CHICAGO, Aug. 09, 2023 — Chicago Atlantic Real Estate Finance, Inc. (NASDAQ: REFI) (“Chicago Atlantic” or the “Company”), a commercial mortgage real estate investment trust, today announced its results for the second quarter ended June 30, 2023.
John Mazarakis, Executive Chairman of Chicago Atlantic, noted, “Our capital structure is among the best in the mortgage REIT sector and the strongest in the cannabis space. We have no shortage of demand for capital from strong credit operators, and that demand is reflected in our pipeline. As planned, we intentionally held back on our loan originations pace during the quarter to remain highly selective on new investments. In doing so, we have been able to take advantage of a new program with the State of New York that offers the opportunity within the REIT to fund up to $50 million in long-term financing at an attractive rate.”
Tony Cappell, Chief Executive Officer, added, “With an ongoing shakeout within the industry of both capital providers and less-experienced cannabis operators, we continue to benefit from our past decisions to focus primarily on vertically integrated operators and limited license states. The loan portfolio is well-positioned with the percentage of floating rate loans at 88%, real estate collateral coverage of 1.5x, a loan-to-enterprise value of 41% and a weighted average yield to maturity at 19.2%. With leverage of 16% at quarter end and over $46 million of current liquidity, we have the flexibility to pursue continued growth in the portfolio.”
- As of June 30, 2023, total loan commitments of approximately $329.2 million ($315.6 million funded, $13.6 million in future fundings) across 25 portfolio investments.
- Weighted average yield to maturity was approximately 19.2% as of June 30, 2023 compared with approximately 19.4% as of March 31, 2023.
- Real estate collateral coverage was 1.5x as of June 30, 2023 compared with 1.6x as of March 31, 2023.
- Loan to enterprise value (calculated as outstanding principal balance divided by total value of collateral) was approximately 41.0% as of June 30, 2023 and March 31, 2023.
- The percentage of loans which bear a variable interest rate remained stable at approximately 88% as of June 30, 2023 and March 31, 2023.
- During the second quarter, Chicago Atlantic had total gross originations of $1.9 million, all of which was funded to existing borrowers. New originations were more than offset by principal repayments of $6.9 million, of which $5.0 million was attributable to unscheduled early repayments.
- During the quarter, the Company established an at-the-market equity program (the “ATM Program”) that allows Chicago Atlantic to issue, at its discretion, up to $75 million of shares of common stock to the public from time to time. The Company subsequently issued approximately 80,000 shares of common stock at a weighted average price of $15.78 per share, raising net proceeds of approximately $1.2 million.
- On June 30, 2023, the Company increased the availability on its revolving credit facility to $100.0 million. The Company had $43.0 million and $58.0 million outstanding on the revolving credit facility as of June 30, 2023 and August 9, 2023, respectively. The Company currently has total liquidity of approximately $46.4 million, comprised of $4.4 million in cash and $42.0 million of availability under the credit facility.
- On June 30, 2023, New York Governor Kathy Hochul and Chicago Atlantic announced that Chicago Atlantic will invest up to $150 million across its platform in the New York State Cannabis Social Equity Investment Fund (or the “New York Fund”). The REIT’s funding is subject to the identification and due diligence of appropriate dispensary locations, a process to which Chicago Atlantic’s in-house real estate team has lent its considerable expertise.
- On August 1, 2023, the REIT advanced $18.8 million, which will fund the opening of 17 dispensaries, at least 15 of which are expected to be operational in late fourth quarter of 2023.
- On July 14, 2023, Chicago Atlantic paid a regular quarterly cash dividend of $0.47 per share of common stock for the second quarter of 2023 to common stockholders of record on June 30, 2023.
Second Quarter 2023 Financial Results
- Net interest income of approximately $13.7 million, representing a sequential decrease of 8.3%; due to the impact of timing of early principal repayments and lower average principal outstanding during the three months ended June 30, 2023 compared to March 31, 2023. Additionally, the decrease reflects the impact of one loan placed on non-accrual status during the quarter which represented approximately $0.6 million of the total decrease. These decreases were partially offset by approximately $0.6 million of interest income from prepayment fees and acceleration of original issue discounts, and a decrease in the weighted average borrowings on the revolving credit facility.
- Total expenses of approximately $3.9 million before provision for current expected credit losses, representing a sequential decrease of 5.8%; primarily attributable to a $0.3 million decrease in net management and incentive fees.
- The total reserve for current expected credit losses of $5.2 million increased sequentially by $1.1 million and amounts to approximately 1.6% of the portfolio principal balance of $318.0 million as of June 30, 2023.
- Distributable Earnings of approximately $10.1 million, or $0.55 per weighted average diluted common share, representing a sequential decrease of 11.3%.
- Book value per common share of $15.06 as of June 30, 2023 compared with $15.04 as of March 31, 2023, primarily due to second quarter distributable earnings in excess of the regular quarterly dividend of $0.47, offset by the increase in the provision for current expected credit losses.
- As of June 30, 2023, the Company had $43.0 million outstanding on its $100.0 million secured credit facility, resulting in a leverage ratio (debt to book equity) of approximately 16%.
Chicago Atlantic affirmed its 2023 outlook previously issued on March 9, 2023.
Conference Call and Quarterly Earnings Supplemental Details
The Company will host a conference call later today at 9:00 a.m. Eastern Time. Interested parties may access the conference call live via webcast on Chicago Atlantic’s investor relations website or may participate via telephone by registering using this online form. Upon registration, all telephone participants will receive the dial-in number along with a unique PIN number that can be used to access the call. A replay of the conference call webcast will be archived on the Company’s website for at least 30 days.
Chicago Atlantic posted its Second Quarter 2023 Earnings Supplemental on the Investor Relations page of its website. Chicago Atlantic routinely posts important information for investors on its website, www.refi.reit. The Company intends to use this website as a means of disclosing material information, for complying with our disclosure obligations under Regulation FD and to post and update investor presentations and similar materials on a regular basis. The Company encourages investors, analysts, the media and others interested in Chicago Atlantic to monitor the Investor Relations page of its website, in addition to following its press releases, SEC filings, publicly available earnings calls, presentations, webcasts and other information posted from time to time on the website. Please visit the IR Resources section of the website to sign up for email notifications.
About Chicago Atlantic Real Estate Finance, Inc.
Chicago Atlantic Real Estate Finance, Inc. (NASDAQ: REFI) is a market-leading commercial mortgage REIT utilizing significant real estate, credit and cannabis expertise to originate senior secured loans primarily to state-licensed cannabis operators in limited-license states in the United States. REFI is part of the Chicago Atlantic platform, which has over 50 employees and has deployed over $1.8 billion across more than 50 loans.
This release contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 that reflect our current views and projections with respect to, among other things, future events and financial performance. Words such as “believes,” “expects,” “will,” “intends,” “plans,” “guidance,” “estimates,” “projects,” “anticipates,” and “future” or similar expressions are intended to identify forward- looking statements. These forward-looking statements, including statements about our future growth and strategies for such growth, are subject to the inherent uncertainties in predicting future results and conditions and are not guarantees of future performance, conditions or results. More information on these risks and other potential factors that could affect our business and financial results is included in our filings with the SEC. New risks and uncertainties arise over time, and it is not possible to predict those events or how they may affect us. We do not undertake any obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, except as required by law.