NewLake Capital Partners, Inc.: Form 10-Q for the period ended Jun 30, 2025

SPECIAL NOTE REGARDING FORWARD LOOKING INFORMATION

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

Forward-looking statements involve numerous risks and uncertainties and you should not rely on them as predictions of future events. Forward-looking statements depend on assumptions, data or methods which may be incorrect or imprecise and we may not be able to realize them. We do not guarantee that the transactions and events described will happen as described (or that they will happen at all). The following factors, among others, could cause actual results and future events to differ materially from those set forth or contemplated in the forward-looking statements:

• actions and initiatives of the U.S. or state governments and changes to government policies and the execution and impact of these actions, initiatives and policies, including the fact that cannabis remains illegal under federal law;
• reduced liquidity of our common stock resulting from limited availability of clearing firms that will settle our securities and settle our securities in secondary offerings;
• general economic conditions, including changes in the financial condition of our tenants resulting from uncertainties or changes in fiscal, monetary and regulatory policies, such as with respect to tariffs;
• adverse economic or real estate developments, either nationally or in the markets in which our properties are located;
• other factors affecting the real estate industry generally;
• increase in interest rates and operating costs;
• the impact of inflation;
• financial market fluctuations;
• the competitive environment in which we operate;
• the estimated growth in and evolving market dynamics of the regulated cannabis market;
• adverse economic effects on the cannabis market;
• the expected medical-use or adult-use cannabis legalization in certain states;
• shifts in public opinion regarding regulated cannabis;
• the additional risks that may be associated with certain of our tenants cultivating adult-use cannabis in our cultivation facilities;
• the risks associated with the development of cultivation centers and dispensaries;
• our ability to successfully identify opportunities in target markets;
• the lack of tenant security deposits will impact our ability to recover rents should our tenants default under their respective lease agreement;
• our status as an emerging growth company and a smaller reporting company;
• our lack of an extensive operating history;
• the concentration of our tenants in certain geographical areas;
• our failure to generate sufficient cash flows to service any outstanding indebtedness;
• rates of defaults on, early terminations of, or non-renewal of leases by tenants, including significant tenants;
• our failure to acquire the properties in our identified pipeline successfully, on the anticipated timeline or at the anticipated costs;
• our failure to properly assess employment growth or other trends in target markets and other markets in which we seek to invest;
• lack or insufficient amounts of insurance;
• bankruptcy or insolvency of a significant tenant or a substantial number of smaller tenants;
• our access to certain financial resources, including banks and other financial institutions;
• our failure to successfully operate acquired properties;
• our ability to operate successfully as a public company;
• our dependence on key personnel and ability to identify, hire and retain qualified personnel in the future;
• conflicts of interests with our officers and/or directors stemming from their fiduciary duties to other entities, including our operating partnership;
• our failure to obtain necessary outside financing on favorable terms or at all;
• general volatility of the market price of our common stock;
• changes in U.S. generally accepted accounting principles ("GAAP");
• environmental uncertainties and risks related to adverse weather conditions and natural disasters;
• our failure to maintain our qualification as a REIT for federal income tax purposes; and
• changes in governmental regulations or interpretations thereof, such as real estate and zoning laws and increases in real property tax rates and taxation of REITs.

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

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

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

This discussion, particularly information with respect to our future results of operations or financial condition, business strategy and plans, and objectives of management for future operations, includes forward-looking statements that involve risks and uncertainties as described under the heading "Special Note Regarding Forward-Looking Information" in this Quarterly Report on Form 10-Q. You should review the disclosure under the heading "Risk Factors" in our most recent annual report on Form 10-K for a discussion of important factors that could cause our actual results to differ materially from those anticipated in these forward-looking statements.

Overview

NewLake Capital Partners, Inc., ("the “Company,” "we," "our," "us,") is an internally managed REIT and a leading provider of real estate capital to state-licensed cannabis operators primarily through sale-leaseback transactions, third-party purchases and funding for build-to-suit projects. Our properties are leased to single tenants on a long-term, triple-net basis, which obligates the tenant for the ongoing expenses of the leased property, in addition to its rent obligations.

