Thank you for standing by and welcome to Chicago Atlantic Real Estate Finance, Fourth Quarter 2021 Earnings Call. At this time, all participants are in a listen-only mode. After the presentation, there will be a question-and-answer session. I would now like to hand the conference over to Tripp Sullivan of Investor Relations. The floor is yours.

Thank you, good morning. Welcome to the Chicago Atlantic Real Estate Finance conference call to review the company's results for the fourth quarter of 2021. On the call today will be John Mazarakis, Executive Chairman; Tony Cappell, Chief Executive Officer; Andreas Bodmeier, Co-President and Chief Investment Officer; and Lindsay Menze, Chief Financial Officer. Our results were released this morning in our earnings press release which can be found on the Investor Relations section of our website along with our supplemental filed with the SEC. A replay of this call will be available shortly after the conclusion of the call through March 29, 2022. The numbers to access the replay are provided in the earnings press release. For those who listen to the replay of this call, we remind you that the remarks made herein are as of today, March 22, 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 risks and other information disclosed in the Company's filings with the SEC. We will also discuss certain non-GAAP measures including, but not limited to the distributable earnings and adjusted distributable earnings. Definitions of these non-GAAP measures and the 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.

Thanks Tripp. Good morning everyone and thank you for joining us today. As this is our first earnings call since completing the IPO in early December, I would like to welcome all of our new shareholders and analysts. We have worked hard to get to this point, and we're excited about the opportunities ahead of us. With less than a month between our IPO in the end of the fourth quarter, the real measure of how strong we start -- we have built -- how strong a start we have built is in the growth of our portfolio, the attractive yields we're generating and the robust pipeline of new loan originations. We will focus much of our time this morning on each of these topics, as well as the state of the industry and the plans for our capital structure. Before we do that, I want to call out some of our financial highlights for the quarter and to date in March. We have been growing our loan commitments at inception of the REIT Q2 2021 we had $72 million in commitments. That number of loan commitments grew to $192 million at IPO and $235 million at the end of 2021. As of March 17, we have $324 million in commitments. Since the IPO and through March 17, we have funded $115 million of new and existing commitments. With that we have deployed all IPO proceeds, which puts us ahead of schedule in deploying the IPO proceeds and beginning to draw on our revolving credit facility. With this portfolio growth, we were able to report $0.57 of earnings and $0.61 of adjustable distributable earnings for Q4. The fourth quarter results, and active start to the year, also enabled the Board to declare a $0.26 dividend in Q4 and to subsequently…

Thanks, John. Good morning, everyone. We've done exactly what we said we would do on our IPO road show last December. We focused on growing our pipeline, putting the IPO proceeds to work at yields and collateral coverage consistent with our existing portfolio, executing on that pipeline as expeditiously as possible, and building on the first mover advantage that John described earlier. Before I get into details on our execution during Q4, and to date and Q1, I'd like to spend a few moments on the key differentiators for us that are responsible for these results. It all starts with how we drive new loan originations. Across the Chicago Atlantic platform, we have seven investment professionals dedicated to new loan originations. We like to think that we are responsible for bringing the normal structure of credit lending to the cannabis world. Most of our cannabis focused competition sources their deals syndicated by investment banks, or in some cases participates in facilities we lead. Other lenders or community banks might have a local relationship with an operator, but typically they won't have the cannabis experience to truly understand what they're underwriting or what their borrower needs. In addition to inbounds from brand recognition we've established, we also get referrals from borrowers, brokers, and banking relationships. When we're looking at new borrowers and loan opportunities, we focus on four criteria. The first is the state. As John noted earlier, our focus is primarily east of the Mississippi. This will continue to be our focus, but that does not preclude us from making loans to the best in class operators in the more efficient markets. Second, we look for a medical state versus an adult-use state as a transition to adult-use creates revenue growth and consequently EBITDA growth, improving the credit worthiness of…

Thanks, Tony. Good morning. We did a good job of outlining our investment activity in the earnings release and supplemental. I'll reference both documents and provide some additional commentary. At our IPO we disclosed a portfolio of 17 loans totaling $192 million in commitments, both funded and unfunded, producing a weighted average yield of 17.1%. By December 31, that portfolio had grown to total loan commitments of $235 million across 21 portfolio companies, with a weighted average yield of 18.6%. That IRR was a little higher than expected due to a high-yielding bridge loan that preceded a larger facility in January 2021. As of March 17, our total loan commitments had grown to $324 million across 23 portfolio companies with a weighted average yield of 17.3%. That figure is more consistent with our expectations going forward. Recapping what we've done since the IPO that equates to $115 million of total loan fundings from both new and existing commitments. Quite a start, but we have much more we want to accomplish. Our portfolio continues to be strong. All loans are current and performing. And as we know, the Fed is raising rates 25 basis points last week is a hot topic. I would highlight that our portfolio is currently 57% floating rate, so we've been able to manage the impact of rising rates. As John noted earlier, the current environment hasn't diminished the demand for debt capital. In fact, it has increased it and we feel comfortable that we will continue to source new opportunities that provide the yields that we've been targeting. We've also considered how inflation and rising interest rates could impact our borrowers. We've witnessed through our borrowers a 10% to 30% increase in construction costs and ongoing delivery delays. We have an experienced real estate and cannabis…

