Chicago Atlantic Real Estate Finance(US:REFI)2025-05-07 14:02Financial Data and Key Metrics Changes - The loan portfolio principal totaled $407 million across 30 portfolio companies with a weighted average yield to maturity of 16.9%, down from 17.2% in the previous quarter [11] - Net interest income for Q1 was $13 million, a 7.3% decrease from $14.1 million in Q4 2024, primarily due to a decrease in non-recurring fees [15] - Total leverage was 28% of book equity as of March 31, down from 34% at the end of 2024 [12] - Distributable earnings per share were approximately $0.47 and $0.46 for basic and fully diluted shares, consistent with the previous quarter [19] Business Line Data and Key Metrics Changes - Gross originations during the quarter were $4.4 million, with $500,000 to new borrowers and $3.9 million to existing borrowers on delayed draw, offset by $9.2 million in sales and repayments [11] - The percentage of fixed-rate loans and floating-rate loans with floors greater than or equal to the prevailing prime rate was 71.2% [11] Market Data and Key Metrics Changes - The cannabis pipeline across the Chicago Atlantic platform stands at $462 million, with expectations for deployments to accelerate in Q2 and Q3 [9][23] - The company remains the third top-performing exchange-listed mortgage REIT, outperforming the median and average total return for all exchange-listed mortgage REITs by approximately 51% and 55% respectively since inception [10] Company Strategy and Development Direction - The company aims to create a differentiated and low-levered risk-return profile insulated from cannabis equity volatility [9] - The focus is on deploying capital with consumer and product-focused operators in limited license jurisdictions at low leverage profiles [7] - The company is cautious in its approach, reflecting selectivity in deployment due to market uncertainties and low valuations in the cannabis sector [40] Management's Comments on Operating Environment and Future Outlook - Management believes that the current operating environment is characterized by volatility and uncertainty, particularly in the cannabis equity markets [6][12] - The company expects to compete for refinancing opportunities in 2025, with a significant number of maturities anticipated [30] - Rescheduling of cannabis regulations could lead to increased cash flow for borrowers and greater market activity, although significant new entrants to the market are not yet evident [32][34] Other Important Information - The company raised approximately $1 million in net proceeds from the issuance of common stock through its ATM program [19] - The CECL reserve on loans held for investment decreased to approximately $3.3 million from $4.4 million, primarily due to the reversal of reserves related to loan number nine [17] Q&A Session Summary Question: Can you provide details on the near-term pipeline of $462 million? - The pipeline is generally related to CapEx, with expectations for deployments to accelerate in Q2 and Q3 [22][23] Question: What pricing assumptions are being made in underwriting? - Pricing in the industry is evolving, with adjustments made based on market conditions and state-specific developments [25][26] Question: How much visibility is there into repayments and net portfolio growth in 2025? - The aim is to achieve net portfolio growth in 2025, with significant maturities expected [30] Question: How would rescheduling impact the business? - Rescheduling could significantly increase after-tax free cash flow for borrowers and enhance the overall market environment [32] Question: What are the unfunded commitments at the end of the quarter? - There are approximately $19.8 million of unfunded commitments related to construction milestones and other projects [43]