I'll close the door for you.
Now we have Anthony Coniglio with NewLake.
Good afternoon. All right. We're all getting over lunch, so I'm going to bring some energy. At least I'm going to try to bring some energy. If it's too much, just ask me to tone down. I am going to try to move through this pretty quickly so that we can get to Q&A. That's a more informative, and quite frankly for me, the more fun part of this business. Let's jump in. What is NewLake Capital Partners? First off, my name is Anthony Coniglio. I am the CEO and founder of NewLake Capital Partners. What is NewLake? We are the second-largest owner of cannabis real estate in the U.S. Our business model is simple. We rent properties to cannabis operators, we collect rent on a monthly basis, and we pay out a quarterly dividend.
We're organized as a real estate investment trust, so we're a yield play in many circles of the investment community. Everybody talks about what are the key factors that investors should know about this business. So briefly, I'll touch on early mover. I put our portfolio against anybody that's provided capital to the cannabis industry, whether that is debt capital, real estate capital, or even private equity capital, and we'll talk a little bit about that here today. I will talk about my team. Everybody says they have a great team. This isn't about the team being great. This is about bringing the skill sets necessary to differentiate yourself and provide quality returns to investors. I've mentioned the portfolio. Growth-oriented focus. You'll hear me talk about the four avenues of growth for NewLake, but the cannabis sector, whether you're up here in Canada, it's stalled a little bit.
We'll talk about why it's stalled a little bit in the U.S., but I think we're on the precipice of getting back to that mid-single digit, potentially low double-digit growth rate. Conservative balance sheet. You won't find. I shouldn't say so definitively. I can't find another REIT that has less leverage than us. Spoiler alert, we have no debt on our balance sheet, and that's unusual. We'll talk about that. Then attractive relative to our peers. You'll also hear me lament, but also talk about the opportunity for you, which is the yield on our stock today, and I'll talk about why we're trading there. Let me first start with why am I here. We're not raising capital. We're not here to look to raise capital. We're here to raise awareness. Let's get into it. By the numbers, we've been in business almost eight years.
I can tell you one interesting thing. We have fewer competitors today than when we started the business 8 years ago. That is unusual, and it's because of the dislocation that's occurred in the cannabis sector over the last few years, and many of the competitors have fallen away due to poor performance or inability to raise additional capital for growth. By the numbers, 35 properties, 12 states, 13 tenants. Excuse me, 13 states, 12 tenants. We have 32 of those properties are leased. That means we have three properties in our portfolio that are available for lease, and that'll be part of our growth story that we talk about. This is a long-duration portfolio. Again, we are the landlord. This is not a mortgage REIT. We own the properties. We buy properties from and for cannabis operators, and we don't take tenancy risk.
We're entering into leases, long-term leases, when we acquire those properties. You could see the weighted average remaining lease term on our portfolio is nearly 12 years. That is long-duration for a portfolio that yields over 13% on the invested capital in those properties in our leased portfolio. So it's an above-market yield on real estate, and it's priced above market because the U.S. cannabis sector obviously has a lack of access to capital and a higher risk profile, and it's why our capital can demand such a premium to other commercial real estate. Let's talk quickly about the people. Again, I said everybody talks about their people. When we started this business 8 years ago, we recognized this wasn't just a real estate business.
You needed to understand as much about cannabis as you did real estate in order to be successful, and we think that's borne fruit. I point to our Chairman, Gordon DuGan. Over 30 years of net lease real estate experience. He ran W. P. Carey, Gramercy Property Trust. Some of the largest net lease REITs in the world Gordon's been part of. We also had on our board Pete Kadens, who was the founder. He recently retired, and Dina took over for him from Green Thumb Industries. Pete was one of the founders of Green Thumb Industries, and we really used his knowledge in the industry to institutionalize that knowledge and perspective to understand the balance sheets, the regulations, the properties, the equipment, so that we could come up with a better underwriting approach for these long-dated leases.
