Good afternoon. I will be your conference operator today. At this time, I'd like to welcome everyone to NewLake Capital Partners' Q1 2022 earnings conference call. Today's call is being recorded. I will now turn the call over to Valter Pinto, Managing Director of KCSA Strategic Communications. Please go ahead.
Thank you, operator. Good afternoon, and welcome everyone to the NewLake Capital Partners' Q1 2022 earnings conference call. I'm joined today by Gordon DuGan, Chairman of the Board, David Weinstein, Chief Executive Officer, Anthony Coniglio, President and Chief Investment Officer, Fred Starker, Chief Financial Officer, and Jarrett Annenberg, Director of Acquisitions. Before we begin, I'm going to remind everyone that statements made during today's conference call may be deemed forward-looking statements within the meaning of the Safe Harbor of Private Securities Litigation Reform Act of 1995, and actual results may differ materially due to a variety of risks and uncertainties and other factors.
For a detailed discussion of some of the ongoing risks and uncertainties in the company's business, I refer you to the press release issued this afternoon and filed with the SEC on Form 8-K, as well as the company's 10-Q and other reports filed periodically with the SEC. The company disclaims any intention or obligation to update or revise any forward-looking statements, whether as a result of new information, future events, or otherwise. The company's guidance is based on current plans and assumptions and subject to risks and uncertainties more fully described in the company's filings with the United States Securities and Exchange Commission. This outlook reflects management's view of current and future market conditions, including assumptions such as the pace of future acquisitions and dispositions, rental rates, occupancy levels, leasing activity, uncollectible rents, operating and general administrative expenses, weighted average diluted shares outstanding, and interest rates.
With that, it's my pleasure to turn the call over to Mr. Gordon DuGan. Gordon, please go ahead.
Thanks, Valter, and thanks again to everyone for joining the call. We couldn't be more pleased with the progress we made thus far in 2022. Our portfolio continues to perform very well, and we declared a Q1 dividend of $0.33 a share, an increase of 6.5% over our Q4 2021 dividend. Very importantly, we secured a $30 million revolving credit facility with the opportunity to increase that facility to $100 million. One thing I would just keep in mind on both our earnings level and our dividend level, as we invest the money that we've committed, our earnings and cash flow should trend up, as we invest that money, which will create more earnings and cash flow.
We have a built-in pipeline of increased earnings and cash flow as long as tenants continue to pay and we continue to fund those deals. You know, we're very excited about the prospects for the business as we go through 2022. The cannabis industry is not immune to volatility, quite the opposite. There's clearly negative sentiment in the market, driven by a number of things, but continued delays in federal legislation is certainly one. Our thesis has always been that legislation will take some time, and we will invest our capital with the operators that have the ability to weather the storm and be the long-term winners in this sector. We continue to believe that it's when, not if, but when isn't short-term for federal legalization.
However, our belief in the growth of the cannabis industry remains steadfast, and our pipeline remains robust with high-quality tenants and real estate. Operators will continue to require access to capital and very significant amounts of capital to fuel the projected growth of the cannabis industry for many years to come. Lastly, I'd like to reiterate what I said last quarter, which is that we are focused on quality, not quantity, and I believe our portfolio is a testament to that. The long-term success of our company will be built upon the discipline we exercise when making investment decisions for our shareholders. We wanna create long-term partnerships with the highest quality cannabis operators throughout the United States. Our strategy is and will continue to be the long-term return on investment for our shareholders.
I'd now like to turn it over to David Weinstein, NewLake CEO.
Thanks, Gordon. Thanks again everyone for joining the call today. As Gordon mentioned, we are focused on quality operators as we continue to grow the portfolio. In keeping with that discipline, on April first, we acquired a 40,000 sq ft cultivation facility in Missouri for $7.3 million and entered into a long-term triple net lease with an affiliate of C3 Industries. We're also committed to fund an incremental $26.7 million, $5.2 million of which is to complete the construction of the existing facility. $16.5 million is to purchase an adjacent parcel of land and construct a 65,000 sq ft cultivation facility, and $5 million is an interest-only four-year loan that can be drawn over the next year. As Gordon noted, our pipeline remains robust.
We still expect to commit the remainder of our IPO capital in short order. We expect this next phase of our growth to be financed with debt capital. Earlier this week, we announced that we entered into a 5-year revolving credit facility with a $30 million initial commitment. The facility contemplates an expansion to $100 million as additional lenders are added. The facility has a fixed interest rate of 5.65% for the first 3 years and a floating rate thereafter. The revolving nature of this facility will help us to efficiently manage our capital usage. While there can be no guarantee we will be successful, we continue to explore alternative debt capital sources. Lastly, we are acutely aware of the trading challenges relating to cannabis-related stocks.
