Good day, and welcome to the Chicago Atlantic Real Estate Finance, Inc. Fourth Quarter 2025 Earnings Call. All participants will be in listen-only mode. Should you need assistance after today's presentation, to ask a question, you may press star then 1 on a touch tone phone. To withdraw your question, please press star then 2. Please note this event is being recorded. I would now like to turn the call over to Tripp Sullivan of SCR Partners. Tripp, please go ahead.

Thank you, Bailey. Good morning. Welcome to the Chicago Atlantic Real Estate Finance, Inc. conference call to review the company's results. On the call today will be Peter Sack, Co-Chief Executive Officer; David Kite, President and Chief Operating Officer; and Phil Silverman, 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 live audio webcast of this call is being made available today. For those who will listen to the replay of this webcast, we remind you that the remarks made herein rather than today 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 and potential loans and other investments, future dividends, and financing activity. All forward-looking statements represent Chicago Atlantic Real Estate Finance, Inc.'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. Investors are urged to carefully review various disclosures made by the company, including the risk 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, 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 will now turn the call over to Peter Sack. Please go ahead.

Thank you, Tripp, and good morning, everyone. Chicago Atlantic Real Estate Finance, Inc. operates within a unique intersection of real estate, credit, and the emerging sector of the U.S. cannabis industry. Our thesis is simple: apply best-in-class sector expertise, highly developed relationship-based sourcing capabilities, and fundamental credit and real estate investment principles to make debt investments in an industry with limited sources of debt capital. We take advantage of limited lending competition to structure, first, what we believe to be differentiated downside risk of senior secured positions, and, second, a highly outsized return profile relative to the broader credit and real estate lending portfolios. Most lending companies are limited in their ability to invest in underwriting and originations expertise in any one particular sector. They become masters of none, and they are price takers, investing in whatever the next investment banker or private equity sponsor offers. Because we focus on one sector with limited lending competition, we have the luxury of investing in a highly respected originations team made up of the best-known leaders in our space. We maintain an outsized underwriting, real estate, and analytics team that specializes solely in this unique niche of cannabis. We directly originate and agent nearly all of our investments. We maintain a team of over 100 professionals overseeing only $2.3 billion in capital under management because we know that with limited lending competition, our investment in expertise and execution capabilities translates directly into alpha generation for our investors. Our discipline, our focus, and institutional investment platform built for the long run is reflected in the execution of Chicago Atlantic Real Estate Finance, Inc. in 2025, and already nearly three months into 2026, we are exceeding our expectations and more enthusiastic than ever about our opportunity set for the coming year. Thank you for…

Thank you, Peter. As of December 31, our loan portfolio principal totaled approximately $411 million across 26 portfolio companies with a weighted average yield to maturity of 16.3% compared with 16.5% for the third quarter. Gross originations during the quarter were approximately $19 million of principal funding, of which $5 million was advanced to a new borrower and $14 million was advanced to existing borrowers. As anticipated, all the loans that had maturities at the end of 2025 were extended with new contractual maturities in 2026. During the quarter, we made significant progress on loan number nine. We funded an advance for the borrower to acquire three additional dispensaries in Pennsylvania, bringing their total to six operating dispensaries. In connection with this advance, the company received all past-due interest from the borrower, which brought the loan current as of 12/31/2025. We expect the six dispensaries to provide sufficient free cash flow to enable the borrower to remain current on its outstanding indebtedness and applicable covenants. Despite being brought current, which resulted in a risk rating upgrade from four to three, we maintained the loan on nonaccrual status as of 12/31/2025. We expect to restore the loan to accrual status once the operator demonstrates sustained performance and continued timely debt service payments. As of 12/31/2025, our portfolio consisted of 37.6% fixed-rate loans and 62.4% floating-rate loans. The floating-rate portion is primarily benchmarked to the prime rate. Following December's 25 basis point rate reduction, which brought the prime rate to 6.75%, only 9% of our portfolio remains exposed to further rate decline. The remaining 91% is either fixed rate or protected by prime rate floors of 6.75% or higher. Importantly, our floating-rate loans are not exposed to interest rate caps. This structural advantage, combined with our rate floor protection, positions our portfolio…

