Q1 2022 AFC Gamma Inc Earnings Call

May 10, 2022

Welcome to the AFC Gamma First Quarter 2022 Earnings Call. My name is Vanessa and I will be your operator for today's call. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session. During the question-and-answer session, if you have a question, please press 0 then 1 on your touchtone phone.

Welcome to the AFC Gamma first quarter 2022 earnings call. My name is Vanessa and I will be your operator for today's call. At this time all participants are in a listen only mode. Later, we will conduct a question and answer session. During the question and answer.

Operator: Welcome to the AFC Gamma Q1 2022 Earnings Call. My name is Vanessa, and I will be your operator for today's call. At this time, all participants are in a listen-only mode. Later, we will conduct a question and answer session. During the question and answer session, if you have a question, please press zero, then one on your touch tone phone. I will now turn the call over to Gabriel Katz, Chief Legal Officer.

Your session. If you have a question. Please press zero that one on your Touchtone phone.

I will now turn the call over to Gabriel Katz, Chief Legal Officer.

I will now turn the call over to Gabriel Katz, Chief Legal officer.

Good morning and thank you all for joining AFC Gamma's earnings call for the first quarter of 2022. I'm joined this morning by Leonard Tannebaum, our Chief Executive Officer, Jonathan Calico, our Head of Real Estate, Robin Tannebaum, our Head of Originations and Investor Relations, and Brett Kaufman, our Chief Financial Officer.

Good morning, and thank you all for joining <unk> earnings call for the first quarter of 2022 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 in Investor Relations and Brett Kaufmann, Our Chief Financial Officer before we begin I would like to note.

Gabriel Katz: Good morning, and thank you all for joining AFC Gamma's earnings call for Q1 2022. 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 May 2022 press release and is posted in the investor relations section of AFC Gamma's website at afcgamma.com, along with our first quarter 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, capital markets activity, portfolio yield, and financial performance and projections in 2022.

Before we begin, I would like to note that this call is being recorded. Replay information is included in our May 10, 2022 press release and is posted in the investor relations section of AFC Gamma's website at afcgamma.com along with our first quarter earnings release and investor presentation.

This call is being recorded replay information is included in our May 10, 2022 press release and is posted in the Investor Relations section of <unk> website at <unk> Dot com, along with our first quarter earnings release and Investor presentation. Today's conference call includes forward looking statements and projections that reflect the company's current.

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, capital markets activity, portfolio yield, and financial performance and projections in 2022.

Views with respect to among other things future market growth capital markets activity portfolio yields and financial performance and trajectory.

Soon.

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.

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 this call, we will 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.

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.

Alliance 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 those from these forward looking statements and projections.

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 this call we will 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 <unk> earnings release, and Investor presentation available on <unk> website. The format for todays call is as follows.

During this call, we will 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.

Gabriel Katz: The format for today's call is as follows: Len will provide introductory remarks and overview of our Q1 2022 performance and strategic commentary. John will discuss AFC Gamma's portfolio, Robyn will discuss the origination pipeline, Brett will summarize our financial results, and 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.

Glenn will provide introductory remarks, an overview of our first quarter 2022 performance, and strategic commentary. John will discuss AFC Gamma's portfolio. Robin will discuss the origination pipeline. Brett will summarize our financial results. We will then open the live for Q&A.

We will provide introductory remarks, an overview of our first quarter 2022 performance and strategic commentary John will discuss <unk> portfolio, Robyn will discuss the origination pipeline breadth will summarize our financial results and we will then open the line for Q&A.

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

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

Leonard Tannenbaum: Thank you, Gabe, and good morning, and welcome to AFC Gamma's earnings call for Q1 2022. I would like to thank our analysts and investors for joining us today to discuss our results. Before turning to our Q1 results, I would like to briefly discuss the macro environment for cannabis. With the broader backdrop of rising interest rates and geopolitical unrest, combined with cannabis-specific factors, such as the uncertainty of regulatory change and pricing compression, cannabis equities have been under pressure. Despite constraints in the equity markets, many cannabis operators have growth plans either to expand in existing states or enter new states, and these growth plans still need to be completed. As a result, many operators are seeking debt to finance their growth, which allows AFC Gamma to maintain its high level of selectivity while maintaining our interest margins. Now, turning to our earnings.

Thank you, Gabe, and good morning and welcome to AFC Gamma's earnings call for the first quarter of 2022. I would like to thank our analysts and investors for joining us today to discuss our results.

Thank you, Dave and good morning, and welcome to <unk> earnings call for the first quarter of 2022, I would like to thank our analysts and investors for joining us today to discuss our results.

Before turning to our first quarter results, I would like to briefly discuss the macro environment for cannabis.

Before turning to our first quarter results I would like to briefly discuss the macro environment for canvas.

With a broader backdrop of rising interest rates and geopolitical unrest, combined with cannabis-specific factors such as the uncertainty of regulatory change and pricing compression, cannabis equities have been under pressure.

Broader backdrop of rising interest rates and geopolitical unrest combined with campus specific factors such as the uncertainty of regulatory change and pricing compression cannabis equities have been under pressure.

Despite constraints in the equity markets, many cannabis operators have growth plans either to expand in existing states or enter new states.

Despite constraints in the equity markets. Many cannabis operators have growth plans to expand in existing states or enter new states attorneys.

These growth plans still need to be completed as a result, many operators are seeking debt to finance that growth, which allows FC gamma to maintain its high level of selectivity.

and these growth plans still need to be completed. As a result, many operators are seeking debt to finance their growth, which allows AFC Gamma to maintain its high level of selectivity while maintaining our interest margins.

Maintaining our interest margins now.

Now turning to our earnings in the first quarter of 2022 FC Gamma generated distributable earnings of 62 cents per weighted average share of common stock district.

Now, turning to our earnings. In the first quarter of 2022, AFC Gamma generated distributable earnings of $0.62 per weighted average share of common stock.

Leonard Tannenbaum: In Q1 of 2022, AFC Gamma generated distributable earnings of $0.62 per weighted average share of common stock. Distributable earnings is the primary metric that the board considers when declaring AFC Gamma's quarterly dividend. As a reminder, the board of directors declared a $0.55 dividend per share in the March quarter, which was paid on 15 April 2022 to shareholders of record as of 31 March 2022. This was the third consecutive quarterly increase to the dividend that was paid to our public shareholders. Since going public, we have generated distributable earnings well in excess of our dividend each quarter and currently have rollover income of approximately $3.1 million or $0.16 per share. At this time, the board expects the current quarterly dividend level should be at least $0.55 per share over the course of 2022.

Distributable earnings is the primary metric that the Board considers when declaring AFCM as quarterly dividend. As a reminder, the Board of Directors declared a $0.55 dividend per share in the March quarter, which was paid on April 15, 2022, to shareholders of record as of March 31, 2022.

Distributable earnings is the primary metric that the board considers when declaring FC Gamma <unk> quarterly dividend.

As a reminder, the board of directors declared a <unk> 55 cent dividend per share in the March quarter, which was paid on April 15th 2022 to shareholders of record as of March 31 2022.

This was the third consecutive quarterly increase to the dividend that was paid to our public shareholders.

This was the third consecutive quarterly increase to the dividend that was paid to our public shareholders since.

Since going public, we have generated distributable earnings well in excess of our dividend each quarter and currently have rollover income of approximately $3.1 million or $0.16 per share.

Since going public we've generated distributable earnings well in excess of our dividend each quarter and currently have rollover income of approximately $3 1 million or <unk> 16 per share.

At this time, the board expects the current quarterly dividend level should be at least 55 cents per share over the course of 2022.

