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Chicago Atlantic Real Estate Finance Announces Second Quarter 2022 Financial Results

·11 min read
Chicago Atlantic Real Estate Finance, Inc.
Chicago Atlantic Real Estate Finance, Inc.

CHICAGO, Aug. 09, 2022 (GLOBE NEWSWIRE) -- Chicago Atlantic Real Estate Finance, Inc. (NASDAQ: REFI) (“Chicago Atlantic” or the “Company”), a commercial real estate finance company, today announced its results for the second quarter ended June 30, 2022.

John Mazarakis, Executive Chairman of Chicago Atlantic, noted, “The cannabis market fundamentals across the country continue to demonstrate that our strategy of lending to borrowers in limited-license states primarily with vertically integrated operations has created a strong investment platform and a very valuable loan portfolio. In order to protect book value while remaining conservatively levered, we have elected to limit additional growth in the REIT portfolio that would require funding from a dilutive equity or debt offering and rather meet the strong demand in our large loan pipeline through the Chicago Atlantic platform for the time being. We have intensified our efforts to expand our existing credit facility and intend to provide an attractive return to our shareholders through a well-covered dividend until such time as capital markets become more efficient and offer opportunities that are accretive to the platform.”

Tony Cappell, Chief Executive Officer of Chicago Atlantic, added, “With the macroeconomic issues in general and the slower than expected regulatory reform and price compression in many states, our direct lending experience is increasingly becoming a distinct competitive advantage. We have adhered to our tenets of robust loan structuring on the front end and intensive loan monitoring alongside our borrowers since the earliest days of the Chicago Atlantic platform. With weighted average yields to maturity approaching 18% and 60% of our loans structured as variable rate, our portfolio has performed well to date amid rising interest rates.”

Investment Activity and Portfolio Performance

  • As of June 30, 2022, total loan commitments of approximately $357.1 million ($331.9 million funded, $25.2 million unfunded) across 22 portfolio companies.

  • The portfolio’s weighted average yield to maturity was approximately 17.7% as of June 30, 2022 compared with approximately 17.2% as of March 31, 2022.

Second Quarter 2022 Financial Results

  • Total interest income of approximately $11.9 million

  • Total expenses of approximately $2.9 million before provision for current expected credit losses

  • Net Income of approximately $7.5 million, or $0.42 per weighted average diluted common share

  • Adjusted Distributable Earnings of approximately $8.8 million, or $0.50 per weighted average diluted common share

  • Book value per common share of $15.13 as of June 30, 2022

  • As of June 30, 2022, the Company had borrowed $45.0 million on its $65.0 million secured credit facility, resulting in a leverage ratio (debt to book value) of approximately 16.8%. Subsequent to quarter end, the Company drew an additional $8.0 million on the facility, leaving $12.0 million of capacity.

Dividends

  • On July 15, 2022, Chicago Atlantic paid a regular quarterly cash dividend of $0.47 per share of common stock for the second quarter of 2022 to common stockholders of record on June 30, 2022. The dividend represented a 17.5% increase from the first quarter of 2022.

Second Half 2022 Outlook
Based on the Company’s decision to only grow the loan portfolio if capital is available which is accretive to book value, Chicago Atlantic expects to report the following for the second half of 2022:

  • Adjusted Distributable Earnings in a range of $1.00 to $1.05 per weighted average diluted common share, or a range of $1.95 to $2.00 for full year 2022

  • The regular quarterly dividend amount for both the third and fourth quarters of 2022 is expected to be at least equal to the $0.47 paid for the second quarter of 2022.

This outlook does not include additional growth in the REIT’s portfolio, potential adjustments to the Prime rate or increased capacity under the secured credit facility. The Company only provides guidance for adjusted distributable earnings, not net income, due to the inherent difficulty in forecasting certain types of expenses that may or may not affect net income per weighted average diluted common share.

Conference Call and Quarterly Earnings Supplemental Details
The Company will host a conference call and live audio webcast, both open for the general public to hear, later today at 9:00 a.m. Eastern Time. The number to call for this interactive teleconference is (877) 317-6789 (international callers: (412) 317-6789). A replay of the call will be available through August 16, 2022, by dialing (877) 344-7529 and entering the replay access code, 6828663.

The live audio webcast of the Company’s quarterly conference call will be available online in the Investor Relations section of the Company’s website at https://investors.refi.reit. The online replay will be available approximately one hour after the end of the call and archived for approximately 90 days.

