REFI - Earnings call 2 2023 | Chicago Atlantic Real Estate Finance, Inc.

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Operator

Thank you for standing by, and welcome to the Chicago Atlantic Real Estate Finance, Inc.

Second Quarter 2023 Earnings Conference Call. [Operator Instructions] As a reminder, today's program is being recorded. And now I'd like to introduce your host for today's program, Tripp Sullivan.

Harry Sullivan

Thank you. morning. Good Chicago results Finance of for the review Call XXXX. Real company's the the Atlantic to Conference Estate to Welcome second quarter

Tony Officer. Officer; Peter On Mazarakis, Co-President; and Andreas will today Interim Sack, Co-President Cappell, Chief Silverman, Chairman; Financial Bodmeier, Investment the Officer; Chief Chief be and Phil Executive call Executive John

SEC. our can in the the Investor Our results in live morning filed found this A with our earnings supplemental section of be is of website, webcast were released press along our release, today. this which made being audio Relations with call available

For of X, call. you are remind those updated and to who made of as listen be the this XXXX, this webcast, herein to remarks the replay will we August today, not that subsequent

review statements expectations. Investors and urged including information date results future risks disclosed other differ call statements that portfolio, to of forward-looking judgment statements filings certain the current may the our potential this represent company's this make from conference Chicago with can to other disclosures various to pipeline within SEC. the subject by Atlantic's company, of the including statements performance and financing our comments and be related laws, prescribed as cause investments, forward-looking During by risks securities carefully of dividends All our meaning of actual to made and and and are materially uncertainties we are activities. the the future the deemed in call, the loans

and turn over Definitions the certain our ahead. are comparable and distributable SEC. of discuss included most Mazarakis. go with in non-GAAP including, to to, measures I'll GAAP earnings to the also Please not distributable non-GAAP but call now measures, reconciliations measures will the John earnings. limited filings these adjusted We

John Mazarakis

the everyone. king risk we morning, lowest of volatility Good at quarter cap premiums fact now After cannabis equity particular, add like can the a yield decades. couple in broader again. that be of sector small soon are financial another Things and level Tripp. in the in Thanks, will

worries in execution I that's add to and these of to creation, the Chicago not, Atlantic. management our you a in distracted. approached of address platform get topics ways we've some of about stress or want recession how lot If a to

Over years, several cycles. there's been X recessions through cycles the collapse past where I've economic competition XX-plus fierce. cycles I've and is catastrophic or where seen

created of Our does managing. No within as evident job we're discuss to New out ] that the than peaks moment. [ fund that that is and deal manager York Peter a State smooth with strategy the partnership we've will better the the trials in

the space. going states of whether high allocation. There's and more in about within There origination front price the show increased we're states a With adult that a actionable The believe of to capital excess financing. decisions to coming investors greatest the leading use new starting leading among in optimism to a remains growing limited-license Missouri. see or lot trends We're M&A are in to robust recognition environment the several online Maryland we that pipeline capital the in deals different also rate that's improved in wholesale that as And the that in balance are good case with with lending, diversified largest than can in of platform, stronger states, this we and and ever transaction $XXX happening as our a medical direct by such isn't grow before industry is activity seen forms well not of quickly, as funded the which away million. things have in loan well-capitalized pricing. portfolio, conservative compression are to experience from a moving own in I team make grow provider sheet improvements states to debt leading

been spots change our disciplined to We're remaining that some have cautiously in picking incredibly to for but We optimistic. time new now, and opportunities. be time could the it cautious pursuit of

Our the opportunity that credit I appropriate other strong could by York to it taking example lead over partnerships. potentially right with a Peter. now an and of great backed New partnership to return is turn will

Peter Sack

for Equity $XX XX, you, to Atlantic Cannabis of the The announced Thank $XXX that million million York has REIT total John. New June New On Chicago this our with Governor partnership the State platform with Hochul York committed and up Fund. accounting to commitment. Social partnership Investment

subject identification due and of is the investment to Our diligence dispensary locations.

