Earnings call transcript Q4 2022

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Operator

Good day and thank you for standing by. Welcome to the AFC Gamma Fourth Quarter 2022 Earnings Call. At this time, all participants are in a listen-only mode. After the speaker’s presentation, there will be a question-and-answer session. [Operator Instructions]

today’s being that advised be conference recorded. is Please hand over Chief to would Officer. now speaker conference to like Katz, I your the today, Legal Gabe Please go ahead.

Gabe Katz

Chief morning. Tannenbaum, ended of Tannenbaum, December AFC Officer. XXXX. I’m our for Financial the Good Head morning Real quarter Executive XX, you our by Officer; this Brett call Kalikow, Leonard fourth year Robyn earnings Kaufman, Chief President; for joining full and joined thank And our Estate; our Gamma’s and all Jonathan

Before Replay in note release XXXX earnings being XX, quarter we website the like this that investor Gamma’s afcgamma.com, and to release press AFC on at begin, I fourth information and would along Investor full call is of our presentation. Relations and XXXX, our year recorded. is posted included portion is February with

includes company’s the and things, yield call in and that conference among current market projections views forward-looking and developments, statements projections other respect anticipated portfolio to, performance future and reflect Today’s financial beyond. with XXXX

These to subject certain actual statements. and cause results factors those could in conditions results uncertainties statements predicting to materially in these and from projected forward-looking are differ future inherent

could to differ and certain periodic SEC recent Please significant Gama’s results materially projections. actual filings the factors with AFC refer from most these statements that cause to for forward-looking

found net be we Gamma’s website. the can most AFC to this a measure investor AFC distributable of distributable presentation refer measure. release will and earnings Reconciliations income, on During non-GAAP comparable call, earnings, Gamma’s which financial available is to earnings GAAP in

remarks for our then and quarter our and call open Brett financial will is as results of performance The the will Len fourth commentary. follows, provide today’s lines format introductory summarize will Q&A. for and we strategic overview

now With turn Executive Leonard to Officer, call Tannenbaum. Chief the that, over our will I

Leonard Tannenbaum

joining morning. execute our fourth analysts ending Good us AFC Gamma’s Gabe. for to thank and during would XX, And and our year business XXXX. pleased December call discuss to I quarter our full for on like to plan results. fourth to continued XXXX. investors the welcome am quarter today of you, to I earnings Thank have the

distributable weighted average $X.XX generated share Gamma of stock. earnings AMC common per of

reminder, a Gamma’s when dividend. Board the considers distributable primary As earnings AFC metric quarterly the declaring that is

Directors out distributable dividend Since per the during out share of line XXXX earnings including fiscal of paying with year. excess a which in December previous public, quarters. declared $X.XX is Board per in dividends quarter, The we each share the in share, $X.XX our generated have for our and per three going paid quarter dividend $X.XX in

AFC For in XX% dividends. paid the year of approximately full XXXX, Gamma out of the earnings distributable form

XXXX. For a XX, the fourth of quarter March on dividend, of April which XX, Board record be shareholders as declared XXXX, has of of Directors will paid $X.XX to the consecutive XXXX, first

variety factors, During lead XXXX, raise the longer during pressure cannabis a equity. the including market to times uncertainty change, of of regulatory faced compression, pricing

During without this of time, borrowers diligence our criteria. liquidity relenting made existing decision our advantage the on stringent support environment, calculated take to to Gamma build future monitor AFC and due opportunities the

originated the not investments our thresholds that months. return risk-adjusted cannabis past any have result, As over new we a debt nine met

form We existing believe purchasing significantly cannabis target assets emerge with X.X sophisticated operators. opportunistic prices who reduced acquirers well-capitalized that Cannabis and will to at competitive will new multistate

and they units In seeing are forward construction next monitoring capital non-profitable platforms. investments wave the pricing continually we meantime, expansion business inflation, on businesses and many current of pause the around their close rates, look formation as well-funded to financing adjust opportunities of and/or take a operators these to right-size are We cannabis pressure. the delays rising and

We and AFC are has certain to set strong present. the in our states market risks credit Gamma Industry-wide broader cannabis focus have portfolio up license constructed, pressures and targeting carefully limited been have reserves. not mitigate cannabis pressures to operators we our generate resulted on that the returns. immune effects us risk-adjusted believe taking believe we higher Although that

of Oklahoma We and Colorado are with with dialogue their have loans portfolio, enterprise continue our continued the as not our Michigan. our basis. on coverage we many actively exposure equity limited of with to have to borrowers our an We to exposure Oregon, we California, license and manage infusions. support states value to have or general, In having business comfortable borrowers unlimited such regular additional Washington,

downgraded one under CECL Category a we to During from the loans analysis. X a Category larger of X quarter, our

to to While the credit prudent felt loan current Category that against down move reserves still and is performing, it asset we additional that. X given a environment was uncertainty, the and the take

reserve more XXXX, the CECL challenging we have December our X.XX% XX, XX, of as from increased environment, September credit Given and to XXXX. as X.X% market of broader

