CHICAGO ATLANTIC REAL ESTATE FINANCE, INC. Investment Activity and Portfolio Performance
- As of
September 30, 2022 , total loan commitments of approximately$348.9 million ($330.4 million funded,$18.5 million unfunded) across 22 portfolio companies. - The portfolio’s weighted average yield to maturity was approximately 18.3% as of
September 30, 2022 compared with approximately 17.7% as ofJune 30, 2022 . - On
November 7, 2022 , Chicago Atlantic partially exercised the accordion feature of its secured revolving credit facility, increasing the size to$92.5 million and adding four newFDIC -insured financial institutions to the lending group. The credit facility matures inDecember 2023 with a one-year extension option, subject to customary conditions.
Third Quarter 2022 Financial Results
- Net interest income of approximately
$12.9 million , representing a sequential increase of 13.4% - Total expenses of approximately
$2.9 million before provision for current expected credit losses, representing a sequential decrease of 1.1% - Net Income of approximately
$9.8 million , or$0.55 per weighted average diluted common share, representing a sequential increase of 31.0% - Adjusted Distributable Earnings of approximately
$10.3 million , or$0.58 per weighted average diluted common share, representing a sequential increase of 16.0% - Book value per common share of
$15.23 as ofSeptember 30, 2022 compared with$15.13 as ofJune 30, 2022 - As of
September 30, 2022 , the Company had borrowed$53.0 million on its$65.0 million secured credit facility, resulting in a leverage ratio (debt to book equity) of approximately 20.0%.
Dividends
- On
October 14, 2022 , Chicago Atlantic paid a regular quarterly cash dividend of$0.47 per share of common stock for the third quarter of 2022 to common stockholders of record onSeptember 30, 2022 .
2022 Outlook
Based on the Company’s year-to-date results and its newly expanded revolving credit facility, Chicago Atlantic increased its outlook for full year 2022:
- Adjusted Distributable Earnings is expected to be in a range of
$2.01 to$2.05 per weighted average diluted common share, compared with a previous range of$1.95 to$2.00 for full year 2022. - The Company’s leverage ratio (debt to book equity) is expected to be in the range of 25% to 35% by
December 31, 2022 . - The regular quarterly cash dividend amount for the fourth quarter of 2022 is expected to be consistent with the
$0.47 previously declared for the third quarter which would result in a full year 2022 regular cash dividend of$1.81 . - The Company anticipates that the current projected full year dividend would potentially require a special dividend to be declared in
December 2022 to meet its 2022 taxable income distribution requirements.
This outlook does not include additional adjustments to the Prime rate subsequent to the date hereof or the impact of any unscheduled loan principal repayments. The Company only provides guidance for adjusted distributable earnings, not net income, due to the inherent difficulty in forecasting certain types of expenses that may or may not affect net income per weighted average diluted common share.
Conference Call and Quarterly Earnings Supplemental Details
The Company will host a conference call and live audio webcast, both open for the general public to hear, later today at
Chicago
About
Forward-Looking Statements
This release contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 that reflect our current views and projections with respect to, among other things, future events and financial performance. Words such as “believes,” “expects,” “will,” “intends,” “plans,” “guidance,” “estimates,” “projects,” “anticipates,” and “future” or similar expressions are intended to identify forward-looking statements. These forward-looking statements, including statements about our future growth and strategies for such growth, are subject to the inherent uncertainties in predicting future results and conditions and are not guarantees of future performance, conditions or results. More information on these risks and other potential factors that could affect our business and financial results is included in our filings with the SEC. New risks and uncertainties arise over time, and it is not possible to predict those events or how they may affect us. We do not undertake any obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, except as required by law.
Contact:
(615) 942-7077
IR@REFI.reit
CONSOLIDATED BALANCE SHEETS
2022 (unaudited) | December 31, 2021 | |||||||||
| Assets | ||||||||||
| Loans held for investment | $ | 331,075,547 | $ | 196,984,566 | ||||||
| Current expected credit loss reserve | (1,497,933 | ) | (134,542 | ) | ||||||
| Loans held for investment, net | 329,577,614 | 196,850,024 | ||||||||
| Cash | 9,331,530 | 80,248,526 | ||||||||
| Interest receivable | 727,279 | 197,735 | ||||||||
| Other receivables and assets, net | 844,486 | 874,170 | ||||||||
| Total Assets | $ | 340,480,909 | $ | 278,170,455 | ||||||
| Liabilities | ||||||||||
| Revolving loan | $ | 53,000,000 | $ | - | ||||||
| Dividend payable | 8,435,222 | 4,537,924 | ||||||||
| Interest reserve | 5,625,979 | 6,636,553 | ||||||||
| Management and incentive fees payable | 1,347,421 | 802,294 | ||||||||
| Related party payable | 1,203,030 | 1,902,829 | ||||||||
| Accounts payable and other liabilities | 716,463 | 212,887 | ||||||||
| Total Liabilities | 70,328,115 | 14,092,487 | ||||||||
| Commitments and contingencies (Note 8) | ||||||||||
| Stockholders’ equity | ||||||||||
| Common stock, par value | 176,579 | 173,551 | ||||||||
| Additional paid-in-capital | 268,888,861 | 264,081,977 | ||||||||
| Accumulated earnings (deficit) | 1,087,354 | (177,560 | ) | |||||||
| Total stockholders’ equity | 270,152,794 | 264,077,968 | ||||||||
| Total liabilities and stockholders’ equity | $ | 340,480,909 | $ | 278,170,455 | ||||||
CONSOLIDATED STATEMENTS OF INCOME
(UNAUDITED)
| For the three months ended | For the three months ended | ||||||||||