We were incorporated in Maryland on April 9, 2019. We conduct our business through a traditional umbrella partnership REIT structure, in which properties are owned by an operating partnership, directly or through subsidiaries. We are the sole general partner of our operating partnership and currently own approximately 98% of the LPI Units. We have elected to be taxed as a REIT for U.S. federal income tax purposes beginning with our short taxable year ended December 31, 2019 and intend to operate our business so as to continue to qualify as a REIT.

As of June 30, 2025, we owned a geographically diversified portfolio consisting of 34 properties across 12 states with 13 tenants, comprised of 19 dispensaries and 15 cultivation facilities.

Emerging Growth Company

We have elected to be an emerging growth company, as defined in the JOBS Act. An emerging growth company may take advantage of specified reduced reporting requirements and is relieved of certain other significant requirements that are otherwise generally applicable to public companies. As an emerging growth company, among other things:

• We are exempt from the requirement to obtain an attestation and report from our auditors on the assessment of our internal control over financial reporting pursuant to the Sarbanes-Oxley Act;
• We are permitted to provide less extensive disclosure about our executive compensation arrangements; and
• We are not required to give our stockholders non-binding advisory votes on executive compensation or golden parachute arrangements.

We have elected to use an extended transition period for complying with new or revised accounting standards.

We may take advantage of the other provisions for up to five years or such earlier time that we are no longer an emerging growth company. We will cease to be an emerging growth company upon the earliest to occur of: (i) the last day of the first fiscal year in which our annual gross revenues exceed $1.2 billion (subject to adjustment for inflation), (ii) the date that we become a “large accelerated filer” as defined in Rule 12b-2 under the Exchange Act, which would occur if the market value of our common stock that is held by non-affiliates exceeds $700 million as of the last business day of our most recently completed second fiscal quarter, (iii) the date on which we have issued more than $1 billion in non-convertible debt during the preceding three-year period, or (iv) the last day of the fiscal year following the fifth anniversary of our initial public offering, which would be December 31, 2026.

Factors Impacting Our Operating Results

Our results of operations are affected by a number of factors and depend on the rental revenue we receive from the properties that we own, interest income we receive from the loans we originate, the timing of lease expirations, general market conditions, the regulatory environment in the cannabis industry, and the competitive environment for real estate assets that support the cannabis industry.

Rental Income

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

• Our ability to enter into new leases at market value rents inclusive of annual rent increases; and
• Rent collection, which primarily relates to each of our current and future tenant’s or guarantor’s financial condition and ability to make rent payments to us on time.

For the six months ended June 30, 2025, all of our rental income was derived from triple-net leases to 13 tenants. Our leases include a parent or other affiliate guarantee and obligate the tenant for all the ongoing expenses of a property, including real estate taxes, insurance, maintenance and utilities. Our rental income is, therefore, dependent on our tenants (and related guarantors) ability to meet their respective obligations to us. Our tenants operate in the cannabis industry. Changes in current state or local laws in the cannabis industry may impair our ability to renew or re-lease properties and the ability of our tenants to fulfill their lease obligations which could materially and adversely affect our ability to maintain or increase rental rates for our properties. Further, some of our existing tenants have limited operating histories and may be more susceptible to payment and other lease defaults. Thus, our operating results will be significantly impacted by the ability of our tenants to achieve and sustain positive financial results.

Financial Performance and Condition of Our Tenants

We own 34 properties, leased to 13 tenants. As of June 30, 2025, all of our tenants are performing under their lease agreement with the exception of one tenant discussed below.

Condition of Our Tenants

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

Revolutionary Clinics

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

AYR Wellness Inc.

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

Financial Markets Update

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

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

Regulatory Update

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

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

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

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

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

Inflation and Supply Chain Constraints

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

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

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

Competitive Environment

We face competition from a diverse mix of market participants, including but not limited to, other companies with similar business models, independent investors, hedge funds and other real estate investors, mortgage REITs, hard money lenders, as well as would-be tenants and cannabis operators themselves, all of whom may compete with us in our efforts to acquire real estate zoned for cannabis cultivation, production or dispensary operations. Competition from others may diminish our opportunities to acquire a desired property on favorable terms or at all. In addition, this competition may put pressure on us to reduce the rental rates below those that we expect to charge for the properties that we own and expect to acquire, which would adversely affect our financial results.

