Q4 2021 AFC Gamma Inc Earnings Call

March 10, 2022

Good day, and thank you for standing by and welcome to the a F. T. Gambeson Incorporated's fourth quarter 2021 earnings conference call. At this time all participants are in a listen only mode. After the speaker's presentation there'll be a question and answer session to ask a question. During the session you will need to press star one on your telephone please be advised that.

Operator: Good day, and thank you for standing by. Welcome to AFC Gamma, Inc. Q4 2021 Earnings Conference Call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there'll be a question and answer session. To ask a question during the session, you'll need to press star one on your telephone. Please be advised that today's conference is being recorded. If you require any further assistance, please press star zero. I would now like to hand the conference over to Gabriel Katz, Chief Legal Officer. Please go ahead.

Good day, and thank you for standing by. Welcome to the AFC Gammas Incorporated's fourth quarter 2021 earnings conference call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question and answer session. To ask a question during the session, you'll need to press star one on your telephone. Please be advised that today's conference is being recorded. If you require any further assistance, please press star zero. I would now like to hand the conference over to Gabriel Katz, Chief Legal Officer. Please go ahead.

Today's conference is being recorded if you require any further assistance. Please press star zero I would now like to hand, the conference over to Gabriel Katz Chief Legal Officer. Please go ahead.

Gabriel Katz: Good morning, and thank you all for joining AFC Gamma's earnings call for the fourth quarter and full year 2021. I'm joined this morning by Leonard Tannenbaum, our chief executive officer, Jonathan Calico, our head of real estate, Robin Tannenbaum, our head of originations and investor relations, and Brett Kaufman, our chief financial officer.

Good morning, and thank you all for joining a FC gamma as earnings call for the fourth quarter and full year 2021, I'm joined this morning by Leonard Tannenbaum, Our Chief Executive Officer, Jonathan Calico, our head of real estate, Robyn Tannenbaum, our head of originations in Investor Relations and break Kaufman, our Chief Financial Officer before we begin I would like to know.

Gabriel Katz: Good morning, and thank you all for joining AFC Gamma's earnings call for the Q4 and full year 2021. I'm joined this morning by Leonard Tannenbaum, our chief executive officer, Jonathan Kalikow, our head of real estate, Robyn Tannenbaum, our head of originations and investor relations, and Brett Kaufman, our chief financial officer. Before we begin, I would like to note that this call is being recorded. Replay information is included in our 10 March 2022 press release and is posted on the investor relations section of the AFC Gamma website at afcgamma.com, along with our Q4 and annual 2021 earnings release and investor presentation. Today's conference call includes forward-looking statements and projections that reflect the company's current views with respect to, among other things, future market growth and developments, financial performance and projections, and originations in 2022.

Gabriel Katz: Before we begin, I would like to note that this call is being recorded. Replay information is included in our March 10, 2022 press release and is posted on the investor relations section of the AFC Gamma website at afcgamma.com, along with our fourth quarter and annual 2021 earnings release and investor presentation.

This call is being recorded replay information is included in our March 10, 2022 press release and is posted on the Investor Relations section of the FC Gamma website at AFC Gamma dotcom, along with our fourth quarter and annual 2021 earnings release and Investor presentation.

Gabriel Katz: Today's conference call includes forward-looking statements and projections that reflect the company's current views with respect to, among other things, future market growth and developments, financial performance and projections, and originations in 2022.

Today's conference call includes forward looking statements and projections that reflect the company's current views with respect to among other things future market growth and development financial performance and projections in originations in 2022.

Gabriel Katz: These statements are subject to the inherent uncertainties in predicting future results and conditions, and certain factors could cause actual results to differ materially from those projected in these forward-looking statements. New risks and uncertainties arise over time, and it is not possible for the company to predict those events or how they may affect these statements. Therefore, you should not place undue reliance on these forward-looking statements. Please refer to AFC Gamma's most recent filings with the SEC for certain significant factors that could cause actual results to differ materially from these forward-looking statements and projections. During the call, we'll also refer to distributable earnings, which is a non-GAAP financial measure. Reconciliations of net income, the most comparable GAAP measure to distributable earnings, can be found in AFC Gamma's earnings release and investor presentation available on AFC Gamma's website. The format for today's call is as follows.

These statements are subject to the inherent uncertainties in predicting future results and conditions and certain factors could cause actual results to differ materially from those projected in these forward looking statements.

Gabriel Katz: New risks and uncertainties arise over time, and it is not possible for the company to predict those events or how they may affect these statements. Therefore, you should not place undue reliance on these forward-looking statements. Please refer to AFC GAMMA's most recent filings with the SEC for certain significant factors that could cause actual results to differ materially from these forward-looking statements and projections.

Risks and uncertainties arise over time and it is not possible for the company to predict those events or how they may affect the statements. Therefore, you should not place undue reliance on these forward looking statements. Please refer to <unk>. Most recent filings with the SEC for certain significant factors that could cause actual results to differ materially from these forward looking statements and projections.

During the call. We will also refer to distributable earnings which is a non-GAAP financial measure reconciliations of nine of net income the most comparable GAAP measure to distributable earnings can be found in <unk> earnings release, and Investor presentation available on AFC canvas website.

Gabriel Katz: During the call, we also refer to distributable earnings, which is a non-GAAP financial measure. Reconciliations of net income, the most comparable GAAP measure to distributable earnings, can be found in AFC GAMMA's earnings release and investor presentation available on AFC GAMMA's website.

The format for todays call is as follows Len will provide introductory remarks, an overview of our fourth quarter and full year 2021 performance and strategic commentary John will discuss AFC gammage portfolio, Robyn will discuss the origination pipeline and breadth will summarize our financial results. We will then open the line for Q&A.

Gabriel Katz: The format for today's call is as follows. Len will provide introductory remarks, an overview of our fourth quarter and full year 2021 performance, and strategic commentary. John will discuss AFC Gamma's portfolio, Robin will discuss the Origination Pipeline, and Brett will summarize our financial results. We will then open the line for Q&A.

Gabriel Katz: Len will provide introductory re-remarks, an overview of our Q4 and full year 2021 performance and strategic commentary. John will discuss AFC Gamma's portfolio. Robin will discuss the origination pipeline, and Brett will summarize our financial results. We will then open the line for Q&A. With that, I will now turn the call over to our Chief Executive Officer, Leonard Tannenbaum.

Gabriel Katz: With that, I will now turn the call over to our Chief Executive Officer, Leonard Tannenbaum.

With that I will now turn the call over to our Chief Executive Officer Leonard Tannenbaum.

Leonard Tannenbaum: Thank you, Gabe, and good morning and welcome to AFC Gamma's earnings call for Q4 fiscal year 2021. I would like to thank our analysts and investors for joining us today to discuss our Q4 and fiscal year results. Before turning to our Q4 results, I'd like to briefly discuss what our goals were for 2021 and what we accomplished. During the year, AFC Gamma completed its initial public offering and began operating as a public REIT. This step has allowed us to accomplish several goals, including valuable access to public debt and equity markets, which provides AFC Gamma with an attractive cost of capital relative to its peers. We ended the year in a leadership position as one of the largest institutional lenders in cannabis, with a reputation for being a consistent relationship lender.

Leonard Tannenbaum: Thank you, Gabe, and good morning and welcome to AFC Gamma's earnings call for the fourth quarter fiscal year 2021. I would like to thank our analysts and investors for joining us today to discuss our fourth quarter and fiscal year results.

Thank you Gail and good morning, and welcome to <unk> earnings call for the fourth quarter fiscal year 2021, I would like to thank our analysts and investors for joining us today to discuss our fourth quarter and fiscal year results.

Leonard Tannenbaum: Before turning to our fourth quarter results, I would like to briefly discuss what our goals were for 2021 and what we accomplished.

Before turning to our fourth quarter results I'd like to briefly discuss what our goals were for 2021 and what we accomplished.

Leonard Tannenbaum: During the year, AMC Gamma completed its initial public offering and began operating as a public REIT. This step has allowed us to accomplish several goals, including valuable access to public debt and equity markets, which provides AMC Gamma with an attractive cost of capital relative to its peers.

During the year AMC gamma completed its initial public offering and began operating as a public REIT.

This step has allowed us to accomplish several goals, including valuable access to public debt and equity markets, which provides AMC gamma with an attractive cost of capital relative to its peers. We ended the year in a leadership position. That's one of the largest institutional lenders in Canada with a reputation for being a consistent relationship lender.

Leonard Tannenbaum: We ended the year in a leadership position as one of the largest institutional lenders in cannabis, with a reputation for being a consistent relationship lender.

Looking at our goals from the beginning of last year, we accomplished almost everything we set out to do and I'm extremely proud of our team for their hard work and dedication.

Leonard Tannenbaum: Looking at our goals from the beginning of last year, we accomplished almost everything we set out to do, and I am extremely proud of our team for their hard work and dedication. First, we targeted $300 million of gross originations and exceeded that goal by generating $341 million of gross originations in 2021. Second, our goal was to increase book value, driving return for our shareholders. We increased book value per share by 12% from $14.83 on 31 December 2020, to $16.61 on 31 December 2021. This increase does not include the positive impact of the accretive offering completed in Q1 2022. Third, our goal was to declare increased dividends quarter over quarter. We declared an initial dividend per share of $0.38 for Q2 2021, and increased that by approximately 32% to $0.50 in Q4 2021.

Leonard Tannenbaum: First, we targeted $300 million of gross originations and exceeded that goal by generating $341 million of gross originations in 2021.

First we targeted $300 million of gross originations and exceeded that goal by generated $341 million of course originations in 2021.

Leonard Tannenbaum: Second, our goal is to increase book value, driving return for our shareholders. We increase book value per share by 12% from $1,483 on December 31, 2020 to $1,661 on December 31, 2021. This increase does not include the positive impact of the accretive offering completed in Q1, 2022.

Second our goal is to increase book value driving returns for our shareholders. We increased book value per share by 12% from 14 83 on December 31, 2020 to 16 61 on December 31, 2021. This increase does not include the positive impact of the accretive offering completed.

In Q1 2022.

Third our goal is to declare increase dividends quarter over quarter we.

Leonard Tannenbaum: Third, our goal is to declare increased dividends quarter over quarter. We declared an initial dividend per share of $0.38 for Q2 2021 and increased that by approximately 32% to $0.50 in Q4 2021.

We declared an initial dividend per share of 38 cents for Q2, 2021 and increase that by approximately 32% to 50 cents in Q4 2020.

Over the year, we further augmented our in house capabilities to continue providing our borrowers with customized financing solutions. We are proud of our growing platform with over 25 employees headquartered in West Palm Beach, Florida. We were also pleased to have seven research analysts covering F. C G providing valuable information to.

Leonard Tannenbaum: Over the year, we've further augmented our in-house capabilities to continue providing our borrowers with customized financing solutions. We are proud of our growing platform with over 25 employees headquartered in West Palm Beach, Florida. We are also pleased to have seven research analysts covering AFCG, providing valuable information to our investors and the broader investment community.