real position state our With and the expand to estate investment opportunities. strong our we include liquidity the decision investing cannabis market, the commercial have and in of compelling financing first-lien to made second-lien strategy

reduced Gamma invest risk-adjusted environment, which void have lending traditional current their with such interest yields to enhanced a market AFC the banks activity, as deals returns. the estate created lenders In rate for in has in real strong and

in are opportunistically To and construction. in loans, commercial real investing we focused direct commercial loans, real leveraging our team’s that construction management loans, core estate on estate end, bridge competency, lending

as opportunity efforts commercial estate view the to our real in We real cannabis source non-cannabis origination both estate loans and lending sizable. non-cannabis and have expanded

continue as commercial finance capital to We the adjust believe to new needed will values real origination and estate real be estate growth. is opportunistic that more in lending environment

matured commercial as billion which mortgages that the even expect should a $XXX.X alternative in increase With XXXX. billion for could mature That’s in additional $XXX lenders non-bank the by multifamily back, that Bankers Association, number will we example, banks lenders be higher, for Mortgage XX% $X.X is the which the AFC XXXX. finance. pulling of held to from trillion, opportunities Gamma outstanding of provide For XX% such and

capital while allow delivering to to us opportunities consistent a are are real to we that evaluating slower We that in of advantage activity estate patient, attractive take of coming investments As commercial our and a be the for our commercial we portfolio’s the power, that current have while may shareholders. real our result has transaction returns. earnings dividend risk will both than market. available non-cannabis ability this usual, volatile be Overall, believe been estate

in internally we nine commercial estate that course implemented have forming pipeline various these evaluate past deals. source The been We’ve has developed months. procedures and the real over processes the and of to

our non-cannabis that first of in commercial evaluating real number a deals have XX real next loan loan and commercial -- anticipate days. estate we We closing estate non-cannabis we’re the

the company’s to to has determined external of internalization with committee right noted around I was Board a independent lead special potential early market our thinking Ultimately, a the this internalization. that our an the formed forward special time Last quarter, manager. of that the move disinterested and members not in committee

the Looking well ahead, AFC navigate our positioned that to strong believe and our Gamma returns. positioning, market about with opportunistically I’m portfolio excited risk-adjusted and market is deals capital invest We environment set. composition opportunity current our in

I will Brett to our call now to results. review financial the over turn

Brett Kaufman

you, Len. Thank

share. of we Beginning to quarter for results $X.XX quarter We fourth pleased of common $X.X or weighted are earnings our XX, XXXX. report million December income fourth ended the strong GAAP per basic with net average had XXXX, in and results, quarterly the fiscal

common $XX.X XXXX interest XX, the XXXX, basic total million of ended million million. weighted For $X.XX average We $XXX $XX.X assets the fourth of share. per net we earnings months or and quarter of generated three ended December of with income distributable

spread common $X.XX On or basis, $XX.X XX common average In million $XX.X basic outstanding share. of an basic of $XX.X XXXX, $XXX.X per income and earned of we earnings the year December $X.XX of borrowers. million ended million ended fourth share. per XXXX annual of net principal the XXXX, of average weighted We million for earnings distributable generated with quarter income XX, across interest we net GAAP weighted or

loans. $XXX.X $XXX such current December X, Gamma’s March portfolio loan average was million across portfolio is XX% loan of over of maturity, for to of and with weighted X, which consisted as XXXX. life AFC XXXX, of XX March funded As approximately XX, each yield million XXXX, the measured The of commitments,

gains the is to overall distributable of with we GAAP, stockholders providing assessing believe represents as accordance any excluding mentioned, known losses, in or in Gamma’s REIT losses, income or net or items expense, for income income as in As AFC earnings loss earnings net non-cash subsidiary provision for previously unrealized performance also CECL, and business. current loss items period. recorded expected credit the such Distributable taxable compensation helpful the computed stock non-cash other

carrying XXXX, reserve Flower of approximately value, compared the our As December currently non-accrual, XXXX. September X.X% of one borrower, our at We portfolio. loans approximately XX, X.X% to represents which One at XX, X.XX% on have of represents CECL

$X.XX AFC common Gamma fourth dividend paid of per a quarter share.

out of paid have our earnings. XX% distributable of XXXX, During approximately we dividends

dividend our to basis, XX% over year. XXX% distributable of reminder, As between an annual a on earnings is pay policy the and

which quarter a paid be first March shareholders to April the Directors of of fourth $X.XX XXXX, of the dividend, XX, For will Board of record declared as XXXX. consecutive XX, on XXXX,

our take at Next, a let’s balance sheet, strong. which look remains

cash of with had of XXXX, approximately is our December liquidity Currently, X, earning to cash million and equivalents of our of X% $XXX.X XXXX, As line as majority XX, March is in we and position balance. the cash our generally X.X%. December

was As per value total XX, and was of December $XXX.X $XX.XX. stockholders’ million equity XXXX, our book share our

With to it the to Operator? Q&A. back that, over will Operator turn now the I start

Operator

Hutton Group. Gaurav first Our Instructions] [Operator Mehta you. Thank from question from comes

is line Your open.