At this time the board expects the current quarterly dividend level should be at least 55 per share over the course of 2022.

That quarterly dividend would produce, if not increased, a $2.20 annual dividend per share, which represents an approximately 13 percent dividend yield relative to March 31, 2022 book value. Of course, that number is higher dividend yield on current share price.

That quarterly dividend would produce if not increased a $2 20 annual dividend per share, which represents an approximately 13% dividend yield relative to March 31, 2022 book value.

Leonard Tannenbaum: That quarterly dividend would produce, if not increased, a $2.20 annual dividend per share, which represents an approximately 13% dividend yield relative to March 31, 2022 book value. Of course, that number is a higher dividend yield on current share price. During Q1, we closed on new commitments of $46.9 million and had gross fundings of $51.5 million. Subsequent to quarter end, we have closed on new commitments of $107.3 million and had gross fundings of $79.9 million. We are pleased that we were able to support the continued growth of two of our existing borrowers as they expand their businesses.

Of course that number is higher dividend yield on our current share price.

During the first quarter, we closed on new commitments of $46.9 million and had gross fundings of $51.5 million. Subsequent to quarter end, we have closed on new commitments of $107.3 million and had gross fundings of $79.9 million.

During the first quarter, we closed on new commitments of $46 9 million.

<unk> fundings of $51 5 million.

Subsequent to quarter end, we have closed on new commitments of $107 3 million had gross fundings of $79 9 million we.

We are pleased that we were able to support the continued growth of two of our existing borrowers as they expand their business.

We are pleased that we were able to support the continued growth of two of our existing borrowers as they expand their businesses.

Our robust pipeline of potential borrowers includes many new and existing borrowers that are expanding into new markets or further penetrating existing markets, though we continue to be focused on the limited license state.

Leonard Tannenbaum: Our robust pipeline of potential borrowers includes many new and existing borrowers that are expanding into new markets or further penetrating existing markets, though we continue to be focused on the limited license states. I would like to discuss a deal that we recently completed to demonstrate how AFC Gamma has the ability to grow with its borrowers as they expand, and that power that being an incumbent lender provides. On 20 April, AFC Gamma closed a loan of up to $82.5 million to Bloom Medicinals, a privately held multi-state cannabis operator with licenses in Missouri, New Jersey, and Ohio. Bloom intends to use the proceeds from the credit facility to repay existing debt, fund expansion initiatives, and acquire a level one cultivation license in Ohio.

Our robust pipeline of potential borrowers includes many new and existing borrowers that are expanding into new markets or further penetrating existing markets that we continue to be focused on the limited license states.

I would like to discuss a deal that we recently completed to demonstrate how AFC Gamma has the ability to grow with its borrowers as they expand and that power that being an incumbent lender provides.

I would like to discuss a deal that we recently completed to demonstrate how AFC gamma has the ability to grow with its borrowers as they expand and that bucket.

And that power that being an incumbent lender provides.

On April 20th, AFC Gamma closed a loan of up to $82.5 million to Bloom Medicinals, a privately held, multi-state cannabis operator with licenses in Missouri, New Jersey, and Ohio.

On April 20th AMC Gamma closed a loan of up to $82 5 million to bloom medicinal privately held multistate cannabis operator with licenses in Missouri, New Jersey and Ohio.

Lumen tends to use the proceeds from the credit facility to repay existing debt fund expansion initiatives and acquire a level one cultivation license in Ohio.

Blumen intends to use the proceeds from the credit facility to repay existing debt, fund expansion initiatives, and acquire a Level 1 cultivation license in Ohio.

AFC Gamma made its first loan to Bloom, Ohio, in December 2020, secured by five dispensaries, and made its second loan to Bloom, Missouri, in April 2021, secured by a cultivation facility and four dispensaries.

Leonard Tannenbaum: AFC Gamma made its first loan to Bloom Ohio in December 2020, secured by 5 dispensaries, and made its second loan to Bloom Missouri in April 2021, secured by a cultivation facility and 4 dispensaries. When Bloom came to AFC with the opportunity to vertically integrate in Ohio and roll the assets into the holding company, we were able to upsize our commitment and assist them in executing our vision, their vision. Given our unique hold size and understanding of their business, we were able to act fast and provide them with the capital necessary to close on the license transaction. We are excited to continue supporting Bloom as they expand their footprint. As the CEO and largest shareholder of AFC Gamma, my first priority is to protect shareholder capital.

AFC Gamma made its first month to Bloom, Ohio in December 2020 secured by five dispensaries and made a second loan to Bloom, Missouri in April 2021 secured by a cultivation facility and four dispensaries.

When Balloon came to AFC with the opportunity to vertically integrate in Ohio and roll the assets into the holding company, we were able to upsize our commitment and assist them in executing our vision.

Look into AFC with the opportunity to vertically integrate in Ohio enrolled the assets into the holding company.

The upsize, our commitment and assist them in executing our vision.

Their vision.

Given our unique hold size and understanding of their business, we were able to act fast and provide them with the capital necessary to close on the license transaction. We are excited to continue supporting Bloom as they expand their footprint.

Given our unique hold size and understanding of their business, we were able to act fast and provide them with the capital necessary to close on the license transaction. We're excited to continue supporting <unk> as they expand their footprint.

As the CEO and largest shareholder of FC Gamma My first priority is to protect shareholder capital.

As the CEO and largest shareholder of AFC Gamma, my first priority is to protect shareholder capital.

We are actively managing our portfolio, having regular dialogue with many of our clients, and are pleased with the coverage of our loans on an enterprise value basis.

Leonard Tannenbaum: We are actively managing our portfolio, having regular dialogue with many of our clients, and are pleased with the coverage of our loans on an enterprise value basis. Additionally, as I described earlier, it's a challenging environment for many cannabis operators due to the pricing pressures as well as increased costs for expansion due to supply chain shortages and inflation. We believe that our portfolio, which focuses on targeting vertically integrated operators in limited licensed states, is set up to mitigate risk and generate strong risk-adjusted returns. All of our borrowers are current with their interest payments, and there are no loans on non-accrual. As of 9 May 2022, the weighted average yield of the portfolio was approximately 18%.

We are actively managing our portfolio, having regular dialogue with many of our clients and are pleased with the coverage of our loans on an enterprise value basis.

Additionally, as I described earlier, it's a challenging environment for many cannabis operators due to the pricing pressures, as well as increased costs for expansion due to supply chain shortages and inflation.

Additionally, as I described earlier to challenging environment for many cannabis operators due to the pricing pressures as well as increased cost for expansion due to supply chain shortages and inflation.

We believe that our portfolio, which focuses on targeting vertically integrated operators in limited licensed states, is set up to mitigate risk and generate strong risk-adjusted returns.

We believe that our portfolio, which focuses on targeting vertically integrated operators in limited license states is setup to mitigate risk and generate strong risk adjusted returns.

All of our borrowers are current with their interest payments and there are no loans on non accrual.

All of our borrowers are current with their interest payments, and there are no loans on nonaccrual.

As of May 9, 2022, the weighted average yield of the portfolio was approximately 18%.

As of May nine 2022, the weighted average yield of the portfolio was approximately 18%.

Given the increase in benchmark interest rates and the increased demand for capital relative to supply in the industry, we believe that pricing is firming versus the slight decrease we saw in pricing over the last two quarters.

