nlcp-20230930

Table of Contents

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

_______________________________________________

FORM 10-Q

x QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2023

o TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from ________to ________

Commission file number 000-56327

NewLake Capital Partners, Inc.

(Exact name of registrant as specified in its charter)


Maryland			83-4400045
(State or other jurisdiction of incorporation or organization)			(I.R.S. Employer Identification No.)

50 Locust Avenue, First Floor, New Canaan CT 06840			203-594-1402
(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

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. Yes x No o

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). Yes x No o

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 o	Accelerated filer o	Non-accelerated filer x	Smaller reporting company x
Emerging Growth Company x

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 o No x

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes o No x

The number of shares of the registrant’s Common Stock, par value $0.01 per share, outstanding as of November 7, 2023 was 20,694,363.

Table of Contents

NewLake Capital Partners, Inc.

FORM 10-Q

September 30, 2023

TABLE OF CONTENTS


		Page No.

Part I Financial Information:
Item 1.	Financial Statements (Unaudited)
	Consolidated Balance Sheets	1
	Consolidated Statements of Operations	2
	Consolidated Statements of Equity	3
	Consolidated Statements of Cash Flows	5
	Notes to the Consolidated Financial Statements	6
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	26
	Special Note Regarding Forward Looking Information
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	40
Item 4.	Controls and Procedures	40
Part II Other Information:
Item 1.	Legal Proceedings	42
Item 1A.	Risk Factors	42
Item 2.	Unregistered Sales of Equity Securities and Issuer Purchases of Equity Securities	43
Item 3.	Defaults Upon Senior Securities	43
Item 4.	Mine Safety Disclosures	43
Item 5.	Other Information	43
Item 6.	Exhibits	43
Signatures		45

Table of Contents

PART I - FINANCIAL INFORMATION

Item 1. Financial Statements.

NEWLAKE CAPITAL PARTNERS, INC.

CONSOLIDATED BALANCE SHEETS

(In thousands, except share and per share amounts)


	September 30, 2023		December 31, 2022
Assets:	(Unaudited)
Real Estate
Land	$	21,397	$	21,427
Building and Improvements	382,087		378,047
Total Real Estate	403,484		399,474
Less Accumulated Depreciation	(28,931)		(19,736)
Net Real Estate	374,553		379,738
Cash and Cash Equivalents	31,065		45,192
In-Place Lease Intangible Assets, net	20,275		21,765
Loan Receivable	5,000		5,000
Property Held for Sale	1,949		—
Other Assets	2,300		2,554
Total Assets	$	435,142	$	454,249

Liabilities and Equity:

Liabilities:
Accounts Payable and Accrued Expenses	$	1,000	$	1,659
Revolving Credit Facility	1,000		1,000
Loan Payable, net	997		1,986
Dividends and Distributions Payable	8,231		8,512
Security Deposits	7,338		7,774
Rent Received in Advance	907		1,375
Other Liabilities	199		1,005
Total Liabilities	19,672		23,311

Commitments and Contingencies

Equity:
Preferred Stock, $0.01 Par Value, 100,000,000 Shares Authorized, 0 and 0 Shares Issued and Outstanding, Respectively	—		—
Common Stock, $0.01 Par Value, 400,000,000 Shares Authorized, 20,694,363 and 21,408,194 Shares Issued and Outstanding, Respectively	207		214
Additional Paid-In Capital	447,531		455,822
Accumulated Deficit	(39,635)		(32,487)
Total Stockholders' Equity	408,103		423,549

Noncontrolling Interests	7,367		7,389
Total Equity	415,470		430,938

Total Liabilities and Equity	$	435,142	$	454,249

The accompanying notes are an integral part of the consolidated financial statements

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CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)

(In thousands, except share and per share amounts)


	Three Months Ended				Nine Months Ended
	September 30,				September 30,
	2023		2022		2023		2022
Revenue:
Rental Income	$	11,297	$	11,595	$	33,637	$	30,217
Interest Income from Loans	131		434		390		2,301
Fees and Reimbursables	63		49		256		239
Total Revenue	11,491		12,078		34,283		32,757

Expenses:
Depreciation and Amortization Expense	3,568		3,630		10,698		9,113
General and Administrative Expenses:
Compensation Expense	1,173		1,040		3,450		5,100
Professional Fees	300		279		986		1,486
Other General and Administrative Expenses	467		419		1,537		1,387
Total General and Administrative Expenses	1,940		1,738		5,973		7,973
Total Expenses	5,508		5,368		16,671		17,086

Loss on Sale of Real Estate	—		—		—		(60)

Income From Operations	5,983		6,710		17,612		15,611

Other Income (Expenses):
Other Income	178		7		607		103
Interest Expense	(95)		(94)		(284)		(167)
Total Other Income (Expense)	83		(87)		323		(64)

Net Income	6,066		6,623		17,935		15,547



Net Income Attributable to Noncontrolling Interests	(108)		(113)		(312)		(262)

Net Income Attributable to Common Stockholders	$	5,958	$	6,510	$	17,623	$	15,285

Net Income Attributable to Common Stockholders Per Share - Basic	$	0.28	$	0.30	$	0.83	$	0.71

Net Income Attributable to Common Stockholders Per Share - Diluted	$	0.28	$	0.30	$	0.83	$	0.71

Weighted Average Shares of Common Stock Outstanding - Basic	21,199,638		21,428,905		21,330,046		21,417,149

Weighted Average Shares of Common Stock Outstanding - Diluted	21,582,314		21,802,487		21,710,101		21,815,763

The accompanying notes are an integral part of the consolidated financial statements

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NEWLAKE CAPITAL PARTNERS, INC.

