Chicago Atlantic Real Estate Finance Inc (REFI) 2023 Q2 法說會逐字稿

Thank you for standing by, and welcome to the Chicago Atlantic Real Estate Finance, Inc. Second Quarter 2023 Earnings Conference Call. (Operator Instructions) As a reminder, today's program is being recorded. And now I'd like to introduce your host for today's program, Tripp Sullivan.

感謝您的耐心等待，歡迎參加芝加哥大西洋房地產金融公司 2023 年第二季度收益電話會議。 （操作員指示）提醒一下，今天的節目正在錄製中。現在我想介紹一下今天節目的主持人特里普·沙利文。

Thank you. Good morning. Welcome to the Chicago Atlantic Real Estate Finance Conference Call to review the company's results for the second quarter of 2023. On the call today will be John Mazarakis, Executive Chairman; Tony Cappell, Chief Executive Officer; Andreas Bodmeier, Co-President and Chief Investment Officer; Peter Sack, Co-President; and Phil Silverman, Interim Chief Financial Officer. Our results were released this morning in our earnings press release, which can be found in the Investor 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.

謝謝。早上好。歡迎參加芝加哥大西洋房地產金融電話會議，回顧公司 2023 年第二季度的業績。今天的電話會議將由執行主席約翰·馬扎拉基斯 (John Mazarakis) 主持。托尼·卡佩爾，首席執行官； Andreas Bodmeier，聯席總裁兼首席投資官；彼得·薩克，聯席總裁；臨時首席財務官 Phil Silverman。我們的業績今天早上在我們的收益新聞稿中發布，您可以在我們網站的投資者關係部分找到該新聞稿，以及我們向美國證券交易委員會提交的補充材料。今天將提供本次電話會議的現場音頻網絡廣播。

For those who listen to the replay of this webcast, we remind you that the remarks made herein are as of today, August 8, 2023, 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 risks and uncertainties that can cause actual results to differ materially from our current expectations.

對於那些收聽本次網絡廣播重播的人，我們提醒您，本文中的言論截至今天，即 2023 年 8 月 8 日，並且不會在本次電話會議之後更新。在本次電話會議中，我們做出的某些評論和聲明可能被視為證券法規定含義內的前瞻性聲明，包括與我們投資組合的未來業績、我們的潛在貸款和其他投資渠道、未來股息和融資相關的聲明活動。所有前瞻性陳述均代表芝加哥大西洋航空公司截至本次電話會議之日的判斷，並受到風險和不確定性的影響，這些風險和不確定性可能導致實際結果與我們當前的預期存在重大差異。

Investors are urged to carefully review various disclosures made by the company, including the risks 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 Mazarakis. Please go ahead.

投資者應仔細審查公司披露的各種信息，包括公司向 SEC 提交的文件中披露的風險和其他信息。我們還將討論某些非公認會計原則措施，包括但不限於可分配收益和調整後的可分配收益。這些非 GAAP 衡量標準的定義以及與最具可比性的 GAAP 衡量標準的調節均包含在我們向 SEC 提交的文件中。我現在將把電話轉給約翰·馬扎拉基斯。請繼續。

Thanks, Tripp. Good morning, everyone. After another quarter of volatility in the broader financial sector and cannabis in particular, we can now add the fact that small cap equity risk premiums are at the lowest level in a couple of decades. Seems like, yield will soon be king again. If you add in worries about a recession or not, that's a lot of ways to get distracted. I want to address some of these topics to stress how we've approached the creation, management and execution of our platform at Chicago Atlantic. Over the past 25-plus years, I've been through 3 recessions and several economic cycles. I've seen cycles where there's catastrophic collapse or cycles where competition is fierce. Our job as a fund manager is to smooth out the peaks and throughs evident within the strategy that we're managing.

