Advanced Flower Capital Inc.

Good day, and thank you for standing by. Welcome to the AFC Gammas Incorporated's fourth quarter 2021 earnings conference call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question-and-answer session. To ask a question during the session, you'll need to press star 1 on your telephone. 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 Gabriel Katz, Chief Legal Officer. Please go ahead.

Good morning, and thank you all for joining AFC Gamma's earnings call for the fourth quarter and full year 2021. I'm joined this morning by Leonard Tannenbaum, our Chief Executive Officer, Jonathan Calico, our Head of Real Estate, Robin Tannenbaum, our Head of Originations and Investor Relations, and Brett Kaufman, our Chief Financial Officer. Before we begin, I would like to note that this call is being recorded. Replay information is included in our March 10, 2022 press release and is posted on the Investor Relations section of the AFC Gamma website at afcgamma.com, along with our fourth quarter and annual 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, future market growth and developments, financial performance and projections, and originations in 2022. These statements are subject to the inherent uncertainties in predicting future results and conditions, and 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 these statements. Therefore, you should not place undue reliance on these forward-looking statements. Please refer to AFC Gamma's most recent filings with the SEC for certain significant factors that could cause actual results to differ materially from these forward-looking statements and projections. During the call, we'll also 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 AFC Gamma's earnings release and investor presentation available on AFC Gamma's website. The format for today's call is as follows. Glenn will provide introductory remarks, an overview of our fourth quarter and full year 2021 performance, and strategic commentary. John will discuss AFC Gamma's portfolio. Robin will discuss the origination pipeline. And Brett will summarize our financial results. We will then open the line for Q&A. With that, I will now turn the call over to our Chief Executive Officer, Leonard Tannenbaum.

Thank you, Gabe. And good morning and welcome to AFC Gamma's earnings call for the fourth quarter fiscal year 2021. I would like to thank our analysts and investors for joining us today to discuss our fourth quarter and fiscal year results. Before turning to our fourth quarter results, I would like to briefly discuss what our goals were for 2021 and what we accomplished. During the year, AFC Gamma completed its initial public offering and began operating as a public REIT. This step has allowed us to accomplish several goals, including valuable access to public debt and equity markets, which provides AFC Gamma with an attractive cost of capital relative to its peers. We ended the year in a leadership position as one of the largest institutional lenders in cannabis, with a reputation for being a consistent relationship lender. Looking at our goals from the beginning of last year, we accomplished almost everything we set out to do, and I am extremely proud of our team for their hard work and dedication. First, we targeted $300 million of gross originations and exceeded that goal by generating $341 million of gross originations in 2021. Second, our goal was to increase book value, driving return for our shareholders. We increased book value per share by 12% from 1483 on December 31, 2020 to 1661 on December 31, 2021. This increase does not include the positive impact of the accretive offering completed in Q1 2022. Third, our goal was to declare increased dividends quarter over quarter. We declared an initial dividend per share of 38 cents for Q2 2021 and increased that by approximately 32% to 50 cents in Q4 2021. Over the year, we further augmented our in-house capabilities to continue providing our borrowers with customized financing solutions. We are proud of our growing platform with over 25 employees headquartered in West Palm Beach, Florida. We are also pleased to have seven research analysts covering AFCG, providing valuable information to our investors and the broader investment community. Looking forward to 2022, we remain very excited about the supporting the rapidly growing cannabis industry and the opportunities ahead of us. Although we have a slow start to the year with 47 million of gross originations, we remain confident in our active pipeline and the targets we have set for ourselves in 2022. During Q1 2022, AFC Gamma made the decision not to close two deals because of issues that surfaced during due diligence, which we could not overcome. At this time, we believe that during 2022, we will generate between $500 million and $700 million of gross originations with anticipated repayments between $100 million and $200 million bringing us to a net originations target range of 300 to 600 million. We intend to fund these commitments with a combination of debt and equity and are currently targeting a debt-to-equity ratio of approximately 0.5 times at the end of 2022. We continue to remain focused on developing the best cost of capital among the limited number of alternative lenders in the industry. I believe we have all the necessary components in place to scale this business and serve the rapidly growing industry. During the fourth quarter, we continued to execute on our pipeline, which led to record originations. We closed on new commitments of 127 million and had net fundings of 121 million during the fourth quarter. Our portfolio of over 400 million resulted in distributable earnings of 52 cents per basic weighted average share. This increase in earnings drove a 16% increase in our quarterly dividend 43 cents per share in the third quarter to 50 cents in the fourth quarter. Since going public in each of the last three quarters, we have generated earnings in excess of our dividend. For 2021, AFC Gamma distributed approximately 91% of distributable earnings, which resulted in carrying over 2.1 million forward into 2022, which as a REIT, we can do on a tax-free basis. Moving on to our portfolio, as of March 4, 2022, we have 14 borrowers operating in 16 states. We remain focused on creating a portfolio that's diversified across states and borrowers. Currently, our portfolio is comprised of 100% first lien loans. We are pleased that at this time we have no loans that are – we have no loans – pleased that at this time we have no loans that aren't – all our loans are current and performing. When evaluating which states to lend to, we prefer lending to operators in limited license markets, as we believe licenses in those states have additional value as a form of security. Additionally, during our underwriting, we evaluate the supply and demand dynamic in each state and where pricing per pound is trending. Currently, AFC Gamma has not lent to any borrowers with primary operations in California, Washington, Oregon, or Oklahoma. four states that have continuously experienced pricing pressure and have unlimited licenses. Due to adverse market conditions in these states, we believe that many operators may experience declining earnings, which may negatively impact lenders in these states. Earnings may be lumpy quarter over quarter due to difficulty in estimating potential deal repayments and forecasting the times of deal closings. Repayments tend to cause an increase in income due to a write-up of OID, as well as the receipt of an exit and or prepayment penalties. As I stated earlier, in 2022, we are currently expected to experience between $100 million and $200 million of repayments as the portfolio continues to mature. We are pleased that our Board has declared a quarterly dividend of $0.55 a share for the first quarter this year payable on April 15th to shareholders of record of March 31st. This dividend represents a 10% increase over the prior quarter and is the third consecutive quarterly increase in our dividend as a public company. Consistent with the past three quarters, we expect to generate distributable earnings at or above this dividend level in the first quarter of 2022. On an annual basis, our dividend policy is to pay between 85% and 100% of distributable earnings over the year. I will now turn the call over to John.