• Loan Portfolio Principal: $410 million across 30 portfolio companies as of December 31, 2024.
• Weighted Average Yield to Maturity: 17.2% as of December 31, 2024, down from 18.3% at September 30, 2024.
• Gross Originations in Q4: $90.7 million in principal funding.
• Net Interest Income: $14.1 million for the fourth quarter, a 2.7% decrease from $14.5 million in the third quarter.
• Interest Expense Increase: $0.4 million increase in the fourth quarter due to new unsecured term notes.
• Total Operating Expenses Increase: Approximately $250,000 increase quarter over quarter.
• Base Management and Incentive Fees for 2024: $8.1 million compared to $8.8 million in 2023.
• Distributable Earnings Per Share: $0.47 basic and $0.46 fully diluted for Q4; $2.08 basic and $2.03 fully diluted for fiscal year 2024.
• Total Dividends Paid in 2024: $2.06 per share, with a payout ratio of approximately 99% of basic distributable earnings.
• Book Value Per Share: $14.83 as of December 30, 2024, down from $14.94 as of December 31, 2023.
• Common Shares Outstanding: Approximately 21.2 million as of December 30, 2024.

• Warning! GuruFocus has detected 8 Warning Signs with DUFRY.

Release Date: March 12, 2025

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

• Chicago Atlantic Real Estate Finance Inc (NASDAQ:REFI) executed a strong fourth quarter, with a stock price increase of 16.7% from November 2024 to March 2025.
• The company deployed $90.7 million in gross originations in Q4 across multiple states, demonstrating strong diversification.
• REFI increased its senior secured credit facility to $110 million and closed on a $50 million unsecured term loan at attractive pricing.
• The company delivered $2.06 per share in dividends to shareholders in 2024, maintaining a high payout ratio.
• REFI's loan portfolio has a weighted average yield to maturity of 17.2%, with a significant portion insulated from interest rate declines.

Negative Points

• The US cannabis industry is facing challenges such as pricing pressure and lack of federal reform, impacting equity values.
• REFI's net interest income decreased by 2.7% in Q4 due to a decrease in the prime rate and timing of deployment of proceeds.
• Interest expense increased due to the new unsecured term notes bearing a fixed interest rate of 9%.
• Loan number 9 remains on non-accrual status, requiring operational and balance sheet restructuring.
• The company's book value decreased due to dividends paid in excess of GAAP net income.

Q & A Highlights

Q: Can you talk about demand for loans and leverage expectations given the $500 million pipeline? A: The demand profile has changed due to compressed equity valuations, but the industry's maturation offsets this. We don't expect to increase leverage beyond what's approved under our senior secured facility. - Peter Sack, Co-CEO

Q: Can you update us on credit quality and the status of loan number 9? A: Overall credit quality hasn't changed significantly. For loan number 9, we've taken operational control and are working to remove a cease and desist order to restore value. - Peter Sack, Co-CEO and David Kite, COO

Q: What are your views on federal cannabis reform and its impact on your strategy? A: We invest assuming no significant federal reforms occur. Any reform would be a positive catalyst, but we don't rely on it in our underwriting. - Peter Sack, Co-CEO

Q: How does the board decide between increasing the base dividend versus paying a special dividend? A: We want the regular dividend to have a significant cushion to performance, ensuring a strong margin of safety for investors. - Peter Sack, Co-CEO

Q: Can you provide an update on your New York operations? A: We've been encouraged by progress in New York, including opening stores and cracking down on illegal operators, which strengthens the legal market. - Peter Sack, Co-CEO

Q: How do you view the impact of upcoming debt maturities in the cannabis industry? A: We aim to be the lender of choice for refinancing opportunities. The market will likely handle maturities in the normal course, and we want to be part of that process. - Peter Sack, Co-CEO

Q: How has the pipeline profile changed, and what is your focus in terms of borrowers? A: We're leveraging our origination team to build relationships with operators pursuing growth initiatives. The focus is on idiosyncratic growth projects and M&A opportunities. - Peter Sack, Co-CEO

Q: Are your borrowers able to operate under the current regulatory status quo? A: Yes, our borrowers can operate under the current conditions, and we underwrite assuming no significant regulatory changes. - Peter Sack, Co-CEO

For the complete transcript of the earnings call, please refer to the full earnings call transcript.