CONSOLIDATED STATEMENTS OF EQUITY

(Unaudited)

(In thousands, except share amounts)


	Three Months Ended September 30, 2023
		Common Stock
		Shares	Par		Additional Paid-in Capital		Accumulated Deficit		Noncontrolling Interest		Total Equity
Balance as of June 30, 2023		21,302,515	$	213	$	455,143	$	(37,508)	$	7,328	$	425,176





Repurchase of Common Stock		(608,152)	(6)		(7,914)		—		—		(7,920)



Stock-Based Compensation		—	—		379		—		—		379



Dividends to Common Stock		—	—		—		(8,071)		—		(8,071)

Dividend Equivalents to Restricted Stock Units		—	—		—		(14)		—		(14)

Distributions to OP Unit Holders		—	—		—		—		(146)		(146)

Adjustment for Noncontrolling Interest Ownership in Operating Partnership		—	—		(77)		—		77		—

Net Income		—	—		—		5,958		108		6,066

Balance as of September 30, 2023		20,694,363	$	207	$	447,531	$	(39,635)	$	7,367	$	415,470


	Three Months Ended September 30, 2022
		Common Stock
		Shares	Par		Additional Paid-in Capital		Accumulated Deficit		Noncontrolling Interest		Total Equity
Balance as of June 30, 2022		21,318,637	$	213	$	456,083	$	(29,395)	$	7,422	$	434,323

Conversion of Vested RSUs to Common Stock		85,180	1		(1)		—		—		—



Stock-Based Compensation		—	—		280		—		—		280



Dividends to Common Stock		—	—		—		(7,919)		—		(7,919)

Dividend Equivalents to Restricted Stock Units		—	—		—		(7)		—		(7)

Distributions to OP Unit Holders		—	—		—		—		(137)		(137)

Adjustment for Noncontrolling Interest Ownership in Operating Partnership		—	—		(10)		—		10		—

Net Income		—	—		—		6,510		113		6,623

Balance as of September 30, 2022		21,403,817	$	214	$	456,352	$	(30,811)	$	7,408	$	433,163

The accompanying notes are an integral part of the consolidated financial statements

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NEWLAKE CAPITAL PARTNERS, INC.

CONSOLIDATED STATEMENTS OF EQUITY

(Unaudited)

(In thousands, except share amounts)


	Nine Months Ended September 30, 2023
		Common Stock
		Shares	Par		Additional Paid-in Capital		Accumulated Deficit		Noncontrolling Interest		Total Equity
Balance as of December 31, 2022		21,408,194	$	214	$	455,822	$	(32,487)	$	7,389	$	430,938





Repurchase of Common Stock		(713,831)	(7)		(9,247)		—		—		(9,254)



Stock-Based Compensation		—	—		1,060		—		—		1,060



Dividends to Common Stock		—	—		—		(24,709)		—		(24,709)

Dividend Equivalents to Restricted Stock Units		—	—		—		(62)		—		(62)

Distributions to OP Unit Holders		—	—		—		—		(438)		(438)

Adjustment for Noncontrolling Interest Ownership in Operating Partnership		—	—		(104)		—		104		—

Net Income		—	—		—		17,623		312		17,935

Balance as of September 30, 2023		20,694,363	$	207	$	447,531	$	(39,635)	$	7,367	$	415,470


	Nine Months Ended September 30, 2022
		Common Stock
		Shares	Par		Additional Paid-in Capital		Accumulated Deficit		Noncontrolling Interest		Total Equity
Balance as of December 31, 2021		21,235,914	$	213	$	450,916	$	(23,574)	$	11,780	$	439,335

Conversion of Vested RSUs to Common Stock		88,182	1		125		—		(126)		—

Conversion of OP Units to Common Stock		79,721	—		1,586		—		(1,586)		—

Stock-Based Compensation		—	—		1,201		—		—		1,201



Dividends to Common Stock		—	—		—		(22,410)		—		(22,410)

Dividend Equivalents to Restricted Stock Units		—	—		—		(112)		—		(112)

Distributions to OP Unit Holders		—	—		—		—		(398)		(398)

Adjustment for Noncontrolling Interest Ownership in Operating Partnership		—	—		2,524		—		(2,524)		—

Net Income		—	—		—		15,285		262		15,547

Balance as of September 30, 2022		21,403,817	$	214	$	456,352	$	(30,811)	$	7,408	$	433,163

The accompanying notes are an integral part of the consolidated financial statements

Table of Contents

NEWLAKE CAPITAL PARTNERS, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

(In thousands)


	For the Nine Months Ended
	September 30, 2023		September 30, 2022
Cash Flows from Operating Activities:
Net Income	$	17,935	$	15,547
Adjustments to Reconcile Net Income to Net Cash Provided by Operating Activities:
Stock-Based Compensation	1,060		1,201
Loss on Sale of Real Estate	—		60
Depreciation and Amortization Expense	10,698		9,113
Amortization of Debt Issuance Costs	201		72
Amortization of Debt Discount	10		20

Non-Cash Application of Security Deposit	(945)		—
Changes in Assets and Liabilities
Other Assets	22		(1,618)
Accounts Payable and Accrued Expenses	(659)		577
Security Deposits	510		1,263
Interest Reserve	—		(2,144)
Rent Received in Advance	(468)		(567)
Other Liabilities	(761)		—
Net Cash Provided by Operating Activities	27,603		23,524

Cash Flows from Investing Activities:



Funding of Tenant Improvements	(5,609)		(43,518)
Investment in Loans Receivable	—		(5,000)
Acquisition of Real Estate	(350)		(35,419)
Disposition of Real Estate	—		761
Net Cash Used in Investing Activities	(5,959)		(83,176)

Cash Flows from Financing Activities:


Repurchase of Common Stock	(9,254)		—
Common Stock Dividends Paid	(24,987)		(21,074)
Restricted Stock Units Dividend Equivalents Paid	(65)		(147)
Distributions to OP Unit Holders	(437)		(401)

Borrowings from Revolving Credit Facility	—		1,000
Principal Repayment on Loan Payable	(1,000)		(1,800)
Deferred Financing Costs	(28)		—
Net Cash Used in Financing Activities	(35,771)		(22,422)

Net (Decrease) in Cash and Cash Equivalents	(14,127)		(82,074)
Cash and Cash Equivalents - Beginning of Period	45,192		127,097

