Advanced Flower Capital Inc.

and thank you for standing by. Welcome to the AFC Gamma 4th Quarter 2022 Earnings Call. At this time, all participants are in the listener mode. After the speaker's presentation, there will be a question and answer session. To ask a question during this session, you'll need to press star 1 1 on your telephone. You will then hear an automated message advising you your hand is raised. To withdraw your question, please press star 1 1 again. please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker today, Gabe 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 ended December 31, 2022. I'm joined this morning by Leonard Tannenbaum, our Chief Executive Officer, Jonathan Calico, our Head of Real Estate, Robin Tannenbaum, our President, 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 February 23, 2023 press release and is posted on the investor relations portion of AFC Gamma's website at afcgamma.com, along with our fourth quarter and full year 2022 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 developments, anticipated portfolio yield, and financial performance and projections in 2023 and beyond. These statements are subject to inherent uncertainties in predicting future results and conditions, and certain factors could cause actual results to differ materially from those projected in these four statements. Please refer to AFC Gamma's most recent periodic filings with the SEC for certain significant 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 AFC Gamma's earnings release and investor presentation available on AFC Gamma's website. The format for today's call is as follows. Len will provide introductory remarks, an overview of our fourth quarter performance and strategic commentary. Brett will summarize our financial results and 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. Good morning and welcome to AFC Gamma's earnings call for the fourth quarter and full year ending December 31st, 2022. I would like to thank our analysts and investors for joining us today to discuss our results. I am pleased to have continued to execute on our business plan during the fourth quarter of 2022. AFC Gamma generated distributable earnings of 62 cents per weighted average share of common stock. As a reminder, distributable earnings is the primary metric that the Board considers when declaring AFC Gamma's quarterly dividend. The Board of Directors declared a 56 cent dividend per share for the December quarter, which is in line with our previous three quarters. Since going public, we have generated distributable earnings in excess of our dividend in each quarter and paid out $3.54 in dividends per share including paying out $2.23 of dividends per share during the 2022 fiscal year. For the full year 2022, AFC Gamma paid out approximately 90% of distributable earnings in the form of dividends. For the first quarter of 2023, the Board of Directors has declared a fourth consecutive $0.56 dividend, which will be paid on April 14, 2023, to shareholders of record as of March 31, 2023. During 2022, the cannabis market faced pressure to a variety of factors, including the uncertainty of regulatory change, price and compression, longer lead times to raise equity. During this time, AFC Gamma made the calculated decision to monitor the environment, support our existing borrowers, and build liquidity to take advantage of future opportunities without relenting on our stringent diligence criteria. As a result, We have not originated any new cannabis debt investments that met our risk-adjusted return thresholds over the past nine months. We believe that cannabis 3.0 will emerge with well-capitalized and sophisticated opportunistic acquirers who will target purchasing existing cannabis assets at significantly reduced prices to form new competitive multi-state operators. We are continually monitoring the formation of capital around the next wave of cannabis investments and look forward to financing these well-funded platforms. In the meantime, we are seeing many operators take a pause on expansion opportunities and or close non-profitable business units as they right-size their current businesses and adjust to rising rates, inflation, construction delays, and pricing pressure. Although we believe our cannabis portfolio has been carefully constructed, we are not immune to the effects that the broader market pressures present. Industry-wide cannabis pressures have resulted in AFC Gamma taking higher credit reserves. We believe that our focus on targeting operators in limited-license states have set us up to mitigate certain risks and generate strong risk-adjusted returns. We continue not to have exposure to unlimited-license states such as California, Washington, Oregon, Oklahoma, or Colorado, and we have limited exposure to Michigan. We actively manage our portfolio, having regular dialogue with many of our borrowers, and we are comfortable with the coverage of our loans on an enterprise value basis. In general, our borrowers have continued to support their business with additional equity infusions. During the quarter, we downgraded one of our larger loans from a category three to a category four under a CECL analysis. While the loan is still performing, given the current environment and uncertainty, we felt that it was prudent to move the asset down to a category four and take additional credit reserves against it. Given the more challenging credit and broader market environment, we have increased our CECL reserve from 1.8% as of September 30th, 2022 to 4.97% as of December 31st, 2022. With our strong liquidity position in the state of the cannabis market, we have made the decision to expand our investment strategy to include investing in compelling first lien and second lien commercial real estate financing opportunities. In the current interest rate environment, banks have reduced their traditional real estate lending activity which has created a void in the market for lenders such as AFC Gamma to invest in deals with enhanced yields and strong risk-adjusted returns. To that end, we are focused on opportunistically investing in commercial real estate bridge loans, construction loans, direct loans, leveraging our management team's core competency in commercial real estate lending and construction. We have expanded our origination efforts to source both cannabis and non-cannabis commercial real estate loans, and view the opportunity in non-cannabis real estate lending as sizable. We continue to believe that the origination environment in commercial real estate lending will be more opportunistic as real estate values adjust and new capital is needed to finance growth. For example, per the Mortgage Bankers Association, $331.2 billion of the $2.8 trillion, which is 12% of the outstanding commercial and multifamily mortgages held by non-bank lenders, will mature in 2023. That's a 33% increase from the $249 billion that matured in 2022. With banks pulling back, we expect that number could be even higher, which should provide additional opportunities for alternative lenders such as AFC Gamma to finance. As a result of our current portfolio's earnings power, we have the ability to be patient while delivering a consistent dividend to our shareholders. We believe that our available capital will allow us to take advantage of the opportunities that may be coming in this volatile commercial real estate market. Overall, while transaction activity has been slower than usual, we are evaluating non-cannabis commercial real estate investments that are attractive for both risk and return. The pipeline that we have developed in commercial real estate has been forming over the course of the past nine months. We've implemented various processes and procedures internally to source and evaluate these deals. We have a number of non-cannabis deals that we're evaluating, and we anticipate closing our first commercial real estate loan non-cannabis commercial real estate loan in the next 90 days. Last quarter, I noted that our board has formed a special committee of independent and disinterested members to lead the company's thinking around a potential early internalization of our external manager. Ultimately, the special committee determined that this was not the right time in the market to move forward with an internalization. Looking ahead, I'm excited about our market positioning portfolio composition, and our opportunity set. We believe that AFC Gamma is well positioned to navigate the current market environment and opportunistically invest our capital in deals with strong risk-adjusted returns. I will now turn the call over to Brett to review our financial results.