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United States securities and exchange commission logo
September 8, 2021
Anthony Cappell
Chief Executive Officer
Chicago Atlantic Real Estate Finance, Inc.
420 North Wabash Avenue, Suite 500
Chicago, IL 60611
Re: Chicago Atlantic
Real Estate Finance, Inc.
Draft Registration
Statement on Form S-11
Submitted August
10, 2021
CIK No. 0001867949
Dear Mr. Cappell:
We have reviewed your draft registration statement and have the
following comments. In
some of our comments, we may ask you to provide us with information so
we may better
understand your disclosure.
Please respond to this letter by providing the requested
information and either submitting
an amended draft registration statement or publicly filing your
registration statement on
EDGAR. If you do not believe our comments apply to your facts and
circumstances or do not
believe an amendment is appropriate, please tell us why in your
response.
After reviewing the information you provide in response to these
comments and your
amended draft registration statement or filed registration statement, we
may have additional
comments.
Draft Registration Statement on Form S-11 filed August 10, 2021
General
1. We note that you intend
to operate in a manner that will allow you to qualify as a real
estate investment
trust. We note your disclosure on page 67 that you expect that at least
75% of your net
proceeds will be used to fund loans related to unfunded commitments and
to originate and
participate in loans and investments consistent with your investment
strategy, but it does
not appear that you have sufficiently identified any such assets to
acquire with a
significant portion of the net proceeds of the offering. As a result, your
offering may constitute
a "blind pool" offering. Please revise your disclosure to identify
this offering as a
blind pool and include the disclosure required by Industry Guide 5, as
applicable, or provide
us with a detailed legal analysis explaining why you do not believe
Anthony Cappell
FirstName LastNameAnthony CappellInc.
Chicago Atlantic Real Estate Finance,
Comapany 8,
September NameChicago
2021 Atlantic Real Estate Finance, Inc.
September
Page 2 8, 2021 Page 2
FirstName LastName
Guide 5 is applicable to your offering. Please also refer to
Securities Act Release 33-6900
(June 17, 1991) and CF Disclosure Guidance: Topic No. 6 for additional
guidance.
2. Please revise the filing to define the term "TYM IRR" and to explain
why you believe the
measure is meaningful to investors.
3. We note that you intend to operate your business in a manner that will
permit you to
maintain an exemption from registration under the Investment Company
Act of 1940, as
amended. Please provide us with a supplemental detailed analysis of:
the specific exemption that you and each of your subsidiaries
intend to rely on; and
how your and each of your subsidiaries investment strategy
and business model will
support that exemption.
Please ensure that the disclosure in your prospectus is consistent
with your supplemental
analysis. We will refer your response to the Division of Investment
Management for
further review.
Prospectus Summary
Overview, page 1
4. We note your disclosure on page 78 that, in addition to originating
loans, you may acquire
loans. Additionally, we note your disclosure on page 33 that your
borrowers may incur
debt obligations that are senior to your position. Please revise your
disclosure to discuss
these aspects of your business. In this respect, please discuss in
greater detail your policy
and practices regarding the "co-investments" that you have made with
affiliates and the
criteria and other considerations made when entering into a
co-investment arrangement.
Our Initial Portfolio, page 5
5. We note your disclosure on page 76 indicates that while a majority of
your loans accrue at
a fixed rate, there is a portion that do so at a floating rate. Please
revise your tabular
portfolio presentation to identify this information.
6. We note your disclosure in footnote (9) that the borrower for Loan #11
made a full
prepayment in July 2021 and your discussion of prepayment risk on page
86. Please
disclose whether the prepayment penalty and additional fees paid were
in line with your
projected yield on the loan or advise.
Our Loan Origination Pipeline, page 7
7. We note your disclosure that you "had executed non-binding term sheets
with prospective
borrowers with respect to five additional potential loans." It appears
that you have entered
into a commitment with the third entity based on your disclosure
following the table.
Please update your disclosure as appropriate to clarify that this is
an outstanding loan and
not a loan in your pipeline or advise.
Anthony Cappell
FirstName LastNameAnthony CappellInc.
Chicago Atlantic Real Estate Finance,
Comapany 8,
September NameChicago
2021 Atlantic Real Estate Finance, Inc.
September
Page 3 8, 2021 Page 3
FirstName LastName
Our Management Agreement, page 8
8. We note that you intend to reimburse your manager for salaries paid to
your executive
officers. In future filings that require disclosure pursuant to Item
404 of Regulation S-K,
please also break out the amounts paid within the expense
reimbursement fees to specify
any amounts reimbursed for salaries or benefits of a named executive
officer.
