Thank you. Our next presenter of the day is Anthony Coniglio, with NewLake Capital [Partners.]
Thanks everyone for joining us here today. NewLake Capital Partners is a [money-manipulative] REIT that's focused on the cannabis space. We are the second-largest owner of cannabis real estate in the United States. Our business model is simple: we purchase properties from and for cannabis operators, we enter into long-term leases with those operators, and we collect rent on a monthly basis, providing dividends to our investors. One of the unique differences that I often hear in attending this conference and other small-cap conferences is investors are fairly surprised in this environment to find a company that has the cash flow profile that we do and the dividend that we pay out. I'm going to walk you through our presentation today.
I love Q&A, so I'm going to move pretty quick through this and see if we can get some Q&A where I think the real value is for you. Okay, overview for NewLake. We founded in 2019, became exclusively focused on the cannabis sector, and at the point before doing $50 million into this sector, we own 33 properties across 12 states with 13 tenants. Our tenants are still the leading cannabis operators in the country and in the world. You look at our largest tenant, Curaleaf, they are a global player in the cannabis industry. Our second-largest tenant, which is Cresco, our top three would be Curaleaf, Cresco, and Trulieve, all three top players in the cannabis industry. We have a long duration of leases, so we're going to be adding out a duration of lease time is over 13 years.
The yield on our portfolio is just around 12%. If you think about that in context, with long duration of leases, and we manage the business with a very disciplined mind towards expenses. I've been around the block for over 35 years, running a number of businesses, and one of the things I've learned is you want to have a lean one. In fact, we have only eight employees that manage our book of nearly $450 million of assets. Since our IPO in 2021, we've been able to grow our dividend nearly 80%. That's not a forward-looking statement in terms of what will happen in the future, but it's a statement about what our strategy was to enter this more in-depth into the growth portfolio. When we started this business back in 2019, what we realized was important to not just understand real estate.
I mean, let's face it, we are real estate investment trusts. We need to understand real estate, but we also understood at the outset it was critically important to understand the cannabis sector. And you can see by the looks of our management team, we are known time. We have significant experience across capital markets, across financial services, and other highly regulated businesses, not to mention real estate. Our board of directors, when you look at it, really is a complement of real estate and cannabis. Gordon DuGan, our Chairman, was a present CEO of W. P. Carey, arguably one of the largest net lease REITs in the world. He also ran a company that was Privacy Property Trust, excuse me, took out from roughly a $300 million market cap company. It was an industrial REIT and sold it to Blackstone in 2018 for $7.5 billion.
Gordon, with decades and decades of non-industry experience, choices on the board of leading cannabis operators. [Pete Catens], one of our [founders], was founder of arguably the most [profitable]. And then Dina Roman recently joined us on the board from GTI . Why that's important is because we institutionalized that cannabis knowledge and then the real estate knowledge and coming up with our approach that's delivered, in my opinion, when you look at it qualitatively or quantitatively, the best portfolio focused on the cannabis industry. It is a growing industry. I think cannabis growth comes from states that initiate new cannabis programs. Some of you may be surprised that Kentucky recently passed it for marijuana and is currently working to roll out a medical program. Growth also comes from states that convert from a medical program to an adult-use program.
An example would be recently Ohio, two years ago, legalized the adult-use cannabis and last year converted on the joint adult-use market. As this industry continues to grow, if you see some of my stats here on the left, we have a goal or even in the adult-use states. What's driving the American public, according to people in Gallup research polls, what's driving the American public to approve of medical cannabis to the tune of [94%] and adult-use cannabis to the tune of roughly two-thirds? This is positive for me. What we as an electorate will be is very, very few things. One thing is that adults should have access to legal cannabis for recreational purposes. We're seeing consumers, particularly of the younger cohort, change their buying behavior from alcohol and spirits, excuse me, spirits and beer, to cannabis-related products.
It's a demographic shift in terms of consumption. It's why we've seen a number of the alcohol and beer companies entering into this segment and look for investments. We think the industry will continue to grow for decades to come. What are some of the catalysts for this industry? Because then we know, depending on the state you're in, you're either in a state like Texas that has a program, but it's only 17,000 patients, or maybe even a state like New York and you've seen an abysmal rollout to adult use, or maybe you're in Pennsylvania where you're medical, and you're potentially going to get adult use later this year or next. What's happening at the federal level? I think the question, where is Donald Trump on this industry?
