REFI - Earnings call transcript Q3 2024 | Chicago Atlantic Real Estate Finance, Inc.

Due to licensing restrictions, you must log in to view earnings call transcripts.

Operator

Good day, and welcome to the Chicago Atlantic Real Estate Finance Third Quarter 2024 Earnings Call. [Operator Instructions] Please note, this event is being recorded. I would now like to turn the conference over to Tripp Sullivan, Investor Relations. Please go ahead.

Harry Sullivan

Thank you. morning. Good Chicago results. Finance the review call Real company's the Atlantic to conference Estate to Welcome

call will Phillip the Kite, Officer. On today Chief Officer; Co-Chief Operating David Executive Officer; and Silverman, Financial be Chief Peter Sack,

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

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

During this dividends the and of and our meaning we the prescribed future may call, by of other portfolio, the investments, our future be performance pipeline including statements potential to make deemed securities loans financing forward-looking related within comments certain statements laws, activities. and statements

All risks carefully cause including in forward-looking filings this our and Atlantic's disclosures and with of risk Chicago materially to differ Investors call are current by the the as made disclosed SEC. uncertainties various the date other the from expectations. and the are judgment of statements information results to represent urged subject review company's that to conference company, actual can

reconciliations also with and filings and to limited non-GAAP our the adjusted measures We will comparable included these measures, SEC. earnings in measures certain most not to, distributable of distributable discuss including, but non-GAAP earnings. are the Definitions GAAP

turn Sack. go now Please ahead. I'll call over the Peter to

Peter Sack

Dakotas, pass. adult-use this adult-use would cannabis, the voters of they individual of week, program. cultural Nebraska rejected the on Florida and majority overwhelmingly to measure are voters This the initiatives to XX% enmeshed cannabis. invest. supported fascinating is And operate have debates times short a a a in approved legalized threshold in voters cannabis Tripp. that health in and Thanks, Cannabis justice, identity. morning, choice everyone. needed for business uniquely wellness, criminal and medical legalization fell These Good of country's but

MSOS, ETF tracks fell more On by than which equities, cannabis U.S. this the news XX%. yesterday,

Real usual, as Finance, Atlantic enthusiastic Chicago Estate is For we and business as are it ever. as

we inception, the mortgage to unique execute real markets differentiated estate includes focus. most expansive commercial the industry protection We We platform and operational and diligence, with the analytics do and in market. because the that operators markets REIT attractive returns serving of so our focused below strongest traditional known underwriting, well in can for on to most fundamental and aim platform teams. private and leverage build mortgage well our credit investment underwrite through We From downside returns an industry's origination, an the a market levels above position traditional competitive volatility.

the always, understanding portfolio. expectation of as The not we quality principle limited change regulatory is of to events, upon collateral focus our license and based our comfortable of and Florida coverage, or our refi. the little on fundamental investments debt service medical election results of our deep speculative continuance represents markets. And political assuming that X% We the invest do existing underwrote Florida for market.

risk-adjusted we expertise basis on returns focus campaign position. on which an is which promises its executive to generating of bipartisan invest. not Senate in likely will endorsed Florida progress as federal that President-elect effort. Trump a such can Real occur up initiatives by the in action Republican we focus translation Estate Finance The on unique in SAFE passage as do We other House of Atlantic has would continue disciplined conceivably, Chicago speculate, and X and investment. could will Still believe and Banking. on opened but And is to the for congressional opportunities rescheduling aligned arena an Amendment differentiated XXXX additional have competitive the facilitate

million, positions we earnings to results The those has medical continue the license states adult transition across to positive from of Atlantic in Today, fruits and $XXX to use. prioritize limited that and platform we QX the grown reflect Chicago efforts. subsequent pipeline and events these to report operators

interest Last $XX into We private exploring rate of accretive be have we from million of the loan in in without unsecured liquidity at to repaid loan capital accelerate part loan and excess October million may In may fund a in bears matures noted new $XX The unsecured next. October, we platforms. quarter, interest-only X repaid of whole time. X lending year this deployment be to institutional or we our in investments. XXXX, penalty. sources years, X% other term that were any entered After and fixed a

BBB+ Egan-Jones from unsecured also and of loan. both a rating term the this company on We received

I team there management points data that to highlight like Before like close, execution. congratulate our for which X on at to I'd and are I'd portfolio

to First, on declines. interest rate have in interest to rates, exposure taken touch successfully actions limit we our David which will more on benchmark detail,

and XXXX XXXX of you of through $XX $XX track, on nonaccrual accrued with don't full extended new were and here? million loans entered Second, we David, $XXX credit retained million transition has successfully from remains rate it this maturities, portfolio's Loan recovery management take maturing improved excluding million with risk. million loans amendment. year, on our why principal were interest. we which every of this the By we available throughout with in repaid these status. and quality $XX #X, terms extended and metric

David Kite

morning. Good Thanks, Peter.

XX Peter XX.X% across XX, to As weighted totaled at XX.X%. million our yield of and due floating reflects portfolio improving in rate prime average companies also portfolio of September primarily down to maturity a $XXX basis XX collateral the better amendments the with June loan XX work That's rate our from across to point It repricing performance. our decrease related earlier borrower portfolio. mentioned around

quarter, quarter credit fourth facility we the $XX an the and $X.X additional originations which funded to existing was To of million an Illinois. date, were million and including new operator principal $XX.X Gross originations, funded to $XX in new million million respectively. a of $XX.X funding, million during in borrowers borrowers, of

Peter we've on year. executed how noted earlier maturities well this our

a rate environment. managed declining Another point portfolio is the to highlight how throughout we've

rate floors prime the based rate. rate rate of prime greater and fixed the prime the increasing Reserve. rates. rate loans comprised protect basis year-end X.X% on to cuts we last interest the to to this portfolio loans achieved portfolio our interest hard of was Federal loan XX from X%. floors During by cut by yield approximately And a certain XX% outstanding fixed rate points XX focused our amendments floating prevailing equal and against converting of principal loans to with have was worked XXXX, on We months, further or through series than At

October this As to increased of percentage XX, XXXX, has approximately XX%.