We also have Peter Martay. A very long career in commercial real estate. Also running a multi-family REIT. As well as Alan Carr and Joyce Johnson. Alan and Joyce, interestingly, have distressed experience. Very, very deep experience in distressed. You might say that's kind of a silly way to start a business, knowing you need distressed people on your board. Well, it's because we never believed that there would be a straight line from where the industry was in 2018 and 2019 to the promised land. We always knew that in a high-growth sector with high regulatory factors, that there would be dislocation. By having some of those voices in the room when we were organizing the business and creating our underwriting approach, gave us a leg up when that dislocation came to fore. One example would be cross-collateralizing your leases or cross-securitizing your security deposits.
These are things that some of the competitors that we had didn't do and found themselves in deep distress. Again, I think the team's great, but it's not about great, it's about skill sets. It's about bringing those skill sets together to have the best underwriting approach. Let's talk very quickly about what's going on in the U.S. around cannabis. It's actually quite exciting. Up here in Canada, you had your party back in 2018 with full legalization. In the U.S., earlier this year, the DEA and the DOJ rescheduled medical cannabis. This is going to be a head-scratcher. Cannabis is a plant, and so a product from cannabis for medical purposes is now rescheduled to Schedule III. If you're operating in compliance with state law, you were afforded the opportunity to file for a DEA registration number.
What that means is those businesses, and within our portfolio, 50% of our properties are dedicated to medical cannabis. Now that they have these registrations, these are literally federally legal businesses to traffic and to produce Schedule III substances. Just the way it would be selling coffee at Starbucks or selling power tools at Home Depot. I talked about it's a plant, so you have medical cannabis over here. You also have adult use cannabis over here. So you grow it, and just because you're going to sell it to medical, it's regulated one way. You sell it adult use, regulated another way. I can't explain it other than to say that's the way the federal government decided to take the path, and they are in the process of working on rescheduling what we would call all-plant cannabis later this year or into early next year.
That process was reinvigorated in April. There was a hearing on it that happened in July. We're awaiting the administrative law judge to provide his conclusions to the DEA, and they will complete their process. The DEA is on the record as the proponent saying the DEA is filing to reschedule to Schedule III. So we could find ourselves within the next quarter or so in a world where cannabis is fully Schedule III in the U.S., and with DEA registrations, making anybody that has that license a federally legal business. Almost just as importantly, and some people might say more importantly, is hemp restrictions. What's happened in the U.S. since 2018 was the development of intoxicating hemp products. Without going into too much detail, hemp and cannabis, same plant. One's male, one's a female. One has a naturally occurring THC reaction, the psychoactive ingredient. Hemp does not have that.
When it was legalized for industrial purposes, think hempcrete, think fiber, think other industrial applications. What some enterprising people realized is, wait a minute, just because it's not a naturally occurring chemical reaction, I could take it in the lab and I can get synthetic THC out of that as one byproduct. We've seen hemp-derived THC products siphoning off sales from the state legal cannabis business over the last three years, and this is actually going to be going away. The president signed into law in November of last year a change in the definition of hemp that would eliminate the hemp-derived THC products, and that date, in here we talked about November, there was an extension to December. So on December 12th, these products will become illegal.
In a state like Ohio, where Ohio moved earlier this year to ban these synthetic products, we have seen sales within the state legal channel, this is our type of tenant base, up anywhere from 5%-25%. Just think about that. Top-line revenue going up significantly, most of that reaching the bottom line, all because the consumer can no longer purchase their hemp-derived product, and they are going back into the state legal channel. A real tailwind for the industry, as well as legislative action. We do not have enough time to dive into that. Some real tailwinds for this industry going on. What I want you to take away from here is that in the U.S., you have about 50% of the markets, excuse me, 50% of the population is in an adult use state.