| September 30, 2022 | 2022 | ||||||||||
| Revenue | |||||||||||
| Interest income | $ | 13,795,097 | $ | 11,850,028 | |||||||
| Interest expense | (861,348 | ) | (449,556 | ) | |||||||
| Net interest income | 12,933,749 | 11,400,472 | |||||||||
| Expenses | |||||||||||
| Management and incentive fees, net | 1,347,421 | 1,247,561 | |||||||||
| General and administrative expense | 1,076,798 | 772,212 | |||||||||
| Organizational expense | - | - | |||||||||
| Provision for current expected credit losses | 306,885 | 1,045,665 | |||||||||
| Professional fees | 348,785 | 743,670 | |||||||||
| Stock based compensation | 84,891 | 122,525 | |||||||||
| Total expenses | 3,164,780 | 3,936,633 | |||||||||
| Net Income before income taxes | 9,768,969 | 7,463,839 | |||||||||
| Income tax expense | - | - | |||||||||
| Net Income | $ | 9,768,969 | $ | 7,463,839 | |||||||
| Earnings per common share: | |||||||||||
| Basic earnings per common share (in dollars per share) | $ | 0.55 | $ | 0.42 | |||||||
| Diluted earnings per common share (in dollars per share) | $ | 0.55 | $ | 0.42 | |||||||
| Weighted average number of common shares outstanding: | |||||||||||
| Basic weighted average shares of common stock outstanding (in shares) | 17,657,913 | 17,657,913 | |||||||||
| Diluted weighted average shares of common stock outstanding (in shares) | 17,752,290 | 17,752,413 | |||||||||
Distributable Earnings and Adjusted Distributable Earnings
In addition to using certain financial metrics prepared in accordance with GAAP to evaluate our performance, we also use Distributable Earnings and Adjusted Distributable Earnings to evaluate our performance. Each of Distributable Earnings and Adjusted Distributable Earnings is a measure that is not prepared in accordance with GAAP. We define Distributable Earnings as, for a specified period, the net income (loss) computed in accordance with GAAP, excluding (i) non-cash equity compensation expense, (ii) depreciation and amortization, (iii) any unrealized gains, losses or other non-cash items recorded in net income (loss) for the period, regardless of whether such items are included in other comprehensive income or loss, or in net income (loss); provided that Distributable Earnings does not exclude, in the case of investments with a deferred interest feature (such as OID, debt instruments with PIK interest and zero coupon securities), accrued income that we have not yet received in cash, (iv) provision for current expected credit losses and (v) one-time events pursuant to changes in GAAP and certain non-cash charges, in each case after discussions between our Manager and our independent directors and after approval by a majority of such independent directors. We define Adjusted Distributable Earnings, for a specified period, as Distributable Earnings excluding certain non-recurring organizational expenses (such as one-time expenses related to our formation and start-up).
We believe providing Distributable Earnings and Adjusted Distributable Earnings on a supplemental basis to our net income as determined in accordance with GAAP is helpful to stockholders in assessing the overall performance of our business. As a REIT, we are required to distribute at least 90% of our annual REIT taxable income and to pay tax at regular corporate rates to the extent that we annually distribute less than 100% of such taxable income. Given these requirements and our belief that dividends are generally one of the principal reasons that stockholders invest in our common stock, we generally intend to attempt to pay dividends to our stockholders in an amount equal to our net taxable income, if and to the extent authorized by our Board. Distributable Earnings is one of many factors considered by our Board in authorizing dividends and, while not a direct measure of net taxable income, over time, the measure can be considered a useful indicator of our dividends.
In our Annual Report on Form 10-K, we defined Distributable Earnings so that, in addition to the exclusions noted above, the term also excluded from net income Incentive Compensation paid to our Manager. We believe that revising the term Distributable Earnings so that it is presented net of Incentive Compensation, while not a direct measure of net taxable income, over time, can be considered a more useful indicator of our ability to pay dividends. This adjustment to the calculation of Distributable Earnings has no impact on period-to-period comparisons.
Distributable Earnings and Adjusted Distributable Earnings should not be considered as substitutes for GAAP net income. We caution readers that our methodology for calculating Distributable Earnings and Adjusted Distributable Earnings may differ from the methodologies employed by other REITs to calculate the same or similar supplemental performance measures, and as a result, our reported Distributable Earnings and Adjusted Distributable Earnings may not be comparable to similar measures presented by other REITs.
For the three months ended | For the three months ended | |||||||
| Net Income | $ | 9,768,969 | $ | 7,463,839 | ||||
| Adjustments to net income | ||||||||
| Non-cash equity compensation expense | 84,891 | 122,525 | ||||||
| Depreciation and amortization | 138,549 | 168,826 | ||||||
| Provision for current expected credit losses | 306,885 | 1,045,665 | ||||||
| Distributable Earnings | 10,299,294 | 8,800,855 | ||||||
| Adjustments to Distributable Earnings | ||||||||
| Adjusted Distributable Earnings | 10,299,294 | 8,800,855 | ||||||
| Basic weighted average shares of common stock outstanding (in shares) | 17,657,913 | 17,657,913 | ||||||
| Adjusted Distributable Earnings per Weighted Average Share | $ | 0.58 | $ | 0.50 | ||||
| Diluted weighted average shares of common stock outstanding (in shares) | 17,752,290 | 17,752,413 | ||||||
| Adjusted Distributable Earnings per Weighted Average Share | $ | 0.58 | $ | 0.50 | ||||
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