Thank you, David. Our net interest income of $14.2 million for the fourth quarter represented a 4% increase from $13.7 million during the third quarter of 2025. The increase was primarily attributable to the collection of past-due interest on loan number nine, totaling $1.7 million, which is recognized upon receipt. This was offset by the impact of the multiple benchmark prime rate cuts in the fourth quarter totaling 50 basis points, 25 each in October and December 2025. Total interest expense, including noncash amortization of financing costs, for the fourth quarter was approximately $1.8 million, an increase from $1.6 million in the third quarter. The weighted average borrowings on our revolving loan increased to $33.6 million compared to $14 million during the third quarter. Our CECL reserve on our loans held for investment as of December 31 was approximately $5.1 million. On a relative size basis, our reserve for expected credit losses represents 1.23% of our outstanding principal of our loans held for investment. The reserve remained consistent with the prior quarter. On a weighted average basis, our portfolio maintains strong real estate coverage of 1.2 times. Our loans are secured by various forms of other collateral in addition to real estate, including UCC-1 all-asset liens on our borrower credit parties. These other collateral types contribute to overall credit quality and lower loan-to-value ratios. Our portfolio has a loan-to-enterprise value ratio on a weighted average basis of 44.2% as of 12/31/2025, calculated as senior indebtedness of the borrower divided by the fair value of total collateral to refi. Distributable earnings per weighted average share on a basic and fully diluted basis were approximately $0.44 and $0.43 for the fourth quarter and $1.92 and $1.88, respectively, for the year. And in January, we distributed the fourth quarter dividend of $0.47 per…

We will now begin the question and answer session. If you are using a speakerphone, please pick up your handset before pressing the keys. If at any time your question has been addressed and you would like to withdraw, please press star then 2. At this time, we will pause momentarily to assemble our roster. Our first question comes from Aaron Grey with Alliance Global Partners. Please go ahead.

Hi, good morning, and thank you for the questions. First question, it is encouraging to hear the commentary on demand for growth capital that you are seeing. Just in terms of the pipeline, can you provide maybe some general line of sight as to when some of those originations might come to fruition? And how many of those may be at the later stage of being finalized? And then secondly, can you provide comfort in being able to potentially deliver another year of net portfolio growth?

Thanks. Thank you. We are still targeting net portfolio growth for this year. I think we have a fairly high degree of confidence in our ability to execute on the pipeline. And I think it is helpful to put in context that as of March, as of March 12, we have about $50 million of liquidity available. And this, frankly, just is not as much as we would like relative to the pipeline that we have. That amount of liquidity can be deployed relatively quickly. The bigger unknown at this point earlier in the year is what repayments in the portfolio will occur between now and December 31. And that is difficult to forecast.

I appreciate the color, Peter, and can understand some of the uncertainty in terms of, you know, the repayments. So maybe a second question, you know, outside of that. Can you talk about maybe the outlook in terms of current yields for potential deals in the pipeline? And has rescheduling, you know, been coming into play on, you know, rate negotiations, the underwriting process? Or has that largely been, you know, not quite taken rescheduling into account yet? Thanks. Hi. Can you guys still hear me here?

Oh, apologies. Rescheduling is driving increases in demand for debt capital that we are seeing in the market. Operators are accelerating investment decisions and accelerating merger and acquisition decisions. It has not changed the conversation around pricing, nor has it changed how we underwrite and evaluate risk. That is largely due to the fact that the announcement of rescheduling, and even the execution of rescheduling, has yet to lead to new lenders entering the market from the vantage point that we sit at.

Okay. Great. So, yes, increased demand, but you are not seeing more come to market. Okay. That is helpful color there, Peter. Thanks very much. I will jump back in the queue.

Our next question comes from Christopher Muller with Citizens Capital Markets. Please go ahead.