Thanks, Andreas, and good morning everyone. First, I would call your attention to the supplemental information filed earlier today, which provides more detailed disclosures in addition to those referenced in these prepared remarks. With less than one month of actual operations as a public entity, the Q4 results aren't yet indicative of our potential performance, but were consistent with what we anticipated in our S11 . The activities since the closing of our IPO has set us up well to deliver even better results over the course of the year. Rather than reading out all of the financial results this morning, I want to call out a few moving parts in our Q4 print. As I noted earlier, we experienced significant growth in our loan portfolio during the quarter, but especially in December as we began deploying the IPO proceeds. As such, our total interest income of $5.8 million doesn't yet reflect full deployment. We're well ahead of schedule on deployment of the IPO proceeds with an increasing benefit in Q1 and the full effect expected to show in Q2. Total expenses for the quarter were nearly equivalent to what we incurred for the year, as we recorded management fees for the first time, as well as approximately $63,000 of organizational expenses, and $148,000 for CECL reserves, both of which were added back in our calculation of adjusted distributable earnings. Organizational expenses were lower than anticipated. Going forward, we expect G&A to be in the range of $2.5 million to $3 million as we are growing faster than expected. Given that our 10-K won't be filed until the 31st with the footnotes to describe it, I'll provide some detail on the CECL reserves. Pursuant to ASC 326, we recorded a $148,000 provision for current expected credit losses in Q4. In determining this reserve, we noted that 92% of the portfolio is fully secured by real estate and 8% has limited or no real estate collateral. Our portfolio on average had real estate collateral coverage of 2.2x as of December 31, 2021. All of our loans are secured by equity pledges of the borrower and all asset liens. After factoring in these items, as well as other adjustments defined in our S11, our adjusted distributable earnings per share was $0.61 for Q4. Our weighted average share count for Q4 reflected only 21 days of the impact from the IPO shares. During Q1 We will see most of the impact of the 17.8 million shares outstanding post offering and post greenshoe exercise in January 2022. Our book value as of December 31 was $15.13 per common share. Operator, we're now ready to take questions.

Thank you. Our first question is from Aaron Hecht with JMP Securities.

Good morning everyone. Congrats on the first earnings call and thanks for taking my questions. Tony, you said the payout ratio for the first quarter the $0.40 dividend would be at least 85%. What metrics are you using for the denominator? Are we talking GAAP earnings, distributable, and is that including or excluding incentive fees if you're using distributable?

Aaron, the 85% or higher is relative to distributable earnings and that's the outlook for the year. Q1 we paid out essentially 100%, but you would expect that number to be lower going forward.

Okay, and then the distributable are you, is that before or after incentive fees?

Andreas, can you hear me?

It's before incentive fees.

Before incentive fees, okay. And then secondly on the leverage, talked about going to one half churn, and obviously, you guys are putting capital to work really quickly. If you get past that one half churn mark, what would you look at first after that? Would you prefer to look at the equity markets? Would you be willing to go to a higher leverage pay level? How would you think about your capital options at that time?

We're seeing a lot of interest in our bank credit facilities. So if we're able to grow that over $100 million, then opportunistically consider a bond offering, we may be above that half a churn of leverage temporarily, before we come back to the equity markets, which would then bring it back down to our target ratio.

Okay. And then last one, if I may. Yields on the signed term sheets what does that profile look like?

So yield, we haven't seen any yield compression. Basically, there are just like we said during the IPO there are sort of two buckets of loans that we're dealing with. The one bucket sort of reflects the heavily brokered deals, the top 5 to 10 MSOs. And then, where we focus our bread and butter is mostly in the single state, dual state operators that have been doing a great job with plenty of collateral and cash flow. So we're continuing to focus on in those operators and we haven't really seen any compression in rates currently.

Great, I appreciate that, John. Great job so far guys, I'll jump back in the queue.

Thank you. Next question is from Mark Smith with Lake Street Capital.

Hi guys, I wanted to talk first just a little bit about the industry. You know, you guys talked about limited license states and primarily focused east of the Mississippi, can you just talk about industry trends that you're seeing primarily in the markets that you operate?

So one anticipated event that we're all looking forward is the New Jersey going Rec. So that has been something we've been looking forward to. Other trends are reflected in Massachusetts and Michigan, where we see slight compression. I would say that those are sort of markets that don't reflect the limited nature of other eastern states. So in those markets, we're focusing on the top tier operators that have targeted their cost per pound and that has been our strategy.

Okay, and then you guys were talking about it here just a minute ago, but just talk about yield to maturity as we look through the year the 17.3, would you expect some compression over time or in a rising rate environment with that move higher? Maybe talk just big picture how you view that this year?

Yes, no, I would say that right now they're going to be consistent for quite some time. Obviously, with the fact that the majority are over half of our loans are floating rate, you'll see a pickup there. Now, in the medium term and longer-term, I would expect that there would be compression, but at least for the first year, foreseeable future in the existing pipeline it's commensurate with what we have in the portfolio.

Perfect. And then the last one from me, just as we think about growth in the portfolio through the rest of the year, can you talk about your mix or maybe expected mix of new borrowers versus kind of existing relationships?

So we have about $40 million in future fundings through existing facilities and we have about $115 million in our underwriting pipeline with signed term sheets and deposits. We expect those ratios to sort of remain the same.

Great. Thank you, guys.

Thank you.

Thank you. And I'm not showing any further questions in the queue sir. I will turn the call back to John Mazarakis for his final thoughts.

Thank you, and thank you all for joining us this morning. We are available for followup questions. Thanks again.

And with that, ladies and gentlemen, we conclude today's conference. Thank you for your participation and you may now disconnect.