||||||||||||||||||||||||
Stock-Based Compensation | - | |||||||||||||||||||||||||||
Dividends to Common Stock | - | ( | ) | ( | ) | |||||||||||||||||||||||
Dividend Equivalents to Restricted Stock Units | - | ( | ) | ( | ) | |||||||||||||||||||||||
Distributions to OP Unit Holders | - | ( | ) | ( | ) | |||||||||||||||||||||||
Adjustment for Noncontrolling Interest Ownership in Operating Partnership | - | ( | ) | |||||||||||||||||||||||||
Net Income | - | |||||||||||||||||||||||||||
Balance as of June 30, 2021 | $ | $ | $ | $ | ( | ) | $ | $ |
CONSOLIDATED STATEMENTS OF CASH FLOWS |
(Unaudited) |
(In thousands) |
For the Six Months Ended | ||||||||
June 30, 2022 | June 30, 2021 | |||||||
Cash Flows from Operating Activities: | ||||||||
Net Income | $ | $ | ||||||
Adjustments to Reconcile Net Income to Net Cash Provided by Operating Activities: | ||||||||
Stock-Based Compensation | ||||||||
Loss on Sale of Real Estate | ||||||||
Depreciation and Amortization Expense | ||||||||
Amortization of Debt Issuance Costs | ||||||||
Non-Cash Financing Expense | ||||||||
Changes in Assets and Liabilities, Net of Acquisitions: | ||||||||
Prepaid Expenses and Other Assets | ( | ) | ( | ) | ||||
Accounts Payable and Accrued Expenses | ( | ) | ||||||
Security Deposits Payable | ||||||||
Interest Reserve | ( | ) | ||||||
Rent Received in Advance | ||||||||
Net Cash Provided by Operating Activities | ||||||||
Cash Flows from Investing Activities: | ||||||||
Cash Acquired from Merger Transaction | ||||||||
Payment of Merger Related Transaction Costs | ( | ) | ||||||
Reimbursements of Tenant Improvements | ( | ) | ( | ) | ||||
Investment in Loans Receivable | ( | ) | ||||||
Acquisition of Real Estate | ( | ) | ( | ) | ||||
Disposition of Real Estate | ||||||||
Net Cash (Used in) Provided by Investing Activities | ( | ) | ||||||
Cash Flows from Financing Activities: | ||||||||
Proceeds from Issuance of Common Stock, Net of Offering Costs | ||||||||
Preferred Stock Dividends Paid | ( | ) | ||||||
Common Stock Dividends Paid | ( | ) | ( | ) | ||||
Restricted Stock Units Dividend Equivalents Paid | ( | ) | ( | ) | ||||
Distributions to OP Unit Holders | ( | ) | ( | ) | ||||
Redemption of Series A Preferred Stock | ( | ) | ||||||
Borrowings from revolving credit facility | ||||||||
Payment of Loan Payable | ( | ) | ||||||
Net Cash (Used in) Provided by Financing Activities | ( | ) | ||||||
Net Increase (Decrease) in Cash and Cash Equivalents | ( | ) | ||||||
Cash and Cash Equivalents - Beginning of Period | ||||||||
Cash and Cash Equivalents - End of Period | $ | $ | ||||||
Supplemental Disclosure of Non-Cash Investing and Financing Activities: | ||||||||
Accrual for Dividends and Distributions Payable | $ | $ | ||||||
Accrual for Reimbursements of Tenant Improvements | $ | $ | ||||||
Real Estate Assets, In-Place Leases, Other Assets and Liabilities Acquired through the Issuance of Common Stock and Warrants | $ | $ | ||||||
Issuance of OP Units for Property Acquisition | $ | $ | ||||||
Operating lease liability for obtaining right of use asset | $ | $ |
The accompanying notes are an integral part of the consolidated financial statements
Note 1 - Organization
NewLake Capital Partners, Inc. (the “Company”, “we”, “us", “our”), a Maryland corporation, was formed on April 9, 2019, under the Maryland General Corporation Law, as GreenAcreage Real Estate Corp. (“GARE”). The Company is an internally managed Real Estate Investment Trust (“REIT”) focused on providing long-term, single-tenant, triple-net sale leaseback and build-to-suit transactions for the cannabis industry. The Company’s year-end is December 31. On March 17, 2021, GARE completed a merger (the “Merger”) with another company (the “Target”) by issuing common stock and warrants, and subsequently changed its name to NewLake Capital Partners, Inc.