Leonard Tannenbaum: Over the year, we further augmented our in-house capabilities to continue providing our borrowers with customized financing solutions. We are proud of our growing platform with over 25 employees headquartered in West Palm Beach, Florida. We are also pleased to have 7 research analysts covering AFCG, providing valuable information to our investors and the broader investment community. Looking forward to 2022, we remain very excited about supporting the rapidly growing cannabis industry and the opportunities ahead of us. Although we had a slow start to the year with $47 million of gross originations, we remain confident in our active pipeline and the targets we have set for ourselves in 2022. During Q1 2022, AFC Gamma made the decision not to close 2 deals because of issues that surfaced during due diligence, which we could not overcome.

Our investors and the broader investment community.

Looking forward to 2022, we remain very excited about the supporting the rapidly growing cannabis industry and the opportunities ahead of us.

Leonard Tannenbaum: Looking forward to 2022, we remain very excited about supporting the rapidly growing cannabis industry and the opportunities ahead of us.

Leonard Tannenbaum: Although we had a slow start to the year with 47 million of gross originations, we remain confident in our active pipeline and the targets we have set for ourselves in 2022.

Although we had a slow start to the year with $47 million of gross originations, we remain confident in our active pipeline and the targets we have set for ourselves in 2022.

Leonard Tannenbaum: During Q1 2022, AFC Gamma made the decision not to close two deals because of issues that surfaced during due diligence, which we could not overcome.

During Q1, 2022 FC Gamma <unk> made the decision not to close two deals because of issues that surfaced during due diligence, which we could not overcome.

Leonard Tannenbaum: At this time, we believe that during 2022 we will generate between $500 million and $700 million of gross originations, with anticipated repayments between $100 million and $200 million, bringing us to a net originations target range of $300 million to $600 million.

At this time, we believe that during 2022, we will generate between $500 million and 700 million of gross originations with anticipated repayments between $100 million and 200 million, bringing us to a net originations target range of 300 to 600 million.

Leonard Tannenbaum: At this time, we believe that during 2022, we will generate between $500 million and $700 million of gross originations, with anticipated repayments between $100 million and $200 million, bringing us to a net originations target range of $300 to $600 million. We intend to fund these commitments with a combination of debt and equity, and are currently targeting a debt-to-equity ratio of approximately 0.5x at the end of 2022. We continue to remain focused on developing the best cost of capital among the limited number of alternative lenders in the industry. I believe we have all the necessary components in place to scale this business and serve the rapidly growing industry. During Q4, we continued to execute on our pipeline, which led to record originations.

Leonard Tannenbaum: We intend to fund these commitments with a combination of debt and equity and are currently targeting a debt to equity ratio of approximately 0.5 times at the end of 2022.

We intend to fund these commitments with a combination of debt and equity and are currently targeting a debt to equity ratio of approximately <unk> five times at the end of 2022.

Leonard Tannenbaum: We continue to remain focused on developing the best cost of capital among the limited number of alternative lenders in the industry. I believe we have all the necessary components in place to scale this business and serve the rapidly growing industry.

We continue to remain focused on developing the best cost of capital among a limited number of alternative lenders in the industry. I believe we have all the necessary components in place to scale this business and serve the rapidly growing industry.

Leonard Tannenbaum: During the fourth quarter, we continued to execute on our pipeline, which led to record originations. We closed on new commitments of $127 million and had net fundings of $121 million during the fourth quarter. Our portfolio of over $400 million resulted in distributable earnings of $0.52 per basic weighted average share.

During the fourth quarter, we continued to execute on our pipeline, which led to record originations. We closed on new commitments of $127 million and had net fundings of 121 million during the fourth quarter our portfolio of over 400 million resulted in distributable earnings of 52.

Leonard Tannenbaum: We closed on new commitments of $127 million, and had net fundings of $121 million during Q4. Our portfolio of over $400 million resulted in distributable earnings of $0.52 per basic weighted average share. This increase in earnings drove a 16% increase in our quarterly dividend from $0.42 per share in Q3 to $0.50 in Q4. Since going public, in each of the last three quarters, we have generated earnings in excess of our dividend. For 2021, AFC Gamma distributed approximately 91% of distributable earnings, which resulted in carrying over $2.1 million forward into 2022, which as a REIT, we can do on a tax-free basis. Moving on to our portfolio. As of 4 March 2022, we have 14 borrowers operating in 16 states.

Per basic weighted average share.

Leonard Tannenbaum: This increase in earnings drove a 16% increase in our quarterly dividend from $0.43 per share in the third quarter to $0.50 in the fourth quarter.

This increase in earnings drove a 16% increase in our quarterly dividend from <unk> 43 per share in the third quarter to 50 cents in the fourth quarter.

Leonard Tannenbaum: Since going public in each of the last three quarters, we have generated earnings in excess of our dividends.

Since going public in each of the last three quarters, we have generated earnings in excess of our dividend.

Leonard Tannenbaum: For 2021, AFC Gamma distributed approximately 91% of distributable earnings, which resulted in carrying over $2.1 million forward into 2022.

For 2021 FC Gamma distributed approximately 91% of distributable earnings which resulted in carrying over $2 1 million forward into 2022.

Leonard Tannenbaum: which as a REIT we can do on a tax-free basis.

Which as a REIT, we can do on a tax free basis.

Moving on to our portfolio.

Leonard Tannenbaum: As of March 4, 2022, we have 14 borrowers operating in 16 states. We remain focused on creating a portfolio that's diversified across states and borrowers. Currently, our portfolio is comprised of 100% first lien loans.

As of March 4th 2022, we have 14 borrowers operating in 16 states. We remain focused on creating a portfolio that's diversified across states and borrowers currently our portfolio is comprised of 100% first lien loans.

Leonard Tannenbaum: We remain focused on creating a portfolio that's diversified across states and borrowers. Currently, our portfolio is comprised of 100% first lien loans. We are pleased that at this time we have no loans that aren't current. All our loans are current and performing. When evaluating which states to lend to, we prefer lending to operators in limited license markets, as we believe licenses in those states have additional value as a form of security. Additionally, during our underwriting, we evaluate the supply and demand dynamics in each state and where pricing per pound is trending. Currently, AFC Gamma has not lent to any borrowers with primary operations in California, Washington, Oregon, or Oklahoma, four states that have continuously experienced pricing pressure and have unlimited licenses.

Leonard Tannenbaum: We're pleased that at this time we have no loans that are, we have no loans.

We're pleased that at this time, we have no loans that are.

We have no loans.

Leonard Tannenbaum: Please, at this time, we have no loans that aren't currently performing. All our loans are currently performing.

Please at this time, we have no loans that arent.

All of our loans are current and performing.

Leonard Tannenbaum: When evaluating which states to lend to, we prefer lending to operators in limited license markets as we believe licenses in those states have additional value as a form of security.

When evaluating which states to let too we preferred lending to operators in limited license markets as we believe licenses in those states have additional value, it's a form of security.

Additionally.

During our underwriting we evaluate the supply and demand dynamic into each state and where pricing per pound is trending.

Leonard Tannenbaum: During our underwriting, we evaluate the supply and demand dynamic in each state and where pricing per pound is trending.

Leonard Tannenbaum: Currently, AFC Gamma has not lent to any borrowers with primary operations in California, Washington, Oregon, or Oklahoma, four states that have continuously experienced pricing pressure and have unlimited licenses.

Currently AMC gamma has not led to any borrowers with primary operations in California.

Washington, Oregon or Oklahoma.

Four states that are continuously experienced pricing pressure and have unlimited licenses.

Leonard Tannenbaum: Due to adverse market conditions in these states, we believe that many operators may experience declining earnings, which may negatively impact lenders in these states.

Due to adverse market conditions in these states. We believe that many operators may experienced declining earnings which may negatively impact lenders in these states.

Leonard Tannenbaum: Due to adverse market conditions in these states, we believe that many operators may experience declining earnings, which may negatively impact lenders in these states. Earnings may be lumpy quarter over quarter due to difficulty in estimating potential deal repayments and forecasting the times of deal closings. The repayments tend to cause an increase in income due to a write-up of OID, as well as the receipt of an exit and/or prepayment penalties. As I stated earlier, in 2022, we are currently expected to experience between $100 million and $200 million of repayments as the portfolio continues to mature. We are pleased that our board has declared a quarterly dividend of $0.55 a share for Q1 this year, payable on 15 April to shareholders of record 31 March.

Earnings may be lumpy quarter over quarter.

Leonard Tannenbaum: due to difficulty in estimating potential deal repayments and forecasting the times of deal closing.

Due to difficulty in a potential youll repayments.

And the estimating potential deal repayments in forecasting the times of deal closings repayments tend to cause an increase in income due to a write up of OID.

Leonard Tannenbaum: Repayments tend to cause an increase in income due to a write-up of OID as well as the receipt of an exit and or prepayment penalty.

As well as the receipt of an exit <unk> prepayment penalties.

Leonard Tannenbaum: As I stated earlier, in 2022, we are currently expected to experience between $100 million and $200 million of repayments as the portfolio continues to mature.

As I stated earlier in 2022, we are currently expected to experience between $100 million and $200 million of repayments as the portfolio continues to mature.

Yeah.

We are pleased that our board has declared a quarterly dividend of 55 cents a share for the first quarter. This year payable on April 15th to shareholders of record on March 31.

Leonard Tannenbaum: We are pleased that our board has declared a quarterly dividend of $0.55 a share for the first quarter of this year, payable on April 15th to shareholders of record of March 31st.

Leonard Tannenbaum: This dividend represents a 10% increase over the prior quarter and is the third consecutive quarterly increase in our dividend as a public company.

This dividend represents a 10% increase over the prior quarter and is the third consecutive quarterly increase in our dividend as a public company.

Leonard Tannenbaum: This dividend represents a 10% increase over the prior quarter and is the third consecutive quarterly increase in our dividend as a public company. Consistent with the past three quarters, we expect to generate distributable earnings at or above this dividend level in Q1 2022. On an annual basis, our dividend policy is to pay between 85% and 100% of distributable earnings over the year. I will now turn the call over to John.

Leonard Tannenbaum: Consistent with the past three quarters, we expect to generate distributable earnings at or above this dividend level in the first quarter of 2022.

Consistent with the past three quarters, we expect to generate distributable earnings.

Or above this dividend level in the first quarter of 2022.

On an annual basis, our dividend policy is to pay between 85% and 100% of distributable earnings over the year I will now turn the call over to John .

Leonard Tannenbaum: On an annual basis, our dividend policy is to pay between 85 percent and 100 percent of distributable earnings over the year. I will now turn the call over to John . Thank you, Len. As the portfolio has begun to evolve and mature, we wanted to begin highlighting certain portfolio management aspects of AFC Gamma's operations.

Jonathan Kalikow: Thank you, Len. As the portfolio has begun to evolve and mature, we wanted to begin highlighting certain portfolio management aspects of AFC Gamma's operations. The goal of our portfolio management is severalfold. First, to maintain a strong relationship with our borrowers. We monitor their operations and credit strength over time through regular dialogue, financial reporting, and covenant testing, along with ensuring that the company's loan is performing. Regular dialogue with each borrower allows us to be able to act quickly should a borrower need to modify or expand a loan. For example, we recently were able to increase loans to three existing borrowers, Verano, Nature's Medicines, and TerrAscend, to finance their new growth initiatives. Second, we wanna make sure we can anticipate any potential issues with the borrower.