Leonard Tannenbaum: Given the increase in benchmark interest rates and the increased demand for capital relative to supply in the industry, we believe that pricing is firming versus the slight decrease we saw in pricing over the last two quarters. Therefore, we believe the weighted average yield to maturity will generally remain consistent for the foreseeable future. As the Federal Reserve has increased rates, we have examined the impact of rising rates in our portfolio. Approximately one-third of the portfolio currently has a floating interest rate, and we are focused on increasing that percentage over time. In addition, we issued $100 million of unsecured fixed interest rate debt in Q4 2021. Turning to capital markets, during Q1, we completed a follow-on equity offering in January of this year. This provided AFC Gamma with approximately $63 million of deployable capital.

Given the increase in benchmark interest rates and the increased demand for capital relative to supply in the industry. We believe that pricing is firming versus the slight decrease we saw on pricing over the last two quarters.

Therefore, we believe the weighted average yield to maturity will generally remain consistent for the foreseeable future.

Therefore, we believe the average weighted average yield to maturity will generally remain consistent for the foreseeable future.

As the Federal reserve is increased rates, we've examine the impact of rising rates in our portfolio.

As the Federal Reserve has increased rates, we have examined the impact of rising rates in our portfolio.

Approximately one-third of the portfolio currently has a floating interest rate, and we are focused on increasing that percentage over time.

Approximately one third of the portfolio currently has a floating interest rate and we are focused on increasing that percentage over time.

In addition, we issued $100 million of unsecured fixed interest rate debt in the fourth quarter of 2021.

In addition, we issued $100 million of unsecured.

Fixed interest rate debt in the fourth quarter of 2021.

Turning to capital markets during the March quarter, we completed a follow on equity offering in January of this year. This provided FC gamma with approximately $63 million of deployable capital.

Turning to capital markets, during the March quarter, we completed a follow-on equity offering in January of this year. This provided AFC Gamma with approximately $63 million of deployable capital.

The stock offering was accretive to book value by 41 cents per share.

Leonard Tannenbaum: The stock offering was accretive to book value by $0.41 per share. Very important is this next statement. We do not intend to sell stock below book value. Subsequent to quarter end, we continue to blend down AFC Gamma's cost of capital by entering into a third-party $60 million senior secured revolving credit facility from two FDIC-insured banks at a very attractive rate of prime plus 0.5%. We are pleased to begin our relationship with these banks, which have over $70 billion of assets in the aggregate. This credit facility can expand to up to $100 million in commitments and fully replaces the $75 million revolving credit facility previously provided by AFC Finance, an affiliate of AFC Gamma. Looking ahead, we remain excited, but highly selective in supporting the rapidly growing cannabis industry.

Very important is this next statement, we do not intend to sell stock below book value.

Very important as this next statements.

We do not intend to sell stock below book value.

Subsequent to quarter end, we continue to blend down Afc's capitals FC Gamma is cost of capital by entering into a third party.

Subsequent to quarter end, we continue to blend down AFC Gamma's cost of capital by entering into a third-party $60 million senior-secured revolving credit facility from two FDIC-insured banks.

$60 million senior secured revolving credit facility from two FDIC insured banks.

at a very attractive rate of prime plus one half a percent.

At a very attractive rate of prime plus one half a percent.

We are pleased to begin our relationship with these banks, which have over $70 billion of assets in the aggregate.

This credit facility can expand to up to $100 million in commitments and fully replaces the $75 million revolving credit facility previously provided by AFC finance that affiliate of FC Gamma.

This credit facility can expand to up to $100 million in commitments and fully replaces the $75 million revolving credit facility previously provided by AFC Finance, an affiliate of AFC Gamma.

Looking ahead.

We remain excited but highly selective in supporting the rapidly growing cannabis industry.

We remain excited, but highly selective, in supporting the rapidly growing cannabis industry.

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 will now turn the call over to John Hecht.

we continue to remain focused on developing the best cost of capital among the limited number of alternative lenders in the industry.

We continue to remain focused on developing the best cost of capital among the limited number of alternative lenders in the industry.

I'll now turn the call over to John .

Thank you, Len. As an enterprise value lender, we carefully evaluate a company's cash flows, licenses, capital structure, and real estate prior to any loan we originate. Since our inception, nearly all of AFC Gamma's loans have had real estate as part of the collateral.

Thank you Len as an enterprise value lender, we carefully evaluate the company's cash flows licenses capital structure and real estate prior to any loan we originate since our inception nearly all of the FC Gamma as loans have had real estate as part of the collateral.

Jonathan Kalikow: Thank you, Len. As an enterprise value lender, we carefully evaluate a company's cash flows, licenses, capital structure, and real estate prior to any loan we originate. Since our inception, nearly all of AFC Gamma's loans have had real estate as part of the collateral. Often underwriting real estate is the most challenging aspect of diligence, especially when any construction or rehabilitation of the property is involved. One of our core competencies and key differentiating factors as a lender focused on cannabis is our expertise and experience in both real estate and real estate finance. In the past two years, we have seen many operators experience increase in construction costs and delivery times. When underwriting a loan, we utilize our knowledge of current construction conditions to enable us to correctly assess risks and timelines.

And often underwriting real estate is the most challenging aspect of diligence, especially when any construction or rehabilitation of the property is involved.

And often underwriting real estate is the most challenging aspect of diligence, especially when any construction and rehabilitation of the properties involved one of our core competencies and key differentiating factors as a lender focused on cannabis is our expertise and experience in both real estate and real estate finance.

One of our core competencies and key differentiating factors as a lender focused on cannabis is our expertise and experience in both real estate and real estate finance.

In the past two years, we have seen many operators experience increase in construction costs and delivery costs.

In the past two years, we have seen many operators experience increase in construction costs and delivery times.

So when underwriting a loan, we utilize our knowledge of current construction conditions to enable us to correctly assess risks and timelines. We are able to leverage the expertise of our in-house construction team on loans made to cannabis entrepreneurs, entrepreneurs who may have little experience in commercial construction, thus providing borrowers with valuable insights while also amplifying AFC Gamma's collateral protection.

So when underwriting alone we utilize our knowledge of current construction conditions to enable us to correctly assess risks and timelines.

Jonathan Kalikow: We are able to leverage the expertise of our in-house construction team on loans made to cannabis entrepreneurs who may have little experience in commercial construction, thus providing borrowers with valuable insights while also amplifying AFC Gamma's collateral protection. In order for us to lend on a construction project, we must have vetted and approved the borrower's general contractors, architects, engineers, construction documents, timelines, budgets, and contracts. Our work does not stop there. Once construction has begun, our in-house team, with the assistance of local third-party specialists, oversee construction progress to make sure the build is according to plan, invoices are accurate and processed timely, construction procedures and safety measures are followed, and there is continued adherence to the project budget.

We are able to leverage the expertise of our in house construction team on loans made to cannabis entrepreneurs entrepreneurs, who may have little experience in commercial construction.

Thus, providing borrowers with valuable insights, while also amplifying AFC gamma as collateral protection.

In order for us to lend on a construction project, we must embedded unapproved the borrowers general contractors architects engineers construction documents timelines budgets and contracts, but our work does not stop there.

In order for us to land on a construction project, we must have vetted and approved the borrower's general contractors, architects, engineers, construction documents, timelines, budgets, and contracts.

But our work does not stop there. Once construction has begun, our in-house team, with the assistance of local third-party specialists, oversee construction progress to make sure the build is according to plan, invoices are accurate and processed timely, construction procedures and safety measures are followed, and there is continued adherence to the project budget.

Once construction has begun our in house team with the assistance of local third party specialists oversee construction progress to make sure. The build is according to plan and voices are accurate and processed timely construction procedures and safety measures are followed and there is continued adherence to the project budget.

Despite this challenging environment for many operators currently in cannabis, we believe our careful underwriting prior to loan origination and oversight throughout the life of our loans has enabled us to create and build upon a well-secured portfolio.