On March 17, 2021, we consummated a merger pursuant to which we combined our company with a separate company, or the Target, that owned a portfolio of cultivation facilities and dispensaries utilized in the cannabis industry, and renamed ourselves “NewLake Capital Partners, Inc.” The Merger was completed through the issuance of
The Company conducts its business through its subsidiary, NLCP Operating Partnership LP, a Delaware limited partnership (the “Operating Partnership” or “OP”). The Company holds an equity interest in the Operating Partnership and is the sole general partner. Subsequent to the Merger, the name of the Operating Partnership was changed from GreenAcreage Operating Partnership LP to NLCP Operating Partnership LP.
On August 13, 2021, we completed our initial public offering ("IPO") of
Note 2 - Basis of Presentation and Summary of Significant Accounting Policies
Basis of Presentation
The consolidated financial statements include the accounts of the Company, the Operating Partnership, as well as the Operating Partnership’s wholly owned properties, each of which is held in a single member LLC and variable interest entities ("VIEs") in which the Company is considered the primary beneficiary. The accompanying unaudited financial statements and related notes have been prepared in accordance with U.S. generally accepted accounting principles (“GAAP”) for interim financial statements and with the instructions to Form 10-Q and Article 10 of Regulation S-X. They do not include all of the information and footnotes required by GAAP for complete financial statements. All significant intercompany balances and transactions have been eliminated in the consolidated financial statements. In managements opinion, all adjustments (which include only normal recurring adjustments) necessary to present fairly the Company’s financial position, results of operations and cash flows have been made. The results of operations for the three and six months ended June 30, 2022 are not necessarily indicative of the operating results for the full year or any future period. These consolidated financial statements should be read in conjunction with the audited consolidated financial statements in the Company’s Annual Report on Form 10-K for the year ended December 31, 2021, and filed with the Securities and Exchange Commission (“SEC”) on March 18, 2022.
Substantially all of the Company's asset are held by and all of its' operations are conducted through the Operating Partnership. The Company is the sole managing general partner of the Operating Partnership. Noncontrolling investors in the Operating Partnership are included in Noncontrolling interest in the Company's Consolidated Financial Statements. See Note 7 "Noncontrolling Interest" for details. The Operating Partnership is a variable interest entity (“VIE”) because the holders of limited partnership interests do not have substantive kick-out rights or participating rights. Furthermore, we are the primary beneficiary of the Operating Partnership because we have the obligation to absorb losses and the right to receive benefits from the Operating Partnership and the exclusive power to direct the activities of the Operating Partnership. As of June 30, 2022 and December 31, 2021, the assets and liabilities of the Company and the Operating Partnership are substantially the same, as the Company does not have any significant assets other than its investment in the Operating Partnership.
Use of Estimates
The preparation of consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the amounts reported in the consolidated financial statements and accompanying notes. Management will adjust such estimates when facts and circumstances dictate. Such estimates include, but are not limited to, useful lives for depreciation of property, the fair value of property and in-place lease intangibles acquired, and the fair value of stock-based compensation. Actual results could differ from those estimates.
Reclassification
Certain prior year balances have been reclassified to conform to our current year presentation.
There have been no significant changes to our accounting polices included in Note 2 to the consolidated financial statements of our Annual Report on Form 10-K for the year ended December 31, 2021.
Note 2 - Basis of Presentation and Summary of Significant Accounting Policies (continued)
In June 2016, the FASB issued ASU 2016-13, Financial Instruments — Credit Losses, which changes the impairment model for most financial assets and certain other instruments. For trade and other receivables, held-to-maturity debt securities, loans and other instruments, companies will be required to use a new forward-looking “expected loss” model that generally will result in the earlier recognition of allowances for losses. In November 2018, the FASB issued ASU 2018-19, Codification Improvements to Topic 326, Financial Instruments — Credit Losses, which among other updates, clarifies that receivables arising from operating leases are not within the scope of this guidance and should be evaluated in accordance with Topic 842. This standard will be effective for the Company until January 1, 2023. The Company does not anticipate this standard will have a material impact on our consolidated financial statements due to the limited nature of financial assets held by the Company subject to ASU 2016-13.
