Chicago Atlantic Q2 Net Income Drops Slightly, But Dividends Increase

Chicago Atlantic Real Estate Finance, Inc. REFI released results for the second quarter ended June 30, 2022, revealing net income of approximately $7.5 million, or $0.42 per weighted average diluted common share, a decrease of 4.35% compared to $7.8 million in Q2 2021.

Q2 2022 Financial Highlights

• Total interest income of approximately $11.9 million

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

• 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 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.

John Mazarakis, executive chairman of Chicago Atlantic, stated, “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.”

Investment Activity and Portfolio Performance

• As of June 30, 2022, total loan commitments of approximately $357.1 million 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.

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.

Photo by Richard T on Unsplash

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