Thank you Len as the portfolio has begun to evolve and mature we wanted to begin highlighting certain portfolio management aspects of AFC gamma is operations.

The goal of our portfolio management and several fold first to maintain a strong relationship with our borrowers we monitor their operations and credit strength over time through regular dialogue financial reporting and covenant testing along with ensuring that the company's loan is performing regular.

John: The goal of our portfolio management is several fold. First, to maintain a strong relationship with our borrowers.

John: We monitor their operations and credit strength over time through regular dialogue, financial reporting, and covenant testing.

John: Along with ensuring that the company's loan is performing, regular dialogue with each borrower allows us to be able to act quickly should a borrower need to modify or expand a loan.

Dialogue with each borrower allows us to be able to act quickly should a borrower need to modify our expand alone.

John: For example, we recently were able to increase loans to three existing borrowers, Verano, Nature's Medicines and Natravis, to finance their new growth initiatives.

For example, we recently were able to increase loans to three existing borrowers marrano Nature's medicines and the Travis to finance their new growth initiatives.

John: Second, we want to make sure we can anticipate any potential issues with the borrower. For instance, monitoring the financial covenants of a company provides us with knowledge as to the trajectory of their business and provides our team with the ability to look ahead towards issues that may arise in the future.

Second we want to make sure we can anticipate any potential issues with the borrower for instance, monitoring the financial covenants of our company provides us with knowledge as to the trajectory of their business and provides our team with the ability to look ahead towards issues that may arise in the future.

Jonathan Kalikow: For instance, monitoring the financial covenants of a company provides us with knowledge as to the trajectory of their business and provides our team with the ability to look ahead towards issues that may arise in the future. In scenarios where a company may not be performing as expected, we can work with them to diagnose the issue and find a remedy, a remedy which may include borrowers investing additional equity, changing or delaying future plans, or posting additional collateral. Third, our portfolio management team must understand the market dynamics in the states in which our borrowers operate, as this will help inform our origination decisions and pricing. We remain focused on lending in limited licensed states and monitoring the supply-demand dynamics in each state, which are ever-evolving.

John: In scenarios where a company may not be performing as expected, we can work with them to diagnose the issue and find a remedy, a remedy which may include borrowers investing additional equity, changing or delaying future plans, or posting additional collateral.

Scenarios, where a company may not be performing.

As expected, we can work with them to diagnose the issue and find a remedy a remedy which may include borrowers investing additional equity changing are delaying future plans for posting additional collateral.

John: Third, our portfolio management team must understand the market dynamics in the states in which our borrowers operate, as this will help inform our origination decisions and pricing.

Third our portfolio management team must understand the market dynamics in the states in which our borrowers operate as this will help inform our origination decisions and pricing.

John: We remain focused on lending in limited license states and monitoring the supply-demand dynamics in each state, which are ever-evolving. Portfolio management remains a cornerstone of what we do, and we are pleased to announce that at this time, all of the loans in our portfolio are current and are performing. I will now turn the call

We remained focused on lending and limited license states and monitoring the supply demand dynamics in each state, which our ever evolving.

Jonathan Kalikow: Portfolio management remains a cornerstone of what we do, and we are pleased to announce that at this time, all of the loans in our portfolio are current and are performing. I will now turn the call over to Robin.

Although management remains a cornerstone of what we do and we are pleased to announce that at this time all of the loans in our portfolio are current and are performing.

I will now turn the call over to Robyn.

John: Thank you, John . As a reminder, ASC Gamma is an institutional lender to the cannabis industry. The loans that we make are typically secured by three pillars, cash flow, licenses, and real estate. The companies that we lend to are domestic single and multi-state operators, which include those that are privately held as well as those listed on the Canadian.

Robyn Tannenbaum: Thank you, John. As a reminder, AFC Gamma is an institutional lender to the cannabis industry. The loans that we make are typically secured by three pillars: cash flow, licenses, and real estate. The companies that we lend to are domestic single and multi-state operators, which include those that are privately held, as well as those listed on the Canadian exchanges. We see ourselves as a relationship lender, financing cannabis operators to build successful businesses. Our origination platform is focused on both expanding loans with a variety of our existing borrowers and continually sourcing new borrowers. From January 2020 through 4 March 2022, we have sourced over $13 billion of transactions, which represents over 500 deals. We continue to expand our lending platform while maintaining a high degree of selectivity. When sourcing deals, incumbency has proven to give us an important edge.

Thank you John as a reminder, a FC gamma is an institutional lender to the candidates the.

The loans that we make are typically secured by three pillars cashflow licenses and real estate the company's everyone to our gymnastics single and multi state operators, which include those that are privately held as well as that is listed on the Canadian exchanges.

We see ourselves as a relationship lender financing candidates operator, 2000 successful businesses. Our origination platform is focused on both expanding lines within a variety of our existing borrowers and continually sourcing new borrowers from January tiny tiny through March 2022, we absorbed over 30.

John: We see ourselves as a relationship lender, financing cannabis operators to build successful business.

John: Our origination platform is focused on both expanding loans with a variety of our existing borrowers and continually sourcing new borrowers. From January 2020 through March 4, 2022, we have sourced over $13 billion of transactions, which represents over 500 deals. We continue to expand our lending platform while maintaining a high degree of selectivity.

<unk> billion dollars, a transaction, which represents over 500 deals we continue to expand our lending platform, while maintaining a high degree of interactivity winstar. Thank Dr. Incumbency has proven to get US an important edge two days during the first quarter of 2022, we increased commitments to three existing borrowers think 47 million.

John: When sourcing deals, incumbency has proven to give us an important edge. To date, during the first quarter of 2022, we increased commitments to three existing borrowers by $47 million.

Robyn Tannenbaum: To date, during Q1 2022, we increased commitments to three existing borrowers by $47 million. The pipeline remains strong with an active pipeline as of 4 March 2022 of over $1 billion. Yet it remains difficult to predict both the timing of converting those deals and closing those deals. The active pipeline may fluctuate quarter-over-quarter as we close transactions, especially as larger transactions move from active to closed. The origination team continues to work hard to ensure the pipeline remains robust, and we are evaluating many deals in the market. Before turning the call over to Brett, I would like to highlight a little bit about AFC Foundation. AFC Gamma's three founding partners have personally pledged to donate $250,000 to the AFC Foundation over the course of 2022.

Got it.

John: The pipeline remains strong with an active pipeline as of March 4th of over $1 billion. Yet it remains difficult to predict both the timing of converting those deals and closing those deals.

The pipeline remains strong with an active pipeline as of March four over $1 billion. Yeah. It remains difficult to predict both the timing of converting those deals and closing those deals.

John: The active pipeline may fluctuate quarter over quarter as we close transactions, especially as larger transactions move from active to closed.

The active pipeline may fluctuate quarter over quarter, as we closed transactions, especially as larger transactions move from active to close.

John: The Origination Team continues to work hard to ensure the pipeline remains robust, and we are evaluating many deals in the market.

Our engineering team continues to work hard to ensure that the pipeline remains robust and we are evaluating many deals in the market.

John: Before turning the call over to Brett, I would like to highlight a little bit about AFC Foundation.

Before turning the call over to Brett I'd like to highlight a little bit about AMC Foundation.

Brett Kaufman: AFC Gamma's three founding partners have personally pledged to donate $250,000 to the AFC Foundation over the course of 2020.

<unk> three founding partners have personally pledged to donate $250000 to the A&P Foundation over the course of 2022.

Robyn Tannenbaum: Since cannabis is a regional business where operators become rooted in their local communities, AFC Foundation collaborates with AFC's borrowers to identify charities positively impacting lives in the state they operate in. As president of AFC Foundation, in collaboration with Organic Remedies, a vertically integrated cannabis company that operates under a clinical registrant license in Pennsylvania, I'm excited to announce that AFC Foundation's first donation was made this quarter to the Pennsylvania Court Appointed Special Advocates Association or PA CASA. PA CASA's mission is to grow, strengthen, and unite local CASA programs as they work toward ensuring that every neglected child in Pennsylvania has access to the service and support of a trained CASA volunteer. AFC Foundation and Organic Remedies are pleased to support PA CASA as they advocate for underserved Pennsylvania youth. I look forward to highlighting another deserving organization and borrower next quarter.

Brett Kaufman: Since cannabis is a regional business where operators become rooted in their local communities, AFC Foundation collaborates with AFC's borrowers to identify charities positively impacting lives in the state they operate in.

Cannabis is a regional business, where operators, becoming rooted in that local community IMT Foundation collaborates with Amc's borrowers to identify Cherokee positively impacting lives in the state they operate in as President of A&P Foundation in collaboration with organic remedy is a vertically integrated cannabis company.

Brett Kaufman: As president of AFC Foundation, in collaboration with Organic Remedies, a vertically integrated cannabis company that operates under a clinical registrant license in Pennsylvania, I'm excited to announce that AFC Foundation's first donation was made this quarter to the Pennsylvania court-appointed Special Advocate Association, or PACA.

That operated under a clinical registrant license in Pennsylvania, I'm excited to announce that AFC foundations first donation was made this quarter to the Pennsylvania Court appointed Special Advocate Association or <unk> costs at.

Brett Kaufman: PA CASA's mission is to grow, strengthen, and unite local CASA programs as they work toward ensuring that every neglected child in Pennsylvania has access to the service and support of a trained CASA volunteer. AFC Foundation and Organic Remedies are pleased to support PA CASA as they advocate for underserved Pennsylvania.

<unk> mission is to grow strengthen and unite little good constant program as they work towards ensuring that every neglected child in Pennsylvania has access to the service and support of the training cost of volunteer AMC Foundation inorganic remedies are pleased to support Ta costs as they advocate for underserved, Pennsylvania.

I look forward to highlighting another deserving organization and borrower next quarter I will now turn it over to Brad to review our financials.

Brett Kaufman: I look forward to highlighting another deserving organization and borrower next quarter. I will now turn it over to Brett to review our financials.

Robyn Tannenbaum: I will now turn it over to Brett to review our financials.

Brett Kaufman: Thanks Robin. Hello everyone and thank you again for joining us here for AFC Gamma's earnings call. We are pleased to report strong results in the fourth quarter and fiscal 2021.

Brett Kaufman: Thanks, Robyn. Hello, everyone, and thank you again for joining us here for AFC Gamma's earnings call. We are pleased to report strong results in Q4 and fiscal 2021. Beginning with our quarterly results for Q4 ended 31 December 2021, we had GAAP net income of $7 million or earnings of $0.43 per basic weighted average common share. For the three months ended 31 December 2021, we generated net interest income of $13 million and distributable earnings of $8.5 million or $0.52 per basic weighted average common share. We ended Q4 of 2021 with total assets of $465 million as compared to $304 million at 30 September 2021.