Critical Accounting Estimates

In accordance with GAAP, our consolidated financial statements require the use of estimates and assumptions that involve the exercise of judgment and use of assumptions. Our most critical accounting estimates will involve decisions and assessments that could affect our reported assets and liabilities, as well as our reported revenues and expenses. Actual results could differ materially from those estimates and assumptions.

We believe that all of the decisions and assessments upon which our consolidated financial statements have been based were reasonable at the time made and based upon information available to us at that time. There have been no changes to the Company's critical accounting estimates included in Management’s Discussion and Analysis of Financial Condition and Results of Operations section of the Company's Annual Report on Form 10-K for the year ended December 31, 2024.

Second Quarter 2025 Highlights

Investment Activity

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

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

Capital Market Activity

Dividends

On June 16, 2025, the Company’s Board of Directors declared a second quarter 2025 cash dividend of $0.43 per share of common stock, equivalent to an annualized dividend of $1.72 per share of common stock. The dividend was paid on July 15, 2025, to stockholders of record at the close of business on June 30, 2025.

Results of Operations

General

We derive substantially all our revenue from rents received from single tenants at each of our 34 properties, all of which are under triple-net leases. As of June 30, 2025, our portfolio remains conservatively leveraged, with only $7.6 million outstanding under our Revolving Credit Facility. Additionally, we maintain low general and administrative expense with an annualized ratio of 1.3% of total assets.

Comparison of the three months ended June 30, 2025 and 2024 (in thousands):

33

Revenues

Rental Income

Rental income for the three months ended June 30, 2025 increased by approximately $311 thousand to approximately $12.6 million, compared to approximately $12.3 million for the three months ended June 30, 2024. The increase in rental income was mainly attributable to:

• A full quarter of rental income from the purchase of a dispensary in Ohio in February 2025, a full quarter of rental income from the purchase of a cultivation facility in Connecticut in May 2024 and approximately two months of rental income from the purchase of a dispensary in Ohio in April 2025. These acquisitions generated an increase of approximately $75 thousand of rental income during the three months ended June 30, 2025.
• A full quarter of rental income from the funding of improvement allowances subsequent to June 30, 2024, at our Arizona, Connecticut, Missouri and Pennsylvania cultivation facilities, which generated approximately $189 thousand of additional rental income during the three months ended June 30, 2025. The additional rental income from our Missouri cultivation facility was derived from the expansion and development of the adjacent land parcel we acquired during the first quarter of 2023.
• Annual rent escalations on our portfolio, which generated an increase of approximately $287 thousand of rental income during the three months ended June 30, 2025.
• These increases were offset by a decline in rental income of approximately $240 thousand, attributable to Revolutionary Clinics paying only approximately 50% of their contractual rent during the three months ended June 30, 2025. During the second half of 2024, the tenant encountered significant operational challenges that impaired their ability to meet full rent obligations starting in June 2024. In December 2024, these challenges culminated in the tenant entering receivership. For further information refer to Note 4 - "Leases".

Interest Income from Loans

Interest income from loans increased slightly due to the annual interest rate increase on our one loan receivable.

Fees and Reimbursables

Fees and reimbursables for the three months ended June 30, 2025 increased by approximately $163 thousand to approximately $231 thousand compared to approximately $68 thousand for the three months ended June 30, 2024, due to timing of revenue reimbursements quarter over quarter.

Expenses

Reimbursable Property Expenses

In certain circumstances we will pay for certain expenses on behalf of the tenant with the tenant being obligated to reimburse us. However, timing differences may cause the recognition of expenses and corresponding reimbursement income to vary between periods. Reimbursable property expenses remained relatively flat quarter over quarter.

Property Carrying Costs

Property carrying costs are expenses we incur to maintain vacant or partially vacant properties. These costs typically include real estate taxes, utilities, property management fees, security, and other expenses needed to keep the properties functional and marketable for leasing. During the three months ended June 30, 2025, we incurred minimal carrying costs for our Fitchburg, Massachusetts property, which was vacated by Revolutionary Clinics in July 2025.

