SECURITIES AND EXCHANGE COMMISSION
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Item 2.02 Results of Operations and Financial Condition.
On August 9, 2022, Chicago Atlantic Real Estate Finance, Inc. (the “Company”) issued a press release announcing its financial results for the quarter ended June 30, 2022. The text of the press release is included as Exhibit 99.1 to this Form 8-K and is incorporated herein by reference.
The information set forth under this Item 2.02, including Exhibit 99.1, is being furnished and shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, or otherwise subject to the liabilities of that section. The information set forth under this Item 2.02, including Exhibit 99.1, shall not be incorporated by reference into any registration statement or other document pursuant to the Securities Act of 1933, as amended, unless it is specifically incorporated by reference therein.
Item 7.01 Regulation FD Disclosure.
On August 9, 2022, the Company disseminated a presentation to be used in connection with its conference call to discuss its financial results for the quarter ended June 30, 2022, which will be held on Tuesday, August 9, 2022 at 9:00 a.m. (eastern time). A copy of the presentation has been posted to the Company’s Investor Relations page of its website and is included herewith as Exhibit 99.2, and by this reference incorporated herein.
The information disclosed under this Item 7.01, including Exhibit 99.2 hereto, is being furnished and shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, or otherwise subject to the liabilities of that section. The information provided herein shall not be deemed incorporated by reference into any filing made under the Securities Act of 1933, as amended, except as expressly set forth by specific reference in such filing.
Item 9.01 Financial Statements and Exhibits.
|99.1||Press release, dated August 9, 2022.|
|99.2||Second Quarter 2022 Earnings Supplemental Presentation, dated August 9, 2022.|
|104||Cover Page Interactive Data File (embedded within the Inline XBRL document)|
Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, the Registrant has duly caused this Current Report on Form 8-K to be signed on its behalf by the undersigned hereunto duly authorized.
|CHICAGO ATLANTIC REAL ESTATE FINANCE, INC.|
|Date: August 9, 2022||By:||/s/ Anthony Cappell|
|Title:||Chief Executive Officer|
Chicago Atlantic Real Estate Finance Announces Second Quarter 2022 Financial Results
CHICAGO—(August 9, 2022) 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.|
|●||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.
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.
CHICAGO ATLANTIC REAL ESTATE FINANCE, INC.
CONSOLIDATED BALANCE SHEETS
|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|
|Other receivables and assets, net||956,438||874,170|
|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|
|Commitments and contingencies (Note 8)|
|Common stock, par value $0.01 per share, 100,000,000 shares authorized at June 30, 2022 and December 31, 2021, respectively, and 17,752,290 and 17,453,553 shares issued and outstanding at June 30, 2022 and December 31, 2021, respectively||176,579||173,551|
|Accumulated earnings (deficit)||(353,038||)||(177,560||)|
|Total stockholders’ equity||268,627,511||264,077,968|
|Total liabilities and stockholders’ equity||$||337,553,668||$||278,170,455|
CHICAGO ATLANTIC REAL ESTATE FINANCE, INC.
CONSOLIDATED STATEMENTS OF INCOME
|Net interest income||11,400,472||9,760,785|
|Management and incentive fees, net||1,247,561||671,505|
|General and administrative expense||777,212||556,141|
|Provision for current expected credit losses||1,045,665||51,343|
|Stock based compensation||122,525||120.940|
|Net Income before income taxes||7,463,839||7,803,952|
|Income tax expense||-||-|
|Earnings per common share:|
|Basic earnings per common share (in dollars per share)||$||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.