Jonathan Kalikow: Despite this challenging environment for many operators currently in cannabis, we believe our careful underwriting prior to loan origination and oversight throughout the life of our loans has enabled us to create and build upon a well-secured portfolio. I'll now turn the call over to Robyn.

I'll now turn the call over to Robyn. 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 Exchange.

I'll now turn the call over to Robyn. 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 our domestic single and multi state operators.

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. 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 9 May 2022, we have sourced approximately $15 billion of transactions, which represents over 550 deals. The pipeline remains strong with an active pipeline of $783 million, yet it remains difficult to predict both the timing of converting and closing these deals.

Which include those that are privately held as well as those listed on the Canadian exchange at 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 May 19, 2022, we have sourced approximately 15.

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 May 9, 2022, we have sourced approximately $15 billion of transactions, which represents over 550 deals.

Billions of transactions, which represents over 550 deals the pipeline remains strong with an active pipeline of $783 million yet it remains difficult to predict both the timing of converting and closing these deals.

The pipeline remains strong with an active pipeline of $783 million, yet it remains difficult to predict both the timing of converting and closing these fields.

Robyn Tannenbaum: When sourcing deals, incumbency has proven to give us an important edge, closing over $150 million in deals so far this year where we were the incumbent lender. We continue to source new transactions and expand our lending platform while maintaining a high degree of selectivity. As of May 9, from inception to date, our selectivity ratio was 3.9%. Currently, our portfolio consists of 12 borrowers across 16 states. We remain focused on creating a portfolio that is diversified across states and borrowers. As a reminder, currently, AFC Gamma has not lent to any borrowers with their primary operations in California, Washington, Oregon, or Oklahoma, four states that allow unlimited licenses and have continually experienced pricing pressure.

When sourcing deals incumbency has proven to give us an important edge closing over $150 million in deals. So far this year, where we were the incumbent lender, we continue to source, new transactions and expand and expand our lending platform, while maintaining a high degree of selectivity as a mainline from inception to date.

When sourcing deals, incumbency has proven to give us an important edge, closing over $150 million in deals so far this year where we were the incumbent lender. We continue to source new transactions and expand our lending platform while maintaining a high degree of selectivity. As of May 9th, from inception to date, our selectivity ratio was 3.9%.

Our selectivity ratio was three 9%.

Currently, our portfolio consists of 12 borrowers across 16 states. We remain focused on creating a portfolio that is diversified across states and borrowers. As a reminder, currently, AFC Gamma has not lent to any borrowers with their primary operations in California, Washington, Oregon, or Oklahoma, four states that allow unlimited licenses and have continually experienced pricing pressure.

Currently our portfolio consists of 12 borrowers across 16 states. We remain focused on creating a portfolio that is diversified across states and borrowers as a reminder, currently AFC gamma has not led to any borrowers with their primary operations in California, Washington, Oregon or Oklahoma.

Matt for states that allow unlimited licenses and have continually experienced pricing pressure before.

Before turning the call over to Brett, as head of AFC Foundation, I'm excited to spotlight another deserving organization that we recently donated to in conjunction with Brady Cobb, the former CEO of our former borrower, OnePlant. The Weldon Project is dedicated to funding social change and financial aid for those who are still serving prison time for nonviolent cannabis-related offenses. Through extensive partnerships throughout the legal cannabis industry...

Robyn Tannenbaum: Before turning the call over to Brett, as head of AFC Foundation, I'm excited to spotlight another deserving organization that we recently donated to in conjunction with Brady Cobb, the former CEO of our former borrower, One Plant. The Weldon Project is dedicated to funding social change and financial aid for those who are still serving prison time for non-violent cannabis-related offenses. Through extensive partnerships throughout the legal cannabis industry, the Weldon Project launched the Mission Green initiative to raise the bar for awareness, social justice, and social equity by providing unique ways for cannabis businesses and consumers to participate in a nationwide campaign aimed to provide relief to those who have been negatively impacted by prohibition. At AFC Foundation, we were impressed by how Weldon Angelos has turned a negative experience into becoming a positive voice, bringing about social change, and we look forward to supporting this deserving organization.

Before turning the call over to Brett as head of AFC Foundation I'm excited to spotlight. Another deserving organization that we recently donated two in conjunction with Brady Cod, the former CEO of our former borrowers one plant.

<unk> project is dedicated to funding social change and financial aid for those who are still serving prison time for nonviolent cannabis related offenses.

Tensive partnerships throughout the legal cannabis industry.

The Weldon Project launched the Mission Green initiative to raise the bar for awareness.

So while it didn't project launch the mission Green initiatives to raise the bar for awareness, social justice and social equity by providing unique ways for cannabis businesses and consumers to participate in a nationwide campaign aimed to provide relief to those who have been negatively impacted by prohibition and AFC Foundation.

social justice, and social equity by providing unique ways for cannabis businesses and consumers to participate in a nationwide campaign aimed to provide relief to those who have been negatively impacted by Prohibition.

At AFC Foundation, we were impressed by how Weldon Angelos has turned a negative experience into becoming a positive voice bringing about social change. And we look forward to supporting this deserving organization. I will now turn it over to Brett to review our financials.

We were impressed by how well it didn't angeles has turned to negative experience into becoming a positive place, bringing about social change and we look forward to supporting this deserving organization 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: Thank you, Robin. We are pleased to begin the current fiscal year with strong results in Q1. For the quarter ended 31 March 2022, we recorded GAAP net income of $10.2 million, or earnings of $0.53 per basic weighted average common share. Compared to our Q4 2021, we had GAAP net income of $7 million, or earnings of $0.43 per basic weighted average common share. For Q1 2022, we generated net interest income of $16.9 million and Distributable Earnings of $11.9 million or $0.62 per basic weighted average common share, compared to net interest income of $13 million and Distributable Earnings of $8.5 million or $0.52 per basic weighted average common share for Q4 2021.

Thank you, Robin. We are pleased to begin the current fiscal year with strong results in the first quarter.

Robin we're pleased to begin the current fiscal year with strong results in the first quarter for the quarter ended March 31, 2022, we recorded GAAP net income of $10 $2 million or earnings of 53 per basic weighted average common share <unk>.

So the quarter ended March 31st, 2022, we recorded gap net income of $10.2 million or earnings of 53 cents per basic waived average common share.

Compared to our fourth quarter of 2021, we had GAAP net income of $7 million or earnings of 43 per basic weighted average common share.

Compared to our fourth quarter of 2021, we had GapNet income of $7 million or earnings of $0.43 per basic way of average common share.

For the first quarter of 2022, we generated net interest income of $16.9 million and distributable earnings of $11.9 million or 62 cents per basic weight average common share compared to net interest income of $13 million and distributable earnings of $8.5 million or 52 cents per basic weight average common share for the fourth quarter of 2021.

For the first quarter of 2022, we generated net interest income of $16 9 million and distributable earnings of $11 9 million or <unk> 62.

Basic weighted average common share compared to net interest income of $13 million and distributable earnings of $8 $5 million or <unk> 52 per basic weighted average common share for the fourth quarter of 2021.

As of March 31, 2022, our total assets were $454 1 million as compared to $464 8 million at December 31, 2021, and $221 5 million at March 31 2021.

As of March 31st, 2022, our total assets were $454.1 million, as compared to $464.8 million at December 31st, 2021 and $221.5 million at March 31st, 2021.