Depreciation and Amortization Expense

Depreciation and amortization for the three months ended June 30, 2025 increased by approximately $0.3 million to approximately $3.9 million compared to approximately $3.6 million for the three months ended June 30, 2024. The increase is primarily attributable to: (i) approximately $37.3 million of improvements placed into services during 2024 related to four cultivation facilities; (ii) our 2025 acquisitions of three dispensaries, contributing approximately $1.3 million in depreciable assets; and (iii) our 2024 acquisition of a cultivation facility, contributing approximately $3.7 million in depreciable assets. These depreciation increases were slightly offset by a decrease of approximately $0.2 million in depreciable assets, which became fully depreciated as of March 31, 2025 and therefore did not incur depreciation expense for three months ended June 30, 2025.

General and Administrative Expenses

The decrease in general and administrative expense is described below by category.

Compensation Expense

Compensation expense includes salaries and benefits for directors, employees and officers, as well as stock-based compensation. For the three months ended June 30, 2025 compensation expense decreased by approximately $0.5 million, to $0.7 million compared to $1.2 million for the three months ended June 30, 2024. The decrease was primarily driven by an employee resignation, resulting in reduced salary and bonus accruals, along with a one-time adjustment of $0.3 million to stock-based compensation for forfeited RSUs and PSUs.

Professional Fees

Professional fees generally include fees paid for audit, tax, legal and consulting services. Professional fees remained relatively flat quarter over quarter.

Other General and Administrative Expenses

Other general and administrative expenses increased moderately by approximately $99 thousand to $554 thousand during the three months ended June 30, 2025, compared to approximately $455 thousand during three months ended June 30, 2024. Other general and administrative expenses are primarily comprised of director and officer insurance, information technology fees, public relations fees, filing and regulatory fees, public reporting fees, corporate rent and various other expenses.

Loss on Sale of Real Estate

The loss on sale of real estate was recognized in connection with the Mokena/Brookville like-kind exchange, reflecting the difference between the carrying value of the Mokena property and the fair value allocation of the Brookville property received.

Provision for Current Expected Credit Loss

Provision for current expected credit loss remained relatively flat quarter over quarter.

Other Income (Expense)

Other Income

Other income, which is mainly comprised of interest income remained relatively flat quarter over quarter.

Interest Expense

Interest expense mainly relates to our Revolving Credit Facility. For the three months ended June 30, 2025, interest expense increased by approximately $82 thousand, to approximately $210 thousand compared to $128 thousand in the same period of 2024. The increase was due to a full quarter of the $7.6 million outstanding balance on our Revolving Credit Facility for the three months ended June 30, 2025 compared to the same period of 2024. Additionally, the Revolving Credit Facility accrued interest at a fixed rate of 5.65% through May 5, 2025. Commencing May 6, 2025, the Revolving Credit Facility adjusted to a variable rate of Prime plus 1%, or 8.50%, contributing to the increase in interest expense during the period.

Comparison of the six months ended June 30, 2025 and 2024 (in thousands):

Revenues

Rental Income

Rental income for the six months ended June 30, 2025 increased by approximately $0.8 million to approximately $25.2 million, compared to approximately $24.4 million for the six months ended June 30, 2024. The increase in rental income was primarily attributable to:

• The full six months of rental income in 2025 from the purchase of a cultivation facility in Connecticut in May 2024, which generated an increase of approximately $0.2 million of rental income during the six months ended June 30, 2025.
• During the six months ended June 30, 2025, we earned approximately $18.9 thousand of rental income from the acquisitions during the period.
• Funding of improvement allowances at our Arizona, Connecticut, Missouri and Pennsylvania cultivation facilities, which generated approximately $0.5 million of additional rental income during the six months ended June 30, 2025. The additional rental income from our Missouri cultivation facility was derived from the expansion and development of the adjacent land parcel we acquired during the first quarter of 2023.
• Annual rent escalations on our portfolio, which generated an increase of approximately $0.6 million of rental income during the six months ended June 30, 2025.
• These increases were offset by a decline in rental income of approximately $0.5 million, attributable to Revolutionary Clinics paying only approximately 50% of their contractual rent during the six months ended June 30, 2025. Beginning in June 2024 and throughout the second half of the 2024, the tenant encountered significant operational challenges that impaired their ability to meet full rent obligations. In December 2024, these challenges culminated in the tenant entering receivership. For further information refer to Note 4 - "Leases".