Cash and Cash Equivalents - End of Period	$	31,065	$	45,023
Supplemental Disclosure of Cash Flow Information:
Interest Paid	$	123	$	15
Supplemental Disclosure of Non-Cash Investing and Financing Activities:
Dividends and Distributions Declared, Not Paid	$	8,231	$	8,064


Conversion of Mortgage Loan Receivable to Real Estate	$	—	$	30,000


Operating lease liability for obtaining right of use asset	$	—	$	277

The accompanying notes are an integral part of the consolidated financial statements

Table of Contents

NEWLAKE CAPITAL PARTNERS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2023

(Unaudited)

Note 1 - Organization

NewLake Capital Partners, Inc. (the “Company”), a Maryland corporation, was formed on April 9, 2019, originally 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 conducts its business through its subsidiary, NLCP Operating Partnership LP, a Delaware limited partnership (the “Operating Partnership” or “OP”). The Company holds a controlling equity interest in the Operating Partnership and is the sole general partner. The Company's common stock trades on the OTCQX® Best Market operated by the OTC Markets Group, Inc., under the symbol “NLCP”.

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 wholly owned subsidiaries of the Operating Partnership 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 management's 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 nine months ended September 30, 2023 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, 2022, and filed with the Securities and Exchange Commission (“SEC”) on March 9, 2023.

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. Refer to Note 8 for details. The Operating Partnership is a VIE because the holders of limited partnership interests do not have substantive kick-out rights or participating rights. Furthermore, the Company is the primary beneficiary of the Operating Partnership because it has 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 September 30, 2023 and December 31, 2022, 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 and impairment of property and in-place lease intangibles acquired, and the fair value of stock-based compensation. Actual results could differ from those estimates.

Table of Contents

NEWLAKE CAPITAL PARTNERS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2023

(Unaudited)

Note 2 - Basis of Presentation and Summary of Significant Accounting Policies (continued)

Reclassification

Certain prior year balances have been reclassified to conform to the Company's current year presentation.

Significant Accounting Policies

There have been no changes to the Company's accounting polices included in Note 2 to the Consolidated Financial Statements of the Company's Annual Report on Form 10-K for the year ended December 31, 2022, except as follows:

Property Held for Sale

The Company classifies real estate held for sale when the following criteria are met: (i) management commits to a plan to sell the property, (ii) the property is available for sale, (iii) the property is actively being marketed for sale at a price that is reasonable, (iv) the sale of the property within one year is considered probable, and (v) significant change to the plan to sell the property is not expected. A real estate asset held for sale is classified as "Property Held for Sale" in the consolidated balance sheets. A property classified as held for sale is no longer depreciated and is required to be reported at the lower of its carrying value or its fair value less cost to sell.

Financial Instruments - Credit Losses

The Company adopted Accounting Standards Codification ("ASC") ASC 326, Financial Instruments - Credit Losses ("CECL") on January 1, 2023, which did not have a material impact to its financial statements. The CECL expected loss model requires an allowance for all expected credit losses for the life of a loan be recognized when the loan is either originated or acquired. The allowance for credit losses is a valuation account that is deducted from, or added to, the amortized cost basis of the financial asset(s) to present the net amount expected to be collected on the financial asset(s). At each reporting period, the company will update its estimate and adjust the allowance for credit losses accordingly. Increases in the allowance are recorded through net income as credit loss expense. Decreases in the allowance are recorded through net income as a reversal of credit loss expense. This standard does not specify a specific measurement technique for estimating expected credit losses. Approaches can vary based on a variety of factors. The Company generally uses a discounted cash flow model approach to determine the credit loss, if any, for its financial instruments subject to the CECL guidance.

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NEWLAKE CAPITAL PARTNERS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2023

(Unaudited)

Note 3 - Real Estate

As of September 30, 2023, the Company owned 32 properties, including one that is classified as held for sale, located in 12 states. The following table presents the Company's held for investment real estate portfolio as of September 30, 2023 (dollars in thousands):


Tenant		Market	Site Type	Land		Building and Improvements		Total Real Estate		Accumulated Depreciation		Net Real Estate
Acreage		Connecticut	Dispensary	$	395	$	534	$	929	$	(71)	$	858
Acreage		Massachusetts	Cultivation	481		9,310		9,791		(1,091)		8,700
Acreage		Pennsylvania	Cultivation	952		9,209		10,161		(1,042)		9,119
Ayr Wellness, Inc.		Nevada	Cultivation	1,002		12,577		13,579		(484)		13,095
Ayr Wellness, Inc.		Pennsylvania	Cultivation	2,964		11,565		14,529		(512)		14,017
Bloom Medicinal	(1)	Missouri	Cultivation	948		14,346		15,294		(419)		14,875
Calypso Enterprises		Pennsylvania	Cultivation	1,486		28,514		30,000		(1,168)		28,832
Columbia Care		California	Dispensary	1,082		2,692		3,774		(219)		3,555
Columbia Care		Illinois	Dispensary	162		1,053		1,215		(83)		1,132
Columbia Care		Illinois	Cultivation	801		10,560		11,361		(838)		10,523
Columbia Care		Massachusetts	Dispensary	108		2,212		2,320		(194)		2,126
Columbia Care		Massachusetts	Cultivation	1,136		12,690		13,826		(1,348)		12,478
Cresco Labs		Illinois	Cultivation	276		50,456		50,732		(5,368)		45,364
Curaleaf		Connecticut	Dispensary	184		2,748		2,932		(232)		2,700
Curaleaf		Florida	Cultivation	388		75,595		75,983		(5,765)		70,218
Curaleaf		Illinois	Dispensary	69		525		594		(46)		548
Curaleaf		Illinois	Dispensary	65		959		1,024		(87)		937
Curaleaf		Illinois	Dispensary	606		1,128		1,734		(101)		1,633
Curaleaf		Illinois	Dispensary	281		3,072		3,353		(266)		3,087
Curaleaf		North Dakota	Dispensary	779		1,395		2,174		(124)		2,050
Curaleaf		Ohio	Dispensary	574		2,788		3,362		(281)		3,081
Curaleaf		Pennsylvania	Dispensary	877		1,041		1,918		(118)		1,800
Curaleaf		Pennsylvania	Dispensary	216		2,011		2,227		(174)		2,053
Greenlight	(2)	Arkansas	Dispensary	238		1,919		2,157		(166)		1,991
Mint	(3)	Arizona	Cultivation	2,400		12,907		15,307		—		15,307
Organic Remedies		Missouri	Cultivation	204		20,897		21,101		(1,910)		19,191
PharmaCann		Massachusetts	Dispensary	411		1,701		2,112		(261)		1,851
PharmaCann		Ohio	Dispensary	281		1,269		1,550		(33)		1,517
PharmaCann		Pennsylvania	Dispensary	44		1,271		1,315		(100)		1,215
Revolutionary Clinics		Massachusetts	Cultivation	926		41,934		42,860		(2,768)		40,092
Trulieve		Pennsylvania	Cultivation	1,061		43,209		44,270		(3,662)		40,608
Total Real Estate(4)				$	21,397	$	382,087	$	403,484	$	(28,931)	$	374,553

