Advanced Flower Capital Inc.

Good day and thank you for standing by and welcome to the AFC Gamma Quarter 2 2021 earnings call. At this time, all participants' lines are in a listen-only mode. After this speaker's presentation, there will be a question and answer session. To ask a question during the session, you will need to press star 1 on your telephone keypad. And please be advised that today's conference is being recorded. If you require any further assistance, please press star 0. I would now like to hand the conference over to your speaker today, Ms. Francesca Smith. Ma'am, please go ahead.

Thank you, Mel. Good morning, and welcome to AFC Gamma, Inc.'s second quarter 2021 earnings conference call. I'm joined this morning by Leonard Tannenbaum, Chief Executive Officer, Jonathan Calico, Head of Real Estate, Robyn Tannenbaum, Head of Origination, and Thomas Jeffrey, Chief Financial Officer. Before we begin, I would like to note that this call is being recorded. Replay information is included in our July 14, 2021 press release and is posted on the investor relations section of ASC Gamma's website at ASCGamma.com, along with our second quarter 2021 earnings release and investor presentation. Today's conference call includes forward-looking statements and projections that reflect the company's current views with respect to, among other things, anticipated market size, expected consolidation in the industry, future events, and financial performance. These forward-looking statements are subject to the inherent uncertainties in predicting future results and conditions. Certain factors could cause actual results to differ materially from those projected in these forward-looking statements. New risks and uncertainties arise over time, and it is not possible for the company to predict those events or how they may affect it. Therefore, you should not place undue reliance on these forward-looking statements. We ask that you refer to our most recent filings with the SEC for important factors that could cause actual results to differ materially from these forward-looking statements and projections. During this call, we will refer to distributable earnings, which is a non-GAAP financial measure, reconciliations of net income, the most comparable GAAP measure to distributable earnings, can be found in our earnings release or in the investor presentation available on our website. The format for today's call is as follows. Len will provide introductory remarks, an overview of our second quarter results, and strategic commentary. John will discuss the real estate lending environment, Robyn will discuss the origination pipeline, and Tom will summarize the financials. We will then open a line for Q&A.

Thank you, Francesca, and welcome to AFC Gamma's Second Quarter Earnings Conference Call. I would like to thank our current shareholders, prospective shareholders, and analysts for joining us. Today I will provide you with an update on AFC Gamma's business, the many opportunities we have ahead of us, and the current state of the cannabis industry. AFC Gamma is an institutional provider of loans to the cannabis industry. typically secured by three pillars, cash flow, licenses, and real estate. The companies that we lend to are domestic, single, and multi-state operators, which include those that are privately held as well as those listed on the Canadian exchanges. During the second quarter, we closed on new commitments of $71.3 million. As of August 1, 2021, we lent to 14 borrowers, which have operations in 14 states. We are pleased that we have continued to diversify our portfolio across states and borrowers. In mid-June, we experienced a significant increase in the actionable pipeline, which was driven by an inflow of deals from large multi-state operators, as well as smaller multi-state and single-state operators. Notably, this increase in the pipeline excludes any capital tied to New York, which recently allowed adult-use cannabis, as the legislation there is not yet finalized. Since mid-June, our actionable pipeline has remained at elevated levels, which was the primary reason for the follow-on offering that we completed in June. As a reminder, the deals in our actionable pipeline, should they convert, could take between three and nine months to close. Many of the deals that we complete are high-touch, require significant due diligence, and potentially require regulatory approval, making it difficult to predict the exact timing of closings. Our robust pipeline of potential borrowers includes many operators expanding into new states. Growth and demand for debt capital that we provide will come from the issuance of new licenses in states such as Georgia and additional new licenses in states such as Ohio, Illinois, and Florida. We are pleased that one of the recently issued Georgia licenses was awarded to our largest borrower, Nature's Medicines. We've also noticed that our customers are accelerating construction to meet the estate-imposed limitation on bill time and to gain a first-mover advantage. During the quarter, we received an investment-grade rating of BBB- from Egan Jones Rating Company. This is an important step when we seek to issue debt. As our actionable pipeline converts into signed deals, it is our intention to seek long-term, unsecured financing for part of those capital needs. We believe issuing debt and establishing a benchmark for our debt cost of capital is important as we continue to execute on our business plan. Conceptually, we believe that using leverage against lower yielding assets of the portfolio is a good way to generate strong returns on equity for our shareholders. In addition, we are pleased that AFC Gamma was added to the Russell 2000, and we expect the inclusion in this world-class market index will bring increased visibility across the investment community. Turning to the industry, the legislative environment surrounding the cannabis market continues to evolve. Senator Schumer of New York recently put forth the Cannabis Administration and Opportunity Act, which, if passed in its current form, would, among other things, remove marijuana from the Controlled Substances Act. Given the current political landscape, we believe it is very unlikely that this piece of legislation will succeed. That said, we remain optimistic that legislation consistent with the goals of the SAFE Act will eventually pass. The SAFE Act may allow for credit cards to be used at cannabis dispensaries and should certainly increase the number of banks accepting deposits from the industry. We recognize that increased competition because of the SAFE Act may drive lower yields for borrowers. However, the SAFE Act will also potentially lower AFC Gamma's cost of capital as more banks could lend to us and more institutions could invest in us. Additionally, we continue to believe the states will have the right to set regulations around their own cannabis programs and will attempt to protect the significant source of tax revenue and job creation that cannabis provides these states. The M&A boom that we mentioned during last quarter's Kerning's Call continues with many large public multi-state operators using a combination of equity, debt, and cash as methods to acquire smaller single-state operators. We believe that we are in a one- to two-year period of rapid consolidation where the big operators will continue to get bigger. Our goal is to be the lender of choice to at least half of the top 15 multi-state operators, as well as companies that are seeking to achieve scale or be acquired by an MSO. We lend at different rates to the top MSOs, the midsize operators, and the smaller state operators. We are seeing some yield compression for the top tier multistate operators due to their size, scale, and access to capital. Going forward, we will continue to employ a high degree of selectivity in the deals that we underwrite and invest in. As we continue to source and evaluate new transactions, We have further expanded our team to over 20 employees and continue to build our corporate infrastructure to support our business plan. We are pleased to announce the hiring of Brett Kaufman, the new Chief Financial Officer for AFC Gamma. For 12 years, Brett served as CFO at Ladenburg Thalmann, a diversified financial services company, which has $1.5 billion in trailing 12-month revenue prior to its sale in 2020. Before that, he spent nine years at Bear Stearns, serving in various roles of increasing responsibility, including managing director and director of financial planning and analysis. We are very excited to have Brett join our team and look forward to introducing him to our investors and analysts in the coming months. We also would like to thank Tom Jeffrey for his contributions, hard work, and diligence as AFC Gamma's CFO. Tom will continue in his role as CFO of AFC Gamma's external manager, AFC Management. Turning to our dividend policy, The Board of Directors intends to declare a dividend for the September quarter on or about September 15th, which will have a record date of September 30th and be payable October 15th. It is anticipated that the quarterly dividend declared by the Board will be greater than or equal to the 38-cent dividend that was paid in the June quarter. This dividend schedule is similar to many other REITs We intend to follow this schedule for future quarters as this timing provides our board with additional visibility into the earnings of that given quarter when declaring the dividend. As a reminder, our dividend policy is to pay between 90% and 100% of distributable earnings over the year with a special dividend at the end of the year if necessary. I will now turn it over to John. Thank you, Len.