Gaurav Mehta

ask to talked on real for to you color taking CRE what you be guys expect you of Can kind lending Thanks assets lending estate I big real on the maybe wanted under would you about. targeting question. that do morning. non-cannabis book that how and you become? provide some Good my estate

Leonard Tannenbaum

a So We properties in experience of we’re the given and taking here think well. already owned I types. general. our We’ve industrial I of looking at area variety commercial -- different have non-cannabis and have estate in in do our looking a so real all we’re we between as construction -- at area approach, asset affiliates think cannabis all expertise some taken modest the

I the would construction. targeting think multifamily we’re

commercial some We’re obviously that real look in. the realizing state at it’s estate, the a taking of

have of of values lot have very industrial. So you course, have to a in loan expertise there, tight to and we

REIT for So that’s to easy industrial transition us an part to.

-- at to safe we’re not be here. we’re at but going looking them not So all them, we’re very are aggressive of we I manners. looking take in mean

Gaurav Mehta

Okay.

Leonard Tannenbaum

current more up year. guess the could year percent the My of And think -- towards is this portfolio going at end the be of end end do XX-XX this balanced year. what by the to I calendar that’s

Gaurav Mehta

a you to as you traditional Okay. are I versus, sources lending? guess, in available guys capital cannabis expect Do change result of purely investing that lending CRE

Leonard Tannenbaum

good to have we if be news non-cannabis able good to is to the going The I able more -- news. assets. that’s going be leverage believe lot take Well, we’re we’re to a

and industry cannabis much of those and it’s that lenders into I want think And primarily move non-cannabis. are as lend terms in assets to first-lien limited. second-lien in very more broad the that to we

So we’ll pool that of bifurcate better be and able achieve asset to sources leverage.

Gaurav Mehta

can lastly, what get color non-cannabis to And do you yields expect on of kind you lending? Okay. provide on some the

Leonard Tannenbaum

We which still between we’ve changed that had not our yield range is XX% for somewhere a XX%. while, and have

and good see overall news. is never quarter up. again. good The field the news that’s So each our is held what it actually until you XX% it’s I can know that at calculated

very the and and opportunities far, strong yields. encouraged So to environment, the so we’re able by been we’ve in environment maintain really the

Gaurav Mehta

Okay. Thank you. I had. all That’s

Operator

Thank our question. you. One moment next for

from Michael comes Cowen. Elias question next from Our

open. Your line is

Michael Elias

questions. for Great. taking the Thanks

prior to Just on double the question. click

us subsectors wondering Given I a that perspective. the more for And secondly, yield estate the the for guys. for was to dividend, around yield on space, credit potential in question estate dividend XX%, the just of stack lending the levels Thank do environment? in for uncertain seeing see expertise the you rank real commercial if a what real then, macro philosophical you. that you’re are, you argument is this believe from gross to based you you extent into your just could dividend do be retaining of made your an current and you’re With to you holding getting capital your

Leonard Tannenbaum

we’re -- at deserve. think Yes. make is this dividend. don’t want that to level paid to I first. the that question appropriate think of I we’re don’t going -- I getting an we to for shareholders time, same Second distribution really they

we’ve see And able be each XX% think of so quarter. But so paying continue far, there’s course, appropriate earn going that us area each dividend probably there, quarter. I our XX%, you of can earnings variance been to is and

it ago, to doesn’t at five which environment, the cannabis. months months back months time. -- that to deal Looking me opportunity. really it It a me months to same pulled banks long estate surprising does takes close a commercial -- real take to this to amazing takes six the It four the create and two creates just

started the they five-month you of months getting finally And pipeline of to nine now so of close the saying towards that that or end have the ago, of it’s can get two-month are they they number end not deals sort but though period close. where we developing closed, the towards

rank When because rank, for we’re to hard done looking years and firm. the for done previous billion XX direct I’ve at my way of this lending you force to it, force it’s in want this I’ve $X

significant we I equity So general what have we what philosophy capital below I value below do a call, us. enterprise just structure is, where us as a have and being, significant investor,

did did was markets should where enough and there cushion cannabis, apart, still make covered. same the sure We we we feel in thing they to which wanted the fall

that needed cushion. we -- So we and but needed --

same real estate I think way. the the

that of minimize people and don’t and risky. maximize to an lender taking estate amount to of we this of You be try want equity I relationships very investments can we want find We the the over different properties, be debt amount space. see the want to real and institutional

So we have we’re lower equity, and loan-to-cost, for those lower across across sectors. -- enterprise because we have I we’re significant But expertise looking situations looking value sectors, looking where loan-to-value. really

Michael Elias

had. Great. all the Thanks I for color. That’s Thanks.

Operator

Thank no I’d remarks. the to back turn Len to like for call Mr. you. other questions And there in closing the are Tannenbaum queue.

Leonard Tannenbaum

reporting Thank since look too forward end Thank not for you. first everyone listening. was future We quarter our year you to results. this distant our

Operator

call. conference participating. you today’s for concludes This you. Thank Thank

disconnect. now may You

AFC Gamma (AFCG) 7 Mar 232022 Q4 Earnings call transcript