We are continuing to pursue a potential uplisting onto a major exchange, but as of today, do not have any update to share. This initiative remains a top priority for us. I'd now like to turn the call over to Anthony to discuss our investment portfolio in more detail.
Thanks, David, and thanks everyone for joining the call today. Let's turn to a discussion of our portfolio. We continue to have no defaults or rent deferrals in our portfolio since the inception of the company, which we are very proud of. This is a tremendous achievement driven by our disciplined underwriting approach. The macroeconomic environment and maturation of the cannabis industry is having an impact on several key metric trends, all of which are creating opportunity for NewLake. As we've seen in most states, markets are maturing, which is then in turn normalizing pricing, and it's slowing the previously high growth trends of the industry, resulting in margin compression for many operators. Operators with discipline and financial flexibility will respond to the environment and find the right balance of margin, market share, and growth.
We're in regular contact with our tenants, and we're vigilantly watching their performance both at the property level as well as at the parent level. Historically, we've seen similar periods, and those periods have created pockets of dislocation, leading to long-term opportunity for us to identify high-quality partners that fit ideally within our portfolio, and this period is no different. With that, let me turn to some specifics on our portfolio. Our largest tenant, Curaleaf, recently announced Q1 earnings, where the company generated Q1 revenue over $300 million, up 20% year-over-year, and adjusted EBITDA of $73 million. The company announced $273 million of cash on the balance sheet, and financial performance should benefit from Curaleaf being one of only seven licensees in New Jersey to open for recreational sales. Our second-largest tenant, Cresco Labs, will announce Q1 results next week.
The company's 2021 revenue was $822 million, and they had adjusted EBITDA of $194 million for the year. At December 31, they had $224 million of cash on the balance sheet. Cresco continues to be the leader in the Illinois market, where we own their cultivation facility. The company recently announced the acquisition of another tenant, Columbia Care, and I'll speak more about that in a moment. Our number three tenant, Revolutionary Clinics, is private, so as usual, we can't share specific financial information here. We own their cultivation facility in Massachusetts, a state which has seen compression in wholesale pricing as incremental cultivation capacity has come online in the state.
Our tenant, though, is vertically integrated in the state with three well-situated dispensaries in the Boston Metro area, providing the company with the ability to absorb pricing volatility through its retail channel. The company expects to open two additional retail locations by the end of 2022, further boosting revenues and diversifying away from wholesale. Our fourth largest tenant is Trulieve. The company reported Q1 earnings this morning. Q1 revenue was $318 million, up more than 60% from last year and up 4% from the previous quarter. Trulieve generated $45 million in cash flow from operations during the quarter and reported a cash balance of $267 million at March 31. They continue to deliver industry-leading margins and have one of the largest dispensary footprints in the industry.
Rounding out our top five tenants is Columbia Care. They report Q1 earnings next week. For fiscal year 2021, the company generated record revenue of $460 million and recorded adjusted EBITDA of $58 million. The company had $82 million of cash on the balance sheet at the end of 2021, and we expect 2022 results to benefit from Columbia Care also being one of the seven operators approved to launch recreational cannabis sales in New Jersey. As I mentioned previously, Cresco announced the acquisition of Columbia Care earlier this year. After the acquisition, Cresco would become our largest tenant concentration. The combined company would have approximately $1.4 billion of revenue with over 130 retail stores across an 18-state footprint.
They would be a market share leader in Illinois and Massachusetts, where most of our properties with them are located. The transaction is subject to customary regulatory approvals and is expected to close later this year. Regarding our pipeline, we continue to see opportunities for build-to-suit transactions as well as fully operational facilities. Our relationships and the fact that NewLake has been a steady force through the previous cycles of the cannabis industry dislocations has been serving us and our investors well. We continue to anticipate the full commitment of our equity capital in short order, and I'm excited to have the credit facility open so we can continue to fund the next exciting phase of our growth. With that, I'll hand it over to our CFO, Fred Starker, to walk us through our financial results in more detail. Fred, over to you.
Thank you, Anthony. Rental income for the three months ended March 31, 2022 increased by approximately $4.8 million to approximately $9.2 million compared to approximately $4.4 million for the three months ended March 31, 2021.