Note 3 - Real Estate
Real Estate Acquisitions
During the six months ended June 30, 2022, the Company invested approximately $
Tenant | Market | Site Type | Closing Date | Real Estate Acquisition Costs | ||
Bloom Medicinal | Missouri | Cultivation | April 1, 2022 | (1) | ||
Ayr Wellness, Inc. | Pennsylvania | Cultivation | June 30, 2022 | |||
Ayr Wellness, Inc. | Nevada | Cultivation | June 30, 2022 | |||
Total | $ | |||||
(1) Includes $5,004 of TI funded at closing of the property. |
Tenant Improvements Funded
During the six months ended June 30, 2022, the Company funded approximately $
Tenant | Market | Site Type | Acquisition Closing Date | TI Funded during six months ended June 30, 2022 | Unfunded Commitments (1) | |||||
Curaleaf | Florida | Cultivation | August 4, 2020 | (2) | ||||||
Mint | Massachusetts | Cultivation | April 1, 2021 | |||||||
Mint | Arizona | Cultivation | June 24, 2021 | |||||||
PharmaCann | Massachusetts | Dispensary | March 17, 2021 | |||||||
Trulieve | Pennsylvania | Cultivation | March 17, 2021 | |||||||
Organic Remedies | Missouri | Cultivation | December 20, 2021 | |||||||
Bloom Medicinal | Missouri | Cultivation | April 1, 2022 | |||||||
Ayr Wellness, Inc. | Pennsylvania | Cultivation | June 30, 2022 | |||||||
Total | $ | $ | ||||||||
(1) The $12.2 million of unfunded commitments does not include a $16.5 million option but not obligation to acquire an adjacent property from an existing tenant. | ||||||||||
(2) On June 16, 2022, the Company funded the expansion of an existing property. |
Disposal of Real Estate
On March 21, 2022, we sold one of our PharmaCann Massachusetts properties for approximately $
Construction in progress was $
Note 3 – Real Estate (continued)
Depreciation and Amortization
Depreciation expense for the three and the six months ended June 30, 2022 and 2021, was $
Amortization of the Company’s acquired in-place lease intangible assets for the three months ended June 30, 2022 and 2021 were approximately $
The following table presents the future amortization of the Company’s acquired in-place leases as of June 30, 2022 (in thousands):
Amortization | ||||
Year | Expense | |||
2022 (six months ending balance at December 31, 2022) | $ | |||
2023 | ||||
2024 | ||||
2025 | ||||
2026 | ||||
Thereafter | ||||
Total | $ |
The following table presents the future contractual minimum rent under the Company’s operating leases as of June 30, 2022 (in thousands):
Contractual | ||||
Minimum | ||||
Year | Rent | |||
2022 (six months ending balance at December 31, 2022) | $ | |||
2023 | ||||
2024 | ||||
2025 | ||||
2026 | ||||
Thereafter | ||||
Total | $ |
Concentration of Credit Risk
As of June 30, 2022, we owned
The following table sets forth the tenants in our portfolio that represented the largest percentage of our total rental income for each of the periods presented:
For the Six Months Ended June 30, | ||||||||||||||||||||
2022 | 2021 | |||||||||||||||||||
Number | Percentage of | Number | Percentage of | |||||||||||||||||
of | Rental | of | Rental | |||||||||||||||||
Leases | Income | Leases | Income | |||||||||||||||||
Curaleaf | % | % | ||||||||||||||||||
Cresco Labs | % | % | ||||||||||||||||||
Trulieve | % | % | ||||||||||||||||||
Revolutionary Clinics | % | % | ||||||||||||||||||
Columbia Care | % | % | ||||||||||||||||||
Acreage | % | % | ||||||||||||||||||
Organic Remedies | % | % |
Concentration of Credit Risk (continued)
For the Three Months Ended June 30, | ||||||||||||||||
2022 | 2021 | |||||||||||||||
Number | Percentage of | Number | Percentage of | |||||||||||||
of | Rental | of | Rental | |||||||||||||
Leases | Income | Leases | Income | |||||||||||||
Curaleaf | % | % | ||||||||||||||
Cresco Labs | % | % | ||||||||||||||
Trulieve | % | % | ||||||||||||||
Revolutionary Clinics | % | % | ||||||||||||||
Columbia Care | % | % | ||||||||||||||
Acreage | % | % | ||||||||||||||
Organic Remedies | % | % |
Impairment
We review current activities and changes in the business condition of all of our properties to determine the existence of any triggering events or impairment indicators. If triggering events or impairment indicators are identified, we analyze the carrying value of our real estate for any impairment. A provision is made for impairment if estimated future operating cash flows (undiscounted and without interest charges) plus estimated disposition proceeds (undiscounted) are less than the current book value of the property. Key inputs that we utilize in this analysis include projected rental rates, estimated holding periods, capital expenditures, and property sales capitalization rates. As of June 30, 2022 and December 31, 2021
