NewLake Capital Partners, Inc.: Form 10-Q for the period ended Jun 30, 2026

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 changes to the federal and state regulation of cannabis and the continuing uncertainty regarding the treatment of cannabis under federal law;
• reduced liquidity of our common stock resulting from the limited availability of clearing firms, broker-dealers, investment banks and other financial institutions willing to support trading in our securities or participate in secondary offerings involving our securities;
• general economic conditions including changes in the financial condition of our tenants resulting from uncertainties or changes in fiscal, monetary and regulatory policies;
• 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 agreements;
• 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;
• successfully integrate and manage 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 accounting principles generally accepted in the United States of America (“GAAP”), including new accounting standards or interpretations;
• 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, new information, data or methods, future events or other circumstances after the date of this report, except as required by applicable law. You should not place undue reliance on forward-looking statements that are based on information currently available to us or to third parties making such 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 included elsewhere in this Quarterly Report on

Form 10-Q as well as our audited consolidated financial statements and 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, 2025 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 regarding our future results of operations or financial condition, business strategy and plans, and management's objectives 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 Limited Partnership Interest ("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, 2026, we owned 34 properties across 12 states, consisting of 19 dispensaries and 15 cultivation facilities which included 31 properties leased to state-licensed operators and 3 properties which were available for lease.

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.

We will cease to qualify as an emerging growth company on December 31, 2026. While we will no longer be eligible for certain accommodations available to emerging growth companies, we currently qualify as a smaller reporting company and a non‑accelerated filer and, as such, are not subject to the auditor attestation requirements of Section 404(b) of the Sarbanes‑Oxley Act or the requirement to hold advisory votes on executive compensation.

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 real estate properties we own and from properties we may acquire in the future. The level and stability of rental income are influenced by a number of factors, including:

Tenant performance and rent collection: Collections primarily relate to tenants' and guarantors' financial condition and ability to make rent payments on time.

Industry and regulatory conditions: Our tenants operate in the cannabis industry. Changes in federal, state or local laws, or in their interpretation or enforcement, may adversely affect our tenants' ability to fulfill lease obligations, which could adversely affect our ability to maintain or increase rental rates.

Tenant operating history: Certain tenants have limited operating histories and may be more susceptible to payment or other lease defaults. Accordingly, our operating results may be influenced by the financial performance and creditworthiness of our tenants.

Ability to re‑lease available properties and manage tenant issues: Our operating results may also be affected by our ability to re‑lease available properties in a timely manner and to manage and resolve tenant‑related issues, including rent defaults, lease restructurings or other credit challenges.

For the three and six months ended June 30, 2026, all rental income was derived from triple-net leases. Under these leases, tenants are generally responsible for real estate taxes, insurance, maintenance and utilities, and most leases include a parent, affiliate or other guaranty. As of June 30, 2026, we had 31 leased properties across 12 tenants and three properties available for lease, which we are actively working to re-lease.

Financial Performance and Condition of Our Tenants

Condition of Our Tenants

The Cannabist Company

On March 24, 2026, The Cannabist Company ("Cannabist"), which operates at four of our properties, including two properties located in Illinois and two properties located in Massachusetts, publicly announced that it had entered into definitive agreements to sell certain assets and entered into a non-binding memorandum of understanding for the sale of certain production, manufacturing, distribution and sale operations (through the sale of equity or assets) in six states, including Illinois and Massachusetts, where we lease properties to Cannabist, and commenced restructuring proceedings under the Companies Creditors Arrangement Act ("CCAA") in Canada. On May 9, 2026, the U.S. Bankruptcy Court for the District of Delaware granted recognition of the Canadian restructuring proceedings under Chapter 15 of the U.S. Bankruptcy Code. We continue to monitor developments related to this tenant and its restructuring proceedings.

During the six months ended June 30, 2026, we collected full rent for each of the four properties leased to Cannabist and the tenant remains current on its contractual lease obligations to us. We hold aggregate security deposits totaling approximately $481.6 thousand across these four properties.