(1) A portion of this investment is currently under development. Once the expansion is completed and placed in service, the Company will begin depreciating this part of the property.

(2) GL Partners, Inc. (Greenlight) took over as tenant, however Curaleaf remains the guarantor subject to certain conditions in the lease agreement.

(3) This property is under development. Once completed and placed in service, the Company will start depreciating this property.

(4) The table does not include one property held for sale.

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NEWLAKE CAPITAL PARTNERS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2023

(Unaudited)

Note 3 - Real Estate (continued)

Real Estate Acquisitions

In March 2023, the Company exercised its option and invested approximately $350 thousand to acquire one parcel of land and committed to fund $16.2 million to expand an existing cultivation facility in Missouri (refer to the Tenant Improvement ("TI") table below).

The following table presents the real estate acquisition for the nine months ended September 30, 2023 (in thousands):

Tenant

Market

Site Type

Closing Date

Real Estate Acquisition Costs

Bloom Medicinal

Missouri

Cultivation

March 3, 2023

350

(1)

Total

350

(1)The Company exercised its option to purchase the adjacent parcel of land to expand its cultivation facility in Missouri and has committed to fund $16.2 million for the expansion.

During the year ended December 31, 2022, the Company invested approximately $67.0 million to acquire four cultivation facilities and one dispensary. The following table presents the real estate acquisitions for the year ended December 31, 2022 (in thousands):

Tenant

Market

Site Type

Closing Date

Real Estate Acquisition Costs(1)

Bloom Medicinal

Missouri

Cultivation

April 1, 2022

7,301

(2)

Ayr Wellness, Inc.

Pennsylvania

Cultivation

June 30, 2022

14,529

Ayr Wellness, Inc.

Nevada

Cultivation

June 30, 2022

13,579

Calypso Enterprises

Pennsylvania

Cultivation

August 5, 2022

30,000

(3)

PharmaCann

Ohio

Dispensary

November 3, 2022

1,550

Total

66,959

(1) Includes the purchase price (and in some cases, transaction costs that have been capitalized into the purchase price) and TI commitments funded at closing, if any, as of December 31, 2022. Excludes TI commitments not funded as of December 31, 2022.

(2) Includes approximately $5.0 million of TI funded at closing of the property.

(3) The Company entered into a $30.0 million mortgage loan on October 29, 2021, which converted to a sale-leaseback on August 5, 2022.

Conversion of Mortgage Loan

The Company funded a $30.0 million mortgage loan to Hero Diversified Associates, Inc. (“HDAI" or "Calypso") on October 29, 2021. On August 5, 2022 the mortgage loan converted to a twenty year sale-leaseback and the Company recorded land and building and improvements which have been included in "Total Real Estate" on the consolidated balance sheets.

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NEWLAKE CAPITAL PARTNERS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2023

(Unaudited)

Note 3 - Real Estate (continued)

Tenant Improvements Funded

During the nine months ended September 30, 2023, the Company funded approximately $5.6 million of tenant improvements. The following table presents the tenant improvements funded for the nine months ended September 30, 2023 (in thousands):


Tenant	Market	Site Type	Closing Date	TI Funded			Unfunded Commitments
Mint	Arizona	Cultivation	June 24, 2021	$	2,366		$	5,703	(1)
Organic Remedies	Missouri	Cultivation	December 20, 2021	282			—
Bloom Medicinal	Missouri	Cultivation	April 1, 2022	2,961		(2)	13,722
Ayr Wellness, Inc.	Pennsylvania	Cultivation	June 30, 2022	—			750




Total				$	5,609		$	20,175

(1) Effective June 1, 2023, the lease agreement was amended to include an additional TI commitment of approximately $6.5 million.

(2)Approximately $534 thousand of the TI funded related to our commitment prior to exercising our option related to the additional parcel.

During the year ended December 31, 2022, the Company funded approximately $45.2 million of tenant improvements. The following table presents the tenant improvements funded for the year ended December 31, 2022 (in thousands):

Tenant

Market

Site Type

Closing Date

TI Funded

Unfunded Commitments

Curaleaf

Florida

Cultivation

August 4, 2020

20,983

(1)

—

Mint

Massachusetts

Cultivation

April 1, 2021

349

—

Mint

Arizona

Cultivation

June 24, 2021

7,415

1,554

(2)

PharmaCann

Massachusetts

Dispensary

March 17, 2021

—

Trulieve

Pennsylvania

Cultivation

March 17, 2021

7,046

(3)

—

Organic Remedies

Missouri

Cultivation

December 20, 2021

4,745

282

Bloom Medicinal

Missouri

Cultivation

April 1, 2022

4,682

534

(4)

Ayr Wellness, Inc.

Pennsylvania

Cultivation

June 30, 2022

—

750

Total

45,245

3,120

(1) On June 16, 2022, the Company funded the expansion of an existing property.