|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|
|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|
Second Quarter 2022 Earnings Supplemental August 9, 2022
This presentation contains forward - looking statements, within the meaning of the Private Securities Litigation Reform Act of 1995 , regarding future events and the future results of the Company that are based on current expectations, estimates, forecasts, projections about the industry in which the Company operates and the beliefs and assumptions of the management of the Company . Words such as “address,” “anticipate,” “believe,” “consider,” “continue,” “develop,” “estimate,” “expect,” “further,” “goal,” “intend,” “may,” “plan,” “potential,” “project,” “seek,” “should,” “target,” “will,” variations of such words and similar expressions are intended to identify such forward - looking statements . Such statements reflect the current views of the Company and its management with respect to future events and are subject to certain risks, uncertainties and assumptions . Should one or more of these risks or uncertainties materialize, or should underlying assumptions prove incorrect, the Company’s actual results, performance or achievements could differ materially from the results expressed in, or implied by, these forward - looking statements . This presentation has been prepared by the Company based on information it has obtained from sources it believes to be reliable . Summaries of documents contained in this presentation may not be complete . The Company does not represent that the information herein is complete . The information in this presentation is current only as of March 31 , 2022 or such other date noted in this presentation, and the Company’s business or financial condition and other information in this presentation may change after that date . The Company undertakes no obligation to update any forward - looking statements in order to reflect any event or circumstance occurring after the date of this presentation or currently unknown facts or conditions . You are urged to review and carefully consider any cautionary statements and other disclosures, including the statements under the heading “Risk Factors” and elsewhere in the Company’s filings with the Securities and Exchange Commission . Factors that may cause actual results to differ materially from current expectations include, among others : the Company’s business and investment strategy ; the impact of COVID - 19 on the Company’s business and the global economy ; the war between Russia and the Ukraine and market volatility resulting from such conflict ; the ability of Chicago Atlantic REIT Manager, LLC (the “Manager”) to locate suitable loan opportunities for the Company, monitor and actively manage the Company’s loan portfolio and implement the Company’s investment strategy ; allocation of loan opportunities to the Company by the Manager ; the Company’s projected operating results ; actions and initiatives of the U . S . or state governments and changes to government policies and the execution and impact of these actions, initiatives and policies, including the fact that cannabis remains illegal under federal law ; the estimated growth in and evolving market dynamics of the cannabis market ; the demand for cannabis cultivation and processing facilities ; shifts in public opinion regarding cannabis ; the state of the U . S . economy generally or in specific geographic regions ; economic trends and economic recoveries ; the amount and timing of the Company’s cash flows, if any, from the Company’s loans ; the Company’s ability to obtain and maintain financing arrangements ; the Company’s expected leverage ; changes in the value of the Company’s loans ; the Company’s expected portfolio of loans ; the Company’s expected investment and underwriting process ; rates of default or decreased recovery rates on the Company’s loans ; the degree to which any interest rate or other hedging strategies may or may not protect the Company from interest rate volatility ; changes in interest rates and impacts of such changes on the Company’s