In 2024, for the first time ever, we had both presidential candidates embracing cannabis reforms for their platforms. For his part, President Trump announced in September his support for four key items around that industry. One, his support for rescheduling cannabis from Schedule I to Schedule III. I note that Schedule I is where fentanyl is. I have not met a person yet that believes cannabis has the addictive and harmful capabilities of a drug like fentanyl. It would take it to Schedule III, which would be something akin to Tylenol with codeine. Importantly, it unlocks two things. It unlocks research. I think the industry surely needs this research for Schedule I drugs in a similar way. It eliminates an onerous tax provision which says that deductions for cannabis companies or companies trafficking Schedule I and II drugs can be limited deductions.
We do not have to go into too much detail, but there are some tax benefits and cash benefits. He also, in addition to the Schedule I, said he supported adult use cannabis. Given he was a Florida resident and was on the ballot in Florida, he said he was voting for adult use cannabis in Florida, and legislatively expressed his support for the Safe [Banking] Bill, which would open up the banking system to the cannabis industry, as well as his support for the STATES Act. This one, I think, is the most important. Similar to other policies in this administration, in his last administration now, where he pushed the issue to the STATES Act. Decriminalize the fact that they want the cannabis policy to be.
You have a lot of catalysts going on at the federal level, both the administrative where that rescheduling is occurring and the legislative where these two pieces of legislation are happening, but also in the legal realm. I love that all three branches of our government are active in cannabis. Two points here that I'll move really quickly through. There is a case winding its way through the Massachusetts Court and now a federal circuit court that's designed to get to the Supreme Court. Few cases get to the Supreme Court. Justice Thomas invited this case back a few years ago when the court dissented on the human cannabis case, where Justice Thomas said in his dissent that that decision was the U.S. is really, I'm paraphrasing, the U.S.
has abdicated its ability to enforce the control of substances relative to cannabis policy because it's hands-off approach and there's many reasons that go along that. There is David Boies, a very famous litigator, and has argued successfully in front of the Supreme Court for Microsoft and for a merit taking on those cases. There is a chance he gets supports there. The last point on this page is in the court system, and we don't love our cousins in the United States. Many—I think that's where up to three or four federal circuit courts have ruled the Controlled Substances Act unconstitutional to take away the right to their arms. Many, many state legal consumers who happen to be veterans or non-veterans who have challenged the constitutionality of being unarmed or having their Second Amendment rights stripped because they're compliant with state law.
There is more opportunity there for the courts to provide positive impact. Those are the key catalysts. I spent so much time on that page because this is what drives value for shareholders over the long term. I'll talk about our dividend, yes, but ultimately this is what really unlocks value of the properties that we own. We are in 12 states, about 1.7 million sq ft I mentioned our top three tenants are Curaleaf, Cresco, and Trulieve, some of the leading names in the industry. We also have a non-public name, somebody you may never have heard of, like a mentor to see the private companies that are performing very, very well.
In fact, they've said this publicly, so I can share that they're profitable, free cash flow positive, and have what some of the public companies would love to have in terms of margins and profitability. How do we underwrite these properties? What is our approach? Three cores relates to the stool. One, of course, is the tenant quality. Now, of course, whenever you're renting real estate, you have to understand the tenant that you have. Here again, I only focus on the cannabis dynamics of this industry. Understanding the balance sheets, understanding the P&Ls, the cash flow statements, and how those will perform as we watch the state and the whole system evolve. Understanding the cannabis market is critically important. We focus on properties that, excuse me, that exist in limited license states. I'd love to use Pennsylvania as an example.
If you want to buy a bottle of vodka in Pennsylvania, you have to go to the state-owned package store. They've taken the same approach to medical cannabis, and we expect them to take a similar, very controlled approach to adult use cannabis. Having the limited number of licenses, you could see here on PA, 33 licenses versus, say, a Washington that has over 1,200, Oregon 1,600. Limited licenses means less competition. It means better margin, which means better cash flow, which means better credit quality, more likely to pay rent. When I look at the issues that occur for landlords across this industry, it's been primarily in those unlimited license jurisdictions like California, Colorado, Michigan, or Oregon. Understanding that market is critically important, not just the state, but down to the particular county and in some places, the city.
