Canadian Cannabis REIT Reports Slightly Higher Revenue YoY, Details Cash Retention Plan

Canadian cannabis-focused real estate investment trust Nova Net Lease NNL NNLRF reported its financial results for the three months ended June 30, 2024. In the filing, the Toronto-headquartered business disclosed total revenues of $392,665, a slight increase from $388,656 in the same period in 2023.

Financial Summary

• Net income reached $1.81 million, which compares to a net loss of $707.592 in the same period of 2023.
• Rental revenues for the period amounted to $494,004.
• General and administrative expenses decreased to $387,439, compared to $468,464 in the same quarter of last year.
• Fair value gain was $1.68 million on Class B Units, compared to a $480,000 loss in the corresponding quarter of 2023.
• At the end of the reporting period the REIT had a working capital deficit of $168,008 when including the liability related to the Class B Units. Excluding this, the working capital was positive $551,992.

During the first half of the year, Nova Net used $304,128 in operating activities and received $217,230 from distributions related to its joint venture investment.

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As part of the cash retention plan, the REIT's board of trustees suspended payment of the REIT's monthly distribution in July 2023. Under the plan, Nova Net also reduced compensation to executive management, eliminated cash compensation to the board of trustees and terminated one employee.

The REIT expects to have enough cash to cover its operating costs and debts for the foreseeable future. However, management highlighted two areas of concern: 1) as of June 30, the available cash is less than the total accounts payable and liabilities, and 2) cash levels will stay low until the REIT has two consecutive quarters of positive cash flow, which will allow the lender to release funds held in reserve. Management believes this requirement has been met and is waiting for the lender's approval to release the reserve funds.

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