Interest Income from Loans

Interest income from loans increased slightly due to the annual interest rate increase on our one $5.0 million loan receivable.

Fees and Reimbursables

Fees and reimbursables for the six months ended June 30, 2025 increased by approximately $302 thousand to approximately $720 thousand from approximately $418 thousand for the six months ended June 30, 2024, due to timing of revenue reimbursements year over year.

Expenses

Reimbursable Property Expenses

For the six months ended June 30, 2025, reimbursable property expenses increased by approximately $618 thousand to approximately $668 thousand compared to approximately $50 thousand for the six months ended June 30, 2024. This increase is mainly attributable to real estate taxes, insurance and utility payments made on behalf of two tenants. In certain circumstances we will pay for certain expenses on behalf of the tenant with the tenant being obligated to reimburse us. However, timing differences may cause the recognition of expenses and corresponding reimbursement income to vary between periods.

Property Carrying Costs

Property carrying costs are expenses we incur to maintain vacant or partially vacant properties. These costs typically include real estate taxes, utilities, property management fees, security, and other expenses needed to keep the properties functional and marketable for leasing. During the six months ended June 30, 2025, the Company incurred minimal property operating costs for our Fitchburg, Massachusetts property, which was vacated by Revolutionary Clinics in July 2025.

Depreciation and Amortization Expense

Depreciation and amortization expense for the six months ended June 30, 2025 increased by approximately $0.6 million to approximately $7.8 million compared to approximately $7.2 million for the six months ended June 30, 2024. The increase is primarily attributable to: (i) approximately $37.3 million of improvements placed into services during 2024 related to four cultivation facilities; (ii) our 2025 acquisitions of three dispensaries, contributing approximately $1.3 million in depreciable assets; and (iii) our 2024 acquisition of a cultivation facility, contributing approximately $3.7 million in depreciable assets. These depreciation increases were slightly offset by a decrease of approximately $0.2 million in depreciable assets, which became fully depreciated during the six months ended June 30, 2025.

General and Administrative Expenses

The decrease in general and administrative expense is described below by category.

Compensation Expense

Compensation expense includes compensation to directors, employees and officers of the Company as well as stock-based compensation. For the the six months ended June 30, 2025, compensation expense decreased by approximately $0.5 million to approximately $1.9 million compared to approximately $2.4 million for the six months ended June 30, 2024. The decrease was primarily driven by an employee resignation during the period, resulting in reduced salary and bonus accruals, along with a one-time adjustment of $0.3 million to stock-based compensation for forfeited RSUs and PSUs.

Professional Fees

Professional fees generally include fees paid for audit, tax, legal and consulting services. Professional fees for the six months ended June 30, 2025 were approximately $0.8 million compared to approximately $0.6 million for the six months ended June 30, 2024. The increase was primarily driven by higher audit expenses incurred during the first quarter of 2025 as most audit fieldwork related to our annual financial statements occurred during that period. Additionally, we incurred incremental costs associated with obtaining consent from our former auditor in connection with our Form 10-K filing.

Other General and Administrative Expenses

Other general and administrative expenses for the six months ended June 30, 2025 increased moderately by approximately $91 thousand from $964 thousand during the six months ended June 30, 2025, compared to $873 thousand during the six months ended June 30, 2024. Other general and administrative expenses are primarily comprised of director and officer insurance, information technology fees, public relations fees, filing and regulatory fees, public reporting fees, corporate rent and various other expenses.

Loss on Sale of Real Estate

The loss on sale of real estate was recognized in connection with the Mokena/Brookville like-kind exchange, reflecting the difference between the carrying value of the Mokena property and the fair value allocation of the Brookville property received.

Provision for Current Expected Credit Loss

Provision for current expected credit loss remained relatively year over year.

Other Income (Expense)

Other Income

Other income, which is mainly comprised of interest income, remained relatively flat year over year.

Interest Expense

Interest expense mainly relates to our Revolving Credit Facility. For the six months ended June 30, 2025, interest expense increased by approximately $0.2 million, to approximately $0.4 million compared to $0.2 million in the same period of 2024. The increase was due to a full six months of interest expense incurred on the $7.6 million outstanding balance on the Revolving Credit Facility for the six months ended June 30, 2025, compared to the same period of 2024. Additionally, the Revolving Credit Facility accrued interest at a fixed rate of 5.65% through May 5, 2025. Commencing May 6, 2025, the Revolving Credit Facility adjusted to a variable rate of Prime plus 1%, or 8.50%, contributing to the increase in interest expense during the six months ended June 30, 2025.