Brett Kaufman: As of 31 March 2022, our total assets were $454.1 million, as compared to $464.8 million at 31 December 2021, and $221.5 million at 31 March 2021. As of 31 March 2022, AFC Gamma's portfolio consisted of $420.1 million of current commitments with $370.6 million funded across our 13 borrowers. During Q1, we closed an additional $46.9 million of new commitments to existing borrowers, sold or we repaid on $45 million from three investments, and we funded $51.5 million of new and existing commitments. As of 9 May 2022, we had $482.7 million of current commitments across 12 borrowers.

As of March 31, 2022, AFC Gamma's portfolio consisted of $420.1 million of current commitments with $370.6 million funded across our 13 borrowers.

As of March 31, 2022, <unk> portfolio consisted of $421 million of current commitments with $376 million funded across our 13 borrowers during the first quarter, we closed an additional $46 $9 million of new commitments to existing borrowers.

During the first quarter, we closed an additional $46.9 million of new commitments to existing borrowers, sold or repaid on $45 million from three investments, and we funded $51.5 million of new and existing commitments.

Sold or we repaid on $45 million from three investments and we funded 51 5 million of new and existing commitments as of May nine 2022, we had $482 $7 million of current commitments across 12 bars.

As of May 9th, 2022, we had $482.7 million of current commitments across 12 bars.

The weighted average portfolio yield to maturity, which is measured for each loan over the life of such loans was approximately 19% as of March 31, 2022, as well as as of December 31, 2021 as mentioned on our last earnings call. We believe providing distributable earnings is helpful to stockholders.

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 31 March 2022, as well as of 31 December 2021. 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. Distributable earnings represents the net income computed in accordance with US 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 March 2022, the CECL reserve of our loans at carrying value represents approximately 1.5% compared to approximately 1.2% at 31 December 2021.

The Wave Average Portfolio Yield to Maturity, which is measured for each loan over the life of such loan, was approximately 19% as of March 31, 2022, as well as December 31, 2021. 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.

In assessing the overall performance of AFC gamut business' distributable earnings represents the net income computed in accordance with U S. GAAP, excluding noncash items, such as equity compensation expense any unrealized gains or losses provision for current expected credit losses also known as seasonal or <unk>.

Distributable earnings represents the net income computed in accordance with U.S. 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.

Other noncash items recorded in net income or loss for the period.

As of March 31, 2022, the <unk> reserve of our loans at carrying value represents approximately one 5% compared to approximately one 2% at December 31, 2021, we continuously evaluate the credit quality of each loan by assessing the risk factors of each loan the increase in the reserve.

As of March 31, 2022, the CESA reserve of our loans at carrying value represents approximately 1.5% compared to approximately 1.2% at December 31, 2021. We continuously evaluate the credit quality of each loan by assessing the risk factors of each loan. The increase in the reserve is primarily due to the macroeconomic factors, changes in the loan portfolio, including new commitments and repayments.

Brett Kaufman: We continuously evaluate the credit quality of each loan by assessing the risk factors of each loan. The increase in the reserve is primarily due to the macroeconomic factors, changes in the loan portfolio, including new commitments and repayments, as well as changes in other data points we use in estimating the reserve. On 15 April 2022, AFC Gamma paid a dividend of $0.55 per common share for Q1 to shareholders of record as of 31 March 2022, an increase of 10% from the $0.50 dividend paid in the Q4 period.

<unk> is primarily due to the macroeconomic factors changes in the loan portfolio, including new commitments and repayments as well as changes in other data points, we used in estimating the reserves.

as well as changes in other data points we use in estimating the reserve.

On April 15, 2022, AMC gamma paid a dividend of <unk> 55 per common share for the first quarter to shareholders of record as of March 31 2022.

On April 15, 2022, AFC Gamma paid a dividend of $0.55 per common share for the first quarter to shareholders of record as of March 31, 2022.

an increase of 10% from the $0.50 dividend paid for the fourth quarter period. At the end of the first quarter, our total stockholders' equity was $336.5 million, and our book value per share was $17.04, as compared to $16.61 as of December 31, 2021.

An increase of 10% from the <unk> 50 dividend paid in the fourth quarter period for the fourth quarter period at the end of the first quarter. Our total stockholders' equity was $336 $5 million and our book value per share was $17 <unk> as compared to $16 61 as of this.

Brett Kaufman: At the end of Q1, our total stockholders' equity was $336.5 million, and our book value per share was $17.04, as compared to $16.61 as of 31 December 2021. The increase in our book value per share is primarily attributable to our follow-on equity offering in Q1. We completed the follow-on equity offering 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. Subsequent to Q1, AFC Gamma entered into a senior secured revolving credit facility with $60 million of current commitments from two FDIC-insured banks and the ability to increase the facility to $100 million.

Remember 31 2021, the increase in our book value per share is primarily attributable to our follow on equity offering in the first quarter. We completed the follow on equity offering in January of this year issuing approximately three 3 million shares of common stock, which provided AFC gamma with approximately 63.

The increase in our book value per share is primarily attributable to our follow-on equity offering in the first quarter.

We completed the follow-on equity offering in January of this year, issuing approximately 3.3 million shares of CometStock, which provided AFC Gamma with approximately $63 million of deployable capital.

Million of deployable capital.

Subsequent to the first quarter AMC gamba entered into a senior secured revolving credit facility with $60 million of current commitments.

Subsequent to the first quarter, AFC Gamma entered into a senior secured revolving credit facility with $60 million of current commitments.

from two FDIC-insured banks and the ability to increase the facility to $100 million. The credit facility matures in April 2025 and will bear interest at a floating rate of prime plus a half a percent, subject to a total interest rate floor of 4.5%.

From two FDIC insured banks and the ability to increase the facility to $100 million.

Leonard Tannenbaum: The credit facility matures in April 2025 and will bear interest at a floating rate of prime plus 0.5%, subject to a total interest rate floor of 4.5%. Upon closing the credit facility, AFC Gamma fully terminated its previous $75 million revolving credit facility that was provided by AFC Finance. We are pleased to have these two institutional banks supporting us, and we look forward to receiving additional commitments under the credit facility over time. As of today, $60 million is available under our credit facility. With that, I will now turn it back over to the operator to start the Q&A. Operator?

The credit facility matures in April 2025, and will bear interest at a floating rate of prime plus a half a percent subject to in total interest rate floor of four 5%.

Upon closing the credit facility, AFC Gamma fully terminated its previous $75 million revolving credit facility that was provided by AFC Finance.

Upon closing the credit facility AFC gamma fully terminated its previous $75 million revolving credit facility that was provided by AFC finance.

We are pleased to have these two institutional bank supporting us and we look forward to receiving additional commitments under the credit facility over time.

We are pleased to have these two institutional banks supporting us, and we look forward to receiving additional commitments under the credit facility over time. As of today, $60 million is available under our credit facility.

As of today $60 million available under our credit facility.

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

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

Operator? Thank you. We will now begin the question and answer session. If you have a question, please press 0, then 1 on your touch-toned phone. If you wish to be removed from the queue, please press 0, then 2. If you're using a speakerphone, please pick up the handset first before pressing the numbers. Once again, with your question, please enter the queue by pressing 0, then 1. We have our first question from Harrison Vivas with Cowan & Company.

Operator.

Thank you we will now begin the question and answer session. If you have a question. Please press star zero and one on your Touchtone phone if you wish to be removed from the queue. Please press zero then too.

Operator: Thank you. We will now begin the question-and-answer session. If you have a question, please press zero then one on your touchtone phone. If you wish to be removed from the queue, please press zero then two. If you're using a speakerphone, please pick up the handset first before pressing the numbers. Once again, with your question, please enter the queue by pressing zero then one. We have our first question from Harrison Vivas with Cowen and Company.

We're using a speakerphone please pick up the handset first before pressing the numbers once again with your question. Please enter the queue by pressing zero that one we have our first question from Harrison Vivas with Cowen <unk> Company.

