Q1 2024 Silver Spike Investment Corp Earnings Call
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Operator: Good day, and thank you for standing by. Welcome to the Silver Spike Investment Corporation First Quarter 2024 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 will need to press star 1 1 on your telephone. You will then hear an automated message advising that your hand is raised. To withdraw your question, please press star 1 1 again. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker today, Umesh Mahajan, Chief Financial Officer. Please go ahead.
Good day, and thank you for standing by.
Umesh Mahajan: Good morning. This is Umesh Mahajan, CFO of Citrus Spike Investment Corp. With me here today is Scott Gordon, CEO of Citrus Spike Investments. Welcome to Silver Spikes' Earnings Conference Call and Live Webcast for the first quarter ended March 31, 2024. Silver Spikes' financial results for the first quarter ended March 31, 2024 were released yesterday and can be accessed from our website at ssic.silverspikecap.com. A replay of the call will also be available on our website.
Speaker Change: Welcome to silver Spike Investment Corporation first quarter 2024 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.
Speaker Change: Ask a question during the session you will need to press star one one on your telephone you will then hear an automated message advising your hand is raised to withdraw your question. Please press star one one again.
Speaker Change: Please be advised that today's conference is being recorded.
Mesh Mahajan: I would now like turn the conference over to your Speaker today will mesh Mahajan Chief Financial Officer. Please go ahead.
Mesh Mahajan: Good morning. This is amazed mahajan CFO all centers like investment cost with me here today is Mark Gordon CEO all centers like investment Corp.
Mark Gordon: Welcome to <unk> earnings conference call and lot of that gas for the first quarter ended March 31, 2020 for <unk> financial results for the first quarter ended March 31, 2024 of the release yesterday and can be accessed from our website at.
Mark Gordon: As the dark silver slight cap dot com.
Mark Gordon: A replay of the call will also be available on our website.
Umesh Mahajan: Before we begin, I would like to remind everyone that certain statements that are not based on historical facts made during this call, including any statements related to financial guidance, may be deemed forward-looking statements under federal securities laws. Because these forward-looking statements involve known and unknown risks and uncertainties, there are important factors that could cause actual results to differ materially from those expressed or implied by these forward-looking statements. We encourage you to refer to our most recent SEC filings for information on some of these risk factors.
Mark Gordon: Before we begin I would like to remind everyone that certain statements that are not based on historical facts made during this call, including any statements related to financial guidance may be deemed forward looking statements under federal Securities laws.
Mark Gordon: Cause these forward looking statements involve known and unknown risks and uncertainties that are important factors that could cause actual results to differ materially from those expressed or implied by these forward looking statements.
Mark Gordon: We encourage you to refer to our most recent SEC filings for information on some of these risk factors.
Umesh Mahajan: Silver Spike assumes no obligation or responsibility to update any forward-looking statements. Please note that the information reported on this call applies only as of today, May 10, 2024. Therefore, you are advised that time-sensitive information may no longer be accurate at the time of any replay or transfer.
Mark Gordon: <unk> assumes no obligation and responsibility to update any forward looking statements. Please note that the information reported on this call speaks only as of today May 10, 2024, and therefore, you're advised that time sensitive information may no longer be accurate at the time of any replay or transcript reading.
Umesh Mahajan: So, good morning again, and thank you all for joining us yesterday. We released our results yesterday along with our 10Q, and there is a management presentation deck attached to the 8K that was filed and made available this morning. Those who have joined us on this morning's webcast should also see a link to the slides that we will use for our discussion today. We may refer to the slides by numbers for your reference. I'll cover the presentation slides and then turn it over to Scott Gordon for his thoughts and remarks.
Speaker Change: So good morning, again, and thank you all for joining we released our results yesterday, along with our 10-Q and there is a management presentation deck attached to the 8-K that was filed.
Speaker Change: And made available. This morning, those are joining us on this earnings webcast should also be a link to the slides that we will use for our discussion today, we've made effort in the slides but numbers.
For your reference.
Speaker Change: On top of the presentation slides and then turn it over to Scott Gordon for his thoughts on the March.
Scott Gordon: Before we get to the financial highlights for the quarter.
Umesh Mahajan: Before we get to the financial highlights for the quarter, a quick recap of the loan portfolio acquisition that we announced this quarter. On February 20, 2024, the company announced that it entered into a definitive agreement to purchase a portfolio of loans from Chicago Atlantic Loan Portfolio, LLC, in exchange for newly issued shares of the company's common stock, subject to certain customary closing conditions. On April 15, 2024, the company filed a registration statement on Form N-14 in connection with this loan portfolio acquisition with the Securities and Exchange Commission, SEC, beer. Currently, it is anticipating this transaction to close in mid-2024.
Scott Gordon: And at March 31, 2020 for a quick recap about the loan portfolio acquisition that we announced in this quarter.
Umesh Mahajan: With that, turning to page 3 of the presentation for financial highlights for the first quarter of 2024, there's the growth investment income for this quarter was 2.8 million, compared to 2.5 million in the first quarter of last year, expenses of approximately 0.8 million, excluding the expenses related specifically to the loan portfolio acquisition, results in investment income, excluding transaction expenses of $2 million, compared to $1.4 million last year. We incurred transaction-related expenses of $2.1 million in the quarter as the definitive agreements were signed in this quarter.
On February 22024, the company announced that it entered into a definitive agreement to purchase from Chicago Atlantic loan portfolio at a Z.
Scott Gordon: A portfolio of loans.
In exchange for newly issued shares of the company's common stock subject to certain customary closing conditions.
On April 15, 2024, the company filed legislation statement on form and 14 in connection with this loan book for the acquisition.
Scott Gordon: The Securities and Exchange Commission the SEC.
Scott Gordon: We are.
Scott Gordon: Currently anticipating this transaction to close in mid 2024.
Umesh Mahajan: Net investment income of negative 0.1 million, and net assets of $84.5 million, down from last year due to the payment of dividends and transaction expenses. On a per share basis, the investment income, excluding transaction expenses, was $0.33 per share compared to $0.22 per share last year. The net investment income was negative one cent per share, and the net asset value at the end of the period as of March 31, 2024 was $15.60. Also, the board declared a regular quarterly cash dividend of $0.25 per share. The dividend will be payable on June 28, to stockholders of record on June 20.
Scott Gordon: With that turning to page three of the presentation for financial highlights for the fourth quarter of 2024.
Scott Gordon: There is the gross investment income for this quarter was $2 8 million.
Scott Gordon: Compared to $2 5 million in the fourth quarter last year.
Scott Gordon: Expenses of approximately <unk> 8 million.
Scott Gordon: Excluding the expenses related specifically to the loan portfolio acquisition.
Scott Gordon: Results in investment income, excluding transaction expenses of $2 million.
Scott Gordon: About a $1 4 million last year.