Thanks, Robin Hello, everyone and thank you again for joining us here for FC Gamma as earnings call. We are pleased to report strong results in the fourth quarter and fiscal 2021, beginning with our quarterly results for the fourth quarter ended December 31, 2021, we had GAAP net income of $7 million or earnings of 43.

Brett Kaufman: Beginning with our quarterly results for the fourth quarter ended December 31st, 2021, we had gap net income of $7 million or earnings of $0.43 per basic weighted average common share.

<unk> <unk> per basic weighted average common share for.

For the three months ended December 31, 2021, we generated net interest income of $13 million and distributable earnings of $8 $5 million or <unk> 52 cents per basic weighted average common share. We ended the fourth quarter of 2021 with total assets of $465 million as compared to.

Brett Kaufman: For the three months ended December 31st, 2021, we generated net interest income of $13 million and distributable earnings of $8.5 million or 52 cents per basic weighted average common share. We ended the fourth quarter of 2021 with total assets of $465 million as compared to $304 million at September 30th, 2021.

$304 million at September 32021.

Brett Kaufman: On an annual basis for the year ended December 31st, 2021, we earned gap net income of $21 million or earnings of $1.57 per basic weighted average common share. In 2021, we generated net interest income of $37 million and distributable earnings of $24.7 million or $1.85 per basic weighted average common share.

Brett Kaufman: On an annual basis for the year ended 31 December 2021, we earned GAAP net income of $21 million or earnings of $1.57 per basic weighted average common share. In 2021, we generated net interest income of $37 million and distributable earnings of $24.7 million or $1.85 per basic weighted average common share. We ended Q4 2021 with $366 million of principal outstanding spread across our 16 borrowers. As of 31 December 2021, AFC Gamma's portfolio consisted of $419 million of current commitments with $364 million funded. So far in 2022, we've closed an additional $46.9 million of new commitments.

On an annual basis for the year ended December 31, 2021, we earned GAAP net income of $21 million or earnings of $1 57 per basic weighted average common share in 2021, we generated net interest income of $37 million and distributable earnings of $24 7 million or <unk>.

$1.85 per basic weighted average common share.

Brett Kaufman: We ended the fourth quarter of 2021 with $366 million of principal outstanding spread across our 16 boroughs.

We ended the fourth quarter of 2021 with $366 million of principal outstanding spread across our 16 bars.

Brett Kaufman: As of December 31, 2021, AFC Gambit's portfolio consisted of $419 million of current commitments with $364 million funded. So far in 2022, we've closed an additional $46.9 million of new commitments. We sold a $15 million short-term debt security investment and also funded $49.4 million of our new and existing commitments.

As of December 31, 2021, <unk> portfolio consisted of $419 million of current commitments with $364 million funded.

So far in 2022, we've closed an additional $46 $9 million of new commitments, we sold at $15 million short term debt security investment and also funded $49 4 million of our new and existing commitments.

Brett Kaufman: We sold a $15 million short-term debt security investment and also funded $49.4 million of our new and existing commitments. As of 4 March 2022, we had $430 million of current commitments with $381 million of principal outstanding across our 14 borrowers. The weighted average portfolio yield to maturity, which is measured for each loan over the life of such loan, was approximately 19% as of 31 December 2021, compared to the weighted average yield to maturity of a portfolio of approximately 21% as of 30 September 2021. Currently, the weighted average portfolio yield to maturity is still approximately 19%. As mentioned on our last earnings call, we believe providing distributable earnings is helpful to stockholders in assessing the overall performance of AFC Gamma's business.

As of March four 2022, we had $430 million of current commitments with $381 million of principal outstanding across our 14 borrowers.

Brett Kaufman: As of March 4th, 2022, we had $430 million of current commitments with $381 million of principal outstanding across our 14 borrowers.

The weighted average portfolio yield to maturity, which is measured for each flown over the life of such long was approximately 19% as of December 31, 2021, compared to the weighted average yield to maturity of our portfolio of approximately 21% as of September 30th 2021 currently the weighted average portfolio yield to me.

Brett Kaufman: The weighted average portfolio yield to maturity, which is measured for each loan over the life of such loan, was approximately 19% as of December 31st, 2021, compared to the weighted average yield to maturity of a portfolio of approximately 21% as of September 30th, 2021.

Brett Kaufman: Currently the weight average portfolio yield to maturity is still approximately 19%.

<unk> is still approximately 19%.

Brett Kaufman: As mentioned on our last earnings call, we believe providing distributable earnings is helpful to stockholders in assessing the overall performance of AFC GAMMA's business.

As mentioned on our last earnings call. We believe providing distributable earnings is helpful to stockholders in assessing the overall performance of AFC Ghana's business' distributable earnings represents the net income computed in accordance with GAAP, excluding noncash items, such as equity compensation expense any unrealized gains.

Brett Kaufman: Distributable earnings represents the net income computed in accordance with GAAP, excluding non-cash items such as equity compensation expense, any unrealized gains or losses, provision for current expected credit losses, also known as CECL, or other non-cash items recorded in net income or loss for the period. As of 31 December 2021, the CECL reserve represents approximately 1.2% of our loans at carrying value. On 14 January 2022, AFC Gamma paid a dividend of $0.50 per common share for Q4 to our shareholders of record as of 31 December 2021, which represents an increase of 16% from Q3. During 2021, AFC Gamma declared dividends of $22.6 million in aggregate, which represents approximately 91% of AFC Gamma's distributable earnings in 2021.

Brett Kaufman: earnings represents the net income computed in accordance with GAAP.

Brett Kaufman: excluding non-cash items such as equity compensation expense, any unrealized gains or losses, provision for current expected credit losses, also known as CECL, or other non-cash items recorded in net income or loss for the period.

Losses provision for current expected credit losses also noted that you saw or other noncash items recorded in net income or loss for the period.

Brett Kaufman: As of December 31st, 2021, the CESLU Reserve represents approximately 1.2% of our loans at carrying value.

As of December 31, 2021, the seats. The reserve represents approximately one 2% of all loans at carrying value.

Brett Kaufman: On January 14, 2022, AFC Gamma paid a dividend of $0.50 per common share for the fourth quarter to our shareholders of record as of December 31, 2021, which represents an increase of 16% from the third quarter.

On January 14th 2022, AMC Gamma paid a dividend of <unk> 50 cents per common share for the fourth quarter to our shareholders of record as of December 31, 2021, which represents an increase of 16% from the third quarter.

Brett Kaufman: During 2021, AFC Gamma declared dividends of $22.6 million in aggregate, which represents approximately 91% of AFC Gamma's distributable earnings in 2021.

During 2021, AMC gathered declared dividends of $22 6 million in aggregate, which represents approximately 91% of AFC cameras distributable earnings and 2021.

Brett Kaufman: Earlier today, AFC Gamma announced its upcoming dividend of 55 cents per common share for the first quarter of 2022 to be paid on April 15, 2022, to shareholders of record as of March 31, 2022, which represents an increase of 10% from the previous quarter.

Brett Kaufman: Earlier today, AFC Gamma announced its upcoming dividend of $0.55 per common share for Q1 2022 to be paid on 15 April 2022 to shareholders of record as of 31 March 2022, which represents an increase of 10% from the previous quarter. At the end of Q4, our total stockholders' equity was $273 million, and our book value per share was $16.61 as compared to $14.83 as of 31 December 2020. The increase in our book value per share as of 31 December 2021 compared to the end of 2020 was primarily attributable to our IPO and follow-on equity offering in Q1 and Q2 2021 respectively, each of which were accretive to our book value.

Earlier today, AMC gamma announced his upcoming dividend of <unk> 55 per common share for the first quarter of 2022 to be paid on April 15th 2022 to shareholders of record as of March 31, 2022, which represents an increase of 10% from the previous quarter at.

Brett Kaufman: At the end of the fourth quarter, our total stockholders' equity was $273 million, and our book value per share was $16.61, as compared to $14.83 as of December 31, 2020.

At the end of the fourth quarter, our total stockholders' equity was $273 million and our book value per share was $16 61.

As compared to $14.83 as of December 31, 2020.

Brett Kaufman: The increase in our book value per share as of December 31st, 2021 compared to the end of 2020 was primarily attributable to our IPO and follow-on equity offering in the first and second quarter of 2021, respectively, each of which were accretive to our book value.

The increase in our book value per share as of December 31, 2021, compared to the end of 2020 was primarily attributable to our IPO and follow on equity offering in the first and second quarter of 2021, respectively, each of which were accretive to our book value.

Brett Kaufman: During the December quarter, we received an increase in our credit rating from Egan Jones, moving us to a triple B plus investment grade rating.

During the December quarter, we received an increase in our credit rating from Egan Jones, moving us towards Triple B plus investment grade rating.

Brett Kaufman: During Q4, we received an increase in our credit rating from Egan-Jones, moving us to a triple B plus investment-grade rating. On 3 November 2021, we closed our 144A debt offering of $100 million aggregate principal amount of senior unsecured notes. These notes have a fixed cash interest rate of 5.75% and do not mature until 2027. We also completed our second equity offering since the IPO in January of this year, issuing approximately 3.3 million shares of common stock, which provided AFC Gamma with approximately $63 million of deployable capital. Last year's IPO was a significant milestone, in particular because as a Nasdaq-listed public company, we're able to utilize both public and private debt and equity markets as we work to maintain and improve our cost of capital.

Brett Kaufman: On November 3, 2021, we closed our $144,000,000 debt offering of $100,000,000 aggregate principal amount of senior unsecured notes.

On November 3rd 2021, we closed our $1 44, a debt offering of 100 million aggregate principal amount of senior unsecured notes. These notes have a fixed cash interest rate of 575% and do not mature until 2027.

Brett Kaufman: These notes have a fixed cash interest rate of 5.75% and do not mature until 2027.

Brett Kaufman: We also completed our second equity offering since the IPO in January of this year, issuing approximately 3.3 million shares of common stock, which provided AFC Gamma with approximately $63 million of deployable capital.

We also completed our second equity offering since the IPO in January of this year issuing approximately three 3 million shares of common stock, which provided AFC gamma with approximately $63 million of deployable capital.

Last year's IPO was a significant milestone in particular, because as a NASDAQ listed public company will be able to utilize both public and private debt and equity markets as we work to maintain and improve our cost of capital as we approach the one year anniversary of our IPO shelf registration eligible.

Brett Kaufman: Last year's IPO was a significant milestone, in particular because as a NASDAQ-listed public company, we're able to utilize both public and private debt and equity markets as we work to maintain and improve our cost of capital. As we approach the one-year anniversary of our IPO, shelf registration eligibility is another tool that may assist in strategically executing more efficient, lower-cost capital markets transactions. With that.

Brett Kaufman: As we approach the one-year anniversary of our IPO, shelf registration eligibility is another tool that may assist in strategically executing more efficient, lower-cost capital markets transactions. With that, we will now open the call to questions. I will now turn it back over to the operator to start the Q&A. Operator?

Ability is another two tool that may assist and strategically executing more efficient lower cost capital markets transactions.