(2) The tenant had been paying rent for the remaining commitment since July 2022 in accordance with the lease agreement.

(3) The tenant had been paying rent for the TI since December 2021 in accordance with the lease agreement. As of May 2022, the TI had been fully funded.

(4) The unfunded commitment did not include an option, because the Company did not have an obligation to acquire the adjacent property from an existing tenant and fund TIs.

Disposal of Real Estate

There were no sales of real estate during the nine months ended September 30, 2023.

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NEWLAKE CAPITAL PARTNERS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2023

(Unaudited)

Note 3 - Real Estate (continued)

On March 21, 2022, the Company sold one of its Massachusetts properties for approximately $0.8 million, which was leased to PharmaCann. The Company recognized a loss on sale of the property of $60 thousand. PharmaCann continued to pay rent for the sold Massachusetts property through increased rent payments from each of the remaining two properties leased by PharmaCann until a suitable replacement property was found. In November 2022 a replacement property was acquired by the Company and leased to PharmaCann.

Real Estate Held for Sale

The Company is under contract with a broker to sell a property with a carrying amount of $1.9 million located in Massachusetts leased to Mint. The property is available for immediate sale in its present condition and management expects the property will sell within one year, accordingly the property is classified in "Property Held for Sale" in the accompanying consolidated balance sheet. The lease agreement contains a make-whole provision. As of September 30, 2023, the property continues to be recorded at its carrying value.

On August 25, 2023, the Company entered into a purchase and sale agreement for the sale of its Massachusetts property that is leased to Mint, subject to customary buyer's due diligence. In connection with the agreement, the buyer deposited $100,000 into an escrow account. The escrow deposit was fully refundable if the contract was terminated during the due diligence period. As of September 30, 2023, the due diligence period had expired and $75,000 of the escrow deposit was non-refundable in the event the buyer terminated the contract. The escrow deposit was not recorded in the accompanying consolidated balance sheet as of September 30, 2023. The sale closed subsequent to September 30, 2023, refer to Note 15 - Subsequent Events for details.

Construction in Progress

As of September 30, 2023 and December 31, 2022, construction in progress was $15.3 million and $12.1 million, respectively, and is classified in "Buildings and Improvements" in the accompanying consolidated balance sheets.

Depreciation and Amortization

Depreciation expense for the three months ended September 30, 2023 and 2022 was $3.1 million and $3.1 million, respectively. Depreciation expense for the nine months ended September 30, 2023 and 2022, was $9.2 million and $7.6 million, respectively.

Amortization of the Company’s acquired in-place lease intangible assets was approximately $0.5 million for both the three months ended September 30, 2023 and 2022. Amortization of the Company’s acquired in-place lease intangible assets was approximately $1.5 million for both the nine months ended September 30, 2023 and 2022. The acquired in-place lease intangible assets have a weighted average remaining amortization period of 10.5 years.

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NEWLAKE CAPITAL PARTNERS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2023

(Unaudited)

In-place Leases

The following table presents the future amortization of the Company’s acquired in-place leases as of September 30, 2023 (in thousands):


Year	Amortization Expense
2023 (three months ending December 31, 2023)	$	496
2024	1,985
2025	1,985
2026	1,985
2027	1,985
Thereafter	11,839
Total	$	20,275

Impairment

The Company reviewed tenant activities and changes in the business condition of all of its properties and reviewed the existence of potential triggering events for impairment indicators to determine if there were impairments at any property. Based on our review, as of September 30, 2023 and September 30, 2022, no impairment losses were recognized.

Note 4 - Leases

As Lessor

The Company's properties are leased to single tenants on a long-term, triple-net basis, which obligates the tenant to be responsible for the ongoing expenses of a property, in addition to its rent obligations. Under certain circumstances the Company will pay for certain expenses on behalf of the tenant and the tenant is required to reimburse the Company. The presentation in the statements of operations for these expenses are gross where the Company records revenue and a corresponding reimbursable expense. Expenses paid directly by a tenant are not reimbursable and therefore not reflected in the statement of operations. The amount may differ due to timing. The revenues associated with the reimbursable expenses were classified in "Fees and Reimbursables" in the accompanying consolidated statements of operations. For the three months ended September 30, 2023, and 2022 the reimbursable revenues were $14.5 thousand and $4.9 thousand, respectively. For the nine months ended September 30, 2023, and 2022 the reimbursable revenues were $111.9 thousand, and $138.6 thousand, respectively. The reimbursable expenses were classified in "Other General and Administrative Expenses" in the accompanying consolidated statements of operations. The reimbursable expenses for the three months ended September 30, 2023 and 2022 were $77.9 thousand and $14.8 thousand, respectively. For the nine months ended September 30, 2023 and 2022 reimbursable expenses were $228.1 thousand, and $148.4 thousand, respectively.

The Company's tenants operate in the cannabis industry. All of the Company's leases generally contain annual increases in rent (typically between 2% and 3%) over the expiring rental rate at the time of expiration. Certain leases of the Company also contain a Tenant Improvement Allowance (“TIA”). TIA is generally available to be funded between 12 and 18 months. In some leases, the tenant becomes liable to pay rent as if the full TIA has been funded, even if there are still unfunded commitments. TIA also contains annual increases which generally increase at the same rate as base rent, per the lease agreement. Certain of the Company's leases provide the lessee with a right of first refusal or right of first offer in the event the Company markets the leased property for sale. Two of the Company’s leases that were entered into in December 2019 provide the lessee with a purchase option to

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NEWLAKE CAPITAL PARTNERS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2023

(Unaudited)

purchase the leased property at the end of the initial lease term in December 2029, subject to the satisfaction of certain conditions. The purchase option provision allows the lessee to purchase the leased property for an amount based on the fair market value of the Company's investment. As of September 30, 2023, the Company's gross investment in these two properties was approximately $6.3 million.