Scott Gordon: We haven't got transaction related expenses of $2 1 million in the quarter as a definitely a agreements were signed in this quarter.
Scott Gordon: Net investment income.
Scott Gordon: Negative <unk> 1 million.
Scott Gordon: Net assets of $84 5 million.
Scott Gordon: Down from last year due to the payment of dividends and the transaction expenses.
Scott Gordon: On a par share basis, the investment income excluding the transaction expenses.
Scott Gordon: Was <unk> 33 per share compared to 22 per share last year.
Scott Gordon: The net investment income was negative <unk> <unk> per share and net asset value at.
Scott Gordon: At the end of the period as of March 31, 2024.
Scott Gordon: It was $13 66.
Scott Gordon: Also the board declared a regular quarterly cash dividend of <unk> 25 per share.
Scott Gordon: The dividend will be payable on June 28.
Scott Gordon: <unk> to stockholders of record on June 20.
Umesh Mahajan: We will not really go through the subsequent few slides in the slide deck in detail, as we have covered them in the past and most investors are already familiar with our story. But turning to page 9, we will talk about our origination efforts. Our deal pipeline remains strong. In general, since the last quarter of 2023, many of the potential borrowers in the industry have not rushed into borrowing money as they were watching the interest rate movements in the credit markets, as well as the developments on the rescheduling of cannabis to Schedule 3.
We will not really go through the subs.
Scott Gordon: Subsequent few slides in the slide deck in detail as we've covered them in the past and most investors are already familiar with our story, but turning to page nine.
Scott Gordon: To talk about our origination efforts our deal pipeline remains strong.
Scott Gordon: In general since last quarter of 2023, many of the potential borrowers in the industry have not rushed into borrowing money as they were watching the interest rate movements and the growth markets as well as the developments on the rescheduling of Canada is just getting <unk>.
Umesh Mahajan: We've used that time period towards due diligence and underwriting of over 25 borrowers as a part of our loan portfolio acquisition that we announced. And at this point, as the industry continues to grow, good operators in the industry have started revisiting their growth and expansion plans. And I started thinking about raising more capital to support their plan. We have an active dialogue with many of the best operators in the industry and have an active pipeline of over 425 million.
Scott Gordon: We've used that time period towards due diligence and underwriting of our 25 borrowers.
Scott Gordon: As a part of our loan portfolio acquisition that we announced.
Scott Gordon: And at this point.
Scott Gordon: The industry continues to grow good operators in the industry has added revisiting that growth and expansion plans.
Scott Gordon: Im sort of thinking about raising more capital to support their plans we have.
Scott Gordon: A an active dialogue with many of the best operators in the industry and have an active pipeline of over $425 million.
Umesh Mahajan: On page 11, we show our portfolio summary as of March 31. There were no new investments in this quarter. As you can see at the top of the page, we have over 54 million, almost 55 million, invested with an average yield to maturity of about 18%. A few points we'd like to reiterate about this portfolio are that all of our positions are for swing loans or secured bonds. None of these loans or bonds are in auto cool status.
Scott Gordon: On page 11, visual our portfolio summary, as of March 31.
Scott Gordon: <unk> investments in this quarter as you can see at the top of the page we have over $54 million almost 55 million invested with an average yield to maturity of about 18% of your point, we'd like to reiterate about this portfolio.
Scott Gordon: All of our positions that are first lien loans are secured bonds.
Scott Gordon: None of these loans or bonds are in and non accrual status.
Umesh Mahajan: Over 90% of our invested portfolio is in flowing rates, and loans, and our gross portfolio yield of 18% compares favorably to the broader listed BDC universe. With that, I will pass it on to Scott Gordon for a few remarks.
Scott Gordon: Over 90% of our investment portfolio.
Scott Gordon: Is in drilling rate.
Loans and our gross portfolio yield of 18% compares favorably to the broader listed BDC universe.
Scott Gordon: With that let me pass it onto Scott Gordon for a few remarks.
Scott Gordon: Thanks so much. I just wanted to take a minute and talk about the big industry news of late, which has been the apparent approval by the DEA of the HHS recommendation to reschedule. This has been a widely anticipated move since the HHS announcement last year. However, the process timeline is uncertain and could take up to several years to complete if it is met with challenges seeking judicial review and or administrative hearings. The change, however, would have a major impact on company cash flows through the elimination of the 280E tax cut.
Scott Gordon: Thanks, So much just wanted to take a minute and talk about the big industry news of late which has been the apparent approval by the DEA have the hhs's recommendation to reschedule Kansas.
Scott Gordon: This has been a widely anticipated move since the HHS in August of last year.
The process timeline, however is uncertainty.
Scott Gordon: Could take up to several years to complete has met with challenges seeking judicial review <unk> administrative hearings.
Scott Gordon: The change however would have a major impact on company cash flows through the elimination of the $2 Adv tax effect.
Scott Gordon: While we view the news as positive, like all legislative initiatives in the cannabis realm, the devil remains in the detail around both timing and implementation. Given the myriad of ambiguities with respect to that, we believe that the current dynamic of capital constraints in the industry will be largely unchanged, nor do we extrapolate anything further on the regulatory front because of the rescheduling process. The Safer Act and other pending pieces of reform will muddle as usual and continue to be subject to all of the same vagaries and obstacles that have been present for some time. As such, we take a mildly optimistic view of the news and maintain some hope that perhaps this time is different. On balance, it's clearly a step in the right direction. With that, I'll catch up.
Scott Gordon: While we do believe is as positive like all legislative initiatives from the Canada surround the Devil remains in the detail around both timing and implementation.
Given the myriad of ambiguity is with respect to that we believe that the current dynamic of capital constraints in the industry will be largely unchanged.
Scott Gordon: Nor do we extrapolate anything further on the regulatory front because of the rescheduling process Safer Act and other pending pieces of reform will muddle as usual and continue to be subject to all of the same bakeries and obstacles have been present for some time.
Scott Gordon: As such we take a mildly optimistic view of the news.
Scott Gordon: And maintained some hope that perhaps this time is different.
Scott Gordon: On balance, it's clearly a step in the right direction.
Speaker Change: With that I'll pass back to mesh thank.
Umesh Mahajan: Thank you, Scott. That's all we have in terms of prepared remarks. We can take questions.
Mesh Mahajan: Thank you Scott.
Mesh Mahajan: That's all we had in terms of prepared remarks, we can take questions.
Mesh Mahajan: Is there anything strategic.
Operator: Thank you. As a reminder to ask a question, please press star 11 on your telephone and wait for your name to be announced. To withdraw your question, please press star 1 1 again. Please stand by while we compile the Q&A roster. Our first question comes from the line of Michael Lavery from Piper Sandler.
Mesh Mahajan: Thank you as a reminder to ask a question. Please press star one one on your telephone and wait for your name to be announced until with Joel. Your question. Please press star one one again.
Speaker Change: Please standby, while we compile the Q&A roster.