Note 4 – Loans Receivable
Mortgage Loan
The Company funded a $
The collateral for the loan includes a first-lien mortgage on a cultivation and processing facility in Erie, Pennsylvania. The loan bears interest at
Loan Receivable
The Company funded a $
Note 5 – Financings
Seller Financing
In connection with the purchase and leaseback of a cultivation facility in Chaffee, Missouri on December 20, 2021, the Company entered into a $
Note 5 – Financings (continued)
Revolving Credit Facility
On May 6, 2022, the Company's Operating Partnership entered into a loan and security agreement (the “Loan and Security Agreement”) with a commercial federally regulated bank, as a lender and as agent for lenders that become party thereto from time to time (the “Agent”). The Loan and Security Agreement matures on May 6, 2027. The Loan and Security Agreement provides, subject to the Accordion Feature described below, $
The outstanding borrowings under the Revolving Credit Facility was $
Note 6 - Related Party Transactions
Merger Agreement
In connection with the Merger, we entered into an investor rights agreement (the “Investor Rights Agreement”). The Investor Rights Agreement provides the stockholders party thereto with certain rights with respect to the nomination of members to our board of directors. Prior to the completion of our IPO, pursuant to the Investor Rights Agreement, HG Vora Capital Management, LLC (“HG Vora”) had the right to nominate four directors to our board of directors. Following the completion of our IPO, for so long as HG Vora owns (i) at least 9% of our issued and outstanding common stock for 60 consecutive days, HG Vora may nominate two of the members of our board of directors, and (ii) at least 5% of our issued and outstanding common stock for 60 consecutive days, HG Vora may nominate one member of our board of directors. If HG Vora owns less than 5% of our issued and outstanding common stock for 60 consecutive days, then HG Vora may not nominate any members of our board of directors pursuant to the Investor Rights Agreement.
Prior to the completion of our IPO, NLCP Holdings, LLC had the right to designate three directors to our board of directors. Subsequent to our IPO, NLCP Holdings, LLC no longer has these rights.
Prior to the completion of our IPO, West Investment Holdings, LLC, West CRT Heavy, LLC, Gary and Mary West Foundation, Gary and Mary West Health Endowment, Inc., Gary and Mary West 2012 Gift Trust and WFI Co-Investments acting unanimously, collectively referred to as the “West Stockholders,” did not have a director nomination right. Following the completion of our IPO, the West Stockholders may nominate one member of our board of directors for so long as the West Stockholders own in the aggregate at least 5% of the issued and outstanding shares of our common stock. If the West Stockholders own in the aggregate less than 5% of our issued and outstanding common stock for 60 consecutive days, then the West Stockholders may not nominate any members of our board of directors pursuant to the Investor Rights Agreement.
Prior to the completion of our IPO, NL Ventures, LLC (“Pangea”) did not have a director nomination right. Following the completion of our IPO, Pangea may nominate one member of our board of directors for so long as Pangea owns at least 4% of our issued and outstanding common stock for 60 consecutive days. If Pangea owns less than 4% of our issued and outstanding common stock for 60 consecutive days, then Pangea may not nominate any members of our board of directors pursuant to the Investor Rights Agreement. The Company made payments to Pangea for reimbursed expenses and services of $
Note 7 - Noncontrolling Interests
Noncontrolling interests represent limited partnership interest in the Operating Partnership not held by the Company. Noncontrolling interests in the Operating Partnership are shown in the consolidated statements of changes in equity.