Non-GAAP Financial Information and Other Metrics

Funds from Operations and Adjusted Funds from Operations

Funds from Operations ("FFO") and Adjusted Funds from Operations ("AFFO") are non-GAAP financial measures and should not be viewed as alternatives to net income calculated in accordance with GAAP as a measurement of our operating performance. We believe that FFO and AFFO are useful to investors because they are widely accepted industry measures used by analysts and investors to compare the operating performance of REITs.

We calculate FFO in accordance with the current National Association of Real Estate Investment Trusts (“NAREIT”) definition. NAREIT currently defines FFO as follows: net income (loss) (computed in accordance with GAAP) excluding depreciation and amortization related to real estate, gains and losses from the sale of certain real estate assets, and impairment write-downs of certain real estate assets and investments in entities when the impairment is directly attributable to decreases in the value of depreciable real estate held by an entity. Other REITs may not define FFO in accordance with the NAREIT definition or may interpret the current NAREIT definition differently than we do and therefore our computation of FFO may not be comparable to such other REITs.

We calculate AFFO by starting with FFO and adjusting for non-cash and certain non-recurring transactions, including non-cash components of compensation expense and the effect of provisions for credit loss. Other REITs may not define AFFO in the same manner as we do and therefore our calculation of AFFO may not be comparable to such other REITs. You should not consider FFO and AFFO to be alternatives to net income as a reliable measure of our operating performance; nor should you consider FFO and AFFO to be alternatives to cash flows from operating, investing or financing activities (as defined by GAAP) as measures of liquidity.

The table below is a reconciliation of net income attributable to common stockholders to FFO and AFFO for the three and six months ended June 30, 2025 and 2024 (in thousands):

Liquidity and Capital Resources

Our cash requirements include the payment of dividends to our shareholders, distributions to our holders of LPI Units ("LPI Unitholders"), general and administrative expenses, debt service, other expenses related to managing our existing portfolio as well as acquisition and unfunded improvement commitments on our properties. The sources of liquidity to fund these cash requirements include rental income from the leasing of our properties, which is our primary source of cash flows, borrowings under our Revolving Credit Facility and equity and debt issuances, including issuance of common stock under our ATM Program, if markets permit. Where possible, we also may issue LPI Units to acquire properties from existing owners seeking a tax-deferred transaction.

As of June 30, 2025, we had $104.3 million of liquidity comprised of $21.9 million of cash and cash equivalents and $82.4 million available on our $90.0 million Revolving Credit Facility, subject to sufficient collateral in the borrowing base. Additionally, the ATM Program allows us to issue equity to raise capital up to $50.0 million. We cannot, however, be certain that these sources of funds will be available at a time and upon terms acceptable to us in sufficient amounts in the future.

During the second half of 2024, the Federal Reserve began easing its monetary policy, reducing the target range for the federal funds rate by a cumulative 100 basis points over several meetings. However, interest rates have remained relatively stable through the first half of 2025, as the Federal Reserve held rates steady. As of June 30, 2025, the annual inflation rate in the United States stood at 2.7% for the twelve-month period then ended. Despite signs of inflation moderation, ongoing macroeconomic challenges including elevated interest rates and lingering inflationary pressures could continue to adversely affect our cash flow from ongoing operations.

We expect that our cash flow from continuing operations over the next twelve months, combined with our cash reserves, will be sufficient to fund our business operations, pay cash dividends to our shareholders, make distributions on our LPI Units, and cover debt service.

Acquisitions and unfunded improvement allowance costs may require funding from borrowings, equity issuance and/or issuances of LPI Units.

Summary of Cash Flows

The following summary discussion of our cash flows is based on the consolidated statements of cash flows in our consolidated financial statements and is not meant to be an all-inclusive discussion of the changes in our cash flows for the periods presented below (in thousands):

Net Cash Provided by Operating Activities:

Net cash provided by operating activities for the six months ended June 30, 2025 and 2024 were approximately $21.6 million and $21.8 million, respectively. Net cash flows provided by operating activities for the six months ended June 30, 2025 and 2024 were primarily related to contractual rent received from our properties, partially offset by our general and administrative expenses.