Speaker Change: Our first question comes from the line of Michael Lavery from Piper Sandler.
Michael Lavery: Thank you good morning, good morning, Michael.
Michael Lavery: Regarding the transaction, can you just touch on how it's progressing and maybe if there's any, you know, regulatory review, you know, updates or just your sense of what we should expect as far as that moves along?
Michael Lavery: Regarding the transaction can you just touch on.
Michael Lavery: How it's progressing and maybe if there is any.
Michael Lavery: Regulatory review.
Michael Lavery: Updates or just your sense of.
Michael Lavery: What we should expect as far as that moves along.
Umesh Mahajan: Yeah, sure. So we have submitted a n 14 [inaudible] That process will take another month or two. It is difficult to estimate the exact time it will take for the completion of SV's review, but following that review, we will be taking the shareholder role. Everything is in terms of the ongoing process for approval, and everything is going as we had anticipated. We think we should get comments from SEC on the document in short order, although it's difficult to know exactly when. And we still think that we should be expecting a close on this transaction sometime soon.
Speaker Change: Yes sure.
Speaker Change: So we have submitted a <unk>.
Speaker Change: In 2014 statement.
Speaker Change: Statement to the SEC for their review on April 15th.
Speaker Change: In 2014 is a.
Speaker Change: It is a document that would be used as a as a proxy as well as.
Speaker Change: Providing information on the transaction we are expecting.
Speaker Change: That process too.
Speaker Change: To take another month or two it is difficult to estimate the exact timing will take for the.
Speaker Change: The completion of <unk>.
Speaker Change: But following that review, we will be taking the shareholder walls. So.
Speaker Change: Everything is.
Speaker Change: In terms of the ongoing process for approval and everything is going as we had anticipated.
Speaker Change: We think we should get we.
Speaker Change: We should get comments from SSE on the document.
Speaker Change: Chart order sterilant doesn't know exactly when.
Speaker Change: And we still think that we should be.
Speaker Change: We should be expecting a clue.
Speaker Change: <unk> on this transaction sometime.
Speaker Change: This summer.
Umesh Mahajan: Okay, great. That's helpful. And just as far as rescheduling has been, you know, sort of in the spotlight in the industry in recent days, can you give a sense of what the implications would be expected to be for you guys in particular and just how the ramifications of that might look for you?
Speaker Change: Okay, Great that's helpful.
Speaker Change: As far as.
Speaker Change: Rescheduling has been.
Speaker Change: Sort of in the spotlight.
Speaker Change: History in recent days.
Speaker Change: Can you give a sense of.
Speaker Change: What the implications would be expected to be for for for you guys in particular and just how.
Speaker Change: The ramifications of that might look for you.
Umesh Mahajan: Yeah, I mean, as Scott mentioned in his advice, that there is.
Speaker Change: As Scott mentioned.
Speaker Change: In his remarks.
Speaker Change: There is.
Umesh Mahajan: There is clearly an implication of the 280E on cannabis operators, and it's an extremely positive one. So the first impact, really from our perspective, is that our portfolio companies, both the companies that we have in our portfolio right now as well as the companies that are, or the borrowers that are in the anticipated portfolio acquisition, are going to have much better cash flows, and the credit metrics are going to look different. So that's a positive thing.
Speaker Change: That is clearly the implication of the $2 <unk> on the cannabis operators and it's extremely positive one so the for us impact really from our perspective is that our portfolio companies.
Speaker Change: Both the companies that we have in our portfolio right now as well as the companies that are by the borrowers that are in the anticipated.
Speaker Change: The acquisition is going to have much better cash flows and the credit metrics are that look.
Speaker Change: Different answer.
Umesh Mahajan: In terms of the overall dynamic, the competitive dynamic for the lending industry, which we operate in, we do not think that just the announcement and even the ultimate passing of 280E is really going to change the dynamic from a supply and demand for capital for cannabis operators. We do not expect the floodgates for capital to open up with this announcement or even with the passing of 280E, and as a result... [inaudible] In a couple of years, we do not anticipate a significant change in either the yields or the overall competitive dynamics.
Speaker Change: So that's a positive in terms of.
Speaker Change: Overall.
Speaker Change: Dynamic competitive dynamic for the lending industry, which we operated in.
Speaker Change: We do not think that.
Speaker Change: Just the announcement and even the ultimate passing of two <unk> is really a delight.
Speaker Change: That dynamic from a supply and demand for capital for the cannabis operators.
Speaker Change: We do not expect the floodgates for catheter to open up.
Speaker Change: With this announcement or even with the batting up to AE and as a result.
Speaker Change: At least over the next.
Couple of years, we do not anticipate a.
Speaker Change: A significant change in either the us or the overall competent dynamic.
Umesh Mahajan: And we do think that the news has led most of the cannabis market to rethink their growth plans. The industry continues to grow pretty rapidly, and the operators, the good operators, are definitely rethinking, and revisiting their plans, and they're going to need capital. And we will be there to support them. So from our perspective, we think it's a positive for our credit metrics and our book borrower companies. We think the dynamics, the competitive dynamics, won't change for us in the near term or definitely over the next year or two. And it's positive in the sense that the operators are better and are going to start talking about their growth plans and much more.
Speaker Change: And we do think that the news had led most of the Canada most of the payers.
Speaker Change: To rethink their growth plans.
Speaker Change: Industry continues to grow pretty nicely and operating areas.
Speaker Change: <unk> are definite data thinking the visiting their plans and then theyre going to need the capital.
Speaker Change: And we will be there to support them support.
From our perspective, we think it's a positive for our credit.
Speaker Change: The metrics of our borrower companies.
Speaker Change: The dynamics the competitive dynamics doesn't change for us in the <unk>.
Speaker Change: In the near term are definitely over the next year or two.
Speaker Change: And it's positive in defense of that the operators are better.
Speaker Change: And are going to start talking about their growth plans.
Speaker Change: Much more awareness.
Umesh Mahajan: Okay, great. Thank you so much.
Speaker Change: Okay, great. Thank you so much.
Speaker Change: Thank you.
Operator: One moment for our next question. Our next question comes from Pablo Zuanich from Zuanich and Associates.
Speaker Change: One moment for our next question.
Speaker Change: Our next question comes from the line of Pablo <unk> from Joanna <unk> Associates.
Pablo Zuanich: Hey Pablo, good morning. Good morning, thank you.
Pablo: Hey, Bob Good morning, good morning, Thank you.
Scott Gordon: Look, two quick questions. One is a follow-up to the prior question. You know, of course, the 280E news and rescheduling is all positive, right? But does that mean that a lot of operators maybe go on a wait-and-hold pattern for now and don't engage until there's more clarity on when that's implemented and on the 280E benefits? I realize that in some states, right, they may go recreational, so they may need to expand, although some of them may already have capacity there.
Pablo: A question with one follow up to that prior question.