謝謝，特里普。大家，早安。在更廣泛的金融領域，特別是大麻領域又經歷了四分之一的波動之後，我們現在可以補充一個事實，即小盤股風險溢價處於幾十年來的最低水平。看來，產量很快就會再次成為王道。如果你加上對經濟衰退與否的擔憂，那就有很多方法可以分散注意力。我想討論其中一些主題，以強調我們如何在芝加哥大西洋航空公司創建、管理和執行我們的平台。在過去 25 多年裡，我經歷了 3 次經濟衰退和幾個經濟周期。我見過災難性崩潰的周期或競爭激烈的周期。作為基金經理，我們的工作是消除我們正在管理的策略中明顯的高峰和低谷。

No deal does that better than the partnership we've created with the State of New York that Peter will discuss in a moment. With the largest platform, our own origination team, experience in direct lending, a well-capitalized and conservative balance sheet and a diversified loan portfolio, I believe we can make a stronger case than ever before that we're the leading capital provider in this space. The pipeline remains robust with actionable deals in excess of $400 million. There are a lot of good things happening in states, such as Maryland and Missouri. And we are starting to see more transaction activity within the industry with the new states coming online that's leading to improved optimism among the investors in different forms of capital allocation.

沒有什麼協議比我們與紐約州建立的伙伴關係更能做到這一點，彼得稍後將討論這一點。憑藉最大的平台、我們自己的發起團隊、直接貸款經驗、資本充足且保守的資產負債表以及多元化的貸款組合，我相信我們可以比以往更有力地證明我們是這一領域領先的資本提供者。空間。管道仍然強勁，可操作的交易超過 4 億美元。馬里蘭州和密蘇里州等州發生了很多好事。隨著新州的上線，我們開始看到行業內有更多的交易活動，這導致投資者對不同形式的資本配置的樂觀情緒有所改善。

There's also a growing recognition that the high rate environment isn't going away quickly, which is leading to decisions about whether to grow or not to grow as well as increased M&A funded by debt financing. We're in front of several trends in limited-license states that are moving from medical to adult use in states that have seen the greatest price compression show improvements in wholesale pricing. We have been cautious for some time now, but it could be time to change that to cautiously optimistic. We're picking our spots and remaining incredibly disciplined in the pursuit of new opportunities. Our partnership with New York is a great example of taking the right opportunity backed by strong credit and an appropriate return that could potentially lead to other partnerships. I will now turn it over to Peter.

人們還越來越認識到高利率環境不會很快消失，這導致人們做出是否增長的決定以及通過債務融資資助的併購活動的增加。我們正面臨著有限許可州的幾種趨勢，這些趨勢正在從醫療用途轉向成人用途，而這些州的價格壓縮幅度最大，表明批發價格有所改善。我們已經謹慎了一段時間了，但現在可能是時候將其轉變為謹慎樂觀了。我們正在選擇自己的位置，並在追求新機會的過程中保持極其嚴格的紀律。我們與紐約的合作夥伴關係是一個很好的例子，我們抓住了有強大信用和適當回報支持的正確機會，這可能會導致其他合作夥伴關係。我現在將把它交給彼得。

Thank you, John. On June 30, Governor Hochul announced our partnership with New York and the New York State Cannabis Social Equity Investment Fund. The Chicago Atlantic platform has committed $150 million to this partnership with the REIT accounting for up to $50 million of that total commitment. Our investment is subject to the identification and due diligence of dispensary locations. We have a highly skilled real estate team that has lent our expertise to picking and building the right locations. And they have been working on these sites for several months. Last week, we advanced our first capital, nearly $19 million to fund the opening of 17 dispensaries, at least 15 of which should be operational in the fall.

謝謝你，約翰。 6 月 30 日，州長 Hochul 宣布我們與紐約州和紐約州大麻社會股權投資基金建立合作夥伴關係。芝加哥大西洋月度平台已向與 REIT 的合作承諾 1.5 億美元，佔承諾總額的 5000 萬美元。我們的投資取決於藥房地點的識別和盡職調查。我們擁有一支技術精湛的房地產團隊，他們利用我們的專業知識來挑选和建造合適的地點。他們已經在這些網站上工作了幾個月。上週，我們預付了第一筆資金，即近 1900 萬美元，用於資助開設 17 家藥房，其中至少 15 家應在秋季投入運營。

This partnership with New York is a whole new ball game and perhaps the largest commitment to social equity initiatives in the history of the industry. We are fortunate to be the capital provider in the cannabis industry that has the operational, financial, legal and underwriting expertise, not to mention the capital to come alongside the state of New York and make this happen. If this works the way we all envision, there could be future opportunities to replicate this partnership in other states. Tony, why don't you take it from here?