The following table presents the future contractual minimum rent under the Company’s operating leases as of September 30, 2023 (in thousands):


Year	Contractual Minimum Rent(1)
2023 (three months ending December 31, 2023)	$	12,463
2024	52,076
2025	54,333
2026	55,734
2027	57,171
Thereafter	609,709
Total	$	841,486

(1) This table includes future contractual rent from one non-performing tenant who did not pay rent for the nine months ended September 30, 2023. Subsequent to September 30, 2023, the Company reached an agreement to amend the existing lease agreement. Refer to Note 15 - Subsequent Events for details.

Concentration of Credit Risk

The ability of any of the Company's tenants to honor the terms of its lease are dependent upon the economic, regulatory, competitive, natural and social factors affecting the community in which that tenant operates.

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NEWLAKE CAPITAL PARTNERS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2023

(Unaudited)

Note 4 - Leases (continued)

The following table presents the five tenants in the Company's portfolio that represented the largest percentage of the Company's recognized rental income for each of the periods presented:


For the Three Months Ended September 30,
2023				2022
Tenant	Number of Leases		Percentage of Rental Income(1)	Tenant		Number of Leases	Percentage of Rental Income(1)
Curaleaf	10		25%	Curaleaf		10	25%
Cresco Labs	1		15%	Cresco Labs		1	17%
Trulieve	1		12%	Trulieve		1	14%
Columbia Care	5		9%	Revolutionary Clinics	(3)	1	13%
Calypso	1	(2)	8%	Columbia Care		5	10%

(1) Calculated based on rental income received during the period. This amount excludes revenue from fees and reimbursements.

(2) This tenant held a mortgage loan as of the three months ended September 30, 2022, therefore the Company received interest income rather than rental income during that period. In August 2022, the mortgage loan converted to a twenty year sale-leaseback.

(3) This tenant is in default of its lease agreement. For the three months ended September 30, 2023, the Company applied approximately $315 thousand of their security deposit towards the outstanding rent.


For the Nine Months Ended September 30,
2023				2022
Tenant	Number of Leases		Percentage of Rental Income(1)	Tenant		Number of Leases	Percentage of Rental Income(1)
Curaleaf	10		25%	Curaleaf		10	25%
Cresco Labs	1		14%	Cresco Labs		1	16%
Trulieve	1		12%	Trulieve		1	13%
Columbia Care	5		9%	Revolutionary Clinics	(3)	1	13%
Calypso	1	(2)	8%	Columbia Care		5	10%

(1) Calculated based on rental income received during the period. This amount excludes revenue from fees and reimbursements.

(2) This tenant held a mortgage loan as of the nine months ended September 30, 2022, therefore the Company received interest income rather than rental income during that period. In August 2022, the mortgage loan converted to a twenty year sale-leaseback.

(3) This tenant failed to pay rental income during the nine months ended September 30, 2023. A security deposit of approximately $945 thousand was applied towards the outstanding rent.

Non-Performing Tenant

For the nine months ended September 30, 2023, Revolutionary Clinics failed to pay contractual rent under one lease agreement. The Company is currently in discussion with the tenant to negotiate a resolution, which could include rent deferrals, rent concessions or other concessions. The Company held a security deposit of approximately three months of contractual rent, of which the Company applied $945 thousand towards the outstanding rent during the nine months ended September 30, 2023. Approximately $315 thousand of security deposit remains for future application. Subsequent to September 30, 2023, the Company reached an agreement to restructure the existing lease agreement. Refer to Note 15 - Subsequent Events for details.

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NEWLAKE CAPITAL PARTNERS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2023

(Unaudited)

Note 4 - Leases (continued)

As Lessee

As of September 30, 2023, the Company was the lessee under one office lease that qualifies under the right-of-use ("ROU") model. Upon entering into the lease in June 2022, the Company recorded a ROU asset of $273 thousand which is classified in “Other Assets” and a lease liability, which is classified in "Other Liabilities" in the accompanying consolidated balance sheets. The ROU asset is amortized over the remaining lease term. The amortization is made up of the principal amortization under the lease liability plus or minus the straight-line adjustment of the operating lease rent.

The following table presents the future contractual rent obligations as lessee as of September 30, 2023 (in thousands):


Year	Contractual Base Rent
2023 (three months ended December 31, 2023)	$	19
2024	75
2025	77
2026	52


Total Minimum Lease Payments	$	223
Less: Amount Discounted Using Incremental Borrowing Rate	$	84
Total Lease Liability	$	139

As of September 30, 2023, the weighted-average discount rate used to calculate the lease liability was 5.65% and the remaining lease term was 2.92 years.

Note 5 – Loan Receivable

The Company funded a $5.0 million unsecured loan to Bloom Medicinals on June 10, 2022. The loan initially bore interest at a rate of 10.25% and is structured to increase annually in April by the product of 1.0225 times the interest rate in effect immediately prior to the anniversary date. The loan can be prepaid at any time without penalty and matures on June 30, 2026. The loan is cross defaulted with their lease agreement with the Company. As of September 30, 2023, the aggregate principal amount outstanding on the unsecured loan receivable was $5.0 million with an interest rate of 10.48%.

CECL Reserve

The Company adopted CECL on January 1, 2023, which did not have a material impact on its financial statements. The Company has only one $5.0 million unsecured loan (discussed above) subject to this guidance, since originating loans is not a core asset class. Estimating the CECL reserve requires significant judgement and based on the Company's analysis as of September 30, 2023, the reserve was de-minimis.

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NEWLAKE CAPITAL PARTNERS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2023

(Unaudited)

Note 6 – 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 $3.8 million loan payable to the seller, which is an independent third party from the tenant. The loan bears interest at a rate of 4.0% per annum. Principal on the loan is payable in annual installments of which $1.8 million and $1.0 million were paid in January 2022 and January 2023, respectively. The remaining principal of $1.0 million and accrued interest is payable in January 2024. The loan's outstanding balance as of September 30, 2023 was $1.0 million and the remaining unamortized discount was $3.4 thousand.

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, $30.0 million in aggregate commitments for secured revolving loans (“Revolving Credit Facility”), the availability of which is based on a borrowing base consisting of fee simple owned real properties that satisfy eligibility criteria specified in the Loan and Security Agreement and the lease income thereunder which are owned by certain subsidiaries of the Operating Partnership.