Pablo: Of course, the news I'm rescheduling and saw positive right, but does that mean that a lot of operators maybe go in and wait on hold but for now I'm going to engage until there's more clarity on the wind that you implemented.
Pablo: Any benefits.
What I said in some states ready to megawatt rigs. So they may need to expand although some of them may already have capacity. There. So I'm just wondering whether we have a period, maybe almost one year what are the demand side. It's weakened temporary I don't know if you want to comment on that and then and then the second let's start with our first effects.
Scott Gordon: So I'm just wondering whether we have a period, maybe almost one year, where the demand side is temporarily weakened. I don't know if you want to comment on that. And then the second... Yeah, I'll take that, Bob.
Scott Gordon: Look, I think we've already seen that dynamic, you know, since the announcement, the initial announcement by HHS of the recommendation to switch to rescheduling to Schedule 3. And so, you know, this has definitely been the backdrop of the market since that announcement, whatever it was four or five months ago. And look, I think there is obviously some degree of hope and expectation among the operators and our borrowers that, you know, this news will sort of drive down borrowing costs and, you know, kind of open the floodgates of capital into the market. But, you know, as Umesh just alluded to, we just don't see that.
Speaker Change: I'll take that Bob.
Bob: Look I think we've already seen that dynamic since the announcement the initial announcement by HHS of the recommendation to switch to reschedule the schedule III and so.
Bob: This has definitely been the backdrop.
Bob: Of the markets since that announcement whatever it was four five months ago.
Bob: And.
Bob: Look I think there.
Bob: There is obviously some degree of hope and an expectation among the operators and our brokers that this news will sort of drive down borrowing costs and kind of open the floodgate of capital into the market.
Bob: As you just alluded to we just don't see that I think there are many impediments.
Scott Gordon: I think there are many impediments to capital constraints in the marketplace, and, you know, 280E wasn't really sort of among the major factors. The federal illegality and just the nature of the complexity of the industry are, I think, the barriers keeping capital from coming in, and that's unchanged. So I think, yeah, you're right that, you know, there might be some, you know, some level of companies out there that, you know, might opt to take a more sort of patient wait and see approach with the belief that, you know, better terms are sort of coming if they do that.
Bob: Of the capital constraints in the marketplace.
Bob: 280, he wasn't release are among the major factors.
Bob: The federal illegality in just the nature of the complexity of the industry I think or are the barriers of.
Bob: Keeping capital from coming in and and that's unchanged. So.
Bob: I think yes, youre right that there might be.
Bob: <unk>.
Bob: No.
Bob: Some level of companies out there that might opt to take a more sort of patient wait and see approach.
Bob: The belief that better terms are sort of coming if they do that.
Scott Gordon: But I also think, you know, a lot of the companies that we speak to sort of accept the sober reality of what has been, you know, the history of disappointment with many of the legislative things that have happened in the industry, and I think if capital is available to them, they'll take it. So, a mixed bag, but yeah, I could see on the margin where, you know, this might take another sort of three to six months of needing to play out for, you know, some folks who might want to stay on the sidelines. But we think, ultimately, you can't wait forever, and many of the operators have already been waiting for a fairly long time.
Bob: But I also think.
Bob: A lot of the companies that we speak to sort of accept the sober reality of what has been the history of disappointment.
Bob: Many of the legislative things that have happened.
Bob: And the industry and I think the capital is available to them.
Bob: We will take it so a mixed bag, but yes, I can see on the margin where.
Bob: This might take another sort of three to six months.
Bob: Meaning to play out for some folks who might want to stay on the sidelines, but.
Bob: We think ultimately.
Bob: You can't wait forever and.
Bob: And many of the operators have already been waiting for a fairly long time. So those that have real kind of expansion plans and need that growth capital I think.
Scott Gordon: So, you know, those that have real kind of expansion plans and need that growth capital, I think, you know, don't have a choice. understood and then, just on a separate subject, in terms of the transaction structure, Maybe just to clarify, obviously, Chicago Atlantic is a group, right? And your transaction is a group, the holding. I'm just trying to understand, in terms of what's public information, the idea that that becomes a bit of a sister company for you, that you work together, you coordinate, I'm referring to the REIT, or that's just a totally separate organization, and your transaction is really with the holding company?
Bob: Joyce.
Joyce: Understood and then just on a separate subject.
So the transaction structure.
Joyce: Maybe just to clarify you're obviously Chicago Atlanta.
Joyce: And your transaction as a group the holding company because nothing to go with a REIT that's a public listed vehicle.
Joyce: But I'm just trying to understand in terms of what's probably inflammation.
Joyce: Idea that that becomes somewhat of a sister company for you that you work together you coordinate I'm, referring to the REIT or is that just a totally separate organization and you are a joke construction is really with the holding company.
Speaker Change: The two are completely separate Pablo you are right they are completely separate.
<unk>.
Joyce: Yes.
Joyce: As a completely independent entity from the meeting.
Speaker Change: Alright, Okay. That's all I have thank you.
Speaker Change: Thank you.
Speaker Change: As a reminder to ask a question. Please press star one one on your telephone and wait for your name to be announced.
Speaker Change: To withdraw your question. Please press star one one again.
Speaker Change: At this time I'm showing no further questions I would now like to turn the conference back over to will mesh mahajan for closing remarks.
Speaker Change: Well. Thank you everyone for joining us for this call. We look forward to keep giving you updates on the transaction and.
Speaker Change: And.
Speaker Change: We look forward to speaking with you again in the next earnings call. Thank you very much.
This concludes today's conference call. Thank you for participating you may now disconnect.
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Speaker Change: Good day and thank you for standing by welcome to the Silver Spike Investment Corporation first quarter 2024 earnings Conference call.
Umesh Mahajan: [inaudible]
Pablo Zuanich: All right. Okay, that's all I have. Thank you.
At this time all participants are in a listen only mode.
Speaker Change: After the speaker's presentation, there will be a question and answer session.
Operator: As a reminder, to ask a question, please press star 1 1 on your telephone and wait for your name to be announced. To withdraw your question, please press star 1 1 again. At this time, I'm showing no further questions. I would now like to turn the conference back over to Umesh Mahajan for closing remarks.
Speaker Change: I'll ask a question. During this session you will need to press star one one on your telephone you will then hear an automated message advising your hand is raised to withdraw your question. Please press star one one again please.
Speaker Change: Please be advised that today's conference is being recorded.
Umesh Mahajan: Well, thank you everyone for joining us on this call. We look forward to keeping you updated on the transaction and look forward to speaking with you again on the next earnings call. Thank you very much. This concludes today's conference call. Thank you for participating. You may now disconnect.
Mesh Mahajan: I'd now like to turn the conference over to your Speaker today will mesh Mahajan Chief Financial Officer. Please go ahead.
Providing this.