Great, thanks so much for taking the questions. So Len, in the past couple quarters, you've given origination targets for the year. I think it was $500 to $700 million was the most recent for gross originations, and $300 to $600 for net of repayments. So can you just kind of refresh us on your targets for this year? Do you still hold, and kind of what's your outlook?

Great. Thanks, so much for taking the questions.

Harrison Vivas: Great. Thanks so much for taking the questions. So Len, in the past couple of quarters, you've given origination targets for the year. I think it was $500 to 700 million, the most recent for gross originations and $300 to 600 million for net of repayments. Can you just kind of refresh us on your targets for this year? Do you still hold, and kind of what's your outlook for 2022?

So then in the past couple of quarters, you've given origination targets for the year I think it was 500 and 700 million was the most recent for gross originations and.

Through the 600 for net of repayments. So can you just kind of refresh us on your targets for this year do you still hold.

And kind of what's your outlook for 2022.

Well the good news is we do have a deal volume to be able to accomplish that the bad news is since you've heard me say that we're not going to sell stock below book.

Leonard Tannenbaum: Well, the good news is we do have the deal volume to be able to accomplish that. The bad news is, since you heard me say that we're not gonna sell stock below book, or that we currently don't anticipate selling stock below book, then I don't know how we're going to raise enough capital to deploy to satisfy that demand. Instead, you get more selective, you get better rates, you get even better deals. It's great for the shareholders. We stay fully deployed and continue to earn a lot of money. We're not able to expand potentially, you know, at the rate that we could, given our strong deal flow. I still hold that we can do that for the year, and we do have the deal flow to do it.

Well, the good news is we do have the deal volume to be able to accomplish that. The bad news is, since you heard me say that we're not going to sell stock below buck,

uh... or that we don't we currently don't anticipates on top of the book then

Or that we currently don't anticipate selling stock below book then.

I don't know how we're going to raise enough capital to deploy to satisfy that demand. So instead, you get more selective, you get better rates.

Don't know, how we're going to raise enough capital to deploy to satisfy that demand. So instead, you would get more selective you get better rates.

you get even better deals. So it's great for the shareholders who stay fully deployed and continue to earn a lot of money, but we're not able to expand potentially, you know, at the rate that we could given our strong deal flow. So I still hold that we can do that for the year. We do have the deal flow to do it.

You get even better deals. So it's great for the shareholders. We stayed fully deploy to continue to earn a lot of money, but we're not able to expand potentially at the rate that we could given our strong deal flow. So I still hold that we can do that for the year and we do have the deal flow to do it.

Leonard Tannenbaum: I don't know how many repayments we get, and I don't know how much capital we're able to raise.

Hi.

I don't know how many repayments we get and I don't know how much capital we're able to raise.

Leonard Tannenbaum: I don't know how many repayments we get, and I don't know how much capital we're able to raise.

I don't know how many payments, we got and I don't how much capital we're able to risk.

Understood would you would you consider allowing your debt to equity ratio kind of tick up on the debt side.

but i said would you would you consider allowing your your debt technically ratio to pick up on the debt

Harrison Vivas: Understood. Would you consider allowing your debt-to-equity ratio kinda tick up on the debt side?

Well, we will because we took some senior debt and we do intend to use it and deploy it at a really great cost of capital.

Leonard Tannenbaum: Well, we will because we took some senior debt and we do intend to use it and deploy it. It's at a really great cost of capital, but we don't anticipate issuing any more. Look, we're very lucky and/or good to issue $100 million of fixed rate debt with a 5.75% coupon. I mean, to put it in perspective, you know, the Ares 9-year debt, and Ares is a BBB- or BBB, multi-billion-dollar BDC is trading at 6.2%. So I mean, we have a very good cost of capital on that $100 million debt piece, and we're really pleased with that. Having said that, we're not gonna issue more of it because I don't think we'd be able to issue more of it at that rate.

Well, we will because we took we took some senior debt, where and we do intend to use it and to play and it's a really great cost of capital, but we don't anticipate issuing any more well look we're very lucky and Andrew are good to issue $100 million of fixed rate debt with a five and three quarters coupon I mean to put it in perspective.

but we don't anticipate issuing any more. Look, we're very lucky and and or good to issue a hundred million dollars of fixed rate debt with a five and three quarters coupon.

I mean, to put it in perspective, you know, the Aries nine-year debt and Aries is a triple B minus or triple B multi-billion dollar BDC is trading at 6.2%. So I mean, we have a very good cost of capital on that $100 million debt piece and we're really pleased with that.

The Aries nine year debt and Aries as a triple b minus or triple B.

Multibillion dollar BDC is trading at 6.2%. So I mean, we have a very good cost of capital on that $100 million debt piece, and we're really pleased with that having said that we're not going to issue more of it because I don't think we'd be able to issue more of at that rate and so I think we're going to stick with our debt to equity ratios.

Having said that, we're not going to issue more of it because I don't think we'd be able to issue more of it at that rate. And so I think we're going to stick with our debt-to-equity ratios and we're going to stick to our discipline to make it.

Leonard Tannenbaum: I think we're gonna stick with our debt to equity ratios, and we're gonna stick to our discipline to make accretive equity deals like this last one for our shareholders, where we made $0.41 a share in accretive book value on the last equity raise.

And we're going to stick to our discipline to make accretive equity raise equity deals for like this last one for our shareholders. When we made 41 cents a share accretive.

equity deals like this last one for our shareholders where we made $0.41 a share in accretive book value on the last equity raise.

On the last equity raise.

So last one from me, just given Schumer delayed his Canada's bill, do you think that jeopardizes any form of the safe path getting past this session and kind of what's your outlook on some form of the safe passing?

Absolutely understood last one for me.

Harrison Vivas: Absolutely. Understood. Last one from me. Just given Schumer delayed his CAOA bill, do you think that jeopardizes any form of the SAFE Act getting passed this session? Kind of, what's your outlook on, you know, some form of the SAFE passing this legislative session? Thanks.

Just given the humor delayed as Canada's Bill do you think that jeopardizes any form of the safeguard getting passed this session.

And then kind of what's your outlook on on some form of the save passing this legislative session.

You know I've been out in different podcasts and panels talking about this and it's funny I was hoping and it turns out that I still believe that that's going to pass and lame duck without capital market support, which actually is the perfect storm for <unk> and the other lenders.

Leonard Tannenbaum: You know, I've been out in different podcasts and panels talking about this, and it's funny. I was hoping, and it turns out that I still believe that it's gonna pass on lame duck without capital market support, which actually is the perfect storm for AFCG and the other lenders. You're gonna get additional institutions that can invest in us, but not necessarily the widespread banks and other lenders that can lend to the industry. You know, I think it's important to think of AFCG as a conduit. Look, it's a lot of work diligencing these companies, working with them. These are direct deals. They're not sponsor-backed deals. There's a lot of KYC and anti-money laundering stuff that we do.

You know, I've been out in different podcasts and panels talking about this, and it's funny. I was hoping, and it turns out that I still believe that this is going to pass on lame duck without capital market support, which actually is the perfect storm for AFCG and the other lenders. You're going to get additional institutions that can invest in us, but not necessarily the widespread banks and other lenders that can lend to the industry. So, you know, I think it's important to think of AFCG as a conduit.

Get additional institutions that can invest in us, but not necessarily the widespread.

Banks and other lenders that can lead to the industry. So.

It's important to think of <unk> as a conduit.

Look, it's a lot of work, diligencing these companies, working with them.

Look it's a lot of work diligently in these companies working with them. These are direct deals theyre not sponsor backed deals.