The following table presents the activity for the Company’s noncontrolling interests issued by the Operating Partnership for the six months ended June 30,:
2022 | 2021 | |||||||||||||||
Noncontrolling | Noncontrolling | |||||||||||||||
OP Units | Interests % | OP Units | Interests % | |||||||||||||
Balance at January 1, | % | % | ||||||||||||||
Restricted Stock Units Converted, net of taxes | - | |||||||||||||||
OP Units Issued | ||||||||||||||||
OP Units Converted | ( | ) | ||||||||||||||
Balance at June 30, | % | % |
Note 8 - Stock Based Compensation
Our board of directors adopted our 2021 Equity Incentive Plan (the “Plan”), to provide employees of the Company and its subsidiaries, certain consultants and advisors who perform services for the Company or its subsidiaries, and non-employee members of the board of directors of the Company with the opportunity to receive grants of incentive stock options, nonqualified stock options, stock appreciation rights, stock awards, stock units, other stock-based awards, and cash awards to enable us to motivate, attract and retain the services of directors, officers and employees considered essential to the long term success of the Company. Under the terms of the Plan, the aggregate number of shares of awards will be no more than
Restricted Stock Units
During the six months ended June 30, 2022, the Company granted
The following table sets forth our unvested restricted stock activity for the six months ended June 30,:
2022 | 2021 | |||||||||||||||
Number of | Weighted Average | Number of | Weighted Average | |||||||||||||
Unvested | Grant Date Fair Value | Unvested | Grant Date Fair Value | |||||||||||||
Shares of RSUs | Per Share | Shares of RSUs | Per Share | |||||||||||||
Balance at January 1, | $ | $ | ||||||||||||||
Granted | $ | $ | ||||||||||||||
Forfeited | ( | ) | $ | |||||||||||||
Vested | ( | ) | $ | ( | ) | $ | ||||||||||
Balance at June 30, | $ | $ |
Note 8 – Stock Based Compensation (continued)
Performance Stock Units
During the six months ended June 30, 2022, the Company did
PSUs are subject to restrictions on transfer and may be subject to a risk of forfeiture if the award recipient ceases to be an employee of the Company prior to vesting of the award. Each PSU is entitled to receive a dividend equivalent payment equal to the dividend paid on the number of shares of common stock issued per PSU vesting. Unearned dividend equivalents on unvested PSUs as of June 30, 2022 and 2021 were $
The following table sets forth our unvested performance stock activity for the six months ended June 30,:
2022 | 2021 | |||||||||||||||
Number of Unvested Shares of PSUs
|
Weighted Average Grant Date Fair Value Per Share | Number of Unvested Shares of PSUs | Weighted Average Grant Date Fair Value Per Share | |||||||||||||
Balance at January 1, | $ | $ | ||||||||||||||
Forfeit | ( | ) | $ | |||||||||||||
Balance at June 30, | $ | $ |
Note 8 – Stock Based Compensation (continued)
Stock Options
Prior to the completion of the IPO, the Company issued
2022 | 2021 | |||||||||||||||
Number of | Weighted Average | Number of | Weighted Average | |||||||||||||
Shares | Exercise Price | Shares | Exercise Price | |||||||||||||
Non-Exercisable at January 1, | $ | $ | ||||||||||||||
Granted | - | - | - | |||||||||||||
Exercisable | ( | ) | ||||||||||||||
Non-Exercisable at June 30, | $ | $ |
Note 9 - Warrants
On March 17, 2021, in connection with the Merger, the Company entered into a warrant agreement which granted the right to purchase
The following table summarizes warrant activity for the six months ended June 30,:
2022 | 2021 | |||||||||||||||
Weighted | Weighted | |||||||||||||||
Number of | Average | Number of | Average | |||||||||||||
Warrants | Exercise Price | Warrants(1) | Exercise Price | |||||||||||||
Exercisable at January 1, | $ | $ | ||||||||||||||
Granted | ||||||||||||||||
Exercised | ||||||||||||||||
Exercisable at June 30, | $ | $ | ||||||||||||||
(1) Warrants granted on March 17, 2021. |
Note 10 - Earnings Per Share
The following table presents the computation of basic and diluted earnings per share (in thousands, except share data) :
For the Three Months Ended | For the Six Months Ended | |||||||||||||||
June 30, | June 30, | |||||||||||||||
2022 | 2021 | 2022 | 2021 | |||||||||||||
Numerator: | ||||||||||||||||
Net Income Attributable to Common Stockholders | $ | $ | $ | $ | ||||||||||||
Add: Preferred Stock Dividends | ||||||||||||||||
Add: Net Income Attributable to OP Interest | ||||||||||||||||
Add: Net Income Attributable to Restricted Stock Units | ||||||||||||||||
Dilutive Net Income Attributable to Common Stockholders | $ | $ | $ | $ | ||||||||||||
Denominator: | ||||||||||||||||
Weighted Average Shares of Common Stock Outstanding - Basic | ||||||||||||||||
Dilutive Effect of OP Units | ||||||||||||||||
Dilutive Effect of Vested Restricted Stock Units | ||||||||||||||||
Dilutive Effect of Options and Warrants | ||||||||||||||||
Dilutive Effect of Unvested Restricted Stock Units | ||||||||||||||||
Weighted Average Shares of Common Stock Outstanding - Diluted | ||||||||||||||||
Earnings Per Share - Basic | ||||||||||||||||
Net Income Attributable to Common Stockholders | $ | $ | $ | $ | ||||||||||||
Earnings Per Share - Diluted | ||||||||||||||||
Net Income Attributable to Common Stockholders | $ | $ | $ | $ |
During the three and six months ended June 30, 2022, the effect of including OP Units and unvested RSUs were included in our calculation of weighted average shares of common stock outstanding – diluted. The effect of outstanding stock options and outstanding warrants were excluded in our calculation of weighted average shares of common stock outstanding – diluted as their inclusion would have been anti-dilutive. During the three and six months ended June 30, 2021, the effect of including vested RSUs were included in our calculation of weighted average shares of common stock outstanding – diluted. The effect of OP Units, outstanding stock options and outstanding warrants were excluded in our calculation of weighted average shares of common stock outstanding – diluted as their inclusion would have been anti-dilutive.