Mesh Mahajan: Amazed Mahajan CFO of <unk> investment Corp. With me here today is Carl Gordon CEO of Citrus like investment Corp.
Operator: This concludes today's conference call. Thank you for participating. You may now disconnect. [inaudible] Spike Inv Spike Inv Spike Inv Spike Inv Spike Inv Spike Inv Spike Inv Spike Inv Spike Inv Spike Inv Spike Inv Spike Inv Spike Inv Spike Inv Spike Inv Spike Inv Spike Inv Spike Inv Spike Inv Spike Inv Spike Inv Spike Inv Spike Inv Spike Inv Spike Inv Spike Inv Spike Inv Spike Inv Spike Inv Spike Inv Spike Inv Spike Inv Spike Inv Spike Inv Spike Inv Spike Inv Spike Inv Spike Inv Spike Inv Spike Inv Spike Inv Spike Inv Spike Inv Spike Inv Spike Inv Spike Inv Spike Inv Spike Inv Spike Inv Spike Inv Spike Inv Spike Inv, Good day and thank you for standing by. Welcome to Silver Spike Investment Corporation First Quarter 2024 Earnings Conference Call.
Mesh Mahajan: Disney was slight earnings conference call and webcast for the first quarter ended March 31 2024.
Mesh Mahajan: <unk> financial results for the first quarter ended March 31, 2024 were released yesterday and can be accessed from our website at S. ICD Doc silver slight cap dot com.
Mesh Mahajan: Play of the card, but also be available on our website.
Mesh Mahajan: Before we begin I would like to remind everyone that certain statements that are not based on historical facts made during this call, including any statements related to financial guidance may be deemed forward looking statements under federal Securities laws.
Mesh Mahajan: Because these forward looking statements involve known and unknown risks and uncertainties that I have.
Mesh Mahajan: What are the factors that could cause actual results to differ materially from those expressed or implied by these forward looking statements.
Mesh Mahajan: We encourage you to refer to our most recent SEC filings for information on some of these risk factors.
Mesh Mahajan: <unk> assumes no obligation and responsibility to update any forward looking statements. Please note that the information reported on this call speaks only as of today May 10, 2024, therefore, you're advised that time sensitive information may no longer be accurate at the time of any replay or transcript reading.
Umesh Mahajan: 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 will need to press star 1 1 on your telephone. You will then hear an automated message advising that your hand is raised. To withdraw your question, please press star 1 1 again. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker today, Umesh Mahajan, Chief Financial Officer. Please go ahead.
Speaker Change: So good morning, again, and thank you all for joining the release our results yesterday, along with our 10-Q and there is a management presentation deck attached to the 8-K that was filed.
Umesh Mahajan: Good morning. This is Umesh Mahajan, CFO of Citrus Spike Investment Corp. With me here today is Scott Gordon, CEO of Citrus Spike Investments. Welcome to Silver Spikes' Earnings Conference Call and Live Webcast for the first quarter ended March 31, 2024. Silver Spikes' financial results for the first quarter ended March 31, 2024 were released yesterday and can be accessed from our website at ssic.silverspikecap.com. A replay of the call will also be available on our website.
Speaker Change: And made available. This morning, those are joining us on this earnings webcast should also be a link to the slides that we will use for our discussion today will be made up over the slides by numbers plenty of Athens.
Umesh Mahajan: Before we begin, I would like to remind everyone that certain statements that are not based on historical facts made during this call, including any statements related to financial guidance, may be deemed forward-looking statements under federal securities laws. Because these forward-looking statements involve known and unknown risks and uncertainties, there are important factors that could cause actual results to differ materially from those expressed or implied by these forward-looking statements. We encourage you to refer to our most recent FTP filings for information on some of these risk factors.
Umesh Mahajan: Silver Spike assumes no obligation or responsibility to update any forward-looking statements. Please note that the information reported on this call applies only as of today, May 10, 2024. Therefore, you are advised that time-sensitive information may no longer be accurate at the time of any replay or transfer.
Umesh Mahajan: So, good morning again, and thank you all for joining us this morning. We released our results yesterday along with our 10Q, and there is a management presentation deck attached to the 8K that was filed and made available this morning. Those who have joined us on this morning's webcast should also see a link to the slides that we will use for our discussion today. We may refer to the slides by numbers for your reference.
Umesh Mahajan: I'll cover the presentation slides and then turn it over to Scott Gordon for his thoughts and remarks. Before we get to the financial highlights for the quarter, I'll end on March 31, 2024.
Speaker Change: The presentation slides and then turn it over dues Scott Gordon for his thoughts on device.
Scott Gordon: Before we get to the financial highlights for the quarter.
Scott Gordon: And at March 31, 2020 for a quick recap about the loan portfolio acquisition that we announced in this quarter.
Umesh Mahajan: A quick recap of the loan portfolio acquisition that we announced in this quarter. On February 20, 2024, the company announced that it entered into a definitive agreement to purchase a portfolio of loans from Chicago Atlantic Loan Portfolio, LLC, in exchange for newly issued shares of the company's common stock, subject to certain customary closing conditions. On April 15, 2024, the company filed a registration statement on Form N-14 in connection with this loan portfolio acquisition with the Securities and Exchange Commission, SEC. The air.
Scott Gordon: On February 22024, the company announced that it entered into a definitive agreement to purchase from Chicago Atlantic loan portfolio at a Z.
Scott Gordon: A portfolio of loans.
Scott Gordon: In exchange for newly issued shares of the company's common stock subject to certain customary closing conditions.
Scott Gordon: On April 15, 2024, the company filed legislation statement on form and 14 in connection with this the importance of the acquisition.
Scott Gordon: The Securities and Exchange Commission SEC.
Umesh Mahajan: Currently, we are anticipating this transaction to close in mid-2024. With that, turning to page 3 of the presentation for financial highlights for the first quarter of 2024. There's the growth investment income for this quarter was 2.8 million, compared to 2.5 million in the first quarter last year; expenses of approximately 0.8 million, excluding the expenses related specifically to the loan portfolio acquisition; results in investment income, excluding transaction expenses of $2 million compared to $1.4 million last year. We have incurred transaction-related expenses of $2.1 million in the quarter as the definitive agreements were signed in this quarter.
Scott Gordon: We are.
Scott Gordon: Currently anticipating this transaction to close in mid 2024.
Scott Gordon: With that turning to page three of the presentation for our financial highlights for the fourth quarter of 2024.
Scott Gordon: Yes.
Scott Gordon: There is the gross investment income for this quarter was $2 8 million.
<unk> $2 5 million in the fourth quarter last year.
Expenses of approximately <unk> 8 million, excluding the expenses related specifically to the loan portfolio acquisition.
Scott Gordon: Results in investment income, excluding transaction expenses of $2 million compared to $1 4 million last year.
Scott Gordon: We haven't got transaction related expenses of $2 1 million in the quarter as a definitely a agreements were signed in this quarter.
