As the cannabis industry continues to mature amid a still-fragmented regulatory environment, a new class of real estate investment trusts is emerging to meet the sector’s capital needs—and in doing so, is carving out a compelling niche for small-cap investors.  

Anthony Coniglio, CEO of NewLake Capital Partners, the second-largest cannabis real estate owner in the U.S., offers a unique vantage point on this evolution. With a portfolio of 34 properties across 12 states and over $500 million in deployed capital, NewLake is leading the charge in cannabis real estate lending, while maintaining a conservative balance sheet and delivering robust dividend growth.  

Coniglio believes that cannabis REITs are among the most overlooked and potentially undervalued sectors in the small-cap universe—offering resilience, high yields, and uncorrelated performance relative to traditional REIT categories. 

CM: NewLake is now the second-largest cannabis real estate owner in the U.S. What do you believe differentiates your investment approach from competitors in this emerging asset class? 

AC: Our understanding of the cannabis sector and focus on limited license jurisdictions are the key differentiators of NewLake’s approach to cannabis real estate. With a deep understanding of the sector, we can not only build quality relationships by being responsive to the needs of our tenants but also underwrite transactions that deliver long-term value for our tenants and stakeholders. Additionally, focusing on limited license jurisdictions improves the quality of our portfolio and provides downside protection. Most of the real estate vacancy issues experienced in the cannabis sector have been in unlimited license jurisdictions such as California, Michigan, and Colorado.   

CM: With 34 properties across 12 states and nearly $500M deployed, how do you evaluate new opportunities in a fragmented and still federally illegal market? 

AC: Our underwriting is rigorous, and our capital structure is conservative as we’ve deployed nearly $500 million across 34 properties with virtually no leverage. This gives us flexibility and staying power, especially in a sector where volatility is the norm. 

We always start with the operator. Does the management team have a proven track record? Are they generating positive cash flow? Can they weather pricing compression and regulatory complexity? From there, we evaluate the market, including states with limited licenses, strong demand dynamics, and regulatory frameworks that reward compliance. Finally, we assess the real estate itself: location, functionality, and its role in the operator’s broader supply chain. Even in a federally illegal environment, we’ve found that you can underwrite risk with discipline and still find attractive, durable returns. 

CM: Cannabis REITs are often overlooked by mainstream investors. What are the most common misconceptions you encounter, and how do you address them? 

AC: The biggest misconceptions are that we invest in farms, our tenants are not sophisticated, and the use of balance sheet leverage. Within our 34 properties, 15 are cultivation facilities, representing more than 90% of our invested capital. These buildings are sophisticated indoor agriculture facilities with state-of-the-art lighting, irrigation, and climate controls, often located in well-trafficked industrial corridors.   

Our tenants are among the largest, most sophisticated operators in the country, including names like Trulieve, Curaleaf, and Cresco. We operate in an overlooked corner of commercial real estate, which creates inefficiencies, and that’s where we find value for our shareholders. 

Lastly, investors are often surprised to learn we have barely any debt. Currently, we have less than $10 million of outstanding debt, with a debt-to-EBITDA ratio of less than 0.2%, which is nearly unheard of in the REIT industry. 

CM: How would you compare the valuation and yield profile of cannabis REITs to more traditional REIT categories like industrial or retail? 

AC: At current prices, NewLakes’ stock is compelling. Double-digit yields are usually a sign of trouble ahead, either from high leverage or a poor quality portfolio. For NewLake, the higher stock yield represents a lack of institutional demand driven by [the industry we focus on]. Clearly, leverage is not an issue for NewLake, at 0.2x debt-to-EBITDA. Even if we tapped the remainder of our $90 million credit facility for future investments, we still maintain a debt-to-EBITDA ratio of less than 2.0x. Our portfolio is one of the best in the cannabis real estate sector, and with an 84% AFFO payout ratio, we have ample protection for credit issues in the future, providing a cushion for our dividend.   

CM: Why should small-cap investors consider cannabis REITs as part of a diversified portfolio? How do you balance growth potential with risk? 

AC: Cannabis REITs offer an attractive yield to investors but will likely come with some volatility as the industry continues to evolve. Any allocation within an investor’s portfolio should match a higher risk appetite and comfort with volatility. While the cannabis industry continues to grow, we are cautious about new investments. The industry itself is expanding, state by state, and our dividend has grown 79% since our IPO; however, our focus on quality may temper some of the growth pace. We believe it is better to focus on quality versus growth and be well-positioned when the industry pivots back into a higher capex expansion period fueled by states adopting new cannabis programs, and ultimately, federal legalization.  

CM: How does the liquidity profile of cannabis REITs compare to other small-cap real estate investments, particularly given the relatively limited institutional coverage? 

AC: Liquidity is an ongoing challenge in this space. Institutional ownership is still limited due to federal legality, and that affects trading volumes. That said, we’ve been building long-term relationships with both retail and institutional investors who understand the story. As rescheduling progresses along with regulatory reform, broader access to custody and capital markets opens, I expect to see improved liquidity and coverage. In the meantime, we stay focused on execution through delivering dividends, managing risk, and scaling prudently. 

CM: Do you anticipate changes in tenant behavior or deal structuring if cannabis is reclassified under the Controlled Substances Act? 

AC: If cannabis moves from Schedule I to Schedule III, it will improve the economics of the industry, most notably by eliminating 280E taxation. This means a lower federal tax bill for our tenants, which should translate to stronger lease coverage and increased credit quality. Rescheduling does not legalize cannabis, and thus we will continue to have a disconnect between state and federal law, maintaining the lack of real estate capital alternatives for the industry, away from cannabis REITs. The bottom line is that rescheduling makes the industry healthier and that’s good for us as a capital provider. 

CM: What regulatory or legislative milestone do you view as the biggest potential unlock for your industry over the next 12–24 months? 

AC: Rescheduling is the biggest near-term unlock. If the DEA finalizes a move to Schedule III, it will remove one of the biggest barriers to profitability – Section 280E – and allow cannabis companies to reinvest in growth. Beyond that, federal banking reform remains critical. Access to basic financial services, institutional capital, and public exchanges would create a cascade of positive developments for the industry. We don’t need full federal legalization to thrive, but we do need a regulatory framework that aligns with the economic reality of this $30 billion market.