You have a growing number of medical use states, but there is plenty of opportunity for this industry to continue to grow. Most notably in the near term, you have Georgia and Texas, two very large populous states, recently refined their medical programs that we think will see significant growth in the coming 5 years. Because there is no interstate commerce, you cannot transport across state lines. Businesses have to replicate their infrastructure, and that means real estate capital. Those are growth opportunities for NewLake. Some of the trends that are driving growth in cannabis, we all see anybody that follows the alcohol industry will know that alcohol sales are flatlining, and in fact, in many places, they are declining.
What is driving that is a younger demographic that is moving away from alcohol, and in many cases, moving more towards cannabis products for their recreational activities on a weekend. We see alcohol and spirit sales decreasing and usage decreasing, and we see cannabis products increasing. The more it is normalized in the U.S., the more we think that the consumer will shift not only their preference from alcohol to cannabis, but also some of the existing cannabis consumers that are in the illicit market will find their way into the state licensed channels. Where do we get growth at NewLake? I just mentioned that we think the industry is going to grow. It comes from four areas. Number 1, we have this long duration portfolio. Remember, nearly 12 years of duration on a remaining weighted average lease term.
Every year we collect rent. Rent goes up by 2.6% across the portfolio. That is just a natural growth in top-line revenue for us. We do not have CapEx responsibilities on our properties. I should tell you, we are what is called a triple-net lease REIT. That means property taxes, insurance, maintenance, CapEx, all of that is the responsibility of our tenant. This is true revenue growth, most of which should go to the bottom line for us. Number 2. When we close on a transaction the way we did in August, we purchased a property that will have a dispensary built on it. I should say within the 35 properties we own, 15 of those, think industrial buildings, 50,000-75,000 sq ft industrial building that is utilized to grow cannabis indoors. We do not have farms. We do not have greenhouses. The other 20 properties are retail properties.
Think 2,000-3,000 sq ft pad site that may be in a retail corridor. We even have one at the King of Prussia Mall, one of the largest malls in the country, if not the world. Sometimes we will purchase a property, and we will provide capital for either improving that property or in this case, to actually build a new building. As we put that money out, we charge rent. When you look at our results from the second quarter, we will have no rent for this acquisition. We will have not only rent for the acquisition, we will have rent as that $1.6 million goes out, and we are at a low cycle as the more transactions we execute, the larger our TI, we call it tenant improvement dollars, the larger the TI goes. Three, we do have properties that have come back to us.
We have three properties today that are available for lease. We are carrying those costs. We have to pay the taxes and the insurance and the utilities. As we lease up those properties, we will not only decrease our expenses and our carrying expense, as the tenant takes those on, we will increase our revenue as we start collecting rent again. Number 4, is new transactions. As I described, we had a new transaction in August. You should expect to see that our transaction activity will pick up here because on the heels of rescheduling, we have seen our pipeline grow. Our opportunity set is really driven by the CapEx cycle of the cannabis industry, and what rescheduling has done in the U.S. is bolstered confidence for companies in the industry to start moving into a CapEx cycle again.
You could see where we are across the nation in the U.S. I would point you to the chart on the right. We have a concentrated portfolio, and typically, you would want to see a very granular portfolio. Our top three tenants, Curaleaf, Cresco Labs, and Trulieve, are some of the top cannabis companies in the world from a margin and a profit and a scale perspective. That is really where we would want our portfolio concentrated, the companies that we do not believe are going away. In fact, we have had some competitors really drive for growth and extend their reach deep into the credit spectrum, only to find deep distress.
In a world over the last three years in the U.S. cannabis business, where literally only the strong have survived, it has been smart and it has been good to be concentrated in the better credits, not diversified into 40 or 50 mid-tier credits, many of which did not have the scale or financial profile to succeed. What I want to point to you on this page is two items, the cannabis market and the real estate. Of course, any real estate portfolio is going to look at tenant quality. We do it just the way everybody else does. On the cannabis market, we focus on limited-license states. The best way to think about this would be a state like Pennsylvania, where you have to go to a state-run package store to buy liquor and alcohol. Very tightly regulated market. You could see Pennsylvania only issued 33 licenses.
