Chicago Atlantic's Q1 2025: Key Contradictions in Lending Strategy and Portfolio Growth

Lending exposure in Massachusetts, portfolio growth expectations, pipeline and loan deployment, pricing pressure and lending exposure, and lending and growth strategy are the key contradictions discussed in Chicago Atlantic Real Estate Finance's latest 2025Q1 earnings call.



Pipeline and Origination Trends:
- Chicago Atlantic Real Estate Finance, Inc.'s cannabis pipeline stands at $462 million, with plans for deployments to accelerate in Q2 and Q3.
- The limited originations in Q1 were driven by caution and selectivity among operators and within the company, due to low valuations and industry uncertainty.

Portfolio Management and Interest Rates:
- The weighted average yield to maturity of the loan portfolio is 16.9%, adjusted by the restructuring of loan number nine.
- The portfolio is positioned to limit the impact of interest rate declines, with 71.2% of the portfolio comprising fixed rate loans and floating rate loans with floors.

Rescheduling and Market Impact:
- Rescheduling cannabis would be highly accretive, increasing after-tax free cash flow and eliminating 280E liabilities, benefiting equity valuations and market certainty.
- While rescheduling would favor larger public operators initially, it might take more time for capital providers to support middle market companies.

Dividend and Financial Stability:
- Distributable earnings per share were consistent at $0.47 (basic) and $0.46 (fully diluted) in Q1, with a dividend payout ratio between 90% and 100% planned for 2025.
- The company maintains financial stability with a debt service coverage ratio of approximately 6.2 to 1 and leverage at 28% of book equity.