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.”
Portfolio Performance
- 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.
Investment Activity
- 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.
Dividends
- 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%.
2023 OutlookChicago Atlantic
affirmed its 2023 outlook previously issued on March 9, 2023.
Conference Call
and Quarterly
Earnings Supplemental
DetailsThe 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.
Forward-Looking StatementsThis
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.
Contact: Tripp Sullivan SCR Partners(615)
942-7077IR@REFI.reit
CHICAGO ATLANTIC REAL ESTATE FINANCE,
INC.CONSOLIDATED BALANCE SHEETS |
|
|
|
June 30,2023
(unaudited) |
|
|
December 31,2022 |
|
Assets |
|
|
|
|
|
|
Loans held for investment |
|
$ |
314,539,900 |
|
|
$ |
339,273,538 |
|
Current expected credit loss reserve |
|
|
(5,121,577 |
) |
|
|
(3,940,939 |
) |
Loans held for investment at carrying value, net |
|
|
309,415,323 |
|
|
|
335,332,599 |
|
Cash |
|
|
18,020,688 |
|
|
|
5,715,827 |
|
Debt securities, at fair value |
|
|
877,610 |
|
|
|
|
|
Interest receivable |
|
|
944,812 |
|
|
|
1,204,412 |
|
Other receivables and assets, net |
|
|
1,010,720 |
|
|
|
1,018,212 |
|
Related party receivables |
|
|
237,885 |
|
|
|
- |
|
Total
Assets |
|
$ |
330,557,038 |
|
|
$ |
343,271,050 |
|
|
|
|
|
|
|
|
|
|
Liabilities |
|
|
|
|
|
|
|
|
Revolving loan |
|
$ |
43,000,000 |
|
|
$ |
58,000,000 |
|
Dividend payable |
|
|
8,708,161 |
|
|
|
13,618,591 |
|
Management and incentive fees payable |
|
|
1,799,667 |
|
|
|
3,295,600 |
|
Related party payable |
|
|
1,601,773 |
|
|
|
1,397,515 |
|
Accounts payable and other liabilities |
|
|
1,415,612 |
|
|
|
1,058,128 |
|
Interest reserve |
|
|
341,951 |
|
|
|
1,868,193 |
|
Total
Liabilities |
|
|
56,867,164 |
|
|
|
79,238,027 |
|
Commitments and
contingencies (Note 8) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stockholders’
equity |
|
|
|
|
|
|
|
|
Common stock, par value $0.01 per share, 100,000,000 shares
authorized and 18,175,393 and 17,766,936 shares issued and
outstanding, respectively |
|
|
181,754 |
|
|
|
176,859 |
|
Additional paid-in-capital |
|
|
276,405,754 |
|
|
|
268,995,848 |
|
Accumulated earnings (deficit) |
|
|
(2,897,634 |
) |
|
|
(5,139,684 |
) |
Total stockholders’
equity |
|
|
273,689,874 |
|
|
|
264,033,023 |
|
Total liabilities and
stockholders’ equity |
|
$ |
330,557,038 |
|
|
$ |
343,271,050 |
|
|
CHICAGO ATLANTIC REAL ESTATE FINANCE,
INC.CONSOLIDATED STATEMENTS OF
INCOME(UNAUDITED) |
|
|
|
For
thethree monthsended |
|
|
For
thethree monthsended |
|
|
For
thethree monthsended |
|
|
|
June 30, 2023 |
|
|
March 31,2023 |
|
|
June 30, 2022 |
|
Revenues |
|
|
|
|
|
|
|
|
|
Interest income |
|
$ |
14,659,222 |
|
|
$ |
16,527,304 |
|
|
$ |
11,850,028 |
|
Interest expense |
|
|
(994,926 |
) |
|
|
(1,618,296 |
) |
|
|
(449,556 |
) |
Net interest
income |
|
|
13,664,296 |
|
|
|
14,909,008 |
|
|
|
11,400,472 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Expenses |
|
|
|
|
|
|
|
|
|
|
|
|
Management and incentive fees,
net |
|
|
1,799,667 |
|
|
|
2,138,005 |
|
|
|
1,247,561 |
|
General and administrative
expense |
|
|
1,280,401 |
|
|
|
1,274,825 |
|
|
|
777,212 |
|
Professional fees |
|
|
537,894 |
|
|
|
569,375 |
|
|
|
743,670 |
|
Stock based compensation |
|
|
263,844 |
|
|
|
138,335 |
|
|
|
122,525 |
|
Provision for current expected
credit losses |
|
|
1,139,112 |
|
|
|
96,119 |
|
|
|
1,045,665 |
|
Total
expenses |
|
|
5,020,918 |
|
|
|
4,216,659 |
|
|
|
3,936,633 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net Income before
income taxes |
|
|
8,643,378 |
|
|
|
10,692,349 |
|
|
|
7,463,839 |
|
Income tax expense |
|
|
- |
|
|
|
- |
|
|
|
- |
|
Net
Income |
|
$ |
8,643,378 |
|
|
$ |
10,692,349 |
|
|
$ |
7,463,839 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings per common
share: |
|
|
|
|
|
|
|
|
|
|
|
|
Basic earnings per common
share (in dollars per share) |
|
$ |
0.48 |
|
|
$ |
0.60 |
|
|
$ |
0.42 |
|
Diluted earnings per common
share (in dollars per share) |
|
$ |
0.47 |
|
|
$ |
0.60 |
|
|
$ |
0.42 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average
number of common shares outstanding: |
|
|
|
|
|
|
|
|
|
|
|
|
Basic weighted average shares
of common stock outstanding (in shares) |
|
|
18,094,288 |
|
|
|
17,879,444 |
|
|
|
17,657,913 |
|
Diluted weighted average
shares of common stock outstanding (in shares) |
|
|
18,273,512 |
|
|
|
17,960,103 |
|
|
|
17,752,413 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Distributable Earnings and Adjusted Distributable
Earnings
In addition to using certain financial metrics prepared in
accordance with GAAP to evaluate our performance, we also use
Distributable Earnings and Adjusted Distributable Earnings to