Compare that to a state like Oregon or Washington that issued well over 1,000 licenses. It's quite simple, the economics. You have more competitors, you have less margin. You have less margin, you have less cash flow, less of a profit profile. The limited license jurisdictions tend to provide a better operating environment, making it a better risk profile for us as the landlord. Because remember, with a 12-year remaining weighted average lease term, the key to our business is collecting rent. Right? I say it's easy to do the deals, not really, but it's easy to do the deals. It's harder to collect rent for 15- 20 years. By focusing on limited license jurisdictions, we think there's value created for the portfolio in doing so. The other thing we really focus on that many of our competitors hadn't was four-wall coverage.
It gets back to that restructuring experience. I've been a banker, and I've had some restructuring experience in my time. One thing was clear: the go-to move for a company in distress is to stop paying on any asset that isn't generating free cash flow. If you look at EBITDAR, that's EBITDA plus rent, that, we think, is a very good measure of what that property can generate in terms of free cash flow for the tenant. You could see that we compare very favorably to what you would see outside of the cannabis sector. I would tell you that the 3.9 is a blend of industrial properties, which tend to have lower EBITDARs, and retail properties. The only company that beats us out is an entirely retail portfolio.
If we only put our retail portfolio up here, we'd be to the left of Four Corners Property Trust. But it's part of our underwriting. What does the property-level cash flow look like? We're looking at that not only on an underwriting basis, but we get quarterly financials for the property level and for the parent to monitor the parent guarantee. To the extent that we see a portfolio declining in its EBITDAR coverage, we're anticipating potential distress, and we're already starting to think about what is it we could do differently with this property, or do we need to have a conversation with the tenant. You could read this on your own. I want to give time for questions. Snapshot of our portfolio. I want to get to this.
Anybody that invests in REITs would look at our stock, and they'd say, "You have a roughly 13% dividend yield." People would typically say, "Gosh, as a REIT, you have a 13% dividend yield?" Man, that's a yield trap. That means one of two things. Either you have too much debt, you're over-leveraged, you have to liquidate assets at a fire sale price to pay down debt, or you just have a terrible portfolio. In either case, you're going to end up having to cut your dividend because REITs generally trade at a mid-single digits dividend yield, call it a 6% dividend yield.
For us to be at such a premium, people will say, "I think your $0.43 dividend or your $1.72 annual is going to be cut to $1 because there's no way you could sustain the dividend." I want to peel that apart. Number one, debt. We don't have any. We're unlevered. Why is that? We used our IPO capital from 2021 to invest. We slowed down our investment pace when we saw the investment landscape getting much more difficult in 2023, 2024, 2025. We thought it was more prudent to pull back than to just grow for growth's sake. We've been generating capital. Even though we've been paying our dividend, we have excess capital that we've been utilizing to execute on our transactions. Our peak was $7.5 million of debt, and we just paid that down. We have zero debt.
Okay, it's not a debt problem. We're in the you have a terrible portfolio problem. A first statistic I point you to is our AFFO payout ratio. For those not familiar with REITs, Available Funds From Operations, AFFO, is our measure of free cash flow. Kind of like an EBITDA proxy. Our measure of free cash flow, what percentage of our free cash flow do we have to utilize to pay out our dividend? Distressed companies may have 100% payout ratio or 110% payout ratio, meaning you're paying out more than the cash flow you're generating, and that's what's starting investors to think, "Oh, wait, they'll cut the dividend." We're at 88% payout ratio. Our target is between 80% and 90%. We have a cushion. We do have a tenant that filed in Canadian bankruptcy. It's Canadian domiciled, but a U.S. company.
8% of our revenues. They filed in March of this year, and they've paid rent every month since. They have some buyers for some of their assets. We're working through that process. Even if I took those properties out and I said, "We don't re-tenant those, and those go completely to zero," not a scenario that I believe will happen, but even if I took that worst, we still have a 3%, 4% cushion for a dividend, plus the growth drivers to be able to grow revenue again. You're probably all sitting there saying, "Well, if it's not the portfolio and if it's not your leverage, what is it? What is the market missing?" Here's the key, folks. It's about restrictions on custody. In the U.S., if you're not listed on New York or NASDAQ, custody agents will generally not custody your stock.
