Advanced Flower Capital Inc.

Hello, good day everyone, and thank you for standing by. Welcome to the AFC Gamma second quarter 2023 earnings 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, you will need to press the star key and the numbers one and one on your telephone. You will then hear a message advising your hand is raised. To withdraw the question, simply press star 11 again. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker today, Gabriel Katz, Chief Legal Officer.

Good morning, and thank you all for joining AFC Gamma's earnings call for the quarter ended June 30, 2023. I'm joined this morning by Leonard Tannenbaum, our Chief Executive Officer, Brandon Hetzel, our Chief Financial Officer, and Robin Tannenbaum, our President. Before we begin, I would like to note that this call is being recorded. Replay information is included in our July 24, 2023 press release and is posted on the investor relations section of AFC Gamma's website at afcgamma.com, along with our second quarter 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. Please refer to AFCGamma'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 gap measure to distributable earnings, can be found in both 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 second quarter performance, and strategic commentary. Brandon 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 quarter ended June 30th, 2023. I would like to thank everyone for joining us today to discuss our results. Turning to the quarterly results for the second quarter of 2023, AFC Gamma generated distributable earnings of 49 cents per basic 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 dividends. The Board of Directors declared a $0.48 dividend per share for the June quarter. Since going public, we have generated distributable earnings that have met or exceeded our dividend in each quarter and paid out $4.58 in dividends per share. Since mid-2022, given the market and interest rate volatility, AFC Gamma has taken a conservative view to deploying capital. We have raised the bar on originations and maintained ample cash on our balance sheet to capitalize on opportunities that may arise. As we stated last quarter, we continue to see an uptick in acquisition activity in the cannabis market, both from existing operators buying distressed assets, as well as new investors coming into the market to purchase assets at a significant discount. The capital formation around these assets is promising. We continue to believe that there are investable states in cannabis, including Missouri, Georgia, Maryland, Arizona, and Ohio, to name a few. Subsequent to quarter end, we funded a new cannabis investment to private company M of approximately $25 million into one of the newly formed, well-capitalized operators that we believe will continue to consolidate valuable assets in key limited license states. We continue to have liquidity to make additional debt investments in operators and limited license states that we believe have strong risk adjusted profiles. Turning to our current portfolio, we have made substantial progress in reducing our exposure to underperforming assets and continue to actively portfolio manage them. We believe that our focus on targeting operators and limited license states has set us up to mitigate certain risks. During the June quarter, and subsequent to quarter end, we have been active in monetizing collateral to reduce exposure to these underperforming credits. We've received select principal prepayments and or sold at par $43.4 million of debt in these credits, which I will now describe in further detail. In May of 2023, we placed private company I which was rated a Category 4 loan under our CECL analysis in foreclosure. We sold two-thirds of the credit facility to a multi-state operator at par plus accrued interest and have a put rate on the remaining one-third immediately prior to the transfer of one of the borrower's cannabis licenses. The multi-state operator is now leading the foreclosure process, and we expect that we will have a full recovery on the remaining one-third of our debt outstanding. This asset remains rated as a Category 4 loan under our CECL analysis. Additionally, during the quarter and subsequent to quarter end, AFC Gamma and its syndicate group received a pay down of approximately $45.9 million of private company A's credit facility from the borrower's sale of its Maryland and Arizona assets. This is another example of AFC Gamma's active portfolio management approach to de-risk underperforming assets. Lastly, we were a small co-lender as part of the larger credit facility to a subsidiary of private company H. During the quarter, we successfully exited the loan as it matured, and we did not participate in the refinancing. We received a repayment of all principal, accrued interest, and excesses. As we have discussed during the last several quarters, private company G, which we were closely monitoring, continues to have cash flow challenges. While private company G, which pays interest in arrears, paid its full monthly interest for May in cash, they did not pay any interest for the month of June and are now 30 days past due. Additionally, during July, they made the decision to lay off their management team, including the CEO and CFO. While we continue to engage with private company GE's restructuring team, we have put them on non-accrual for the month of June. We remain excited, however, about their near-term prospects in New Jersey and look forward to the full optimization of their cultivation facility in September. we may need to eject additional capital to the specific project to complete the full build-out in New Jersey. In order to reduce our exposure to this underperforming asset, we've initiated a consensual foreclosing proceeding with respect to the borrower's three Pennsylvania dispensaries. We expect that the net cash proceeds of the public auction would be used to prepay a portion of the principal outstanding under our credit facility. All interested parties should contact TPL Group to participate in the UCC Article 9 foreclosure auction, which is scheduled for September 6th. Additionally, private company G has told us that they intend to sell certain non-core, non-collateral assets to contribute towards interest payments and its expansion of its New Jersey operations. As we have said in past calls, we believe there are credible newer cannabis operators entering the market that are well capitalized to take advantage of the current market environment. And we are pleased to begin investing in this next phase of the cannabis industry. As you may have seen in today's Wall Street Journal, in the article titled, New Lending by Mortgage Reads, has dried up. Very informative article. The opportunity in non-cannabis real estate continues to grow and centers around the regional banks and mortgage REITs, limiting the amount of capital they are lending on a loan-to-cost basis. As a result, this creates an opportunity for alternative lenders like us to fill that void. We continue to see interesting deals in commercial real estate and have formed a strong pipeline of these opportunities and are working through several deals in the term sheet stage. With that, I'll turn over the call to Brandon to review our financial results.