results of operations, cash flows and the market value of the Company’s loans ; interest rate mismatches between the Company’s loans and the Company’s borrowings used to fund such loans ; the departure of any of the executive officers or key personnel supporting and assisting the Company from the Manager or its affiliates ; impact of and changes in governmental regulations, tax law and rates, accounting guidance and similar matters ; the Company’s ability to maintain the Company’s exclusion or exemption from registration under the Investment Company Act ; the Company’s ability to qualify and maintain the Company’s qualification as a REIT for U . S . federal income tax purposes ; estimates relating to the Company’s ability to make distributions to its stockholders in the future ; the Company’s understanding of its competition ; and market trends in the Company’s industry, interest rates, real estate values, the securities markets or the general economy . Market and Industry Data In this presentation, the Company relies on and refers to certain information and statistics obtained from third - party sources which it believes to be reliable, including reports by market research firms . The Company has not independently verified the accuracy or completeness of any such third - party information . Because the cannabis industry is relatively new and rapidly evolving, such market and industry data may be subject to significant change in a relatively short time period . Important Disclosure Information Chicago Atlantic Real Estate Finance, Inc. | 2
▪ Successful IPO in December 2021 (NASDAQ: REFI) ▪ Track record of identifying market inefficiencies, particularly where risk is fundamentally mispriced ▪ Ability to redeploy capital quickly ▪ Access to Sponsor’s leading cannabis lending platform as lead or co - lead ▪ Proprietary sourcing network and direct originations team ▪ Experienced and robust origination team responsible for sourcing and closing over $1.3B in credit facilities since 2019 ▪ Sizable and growing loan portfolio offering compelling risk - adjusted returns ▪ Diversified across operators, geographies and asset types with strong real estate collateral coverage as well as additional collateral Company Overview Chicago Atlantic Real Estate Finance, Inc. | 3 $850+mm near - term pipeline under evaluation (1) $1.4B in loans closed since platform inception (1) 46 cannabis loans closed across platform (1) $357.1mm current portfolio size (1) with substantial pipeline 17.7% gross portfolio yield (1) 1.9x real estate collateral coverage in current portfolio (1) Note: (1) As of June 30, 2022
Investment Highlights Chicago Atlantic Real Estate Finance, Inc. | 4 Pioneer in cannabis lending with first - mover advantage Proprietary and extensive deal sourcing capabilities Differentiated investment approach Compelling opportunity in rapidly growing cannabis market Lender of choice to leading cannabis operators
Industry - Leading Management and Investment Team Deep Cannabis, Credit and Real Estate Expertise With Entrepreneurial Approach Note: (1) Denotes member of Investment Committee Peter Sack (1) Co - President ▪ Former Principal at BC Partners Credit, leading their cannabis practice ▪ Underwritten $138mm in cannabis credit transactions ▪ Former private equity investor, focusing on distressed industrial opportunities ▪ MBA from University of Pennsylvania’s Wharton School of Business and BA from Yale University Lindsay Menze CFO ▪ Finance and accounting expert, with over 10 years of experience, focusing on complex accounting and financial reporting ▪ Former Director at RSM US and Manager at Deloitte, focusing primarily on real estate industry ▪ CPA and BBA from University of Notre Dame Andreas Bodmeier (1) Co - President and CIO ▪ Underwritten over $500mm in cannabis credit transactions ▪ Former Principal of consulting firm focused on FX and commodity risk management ▪ Former Senior Advisor, U.S. Dept. of Health and Human Services ▪ PhD in Finance and MBA from Chicago Booth and MSc from Humboldt University (Berlin) John Mazarakis (1) Executive Chairman ▪ Originated over $500mm in cannabis credit transactions ▪ Developed and owns over 1mm sf of real estate across 4 states ▪ Founded restaurant group with 30+ units and 1,200+ employees ▪ MBA from Chicago Booth and BA from University of Delaware Tony Cappell (1) CEO ▪ Debt investor with over 15 years of experience, beginning at Wells Fargo Foothill ▪ Completed over 150 deals, comprising over $5bn in total credit ▪ Former Managing Director and Head of Underwriting at Stonegate Capital ▪ MBA from Chicago Booth and BA from University of Wisconsin 100 YEARS OF COMBINED EXPERIENCE AND OVER $8 BILLION IN REAL EST ATE AND COMMERCIAL CREDIT Chicago Atlantic Real Estate Finance, Inc. | 5
Veteran Independent Directors Significant Public Board, REIT, Financial and Corporate Governance Expertise Michael Steiner ▪ Current investor in Chicago Atlantic ▪ Founder and President of Service Energy and Petroleum Equipment, which are engaged in distribution of petroleum products ▪ Expert in highly regulated industries ▪ BA in History from Wake Forest University and MBA from University of Delaware Donald Gulbrandsen ▪ Current investor in Chicago Atlantic ▪ Founder and CEO of Gulbrandsen Companies, a holding company for specialty chemical manufacturing companies ▪ Products sold in over 45 countries ▪ Over 900 employees in 7 facilities worldwide ▪ BS in Chemical Engineering and BA in History from Cornell University Brandon Konigsberg ▪ Former CFO at J.P. Morgan Securities and Managing Director at JPMorgan Chase ▪ Current member of board of directors of GTJ REIT, SEC - registered equity REIT ▪ Former auditor at Goldstein, Golub and Kessler ▪ CPA and BA in Accounting from University of Albany and MBA from New York University’s Stern School of Business Jason Papastavrou ▪ Lead Independent Director ▪ Founder and CIO of ARIS Capital Management ▪ Current member of board of directors of GXO Logistics (NYSE:GXO); and, previous board member of XPO Logistics (NYSE:XPO) and United Rentals (NYSE:URI) ▪ BS in Mathematics and MS and PhD in Electrical Engineering and Computer Science from MIT Fredrick C. Herbst ▪ Audit Committee Chair ▪ Former CFO of Ready Capital (NYSE:RC) and Arbor Realty Trust (NYSE:ABR), two publicly traded, commercial mortgage REITs ▪ Former Managing Director of Waterfall Asset Management ▪ Former CFO of Clayton Holdings and The Hurst Companies ▪ CPA and BA in Accounting from Wittenberg University Chicago Atlantic Real Estate Finance, Inc. | 6
Investment Portfolio Activity Chicago Atlantic Real Estate Finance, Inc. | 7 $129.5 $200.4 $281.5 $331.9 $43.0 $34.7 $39.6 $25.2 Q3 2021 Q4 2021 Q1 2022 Q2 2022 Funded Unfunded COMMITMENTS (in millions) $172.5 $235.1 $321.1 $357.1 Weighted average yield to maturity of ~17.7% as of June 30, 2022
Portfolio Diversity Chicago Atlantic Real Estate Finance, Inc. | 8 Our portfolio is diversified across operators, geographies, and asset types PRINCIPAL OUTSTANDING (1) By Loan 7% 0.1% 6% 11% 3% 3% 9% 6% 3% 2% 4% 2% 2% 1% 1% 5% 5% 5% 0.4% 10% 9% 6% By Location 82.9% 0.1% 17.0% Retail/Industrial Retail Industrial By Real Estate Collateral Type $334M 3% 10% 10% 17% 5% 9% 11% 32% 3% Arizona Florida Maryland Massachusetts Michigan Missouri Ohio Pennsylvania Various West Virginia $334M $334M Note: (1) As of June 30, 2022
Loan Collateral Coverage Chicago Atlantic Real Estate Finance, Inc. | 9 1.9x real estate collateral coverage ADDITIONAL COLLATERAL Portfolio Weighted Average (1.9x) Our loans to owner operators in the state - licensed cannabis industry are secured by additional collateral, including personal guarantee where applicable subject to local laws and regulations: REAL ESTATE COLLATERAL COVERAGE (1) Accounts Receivable Equipment Licenses/ Equity Pledges <1x 1-1.5x 1.5-2x >2x 19% As percentage of total carrying value, as of June 30, 2022 35% 40% 6% (1) See page 17 for real estate collateral coverage by loan. Expressed as percentage of total principal balance of $334.3 million as of June 30, 2022.