與紐約的合作是一次全新的合作，也許也是該行業歷史上對社會公平倡議的最大承諾。我們很幸運能夠成為大麻行業的資本提供者，擁有運營、財務、法律和承保專業知識，更不用說與紐約州一起實現這一目標的資本。如果這按照我們所有人的設想發揮作用，未來可能有機會在其他州複製這種夥伴關係。托尼，你為什麼不把它從這裡拿走呢？

Good morning. At June 30, our loan portfolio had total loan commitments of $329 million across 25 portfolio companies with a weighted average yield to maturity of 19.2% compared with 19.4% at March 31 and 17.7% a year ago. As expected, we kept new originations limited with total gross originations of only $1.9 million to existing borrowers. That was offset by $6.9 million of principal repayments, $5 million of which was related to unscheduled early repayments. Our portfolio remains 88% floating rate based off the prime rate consistent with last quarter and up from 60% from June of 2022. With the Federal Reserve raising their target rate again last week and the increase in the prime rate to 8.5%, we continue to see a positive impact on portfolio yield. I'll now turn it over to Andreas.

早上好。截至6 月30 日，我們的貸款組合在25 家投資組合公司中的貸款承諾總額為3.29 億美元，加權平均到期收益率為19.2%，而3 月31 日為19.4%，一年前為17.7 %。正如預期的那樣，我們對現有借款人的新發放總額僅為 190 萬美元。這被 690 萬美元的本金償還所抵消，其中 500 萬美元與計劃外的提前還款有關。我們的投資組合基於與上季度一致的最優惠利率，保持88% 的浮動利率，高於2022 年6 月的60%。隨著美聯儲上週再次上調目標利率，並將最優惠利率提高至8.5% ，我們繼續看到對投資組合收益率的積極影響。我現在把它交給安德烈亞斯。

For the first time in our life as a platform, we experienced a default this quarter and moved Loan #9 to nonaccrual. The decision to place this loan on nonaccrual is borrower specific and not representative of the performance across the rest of the portfolio. The borrower did not make contractual payments due under our loan since May. As a result, we accelerated the obligations due under the loan and are in the process of exercising our rights and remedies in pursuit of full repayment of outstanding obligations. Due to our stringent underwriting, we are confident that we will be made whole on this loan.

作為一個平台，我們在本季度首次經歷了違約，並將第 9 號貸款轉為非應計貸款。將此貸款設為非應計貸款的決定是針對具體借款人的，並不代表投資組合其他部分的業績。自五月份以來，借款人沒有支付我們貸款項下的到期合同付款。因此，我們加速了貸款項下的到期債務，並正在行使其權利和補救措施，以尋求全額償還未償債務。由於我們嚴格的承保，我們有信心在這筆貸款上獲得完整。

The current outstanding principal balance is approximately $16.1 million, and no past due interest has been accrued or recognized to income. On the capital structure side, we were able to increase our revolving credit facility to $100 million within the quarter with the addition of another bank to the syndicate. With that upsize in the revolver, we are comfortable where we are with that size. As of quarter end, we had $43 million outstanding on the line. With the advance on the $18.8 million New Year loan subsequent to quarter end that Peter mentioned earlier, we drew an additional $15 million on the revolver and have $58 million outstanding on the line as of today, which provides the company with a total of $46 million in liquidity.

目前未償本金餘額約為 1,610 萬美元，並且沒有應計或確認為收入的逾期利息。在資本結構方面，隨著另一家銀行加入銀團，我們能夠在本季度將循環信貸額度增加到 1 億美元。隨著左輪手槍尺寸的加大，我們對這個尺寸感到滿意。截至季度末，我們尚有 4,300 萬美元未償付。彼得之前提到，隨著季度末預支了1880 萬美元的新年貸款，我們又從左輪手槍中提取了1500 萬美元，截至今天還有5800 萬美元未償還貸款，這為公司提供了總計4600 萬美元的資金。在流動性方面。

Our balance sheet is still under levered at 16% of book equity at quarter end compared with 22% at year-end. Our debt service coverage ratio on a consolidated basis was 11.5:1 as of quarter end compared with the requirement of 1.35:1. Given that leverage among other mortgage REITs remains elevated, we believe we offer a very compelling dividend yield backed by strong portfolio yields and coverage without the level of risk that these other REITs have taken on. In addition, we also benefit from strong underwriting and collateral coverage that extends well beyond the real estate. I'll now turn it over to Phil to review our financial results.