XX% interest loans be and uncertainty rates. cuts, to increase decreased on In rate of and tariffs with summary, portfolio possible for fixed floating but Meanwhile, floating potential rate to stimuli, percentage leaves our exposure imports all escalation Middle at we cuts Europe take the mix decide a is course medium- and the the of exposed to Federal not we've rate XX% economic regard tax current levels, our that long-term current the East rates, create expect and The well portfolio and interest in positioned. reverse interest us the and should caps of the advantage of able remains by additional rate approximately to to to Reserve wars

year-end. equity quarter was at XX% compared end XX% of at to book leverage Total at

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

size During quarter, of facility the credit increased the in total. to revolving again we our $XXX million

term to facility. $XX XX, we repay borrowings outstanding had of amount Subsequent credit and loan proceeds full the outstanding down the new the revolving million As unsecured to quarter on the on our used we drew September end, facility. temporarily on

and million now revolving on turn Phil. of available $XX.X million As over facility we of it $XX.X I'll borrowing credit today, have to outstanding the capacity.

Phillip Silverman

David. Thanks,

from Our cash for second the quarter from increased by $XX.X net quarter. interest amortization X% interest $X.X fees discounts million unused the comparable period. interest, income and for or Gross income the to million interest, increased $XX.X PIK third million of recurring during

X% during million. $X.X such we received and of with decreased $XX.X of compared compared due with during loans approximately the of $XX.X average million quarter to the QX, lower second third we million approximately during weighted $XX.X Interest quarter borrowings recognized $X.X during the During by third second third quarter, expenses exit totaling million the connection quarter. of million million quarter. $X.X repayment these full during In with repayments fees modestly X to fees the prepayment

the expenses Total $X.X credit before provision at operating million. quarter-over-quarter remained consistent approximately for losses

million XXXX, loans Our our on as compared with of September XXXX. of held expected CECL as size X.X% $X.X of of investment. basis, million $X.X outstanding June And represents credit losses principal relative reserve approximately a was for XX, our for reserve XX,

subsequently $X.X and In the a decreased for sold $XX held-for-sale Loan the quarter, #X party of the at we million million. at During connection transferred classification was losses principal credit third of with by approximately sale, provision par. to

risk the June of to the approximately XX. portfolio basis XX XX% of as or with quality of compared portfolio of carrying XX% better X risk value Credit as rated at a on improved September rating

rating on million. Loan is and nonaccrual remains $X.X included #X reserve of credit carries for status and #X risk in a losses approximately

together full In September Loan and in quarter # no quarter risk is This reserve payable. of we applicable repayment interest received at October, rating of with XX a loan end, fees X XX, and carry as subsequent CECL to included end. all

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

dividend Adjusted $X.XX with In consistent third quarter distributed last share regular the common distributable average the of QX $X.XX our and earnings per Board prior quarter declared the share, second quarter XXXX of for year. $X.XX compared October, which the per by was we for diluted with was quarter. third weighted

as million XX. share value Our XX diluted and approximately of On shares basis, per $XX.XX September of XX. both common of XX with there September book June June are XX.X compared was $XX.XX fully outstanding a common as as

Lastly, previously Operator, to take we've questions. we're March affirmed ready our XX. now issued on guidance

Operator

Street And Capital. Mark comes from question the Smith Lake with first

Mark Smith

First for question me.

changes addressed curious, the as we a But look market election seeing, any update industry lot be states? You results would places the kind seems certain you. today, the improving? what industry on a you're weakness Any be where in of to kind kind general potential great. for core and and of Just cannabis any of at I'm of

Peter Sack

another operators. and loans, pivot built emerging markets relatively We the -- portfolio our of platform and to quickly. the for to market -- the those of part to our are we of duration that we've one and our of And the of -- mature nascent underwrite we that portfolio dissect markets question. markets, Thanks in originate of on our that's because active portfolio we're markets. terms duration Sure. new from our and and management of to segments able are states part And tend focus

and looking operators to Maryland We're that expanding of core spending operators, of these brands a their lot operators, effort the the on Missouri in region another are to country their leveraging operators market one are and are of generally into region success markets. expand neighboring And perhaps Ohio from that country.

thinking there is, market because And whole uncorrelated time we U.S. spend is the in tend market a XX some about the markets. to in cannabis distinct as in a less U.S. There's not relatively cannabis the what ways,

we in tend states dynamics competitive isolation focus them. of working operators so to And in on are these each the are and the some best who of in what

Mark Smith

any any driving particular of how looks? new more I your pipeline kind the And around be Okay. thoughts opportunities guess, that to seems And in loans, of kind for in pipeline? state that

Peter Sack

operators. for just time lot us, and And today. talent The in $XXX As finding the we're Missouri focused on Ohio, going the I right executing to Maryland support continue process. focus pipeline that that of we're the right -- finding is best approximately on in operators and million we're us in but markets. strong to to said, And a at spending

Operator

conference no Peter questions, to the With question-and-answer for remarks. closing Sack like the and back turn any to would Instructions] I [Operator conclude session over further

Peter Sack

you support Thank attendance, the the for remain after Thank to and available you. the call. and speak we

Operator

The conference for attending has now concluded. today's presentation. Thank you

You may disconnect. now

Chicago Atlantic Real Estate Finance (REFI) 7 Nov 242024 Q3 Earnings call transcript