Total Commitment: $357.1M Portfolio Overview (as of June 30, 2022) Loan Initial Funding Date (1) Maturity Date (2) Total Commitment (3) Principal Balance as of 6/30/2022 Percentage of Our Loan Portfolio Future Fundings Interest Rate (4) Periodic Payment (5) YTM IRR (6) 1 (8) 7/2/20 5/30/23 $ 30,000,000 $ 30,000,000 9.0% $ - 10.07% I/O 13.1% 2 11/19/20 1/31/25 $ 7,250,000 $ 6,957,500 2.0% $ - P + 11.00% (7) P&I 18.5% 3 3/5/21 12/31/24 $ 35,891,667 $ 36,343,859 10.9% $ - P + 6.65% (7) Cash 3.25% PIK I/O 15.8% 4 3/25/21 3/31/24 $ 20,105,628 $ 20,539,287 6.1% $ - 13.625% Cash, 2.75% PIK P&I 20.0% 5 (9) 4/19/21 4/28/23 $ 12,900,000 $ 11,229,539 3.4% $ 1,619,952 19.85% P&I 23.6% 6 4/19/21 4/28/23 $ 3,500,000 $ 1,500,000 0.5% $ 2,000,000 P + 12.25% (7) P&I 23.0% 7 5/8/21 5/31/25 $ 12,900,000 $ 13,129,000 4.0% $ - P + 10.75% (7) Cash, 4% PIK (10) P&I 21.1% 8 8/20/21 2/20/24 $ 6,000,000 $ 4,500,000 1.4% $ 1,500,000 P + 9.00% (7) P&I 14.4% 9 8/4/21 8/30/24 $ 25,000,000 $ 23,020,760 6.9% $ 2,142,857 13% Cash, 2.5% PIK P&I 16.9% 10 9/1/21 9/1/24 $ 9,500,000 $ 9,648,063 2.9% $ - P + 9.25% (7) Cash, 2% PIK P&I 18.8% 11 9/3/21 6/30/24 $ 15,000,000 $ 15,379,246 4.7% $ - P + 10.75% (7) Cash, 3% PIK P&I 20.5% 12 9/20/21 9/30/24 $ 470,411 $ 352,808 0.1% $ - 11.00% P&I 21.4% 13 9/30/21 9/30/24 $ 32,000,000 $ 32,314,053 9.5% $ - P + 8.75% (7) Cash, 2% PIK I/O 18.4% 14 11/8/21 10/31/24 $ 20,000,000 $ 20,000,000 6.0% $ - 13.00% P&I 15.8% 15 11/22/21 11/22/22 $ 10,600,000 $ 10,600,000 3.2% $ - P + 7.00% (7) I/O 13.4% 16 12/27/21 12/27/26 $ 5,000,000 $ 5,000,000 1.5% $ - 15% Cash, 2.5% PIK P&I 18.5% 17 12/29/21 12/29/23 $ 6,000,000 $ 3,692,478 1.1% $ 2,400,000 10.50% Cash, 1% to 5% PIK (11) I/O 18.3% 18 12/30/21 12/31/24 $ 13,000,000 $ 7,500,000 2.3% $ 5,500,000 P + 9.25% (7) P&I 29.4% 19 1/18/22 1/31/25 $ 25,000,000 $ 15,000,000 4.4% $ 10,000,000 11.00% P&I 14.4% 20 2/3/22 2/28/25 $ 30,000,000 $ 30,369,303 9.0% $ - P + 8.25% (7) Cash, 3% PIK P&I 22.0% 21 3/11/22 8/29/25 $ 20,000,000 $ 20,172,651 6.1% $ - 11% Cash, 3% PIK P&I 15.3% 22 5/9/22 5/30/25 $ 17,000,000 $ 17,073,745 5.1% $ - 11.00% Cash, 3% PIK P&I 15.1% Subtotal $ 357,117,706 $ 334,322,292 100.0% $ 25,162,809 14.8% Wtd . Average 17.7% Chicago Atlantic Real Estate Finance, Inc. | 10
Portfolio Overview (continued) Chicago Atlantic Real Estate Finance, Inc. | 11 Notes: (1) All loans originated prior to April 1, 2021 were purchased from affiliated entities at fair value plus accrued interest on or su bsequent to April 1, 2021 (2) Certain loans have extension options from original maturity date. (3) Total Commitment excludes future amounts to be advanced at sole discretion of the lender. (4) "P" = prime rate and depicts floating rate loans that pay interest at the prime rate plus a specific percentage; "PIK" = paid in kind interest. (5) P&I = principal and interest. I/O = interest only. P&I loans may include interest only periods for a portion of the loan term . (6) Includes OID, unused fees, and exit fees, but assumes no prepayment penalties or early payoffs. (7) This Loan is subject to prime rate floor. (8) The aggregate loan commitment to Loan #1 includes a $4.005 million initial advance which has an interest rate of 15.25%, a se con d advance of $15.995 million which has an interest rate of 9.75%, and a third advance of $10.0 million which has an interest rate of 8.5%. The statistics presented ref lec t the weighted average of the terms under both advances for the total aggregate loan commitment. (9) The aggregate loan commitment to Loan #5 includes a $9.3 million initial advance, which has a base interest rate of 15.25% an d 2 .00% PIK, and a second advance of $2.0 million, which has an interest rate of 39.00%. The statistics presented reflect the weighted average of the terms under both advances for the total aggregate loan commitment. (10) Subject to adjustment not below 2% if borrower receives at least two consecutive quarters of positive cash flow after the clo sin g date. (11) PIK is variable with an initial rate of five percent (5.00%) per annum, until borrower’s delivery of audited financial statem ent s for the fiscal year ended December 31, 2021, at which time the PIK interest rate shall be adjusted to a rate of 1% to 5% contingent on the financial results of the borrower.