The increase in rental income was primarily attributable to the 19 properties we acquired in March 2021 in connection with the merger, generated an increase of approximately $2.7 million in rental revenue during the three months ended March 31, 2022. The 4 properties we acquired after the Q1 of 2021 generated approximately $2 million of rental revenue during the three months ended March 31, 2022. Rental income from the pre-merger portfolio properties generated an increase of approximately $100,000 of rental income during the three months ended March 31, 2022. In addition, interest income from the mortgage loan we entered into during the Q4 of 2021 generated $900,000 of revenue during the Q1 of 2022.
Net income attributable to common shareholders through three months ended March thirty-first, 2022 increased to $5 million as compared to a net income attributable to common shareholders of $1.5 million for the same period in 2021. Our general administrative expense for the three months ended March thirty-first, 2022 increased by approximately $900,000 to approximately $1.8 million, compared to approximately $900,000 for the three months ended March thirty-first, 2021. The increase in general administrative expenses was primarily due to increased payroll, D&O insurance, investor relations, recruiting, potential restructuring and other expenses related to becoming a public company. As David previously mentioned, our recently announced credit facility is a 5-year revolver with a $30 million initial commitment. The credit facility contemplates an expansion to $100 million as additional lenders are added.
The credit facility has a fixed interest rate of 5.65% for the first three years and a floating rate thereafter. For the Q1 of 2022, FFO and AFFO attributable to common shareholders was approximately $7.7 million and $8.1 million respectively, as compared to $2.5 million and $3.4 million respectively for the Q1 of 2021. Looking ahead, the company expects full year revenue to be in the approximate range of $42 million-$44 million, and SG&A expenses exclusive of potential restructuring costs, that would be in connection with a possible uplisting to be approximately $7 million-$7.2 million. On March 15, 2022, the company declared a Q1 2022 cash dividend of $0.33 per share of common stock, equivalent to an annualized dividend of $1.32.
The dividend was for the period beginning on January 1, 2022, through the end of the Q1 , March 31, 2022, and was paid on April 14, 2022 to stockholders of record at the close of business on March 31, 2022. FFO and AFFO are supplemental non-GAAP financial measures used in the real estate industry to measure and compare the operating performance of real estate companies. A complete reconciliation containing adjustments from GAAP net income attributable to common shareholders to FFO and AFFO and definitions of terms are included at the end of our press release. Please refer to that press release for more information. With that, I will turn it back over to Gordon DuGan for closing remarks.
Thanks, Fred, and thanks everyone for joining us today. As you heard from the call, we are very pleased with how the company is doing today. We're very excited about the prospects going forward. As the volatility has hit the markets, we think our investment opportunities have gotten even more interesting than they were, and they were already pretty interesting. We look forward to executing on our business plan this year. Thank you for your support.
Operator, please open up the call for questions.
Thank you. If you would like to signal with questions, please press star one on your touch tone telephone. If you're joining us today using a speakerphone, please make sure your mute function is turned off to allow your signal to reach our equipment. Again, that is star one if you would like to signal with questions, star one. Our first question will come from John Massocca with Ladenburg Thalmann.
Good afternoon.
Hey, John.
Hey.
Hey, John.
Maybe starting off with the newest piece of news. What is the outlook on your end in terms of timing for utilizing and drawing down part or all of the new credit facility? I guess, what is the outlook maybe for expanding it per the terms of the accordion?
Hey, John, it's David. We are currently working with the lead bank to add other participants into that facility. We don't expect to draw on the facility until we actually need the capital.
Okay. Clear. Appreciate the color on some of the top tenants. Maybe as you look at some of the smaller tenants in the portfolio and underwriting new transactions, how are you thinking about access of those tenants to alternative sources of capital? What does that environment look like today? Is it changing the type of deals you're looking at?
Yeah. It's Anthony. Hi, John. We've always looked if you remember how we underwrite our transactions, we underwrite four things, and one of them is the tenant. We always talk about how when we look at the tenants, we look at their ability to manage a high growth business in a highly regulated industry, and we also look at their ability to raise capital. One thing we know from being in the business for the past three-plus years is we understand the cannabis industry has cycles. We're always looking when we underwrite transactions at the management's ability to raise capital, not just in good markets, but their ability to run a business that can raise capital when they need it as well. It's not just a new focus for us in this environment, it's always been a focus for us.
In terms of changing the deal or changing how we look at deals, we've always expected margin compression in the markets. Whenever we underwrite our transactions, we underwrite those with the expectation that our tenant will have margin compression. This is not surprising to us. In fact, in markets such as Massachusetts or even in Pennsylvania, we almost can predict the margin compression 12-18 months ahead of time because we see all of those transaction decks as they're making the rounds to get funded. We know when that additional capacity is likely to come on. It's a long-winded answer to come back to.
