Cannabis-Focused BDCs and REITs in a Shifting Regulatory and Credit Landscape

The cannabis sector stands at a pivotal juncture, with regulatory tailwinds and evolving credit dynamics reshaping the investment landscape. As federal rescheduling debates gain momentum and state-level legalization expands, cannabis-focused business development companies (BDCs) and real estate investment trusts (REITs) are uniquely positioned to capitalize on this transition. Chicago Atlantic Real Estate Finance (NASDAQ: REFI) and its sister BDC, Chicago Atlantic BDC (NASDAQ: LIEN), exemplify this strategic alignment. With a dual-listed platform targeting cannabis-related lending, the firm's disciplined approach to risk management and regulatory foresight offers a compelling case study for investors. Peter Sack, CEO of Chicago Atlantic, will address these themes in a Zuanic & Associates fireside chat on January 13, 2026, providing a timely opportunity to dissect the firm's positioning in a sector poised for transformation.

Strategic Positioning: Dual-Listed Platform and Portfolio Discipline

Chicago Atlantic's dual-listed structure-REFI as a REIT and LIEN as a BDC-enables a diversified approach to cannabis financing. As of March 31, 2025, the combined loan portfolio totaled $400 million, with a weighted average yield to maturity of 16.9%. This high-yield focus is underpinned by a pipeline of $441 million in cannabis-related opportunities as of Q3 2025, reflecting the firm's ability to scale in limited-license jurisdictions where regulatory predictability enhances investment stability. Sack has emphasized the importance of "disciplined execution and selective investment" as the industry matures according to company leadership, a philosophy evident in the portfolio's conservative leverage with 33% of book equity as of September 30, 2025 and underwriting criteria prioritizing diverse revenue streams and EBITDA multiples under two times as reported.

The firm's focus on limited-license markets, such as Virginia, further insulates it from oversupply risks while aligning with states likely to benefit from federal rescheduling. This strategic emphasis on regulatory alignment is critical, as rescheduling could catalyze acquisitions, refinancings, and broader market activity, directly expanding lending opportunities for REFI and LIEN.

Interest-Rate Sensitivity and Risk Mitigation

Interest-rate risk remains a key concern for cannabis-focused lenders, but Chicago Atlantic's portfolio structure mitigates this exposure. Approximately 58.5% of its loans carry variable rates, while 41.5% are fixed, with 86% of REFI's loans featuring interest rate floors of 7% or higher. These floors, combined with structured loan terms and conservative leverage, ensure portfolio resilience even in a low-rate environment. Sack has highlighted the firm's proactive approach to rate insulation, including floor protections and disciplined underwriting, which together preserve credit quality and yield stability.