Chicago Atlantic Real Estate Finance, Inc. Q2 FY2025 earnings call

• Maintained a steady approach in the cannabis equity markets, deploying capital with consumer and product-focused operators in limited license jurisdictions at low leverage profiles.
• Cannabis pipeline increased from $462 million to nearly $650 million. Signed term sheets in the pipeline to offset early Q3 payoffs.
• Extended credit facility from June 30, 2026 to June 30, 2028 with no change to economic terms.
• Loan portfolio details: $421.9 million principal, weighted average yield-to-maturity 16.8%, 40.7% fixed rate and 59.3% floating rate loans.
• Net interest income increased due to nonrecurring fees and incremental gross interest income from new deployments. Interest expense consistent. CECL reserve increased to $4.4 million from $3.3 million. Distributable earnings per share increased, and the first quarter dividend of $0.47 per common share was distributed.

As of June 30, the loan portfolio principal totaled $421.9 million across 30 portfolio companies with a weighted average yield-to-maturity of 16.8%. Net interest income for the second quarter was $14.4 million, a 10.6% increase from $13 million in the first quarter. The cannabis pipeline across the Chicago Atlantic platform increased from $462 million a quarter ago to nearly $650 million today. Distributable earnings per weighted average share on a basic and fully diluted basis were approximately $0.52 and $0.51 for the second quarter, an increase from $0.47 and $0.46 in the first quarter. The portfolio has a loan-to-enterprise value ratio on a weighted average basis of 43.2% as of June 30.

Expect to maintain a dividend payout ratio based on basic distributable earnings per share of 90% to 100% for the 2025 tax year. If taxable income requires additional distributions in excess of the regular quarterly dividend to meet taxable income requirements, a special dividend is expected in the fourth quarter.

• Forward-looking statements are subject to risks and uncertainties that can cause actual results to differ materially from current expectations.
• Cannabis equity market volatility, changes in interest rate policy, and regulatory uncertainties in markets like New York pose risks.

Q: Pablo Zuanic asks about the New York program, how many stores have been funded and the market status.

A: Relationship with the New York Social Equity Fund is strong; they've built close to 23 dispensaries that are operating relatively successfully. The New York market is developing well with a developing wholesale market, improved product quality/diversity, and a developed ecosystem of dispensary operators.

Q: Aaron Grey asks about the pipeline and prepayments.

A: Pipeline growth is due to increased M&A activity, operational and balance sheet restructurings, and growing ESOP sale transactions. Prepayments are difficult to predict but are redeployed into new opportunities; while early Q3 prepayments were large, they are being redeployed into the existing pipeline of opportunities.

Q: Pablo Zuanic asks about market demand and competition.

A: Focus is on consumer and product-focused operators in limited license jurisdictions. There's a wait-and-see approach due to cost of capital options. Having multiple funding sources enhances flexibility in being a competitive partner to borrowers, leading to a higher quality, more diversified portfolio.