Umesh Mahajan: Net investment income of negative 0.1 million, and net assets of $84.5 million, down from last year due to the payment of dividends and transaction expenses. On a per share basis, the investment income, excluding transaction expenses, was $0.33 per share compared to $0.22 per share last year. The net investment income was negative one cent per share, and the net asset value at the end of the period as of March 31, 2024 was $15.60. Also, the board declared a regular quarterly cash dividend of $0.25 per share. The dividend will be payable on June 28, to stockholders of record on June 20.
Scott Gordon: Net investment income of negative $1 million.
Scott Gordon: Net assets of $84 5 million.
Scott Gordon: Down from last year due to the payment of dividends and the transaction expenses.
Scott Gordon: On a partial year basis, the investment income excluding the transaction expenses.
<unk> was <unk> 33 per share compared to 22 per share last year.
Scott Gordon: The net investment income was negative <unk> <unk> per share and net asset value at the end of the pit as of March 31 2024.
Scott Gordon: It was $13 60.
Scott Gordon: Also the board declared a regular quarterly cash dividend of 25 per share the dividend will be payable on June 28.
Stockholders of record on June 20.
Umesh Mahajan: We will not really go through the subsequent few slides in the slide deck in detail, as we have covered them in the past and most investors are already familiar with our story. But turning to page 9, we will talk about our origination efforts. Our deal pipeline remains strong. In general, since the last quarter of 2023, many of the potential borrowers in the industry have not rushed into borrowing money as they were watching the interest rate movements in the credit markets, as well as the developments on the rescheduling of Canada's to Schedule 3.
Scott Gordon: We will not really go to the subsea.
Scott Gordon: Subsequent few slides in the slide deck in detail as we've covered them in the past and most investors are already familiar with our story, but turning to page nine.
To talk about our origination efforts our deal pipeline remains strong.
Scott Gordon: In general since last quarter of 2023, many of the potential borrowers in the industry have not rushed into borrowing money as they were watching the interest rate movements and the growth markets as well as the developments on the rescheduling of Canada is just getting three.
Umesh Mahajan: We've used that time period towards due diligence and underwriting of over 25 borrowers as a part of our loan portfolio acquisition that we announced, and at this point, as the industry continues to grow, good operators in the industry have started revisiting their growth and expansion plans. And I started thinking about raising more capital to support their plan. We have an active dialogue with many of the best operators in the industry and have an active pipeline of over 425 million.
Scott Gordon: Video is that time period towards due diligence and underwriting of our 25 borrowers.
Scott Gordon: As a part of our loan portfolio acquisition that we announced.
Scott Gordon: And at this point.
Scott Gordon: The industry continues to grow good operators in the industry outside of revisiting that growth and expansion plans.
Scott Gordon: Im sort of thinking about raising more capital to support their plans we have.
Scott Gordon: A an active dialogue with many of the best operators in the industry and have an active pipeline of over $425 million.
Umesh Mahajan: On page 11, we show our portfolio summary as of March 31. There were no new investments in this quarter. As you can see at the top of the page, we have over 54 million, almost 55 million, invested with an average yield to maturity of about 18%. A few points we'd like to reiterate about this portfolio are that all of our positions are forced lien loans or secured bonds. None of these loans or bonds are in auto cool status.
Scott Gordon: On page 11, visual our portfolio summary, as of March 31.
Scott Gordon: Kevin O'neill investments in this quarter as you can see at the top of the page we have over 54 million almost 55 million invested with an average yield to maturity of about 18% of your point, we'd like to reiterate about this portfolio.
Scott Gordon: All of our positions that are first lien loans are secured bonds.
Scott Gordon: None of these loans or bonds are in non accrual status.
Umesh Mahajan: Over 90% of our invested portfolio is in floating rates, loans, and our gross portfolio yield of 18% compares favorably to the broader listed BDC universe. With that, I will pass it on to Scott Gordon for a few remarks. Thank you.
Scott Gordon: Over 90% of our investment portfolio.
Scott Gordon: Is in drilling rate.
Scott Gordon: Loans and our gross portfolio yield of 18% compares favorably to the broader listed BDC universe.
Scott Gordon: With that let me pass it onto Scott Gordon for a few remarks.
Scott Gordon: Thanks so much. I just wanted to take a minute and talk about the big industry news of late, which has been the apparent approval by the DEA of the HHS recommendation to reschedule. This has been a widely anticipated move since the HHS announcement last year. However, the process timeline is uncertain and could take up to several years to complete if it is met with challenges seeking judicial review and or administrative hearings. The change, however, would have a major impact on company cash flows through the elimination of the 280e tax rate.
Scott Gordon: Thanks, So much just wanted to take a minute and talk about the big industry news of late which has been the apparent approval by the DEA have the hhs's recommendation to reschedule candidates.
Scott Gordon: This has been a widely anticipated move since the HHS in August of last year.
The process timeline, however is uncertain.
Scott Gordon: Could take up to several years to complete has met with challenges seeking judicial review <unk> administrative hearings.
Scott Gordon: The change however would have a major impact on company cash flows through the elimination of the $2 80, a tax effect.
Scott Gordon: While we view the news as positive, like all legislative initiatives in the cannabis realm, the devil remains in the detail around both timing and implementation. Given the myriad of ambiguities with respect to that, we believe that the current dynamic of capital constraints in the industry will be largely unchanged. Nor do we extrapolate anything further on the regulatory front because of the rescheduling process. The Safer Act and other pending pieces of reform will muddle as usual and continue to be subject to all of the same vagaries and obstacles that have been present for some time. As such, we take a mildly optimistic view of the news and maintain some hope that perhaps this time is different. On balance, it's clearly a step in the right direction. With that, I'll catch that.
Scott Gordon: While we view the news is positive what all legislative initiatives from the candidates around the Devil remains in the detail around both timing and implementation.
Scott Gordon: Given the myriad of ambiguity is with respect to that we believe that the current dynamic of capital constraints in the industry will be largely unchanged.
Scott Gordon: Nor do we extrapolate anything further on the regulatory front because of the rescheduling process Safer Act and other pending pieces of reform will muddle as usual and continue to be subject to all of the same bakeries and obstacles that have been present for some time.
Scott Gordon: As such we take a mildly optimistic view of the news and.
Scott Gordon: We maintained some hope that perhaps this time is different on.
Scott Gordon: On balance it is clearly a step in the right direction.
Speaker Change: With that I'll pass back to <unk>. Thank.
Umesh Mahajan: Thank you, Scott. That's all we have in terms of prepared remarks. We can take questions.
Speaker Change: Thank you Scott.
Speaker Change: That's all we had in terms of prepared remarks, we can take questions.
Speaker Change: Is there any duty.
Operator: Thank you. As a reminder to ask a question, please press star 1 1 on your telephone and wait for your name to be announced. To withdraw your question, please press star 1 1 again. Please stand by while we compile the Q&A roster. Our first question comes from the line of Michael Lavery from Piper Sandler.