These are direct deals. They're not sponsor-backed deals. There's a lot of KYC and anti-money laundering stuff that we do. So I think the banks are going to utilize us, lending group, as the conduit to the operators. And I think that role should generate really good yields.

There's a lot of <unk> and anti money laundering stuff that we do so I think the banks are going to utilize us lending group as the conduit to the operators and I think that role should generate really good yields.

Leonard Tannenbaum: I think the banks are gonna utilize us lending group as the conduit to the operators, and I think that role should generate really good yields.

Understood. Thanks, so much I'll hop back in the queue.

Harrison Vivas: Understood. Thanks so much. I'll hop back in the queue.

We have our next question from John Hecht with Jeffreys.

We have our next question from John Hecht with Jefferies.

Operator: We have our next question from John Hecht with Jefferies.

Hey, guys, thanks, very much and congratulations on a good quarter in our and getting the revolver that sounds like that's not just a good opportunity.

John Hecht: Hey, guys, thanks very much, and congratulations on a good quarter and on getting the revolver. That sounds like that's a good opportunity. I'm wondering, can you talk about, you know, Len, forget for a moment that it trades below book value, you know, considering your good pipeline and that, like, assuming prepayments were somewhat normal and you guys work through your pipeline, you know, in a fashion that's consistent with historical, like, how big might the balance sheet be? This is not asking for guidance. It's just sort of saying if you didn't have constraints, how big, how much you grow this year, you know, just to give us a sense for the opportunity.

Hey guys, thanks very much and congratulations on a good quarter and I'm getting a revolver. That sounds like that's a good opportunity. I'm wondering, can you talk about...

I'm wondering can you talk about.

Yes.

Forget for a moment that you.

Forget for a moment that your trade below book value,

Yeah.

You trade below book value.

you know, considering your, your, your good pipeline, it's not like, assuming prepayments were somewhat normal and you guys work through your pipeline.

Considering you're you're good pipeline in the static you're assuming.

Payments were somewhat normal.

<unk> worked through your pipeline.

you know, in a fashion that's consistent with historic history, like how big might the balance should be? This is not asking for guidance. It's just sort of saying if you didn't have constraints, how much, how much, you know, big might it be?

And in a fashion, that's consistent with historic history.

How big might the balance sheet being that this is not asking for guidance just sort of seeing if you didn't have constraints.

How much how much big much should grow this year just to give us a sense for the opportunity.

I think if the stock trade at.

Leonard Tannenbaum: I think if the stock traded at a level that allowed us to do equity offerings that added to book value for our shareholders, I think our same plan we outlined last quarter and maybe the same indication the quarter before holds. I think we could do $500 to 700 million of gross originations. We're gonna get $100 to 200 million of repayments, maybe even a little more. You know, we could net and grow the balance sheet by around $200 to 300 million by the end of the year. I still think that's the sort of benchmark, but it could be better or worse, depends on the repayments, and it depends on where the stock trades.

I think of the stock traded at a level that allowed us to do equity offerings that added to book value.

At a level that allowed us to do equity offerings that added to book value.

for our shareholders, I think, are the same plan we outlined last quarter.

For our shareholders I think are the same plan, we outlined last quarter and maybe the same indication in the quarter before holds where I think we could do $5 million to $700 million of gross originations. We can do we're going to get 1% to $301 million to $200 million of repayments, maybe even a little more.

maybe the same indication the quarter before holds, where I think we could do $500 to $700 million of gross originations. We're going to get $100 to $200 million of repayments, maybe even a little more. We could net and grow the balance sheet by around $200 to $300 million by the end of the year. I still think that that's a good idea.

We kept net and grow the balance sheet by around $2 million to $300 million by the end of the year.

I still think that that's that's the sort of bench.

you know, benchmark. But it could be better or worse, depends on the repayments. And it depends on where the stock trades.

Benchmark, but it could be better or worse depends on the repayments.

Trends on where the stock trades.

Yep.

David Brown: Yep. You talked about, you know, maybe a little bit of disruption on the macro basis that may be hitting some of the industry and maybe even some of the lenders. Can you give us an update of competition? It sounds like you're even able to kind of successfully firm up your requirements on a deal and still get a lot of volume. What's the competitive environment like in that regard?

John Hecht: Yep. You talked about, you know, maybe a little bit of disruption on the macro basis that may be hitting some of the industry and maybe even some of the lenders. Can you give us an update of competition? It sounds like you're even able to kind of successfully firm up your requirements on a deal and still get a lot of volume. What's the competitive environment like in that regard?

And.

You talked about.

Yes, it's a little bit of disruption on the macro basis.

a little bit of disruption on the macro basis that may be hitting some of the industry and maybe even some of the lenders. Can you give us an update of competition? It sounds like you're even able to kind of successfully firm up your requirements on a deal and still get a lot of volume. What's the competitive environment like in that regard?

That may be hitting some of the industry and maybe even some of the lenders can you give us an update of competition. It sounds like you're you've been able to kind of successfully firm up your requirements on a deal I still get a lot of volume, what's the competitive environment like in that regard.

Well the good news for us is AFCG is not our only pocket of capital, so we have an expanded pocket of capital available too.

Well the good news for US is <unk> is not our only a pocket of capital. So we have an expanded pocket of capital available to two.

Leonard Tannenbaum: Well, the good news for us is AFCG is not our only pocket of capital, so we have an expanded pocket of capital available to our clients. That allows us to take hold sizes that are, you know, some of the biggest in the industry. You could see that on the Bloom deal. You could see us holding $100 million of Verano where the REIT doesn't hold all of it, but we hold $100 million of Verano. So that ability to do large deals, to develop the certainty of capital necessary for our clients when they wanna build large projects, you know, is really important to them. It allows us to command a premium price. It allows us to lead a transaction, and I think that's really important.

to our clients. And that allows us to take hold sizes that are.

Our clients and that allows us to take hold sizes that are.

you know, some of the biggest in the industry. And you could see that on the Bloom deal, you could see us holding $100 million of Verano where the REIT doesn't hold all of it, but we hold $100 million of Verano. And so that ability to do large deals, to develop the certainty of capital necessary for our clients when they want to build large projects.

Some of the biggest in the industry and you could see that on the Bloom deal you could see us holding $100 million of Verona, where the REIT doesn't hold all of it but we hold $100 million of Toronto, and and and so that ability to do large deals to be to develop the certainty of capital necessary for our clients when they want to build large <unk>.

<unk>.

you know, is really important to them, allows us to command a premium price, allows us to lead a transaction, and I think that's really important. So I feel like, I feel like we're really well positioned.

It's really important to them allows us to command a premium price allows us to lead a transaction and I think that's really important.

Leonard Tannenbaum: I feel like we're really well-positioned in the industry. There are a couple of competitors. Their stocks are also trading down. I can't tell you whether they're gonna issue stock below book value, but, you know, we don't intend to. You know, they'll run out of capital, and they also, my guess, is have smaller hold sizes than we do.

So I feel like I feel like we're really well positioned in the industry. There are a couple of competitors. Their stocks are also trading down I can't tell you, whether they're going to issue stock below book value, but.

in the industry. There are a couple of competitors. Their stocks are also trading down. I can't tell you whether they're going to issue stock below book value, but we don't intend to. So they'll run out of capital, and they also, my guess is, have smaller hold sizes than

We don't intend to and and so.

They don't run out of capital and they also my guess is have smaller hole sizes than we do.

Okay wonderful thanks, very much for that.

David Brown: Okay. Wonderful. Thanks very much for taking my questions.

John Hecht: Okay. Wonderful. Thanks very much for taking my questions.

