Chicago Atlantic Real Estate Finance, Inc. Q3 FY2025 earnings call

• Demonstrated consistent execution and performance in a volatile private credit environment, with gross originations on pace for net growth in the loan portfolio. - Cannabis pipeline stood at approximately $441 million, diversified across growth investments, maturities, M&A, and ESOP sales. - Deployed capital with consumer and product-focused operators in limited license jurisdictions at low leverage profiles, including funding a $75 million 3-year secured revolver with Verano. - Portfolio has a differentiated risk-return profile insulated from cannabis equity and interest rate volatility, with floating rate loans having interest rate floors protecting 86% of the portfolio. - Management and Board purchased shares, increasing collective ownership to nearly 1.8 million shares.

As of September 30, 2025, the loan portfolio principal totaled approximately $400 million across 26 portfolio companies. Gross originations during the quarter were $39.5 million, with $11 million advanced to a new borrower and $20 million related to the Verano credit facility, offset by unscheduled principal repayments of $62.7 million. The portfolio consisted of 36.7% fixed rate loans and 63.3% floating rate loans (primarily benchmarked to prime rate), with only 14% exposed to further rate declines after the 25 basis point rate reduction. Net interest income for Q3 was $13.7 million, down 5.1% from Q2. Interest expense was $1.6 million, down from $2.1 million. The CECL reserve on loans held for investment was $5 million. Distributable earnings per weighted average share were approximately $0.50 (basic) and $0.49 (fully diluted) for Q3, down from prior quarter. Book value per common share outstanding was $14.71 as of September 30.

• Expect to maintain a dividend payout ratio of 90% to 100% of basic distributable earnings per share for the 2025 tax year. - If additional distributions are needed, a special dividend may be paid in the fourth quarter. - Gross originations are on pace to hit net growth goal in the loan portfolio.

• Volatile private credit environment, including declining interest rates impacting floating rate portfolios, syndicated loan market concerns (fraud, excess capital, underwriting standards), leading to trading at a discount to book value. - Uncertainty around cannabis industry reforms, affecting loan-to-value ratios and cash flow dynamics of operators. - Uncertain tax provisions for MSOs (280E) and their impact on borrowers' ability to service debt.

Q: Talk about the pipeline, especially ESOPs and maturing loans.

A: ESOPs remain a large part of the pipeline with ordinary churn. Most maturing loans before year-end are expected to be retained in some form.

Q: Approach to underwriting and LTVs in a potential reform scenario.

A: Underwriting focuses on market analysis, supply chain, limited license jurisdictions, diverse earnings streams, conservative leverage. LTVs could change based on cash flow dynamics and equity interest in the sector post-reform.

Q: Competition from banks in the cannabis space and New York lending program.

A: Welcomes banks as partners, sees them as integral to the lending ecosystem. New York Social Equity Fund has paused additional capital draws but is ready to support if they resume.