Speaker Change: Thank you as a reminder to ask a question. Please press star one one on your telephone and wait for your name to be announced to withdraw. Your question. Please press star one one again.
Speaker Change: Please standby, while we compile the Q&A roster.
Speaker Change: Yes.
Speaker Change: Our first question comes from the line of Michael Lavery from Piper Sandler.
Michael Lavery: Thank you and good morning.
Michael Lavery: Morning, Michael.
Michael Lavery: Regarding the transaction, can you just touch on how it's progressing and maybe if there are any regulatory review updates or just your sense of what we should expect as far as that moves along?
Michael Lavery: Regarding the transaction can you just touch on.
Speaker Change: It's progressing and maybe if there is any.
Speaker Change: Regulatory review.
Speaker Change: Updates or just your sense of.
Speaker Change: What we should expect as far as that moves along.
Umesh Mahajan: Yeah, sure. So we have submitted a N-14 statement to the SEC for review on April 15th. That N-14 is a document that would be used as a proxy as well as providing information on the transaction. We are expecting that process to take another month or two; it is difficult to estimate the exact times it will take for the completion of SV's review, but following that review, we will be taking the shareholder role.
Speaker Change: Yes sure.
Speaker Change: So we have submitted.
Speaker Change: In 2014 states.
Speaker Change: Statement to the SEC for their review on April 15th.
Speaker Change: In 2014 is a.
Speaker Change: It is a document that would be used as a as a proxy as well as.
Speaker Change: Providing information on the transaction we are expecting.
Speaker Change: That process too.
Speaker Change: To take another month or two it is difficult to estimate the exact timing will take for the.
Speaker Change: The completion of his visa view.
Speaker Change: But following that review, we will be taking the shareholder walls. So.
Umesh Mahajan: Everything in terms of the ongoing process for approval is going as we had anticipated. We think we should get comments from SAC on the document in short order. It's difficult to know exactly when. And, and we still think that we should be expecting a close on this transaction sometime.
Speaker Change: Everything is.
Speaker Change: In terms of the ongoing process for approval and everything is going as we had anticipated.
Speaker Change: We think we should get we.
Speaker Change: We should get comments from SSE on the document.
Speaker Change: Chart order stiffened, Illinois exact event.
Speaker Change: And we still think that we should be.
We should be expecting a call.
Speaker Change: Those on this transaction sometime.
Speaker Change: This summer.
Umesh Mahajan: Okay, great. That's helpful. And just as far as rescheduling has been, you know, sort of in the spotlight in the industry in recent days, can you give a sense of what the implications would be expected to be for you guys in particular and just how the ramifications of that might look for you?
Speaker Change: Okay, Great that's helpful.
Speaker Change: As far as.
Speaker Change: Rescheduling has been.
Speaker Change: Sort of in the spotlight.
Speaker Change: History in recent days.
Speaker Change: Can you give a sense of.
Speaker Change: What the implications would be expected to be for for for you guys in particular and just how the ramifications of that might look for you.
Umesh Mahajan: Yeah, but as Scott mentioned, in a device that there is. There is clearly an implication of the 280E on cannabis operators, and it's an extremely positive one. So the first impact, really from our perspective, is that our portfolio companies, both the companies that we have in our portfolio right now as well as the companies that are, or the borrowers that are in the anticipated portfolio acquisition, are going to have much better cash flows, and the credit metrics are going to look different. So that's a positive.
Speaker Change: As Scott mentioned.
Speaker Change: In his remarks.
Speaker Change: There is.
Speaker Change: That is clearly the implication of the $2 <unk> on the cannabis operators and it's extremely positive one so the for us impact really from our perspective is that our portfolio companies.
Speaker Change: Both the companies that we have in our portfolio right now as well as the companies that are by the borrowers that are in the anticipated.
Speaker Change: The acquisition is going to have.
Speaker Change: Much better cash flows and the credit metrics are that look.
Speaker Change: Different entity.
Speaker Change: So that's a positive in terms of.
Umesh Mahajan: In terms of the overall dynamic, competitive dynamic for the lending industry, which we operate in, we do not think that just the announcement and even the ultimate passing of 280E is really going to change the dynamic from a supply and demand for capital for cannabis operators. We do not expect the floodgates for capital to open up with this announcement or even with the passing of 280E, and as a result... Please over the next few years.
Speaker Change: Overall.
Speaker Change: <unk>.
Speaker Change: And I'll make for the lending industry, which we operate in.
Speaker Change: We do not think that just the announcement and even the ultimate passing of two AE is really good.
Speaker Change: The dynamic from a supply and demand.
Speaker Change: For capital for the cannabis operators video.
Speaker Change: We do not expect the floodgates for catheter to open up.
Speaker Change: With this announcement or even with the batting up to AE and as a result.
Speaker Change: At least over the next couple of years, we do not anticipate a.
Umesh Mahajan: In a couple of years, we do not anticipate a significant change in either the yields or the overall competitive dynamic. And we do think that the news has led most of the cannabis market to rethink their growth plans. The industry continues to grow pretty rapidly, and the operators, the good operators, are definitely rethinking and revisiting their plans, and they're going to need the capital, and we will be there to support them. So, from our perspective, we think it's a positive for our credit, and metrics of our book borrower companies. We think the dynamics, the competitive dynamics, won't change for us in the near term or definitely over the next year or And it's positive in the sense that the operators are better and are going to start talking about their growth plans and much more.
Speaker Change: A significant change in either the us or the overall confidence.
Speaker Change: Okay.
Speaker Change: And we do think that the news had led most of the cannibals prepays.
Speaker Change: To rethink their growth plans.
Speaker Change: Industry continues to grow pretty rapidly and operating areas.
Speaker Change: <unk> are definitely thinking the visiting their plans and then theyre going to need the capital.
Speaker Change: And we will be there to support them. So from our perspective, we think it's a positive for our credit.
Speaker Change: The metrics of our borrower companies.
Speaker Change: The dynamics the competitive dynamics doesn't change for us in the.
Speaker Change: In the near term are definitely over the next year or two.
Speaker Change: And it's positive in the sense that the operators are better.
Speaker Change: And are going to start talking about their growth plans and much more awareness.
Umesh Mahajan: Okay, great. Thank you so much.
Speaker Change: Okay, great. Thank you so much.
Speaker Change: Yes.
Speaker Change: Thank you.
Operator: One moment for our next question. Our next question comes from Pablo Zuanich from Zuanich and Associates.
Speaker Change: One moment for our next question.
Speaker Change: Yeah.
Speaker Change: Our next question comes from the line of Pablo <unk> from <unk> Associates.
Pablo Zuanich: Hey Pablo. Good morning. Good morning.
Pablo: Hey, Bob Good morning, good morning, Thank you.