With that we'll now open the call to questions.

Brett Kaufman: I will now turn it back over to the operator to start the Q&A.

I will now turn it back over to the operator to start the Q&A.

Speaker Change: Thank you. As a reminder, to ask a question, you'll need to press star 1 on your telephone. To withdraw your question, please press the pound key. Please stand by while we compile the Q&A roster.

Operator: Thank you. As a reminder, to ask a question, you'll need to press star one on your telephone. To withdraw your question, please press the pound key. Please stand by while we compile the Q&A roster. Our first question comes from Gaurav Mehta with EF Hutton. Your line is open.

Thank you. Thank you as a reminder to ask a question you'll need to press star one on your telephone to withdraw your question. Please press the pound key please standby, while we complete compile the Q&A roster.

Speaker Change: Our first question comes from Gaurav Mehta with EF Hutton, your line is open.

Our first question comes from Gaurav Mehta with E. F. Hutton Your line is open.

Gaurav Mehta: Yeah, thanks. Good morning guys. Good morning question on your on your loan commitment. I think in your prepared remarks, we talked about to start.

Gaurav Mehta: Yeah, thanks. Good morning, guys.

Yeah. Thanks, good morning, guys.

Leonard Tannenbaum: Good morning.

Leonard Tannenbaum: The first question on your loan commitment. I think in your prepared remarks, you talked about slow start to the year with $47 million of gross originations as of March, and then you gave a range of $500 to 700 million for gross originations for 2022. You know, what do you attribute the slow start to the year to? Is that just the timing? Then the range that you guys gave, $500 to 700 million, it seems like that range compares to the $700 million number that you provided on the last call. Has anything changed in your view of the loan commitments, or it's just a range that you guys didn't provide last quarter?

Gaurav Mehta: The first question on your loan commitment. I think in your prepared remarks, you talked about slow start to the year with $47 million of gross originations as of March, and then you gave a range of $500 to 700 million for gross originations for 2022. You know, what do you attribute the slow start to the year to? Is that just the timing? Then the range that you guys gave, $500 to 700 million, it seems like that range compares to the $700 million number that you provided on the last call. Has anything changed in your view of the loan commitments, or it's just a range that you guys didn't provide last quarter?

Good morning question on your when you don't connect and then I think in your prepared remarks, you talked about fluid stock.

Gaurav Mehta: to the year with 47 million dollars of gross originations as of March and then you gave a range of 500 to 700 million dollars for

To the year with $47 million of gross originations.

Of March and then you gave a range of $500 million to $700 million floor.

Speaker Change: So, you know, what do you attribute the slow start to the year to, is that just the timing? And then the range that you guys gave, $500 to $700 million, it seems like that range compares to the $700 million number that you provided on the last call. So has anything changed in your view of the loan commitments, or it's just a range that you guys didn't provide last quarter?

Gross originations for 2022 so.

What what do you attribute this mill and start to the year two is that just the timing and then.

The range that you guys gave $500 million to $700 million. It seems like that range compares to the 700 million dollar number that you provided on the last call. So has anything changed in your view of the loan commitments are.

Story and that you guys didn't provide last quarter.

Okay. So.

Leonard Tannenbaum: Good, great questions. As I said earlier in the call, there were two deals that we expected to close that were in documentation. During our diligence period, which is extensive, we decided not to do those two deals for a variety of reasons. Being very selective is important to us, especially in this environment. That's one reason why this quarter is a bit lighter. But at the same time, we've a lot of confidence because we have a great pipeline and that we've built over time. As a reputation, we're getting a lot of referrals and re-ups from our existing parties. We feel confident currently that we can hit this $500 to 700 million number.

Speaker Change: Great questions. As I said earlier in the call, there were two deals that we expected to close that we were in documentation, and during our diligence period, which is extensive, we decided not to do those two deals for a variety of reasons.

Great questions as I said earlier in the call. There are two deals that we expect it to close than we were in documentation and during our diligence period, which is extensive we decided not to do those two deals for a variety of reasons.

Speaker Change: And so being very selective is important to us, especially in this environment.

And so being very selective as important to us, especially in this environment and so that's one reason why this quarter is a bit lighter and but at the same time, where a lot of confidence because we have a great pipeline and that we've built over time and as our reputation we're getting a lot of referrals and re ups from our existing parties.

Speaker Change: And so that's one reason why this quarter is a bit lighter.

Speaker Change: But at the same time, we have a lot of confidence because we have a great pipeline that we've built over time, and as a reputation, we're getting a lot of referrals and re-ups from our existing parties. So we feel confident.

So we feel confident currently that we can get hit this $500 million to $700 million number you probably can draw the conclusion that if we've only done 47 million to date that that has to pick up pretty a lot in the next 10 months. So I think that's a natural conclusion to do but you are right. We did take the effective.

Speaker Change: Currently that we can get hit this 500 to 700 million dollar number

Speaker Change: You probably can draw the conclusion that if we've only done $47 million to date, that has to pick up a lot in the next 10 months. So I think that's a natural conclusion to do.

Brett Kaufman: You probably can draw the conclusion that if we've only done $47 million to date, that has to pick up a lot in the next 10 months. I think that's a natural conclusion to do. You are right. We did effectively take down our estimate from $700 million to $500 to $700 million of gross originations, from the last time. I do think it moved down, and we wanted to give a range. It could hit $700 million, but I'm less confident that that happens, partially because the turbulence in the markets. You know, we wanna be careful about how we issue equity and how we raise equity.

Speaker Change: But you are right, we did take, effectively take down our estimate from 700 million to 500 to 700 million of gross originations from the last time. So I do think it moved down, and we wanted to give a range. It could hit 700, but I'm less confident that that happens.

We take down our estimate from 700 million to $500 million to $700 million of gross originations from the last time. So I do think it moved down and we wanted to give a range it could be at 700, but I'm less confident that that happens partially because of the turbulence in the markets.

Speaker Change: partially because of the turbulence in the markets, we want to be careful about how we issue equity and how we raise equity. And so we really care about increasing value for our shareholders, increasing and maintaining our dividend, and trying to increase book value over time. And in this market environment, that may not allow us to raise a lot of equity this year, so we have to be more selective on the deals that we do, which is actually really good for the portfolio.

We want to be careful about how we how we issue equity and how we raise equity and so we really care about increasing value for our shareholders, increasing that increasing and maintaining our dividend and trying to increase book value over time, and you know that made in this market environment that may not allow us to raise a lot of <unk>.

Brett Kaufman: We really care about increasing value for our shareholders, increasing that, increasing and maintaining our dividend, and trying to increase book value over time. You know, in this market environment, that may not allow us to raise a lot of equity this year. We have to be more selective on the deals that we do, which is actually really good for the portfolio.

This year, so we have to be more selective on the deals that we do which is actually really good for the portfolio.

Okay.

Speaker Change: Great. And second question on your yield, your portfolio yield to maturity is 19% as of March. Do you expect that you'll be able to maintain that kind of yield to the end of 2022?

Gaurav Mehta: Great. Second question on your yield. Your portfolio yield to maturity is 19% as of March. Do you expect that you'll be able to maintain that kind of yield through the end of 2022?

Great.

Second question on your yield your portfolio yield to maturity of 19% as of March do you expect that you would be able to maintain that kind of yield.

At the end of 2022.

Speaker Change: So I've been really positively surprised. First of all, the market turbulence and the increase, even in yielding in the high yield markets, which is pretty obvious, really has helped us. If you look at curaleaf bonds and how they trade, and you guys can call the different brokers to see that, they were issued a par, and they're trading somewhere between 96.

So I've been really positively surprised first of all the market turbulence and the increase even in yielding in the high yield markets, which is pretty obvious.

Leonard Tannenbaum: I've been really positively surprised. First of all, the market turbulence and the increase, even, in yields in the high-yield markets, which is pretty obvious, really has helped us. If you look at Curaleaf bonds and how they trade, and you guys can call the different brokers to see that. They were issued at par, and they're trading somewhere between 96

Really has helped us if you look at clearly bonds and how they trade and you guys can call the different brokers to see that their state. They were issued at par and Theyre trading somewhere between 96 and 98, so even one of them industry leaders has traded down somewhat so I think that that should widen spreads across it.

Speaker Change: and 98. So even one of the industry leaders, you know, is traded down somewhat. So I think that that should widen spread.

Leonard Tannenbaum: 98. Even one of the industry leaders, you know, has traded down somewhat. I think that should widen spreads across. If that's one of the industry leaders, then everything kind of keys off of those types of high performance credits. I think we are gonna be able to maintain better yields this year than I would have expected before. I can't tell you what that's gonna be, but I was positively surprised to see it maintain at 19% quarter-over-quarter.

Speaker Change: if that's one of the industry leaders, then everything sort of keys off of those types of high performance credits. And so I think we are going to be able to maintain better yields this year than I would have expected before. I can't tell you what that's going to be, but I was positively surprised to see it maintain at 19 percent quarter over quarter.

One of the industry leaders and everything sort of keys off of those types of hi, Cai.

For them its credits and so I think we are going to be able to maintain better yields this year than I would've expected before I can't tell you what that's going to be but I was positively surprised to see it maintain at 19% quarter over quarter.

Alright, thanks for taking my questions today.

Gaurav Mehta: All right. Thanks for taking my questions today.

Operator: Thank you. Our next question comes from Gerald Pascarelli with Cowen. Your line is now open.

Thank you.

Speaker Change: Our next question comes from Gerald Pasquarelli with Cowan. Your line is now open. Hi. Good morning. Thank you very much for taking

Our next question comes from Gerald Pascarelli with Cowen. Your line is now open.

Hi, Good morning, Thank you very much for taking the questions.

Gerald Pascarelli: Hi, good morning. Thank you very much for taking the questions.

Sure.

Leonard Tannenbaum: Sure.

Gerald Pasquarelli: Len, can you talk a little bit more about your outlook for the prepayments? I'm still going through the K here, and it looks like there's been a little over a million dollars prepaid thus far in 1Q, if I'm looking at that number, right? So number one, is that correct? And then number two, I guess, what's driving your underlying assumption for that to pick up? I would assume it's from maybe some of the top credits that are seeing lower

Gerald Pascarelli: Len, can you talk a little bit more about your outlook for the prepayments? I'm still going through the K here, and it looks like there's been a little over $1 million prepaid thus far in Q1, if I'm looking at that number right. So number one, is that correct? Then number two, I guess, what's driving your underlying assumption for that to pick up? I would assume it's from maybe some of the top credits that are seeing lower interest rates, you know, now than maybe in the year ago period. I would just love you to provide any color on your expectations there.

Ken can you talk a little bit more about your <unk>.

Outlook for for the prepayments I'm still going through the K here and it looks like Theres been.

A little over a million dollars prepaid thus far in <unk>, if I'm looking at that number right. So number one is that correct and then number two I guess, what's driving your underlying assumption for that to pick up I would assume it's from maybe some of the top credits that are better seem lower.

Gerald Pasquarelli: Lower interest rates, you know, now than maybe in a year ago period, but we just love you to provide any color on your on your expectations there.