of picking these of game and perhaps the have sites been the we at to a be equity and the that our social XX the months. should least has partnership for XX history initiatives building opening to a real is locations. to ball of lent highly fund capital, the dispensaries, fall. This York team they with nearly in operational advanced right Last first $XX in several our estate the industry. expertise And have whole which New million We skilled commitment on new working week, largest

the future take are this to to partnership in why here? York Tony, it the and to that underwriting states. works the make to We you mention from all be don't we legal provider the envision, operational, this replicate If there be industry capital other way capital opportunities come the alongside happen. financial, the could of and this cannabis fortunate New in state has not expertise,

Anthony Cappell

portfolio XX.X% XX yield Good total morning. a March At loan average ago. XX with of June and weighted XX, with portfolio XX.X% of a $XXX across maturity companies commitments at our XX.X% to compared million had loan year

was principal gross $X.X million by originations new which of to unscheduled As That early $X.X existing of offset was only related repayments, expected, of million repayments. originations we $X total to million borrowers. kept with limited

rate XXXX. quarter off floating from based prime rate XX% of remains portfolio XX% last with Our up consistent from June the and

now portfolio in it Reserve Federal rate prime impact their I'll turn to increase the to target we see the yield. week last Andreas. again to and positive With continue raising a X.X%, over rate the on

Andreas Bodmeier

of a our Loan moved under not quarter our and The rest we nonaccrual. the in borrower #X contractual did across a the representative the time this May. The is default first loan performance loan since on not due to this to the place payments borrower For portfolio. specific life decision make experienced platform, as of and nonaccrual

a loan. The on $XX.X has underwriting, recognized As the loan our and accelerated made we and been are approximately we this be is interest the the our are or to under due confident of result, of balance outstanding and principal will of repayment in past obligations pursuit full exercising that process million, obligations. due no we in Due rights stringent accrued remedies whole outstanding income. to current

were we to the revolving our to facility addition that to able increase with upsize of the With are On where bank $XXX within credit syndicate. comfortable million we in the we the are revolver, with capital size. structure the that quarter side, another

As of quarter we end, million had $XX on the outstanding line.

million to million mentioned advance quarter Peter provides end New company an on we $XX.X today, of outstanding the the line of Year that the as on total on with the loan additional drew have in liquidity. earlier, million million and the $XX which $XX subsequent With revolver $XX a

compared XX% levered is at Our of end quarter under equity still XX% year-end. with book at at balance sheet

quarter ratio on a XX.X:X end coverage X.XX:X. consolidated service requirement of of debt compared as was with the Our basis

that very and coverage believe of elevated, REITs these mortgage portfolio yield other the remains on. a among leverage without level have that offer we other risk yields taken we dividend compelling backed Given REITs strong by

from over also we the strong addition, I'll beyond now our coverage turn and extends real In it Phil to underwriting well collateral results. review benefit estate. that to financial

Phillip Silverman

during outstanding from from or income the Andreas. million for principal the X.X% accounted average on May. Total million QX. facility operating in status point million before sequential decreases payout We stock-based during were expenses for QX In for reserve first for a diluted primarily quarter. prime expected principal resulted decrease partially million of the CECL quarter CECL decline our $X.X early $X.XX the during management QX. $XXX compensation, compared offset fees. Thank $X.X the on due incentive as and to by interest by provision as positive Net May, income. fees. revolving of $XXX million second which our the the incentive well XX% ] in a $X.XX quarterly management average the increase our borrowings lower XX%. for lower down weighted approximately share average the in decrease primarily determination basis by was diluted X. QX as approximately increased decrease have XX. The in recognized to $X.X approximately with income impact loan common was of a June principal $X.XX the which by the to and to higher further [ an rate Adjusted $X.X impact The million Year-to-date, nonrecurring QX. decreased XX repayments of quarter you, due distributed a million to distributable These CECL losses of was credit and net in of QX, the million outstanding earnings per loan we ratio X.X%, The as compared interest in provision share $X reversals as $X.XX the in as and partially one The placed weighted one risk attributable of is as offset decrease in nonaccrual credit were driven with the of quarter, quarter for a compared principal of during of per repayments dividend reserve rating $X.XX compared to downgrade to considered QX of we balance dividend well $XX average We QX. a in distributed earnings QX during taxable

