Chicago Atlantic beats Q4 forecasts, annual income up 17%

Chicago Atlantic beats Q4 forecasts, annual income up 17%

The firm wants to capitalize on bigger cannabis companies struggling with debt repayment.

Chicago Atlantic Real Estate Finance Inc. (Nasdaq: REFI) eked past fourth-quarter and annual financial results that show positive trends in its lending operations.

The cannabis loan provider saw net interest income rise to $57.1 million for the year ending Dec. 31, 2023, up 17% from the previous year.

For the fourth quarter, the company saw a sequential rise in net interest income of 8%, amounting to approximately $14.8 million. That beat Seeking Alpha’s analyst average by $500,000.

However, it faced a slight dip in net income, which was reported at $9.4 million, or $0.51 per weighted average diluted share, marking a 5.8% decrease from the prior quarter. That was mostly due to an rise in management and incentive fees.

Despite languishing cannabis banking legislation, the firm is practicing patience in a federally prohibited market that’s starting to rebound a bit after extreme lows over the past few years.

“The improvement in the regulatory landscape has fed new investment opportunities for us while significantly improving the equity value of many of our borrowers,” executive chairman John Mazarakis said in a statement Tuesday.

Total loan commitments by the end of 2023 stood at approximately $378.8 million, with the company maintaining a real estate collateral coverage ratio of 1.5 times. Investment activity during the quarter showed a total gross origination of $24.7 million.

Chicago Atlantic also mended its secured revolving credit facility, extending its maturity to June 2026 and raising the capacity to $150 million. As of the end of 2023, the company had a leverage ratio of approximately 24%, with $66 million outstanding on its credit facility.

Management provided a 2024 outlook, stating its intention to maintain a dividend payout ratio based on distributable earnings per share of approximately 90% to 100%. They are also thinking about giving out an extra dividend at the end of the year to meet legal requirements for distributing income.

“The wall of debt maturities we have anticipated among the larger cannabis operators is beginning to occur, with early indications this opportunity could be as meaningful over the next 12 to 18 months as we have previously predicted,” Mazarakis said.

“We intend to utilize our direct lending expertise and leading platform in the cannabis space to continue to position us in front of these trends driving the improved sentiment and growth in the industry.”

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