Less than a decade ago, one of the most prolific investors in licensed U.S. cannabis operators believed the plant was bad.
“I was simply consuming what the government and media were feeding me,” explains Anthony Coniglio, chief executive of NewLake Capital Partners. A real estate investment trust (REIT), NewLake over the last five years has committed more than $420 million in capital via sale-leaseback transactions to a dozen prominent operators including Curaleaf, Cresco Labs and AYR.
In this week’s edition of Careers in Cannabis, Coniglio shares how a six-week immersion enlightened him on the positive properties (and investment return possibilities) of the plant, why he believes 280e reform as part of rescheduling cannabis to Schedule 3 will create a “positive feedback loop” for the industry, and what cannabis form factor he believes will ultimately be the “holy grail.”
Grown In: What inspired you to get into cannabis?
Anthony Coniglio: Throughout my career, I’ve always looked for opportunities where the market was underserved. I feel like the best opportunities that come along are those that are the hardest to get at. When I sold the previous company I was running – a residential mortgage company – I was looking for what I wanted to do next and I was trying to find different sectors where there are underserved markets.
Somebody presented cannabis real estate as an underserved market. After rejecting the idea as out of hand because of my uneducated perspective, I investigated and took a 6-week immersion to understand how cannabis has had such a positive impact on people and now the negative perceptions.
Grown In: Elaborate more on what you mean about an uneducated perspective.
Anthony Coniglio: It was fed by what I was told in college and what I was told throughout the course of my life. Drugs are bad. Not having done my own work, I was simply consuming what the government and media were feeding me.
Once I had the opportunity to immerse myself in the topic, it removed that stigma for me. From there I began to focus on the business opportunity. I got excited about being part of such a nascent industry and providing capital and services where there are few options.
It was also an opportunity to be part of the professionalization of the industry that was beginning to take place around 2018 and 2019. We started to see this industry transform from more than a culture and cottage industry to a more professionalized and traditionally business-oriented approach for companies who want to scale.
Grown In: How do you bring skills from previous professions into this role?
Anthony Coniglio: Throughout the course of my career at Morgan Stanley and my mortgage company, I ran high-growth businesses in highly regulated industries. I was able to create relationships and operate those businesses in a way that allows them to scale successfully.
When I looked at this opportunity, I could use those same skill-sets. How to responsibly navigate and operate in a highly regulated industry such as cannabis.
Grown In: Let’s turn to the industry. What are the primary pathways you see at this point for cannabis normalization?
Anthony Coniglio: Let’s define what normalization is – for some people its full legalization. For others, it’s rescheduling to Schedule 3 or SAFER Banking. Another pathway for regulatory change is the David Boies lawsuit as well.
For me when I look at the different pathways to regulatory change, rescheduling is poised to make the biggest impact on the industry. It has the chance to be the catalyst that will create a positive feedback loop because 280e reform will improve the cash flow profile of the industry, as well as some operators specifically.
This improvement would get investment attention. And once you get that catalyst and attract investors on the sidelines waiting for that to happen, you will see equity prices increase. Operators will use equity to pay down debt, and as the balance sheet of those companies improve more investors will come in.
If you don’t get schedule 3 out of the Drug Enforcement Agency in 2024, I think we’re in for a really difficult environment over the next few years.
Grown In: Do you think SAFER Banking has a chance to pass into law in 2024?
Anthony Coniglio: I don’t see SAFER happening, unless Section 10 is enhanced in a way that brings in big republican support. It deals with Operation Choke Point where under the Obama administration banking regulators used regulatory authority to discriminate against businesses that were out of favor with the administration, including firearms dealers.
Republicans are looking for a path to put curbs into laws that limit regulators authority. Now that we have conservative Speaker of the House, the only way you get that through is a robust modification Section 10. So, it would not be a cannabis bill, but really a gun rights and anti regulation bill.
Grown In: How much attention do you pay to the $28 billion hemp-derived THC market?
Anthony Coniglio: I don’t pay attention. The tenant base that we have and your traditional cannabis companies have grown and survived in a world of non-regulated competition.
I think regulators will finally get at it because there is a tax regime for the regulated sector that does not exist in hemp. Here is a financial incentive to tax. There is also a safety issue.
Grown In: Where do you believe the biggest growth opportunity is in cannabis?
Anthony Coniglio: As human beings, we are conditioned to be rewarded with drinks. When we are babies it is milk, young kids it’s juice boxes, teenagers sodas and adults beer. I think the holy grail of the industry ends up being drinks.
Fireside Chat tomorrow with IL Cannabis Regulation Oversight Officer Erin Johnson
After more than two years of delays, several dozen newly licensed Illinois dispensaries – as well as multiple licensed infusers and craft grow operations in the state, are now up and rolling.
Credit Illinois Cannabis Regulation Oversight Officer Erin Johnson and her team with getting the program back on track over the last 12 months. Johnson tomorrow will participate in a fireside chat with new Cannabis Business Association of Illinois Executive Director Tiffany Ingram. Details on the event below.
Applications Now Open for the 2024 Cannabis Innovation Lab, Produced by 1871 and Grown In
Building on the success of its inaugural year, Grown In is partnering once again on the execution of the 2024 Cannabis Innovation Lab, with Grown In’s own CEO, Brad Spirrison, as the Entrepreneur-in-Residence.
This lab connects growth-stage startups with late-stage lab partners, corporate innovators, investors, and experts in the cannabis industry to explore the rapidly evolving field of cannatech. This year, the program includes innovation within CBD, THC, and Hemp.