$400m+ in Cannabis Related Assets with Anthony Coniglio
Aug 13, 2024
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Join Anthony Coniglio from New Lake Capital Partners, a specialist in cannabis real estate investment, as he dives into the booming cannabis market. He shares insights on the unique investment opportunities and risks in retail and industrial properties leased to cannabis tenants. The discussion highlights the complexities of navigating state laws and the importance of due diligence. Anthony also emphasizes the shift in public perception, revealing how cannabis is increasingly favored among younger consumers over traditional alcohol.
Investing in cannabis-related real estate can yield significant returns, but it requires careful evaluation due to market volatility and regulatory challenges.
NewLake Capital Partners capitalizes on the cannabis sector's potential by focusing on sale-leaseback transactions and diversifying its investment portfolio across multiple states.
Deep dives
Challenges of Cannabis Investment
Investing in the cannabis industry has proven to be difficult over the past few years, despite its perceived potential. Many investors have faced financial losses due to the volatile nature of the market and regulatory challenges. This reality highlights that, although cannabis has gained popularity, it operates within a complex and evolving landscape requiring careful evaluation. Understanding the risks and long-term viability of cannabis investments is crucial for success in this field.
Role and Strategy of NewLake Capital Partners
NewLake Capital Partners is structured as an internally managed Real Estate Investment Trust (REIT) focused on providing capital to cannabis operators. The company specializes in sale-leaseback transactions and owns a diverse portfolio that includes cultivation facilities and dispensaries across multiple states. By identifying the cannabis sector as an underserved market, NewLake has successfully invested over $400 million in real estate assets, demonstrating a growth trajectory with significant returns, including a dividend increase since its IPO in 2021. This strategic focus has positioned NewLake as a significant player in the cannabis real estate market.
Understanding Cannabis Legislation
The legal landscape for cannabis varies significantly across the United States, with over half the population living in states with some form of adult-use laws. Currently, 24 states have legalized adult-use cannabis, while around 38 to 40 states allow for medical use. Regulations differ widely among states, influencing both the growth of the market and investment opportunities. As some states move towards full legalization, creating more opportunities for cannabis businesses, understanding these intricacies is essential for investors looking to navigate the market effectively.
Identifying Investment Risks
Investors in the cannabis industry must remain aware of various risks, particularly the continuing federal illegality of cannabis. Although Congress has shown a hands-off approach toward state-legal cannabis businesses, underlying legal risks remain a significant concern for property owners. Additionally, investors must closely monitor tenants' financial health, as many cannabis businesses face challenges such as rapid price declines and regulatory hurdles. By focusing on management quality and market dynamics, investors can better mitigate potential pitfalls associated with cannabis investments.
Enjoy this discussion with Anthony Coniglio, of New Lake Capital Partners, about investing in the retail and industrial real estate components of cannabis-related real estate. Jonathan and Anthony discuss the opportunities, risks, and New Lake's preferred strategies when investing in real estate leased by cannabis-related tenants.