Chicago Atlantic posted its Second Quarter 2022 Earnings Supplemental on the Investor Relations page of its website. Chicago Atlantic routinely posts important information for investors on its website, www.refi.reit. The Company intends to use this website as a means of disclosing material information, for complying with our disclosure obligations under Regulation FD and to post and update investor presentations and similar materials on a regular basis. The Company encourages investors, analysts, the media and others interested in Chicago Atlantic to monitor the Investor Relations page of its website, in addition to following its press releases, SEC filings, publicly available earnings calls, presentations, webcasts and other information posted from time to time on the website. Please visit the IR Resources section of the website to sign up for email notifications.

About Chicago Atlantic Real Estate Finance, Inc.
Chicago Atlantic Real Estate Finance, Inc. (NASDAQ: REFI) is a market-leading mortgage REIT utilizing significant real estate, credit and cannabis expertise to originate senior secured loans primarily to state-licensed cannabis operators in limited-license states in the United States.

Forward-Looking Statements
This release contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 that reflect our current views and projections with respect to, among other things, future events and financial performance. Words such as “believes,” “expects,” “will,” “intends,” “plans,” “guidance,” “estimates,” “projects,” “anticipates,” and “future” or similar expressions are intended to identify forward-looking statements. These forward-looking statements, including statements about our future growth and strategies for such growth, are subject to the inherent uncertainties in predicting future results and conditions and are not guarantees of future performance, conditions or results. More information on these risks and other potential factors that could affect our business and financial results is included in our filings with the SEC. New risks and uncertainties arise over time, and it is not possible to predict those events or how they may affect us. We do not undertake any obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, except as required by law.

Contact:
Tripp Sullivan
SCR Partners
(615) 942-7077
IR@REFI.reit

CHICAGO ATLANTIC REAL ESTATE FINANCE, INC.
CONSOLIDATED BALANCE SHEETS

 

June 30, 
2022 (unaudited)

December 31, 
2021

Assets

 

 

 

 

 

Loans held for investment

$

330,201,986

 

 

$

196,984,566

 

Current expected credit loss reserve

 

(1,203,424

)

 

 

(134,542

)

Loans held for investment, net

 

328,998,562

 

 

 

196,850,024

 

Cash

 

6,623,096

 

 

 

80,248,526

 

Interest receivable

 

975,572

 

 

 

197,735

 

Other receivables and assets, net

 

956,438

 

 

 

874,170

 

Total Assets

$

337,553,668

 

$

278,170,455

 

 

 

 

 

 

 

Liabilities

 

 

 

 

 

Interest reserve

$

6,370,024

 

 

$

6,636,553

 

Dividend payable

 

8,405,865

 

 

 

4,537,924

 

Related party payable

 

739,950

 

 

 

1,800,000

 

Payable for investment purchased

 

6,629,075

 

 

 

-

 

Revolving line of credit

 

45,000,000

 

 

 

-

 

Management and incentive fees payable

 

1,247,561

 

 

 

905,123

 

Accounts payable and other liabilities

 

533,682

 

 

 

212,887

 

Total Liabilities

68,926,157

 

14,092,487

 

Commitments and contingencies (Note 8)

 

 

 

 

 

 

 

 

 

 

 

Stockholders’ equity

 

 

 

 

 

Common stock, par value $0.01 per share, 100,000,000 shares authorized at June 30, 2022 and December 31, 2021, respectively, and 17,752,290 and 17,453,553 shares issued and outstanding at June 30, 2022 and December 31, 2021, respectively

 

176,579

 

 

 

173,551

 

Additional paid-in-capital

 

268,803,970

 

 

 

264,081,977

 

Accumulated earnings (deficit)

 

(353,038

)

 

 

(177,560

)

Total stockholders’ equity

268,627,511

 

264,077,968

 

 

 

 

 

 

 

Total liabilities and stockholders’ equity

$

337,553,668

 

$

278,170,455

 

CHICAGO ATLANTIC REAL ESTATE FINANCE, INC.
CONSOLIDATED STATEMENTS OF INCOME
(UNAUDITED)

 

For the 
three months 
ended

For the  
three months  
ended

 

June 30, 
2022

March 31, 
2022

Revenue

 

 

 

 

 

Interest income

$

11,850,028

 

 

$

9,833,053

 

Interest expense

 

(449,556

)

 

 

(72,268

)

Net interest income

 

11,400,472

 

 

 

9,760,785

 

 

 

 

 

 

 

Expenses

 

 

 

 

 

Management and incentive fees, net

 

1,247,561

 

 

 

671,505

General and administrative expense

 

777,212

 

 

 

556,141

Provision for current expected credit losses

 

1,045,665

 

 

 

51,343

Organizational expense

 

-

 

 

-

 

Professional fees

 

743,670

 

 

 

556,904

Stock based compensation

 

122,525

 

 

 

120.940

Total expenses

 

3,936,633

 