Lease Modifications

San Diego, CA

On January 28, 2026, we entered into a First Amendment to the Lease Agreement (the “Amendment”) for our dispensary property located in San Diego, California. Pursuant to the Amendment, we consented to a change in control of the tenant, pursuant to which Wellgreens acquired the tenant entity formerly operated by the Cannabist. In connection with the Amendment, the lease term was extended by five years, through December 31, 2034, with three renewal options and annual contractual rent escalators. In addition, the existing purchase option under the lease remained with the tenant. All other material terms of the lease remain unchanged.

Sinking Springs, PA

As a result of a third‑party transaction involving Acreage Holdings, Inc.’s Pennsylvania cultivation operations (Prime Wellness) during March 2026, we added Holistic Industries as an additional guarantor under the lease for our Sinking Springs, Pennsylvania property. As part of this same transaction, we also added Canopy USA as an additional guarantor under the lease with Acreage Holdings’ Massachusetts subsidiary, The Botanist, for our Sterling, Massachusetts cultivation facility.

Other than the addition of these guarantors, there were no modifications to the economic or non‑economic terms of either lease, and the Company did not provide capital, financing, or other consideration in connection with these arrangements.

Available Properties

As of June 30, 2026, three of our cultivation facilities, located in Pottsville, Pennsylvania; Sparks, Nevada; and Fitchburg, Massachusetts, were available for lease following tenant departures in 2025. We continue to actively market these properties for lease.

Financial Markets Update

U.S. monetary policy remains restrictive relative to historical norms, and interest rates continue to be elevated compared to prior years. Capital availability remains selective, particularly for emerging and specialized sectors such as cannabis. While certain operators have successfully refinanced or extended debt maturities, many continue to experience margin pressure, elevated leverage and limited access to traditional financing sources. Significant debt maturities remain outstanding across the industry through 2026 and 2027, leading to ongoing refinancing risk. Industry-wide credit stress has contributed to several notable restructurings and insolvency proceedings across the sector, including at the parent-company level of certain private and public multi-state operators.

Broader macroeconomic uncertainty persists, including inflationary pressures, uncertainty regarding future interest rate policy and cautious investor sentiment. These conditions have contributed to a disciplined approach to capital deployment across equity and credit markets, with increased emphasis on liquidity, balance-sheet strength and risk management.

As a REIT focused on leasing properties to cannabis tenants, we continue to closely monitor these evolving market dynamics. Disciplined underwriting, proactive tenant engagement and active portfolio management remain central to our strategy as we operate in an environment characterized by elevated borrowing costs, selective capital availability and sector-specific regulatory and credit risks. We believe the ongoing financial pressures affecting portions of the cannabis industry, including refinancing challenges associated with upcoming debt maturities, underscore the importance of prudent tenant evaluation and thoughtful portfolio construction.

Regulatory Environment - Industry Impacts

As of June 30, 2026, the federal regulatory environment for cannabis continued to evolve. In April 2026, the U.S. Department of Justice ("DOJ") issued an order rescheduling medical cannabis sold under qualifying state-licensed medical marijuana programs from Schedule I to Schedule III of the Controlled Substances Act ("CSA"). The order permits qualifying state-licensed medical marijuana operators that obtain and maintain the required DEA registrations to operate under a federal Schedule III framework and eliminates the application of Internal Revenue Code Section 280E for qualifying state-licensed medical marijuana businesses. As a result, qualifying operators may benefit from reduced federal tax burdens, improved operating cash flows and enhanced access to capital.

Legal challenges have been filed in the U.S. Court of Appeals for the D.C. Circuit challenging the April 2026 DOJ order and related DEA actions. These challenges include claims that the order exceeds DOJ's statutory authority, was procedurally deficient, and did not comply with applicable administrative requirements under the Administrative Procedure Act, the Controlled Substances Act and treaty-related obligations. Certain petitioners have sought to have the April 2026 order vacated, and, based on the information available as of the date of this filing, these legal challenges remain unresolved. If successful, these challenges could result in changes to, or the reversal of, the current federal classification framework applicable to qualifying state-licensed medical cannabis businesses.