Hey, guys. Thanks for taking the question. And I guess I will stay on a similar line of questioning here. So nice slide you guys have on the regulatory reform in the deck there. On the point about not seeing increased competition, is that as we sit today, or does that assume Schedule III gets finalized? And then maybe a second layer to that question. What do you think would increase competition in the space?

Alright. Well, as we sit today, we have not seen new lenders enter the market due to the follow-on of Trump's announcement of rescheduling. We also have not heard of lenders or significant lenders sitting on the sidelines and saying, well, when rescheduling happens, we are ready to deploy X amount of capital, and we are gathering opportunities to be able to do that. We have not observed that in the market. What do I think would be required to support a large influx of new lenders into the cannabis market? I think there is a series of reforms that would be very helpful, and we, in general, look forward to that. One, full legalization would open up cannabis and would open up, really, the broader wave of private credit market participants to enter. A framework under which existing cannabis operators could produce, market, and distribute cannabis as a Schedule III substance perhaps would do that. I think it would be helpful to have cannabis companies listed on the New York Stock Exchange and Nasdaq. It would be helpful to have the broader pieces of the financial ecosystem open to servicing cannabis companies. That includes major accounting firms, major law firms, major custodians. There are a lot of, I think, little steps that individually do not seem like big hurdles but are very important for opening up access to capital markets that are required and that I think are still going to take a long time to evolve in terms of how broader participants in our financial system approach and view cannabis as a market. And that process perhaps has not even begun yet.

Got it. Very helpful. And then I guess changing gears a little bit. It looks like there are two new nonaccrual loans. Both of them are in Arizona. Are these loans to the same sponsor? Is it something market-specific in Arizona going on there?

They are loans related to the same sponsor. Arizona is having, I think, a challenging pricing environment that our borrower in this case is navigating in close collaboration with us.

Got it. Appreciate you guys taking the questions today.

Our next question comes from Pablo Zuanic with Zuanic and Associates. Please go ahead.

Thank you, and good morning, everyone. Can we just go back to loan number nine? I know you gave a little color there. But I am just trying to understand. I think the combined principal in September was $19 million, and now it is $29 million. So you decided to lend more money to a borrower that is in trouble. Right? So I am just trying to understand the logic of that. And then if you can provide more color in terms of what is going on with that borrower, please. Thank you. I know you gave some color in the call. Thanks.

Absolutely. I think this is an effort—no, number nine has been a good example of really the full toolkit that Chicago Atlantic Real Estate Finance, Inc. can bring to the table in addressing challenging credit situations and challenging workout and restructuring opportunities. In this position, we completed a full foreclosure on the assets and change of control of the assets in 2025, over the course of the recapitalization of the business. Over the course of 2025, the business reorganized its operations, improved its cash flow and revenue significantly, and at the end of 2025, Chicago Atlantic Real Estate Finance, Inc. supported the company's acquisition of additional dispensaries within its market. And it did so both with capital from Chicago Atlantic Real Estate Finance, Inc. and additional junior capital behind Chicago Atlantic Real Estate Finance, Inc., and it dramatically changed the operating profile of the business, the cash flow of the business, and it permits the company to become current on all of its interest in 2025. And so we hold this loan in—I think, as we said at December 31, 2025, it is in a little bit of a gray area from an accounting position on how we need to present this loan. I say gray area because as of 12/31/2025, the loan is current on all interest, but we have chosen not to formally take it off nonaccrual. I think that represents a high level of conservatism in how we view the portfolio and how we present the portfolio, which I think is important in this environment of private credit investor skepticism. But I think that those series of events make us confident or hopeful that we will be revisiting that nonaccrual status shortly in 2026.

And, Pablo, just to be clear, despite the loan being on nonaccrual, the borrower made their January and February payments, so we recognize those as income on a cash basis. So despite the loan not being accrued, to Peter's point and for the reasons that he noted, we are still recognizing income as it is received in cash.

Right. Thank you. And then just moving on to the early repayments on loan number one and loan number 27. You know, when those things happen, I try to think in terms of, well, it could have been extended, or maybe you did not want to extend it because of credit issues, or maybe that borrower had better alternatives out there. I do not know if you can give some color in terms of those two early repayments.