Driven by proprietary deal sourcing Total current pipeline of approximately $860.3mm 1 ▪ Recent legalization at the state level creates a new influx of opportunities ▪ Increase in M&A activity requires additional debt financing ▪ Robust set of profitable operators and refinancing opportunities Note: (1) As of June 30, 2022 Loan Origination Pipeline Over 500 Qualified Deals Sourced and Reviewed $850+mm 1 in Potential Fundings $500mm+ 1 Terms Issued $309.3mm 1 in Signed Term Sheets Chicago Atlantic Real Estate Finance, Inc. | 12
$7.4 $11.2 $13.4 $18.2 $21.8 $25.0 $27.4 $5.9 $9.1 $11.5 $13.0 $14.0 $14.8 $15.5 2019 2020 2021E 2022E 2023E 2024E 2025E Adult-Use Sales Medical Sales $13.2 $20.3 $24.9 $31.2 $35.7 $39.7 $42.9 Note: (1) Per New Frontier Data U.S. CANNABIS SALES (1) MARKET DRIVERS Compelling Market Opportunity ▪ Sales of the U.S. cannabis industry expected to rival beer ($100bn), spirits ($97bn) and wine ($62bn) by 2030 ▪ Continued legalization at state level expected to drive continued demand for capital ▪ Highly fragmented industry ripe for consolidation ▪ State and local governments deemed cannabis essential businesses during pandemic ▪ Wave of East Coast Legalization ($ in billions) Chicago Atlantic Real Estate Finance, Inc. | 13
Note: (1) Per DISA Global Solutions, as of March 2022 Compelling Market Opportunity Legalized Medical and/or Decriminalized CBD Only or Fully Prohibited LEGISLATIVE TAILWINDS CURRENT LEGALIZATION (1) : 37 STATES ▪ Continued state - level legalization, including transition from medical to adult - use cannabis ▪ SAFE Banking Act would protect banks providing services to state - licensed cannabis businesses ▪ Chicago Atlantic expects to have a lower cost of capital on bank financing as a result of the SAFE Banking Act Chicago Atlantic Real Estate Finance, Inc. | 14
Shorter loan durations Better diversification Lower LTVs Deal leads Ability to upsize Close relationships with management teams We negotiate the deal REIT shares 50% of the origination fee Underwrite enterprise value in the borrowers Competitive Landscape COMPETITORS: GROUPS Mortgage REITs BDCs Sale/ Leaseback REITs Cannabis - Focused Lenders Community Banks COMPETITIVE ADVANTAGES Our borrower’s only source of debt Chicago Atlantic Real Estate Finance, Inc. | 15
Q2 2022 Financial Overview Appendix Chicago Atlantic Real Estate Finance, Inc. | 16
Collateral Overview (as of June 30, 2022) Loan Investment (1 ) Location Property Type Principal Balance as of 6/30/2022 Implied Real Estate Collateral for REIT (2) Our Real Estate Collateral Coverage as of 6/30/2022 1 Senior Real Estate Corporate Loan Various Retail/Industrial $ 30,000,000 $ 104,534,275 3.5x 2 Senior Real Estate Corporate Loan Pennsylvania Retail/Industrial $ 6,957,500 $ 3,680,000 0.5x 3 Senior Real Estate Corporate Loan Michigan Retail/Industrial $ 36,343,859 $ 75,563,683 2.1x 4 Senior Real Estate Corporate Loan Various Retail/Industrial $ 20,539,287 $ 23,866,650 1.2x 5 Senior Real Estate Corporate Loan Arizona Industrial $ 11,229,539 $ 19,700,000 1.8x 6 Senior Real Estate Corporate Loan Massachusetts Retail/Industrial $ 1,500,000 $ 907,500 0.6x 7 Senior Real Estate Corporate Loan Pennsylvania Industrial $ 13,129,000 $ 25,000,000 1.9x 8 Senior Real Estate Corporate Loan Michigan Retail/Industrial $ 4,500,000 $ 10,900,000 2.4x 9 Senior Real Estate Corporate Loan Various Retail/Industrial $ 23,020,760 $ 58,740,922 2.6x 10 Senior Real Estate Corporate Loan West Virginia Retail/Industrial $ 9,648,063 $ 15,160,000 1.6x 11 Senior Real Estate Corporate Loan Pennsylvania Retail/Industrial $ 15,379,246 $ 16,700,000 1.1x 12 Senior Loan Michigan Retail $ 352,808 $ 3,000,000 8.5x 13 Senior Real Estate Corporate Loan Maryland Industrial $ 32,314,053 $ 33,440,000 1.0x 14 Senior Real Estate Corporate Loan Various Retail/Industrial $ 20,000,000 $ 78,000,000 3.9x 15 Senior Real Estate Corporate Loan Various Retail/Industrial $ 10,600,000 $ 17,606,318 1.7x 16 Senior Real Estate Corporate Loan Various Retail/Industrial $ 5,000,000 $ - 0.0x 17 Senior Real Estate Corporate Loan Michigan Retail/Industrial $ 3,692,478 $ 9,510,000 2.6x 18 Senior Real Estate Corporate Loan Florida Retail/Industrial $ 7,500,000 $ - 0.0x 19 Senior Real Estate Corporate Loan Florida Retail/Industrial $ 15,000,000 $ 35,825,000 2.4x 20 Senior Real Estate Corporate Loan Ohio Retail/Industrial $ 30,369,303 $ 36,990,000 1.2x 21 Senior Real Estate Corporate Loan Florida Retail/Industrial $ 20,172,651 $ 28,000,000 1.4x 22 Senior Real Estate Corporate Loan Missouri Retail/Industrial $ 17,073,745 $ 27,580,000 1.6x $ 334,322,292 $ 624,704,348 1.9x Notes: (1) Senior Real Estate Corporate