We need a deep understanding of these jurisdictions and a perspective on how they will follow. Third is the real estate. Of course, we're a real estate trust, so we have to pay attention to the real estate. It's all about location, location, location. Here for us, it really is about cash flow, cash flow, cash flow. Because at the end of the day, if the tenant is generating cash flow from your location, they're more likely to pay rent. We focus on what we call EBITDA. That's EBITDA plus rent. It's a very well-off term in the industry. You can see by the chart on the right that our coverage, our formal coverage, which is that multiple that our rent is of the EBITDA, is high relative to all these other real estate categories.
That really has been a key component to the outperformance of the portfolio with [EBIT] relative to what providers have in the past. Let's skip over a couple of these. Let's talk a little bit about these opportunities. This is our fourth quarter presentation. First on the right, you can see the growth in dividend. I want you to know we're nearly 80% increase in dividend since we went public in 2021. A lot of people say, particularly in this environment, Anthony, I look at your dividend yield. Your dividend is yielding over 13%. For those that pay attention to real estate investment trusts, when you see a 13% yield, typically people say, "This is a yield trap. You're going to cover your dividend, and it's usually one of two things.
You're going to have a debt problem, or you're going to put hold of the problem. The trouble is ahead. Why are you at 13%, and why should I not be scared of that? Let's take it along. If you look at debt, I may have mentioned earlier, and if I skipped over, shame on me, we only have $7.5 million of debt on $454 million of assets. Almost unlevered as a real estate investment trust. 0.2 times debt to EBITDA. You're not saying that. 0.2 times debt to EBITDA. We do have a $90 million credit facility with $83 million available to us today, only $7 million outstanding. If we took down the entirety of that, we'd still be well under two times debt to EBITDA. It's not a leverage issue. It's clearly not a leverage issue. Maybe you have a terrible portfolio.
One of our main competitors, the largest in the industry, has recently been in significant defaults in their portfolio. We had, in the fourth quarter, an 83% payout ratio. For those not familiar with REITs, AFFO, Adjusted Funds from Operations, is our measure of free cash flow. As a real estate investment trust, we like to count 90% of net income. There are some differences because of non-cash items between net income and AFFO. We have hit up 83% of our AFFO in the fourth quarter for dividends. We do have one property in our portfolio where the tenant has gone for receivership.
When you look at the impact on AFFO, if that receiver is not successful in selling the business and keeping the tenant in that location, if we get that property back, AFFO goes from, I'm doing the math for you, you can figure it out from the public information, we go from, say, 83% to 85-86%. That is the one name in the portfolio that is probably going to default. When you look at the inverse from 100%, that means that once that comes back to us, if it comes back to us, we still would have 14% of our revenue could go away, and we could still cover the dividend.
When you compare that to others in the industry that have 7%, 10%, 20% defaults in their portfolio, you could see, in my opinion, with a well-covered dividend and a quality portfolio, I do not think it is a portfolio issue. People say, "If it is not debt and it is not a portfolio, then what is it?" I think part of it is structural. Part of it is that we trade on the MTC. We run our company to comply in all respects with New York and NASDAQ listing requirements, but they will not have us. Why? Because we are focused on the cannabis industry. Our main competitor is on the New York Stock Exchange. It is an advantage for them for sure, and has been an advantage for them. They were grandfathered on before the rules changed.
Because we're not on the exchange, private brokers have said, "We won't custody any stock for marijuana to be a business unless they list them up in New York and NASDAQ." They've been using outsourcing compliance to New York and NASDAQ. There's no easy list of stock. These investors can't invest in us. Those rules changed at the prime brokers after we went public. If you look at Stock Chart of 2022, the institutional support we had in our IPO and after our IPO was unwound because of those restrictions during 2022. When you look at our investor base today, by and large, the liquidity that we have is mostly high-net-worth individuals, very small institutions, and retail. They are in the last opportunity.
Because that institution was, I'll call it at the gate, when we talk to those organizations, and we still do, to maintain those relationships, they understand the opportunity. 13.5% dividend yield today for events, but they can't act on it. That really is, in my opinion, the opportunity for investors. I said I was going to leave it open for Q&A, and I'd love to get into that now. If it has the right safe harbor for those for the exchanges. It's currently drafted. It uses a definition that doesn't meet broker dealers. The industry has been talking to the Congressional Leaves that would draft a reintroduction of that bill to try to get that language changed to an appropriate definition of financial institution that would give the exchanges the explicit safe harbor.