Lower interest rates now than maybe in the year ago period, but would just love you to provide any color on your and your expectations there.

So we're actually seeing so I expect that last year.

Gerald Pasquarelli: So we're actually seeing, so I expected last year as we talked that we would see lower interest rates this year versus last year, but I didn't, you know, we didn't know where the market environment was. So I think this market environment and the constraints on the capital, but still the high demand for capital to build out, to build out these states.

Leonard Tannenbaum: I expected last year, as we talked, that we would see lower interest rates this year versus last year, but I didn't, you know, we didn't know where the market environment was. I think this market environment and the constraints on the capital, but still the high demand for capital to build out these states is allowing us to maintain yields for now in this really nice 19% range of yield to maturity. We're pretty pleased about that. We really don't wanna get into the business of. It is gonna be difficult for you guys to forecast earnings. As you can, as I said, you know, we declared a $0.55 dividend and we earned at least $0.55 this quarter.

As we talked that we would see lower interest rates this year versus last year, but I didn't we didn't know where the market environment was so I think this market environment and the constraints on the capital, but still the high demand for capital to build out to build out these states.

Gerald Pasquarelli: is allowing us to maintain yields for now.

Wowing us to maintain yields for now.

Gerald Pasquarelli: in this really nice 19% range of yield to maturity.

And this really nice you know 19% range of.

Field to maturity.

Gerald Pasquarelli: So we're pretty pleased about that. We really don't want to get into the business. It is going to be difficult for you guys to forecast earnings. As I said, we declared a $0.55 dividend, and we earned at least $0.55 this quarter.

So we're pretty pleased about that we really don't want to get into the business. It is going to be difficult for you guys to forecast earnings as you can as you as I said, we declared a <unk> 55 dividend and we earned at least 55 this quarter.

Leonard Tannenbaum: That's great. We wanna continue paying dividends at or below our earnings, and that's our goal over the course of the year. You know, we already know that Q1 is a good quarter, and obviously some of that is going to be from repayments. We can see today that that's gonna continue in Q2 and Q3 of this year. My estimate of $100 to 200 million, I feel pretty comfortable about that too, is that we're gonna get that money back to us and be able to redeploy it, which really generates very high IRRs, which is great for our investors.

Gerald Pasquarelli: And so that's great and we want to continue paying dividends at or below our earnings and that's our goal over the course of the year.

And so that's great and we want to continue paying dividends at or below our earnings and that's our goal.

Over the course of the year.

Gerald Pasquarelli: We already know that first quarter is a good quarter and obviously some of that is going to be from repayments.

So you.

We had a good we were already know that first quarter is a good quarter and obviously some of that since it's going to be from repayments.

Gerald Pasquarelli: And we can see today that that's going to continue in the second quarter and the third quarter of this year. So my estimate of 100 to 200 million, I feel pretty comfortable about that too, is that we're going to get that money back at us and be able to redeploy it, which really generates very high IRRs, which is great for us.

And we can see today that that's going to continue in the second quarter in the third quarter of this year. So so I estimate of 100 to 200 million I feel pretty comfortable about that too.

That we're going to get that money back at us and be able to redeploy it which really generates very high irr's.

Which which is great for our investors.

Speaker Change: Got it. That's that's helpful. Thank you. I guess given where where the equity markets are.

Got it.

Gerald Pascarelli: Got it. That's helpful. Thank you. I guess, given where the equity markets are and some of your previous commentary, you know, it seems like future debt raises are likely in the cards here. Given the triple B plus rating, has anything changed in terms of your expectations on what your own cost of capital would be relative to your first debt raise? Or do you expect, you know, the rates to be, the headline rates, that is, relatively similar to what you have on the books today? Thank you.

That's helpful. Thank you.

I guess, given where the equity markets are and some of your previous commentary.

Speaker Change: your previous commentary. It seems like future debt raises are likely in the cards here. Given the triple B plus rating, has anything changed in terms of your expectations on what your own cost of capital would be relative to your first debt raise? Or do you expect the headline rates that is to be relatively similar to what you have on the books today?

It seems like quite future debt raises are likely in the cards here.

Given the the triple B plus rating.

Has anything changed in terms of your expectations on what your own cost of capital would be relative to your first to your first debt raise or do.

Do you expect the rates to be that the headline rates that that has to be relatively similar to what you have on the books today. Thank you.

Well I wanted to layer in senior debt and so one of the things we've talked about in last couple of calls, but we haven't yet hit it on but some tend to execute on is bringing in some really good banks to lend to us on the senior side and we're still in that process of working on that and and <unk>.

Leonard Tannenbaum: Well, I wanna layer in senior debt. One of the things we've talked about in the last couple of calls, but we haven't yet executed on, but intend to execute on, is bringing in some really good banks to lend to us on the senior side, and we're still in that process of working on that. I think that cost of debt is really great. We are somewhat limited, and I wouldn't go too high either on senior debt, in terms of you could read our bond indenture, and we can do up to 25% in senior, but it still leaves us a lot of room from zero today, and that debt, you know, should be even a lower cost than the bonds.

Speaker Change: Well, I want to layer in senior debt, and so one of the things we've talked about in the last couple of calls, but haven't yet executed on, but intend to execute on, is bringing in some really good banks to lend to us on the senior side, and we're still in that process of working on that.

Speaker Change: And so, I think that cost of debt is really great. We are somewhat limited and I wouldn't go too high either on senior debt in terms of you could read our bond and venture and we can do up to 25%.

So I think that cost of that is really great. We are somewhat limited and I would never I wouldn't go too high either on senior debt.

In terms of what you can read our bond indenture, and we can do up to 25% and senior but it still leaves us a lot of room from zero today.

Speaker Change: in senior, but it still leaves us a lot of room from zero today, and that debt should be even a lower cost than the bond.

And zero and that that should be even a lower cost than the bond.

Speaker Change: If I were to issue more bonds today in today's volatile market environment, my expectation is it would be very similar rates.

Leonard Tannenbaum: If I were to issue more bonds today in today's volatile market environment, my expectation is it would be very similar rates, similar pricing to the last raise. My hope was that it would be, you know, cheaper pricing, but I don't think that would happen in today's environment. I think all interest rates are a bit higher.

If I were to issue more bonds today in today's volatile market environment. My expectation is it would be very similar rates.

Speaker Change: similar pricing to the last raise. My hope was that it would be, you know, cheaper pricing, but I don't think that would happen in today's environment. I think all interest rates are a bit higher.

Similar pricing to the last raise my hope was that it would be cheaper pricing, but I don't think that would happen in today's environment. I think all interest rates are a bit higher.

Got it thanks very much for the color and I'll pass it on.

Gerald Pascarelli: Got it. Thanks very much for the color, Len. I'll pass it on.

Thank you. Thank you. Thank you. Our next question comes from Aaron Hecht with JMP Securities. Your line is open.

Leonard Tannenbaum: Thank you.

Speaker Change: Thank you. Thank you. Thank you. Our next question comes from Erin Heck with J&P Securities. Your line is open.

Operator: Thank you. Thank you. Our next question comes from Aaron Hecht with JMP Securities. Your line is open.

Erin Heck: Morning, thanks for taking my questions. In your pipeline, has the expected investment mix between MSOs and smaller operators changed at all? And are you seeing any divergence in yields across either of those segments versus the last quarter?

Aaron Hecht: Morning. Thanks for taking my questions.

Good morning, Thanks for taking my questions are in your pipeline has the expected investment mix between Msos and smaller operators changed at all and are you seeing any divergence in yields across either of those segments versus last quarter.

Leonard Tannenbaum: Morning.

Aaron Hecht: In your pipeline, has the expected investment mix between MSOs and smaller operators changed at all? Are you seeing any divergence in yields across either of those segments versus the last quarter?

Erin Heck: I think the pipeline mix is similar. It really hasn't changed much between MSOs, second-tier operators, and the single-state operators, which is how we divide up the three buckets.

I think the pipeline mix is similar it really hasnt changed much between Msos second tier operators and the single state operators, which is how we divide up the three buckets.

Leonard Tannenbaum: I think the pipeline mix is similar. It really hasn't changed much between MSOs, second-tier operators, and the single state operators, which is how we divide up the three buckets. What I will tell you is MSOs that thought they could get such great yields, and they have executed really, I believe in this market environment, that that's not sustainable. You could see that in the way they're trading. Even Trulieve is trading down. You have Trulieve trading down. You have Columbia Care that sucked a lot of the wind out of the market, available capital out of the market on their last raise. That's really good for, you know, us to have really a lot of the institutional clients are full of cannabis.

What I will tell you is msos that thought they could get such great yields and they have an executed really I believe in this market environment that that's not sustainable and you could see that in the way they're trading even truly if it's trading down you have clearly trading down you have Colombia care that sucked a lot of the wind out of the market available.

Erin Heck: But what I will tell you is MSOs that thought they could get such great yields, and they have, and executed, really, I believe in this market environment, that's not sustainable. And you can see that in the way they're trading, even TruLeaf is trading down, you have Curaleaf trading down, you have ColumbiaCare that sucked a lot of the wind out of the market, available capital out of the market on their last raise.

Capital out of the market on their last race. So that's really good for.

Erin Heck: So that's really good for us to have really a lot of the institutional clients are full of cannabis. They don't want more cannabis exposure that have played in cannabis before. There really aren't a lot of new entrants to the market. So this is a really good environment for the alternative lenders in general, and I expect yields to hold up because of that.

US to have to have really the a lot of the institutional clients are full of cannabis. If they don't want more cannabis exposure that are played in Canada before there really arent a lot of new entrants to the market. So this is a really good environment for the alternative lenders in general and and I expect yields to hold up because of that.

Leonard Tannenbaum: They don't want more cannabis exposure that have played in cannabis before. There really aren't a lot of new entrants to the market. This is a really good environment for the alternative lenders in general, and I expect yields to hold up because of that.

Erin Heck: And in terms of competition, have you seen any increase, I guess, especially on the smaller...

Aaron Hecht: Understood. In terms of competition, have you seen any increase, I guess, especially on the smaller operator side?

Understood and in terms of competition.

Have you seen any increase I guess, especially on the smaller operator side.

No I think the same players in this market that were a year ago and we just haven't seen.

Erin Heck: No, I think the same players are in this market that were a year ago and we just haven't seen.

Leonard Tannenbaum: No, I think the same players are in this market that were a year ago, and we just haven't seen new entrants to the market in competition. I think one surprise, if there are any surprising competition, is some of the banks are taking swings here on the $10 to 20 million dollar type bite size. Sometimes we're in a deal and they're like, "Wait, we can get $20 million at 6 percent." It's like, "Great. Go take it." Now, that comes with a lot of hooks and caveats and other things too. Look, I think ultimately, if we see some legislative change at the end of the year, more banks will participate in the market, and I think that's really healthy. Right now, that's the only. It's not really a change.

Erin Heck: new entrance to the market in competition. I think one surprise.

Entrance to the market and competition I think one surprise if it if there are any surprising competition to some of the banks are taking swings here on the $10 million to $20 million type byte size and so sometimes we're in a deal and they're like wait we can get 20 million at 6%.