Loans are structured as loans to owner operators secured by real estate. Senior Loans are lo ans to a property owner and leased to third party tenant. (2) Real estate is based on appraised value as is, or on a comparable cost basis, as completed. The real estate values shown in the collateral table are estimates by a third - party appraiser of the market value of the subject real property in its current ph ysical condition, use, and zoning as of the appraisal date. The appraisals assume that the highest and best use is use as a cannabis cultivator or dispensary, as applicable. The appraisals recognize that the current use is highly regulated by the state in which the property is located; however, there are sales of comparable properties that dem on strate that there is a market for such properties. The appraisals utilize these comparable sales for the appraised property’s value in use. For properties used for cannabis cultivation, the appraisals use sim ilar sized warehouses in their conclusion of the subject’s “as - is” value without licenses to cultivate cannabis. However, the ap praised value is assumed to be realized from a purchase by another state - licensed cannabis operator or a third party purchaser that would lease the subject property to a state - licensed cannabis operator. The re gulatory requirements related to real property used in cannabis - related operations may cause significant delays or difficulties in transferring a property to another cannabis operator, as the state regulator may require inspection and approval of the new tenant/user. Further, the value is also determined using the income approach, base d o n market lease rates for comparable properties, whether dispensaries or cultivation facilities. It indicates the value to a t hir d - party owner that leases to a dispensary or cultivation facility. Finally, the appraisal contains a value based on the cost for another operator to construct a similar facility, which we refer to as the “cost appro ach .” We believe the cost approach provides an indication of what another state - licensed operator would pay for a separate facility instead of constructing it itself. The appraisal’s opinion of value reflects current conditions and the likely actions of market participants as of the date of appraisal. It is based on the available informatio n g athered and provided to the appraiser, and does not predict future performance. Changing market or property conditions can an d l ikely will have an effect on the subject’s value. Chicago Atlantic Real Estate Finance, Inc. | 17
Balance Sheet (unaudited) Chicago Atlantic Real Estate Finance, Inc. | 18 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 956,438 847,170 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, an d 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
Statement of Operations (unaudited) Chicago Atlantic Real Estate Finance, Inc. | 19 Three months ended June 30, 2022 Three months ended March 31, 2022 Revenues 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
Reconciliation of Distributable Earnings and Adjusted Distributable Earnings to GAAP Net Income Chicago Atlantic Real Estate Finance, Inc. | 20 Three months ended June 30, 2022 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
Annual Base Management Fee (on Equity) 1.5% Origination Fees (Rebated to REIT) 50.0% Incentive Compensation Terms: Incentive Fees (of Core Earnings) 20.0% Hurdle Amount (on Avg. Equity); No Catch - up Provision 8.0% External Manager ▪ Externally - managed by Chicago Atlantic REIT Manager, LLC, a subsidiary of Chicago Atlantic Group, LLC ▪ John Mazarakis (Executive Chairman), Tony Cappell (CEO) and Andreas Bodmeier (Co - President & CIO) control and beneficially own over 80% of the Manager ▪ The Manager is comprised of an experienced team of investment professionals, who currently manage several externally - managed vehicles with over $500mm in additional assets – Synergies from over 30 professionals, spanning real estate credit, asset - based lending and real estate private equity, as well as robust accounting and compliance functions Management Agreement Overview Management Agreement and Equity Incentive Plan ▪ Initial term of three years ▪ Following the initial term, the agreement automatically renews every year for an additional one - year period, unless Chicago Atlantic or the Manager elects not to renew ▪ Shareholder - friendly management agreement: ▪ 8.5% equity incentive plan: – 0.5 % granted at completion of IPO – 8% granted at discretion of Board based on Company performance after IPO MANAGEMENT FEES Chicago Atlantic Real Estate Finance, Inc. | 21