The April 2026 order does not apply to adult-use cannabis, which remains subject to a separate federal regulatory framework. Separately, the DEA initiated an expedited administrative process to consider broader rescheduling of cannabis. The DEA administrative hearing regarding broader cannabis rescheduling commenced on June 29, 2026 and concluded on July 15, 2026. Following the hearing, the DEA Administrative Law Judge established August 17, 2026 as the deadline for transcript corrections and optional post-hearing briefs, after which time he will issue his findings and recommendation to the DEA Administrator. As of the date of this filing, no final determination has been issued in the broader rescheduling proceeding.

We believe these developments represent a significant milestone for the regulated cannabis industry and may improve operating cash flows, credit profiles and access to capital for certain operators over time. However, the ultimate impact of these developments will depend on the outcome of pending legal challenges, ongoing administrative proceedings, future federal regulatory actions, and the implementation and interpretation of applicable federal and state requirements. We continue to monitor these developments and their potential impact on our tenants and the broader cannabis industry.

Inflation and Supply Chain Constraints

The Consumer Price Index ("CPI") rose by approximately 3.5% for the twelve months ended June 30, 2026. While inflation remains well below the peaks experienced during 2022, recent data indicates renewed upward pressure, particularly related to energy costs. It remains above the Federal Reserve’s long-term 2% target, contributing to higher costs across labor, materials, and services.

Inflation has increased operating costs for state-regulated cannabis operators, including higher wages and rising prices for cultivation inputs such as fertilizers, nutrients and specialized equipment. Development and redevelopment projects have remained capital-intensive due to elevated material costs and evolving regulatory requirements. Although global supply chains have stabilized, cannabis operators continue to experience delays in accessing specialized equipment required for cultivation and processing facilities.

These pressures have been compounded by geopolitical tensions and shifting trade policies, which have contributed to uncertainty in input pricing and the timing of capital projects. As a result, many cannabis businesses continue to experience higher capital requirements and delays in project starts or completions. We continue to monitor inflationary and supply-chain conditions and their potential effects on our tenants and investment commitments.

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 our critical accounting estimates included in "Management’s Discussion and Analysis of Financial Condition and Results of Operations" section of our Annual Report on Form 10-K for the year ended December 31, 2025.

Second Quarter 2026 Highlights

Capital Market Activity

Dividends

On June 12, 2026, our Board of Directors declared a second quarter 2026 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, 2026, to stockholders of record at the close of business on June 30, 2026.

Recent Developments

On August 5, 2026, we entered into an amendment to the Revolving Credit Facility, amending the Loan and Security Agreement. The amendment (i) maintains the aggregate commitment under the Revolving Credit Facility at $90.0 million, subject to lender approval for borrowings in excess of $30.0 million; (ii) extends the maturity date by two years from May 6, 2027 to May 6, 2029; (iii) modifies the interest rate provisions such that borrowings bear interest at a variable rate equal to the greater of (a) the Prime Rate quoted in The Wall Street Journal (Western Edition) or (b) 6.25%; and (iv) revises the unused line fee provisions such that a 0.25% per annum fee applies only if average daily revolver usage is less than 35% of approved availability for the applicable period.

Results of Operations

General

During the three months ended June 30, 2026, we derived substantially all of our revenue from rental income generated by 31 leased properties, each of which is leased to a single tenant under a triple‑net lease. We continue to market our three available cultivation facilities located in Pottsville, Pennsylvania; Sparks, Nevada; and Fitchburg, Massachusetts, for lease and are actively seeking replacement tenants. As of June 30, 2026, our portfolio remained conservatively leveraged, with only $7.6 million outstanding under our Revolving Credit Facility. Our annualized general and administrative expense ratio was 1.5% of total assets.

Comparison of the three months ended June 30, 2026 and 2025 (in thousands):

Revenues

Rental Income

Rental income for the three months ended June 30, 2026 decreased by approximately $0.8 million, to approximately $11.8 million, compared to approximately $12.6 million for the three months ended June 30, 2025. The decrease in rental income was primarily attributable to:

• Approximately $0.4 million related to our Fitchburg, Massachusetts cultivation facility, which was available for lease during the three months ended June 30, 2026. The property became available following the departure of the prior tenant in July 2025.
• Approximately $0.7 million related to two cultivation facilities located in Sparks, Nevada and Pottsville, Pennsylvania, which were available for lease during the three months ended June 30, 2026. The properties became available following the departure of the prior tenant in August 2025.