Loan number one was refinanced with a new credit facility in which Chicago Atlantic Real Estate Finance, Inc. participated. So we did not extend the loan, but we executed, or we participated in and led, a refinancing of the existing loan. Number 27 did pay off, and we opted not to pursue a refinancing for a number of decisions, some pricing, some credit-related. But I think it is a healthy mix that you should expect to see, that some loans will be refinanced, some loans will be extended, and, in the case of a loan being refinanced and Chicago Atlantic Real Estate Finance, Inc. not leading the refinancing, it does not mean that the relationship is over and that there will not be opportunities in the future.

Thank you. And then just a bigger picture, I was looking at the press release on the third quarter conference call. I think back then you talked about a pipeline of $415 million and now it is $616 million. Right? So, obviously, you have $200 million more. But on the other hand, you said, you know, no changes in pricing, no changes in terms of discussions. I am just trying to reconcile the fact that the pipeline increased, you know, by 50%. And on the other hand, you are saying you are not changing the way you are evaluating risk based on rescheduling potential and that there are no changes in pricing. I am just trying to connect the two.

Yes. Pipeline is a proxy for opportunity set, but within that pipeline, there is a broad range of risk/reward opportunities. As our capital becomes particularly constrained—perhaps this is where you are going with your question—as our capital becomes constrained relative to the opportunity set, you obviously will see a forced change in selection and a forced change in the opportunities that we can fund and the risk/reward that we are funding. And we are constantly evaluating what is the pricing that we can extract and how can we manage those levers of risk for the advantage of the funds. What I think I wanted to address more specifically is that rescheduling has not led us to lower the bar of underwriting, to decrease our credit underwriting standards, or to increase the leverage at which we are willing to lend, as another example. It is not leading us to decrease the pricing at which we are deploying capital or changing our willingness to deploy capital at lower levels. I hope that gives you some clarity on our mindset as we approach what is an evolving market opportunity.

Right. Thank you. That is very helpful. And one last one, if I may. You know, obviously, thank you for all the color you gave on the slide deck about, you know, the reform outlook and the positive impact for the industry. And, of course, I agree, but maybe playing a little bit devil's advocate, and I am not pushing back. You know, one could make the argument that from a cash flow perspective, nothing changes for the companies because none of them, including Green Thumb, are paying 280E tax. So the only thing that could change is that share prices go up a lot and the companies are able to issue equity. But as we saw on December 18, you know, the jump in share prices did not last very long. Right? So I am afraid that we would have a situation: we get rescheduling, but cash flow does not change, obviously, because you are not paying 280E, and then we do not really have the ability for companies to issue equity because share prices do not go up so much. So from that perspective, you know, in practical terms, very little would change. I mean, I am sure you would disagree with me, but if you can comment on that, Peter, then that is my last question. Thanks.

Yes. I think the fundamental disagreement—the fundamental piece that I would push back on—is how you view the current environment. The concept that companies are accruing a tax liability and are not paying those taxes is not a particularly sustainable one in the long term, and it is an aspect of underwriting that we focus on very intensely when we are evaluating new opportunities. We are evaluating what amount of taxes are unpaid on their balance sheet today. If they are not current and not paying their 280E taxes, how might that balance grow over the life of our investment? And then what guardrails can we put in place from a covenant perspective and a loan agreement perspective to ensure that those balances do not grow and that those balances and their nonpayment of taxes are factored into how we measure risk on a monthly basis when we receive their compliance certificates. And so we look at the current environment—and to paraphrase your words—we do not say, oh, they are not paying their tax, so it does not matter. We look at that current environment with a very healthy amount of skepticism and factor it into how we underwrite our loans. And so when rescheduling does occur and those taxes are no longer being accrued because they are no longer due on a go-forward basis, that, to us, is a strong credit improvement.

Right. Thank you very much. That is great color. Thanks.

This concludes our question and answer session. The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.