XX. fully principal of estate we data, Our a total and to portfolio expected with to reserve these estate basis, and loss macro default X.X% result reflected QX. On remaining environmental the other during which continued as to Approximately rates relative an size probability secured factors principal real collateral. the secured loss contributed of the and contemplates compared third-party rising reserve as by The the increase no QX in compared X.X% of in as rates increase having March XX% benchmark outstanding collateral. in approximately overall are of estimate the provision real to X% environment based loan outstanding during QX. the benchmark is is the further rate of on XX% increase increased partially loss

average a XX, coverage on real estate X.Xx of weighted portfolio of had as June Our XXXX. collateral basis

per $XX.XX of June as as common to XX. increased share book Our of $XX.XX March value with compared XX

Lastly, we affirmed our of our we're Operator, the XXXX I on through issued questions. take to ready based outlook. results first now previously the half would note that have year,

Operator

our question Instructions] Street. [Operator of Mark Smith first from Lake the And line comes from

Mark Smith

give details great. into York give us can this be can deal rates? us you you would kind any on capital additional additional potential additional of timing if details curious of this Just put New Any

John Mazarakis

Unfortunately, published far. we will so stick to what we

risk the in to detailed enough transaction. we associated it's what return of provide think a as can we've I in kind detail. the with borrowers our done line with to past, the guidance In discuss

Mark Smith

fair. [indiscernible] gets see utilization thoughts pipeline that excited? on states. recently forward talked that And ] we that with any maybe maybe you additional I have the That's states new then on Minnesota [indiscernible] recently know gone [ in any or you

John Mazarakis

Ohio, state. it's probably next the

As enough expected. November. initiative have to was you ballot signatures they've the the in That know, gathered on

capable next the it's So our sometime ]. X breath, I little that Florida turn is point next legislature. a course, are XX holding has cautiously state to Florida, ] of We're at way representing should but the the with at our also some operators PA, looking that the we're we bit get rec big. a that portfolio also states feel will [ be And through we those signatures rather although the optimistic would Ohio collected say [ strongly state of rec biggest have in in But probably not turning we and year. harder months, Florida.

Mark Smith

your Okay. And unchanged? level assume probably changing anything the at outlook I is federal on

John Mazarakis

we quite but That requires speculate. can We're crystal not a Yes. ball. there yet,

Mark Smith

pockets anywhere for last headwinds, just call reported Are worse tough The from as or results at me you have we industry industry others new continued of weakness out is to and look seeing pretty the geographically? maybe that here. in question outlook

John Mazarakis

kind I'm result a turning as ground. of have a I puts plateau What on haven't the seen is been the CapEx constantly and weakness, seeing I [indiscernible]. off of

in suspect some what and I upwards. off, seeing ticking is So we're prices kind -- are cases, of leveling

to excel, So is for doing, Darwinian day since consolidation, process, to knows they're X. prepared be there's whoever going a we -- which going what were they're and this

Operator

And Penn comes of Instructions] question next from the line Oppenheimer. our Mitchel [Operator from

Mitchel Penn

on details an we've the terms the of more Can idea you process is provide -- give a how us and of in the seen timing this nonaccrual? And this first the nonaccrual. is time

around So that? more color

John Mazarakis

for very known is Atlantic Chicago Mitch, efficient. being

scheduled a going has report And go I'm we're a to taking to course, that filed to have today. try So of borrower happy sale the place over we it counterclaim. tomorrow. But also

scheduled the right for sale now, is few and we in the have of buyers assets. purchase waiting As tomorrow, to line a

ahead So much we're very of the game.

Mitchel Penn

that $XX.X books? million Terrific. And your on

John Mazarakis

sorry, I'm can repeat that? you Mitch,

Mitchel Penn

The value, carrying loan... value -- that $XX.X the million,

John Mazarakis

Yes, plus ]... of XXX [

Phillip Silverman

is losses been That's that at correct, had income this loan. related And point, we're have of there placed the on to balance Mitchel. are on $XX.X balance sheet about this on The million. been very $XXX,XXX We if sheet it on not to carrying value this recognized loan comfortable that were had be any status. nonaccrual any sufficient the reserves would

Operator

ladies for participation. This Thank does program. conclude session as the and gentlemen, you, well question-and-answer as today's your

You may now disconnect. Good day.

Chicago Atlantic Real Estate Finance (REFI) 9 Aug 232023 Q2 Earnings call transcript