evaluate our performance. Each of Distributable Earnings and
Adjusted Distributable Earnings is a measure that is not prepared
in accordance with GAAP. We define Distributable Earnings as, for a
specified period, the net income (loss) computed in accordance with
GAAP, excluding (i) non-cash equity compensation expense, (ii)
depreciation and amortization, (iii) any unrealized gains, losses
or other non-cash items recorded in net income (loss) for the
period, regardless of whether such items are included in other
comprehensive income or loss, or in net income (loss); provided
that Distributable Earnings does not exclude, in the case of
investments with a deferred interest feature (such as OID, debt
instruments with PIK interest and zero coupon securities), accrued
income that we have not yet received in cash, (iv) provision for
current expected credit losses and (v) one-time events pursuant to
changes in GAAP and certain non-cash charges, in each case after
discussions between our Manager and our independent directors and
after approval by a majority of such independent directors. We
define Adjusted Distributable Earnings, for a specified period, as
Distributable Earnings excluding certain non-recurring
organizational expenses (such as one-time expenses related to our
formation and start-up).
We believe providing Distributable Earnings and Adjusted
Distributable Earnings on a supplemental basis to our net income as
determined in accordance with GAAP is helpful to stockholders in
assessing the overall performance of our business. As a REIT, we
are required to distribute at least 90% of our annual REIT taxable
income and to pay tax at regular corporate rates to the extent that
we annually distribute less than 100% of such taxable income. Given
these requirements and our belief that dividends are generally one
of the principal reasons that stockholders invest in our common
stock, we generally intend to attempt to pay dividends to our
stockholders in an amount equal to our net taxable income, if and
to the extent authorized by our Board. Distributable Earnings is
one of many factors considered by our Board in authorizing
dividends and, while not a direct measure of net taxable income,
over time, the measure can be considered a useful indicator of our
dividends.
In our Annual Report on Form 10-K, we defined Distributable
Earnings so that, in addition to the exclusions noted above, the
term also excluded from net income Incentive Compensation paid to
our Manager. We believe that revising the term Distributable
Earnings so that it is presented net of Incentive Compensation,
while not a direct measure of net taxable income, over time, can be
considered a more useful indicator of our ability to pay dividends.
This adjustment to the calculation of Distributable Earnings has no
impact on period-to-period comparisons.
Distributable Earnings and Adjusted Distributable Earnings
should not be considered as substitutes for GAAP net income. We
caution readers that our methodology for calculating Distributable
Earnings and Adjusted Distributable Earnings may differ from the
methodologies employed by other REITs to calculate the same or
similar supplemental performance measures, and as a result, our
reported Distributable Earnings and Adjusted Distributable Earnings
may not be comparable to similar measures presented by other
REITs.
|
|
|
|
|
|
|
|
|
|
|
|
For
thethree monthsended |
|
|
For
thethree monthsended |
|
|
For
thethree monthsended |
|
|
|
June 30, 2023 |
|
|
March 31, 2023 |
|
|
June 30, 2022 |
|
Net Income |
|
$ |
8,643,378 |
|
|
|
10,692,349 |
|
|
|
7,463,839 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjustments to net
income |
|
|
|
|
|
|
|
|
|
|
|
|
Non-cash equity compensation
expense |
|
|
263,844 |
|
|
|
138,335 |
|
|
|
122,525 |
|
Depreciation and
amortization |
|
|
91,798 |
|
|
|
167,304 |
|
|
|
168,826 |
|
Provision for current expected
credit losses |
|
|
1,139,112 |
|
|
|
96,119 |
|
|
|
1,045,665 |
|
Distributable
Earnings |
|
|
10,138,132 |
|
|
|
11,094,107 |
|
|
|
8,800,855 |
|
Adjustments to
Distributable Earnings |
|
|
- |
|
|
|
- |
|
|
|
- |
|
Adjusted Distributable
Earnings |
|
|
10,138,132 |
|
|
|
11,094,107 |
|
|
|
8,800,855 |
|
Basic distributable earnings
per common share (in dollars per share) |
|
$ |
0.56 |
|
|
$ |
0.62 |
|
|
$ |
0.50 |
|
Diluted distributable earnings
per common share (in dollars per share) |
|
$ |
0.55 |
|
|
$ |
0.62 |
|
|
$ |
0.50 |
|
Weighted average
number of common shares outstanding: |
|
|
|
|
|
|
|
|
|
|
|
|
Basic weighted average shares
of common stock outstanding (in shares) |
|
|
18,094,288 |
|
|
|
17,879,444 |
|
|
|
17,657,913 |
|
Diluted weighted average
shares of common stock outstanding (in shares) |
|
|
18,273,512 |
|
|
|
17,960,103 |
|
|
|
17,752,413 |
|
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