季度末我們的資產負債表槓桿率仍為賬面淨值的 16%，而年底則為 22%。截至季度末，我們的綜合償債覆蓋率為 11.5:1，而要求為 1.35:1。鑑於其他抵押房地產投資信託基金的槓桿率仍然較高，我們相信我們可以提供非常引人注目的股息收益率，並得到強勁的投資組合收益率和覆蓋範圍的支持，而無需承擔其他房地產投資信託基金所承擔的風險水平。此外，我們還受益於強大的承保和抵押品覆蓋範圍，其範圍遠遠超出了房地產領域。我現在將把它交給菲爾來審查我們的財務業績。

Thank you, Andreas. Net interest income for the quarter decreased $1.2 million or 8.4% from Q1. In Q2, we recognized approximately $0.6 million in nonrecurring interest income from early principal repayments as compared to $1 million during the first quarter. The decrease was further driven by the impact of one loan placed on nonaccrual status in May, which accounted for $0.6 million of the sequential decline as well as a decrease in the average principal outstanding of $332 million during Q1 as compared to $319 million in Q2. These decreases were partially offset by lower average borrowings on our revolving credit facility and the positive impact of the 25 basis point increase in the prime rate in May.

謝謝你，安德烈亞斯。本季度淨利息收入較第一季度減少 120 萬美元，即 8.4%。第二季度，我們確認了來自提前本金償還的約 60 萬美元的非經常性利息收入，而第一季度為 100 萬美元。這一下降的進一步原因是5 月份一筆非應計貸款的影響，該貸款佔環比下降的60 萬美元，以及第一季度平均未償本金減少3.32 億美元，而第二季度為3.19 億美元。這些下降被我們的循環信貸額度平均借款下降以及 5 月份優惠利率上調 25 個基點的積極影響部分抵消。

Total operating expenses for the quarter before our CECL provision were down 5.8%, primarily due to a decrease in net management and incentive fees. Adjusted distributable earnings was $0.55 per weighted average diluted share for Q2 compared with $0.62 during Q1. We distributed a dividend of $0.47 during the second quarter, which resulted in a dividend payout ratio of approximately 85%. Year-to-date, we have distributed approximately 80% of taxable income. The Q2 diluted earnings per weighted average common share was $0.47 compared to $0.60 in Q1. The decrease is primarily due to a higher provision for expected credit losses and stock-based compensation, partially offset by the lower management and incentive fees. We increased our quarterly CECL reserve by $1.1 million as of June 30.

在我們撥備 CECL 之前的季度總運營費用下降了 5.8%，主要是由於淨管理費和激勵費的減少。第二季度調整後可分配每股加權平均攤薄收益為 0.55 美元，而第一季度為 0.62 美元。第二季度我們派發了 0.47 美元的股息，股息支付率約為 85%。今年迄今為止，我們已經分配了大約 80% 的應稅收入。第二季度稀釋後每股加權平均普通股收益為 0.47 美元，而第一季度為 0.60 美元。減少的主要原因是預期信貸損失和股票補償撥備增加，但部分被管理費和激勵費減少所抵消。截至 6 月 30 日，我們將季度 CECL 準備金增加了 110 萬美元。

The CECL determination for the quarter considered reserve reversals attributable to the principal repayments during Q2 as well as the downgrade of one loan with an outstanding principal balance of $11 million to a risk rating of 4. Our reserve estimate further contemplates benchmark third-party loan loss data, which during Q2 reflected an increase in expected loss and probability of default rates as compared to Q1. The increase in these benchmark loss rates are the result of the continued rising rate environment and other macro environmental factors and contributed to the overall increase in the provision during Q2.