Do you have a—
I don't, and I don't think anyone should play NewLake or the industry based on its value. The way I answer that question is I always take the over when it comes to Washington, D.C.
You think that the change in the banking and in the—Yes
I should have repeated the question. The question was, will receiving going to Schedule III change the economics of our business? No, because it doesn't legalize marijuana. It just moves it to a different schedule. It does improve the credit quality of our entire portfolio overnight because it eliminates that owner's 280E. I'm fairly brief on the story on 280E. It's a section of the IRS code which says that if you sell a substance that's on Schedule I or Schedule II, you're only allowed to deduct cost of goods sold. It's kind of crazy.
If you're a cocaine dealer, you stop the size of the axe, which I mean, you can only deduct cost of install. You have to come up with intangible income. The penny case here is effectively a 45%-55% tax rate. By eliminating that limitation on deductions, it brings them to a normalized corporate tax rate, which improves net cash flow and improves their credit quality. It does not legalize it to then bring in credit funds, events, etc. You're welcome. Someone's going to ask if I have samples to hang out. The answer is no. Use the V. Use the V. People know it. They're just our tenants. We do not touch the funds, so to speak. Let me talk about, while you're speaking of additional questions, let me expand on the commentary or the question around the Safe [Banking] Act.
We often get the question, "Well, if safe banking passes, if banks can service the industry, isn't that bad for the role? Would it bring in a whole bunch of competition?" I say quite the opposite. That is what benefits us. Here is why. In the safe banking bill, it has gone through an evolution. It went through an evolution in 2023. One of the key things that changed was the rulemaking period went from six months to one year. I spent nearly 15 years at JP Morgan and some banks before that. I have been in the banking world. One thing I can tell you is banks do not like to move until the rules are set. The other thing I can tell you is that it is going to take longer for federal regulators to get together and come up with a set of banking regulations for businesses.
Legal in some states, but illegal in other states. It can be very complicated. I think it'll be a long period of time before banks provide loan products to the industry. Number two, when banks do ultimately enter, and there's a few regionals that do play in the space today, they typically take an owner's haircut. I'm looking at 50% of nine cannabis value. We're looking at the problem. We're understanding cash flow profile of these businesses. We're giving them somewhat for cannabis value. They can't touch us in terms of understanding the asset class. When you look at the corollary to other real estate asset classes, like a sell town or a glass space, and highly improved properties, what you find is that banks typically get beat by REITs that specialize in that particular sleeve of asset classes.
What we ultimately think will happen is we'll benefit from the legalization of funds to be on the store listed industry because they'll focus on providing capital through a diversified portfolio of professionally managed commercial real estate rather than an [18-upgrade cash flow] during creative operators.
Isn't there also risk in retailers?
The question was, isn't there risk to the retailers in the industry operating in cash and that? The answer is yes, absolutely. What's really fascinating about this industry is it's fairly legal, so it's difficult to—you can't accept credit cards. You have to take in cash. Yet when you pay your state taxes, the taxes go unless you say the Bank of America, right? I have heard stories of armored cars picking up cash at dispensaries. Then where do they go at the end of the day?
In certain cities, they'll literally drive through the doors of the Federal Reserve in that local city to drop off their cash. It leads into the federal banking system. Yes, but it is—we believe safety is an important element of the Safe Banking Act because it does get cash out of these retail locations. Unfortunately, we have had a couple of people in the industry die in robberies who were shot and killed. One police officer responding to a theft was shot and killed, unfortunately. It is just very—beyond the economics of this, it is a real safety issue. The time for one more question. Come on. Come on. I know it's all—I'm so sorry. I don't know. Come on. Just a pretty—I don't have any long prediction on these companies. All right.
Insurance and liability.
Yes. The question is around insurance and liability.
Because we're a triple-net lease, all the costs and expenses related to the property are borne by the operator, by the tenant. We require, similar to the way you have a regular lease arrangement, we require them to have the same type of property casualty insurance that you would if you were an industrial company in our cultivation facilities, or you were a REIT sitting in a retail location. With that, we're going to close it out. Thank you, everybody, for joining us here in the room and online. We appreciate the opportunity. If you have any questions, newlake.com is our website. NLCP is our ticker symbol. Feel free to reach out to us. Thank you very much.