John Schroyer
Chicago Atlantic Real Estate Finance Inc. (Nasdaq: REFI) pulled in another $13.7 million in interest income from its mortgage portfolio for the quarter that ended Sept. 30, nearly the exact same amount of income the firm made in Q2 and up by about $800,000 from the same quarter a year prior.
Net income was $9.9 million, up just about $200,000 from the same quarter in 2022.
“The underlying performance of the loan portfolio during the quarter continues to demonstrate that our diligent underwriting and focus on the strongest operators in limited license states are accomplishing these two primary objectives for our investors,” Executive Chairman John Mazarakis said in a press release.
“With the substantial improvement in the equities of the cannabis operators of late and a more positive indication of future regulatory relief, the creditworthiness of our borrowers has improved in the past quarter. This credit improvement and more positive outlook align well with our expectation of greater demand for capital from some of the larger operators over the next 12 to 18 months,” Mazarakis added.
At the end of September, the cannabis-focused real estate investment trust had $355.9 million in total loans in its portfolio spread across 27 investments, with a weighted average yield to maturity of 19.3%. The loan to enterprise value for the company portfolio is 42.5%, and a whopping 81% of Chicago Atlantic’s loans have a variable interest rate.
In the most recent quarter, Chicago Atlantic reported that it issued $35.4 million in new loans, with $32.8 million going to new borrowers. Principal repayments hit $10.9 million, of which $8.8 million was early repayments.
At the close of the quarter, Chicago Atlantic had $25 million in cash and $63 million in debt. After the quarter closed, the company rang up its debt to $74 million as of Nov. 7.
CEO Tony Cappell further noted that the company’s investments are solidly backed by real estate collateral.
“The sequential gross originations growth of $35 million and the ability to improve our weighted average yield to maturity to 19.3% this quarter demonstrate our success in continuing to capture a greater share of new loan demand in the cannabis industry,” Cappell said.
“Credit quality remains paramount with real estate collateral coverage of 1.5x. While we remain under-levered at 23% and with $25 million of liquidity, we are re-initiating discussions to expand our credit facility to provide even more capacity to fund new opportunities from our active investment pipeline.”
New York Update
Chicago Atlantic has also been in somewhat in recent months for its $150 million commitment to the state of New York, where it’s heavily leaning into real estate for social equity operators.
The firm also revealed not long ago to Bisnow that its investment strategy in the state has evolved. It’s now planning to use $100 million of that pool of money to purchase retail sites outright and then lease them back to the state of New York. The state can then in turn sublease the shops to cannabis retailers.