CECL 對本季度的決定考慮了第二季度本金償還導致的準備金轉回，以及將一筆未償本金餘額為1100 萬美元的貸款降級至4 的風險評級。我們的準備金估計進一步考慮了基準第三方貸款損失數據顯示，第二季度的預期損失和違約率較第一季度有所增加。這些基準損失率的上升是持續上漲的利率環境和其他宏觀環境因素的結果，並推動了二季度撥備的整體增加。

On a relative size basis, we increased the total reserve to approximately 1.6% of outstanding principal as compared to 1.3% as of March 31. Approximately 74% of the portfolio based on outstanding principal is fully secured by real estate collateral. 24% is partially secured with the remaining 2% having no real estate collateral. Our portfolio on a weighted average basis had real estate collateral coverage of 1.5x as of June 30, 2023. Our book value as of June 30 increased to $15.06 per common share compared with $15.04 as of March 31.

從相對規模來看，我們將總準備金增加至未償本金的約1.6%，而截至3 月31 日的比例為1.3%。基於未償本金的投資組合中約74% 完全由房地產抵押品擔保。 24% 有部分抵押，其餘 2% 沒有房地產抵押。截至2023 年6 月30 日，我們的投資組合按加權平均計算，房地產抵押品覆蓋率為1.5 倍。截至6 月30 日，我們的賬面價值增至每股普通股15.06 美元，而截至3 月31日為每股普通股15.04 美元。

Lastly, I would note that based on our results through the first half of the year, we have affirmed our previously issued 2023 outlook. Operator, we're now ready to take questions.

最後，我要指出的是，根據我們上半年的業績，我們確認了之前發布的 2023 年展望。接線員，我們現在準備好回答問題。

(Operator Instructions) And our first question comes from the line of Mark Smith from Lake Street.

（操作員說明）我們的第一個問題來自 Lake Street 的 Mark Smith。

Just curious if you can give us any additional details on this New York deal kind of potential timing of additional capital put into this rates? Any additional details you can give us would be great.

只是好奇您能否向我們提供有關紐約交易的任何其他詳細信息以及額外資本投入此利率的潛在時機？如果您能為我們提供任何其他詳細信息，我們將非常感激。

Unfortunately, we will stick to what we published so far. I think it's detailed enough to kind of provide a guidance as to the risk return associated with the transaction. In line with what we've done in the past, we can't discuss our borrowers in detail.

不幸的是，我們將堅持迄今為止發布的內容。我認為它足夠詳細，可以為與交易相關的風險回報提供指導。根據我們過去的做法，我們無法詳細討論借款人。

That's fair. And then any additional thoughts on new states. I know we talked recently on Minnesota (inaudible) states that maybe have recently gone forward with (inaudible) utilization or any [that you see] in the pipeline that maybe gets you excited?

這還算公平。然後是關於新狀態的任何其他想法。我知道我們最近談論了明尼蘇達州（聽不清），這些州最近可能已經推進了（聽不清）利用或任何[您看到的]管道中可能讓您興奮的事情？

Ohio, it's probably the next state. As you know, they've gathered enough signatures to have the initiative on the ballot in November. That was expected. So we should be looking at Ohio turning rec sometime next year. I would also say that we're a little bit cautiously optimistic with PA, although it's a harder way to get through the legislature. But those 2 states are rather big. And of course, the biggest state that has collected the signatures is the state of Florida. We're not holding our breath, but we have capable operators representing our portfolio in Florida, and we also feel strongly that at some point in the next 24 months, probably Florida will turn rec .

俄亥俄州，可能是下一個州。如您所知，他們已經收集了足夠的簽名，可以在 11 月份的投票中佔據主動。這是預料之中的。因此，我們應該考慮明年某個時候俄亥俄州將成為REC。我還想說，我們對 PA 持謹慎樂觀的態度，儘管這是通過立法機關的更困難的方式。但這兩個州相當大。當然，收集簽名的最大州是佛羅里達州。我們並沒有屏息以待，但我們在佛羅里達州擁有代表我們投資組合的有能力的運營商，而且我們也強烈感覺到，在未來 24 個月的某個時刻，佛羅里達州可能會變成 rec 。

Okay. And I assume your outlook on anything changing at the federal level is probably unchanged?

