Chicago Atlantic Real Estate Finance, Inc.

Welcome to the Chicago Atlantic Real Estate Finance Inc. First Quarter 2022 Earnings Conference Call. My name is John, and I'll be your operator for today's call. At this time, all participants are in listen-only mode. Later, we will conduct a question-and-answer session. During the question-and-answer session, if you do have a question, press 01 on your touchtone phone. And now I'll turn the call over to Tripp Sullivan of SCR Partners.

Thank you. Good morning. Welcome to the Chicago Atlantic Real Estate Finance Conference call to review the company's results for the first quarter of 2022. On the call today will be John Matsourakis, Executive Chairman, Tony Kappel, Chief Executive Officer, and Andreas Bodmeier, Co-President and Chief Investment Officer. Our results for release this morning and our earnings press release, which can be found on the Invest Relations section of our website, along with our supplemental filed with the SEC. A live audio webcast of this call is being made available today. For those who listen to the replay of this webcast, we remind you that the remarks made herein are as of today, May 12, 2022, and will not be updated subsequent to this call. During this call, certain comments and statements we make may be deemed forward-looking statements within the meaning prescribed by the securities laws, including statements related to the future performance of our portfolio, our pipeline of potential loans and other investments, future dividends, and financing activities. All forward-looking statements represent Chicago Atlantic's judgment as of the date of this conference call and are subject to risk and uncertainties that can cause actual results to differ materially from our current expectations. Investors are urged to carefully review various disclosures made by the company, including the risk and other information disclosed in the company's filings with the SEC. We also will discuss certain non-GAAP measures, including but not limited to distributable earnings and adjusted distributable earnings. Definitions of these non-GAAP measures and reconciliations to the most comparable GAAP measures are included in our filings with the SEC. I'll now turn the call over to John Masarakis. Please go ahead.

Thanks, Tripp. Good morning, everyone, and thank you for joining us today. This has been a quick turnaround since our Q4 reporting in mid-March, so I want to address some of the macroeconomic issues that are grabbing everyone's attention before we briefly summarize our activity since the last call. Let's start with the issues of the day. While there are real concerns in the broader market with rising rates, the war in Ukraine, and whether the Federal Reserve will push the economy into a recession, We believe all perspective has been lost on the growth potential in the cannabis lending. I think the market may have also lost sight of the reasons why we have been so bullish on this sector the past four years. There is no disputing that rates are rising and that there has been substantial disruption in the equity markets for cannabis operators. What's been lost is that this business is incredibly resilient, counter-cyclical, and uncorrelated to the broader market. It acts much like the pharmaceutical industry, as well as the alcohol and tobacco. Those sectors continue to demonstrate very inelastic demand, and cannabis is much of the same. Cannabis is growing by close to 20% per year, and this growth is not contingent upon the broader economy. This growth is tied to regulatory matters and to expansion of licensing within an existing state. This is one of the few industries that exist that you can directly correlate new regulations and new licensing with demand for capital. New Jersey is a great example. Previously, a $300 million medical market, now with the move to adult use, it is easily a $1 billion retail market. Recession or no recession, it will remain so. This is why we're so busy. States like Georgia, Ohio, Illinois, Arizona, Maryland, and Alabama are adding new licenses And Florida has a new license as well. These are states that are driving our growth. Approximately 63% of our loans are tied to prime. We do not have any LIBOR-based loans. These floating rate loans allow us to adjust with the market. You'll note that as of May 10th, our weighted average yield to maturity increased to 17.5%. I would also highlight that our portfolio today has $337 million in commitments and a market cap in excess of $290 million as of Monday. We have incurred no leverages of March 31st and have since borrowed $30 million against our credit facility. We're trading at an unlevered yield to book of approximately 10.6%. That's why I think we need to bring back a little more perspective to what's going on in our markets and in our business. Our operators are in great shape as well. They usually have no leverage other than our loans. you would have operators carry four to six times debt to EBITDA ratio of leverage, and then a mortgage rate would carry a couple turns of leverage on top of that. That's not the case in our portfolio. One of our newest loans is with a borrower who currently has 11 million of EBITDA, and our loan is only $17 million. This borrower has no other debt on its capital structure. My goal all along has been to continue building on our reputation as a capital provider that can be trusted, and to grow together with the leading operators in the industry. We primarily target the limited license states with operators that are vertically integrated, and we have been able to pick and choose the borrowers we want to back. Our disciplined approach produces a higher yielding and very well-collateralized portfolio. With this, I will turn to Tony. And Tony, why don't you take it from here?