On July 29, 2022, the Operating Partnership, entered into an amendment to the Revolving Credit Facility, amending the Loan and Security Agreement, to increase the aggregate commitment under the Revolving Credit Facility from $30.0 million to $90.0 million and added two additional lenders. The Loan and Security Agreement also allows the Company, subject to certain conditions, to request additional revolving incremental loan commitments such that the Revolving Credit Facility may be increased to a total aggregate principal amount of up to $100.0 million. Borrowings under the Revolving Credit Facility may be voluntarily prepaid and re-borrowed, subject to certain fees.

The Revolving Credit Facility bears a fixed rate of 5.65% for the first three years and thereafter a variable rate based upon the greater of (a) the Prime Rate quoted in the Wall Street Journal (Western Edition) (“Base Rate”) plus an applicable margin of 1.0% or (b) 4.75%.

As of September 30, 2023, the Company had approximately $1.0 million in borrowings under the Revolving Credit Facility and $89.0 million in funds available to be drawn, subject to sufficient collateral in the borrowing base.

The facility is subject to certain liquidity and operating covenants and includes customary representations and warranties, affirmative and negative covenants and events of default. As of September 30, 2023, the Company complied with the terms of such covenants.

Note 7 - Related Party Transactions

Merger Agreement

In connection with the merger, pursuant to which we combined the Company with a separate company that owned a portfolio of dispensaries and cultivation facilities utilized in the cannabis industry, and renamed ourselves NewLake Capital Partners, Inc. (the "Merger") on March 17, 2021, the Company 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 the Company's board of directors. Prior to the completion of the Company's IPO, pursuant to the Investor Rights Agreement, HG Vora Capital Management,

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NEWLAKE CAPITAL PARTNERS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2023

(Unaudited)

Note 7 - Related Party Transactions (continued)

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.

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.

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.

Note 8 - Noncontrolling Interests

The Company's noncontrolling interests represent limited partnership interest in the Operating Partnership not held by the Company. Noncontrolling interests represented 1.7% ownership in the Operating Partnership at September 30, 2023 and December 31, 2022.

The following table presents the activity for the Company’s noncontrolling interests issued by the Operating Partnership for the nine months ended September 30, 2023 and the year ended December 31, 2022:


	September 30, 2023			December 31, 2022
	OP Units	Noncontrolling Interests %		OP Units	Noncontrolling Interests %
Balance at January 1,	373,582	1.7	%	453,303	2.1	%




OP Units Converted	—	—	%	(79,721)	(0.4)	%
Balance at End of Period	373,582	1.7	%	373,582	1.7	%

Note 9 - Stock Based Compensation

The Company's board of directors adopted the 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 the Company 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 2,275,727 shares. If and to the extent shares of awards granted under the Plan, expire or are canceled, forfeited, exchanged or surrendered without having been exercised, or if any stock awards, stock units or other stock-based awards are forfeited, terminated or otherwise not paid in full, the shares subject to such grants shall again be available for issuance or transfer under the Plan. The Plan has a term of ten years until August 12, 2031. As of September 30, 2023, there were approximately 1,912,535 shares available for issuance under the Plan.

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NEWLAKE CAPITAL PARTNERS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2023

(Unaudited)

Note 9 - Stock Based Compensation (continued)

Restricted Stock Units

Restricted Stock Units ("RSUs") are granted to certain directors, officers and employees of the Company. Per the terms of the agreements, certain director RSUs that vest cannot be converted until the director separates from the Company. Total outstanding RSUs as of September 30, 2023 and 2022 were 106,820 and 54,175, respectively.

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NEWLAKE CAPITAL PARTNERS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2023

(Unaudited)

Note 9 - Stock Based Compensation (continued)

Unvested Restricted Stock Units

The following table sets forth the Company's unvested RSU activity for the nine months ended September 30,:


	For the Nine Months Ended September 30,
	2023			2022
	Number of Unvested Shares of RSUs	Weighted Average Grant Date Fair Value Per Share		Number of Unvested Shares of RSUs	Weighted Average Grant Date Fair Value Per Share
Balance at January 1,	29,255	$	22.89	45,018	$	27.49
Granted	59,031	$	12.87	19,362	$	20.54
Forfeited	—	$	—	(8,566)	27.49
Vested	(18,318)	$	23.54	(20,173)	$	27.49
Balance at September 30,	69,968	$	15.15	35,641	$	23.71

Vested Restricted Stock Units

The following table sets forth the Company's vested RSU activity for the nine months ended September 30,:


	For the Nine Months ended September 30,
	2023			2022
	Number of Vested Shares of RSUs	Weighted Average Grant Date Fair Value Per Share		Number of Vested Shares of RSUs	Weighted Average Grant Date Fair Value Per Share
Balance at January 1,	18,534	$	23.93	127,176	$	21.08
Vested	18,318	20.14		9,493	27.49
Converted	—	—		(118,135)	21.15
Balance at September 30,	36,852	$	22.05	18,534	$	23.93

Each RSU represents the right to receive one share of common stock upon vesting. Each RSU is also entitled to receive a dividend equivalent payment equal to the dividend paid on one share of common stock upon vesting. Unearned dividend equivalents on unvested RSUs as of September 30, 2023 and 2022 were $88,756 and $35,850, respectively.

The amortization of compensation costs for the awards of RSUs are classified in "Compensation Expense" in the accompanying consolidated statements of operations and amounted to approximately $0.5 million and $0.8 million for the nine months ended September 30, 2023 and 2022, respectively. Included in the $0.8 million of stock-based compensation for the nine months ended September 30, 2022 is approximately $0.2 million of accelerated expense related to the retirement and separation of certain officers. There was no accelerated expensed for the nine months ended September 30, 2023. The amortization of compensation costs for the awards of RSUs amounted to approximately $0.2 million and $0.1 million for the three months ended September 30, 2023 and 2022, respectively. The remaining unrecognized compensation cost of approximately $0.7 million for RSU awards is expected to be recognized over a weighted average amortization period of 1.2 years as of September 30, 2023.