The decreases in rental income described above were partially offset by:

• Annual rent escalations across our portfolio, which increased rental income by approximately $0.3 million during the three months ended June 30, 2026.
• A full quarter of rental income from two dispensaries acquired in Ohio during 2025 as well as rental income associated with improvement allowances funded at one of the Ohio dispensaries, which together increased rental income by approximately $30 thousand during the three months ended June 30, 2026.

Interest Income from Loans

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

Fees and Reimbursables

Fees and reimbursables decreased slightly due to timing of revenue reimbursements during the three months ended June 30, 2026, compared to the three months ended June 30, 2025.

Expenses

Reimbursable Property Expenses

Reimbursable property expenses for the three months ended June 30, 2026 remained relatively flat quarter over quarter. From time to time, we may pay certain property-level expenses on behalf of tenants that are reimbursable to us. Accordingly, fluctuations between periods primarily reflect the nature and amount of expenses paid on behalf of tenants during the period and are not indicative of a recurring expense trend.

Property Carrying Costs

Property carrying costs represent expenses incurred to maintain properties that are available for lease. These costs generally include real estate taxes, utilities, property management fees, security, and other expenses necessary to keep the properties functional and marketable. We incurred minimal property carrying costs during the three months ended June 30, 2025, as only one property incurred such costs. During the three months ended June 30, 2026, we incurred approximately $0.1 million of property carrying costs related to three cultivation facilities located in Fitchburg, Massachusetts; Pottsville, Pennsylvania; and Sparks, Nevada that were available for lease during the period.

Depreciation and Amortization

Depreciation and amortization remained relatively flat quarter over quarter.

General and Administrative Expenses

Total general and administrative expenses for the three months ended June 30, 2026 increased by approximately $0.5 million to approximately $1.9 million, compared to $1.4 million for the three months ended June 30, 2025. The increase in total 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, 2026, compensation expense increased by approximately $0.3 million to $1.0 million, compared to $0.7 million for the three months ended June 30, 2025. The increase was primarily attributable to an employee resignation in May 2025, which resulted in a one-time reduction in compensation expense during the three months ended June 30, 2025. To a lesser extent, modest annual merit-based salary increases and modest increases in stock-based compensation expense contributed to the increase during the three months ended June 30, 2026

Professional Fees

Professional fees for the three months ended June 30, 2026 increased by approximately $0.2 million, to approximately $0.4 million compared to approximately $0.2 million for the three months ended June 30, 2025. The increase was primarily attributable to higher consulting and legal costs associated with corporate initiatives and efforts related to our portfolio.

Other General and Administrative Expenses

Other general and administrative expenses remained relatively flat quarter over quarter.

Loss on Sale of Real Estate

There were no property sales or exchanges during the three months ended June 30, 2025.

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 which is mainly comprised of interest on our Revolving Credit Facility remained relatively flat quarter over quarter.

Comparison of the six months ended June 30, 2026 and 2025 (in thousands):

Revenues

Rental Income

Rental income for the six months ended June 30, 2026 decreased by approximately $1.6 million to approximately $23.5 million, compared to approximately $25.2 million for the six months ended June 30, 2025. The decrease in rental income was primarily attributable to:

• Approximately $0.8 million related to our Fitchburg, Massachusetts cultivation facility, which was available for lease during the six months ended June 30, 2026. The property became available following the departure of the prior tenant in July 2025.
• Approximately $1.5 million related to two cultivation facilities located in Sparks, Nevada and Pottsville, Pennsylvania, which were available for lease during the six months ended June 30, 2026. The properties became available following the departure of the prior tenant in August 2025.

