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The prospect of federal marijuana reform is growing investment and improving equity for Chicago Atlantic Real Estate Finance’s clients, senior management said Tuesday during the company’s fourth-quarter and full-year earnings call.
Net interest income for the Illinois-based cannabis real estate investment trust (REIT) grew to $57.1 million for the year ending Dec. 31, an increase of 17%, according to a news release.
Its net interest income grew to $14.8 million in the fourth quarter compared to the previous quarter.
Chicago Atlantic’s net income was $9.4 million, or 51 cents per weighted average diluted share, in the fourth quarter.
That’s a decline of 5.8% compared to the previous quarter, which the company attributed to an increase in management and incentive fees.
The anticipation of the potential rescheduling of marijuana and the elimination of the punishing Section 280E of the Internal Revenue Code would lead to improved cash flow among Chicago Atlantic’s borrowers, executives said during the earnings call.
“The demand for credit in this capital-constrained industry should only accelerate as a result,” co-CEO Tony Cappell said.
Growing state markets, such as Ohio’s forthcoming recreational cannabis launch and the potential for adult-use legalization in Florida, will also grow demand for loans, Cappell said.
As of Dec. 31, Chicago Atlantic had committed to lending $378.8 million ($371.3 million funded; $7.5 million in future funding) across 27 portfolio investments.
In the fourth quarter, Chicago Atlantic reported total gross originations of $24.7 million, of which $8.6 million and $16.1 million was funded to new borrowers and existing borrowers, respectively.
New originations were partially offset by principal repayments of $13.7 million.
The company said $10.9 million of that was attributable to unscheduled early repayments.
Chicago Atlantic’s senior management was asked during the call what impact the lender might expect from Section 280E tax refunds such as those recently reported by multistate operators Trulieve Cannabis and Ascend Wellness.
“Overall, that is a very positive development and we look forward to those cash flows increasing,” Executive Chair John Mazarakis said.
Earlier this month, Chicago Atlantic extended its $92.5 million secured revolving credit facility by an additional year.
Meanwhile, the company on Tuesday announced two promotions among its senior management team. Both were effective March 7:
- Former co-President Peter Sack is now co-CEO alongside Cappell.
- Interim Chief Financial Officer Phil Silverman was given the post on a permanent basis.
Kate Robertson can be reached at kate.robertson@mjbizdaily.com.
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