Net Cash Used in Investing Activities:

Net cash used in investing activities for the six months ended June 30, 2025 and 2024 were approximately $0.8 million and $15.4 million, respectively. Net cash used in investing activities for the six months ended June 30, 2025 related to approximately $0.8 million used to purchase two dispensaries in Ohio. Net cash used in investing activities for the six months ended June 30, 2024 related to approximately $4.0 million used to purchase a cultivation facility in Connecticut and approximately $11.4 million used to fund improvement allowances at our cultivation facilities in Arizona and Missouri.

Net Cash Used in Financing Activities:

Net cash used in financing activities for the six months ended June 30, 2025 and 2024 were approximately $19.2 million and $11.6 million, respectively. Net cash used in financing activities for the six months ended June 30, 2025, was mainly related to approximately $18.3 million in dividend payments to holders of our common stock and vested RSUs, as well as distributions on our LPI Units, approximately $0.3 million paid to redeem 15,198 LPI Units in cash, approximately $0.4 million related to cash paid for taxes in lieu of issuance of common stock on vested RSUs and PSUs and approximately

$0.3 million to issue PSUs in cash. Net cash used in financing activities for the six months ended June 30, 2024, was mainly related to approximately $17.0 million in dividend payments to holders of our common stock and vested RSUs, as well as distributions on our LPI Units, $1.0 million to pay down our loan payable and approximately $46 thousand related to cash paid for taxes in lieu of issuance of common stock on vested RSUs. These cash outflows were offset by $6.6 million drawn on our Revolving Credit Facility.

Dividends

To maintain our qualification as a REIT, U.S. federal income tax law generally requires that we distribute at least 90% of our REIT taxable income annually, determined without regard to the deduction for dividends paid and excluding capital gains. We must pay tax at regular corporate rates to the extent that we annually distribute less than 100% of our taxable income. We evaluate each quarter to determine our ability to pay dividends to our stockholders based on our net taxable income if and to the extent authorized by our board of directors. Before we pay any dividend, whether for U.S. federal income tax purposes or otherwise, we must first meet both our operating requirements and debt service payments. If our cash available for distribution is less than our net taxable income, we could be required to sell assets or borrow funds to make cash distributions or we may make a portion of the required distribution in the form of a taxable stock distribution.

As a result of this distribution requirement, our Operating Partnership cannot rely on retained earnings to fund its ongoing operations to the same extent that other companies whose parent companies are not REITs can. During the six months ended June 30, 2025, we declared and our board of directors approved, cash dividends on our common stock and restricted stock units and in our capacity as general partner of our Operating Partnership, we authorized distributions on our LPI Units of $0.86 per share.

During the six months ended June 30, 2024, we declared and our board of directors approved, cash dividends on our common stock and restricted stock units and in our capacity as general partner of the Operating Partnership, we authorized distributions on our LPI Units of 0.84 per share.

Contractual Obligations and Commitments

Unfunded Commitments

As of June 30, 2025, we had aggregate unfunded commitments of $12.1 million to develop and improve our cultivation facility in Connecticut and our two dispensaries in Ohio.

Corporate Office Lease

As of June 30, 2025, we were the lessee under one office lease for a term of four years, subject to annual escalations. The annual rent payments range from approximately $72 thousand in year one to approximately $85 thousand in year four. The office lease has a remaining weighted average term of approximately 1.17 years.

Revolving Credit Facility

The Revolving Credit Facility bore interest at a fixed rate of 5.65% through May 5, 2025. Subsequent to May 5, 2025, the Revolving Credit Facility bears interest at a variable rate based upon the greater of (a) the Prime Rate quoted in the Wall Street Journal (Western Edition) plus an applicable margin of 1.0% or (b) 4.75%. As of June 30, 2025, the interest rate on our Revolving Credit Facility was 8.50% and we had $7.6 million outstanding under the facility. See note 6 - Financings for more details.