Scott Gordon: Thank you. Look, I have two quick questions. One, a follow-up to the prior question. You know, of course, the 280E news and rescheduling are all positive, right? But does that mean that a lot of operators maybe go on a wait-and-hold pattern for now and don't engage until there's more clarity on when that's implemented and on the 280E benefits? I realize that in some states, right, they may go recreational, so they may need to expand, although some of them may already have capacity there.
Pablo: Quick question with one follow up to that prior question.
Pablo: Of course at <unk> newest rescheduling is all positive right, but does that mean that a lot of operators maybe go in a wait and hold biogen for now I'm going to engage until there's more clarity on the wind that's implemented and on the <unk> benefits I realize that in some states ready to megawatt rigs. So they may need to expand although some of them may already have capacity.
Scott Gordon: So I'm just wondering whether we have a period, maybe almost one year, where the demand side is temporarily weakened. I don't know if you want to comment on that. And then the second... Yeah, I'll take that, Pablo.
Pablo: So I'm just wondering whether we have a period, maybe almost one year what are the demand side. It's weakened temporarily I don't know if you want to comment on that and then the second let's start with our first effects.
Scott Gordon: Look, I think we've already seen that dynamic, you know, since the announcement, the initial announcement by HHS of the recommendation to switch to rescheduling to Schedule 3. And so, you know, this has definitely been the backdrop of the market since that announcement, whatever it was four or five months ago. And look, I think there is obviously some degree of hope and expectation among the operators and our borrowers that, you know, this news will sort of drive down borrowing costs and, you know, kind of open the floodgates of capital into the market. But, you know, as Umesh just alluded to, we just don't see that.
Speaker Change: I'll take that Bob.
Bob: Look I think we've already seen that dynamic since the announcement the initial announcement by HHS of the recommendation to switch to rescheduled schedule III and so.
Bob: This has definitely been the backdrop.
Bob: Of the markets since that announcement whatever it was four five months ago.
Bob: And.
Bob: Look I think they're there.
Bob: There is obviously some degree of hope and an expectation among the operators and our brokers that this news will sort of drive down borrowing costs and kind of open the floodgate of capital into the market.
Speaker Change: As you just alluded to we just don't see that I think there are many impediments.
Scott Gordon: I think there are many impediments to capital constraints in the marketplace, and, you know, 280E wasn't really sort of among the major factors. The federal illegality and just the nature of the complexity of the industry are, I think, the barriers keeping capital from coming in, and that's unchanged. So I think, yeah, you're right that, you know, there might be some, you know, some level of companies out there that, you know, might opt to take a more sort of patient wait and see approach with the belief that, you know, better terms are sort of coming if they do that.
Of the capital constraints in the marketplace.
Speaker Change: 280, <unk> wasn't release are among the major factors.
Speaker Change: The federal illegality in just the nature of the complexity of the industry I think or are the barriers of.
Speaker Change: Keeping capital from coming in and and that's unchanged. So.
Speaker Change: I think yes, you are right.
Speaker Change: There might be.
Speaker Change: Some.
Speaker Change: Some level of companies out there that might opt to take a more sort of patient wait and see approach.
Speaker Change: With the belief that better terms are sort of coming if they do that.
Scott Gordon: But I also think, you know, a lot of the companies that we speak to sort of accept the sober reality of what has been, you know, the history of disappointment with many of the legislative things that have happened in the industry, and I think if capital is available to them, they'll take it. So, a mixed bag, but, yeah, I could see on the margin where, you know, this might take another sort of three to six months of needing to play out for, you know, some folks who, we think, ultimately, you can't wait forever, and many of the operators have already been waiting for a fairly long time.
Speaker Change: But I also think.
Speaker Change: A lot of the companies that we speak to sort of accept the silver reality of what has been the history of disappointment.
Speaker Change: On many of the legislative things that happen.
And the industry and I think the capital is available to them.
Speaker Change: They'll take it so a mixed bag, but yes, I can see on the margin where.
Speaker Change: This might take another sort of three to six months.
Speaker Change: Meaning to play out for some folks who might want to stay on the sidelines, but.
Speaker Change: We think ultimately.
Speaker Change: You can't wait forever and.
Speaker Change: And many of the operators have already been waiting for a fairly long time. So those that have real kind of expansion plans and need that growth capital I think.
Scott Gordon: So, you know, those that have real kinds of expansion plans and need that growth capital, I think, you know, don't have to wait forever. And then, just on a separate subject, in terms of the transaction structure, Maybe just to clarify, obviously, Chicago Atlantic is a group, right? And your transaction is a group, the holding. I'm just trying to understand, in terms of what's public information, this idea that it could become a bit of a sister company for you, that you work together, you coordinate, I'm referring to the REIT, or that's just a totally separate organization, and your transaction is really with the holding company.
Speaker Change: Choice.
Speaker Change: Understood and then just on a separate subject.
Speaker Change: In terms of the transaction structure maybe.
Speaker Change: Maybe just to clarify you're obviously, Chicago Atlanta Ticket's, a group right in your transactional user group the holding company. It has nothing to do with it right. That's a public listed vehicle.
But I'm just trying to understand this.
Speaker Change: What's probably inflammation.
Speaker Change: The idea that that becomes somewhat of a sister company for you that you work together you coordinate I'm, referring to the REIT or is that just a totally separate organization and you heard Joe construction is really with the holding company.
Scott Gordon: Pablo you're right, they're completely separate, and yeah, they're separate. The reader is a completely independent entity from
Speaker Change: The two are completely separate Pablo you are right they are completely separate.
Speaker Change: <unk>.
Speaker Change: Yes, they are separate data as a completely independent entity from the meeting.
Pablo Zuanich: All right. Okay. That's all I have. Thank you.
Speaker Change: Alright, Okay. That's all I have thank you.
Operator: Thank you. As a reminder, to ask a question, please press star 11 on your telephone and wait for your name to be announced. To withdraw your question, please press star 11 again. At this time, I'm showing no further questions. I would now like to turn the conference back over to Umesh Mahajan for closing remarks.
Speaker Change: Thank you.
Speaker Change: As a reminder to ask a question. Please press star one one on your telephone and wait for your name to be announced.
To withdraw your question. Please press star one one again.
Speaker Change: At this time I am showing no further questions I would now like to turn the conference back over to will mesh mahajan for closing remarks.
Umesh Mahajan: Well, thank you, everyone, for joining us on this call. We look forward to keeping you updated on the transaction and look forward to speaking with you again on the next earnings call. Thank you very much.
Speaker Change: Well. Thank you everyone for joining us for this call. We look forward to keep giving you updates on the transaction and.
Speaker Change: And <unk>.
Speaker Change: Look forward to speaking with you again in the next earnings call. Thank you very much.
Operator: This concludes today's conference call. Thank you for participating. You may now disconnect.
Speaker Change: This concludes today's conference call. Thank you for participating you may now disconnect.