Wonderful. Thanks very much for taking my questions.

Taking my questions.

Sure.

Leonard Tannenbaum: Sure.

We have our next question from Mark Smith with Lake Street capital.

Operator: We have our next question from Mark Smith with Lake Street Capital Markets. Pardon me.

We have our next question from Mark Smith with Lake Street Capital Markets.

Markets Pardon me.

I guess first just.

Hi guys. First, just kind of a big picture question. Are you seeing any industry improvement in the mature states? And I know you're not in California, Washington, Oregon, but are you seeing any improvement there or are you seeing any continued weakness in some of the states where you may be operating?

Mark Smith: Hi, guys. First, just a kind of a big picture question. Are you seeing any industry improvement in the mature states? I know you're not in, you know, California, Washington, Oregon, but are you seeing any improvement there or, you know, are you seeing any continued weakness in some of the states where you may be operating?

Kind of a big picture question.

<unk> seen an industry improvement and the mature states and I know youre not in California, Washington, Oregon, and what are you seeing any improvement there or are you.

Yeah.

Continued weakness in some of the states, where you may be operated.

So really it's going state by state I mean, we're seeing Pennsylvania cultivation fall off a cliff.

Leonard Tannenbaum: Really it's going state by state. I mean, we're seeing Pennsylvania cultivation fall off a cliff. We're seeing Arizona, where we have a large exposure, actually firm up a little bit, which took a while to firm up after Croptober, but it is firming. Michigan continues in decline and staying near the bottom. There's way too much oversupply. At the same time, New Jersey is great, right? It's. You're looking at every state, the constantly changing dynamics, and we're reevaluating and really keeping tabs on the pulse of what's going on. It leads us to want to be, in general, with multi-state operators versus single state operators, because I think single state risk is really enhanced from two or three years ago.

So really, it's going state by state. I mean, we're seeing Pennsylvania cultivation fall off a cliff. And we're seeing Arizona, where we have a large exposure, actually firm up a little bit. It took a while to firm up after October , but it is firming. Michigan continues in decline and staying near the bottom. There's way too much oversupply. At the same time, New Jersey's great, right? So you're looking at every state constantly changing.

And we're seeing Arizona, where we have a large.

Exposure actually firm up a little bit which it.

It took a while to firm up after crop tober, but it is firming.

Michigan continues in decline and stay near the bottom as wait there's way too much oversupply at.

At the same time, New Jersey is great right. So it's it's.

Youre looking at every state the constantly changing dynamics and.

and we're reevaluating and really keeping tabs on the pulse of what's going on, it leads us to want to be, in general, with multi-state operators versus single-state operators. Because I think single-state risk is really enhanced.

And were reevaluating and really keeping tabs on the pulse of what's going on it leads us to want to be in general with multistate operators versus single state operators, because I think single state risk is.

Really enhanced from a two or three years ago.

Yeah.

Mark Smith: Okay. And then as we see these volatile equity markets, you know, how much of an opportunity does this create, you know, for these guys looking for debt financing rather than equity financing, you know, in pushing them, you know, operators into you maybe rather than equity markets?

Okay.

And then as we see these volatile equity markets, you know, how much of an opportunity does this create, you know, for these guys looking for debt financing rather than equity financing, you know, and pushing them, you know, operators into you, maybe rather than equity.

And then as we see these volatile equity markets you know how much of an opportunity does this create.

Forbes these guys looking for debt financing rather than equity financing.

Yeah.

<unk>.

Operators into you, maybe rather than equity markets.

I mean it creates a really a much better opportunity because as I said I think in previous calls

I mean, it creates a really a much better opportunity because as I said I think in previous calls.

Leonard Tannenbaum: I mean, it creates a much better opportunity because as I said, I think in previous calls, one of our biggest competitors and partners, right, were Canaccord and Seaport in terms of their ability to syndicate. Many of the partners that they syndicate to are full up on their cannabis exposure and/or watching Curaleaf bonds trade 95 or south, watching Trulieve bonds trade down, watching TerrAscend bonds trade down. They're taking losses. Rates have gone up 200 basis points, and that does affect the high end of the market, right? The more secure ones.

One of our biggest competitors and partners were Canaccord and Seaport in terms of their ability to syndicate.

One of our biggest competitors and partners right, where canaccord <unk> seaport in terms of their ability to syndicate all of those partners that theyre at all all the terrible word many of the partners that they simply get to our full up on their cannabis exposure and are watching carefully funds trading 95, or south watching truly bonds trade down watching tariffs and drunk bonds.

All those partners that they're syndicated to are full up on their cannabis exposure and are watching Curaleaf Funds trade 95 or south.

watching Truly bonds trade down, watching Terrasend bonds trade down, they're taking losses. But also, rates have gone up 200 basis points, and that does affect.

Theyre, taking losses, but also rates have gone up 200 basis points and that does affect the high end of the market right that the more secure ones. So I think that right back up really provides a floor for what.

high end of the market, the more secure ones. So I think that rate backup really provides a floor for our discussions with the second tier multi-state operators in saying, look, if Curaleaf is borrowing at X, or Trulieve is borrowing at X, and they're industry leaders,

Leonard Tannenbaum: I think that rate backup really provides a floor for our discussions with the second tier multi-state operators and saying, "Look, if Curaleaf is borrowing at X or Trulieve is borrowing at X, and they're the industry leaders, you know, you're wide of that." Then it's just a question of how wide you are. That conversation goes a lot better when those interest rates back up from, you know, 9 to 10% to 11 to 12%. Everything moves from there. As always happens, right? You take your industry benchmarks, and you benchmark off of them.

For our discussions with the second tier multistate operators, and saying look if keira leaf is borrowing it acts are truly barring it acts in there that they are industry leaders.

you know, you're wide of that. And then it's just a question of how wide you are.

Your wide of that and then it's just a question of how wide you are and so that conversation goes a lot better when there when those interest rates backup from the <unk>.

and so that conversation goes a lot better when they're when those interest rates back up from the you know nine ten percent to eleven to twelve percent and so everything moves from there as always happens right you take your industry benchmarks and and any benchmark off

9%, 10% to 11%, 12% and so everything moves from there.

This happens right you take your industry benchmarks in any benchmark off of them.

Okay, great. Thank you.

Mark Smith: Okay, great. Thank you.

And thank you.

Operator: Thank you. We have no further questions in queue. I will now turn the call over to Leonard Tannenbaum, CEO, for closing remarks.

We have no further questions in queue.

We have no further questions in queue. I will now turn the call over to Len Tenenbaum, CEO , for closing remarks.

I will now turn the call over to Lynn Tenenbaum CEO for closing remarks.

Look, we really appreciate everyone attending the call. We had a very exciting quarter. We are all excited about our prospects as lending to the industry and our customers' prospects in developing their business plans. And we look forward to continue reporting to you in the future quarters our progress.

Leonard Tannenbaum: Look, we really appreciate everyone attending the call. We had a very exciting quarter. We are all excited about our prospects as lending to the industry and our customers' prospects in developing their business plans. We look forward to continue reporting to you in the future quarters our progress.

We really appreciate everyone attending the call we had a very exciting quarter.

We're all excited about our prospects is lending to the industry and our customers prospects and developing their business plans and we look forward to continue to reporting to you in the future quarters our progress.

And thank you ladies and gentlemen, this concludes our conference. We thank you for participating you may now disconnect.

And thank you, ladies and gentlemen. This concludes our conference. We thank you for participating. You may now disconnect.

Operator: Thank you, ladies and gentlemen. This concludes our conference. We thank you for participating. You may now disconnect.

So So

Yes.

[music].

Okay.

you

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