Adoption of New or Revised Accounting Standards

We are an emerging growth company, as defined in the JOBS Act. Under the JOBS Act, emerging growth companies can delay adopting new or revised accounting standards issued subsequent to the enactment of the JOBS Act until such time as those standards apply to private companies. We elected to use this extended transition period for complying with new or revised accounting standards that have different effective dates for public and private companies until the earlier of the date that we: (i) are no longer an emerging growth company; or (ii) affirmatively and irrevocably opt out of the extended transition period provided in the JOBS Act. As a result, our consolidated financial statements may not be comparable to companies that comply with the new or revised accounting pronouncements as of public company effective dates.

Interest Rate Risk

Interest rates are influenced by a range of factors, including fiscal and monetary policy, global economic conditions, and other variables beyond our control. We are subject to interest rate risk in connection with our Revolving Credit Facility, which carries a floating interest rate indexed to the prime rate (Wall Street Journal Western addition quoted rate). As of June 30, 2025, we had $7.6 million in principal outstanding under the facility, bearing interest at 8.50%, reflecting a 100 basis point spread over the prevailing prime rate of 7.50%. Our cost of financing increased following the transition from a fixed rate of 5.65% through May 2025 to a floating rate thereafter. While the prime rate has remained stable, our effective interest rate may fluctuate with future changes in the prime rate. We may seek to mitigate this exposure through the use of interest rate derivative instruments.

Impact of Inflation

As of June 2025, the annual inflation rate declined to approximately 2.7% from 3.0% as of June 2024. We enter into leases that generally provide for annual fixed increases in rent at a predetermined rate. In some instances, leases provide for annual increases in rent based on the increase in the Consumer Price Index ("CPI"). We expect these lease provisions to result in rent increases over time. During periods when inflation exceeds the rent increases stipulated in the leases, rent increases may not keep pace with the rate of inflation.

Seasonality

Our business is not, and we do not expect our business to be, subject to material seasonal fluctuations.

In the commercial real estate market, property prices generally continue to fluctuate. Likewise, during certain periods, the U.S. credit markets have experienced significant price volatility, dislocations, and liquidity disruptions, which may impact our access to and cost of capital. We continually monitor the commercial real estate and U.S. credit markets carefully and, if required, will make decisions to adjust our business strategy accordingly.

Our management, including our Chief Executive Officer (the "CEO") and Chief Financial Officer (the "CFO"), reviewed and evaluated the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Rule 13a-15(e) and 15d-15(e) of the Securities Exchange Act) as of the end of the period covered by this report. Based on that review and evaluation, the CEO and CFO have concluded that our current disclosure controls and procedures, as designed, (1) were effective in ensuring that information required to be disclosed by the Company in reports it files or submits under the Securities Exchange Act is accumulated and communicated to our management, including our CEO and CFO, as appropriate to allow timely decisions regarding required disclosure and (2) were effective in ensuring that information required to be disclosed by the Company in reports it files or submits under the Securities Exchange Act is recorded, processed, summarized and reported within the time periods specified by the SEC’s rules and forms.

Limitations on Controls

Our system of internal control over financial reporting was designed to provide reasonable assurance regarding the preparation and fair presentation of published financial statements in accordance with accounting principles generally accepted in the United States. All internal control systems, no matter how well designed, have inherent limitations. Therefore, even those systems determined to be effective can provide only reasonable assurance and may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

Changes in Internal Control over Financial Reporting

There have been no changes in our internal controls over financial reporting that occurred during the three months ended June 30, 2025 that have materially affected or are reasonably likely to materially affect our internal control over financial reporting.

There have been no material changes to the risk factors set forth in the section titled “Risk Factors” included in our Annual Report on Form 10-K, dated March 6, 2025, filed with the SEC. Our business involves significant risks. You should carefully consider the risks and uncertainties described in our Annual Report on Form 10-K, together with all of the other information in this Quarterly Report on Form 10-Q, as well as our audited consolidated financial statements and related notes as disclosed in our Annual Report. The risks and uncertainties described in our Annual Report are not the only ones we face. Additional risk and uncertainties that we are unaware of or that we deem immaterial may also become important factors that adversely affect our business. The realization of any of these risks and uncertainties could have a material adverse effect on our reputation, business, financial condition, results of operations, growth and future prospects as well as our ability to accomplish our strategic objectives. In that event, the market price of our common stock could decline and you could lose part or all of your investment.