Chicago Atlantic Q3 Net Income Grows 31% Sequentially, Provides Outlook

Chicago Atlantic Real Estate Finance, Inc. REFI released its results for the third quarter ended September 30, 2022, revealing net income of approximately $9.8 million, or $0.55 per weighted average diluted common share, representing a sequential increase of 31.0%.

Q3 2022 Financial Results

Net interest income of approximately $12.9 million, representing a sequential increase of 13.4%
Total expenses of approximately $2.9 million before provision for current expected credit losses, representing a sequential decrease of 1.1%
Adjusted distributable earnings of approximately $10.3 million, or $0.58 per weighted average diluted common share, representing a sequential increase of 16.0%
Book value per common share of $15.23 as of September 30, 2022 compared with $15.13 as of June 30, 2022
As of September 30, 2022, the company had borrowed $53.0 million on its $65.0 million secured credit facility, resulting in a leverage ratio of approximately 20.0%.

John Mazarakis, executive chairman of Chicago Atlantic, stated, “Having previously made the strategic decision to limit growth in the REIT portfolio until we had sourced more accretive sources of capital, we exceeded our expectations for the third quarter, improved book value and raised our full year outlook on the strength of improved portfolio yields and a sequential reduction in expenses. The loan pipeline remains very robust, and we have been able to selectively fulfill demand through the broader Chicago Atlantic platform. With the recent increase in the REIT’s credit facility, we expect to put the additional capital to work accretively by executing on attractive pipeline opportunities that we are originating in limited-license states.”

Investment Activity and Portfolio Performance

As of September 30, 2022, total loan commitments of approximately $348.9 million ($330.4 million funded, $18.5 million unfunded) across 22 portfolio companies.
The portfolio’s weighted average yield to maturity was approximately 18.3% as of September 30, 2022 compared with approximately 17.7% as of June 30, 2022.
On November 7, 2022, Chicago Atlantic partially exercised the accordion feature of its secured revolving credit facility, increasing the size to $92.5 million and adding four new FDIC-insured financial institutions to the lending group. The credit facility matures in December 2023 with a one-year extension option, subject to customary conditions.

Dividends

On October 14, 2022, Chicago Atlantic paid a regular quarterly cash dividend of $0.47 per share of common stock for the third quarter of 2022 to common stockholders of record on September 30, 2022.

2022 Outlook
Based on the company’s year-to-date results and its newly expanded revolving credit facility, Chicago Atlantic increased its outlook for full year 2022:

Adjusted distributable earnings is expected to be in a range of $2.01 to $2.05 per weighted average diluted common share, compared with a previous range of $1.95 to $2.00 for full year 2022.
The company’s leverage ratio is expected to be in the range of 25% to 35% by December 31, 2022.
The regular quarterly cash dividend amount for the fourth quarter of 2022 is expected to be consistent with the $0.47 previously declared for the third quarter which would result in a full year 2022 regular cash dividend of $1.81.
The company anticipates that the current projected full year dividend would potentially require a special dividend to be declared in December 2022 to meet its 2022 taxable income distribution requirements.
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