The decreases in rental income described above were partially offset by increases in rental income primarily attributable to:

• Annual rent escalations across our portfolio, which generated an increase of approximately $0.6 million of rental income during the six months ended June 30, 2026.
• A full six months of rental income from two dispensaries acquired in Ohio during 2025 as well as rental income associated with improvement allowances funded at one of the Ohio dispensaries, which together increased rental income by approximately $0.1 million during the six months ended June 30, 2026.

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, 2026 decreased by approximately $150 thousand, to approximately $570 thousand, from approximately $720 thousand for the six months ended June 30, 2025, primarily due to timing of revenue reimbursements between periods.

Expenses

Reimbursable Property Expenses

For the six months ended June 30, 2026, reimbursable property expenses decreased by approximately $0.3 million to approximately $0.4 million compared to approximately $0.7 million for the six months ended June 30, 2025. In certain circumstances we will pay for select expenses on behalf of the tenant with the tenant being obligated to reimburse us. Accordingly, fluctuations between periods primarily reflect the nature and amount of expenses paid on behalf of tenants during the period and are not indicative of a recurring expense trend.

Property Carrying Costs

Property carrying costs represent expenses incurred to maintain properties that are available for lease. These costs generally 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, 2026, we incurred approximately $0.4 million of property carrying costs related to three cultivation facilities located in Fitchburg, Massachusetts; Pottsville, Pennsylvania; and Sparks, Nevada that were available for lease during the period. Property carrying costs were minimal during the prior-year period, and the increase was primarily attributable to carrying costs incurred at these facilities during the six months ended June 30, 2026.

Depreciation and Amortization Expense

Depreciation and amortization expense remained relatively flat year over year.

General and Administrative Expenses

The increase 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 six months ended June 30, 2026, compensation expense increased by approximately $0.1 million, to approximately $2.0 million compared to approximately $1.9 million for the six months ended June 30, 2025. The increase was primarily attributable to an employee resignation in May 2025, which resulted in a one-time reduction in compensation expense during the six months ended June 30, 2025. To a lesser extent, modest annual merit-based salary increases and modest increases in stock-based compensation expense also contributed to the increase during the six months ended June 30, 2026.

Professional Fees

Professional fees generally include fees paid for audit, tax, legal and consulting services. For the six months ended June 30, 2026, professional fees increased by approximately $0.1 million, to approximately $0.9 million compared to approximately $0.8 million for the six months ended June 30, 2025. The increase was primarily attributable to higher consulting and legal costs associated with corporate initiatives and efforts related to our portfolio.

Other General and Administrative Expenses

Other general and administrative expenses remained relatively flat year over year.

Loss on Sale of Real Estate

There were no property sales or exchanges during the six months ended June 30, 2026.

Provision for Current Expected Credit Loss

Provision for current expected credit loss remained relatively flat 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 increased minimally related to the change in borrowing costs under our Revolving Credit Facility, which transitioned to a variable interest rate of Prime plus 1% compared to a fixed rate of 5.65%, effective May 6, 2025. The interest rate under our Revolving Credit Facility at June 30, 2026 was 7.75%.

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 losses. 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, 2026 and 2025 (in thousands):

Liquidity and Capital Resources

Our primary liquidity requirements include the payment of dividends to our shareholders, distributions to holders of LPI Units ("LPI Unitholders"), general and administrative expenses, debt service obligations, capital expenditures related to our existing portfolio, and funding for acquisitions and unfunded improvement commitments. We expect to meet these obligations through a combination of cash flows generated from operations, borrowings under our Revolving Credit Facility, and access to capital markets, including issuance under our at-the-market equity program ("ATM Program"), subject to availability and markets conditions. Where appropriate, we also may issue LPI Units as consideration for property acquisitions to facilitate tax-deferred transaction for sellers.

As of June 30, 2026, our liquidity total included $25.8 million of cash and cash equivalents along with $82.4 million available on our Revolving Credit Facility, subject to sufficient collateral in the borrowing base. While we believe these sources of liquidity are adequate to support our near-term needs, there can be no assurance that such sources will remain available to us on terms acceptable or in amounts sufficient to meet our future requirements.