Think Pershing, Bank of New York, Goldman Sachs, Morgan Stanley. These were organizations that custodied our stock at our IPO in 2021. But with a change in rules that occurred in late 2021, and you look at our stock price, I call it the great unwind, all the institutions that participated in our IPO and bought us in the post-IPO through the summer and fall of 2021 and 2022, they had to unwind those positions as a result of the change. You'll see a complete slide in our stock price. Today, we have over 12,000 retail investors. We're largely retail stock. I meet with institutions. They say, "I get it. I love it. I just can't buy it." What changes? It's an uplisting.
The rule says if you're not listed on New York or NASDAQ and you serve the cannabis industry, that stock can't be granted. What do we need? Well, I would tell you we operate our business to comply with New York and NASDAQ listing requirements, and we've done that for the last four or five years. We need legal change. We have that legal change for half the portfolio. That was the rescheduling of medical marijuana that happened in April. Half our portfolio is properties that are utilized exclusively in medical activities. The other half of the portfolio is mixed use, some medical, some adult use. With the completion of rescheduling, with those DEA licenses that get granted, creates that legality for the balance of those properties.
We can then go and apply immediately for uplisting to New York or NASDAQ, and we think unleashing the opportunity for institutional investors to see an unlevered balance sheet with a way above market yield and a well-protected dividend, and we think that's going to attract some interesting institutional investment that'll get that dynamic of supply and demand for our shares out of whack, so to speak, which as we all know, what moves a stock price up is sustained demand that exceeds the sustained supply. We don't have that overall sustained demand today because the largest organizations that drive demand are institutions, right? It's not generally going to be retail investors. Let's pause there, and as I said, Q&A is more fun. Let's-
If I buy the stock today, how does the custody work?
The question was, if I bought the stock today, how does the custody work? We have a dropdown on our website that shows where you can buy our stock. Charles Schwab would be a place. When I buy stock, I'll buy it at Charles Schwab. Interactive Brokers would be another one that we know will take the stock. Fidelity mostly takes it. We've heard some people say they weren't able to do it at Fidelity. But on our website is a dropdown for that.
[inaudible]
I don't have the answer to that. I don't know. Question.
I know that nobody knows, but what is the timing that we will see the rescheduling [inaudible]?
The question was, what is the timing for full rescheduling to occur in the U.S.? This is a guess. It is an educated guess because I have really studied the process. I think it is at the earliest end of 2026, more likely end of December, more likely during the first quarter. I want to give you a quick little substance on it. The hearing is done. There was a stay on the judge's decision. By the way, the DEA doesn't have to listen to the judge. Back in 1988, there was the same rescheduling hearing. The judge said to the DEA, "You should reschedule to Schedule III." The DEA said, "Thank you very much. Sit down. We are keeping it Schedule I." We just need from a procedural perspective, we need this to be complete. The judge will come out with his recommendation.
The participants get 25 days to add their response, then the record is closed, then the DEA, who knows, we think it happens a month or two after that, because this process was started in 2023. Question here.
Why do you have no debt? Are you not able to access capital markets? To your point, I have never seen it, and I am curious. If you were able to do it, what could you borrow?
Yes. The question was, why don't we have debt? Do we have access to markets? I cannot believe I even left this out. We have a $90 million available credit facility that is priced at prime. So 7% borrowing rate right now. We recently extended that to 2029 and reduced the cost of borrowing by 100 basis points, which I think is a validation of our underwriting approach and the quality of the portfolio to extend and reduce pricing. We do want to grow with debt, but we are only going to have reasonable growth. Quick one. Nope, no more. We are cut. I will answer your question afterwards, and yours as well. Okay, Lindsay?
Thank you.
Thank you. Thank you, everybody.