 

 

1,956,833

 

 

 

 

 

 

 

Net Income before income taxes

7,463,839

 

7,803,952

 

Income tax expense

 

-

 

 

-

Net Income

$

7,463,839

 

$

7,803,952

 

 

 

 

 

 

 

Earnings per common share:

 

 

 

 

 

Basic earnings per common share (in dollars per share)

$

0.42

 

 

$

0.44

 

Diluted earnings per common share (in dollars per share)

$

0.42

 

 

$

0.44

 

 

 

 

 

 

 

Weighted average number of common shares outstanding:

 

 

 

 

 

Basic weighted average shares of common stock outstanding (in shares)

 

17,657,913

 

 

 

17,641,090

 

Diluted weighted average shares of common stock outstanding (in shares)

 

17,752,413

 

 

 

17,737,975

 

Distributable Earnings and Adjusted Distributable Earnings

In addition to using certain financial metrics prepared in accordance with GAAP to evaluate our performance, we also use Distributable Earnings and Adjusted Distributable Earnings to evaluate our performance. Each of Distributable Earnings and Adjusted Distributable Earnings is a measure that is not prepared in accordance with GAAP. We define Distributable Earnings as, for a specified period, the net income (loss) computed in accordance with GAAP, excluding (i) non-cash equity compensation expense, (ii) depreciation and amortization, (iii) any unrealized gains, losses or other non-cash items recorded in net income (loss) for the period, regardless of whether such items are included in other comprehensive income or loss, or in net income (loss); provided that Distributable Earnings does not exclude, in the case of investments with a deferred interest feature (such as OID, debt instruments with PIK interest and zero coupon securities), accrued income that we have not yet received in cash, (iv) provision for current expected credit losses and (v) one-time events pursuant to changes in GAAP and certain non-cash
charges, in each case after discussions between our Manager and our independent directors and after approval by a majority of such independent directors. We define Adjusted Distributable Earnings, for a specified period, as Distributable Earnings excluding certain non-recurring organizational expenses (such as one-time expenses related to our formation and start-up).

We believe providing Distributable Earnings and Adjusted Distributable Earnings on a supplemental basis to our net income as determined in accordance with GAAP is helpful to stockholders in assessing the overall performance of our business. As a REIT, we are required to distribute at least 90% of our annual REIT taxable income and to pay tax at regular corporate rates to the extent that we annually distribute less than 100% of such taxable income. Given these requirements and our belief that dividends are generally one of the principal reasons that stockholders invest in our common stock, we generally intend to attempt to pay dividends to our stockholders in an amount equal to our net taxable income, if and to the extent authorized by our Board. Distributable Earnings is one of many factors considered by our Board in authorizing dividends and, while not a direct measure of net taxable income, over time, the measure can be considered a useful indicator of our dividends.

In our Annual Report on Form 10-K, we defined Distributable Earnings so that, in addition to the exclusions noted above, the term also excluded from net income Incentive Compensation paid to our Manager. We believe that revising the term Distributable Earnings so that it is presented net of Incentive Compensation, while not a direct measure of net taxable income, over time, can be considered a more useful indicator of our ability to pay dividends. This adjustment to the calculation of Distributable Earnings has no impact on period-to-period comparisons.

Distributable Earnings and Adjusted Distributable Earnings should not be considered as substitutes for GAAP net income. We caution readers that our methodology for calculating Distributable Earnings and Adjusted Distributable Earnings may differ from the methodologies employed by other REITs to calculate the same or similar supplemental performance measures, and as a result, our reported Distributable Earnings and Adjusted Distributable Earnings may not be comparable to similar measures presented by other REITs.

 

For the three
months ended
June 30, 2022

 

For the three
months ended
March 31, 2022

Net Income

$

7,463,839

 

$

7,803,952

Adjustments to net income

 

 

 

 

 

Non-cash equity compensation expense

 

122,525

 

 

120,940

Depreciation and amortization

 

168,826

 

 

72,268

Provision for current expected credit losses

 

1,045,665

 

 

51,343

Distributable Earnings

 

8,800,855

 

 

8,048,503

Adjustments to Distributable Earnings

 

 

 

 

 

Certain organizational expenses

 

-

 

 

-

Adjusted Distributable Earnings

 

8,800,855

 

 

8,048,503

Basic weighted average shares of common stock outstanding (in shares)

 

17,657,913

 

 

17,641,090

Adjusted Distributable Earnings per Weighted Average Share

$

0.50

 

$

0.46

Diluted weighted average shares of common stock outstanding (in shares)

 

17,752,413

 

 

17,737,975

Adjusted Distributable Earnings per Weighted Average Share

$

0.50

 

$

0.45