Note 11 - Stockholders' Equity
Preferred Stock
On April 6, 2021, the Company redeemed the
Common Stock
As of June 30, 2022, the Company had
Activity for the three and six months ended June 30, 2022:
During the three and six months ended June 30, 2022,
Activity for the three and six months ended June 30,2021:
During January and February 2021, the Company issued
During March 2021, in connection with the Merger, the Company issued
Dividends
The following tables present the cash dividends, dividend equivalents on vested RSUs and, in our capacity as general partner of the Operating Partnership, authorized distributions on our OP Units declared by the Company during the six months ended June 30, 2022 and 2021:
Amount per | Dividends and | Dividends and | ||||||||
Declaration Date | Share/Unit | Period Covered | Distributions Paid Date | Distribution Amounts | ||||||
March 15, 2022 | $ | January 1, 2022 to March 31, 2022 | | $ | ||||||
June 15, 2022 | April 1, 2022 to June 30, 2022 | | ||||||||
Total | $ | $ |
Amount per | Dividends and | Dividends and | ||||||||
Declaration Date | Share/Unit | Period Covered | Distributions Paid Date | Distribution Amounts | ||||||
February 27, 2021 | $ | January 1, 2021 to March 16, 2021 | | $ | ||||||
March 15, 2021 | January 1, 2021 to March 16, 2021 | | ||||||||
June 16, 2021 | March 17, 2021 to June 30, 2021 | | ||||||||
Total | $ | $ |
The Company had accrued unearned dividend equivalents on unvested RSUs and unvested PSUs of $
Note 12 – Fair Value Measurements
Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants on the measurement date. Accounting guidance also establishes a fair value hierarchy that requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. The standards describe three levels of inputs that may be used to measure fair value:
Level 1 – Observable inputs that reflect quoted prices (unadjusted) for identical assets or liabilities in active markets.
Level 2 – Includes other inputs that are directly or indirectly observable in the marketplace.
Level 3 – Unobservable inputs that are supported by little or no market activities, therefore requiring an entity to develop its own assumptions.
The carrying amounts of financial instruments such as cash and cash equivalents, accrued expenses and other liabilities approximate their fair values due to generally short-term nature and the market rates of interest of these instruments. The carrying amounts of the Company's loans receivable, loan payable and Revolving Credit Facility approximate their fair values due to the market interest rates of these instruments.
Note 13 - Commitments and Contingencies
As of June 30, 2022, the Company has aggregate unfunded commitments to invest $
As of June 30, 2022, the Company is the lessee under one office lease for a term of
The Company owns a portfolio of properties that it leases to entities which cultivate, harvest, process and distribute cannabis. Cannabis is an illegal substance under the Controlled Substances Act. Although the operations of the Company’s tenants are legalized in the states and local jurisdictions in which they operate, the Company and its tenants are subject to certain risks and uncertainties associated with conducting operations subject to conflicting federal, state and local laws in an industry with a complex regulatory environment which is continuously evolving. These risks and uncertainties include the risk that the strict enforcement of federal laws regarding cannabis would likely result in the Company’s inability, and the inability of its tenants, to execute their respective business plans.
Note 14 - Subsequent Events
Funded Commitments
Subsequent to June 30, 2022, the Company funded approximately $
Loan Receivable
On August 5, 2022, the $
Revolving Credit Facility
On July 29, 2022, the Operating Partnership, entered into an amendment to the Revolving Credit Facility, amending the Loan and Security Agreement, dated as of May 6, 2022, to increase the aggregate commitment under the Revolving Credit Facility from $