In May 2025, the interest rate on our Revolving Credit Facility transitioned from a fixed rate of 5.65% to a variable rate of prime plus 1.00%. As of June 30, 2026, we had $7.6 million outstanding under the facility. Refer to Note 17 - "Subsequent Events" for additional details regarding the amendment to our Revolving Credit Facility. Given the relatively low outstanding balance, the impact of the rate change on our interest expense and liquidity has not been significant. Based on our current level of borrowings and the absence of any near‑term debt maturities, we do not expect changes in market interest rates to materially affect our liquidity position in the near term.

Based on our current projections, we believe that cash flows from continuing operations over the next twelve months, together with existing cash on hand and available borrowing capacity, will be sufficient to fund our operating activities, pay dividends to shareholders, make required distributions to LPI Unitholders, and service our debt obligations. Acquisitions and unfunded improvement allowance costs may require funding from borrowings, equity issuance and/or issuances of LPI Units. We may utilize a combination of these sources depending on market conditions and capital availability.

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, 2026 and 2025 was approximately $20.8 million and $21.6 million, respectively. Operating cash flow in both periods were primarily related to contractual rent received from our properties, partially offset by our general and administrative expenses and property carrying costs.

Cash Used in Investing Activities:

Cash used in investing activity during the six months ended June 30, 2026 and 2025 was approximately $0.4 million and $0.8 million, respectively. Cash used in investing activities during 2026 primarily related to funding an improvement allowance at a dispensary in Ohio, while cash used in investing activities during 2025 was primarily related to the purchase two dispensaries in Ohio.

Cash Used in Financing Activities:

Cash used in financing activities for the six months ended June 30, 2026 and 2025 was approximately $18.6 million and $19.2 million, respectively. Financing cash outflows in both periods primarily consisted of dividend payments, distributions to holders of LPI Units and cash paid for taxes in lieu of issuing common stock upon the vesting of RSUs and PSUs. The higher financing cash outflows during 2025 were primarily attributable to the cash settlement of PSUs and cash redemptions of LPI Units.

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, 2026, 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, 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 the Operating Partnership, we authorized distributions on our LPI Units of $0.86 per share.

Contractual Obligations and Commitments

Corporate Office Lease

As of June 30, 2026, we were the lessee under one office lease which had an initial term of four years and was amended on November 20, 2025, to extend the initial term for one year ending August 31, 2027. The lease is subject to annual escalations and the annual rent payments range from approximately $72 thousand in year one to approximately $85 thousand in year five. The office lease has a remaining weighted average term of approximately 1.17 years.

Revolving Credit Facility

Effective May 6, 2025, the Revolving Credit Facility transitioned from a fixed rate of 5.65% to a variable rate structure, bearing interest at a variable rate based upon the greater of (a) the Prime Rate published in the Wall Street Journal (Western Edition) plus a margin of 1.0%, or (b) 4.75%. As of June 30, 2026, the interest rate on our Revolving Credit Facility was 7.75% and we had $7.6 million outstanding under the facility. Refer to Note 6 - "Financings" for additional 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 exposed to interest rate risk through our Revolving Credit Facility, which bears a floating interest rate indexed to the Prime Rate published in the Wall Street Journal (Western Edition). As of June 30, 2026, we had $7.6 million in principal outstanding under the facility, bearing interest at 7.75%, which reflects a 100 basis point spread over the prevailing Prime Rate of 6.75%. Our cost of financing increased following the transition from a fixed rate of 5.65% through May 2025 to a variable structure thereafter. Although the Prime Rate has remained stable since the fourth quarter of 2025, our effective interest rate remains subject to future fluctuations in benchmark rates. To manage this exposure, we may evaluate the use of interest rate derivative instruments or other hedging strategies.

Impact of Inflation

As of June 30, 2026, inflation remained elevated with the CPI rising approximately 3.5% over the trailing twelve month period. This reflects a modest increase compared to the 2.7% inflation rate recorded during the trailing twelve months period ended June 30, 2025. While inflation continues to trend downward from the peaks of 2022, it remains above the Federal Reserve's long-term 2% target.

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 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, 2026 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, 2026, 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.