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NEWLAKE CAPITAL PARTNERS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2023

(Unaudited)

Note 9 - Stock Based Compensation (continued)

Performance Stock Units

Performance Stock Units (“PSUs”) are granted to officers and certain employees of the Company. Total outstanding PSUs as of September 30, 2023 and 2022 were 121,858 and 66,841, respectively.

The following table sets forth the Company's unvested performance stock activity for the nine months ended September 30,:


	For the Nine Months Ended September 30,
	2023			2022
	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,	66,841	$	24.04	77,742	$	24.04
Granted	55,017	$	11.23	—	$	—

Forfeited	—	—		(10,901)	$	24.03
Balance at September 30,	121,858	$	18.26	66,841	$	24.04

PSUs vest subject to the achievement of relative total shareholder return as measured against a peer group of companies and absolute compounded annual growth in stock price during each performance period. The actual number of shares of common stock issued will range from 0 to 243,716 depending upon performance. The performance periods are August 13, 2021 through December 31, 2023, January 1, 2022 through December 31, 2024, and January 1, 2023 through December 31, 2025 and 18,858, 47,983 and 55,017 PSUs are scheduled to vest at the end of each performance period, respectively.

PSUs are recorded at fair value which involved using a Monte Carlo simulation for the future stock prices of the Company and its corresponding peer group. A fair value of $24.15, $24.00 and $11.23 were used for PSUs with performance periods ending December 31, 2023, 2024 and 2025, respectively. 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 September 30, 2023 and 2022 were $259,546 and $90,904, respectively.

The amortization of compensation costs for the awards of PSUs are included in "Compensation Expense" in the accompanying consolidated statements of operations and amounted to $0.6 million and $0.4 million for the nine months ended September 30, 2023 and 2022, respectively. The amortization of compensation costs for the awards of PSUs amounted to $0.2 million for both the three months ended September 30, 2023 and 2022. The remaining unrecognized compensation cost of approximately $1.0 million for PSU awards is expected to be recognized over a weighted average amortization period of 1.7 years as of September 30, 2023.

Stock Options

Prior to the completion of the IPO, the Company issued 791,790 nonqualified stock options (the “Options”) to purchase shares of the Company’s common stock, subject to the terms and conditions of the applicable Option Grant Agreements, with an exercise price per share of common stock equal to $24.00 and in such amounts as set forth in the Option Grant Agreements. The Options vested on August 31, 2020 and were fully exercisable as of September 30, 2023. The options expire on July 15, 2027.

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NEWLAKE CAPITAL PARTNERS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2023

(Unaudited)

Note 10 - Warrants

On March 17, 2021, in connection with the Merger, the Company entered into a warrant agreement which granted the right to purchase 602,392 shares of common stock of the Company at a purchase price of $24.00 per share. Warrants are immediately exercisable and expire on July 15, 2027.

The following table summarizes warrant activity for the nine months ended September 30,:


	2023			2022
	Number of Warrants(1)	Weighted Average Exercise Price		Number of Warrants(1)	Weighted Average Exercise Price
Exercisable at January 1,	602,392	$	24.00	602,392	$	24.00
Granted	—	—		—	—
Exercised	—	—		—	—
Exercisable at September 30,	602,392	$	24.00	602,392	$	24.00

(1) Warrants were granted on March 17, 2021.

Note 11 - Stockholders' Equity

Preferred Stock

As of September 30, 2023 and December 31, 2022, the Company had 100,000,000 shares of preferred stock authorized and 0 shares of preferred stock outstanding.

Common Stock

On August 13, 2021, the Company completed its initial public offering ("IPO") of 3,905,950 shares of common stock, with a par value $0.01 per share.

Stock Repurchase Program

On November 7, 2022, the board of directors of the Company authorized a stock repurchase program of its common stock up to $10.0 million through December 31, 2023. On September 15, 2023, the board of directors authorized an amendment to the stock repurchase program for the repurchase of up to an additional $10.0 million of outstanding common stock and extended the program through December 31, 2024. Purchases made pursuant to the stock repurchase program will be made in the open market, in privately negotiated transactions, or pursuant to any trading plan that may be adopted in accordance with Rule 10b-18 of the Securities and Exchange Act of 1934, as amended. The authorization of the stock repurchase program does not obligate the Company to acquire any particular amount of common stock. The timing, manner, price and amount of any repurchases will be determined by the Company in its discretion and will be subject to economic and market conditions, stock price, applicable

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NEWLAKE CAPITAL PARTNERS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2023

(Unaudited)

Note 11 - Stockholders' Equity (continued)

legal requirements and other factors. The stock repurchase program may be suspended or discontinued by us at any time and without prior notice.

For the nine months ended September 30, 2023, pursuant to the repurchase plan, the Company acquired 713,831 shares of common stock with an average price, including commissions, of $12.96 totaling approximately $9.3 million. The remaining availability under the program as of September 30, 2023 was approximately $10.7 million.

Conversion of OP Units

There were no OP Units converted to common stock during the nine or three months ended September 30, 2023. During the nine months ended September 30, 2022, 79,721 OP Units were converted one for one into shares of the Company's common stock. During the three months ended September 30, 2022, no OP Units were converted to common stock.

Dividends

The following tables describe the cash dividends, dividend equivalents on vested RSUs and, in the Company's capacity as general partner of the operating partnership, authorized distributions on the Company's OP Units declared by the Company during the nine months ended September 30, 2023 and 2022:

Declaration Date

Record Date

Period Covered

Distributions Paid Date

Amount per Share/Unit

March 7, 2023

March 31, 2023

January 1, 2023 to March 31, 2023

April 14, 2023

0.39

June 15, 2023

June 30, 2023

April 1, 2023 to June 30, 2023

July 14, 2023

0.39

September 15, 2023

September 29, 2023

July 1, 2023 to September 30, 2023

October 13, 2023