It's been a core part of our underwriting from when we started the business, and we absolutely expect that the larger and the smaller tenants will be able to run their businesses in a lower margin environment. In fact, just one final point. If you look at the most recent transaction we announced with C3 Industries, they've been running businesses in unlimited licensed states that have seen significant margin compression over the last couple of years, and they've been doing that in a very profitable way. Those are the types of tenants we like to partner with in our transactions.
Okay. Understanding is a purely hypothetical question because there haven't been any historical tenant credit issues. If you were to see some type of historic, you know, tenant credit issue or even a theoretical default, I mean, how do you think that type of situation plays out within the portfolio? You know, what are, you know, targets, if there are any, for recoveries on kind of in-place rents, et cetera?
Yeah. Again, you know, it starts at the underwriting, and we're very confident in the tenants we have. I also want to emphasize, part of our underwriting, and we disclose in our deck, is the EBITDA coverage ratio at our properties. When we think about lower margins, we think about the cash flows that our properties present to us, and the cash flow that our properties generate for the tenant, that drives their ability to pay rent. We are in regular dialogue with our tenants. We get quarterly financials. We're on top of any sort of evolving risk issues. To the extent we ever did get to a default, I'd remind you, we do also have parent guarantees in our transactions.
Where we have multiple properties with tenants, we do cross-default and cross-collateralized security deposits. If somebody in that scenario were to default on the rent, we could pull security deposits from other dispensaries. That's beneficial because many of these locations, as I said earlier, have very high EBITDA coverage ratios, and they're locations our tenants would wanna keep open. If we did need to put a tenant out, we think by focusing on limited licensed states, these properties are unlikely to go dark. By having tenants in limited licensed states, those licenses have real intrinsic value.
I think we've seen in other instances where operators have experienced difficulty, they're likely to monetize those licenses through an M&A transaction, and we'd have a better credit quality counterparty in that scenario step in and continue paying rent to continue to operate the facility.
John, it's a good question and one that we've grappled with, like what does a workout look like in the cannabis world? There are parallels to just the general net lease world, you know, where we own mission-critical facilities with good EBITDA coverage. You know, we should be okay. But it's also cannabis, so interruptions in cash flow could happen. We've been watching how other people are, you know, doing their workouts, as best as we can figure them out. You know, we'll just have to see.
I think that the mission-critical nature of these buildings and the fact that there's still more need for capacity in this industry will ultimately, you know, allow the workouts to happen and happen to the satisfaction of the landlords. Like, it's kind of done in other net lease industries, except where there's overcapacity of space. You know, we'll see how it all works. Like, you know, with cannabis, somebody could call up and say, "I'm just not paying you. How do you like that?" We're gonna, you know, have to deal with that kind of situation. We haven't had to. It's weird. You know, cannabis is a different animal. We watch how others work things out.
My sense is that by and large, things are getting worked out okay. You know, the other REITs, I think everyone else has had to get into workout mode. We haven't yet. We'll, you know, they work them out, I think. I don't know how much transparency they give, but you know.
Okay.
Things are getting worked out. You know, look, they need to keep the lights on, they're gonna pay the rent. Whether they pause for a workout, you know, that's not a tip. Like, that happens.
Okay, fair. You know, apologies if I missed this in the prepared remarks. You know, in the press release, earnings release, you gave kind of an expected revenue number for 2022. What's contemplated in that range? Is that just, you know, the in-place portfolio and announced acquisitions, or does that include some kind of hypothetical future investment activity?
That includes future investment activity. It's funding the commitments we have today and new investments.
One thing, John, just to add to that's been consistent. Everything seems to take longer in the cannabis world. So funding the, you know, funding our deals takes longer. The M&A transactions at the MSO level take forever. Everything just tends to take longer. So from our perspective, getting the money out the door has been slower, not so much from an origination standpoint, but, like, if you look at how much we expected to fund in our construction, you know, we funded less than we expected to. That's been kind of a consistent mantra in the cannabis world. Maybe it's just everybody has rosy projections and they're always trying to catch up to them. I don't know.
Understood. That's it for me. Thank you very much.
Thanks, John.
Thank you. Once again, if you would like to signal with questions, please press star one on your touch tone telephone. Again, that is star one if you would like to signal. We'll pause for just a moment. At this time, there are no further questions.
Super. Thanks everyone for joining us. As always, you can reach out to David, Anthony, myself, anybody on the team, Fred, Jarrett, and we look forward to speaking soon. Thanks again.
Thank you. This concludes today's conference call. You may disconnect your lines. Thank you for participating, and have a pleasant day.