好的。我認為您對聯邦層面發生的任何變化的看法可能沒有改變？

Yes. That requires a crystal ball. We're not quite there yet, but we can speculate.

是的。這需要一個水晶球。我們還沒有完全做到這一點，但我們可以推測。

The last question for me is just as we look at industry headwinds, others in the industry that have reported pretty tough results and outlook here. Are you seeing anywhere to call out from pockets of continued or maybe worse new weakness geographically?

我的最後一個問題是，正如我們關注行業逆風一樣，行業中的其他人也報告了相當艱難的結果和前景。您是否認為有任何地方可以彌補持續存在的或可能更糟的新地理弱點？

I haven't been seeing weakness, and I'm kind of constantly boots on the ground. What I have seen is a plateau as a result of turning off the CapEx (inaudible). So I suspect -- what we're seeing is prices are kind of leveling off, and in some cases, ticking upwards. So -- this is a Darwinian process, whoever knows what they're doing, they're going to excel, and there's going to be consolidation, which we were prepared for since day 1.

我沒有看到弱點，而且我一直腳踏實地。我所看到的是由於關閉資本支出而導致的停滯狀態（聽不清）。所以我懷疑——我們看到的是價格正在趨於平穩，在某些情況下，還會上漲。所以——這是一個達爾文的過程，無論誰知道自己在做什麼，他們都會表現出色，並且將會出現整合，這是我們從第一天起就做好準備的。

(Operator Instructions) And our next question comes from the line of Mitchel Penn from Oppenheimer.

（操作員說明）我們的下一個問題來自奧本海默的米切爾·佩恩（Mitchel Penn）。

Can you provide more details on the nonaccrual?

您能否提供有關非應計費用的更多詳細信息？

And give us an idea of the process and the timing in terms of how this is -- this is the first time we've seen a nonaccrual. So more color around that?

請讓我們了解一下流程和時間安排——這是我們第一次看到非應計利息。那麼周圍還有更多顏色嗎？

Mitch, Chicago Atlantic is known for being very efficient. So I'm happy to report that we have a scheduled sale taking place tomorrow. But of course, the borrower has also filed a counterclaim. And we're going to try to go over it today. As of right now, the sale is scheduled for tomorrow, and we have a few buyers in line waiting to purchase the assets. So we're very much ahead of the game.

米奇，芝加哥大西洋航空公司以高效而聞名。因此，我很高興地報告，我們明天將進行預定的銷售活動。當然，借款人也提出了反訴。今天我們將嘗試回顧一下它。截至目前，銷售定於明天進行，我們有一些買家排隊等待購買資產。所以我們在這場比賽中處於領先地位。

Terrific. And that $16.2 million on your books?

了不起。你賬上的那1620萬美元呢？

I'm sorry, Mitch, can you repeat that?

對不起，米奇，你能再說一遍嗎？

The value -- the carrying value, $16.2 million, that loan...

價值——賬面價值，1620萬美元，那筆貸款……

Yes, plus [$600,000] (corrected by company after the call) of...

是的，加上 [600,000 美元]（電話後由公司更正）...

That's correct, Mitchel. The carrying value on the balance sheet is $16.2 million. We had about $600,000 of income that would have been recognized on this loan had it not been placed on nonaccrual status. And at this point, we're very comfortable that any reserves on the balance sheet are sufficient if there were to be any losses related to this loan.

是的，米切爾。資產負債表上的賬面價值為 1,620 萬美元。如果這筆貸款沒有被置於非應計狀態，我們大約有 600,000 美元的收入將在這筆貸款中得到確認。在這一點上，我們非常確信，如果出現與這筆貸款相關的任何損失，資產負債表上的任何準備金都是足夠的。

This does conclude the question-and-answer session as well as today's program. Thank you, ladies and gentlemen, for your participation. You may now disconnect. Good day.

問答環節和今天的節目到此結束。謝謝女士們先生們的參與。您現在可以斷開連接。再會。