Erin Heck: If there are any surprising competitions, some of the banks are taking swings here on the $10 to $20 million type bite size.

Erin Heck: And so sometimes we're in a deal and they're like, wait, we can get $20 million at 6%. It's like, great, go take it. Now, that comes with a lot of hooks and caveats and other things, too. Look, I think ultimately, if we see some legislative change at the end of the year, more banks will participate in the market. I think that's really healthy. But right now, that's the only, it's not really a change. That's the only time we've really seen additional entrance.

Great [laughter] go take it now.

That comes with a lot of hooks and caveats and other things to that.

Look I think ultimately if we see some legislative change the end of the year more banks will participate in the market and I think that's really healthy but right now that's the only.

It's not really a change that's the only time, we've really seen additional entrance.

Leonard Tannenbaum: That's the only time we've really seen additional entrants.

Aaron Hecht: Thanks, Len. Nice results.

Thanks, a lot and nice results.

Leonard Tannenbaum: Thank you.

Thank you.

Speaker Change: Thank you. Our next question comes from John Heck with Jeffries. Your line is open.

Thank you. Our next question comes from John Hecht with Jefferies. Your line is open.

Operator: Thank you. Our next question comes from John Hecht with Jefferies. Your line is open.

John Heck: Morning, guys. Thanks for taking my question, and congratulations on finishing a busy year. Thank you. Some of this stuff has been touched on one way or the other, but I'm just wondering, maybe at a high level, how does inflation affect the operators you go into and just the overall industry construct?

John Hecht: Morning, guys. Thanks for taking my question, and congratulations on finishing a busy year.

Morning, guys. Thanks for taking my question and congratulations on finishing a busy year.

John Hecht: Morning, guys. Thanks for taking my question, and congratulations on finishing a busy year.

Leonard Tannenbaum: Thank you.

Thank you.

John Hecht: You know, some of this stuff has been touched on in one way or the other, but I'm just wondering if we get high level when, you know, how does inflation affect the operators you lend to and just the overall industry construct?

Some of this stuff has been touched on in one way or the other but I was just wondering maybe at a high level then.

How does inflation effect the operators, you're going to you or just the overall industry construct.

So I have given the enormous amount of thought because one of my favorite things to do is think of macroeconomic strategies and money flows and how things affect especially as a lender.

Speaker Change: So I've given this an enormous amount of thought, because one of my favorite things to do is think of macroeconomic strategies and money flows and how things affect, especially as a lender, with interest rates, how will those have offsetting effects, which often happen.

Leonard Tannenbaum: I've given this enormous amount of thought, 'cause one of my favorite things to do is think of macroeconomic strategies and money flows and how things affect, and especially as a lender, with interest rates, how will those have offsetting effects which often happens. You'd expect. I would expect, and just thinking about this as a baseline comment, that inflation should benefit an industry that is, you know, like anything that's to do with production of food or production of marijuana or production of whatever, because inflation's good for that, right? You have a cost of capital that's already invested, and you're able to get more for the product that comes out of that cost of capital.

With interest rates, how will those have offsetting effects, which often happens.

Speaker Change: I would expect, just thinking about this as a baseline comment, that inflation should benefit an industry that is...

You would expect I would expect and just thinking about this as a baseline comment that inflation should benefit an industry that is.

Speaker Change: you know, like, like anything that's to do with production of food or production of marijuana or production of whatever. Because inflation is good for that, right? You have a, you have a, you have a cost of capital that's already invested, and you're able to get more for the product that comes out of that cost of capital.

You know.

Like anything that has to do with production of food or production of marijuana or production of whatever.

Because inflation is good for that right.

Do you have a cost of capital that's already invested and Youre able to get more for the product that comes out of that cost of capital and even though there's a labor component. The labor component is not rising as fast as the inflation component and so much of it is fixed cost.

Speaker Change: And even though there's a labor component, the labor component is not rising as fast as the inflation component, and so much of it is fixed cost. But inflation really benefits.

Leonard Tannenbaum: Even though there's a labor component, the labor component's not rising as fast as the inflation component, and so much of it is fixed cost. The inflation really benefits those operators that already have their infrastructure in place. It's actually really hurting those operators that are continuously building their infrastructure, 'cause I'm gonna throw out some guesses of numbers, but it's based upon a lot of data points that we have here, that cost of construction is up at least 30%, if not more. The delays are substantial. What that's doing is to build that same indoor grow or greenhouse, modified greenhouse grow costs you at least 30% more.

Depletion really benefits those operators that already have their infrastructure in place, it's actually really hurting those operators that are continuously building their infrastructure because I.

Speaker Change: those operators that already have their infrastructure in place.

Speaker Change: actually really hurting those operators that are continuously building their infrastructure. I'm going to throw out some guesses of numbers, but it's based upon a lot of data points that we have here, that cost of construction is up at least 30 percent, if not more. And the delays are substantial. And so what that's doing is to build that same

I will I'm going to throw out some guesses of numbers, but it's based upon a lot of data points that we have here that cost for construction is up at least 30% if not more and the delays are substantial and so what that's doing is to build that same indoor.

Speaker Change: indoor grow or greenhouse modified greenhouse grow cost you at least 30% more.

Indoor grow or greenhouse modify greenhouse grow cost you at least 30% more.

Leonard Tannenbaum: What that means is, the existing operators that have existing infrastructure definitely benefit, and it's harder and harder for new entrants to the market, which should start stabilizing and benefiting pricing. We haven't really seen the price turn yet, which I expected after Croptober, but there's a lot of marginal producers that are going out of business, and as that happens and new entrants can't build because the return on investment doesn't make sense, I do expect the prices will stabilize and/or increase during the remainder of the year.

Speaker Change: So what that means is the existing operators that have existing infrastructure definitely benefit, and it's harder and harder for new entrants to the market, which should start stabilizing and benefiting pricing. We haven't really seen the price turn yet, which I expected after October , but I can't imagine. There's a lot of marginal producers that are going out of business.

So what that means is that they.

The existing operators that have existing infrastructure definitely benefit and it's harder and harder for new entrants to the market, which should start stabilizing and benefiting pricing, we haven't really seen the price turn yet, which I expected after crop tober, but I can't imagine there's a lot of marginal producers that are going out of business and as that.

Speaker Change: And as that happens and new entrants can't build because the return on investment doesn't make sense, I do expect that prices will stabilize and or increase during the remainder of the

It happens in new entrants can't build because the return on investments does it make sense I do expect that prices will stabilize <unk> increase during the remainder of the year.

Speaker Change: Okay, that's a very good thoughtful help or helpful thoughts. The second question I have is you guys mentioned you sold

Okay.

John Hecht: Okay. That's a very good, thoughtful help or helpful thoughts. The second question I have is, you guys mentioned you sold a small note. I think, around $15 million in the quarter. I'm wondering, you know, what. How was the execution of that, just to kinda give me a sense of how capital markets overall for, you know, your type of asset class compares to other more generic types.

Very good thoughtful hope or helpful thoughts.

The second question is you guys mentioned you sold.

A small note thinking about $15 million a quarter I'm wondering.

Speaker Change: Small note, I think around $15 million in the quarter. I'm wondering, how was the execution of that, just to kind of give me a sense?

How was the execution of that just to kind of give me a sense of how.

Speaker Change: how capital markets overall for your type of asset class compares to other more generic

Capital markets overall for your type of asset class compares to other more generic types.

So exactly so we bought that node is sort of a cash management tool from a existing cannabis operator that we felt comfortable with and then turned around and sold the note when we had better ideas to deploy that capital at higher interest rates.

Speaker Change: So exactly. So we bought that note as sort of a cash management tool from a existing cannabis operator that we felt comfortable with, and then turned around and sold the note when we had better ideas to deploy that capital at higher interest rates.

Leonard Tannenbaum: Exactly. We bought that note as sort of a cash management tool from an existing cannabis operator that, you know, we felt comfortable with, and then turned around and sold the note when we had better ideas to deploy that capital at higher interest rates. Seaport executed both of those trades, and they do an excellent job. In my opinion, Seaport does an excellent job trading, really creating market bids and offers, and we have a very good sense of where the market is due to the, you know, really the depth of their contacts and book.

Speaker Change: Seaport executed both of those trades and they do an excellent job, in my opinion, Seaport does an excellent job trading, really creating market bids and offers, and we have a very good sense of where the market is due to really the depth of their contacts and books.

Seaport executed both of those trades and they do an excellent job in my opinion seaport does an excellent job trading.

Really creating market bids and offers and we have a very good sense of where the market is due to the really the depth of their contacts and book.

Okay.

John Hecht: Okay. Final question, you did touch on this, Len. You know, you think you're keeping to the line that there's possibly something at the federal level by year-end, but anything, any changes at the state level that are worth noting or would cause you to move faster or slower under a certain geography?

Speaker Change: And final question, you did touch on this, Lynn, you know, you think you can possibly keep it in the line, if there's possibly something at the federal level by your end, but anything, any changes at the state level that are worth noting or would cause you to move faster or slow under a certain geography.

And final question you did touch on this then.

Thank you can possibly you keep it at the line is this possibly something at the federal level by year end, but anything any changes at the state level that are worth, noting or would cause you to move faster or slower nurse or geography.

Lynn: So that, as the political cycle starts...

So that has the political cycle starts.

Leonard Tannenbaum: As the political cycle starts moving towards this critical year, my current expectation is that Schumer's gonna pivot after 4/20 and push the SAFE Act and HOPE Act in combination, and that has a reasonable chance of passing. We don't know what the components of the SAFE Act are at all, and capital markets is still not in there, but that's still my expectation for the fall. As for state by state, it is amazing to me how rapidly changing these states are. Take New Jersey, for example, which should have been rec six months ago and still can't get their act together, and now it's saying May, and then it's June.

Moving towards the critical year, my expectation and my current expectation is that schumer's going to pivot after for 'twenty and.

Lynn: moving towards this critical year, my current expectation is that Schumer is going to pivot after 420.

Pushed the Safe Act and Hope Act and in a combination and that that has a reasonable chance of passing we don't know what the components of the Safe Act.

Lynn: push the SAFE Act and HOPE Act in combination and that that has a reasonable chance of passing.

Lynn: We don't know what the components of the SAFE Act are at all, and capital markets is still not in there, but that's still my expectation for the fall. As for state-by-state, it is amazing to me how rapidly changing these states are. Take New Jersey, for example, which should have been wrecked six months ago and still can't get their act together, and now and now it's saying May, and then it's June . So it's always another month.

Or at all and capital markets are still not in there, but that's still my expectation for the fall.

As for state by State is amazing to me how rapidly changing these states or take New Jersey for example, which should've been rack six months ago and still can't get their act together and now and I was saying May and then its June .

Leonard Tannenbaum: It's always another month to get that rolled out or New York, which is still trying to put together their program and should have been rec also. You know, we're learning a lot about the different states that we're operating in. One of our real core competencies is focusing on the data and focusing on the state-by-state supply and demand dynamic, but also how things are changing legislatively within the states. We continue to spend a lot of time talking to politicians, talking to governors directly and getting inputs into what's going on.

