In a risky hashish market pushed by regulatory uncertainty and the upcoming U.S. elections, New Lake Capital Companions NLCP stands out as a secure possibility for buyers searching for constant returns.
With its cannabis-focused actual property portfolio, NLCP affords sturdy dividend yields and regular rental revenue development, making it a pretty selection amid market turbulence.
Based on Pablo Zuanic of Zuanic & Associates, NLCP’s monetary efficiency and dividend yield make it a doubtlessly engaging possibility for buyers navigating the risky hashish sector.
Get Benzinga’s unique evaluation and the highest information concerning the hashish trade and markets day by day in your inbox without spending a dime. Subscribe to our e-newsletter right here. Should you’re severe concerning the enterprise, you possibly can’t afford to overlook out.
Rental Revenue Progress And AFFO Power
NLCP’s rental revenue for the primary half of 2024 elevated by 10% year-over-year, reaching $12.2 million, famous Zuanic. The corporate’s internet actual property portfolio (NREP) grew by 2.4% for the reason that finish of 2023, bringing its whole portfolio yield to an annualized 12.7%.
That is barely behind its peer, Progressive Industrial Properties (IIPR), which posted a 14.6% yield on its portfolio after a 5% development since year-end 2022. Regardless of the slower development, NLCP’s Adjusted Funds from Operations (AFFO) rose by 17% year-over-year in Q2 2024, in comparison with a modest 1% enhance for Progressive Industrial Properties, Inc. IIPR.
Dividend Safety And Yield Comparability
NLCP’s quarterly dividend of $0.43 per share supplies an 8.7% yield, considerably greater than IIPR’s 5.9% yield and 500 foundation factors above the U.S. 10-year Treasury fee.
Zuanic’s projections estimate an AFFO per share of $2.10 for 2024, translating to a price-to-AFFO ratio of 9.4x, in comparison with 14.1x for IIPR, indicating a possible worth for NLCP buyers.
Learn Additionally: Delivering Returns As The Hashish Market Tanks: What Wall St Received’t Inform You About Chicago Atlantic Actual Property’s Progress
Portfolio Dangers
Though NLCP’s portfolio is absolutely rented, sure dangers stay. Zuanic experiences that Revolutionary Clinics, a tenant accounting for 10% of NLCP’s rental revenue, missed 50% of its June and July 2024 hire funds. The corporate is negotiating with the tenant to resolve the difficulty, presumably by hire deferrals or different concessions. Moreover, 5 operators account for 62% of NLCP’s rental revenue, with Curaleaf CURLF representing 22%.
By comparability, IIPR’s high 5 tenants contribute 48% of its rental income, highlighting potential focus dangers in each corporations.
Debt Leverage Amongst REITS
Throughout the hashish actual property funding belief (REIT) sector, mortgage REITs like Chicago Atlantic REFI and AFCG AFCG have skilled completely different development charges. REFI’s mortgage e-book grew by 22% year-over-year in Q2 2024, whereas AFCG noticed some notable exits in the course of the quarter, leading to a smaller mortgage e-book.
Regardless of these variations, NLCP maintains a conservative debt technique, with solely $7.6 million drawn from its $90 million credit score facility, representing 1.9% of fairness. In distinction, IIPR carries $297 million in debt, or 15% of its fairness, however boasts a 17x debt service protection ratio, signaling a robust means to satisfy its obligations.
Valuation And Outlook
Whereas NLCP at the moment trades close to its e-book worth of $19.54 at $19.76 per share, IIPR trades at 1.82 instances its e-book worth, reflecting a premium tied to its perceived development potential.
Though NLCP lacks an inventory on a serious U.S. alternate, Zuanic’s report suggests the corporate may obtain a premium valuation if the hashish trade’s development continues, significantly given its stable dividend yield and robust AFFO efficiency.
Learn Subsequent: New Legal guidelines Might Unleash $1.7B Demand For Hashish Loans, This Actual Property Inventory Is Set To Capitalize
Market Information and Information delivered to you by Benzinga APIs
© 2024 Benzinga.com. Benzinga doesn’t present funding recommendation. All rights reserved.