Use of Proceeds, page 67
9. Please revise to clarify how you considered the requirements of Item
504 of Regulation S-
K in preparing this registration statement. Discuss the priority of
the loans expected to be
funded through the proceeds of the offering and what your plans are
for funding them
should the offering proceeds prove insufficient to do so.
Overview, page 74
10. We note that your manager and its affiliates will originate loans
between $5 million and
$200 million and that you intend to hold up to $30 million of the
loans. Please revise to
clarify what form your interest in these loans will take. For
instance, are your interests in
the loan participations or do you own the whole loan? Consider the
need to revise
throughout the registration statement to clarify your relationship
with your manager and
affiliates based on your response to this comment.
11. We note that, generally, the loans you hold will have terms of one to
five years and will
amortize when terms exceed three years. Please revise to specifically
state, if true, that
loans with terms of one to two years are interest only loans.
Loan Portfolio, page 81
12. Please tell us how you considered the requirements of SAB 1I in
preparing this
registration statement. In your response, please address each loan in
your portfolio at June
30, 2021, the loans you funded in the subsequent period and each loan
that you intend to
fund in the immediate future, including those loans you will fund with
the proceeds of the
offering, that meet the threshold(s) set forth in the SAB.
Contractual Obligations and Other Commitments, page 84
13. Please revise to clarify how you intend to meet your obligations and
commitments should
the offering not provide sufficient liquidity. See our comment on the
Use of Proceeds
section and consider your intent to also fund loans using the proceeds
of the offering in
your revisions to this comment.
Our Manager, page 91
14. Please balance your disclosure regarding management's experience with
a discussion of
any adverse business developments.
Anthony Cappell
Chicago Atlantic Real Estate Finance, Inc.
September 8, 2021
Page 4
Collateral Overview, page 100
15. Please revise note 2 to the table to provide an expanded discussion of
why the Total Loan
Principal and Implied Real Estate Collateral for REIT columns provide
meaningful
information for your investors.
16. We note that you have highlighted the implied value of additional
collateral as well as
total collateral for your portfolio in addition to the value of the
real estate collateral and
coverage. Please expand your disclosure regarding the additional
collateral amounts to
further identify and quantify the other assets. Please also discuss in
more detail how such
assets may be collected and liquidated in the event of a default. To
the extent that a
material portion of the additional collateral includes cannabis
inventory, please expand
your risk factor disclosure to specifically address the risks
associated with the
collateralization and transferability of cannabis, both to your
business and to an
investment in your securities, in the event of default. In this
respect, your risk factor on
page 40 does not appear to sufficiently highlight the risks associated
with the
collateralization and transferability of cannabis inventory as opposed
to other cannabis-
related assets, such as licenses and equipment.
Illustrative Description of Borrowers, page 101
17. We note your risk factor disclosure on page 25 that you "primarily
provide loans to
established companies . . . ." Please revise your initial portfolio
disclosure regarding your
borrowers to describe in more detail their operating history and
further clarify what you
mean by "established" companies.
Principal Stockholders, page 124
18. Please identify the natural person(s) with voting or investment power
over the shares
owned by the entities included in your beneficial ownership table.
Report of Independent Registered Public Accounting Firm, page F-2
FirstName LastNameAnthony Cappell
19. Please have your auditors amend their audit report to indicate that
their audit was
Comapany NameChicago
conducted Atlantic
in accordance Real
with theEstate Finance,
standards of theInc.
PCAOB, rather than
only
the auditing
September standards.
8, 2021 Page 4 Refer to the guidance in paragraph .09 of AS
3101.
FirstName LastName
Anthony Cappell
FirstName LastNameAnthony CappellInc.
Chicago Atlantic Real Estate Finance,
Comapany 8,
September NameChicago
2021 Atlantic Real Estate Finance, Inc.
September
Page 5 8, 2021 Page 5
FirstName LastName
You may contact Paul Cline at (202) 551-3851 or Shannon Menjivar at
(202) 551-3856 if
you have questions regarding comments on the financial statements and related
matters. Please
contact Stacie Gorman at (202) 551-3585 or Erin E. Martin at (202) 551-3391
with any other
questions.
Sincerely,
Division of
Corporation Finance
Office of Real
Estate & Construction