So it's always another month to get that have rolled out or New York, which is still trying to put together their program. It should've been rec also.

Lynn: to get that rolled out. Or New York, which is still trying to put together their program and should have been REC also. But we're learning a lot about the different states that we're operating in. One of our real core competencies is focusing on the data and focusing on the state by state supply and demand dynamic, but also how things are changing legislatively within the states. And so we continue to spend a lot of time.

But we're learning a lot about the different states that we're operating in one of our real core competencies is focusing on the data and focusing on the state by state supply and demand dynamic, but also how things are changing legislatively within the states and so we continue to spend a lot of time.

Lynn: talking to politicians, talking to governors directly, and getting inputs into what's going on.

Talking to politicians talking to governors directly and and getting inputs into what's going on.

Okay. Thanks, very much guys.

John Hecht: All right. Thanks very much, guys.

Leonard Tannenbaum: Thank you.

Thank you.

Operator: Thank you. As a reminder, to ask a question, you'll need to press star one on your telephone. Our next question comes from Mark Smith with Lake Street Capital Markets. Your line is open.

Speaker Change: Thank you. As a reminder, to ask a question, you'll need to press star one on your telephone. Our next question comes from Mark Smith with Lake Street Capital. Your line is open.

As a reminder to ask a question you will need to press star one on your telephone. Our next question comes from Mark Smith with Lake Street Capital. Your line is open.

Mark Smith: Hi guys, Len, you called out some of the states where we're seeing weakness in the cannabis industry, California, Washington, Oregon, etc. Are you seeing any weakness in any other states? Are you seeing this bleed in anywhere else in the market?

Mark Smith: Hi, guys. Len, you called out some of the states where we're seeing, you know, weakness in the cannabis industry, California, Washington, Oregon, etcetera. Are you seeing any weakness in any other states? Are you seeing this bleed in anywhere else, in the market?

Hi, guys.

Lynn you called out some of the states, where we're seeing weakness in the cannabis industry, California, Washington, Oregon et cetera.

Have you seen any weakness in any other states are you seeing this bleed and anywhere else in the market.

Len: Oh, for sure. Those states are going to have an enormous amount of defaults and problems. With cannabis prices continuously depressed, we're talking about California pricing went under $300 a pound. That's just beyond any marginal production. But of course, the spillover effect, you saw Arizona wholesale is probably down around $1,000. Michigan has become super competitive on the low end. What's amazing to me, well, it's not amazing to me, what's sort of according to our thesis, the high end.

Oh for sure I mean, those states I can have an enormous amount of defaults and problems and with cannabis prices continuously depressed I mean, what we're talking about the California pricing went under $300 a pound and that's just beyond any marginal production, but of course. This spillover effect you saw our Arizona wholesale is probably down around one <unk>.

Leonard Tannenbaum: Oh, for sure. I mean, those states are gonna have an enormous amount of defaults and problems, and with cannabis prices continuously depressed, I mean, we're talking about California pricing went under $300 a pound, and that's just beyond any marginal production. But of course, the spillover effect, you saw Arizona wholesale is probably down around $1,000. Michigan has become super competitive on the low end. What's sort of according to our thesis, the high end has held up, but even the high end gets hit when the mid-tier drops that far. But the high end is held up to at least double the base price of the mid-tier. Retail in Arizona has done well, right? Retail has held up really well.

Dollars, Michigan has become super competitive on the low end.

What's amazing to me, it's not a basic to me, what's what's sort of according to our thesis at the high end has held up but even the high end gets hit.

Len: But even the high end gets hit when the mid tier drops that far, but the high end is held up to at least double the base price of the mid tier.

When the mid tier drops that far but the high end is held up to at least double the base price of the mid tier and but retail in Arizona has done well right retail has held up really well. So I guess margins have increased one retail if you're just in retail we're really focused on making sure that we're vertically integrated is <unk>.

Len: But retail in Arizona has done well, right? Retail has held up really well. So I guess margins have increased on retail, if you're just in retail. We're really focused on making sure that we're vertically integrated as much as we can be in our borrowers. And I think the vertical integration is really important from that risk mitigation, because as prices go down, sometimes it's a better retail environment.

Leonard Tannenbaum: I guess margins have increased on retail if you're just in retail. We're really focused on making sure that we're vertically integrated as much as we can be in our borrowers. I think the vertical integration is really important from that risk mitigation because as prices go down, sometimes it's a better retail environment. Sometimes the prices get constrained, you know, it's much better to produce.

As we can be in our in our borrowers and I think the vertical integration.

It's really important from that risk mitigation, because as prices go down.

Sometimes it's a retail better retail environment.

Len: Sometimes if prices get constrained, it's much better to produce.

Sometimes if prices get constrained.

It's much better to produce.

Speaker Change: Okay and might be reaching a little bit on this but you know as we look at the deals that didn't close you know can you talk about was this kind of issues within the states where they operated or was it more so specific just to the deal and why those didn't close?

Mark Smith: Okay. Might be reaching a little bit on this, but, you know, as we look at the deals that didn't close, you know, can you talk about was this kind of issues within the states where they operated, or was it more so specific just to the deal and why those didn't close?

Okay.

It might be reaching a little bit on this but you know as we look at the deals that didn't close can you talk about was this kind of issues within the states, where they operated or or was it more so specific just to the deal.

Why those didn't close.

I don't want to talk specifically to the deals, but I will say the things that we lend to as Robin said as licenses cash flows and real estate and a lot and given the changing market environment.

Leonard Tannenbaum: I don't wanna talk specifically to the deals, but I will say the things that we lend to, as Robyn said, is licenses, cash flows, and real estate. Given the changing market environment, you know, we're very focused on the ability of a company to repay its debt being lenders. To the extent that we don't believe their business models and/or think they need additional liquidity and/or underestimating CapEx spend, given this crazy environment where prices have gone up 30%+ and everything's delayed, you know, we're really challenging those models, and we're challenging those forecasts to make sure the company has adequate liquidity. I think that's caused us to really have a tighter filter until the bottlenecks and the delays, you know, start unraveling.

Speaker Change: I don't want to talk specifically to the deals, but I will say the things that we lend to, as Robin said, is licenses, cash flows, and real estate.

Speaker Change: And a lot, and given the changing market environment.

Speaker Change: you know, we're very focused on the ability of a company to repay its debt, being lenders. And to the extent that we don't believe their business models and or think they need additional liquidity and or underestimating CapEx spend given this crazy environment where

We're very focused on the ability of a company to repay its debt being lenders and to the extent that we don't believe their business models and or think they need additional liquidity and are under under estimating capex spend given this crazy environment, where.

Speaker Change: Prices have gone up 30-plus percent and everything's delayed. We're really challenging those models and we're challenging those forecasts to make sure the company has adequate liquidity. And I think that's caused us to really have a...

Prices have gone up 30, plus percent and everything is delayed.

You know, we're really challenging those models and we're challenging those forecast to make sure. The company has adequate liquidity and I think that's that's caused us to really be have a tighter filter until the bottlenecks and the delays you know start start unraveling I think we've got to be very careful about making sure companies can have some.

Speaker Change: filter until the bottlenecks and the delays.

Speaker Change: you know, start unraveling. I think we've got to be very careful about making sure companies can have sustainable cash flows.

Leonard Tannenbaum: I think we've got to be very careful about making sure companies can have sustainable cash flow.

Haynesville cash flow.

Mark Smith: Okay. Then the last one from me, just as we look at, you know, the growth that you kind of expect in the portfolio this year, you know, can you weigh kind of how you expect that coming from, you know, current partners versus kind of new partners that you bring in?

Okay.

Speaker Change: And then the last one for me, just as we look at, you know, the growth that you kind of expect in the portfolio this year, you know, can you weight kind of how you expect that coming from, you know, current partners versus kind of new partners?

And then the last one for me just as we look at it you know the growth that you kind of expect in the portfolio. This year.

Can you wait kind of how you expect that coming from current partners versus kind of new partners that you bring in.

Leonard Tannenbaum: Over time, when I managed the portfolio. You know, we managed a $5 billion portfolio for 15 years, and in the beginning it was almost all new, obviously, because it's all new relationships. As a mature portfolio, we had about 50% of our loans come from existing partners and 50% were new. In fact, if you look at business development companies, Ares, Apollo, like, any of them, and they'll tell you know, we originated whatever amount, let's call it $100 million, $50 million was from existing parties with eight loans and then, you know, $50 million was new loans. I think that's where a mature portfolio gets to.

Speaker Change: So over time, when I managed a $5 billion portfolio for 15 years, and in the beginning

So over time what I'm.

Manage the portfolio managed up $5 billion portfolio for 15 years and in the beginning.

Speaker Change: It was almost all new, obviously, because it's all new relationships.

It was almost all new obviously, because it's all new relationships, Adam as a mature portfolio.

Speaker Change: As a mature portfolio, we had about 50% of our loans come from existing partners and 50% were new. In fact, if you look at business development companies.

We had about 50% of our loans come from existing partners and 50% were new in fact, if you look at business development companies.

Speaker Change: Ares, Apollo, like any of them, and they'll tell you, you know, we originated whatever amount, let's call it $100 million, $50 million was from existing parties with eight loans and then, you know, $50 million was new loans. And I think that's where

Ares Apollo.

Any of them and they'll tell you originated whatever Mount let's call. It $100 million 50 million was from existing parties with eight loans and then you know $50 million with new loans and I think that's where a.

Speaker Change: a mature portfolio gets to, we're not there yet, but we definitely are trending in that direction because we're good partners to our clients.

Mature portfolio gets too we're not there yet, but we definitely are trending in that direction, because we're good partners to our to our.

Leonard Tannenbaum: We're not there yet, but we definitely are trending in that direction because we're good partners to our clients.

To our clients.

Mark Smith: Excellent. Thank you, guys.

Excellent. Thank you guys.

Thank you and I'm currently showing no further questions at this time I'd like to hand, the conference back over to Mr. Leonard.

Operator: Thank you. I'm currently showing no further questions at this time. I'd like to hand the conference back over to Mr. Leonard Tannenbaum for closing comments.

Speaker Change: Thank you. And I'm currently showing no further questions at this time. I'd like to hand the conference back over to Mr. Leonard Tannenbaum for a closing comment.

Tennenbaum for closing comments.

Leonard Tannenbaum: Well, thank everyone for attending our call. We're really pleased with the results and excited about this year. And we look forward to reporting to you again in three months.

Leonard Tannenbaum: Well, thanks everyone for attending our call. We're really pleased with the results and excited about this year, and we look forward to reporting to you again in three months.

Well, thank everyone for attending our call. We're really pleased with our results and excited about this year and we look forward to reporting to you again in three months.

Thank you for your participation in today's conference you May now disconnect everyone have a wonderful day.

Speaker Change: Thank you for your participation in today's conference. You may now disconnect. Everyone have a wonderful day.

Operator: Thank you for your participation in today's conference. You may now disconnect. Everyone, have a wonderful day.

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