“Since our last earnings call, we have sold two-thirds of the Private Company I credit facility, which was a Category 4 loan under our CECL analysis as of March 31, 2023 and was placed in foreclosure in May 2023. We sold our portion of the credit facility at par plus accrued interest to a multi-state cannabis operator and have a put right on the remaining one-third immediately prior to the transfer of one of the borrower’s cannabis licenses,” AFC said in the statement.
The company added that it has received a paydown of approximately $5.9 million on its portion of the Private Company A credit facility from the borrower’s sale of its Maryland assets and a repayment of all principal, accrued interest and exit fees upon maturity of the credit facility to a subsidiary of Private Company H.
AFC also updated shareholders on Private Company G, which had capitalized a substantial amount of its interest over a limited period. AFC said it has so far received 60% of the borrower’s June interest payment in cash with a payment plan to receive the rest of the June interest payment in cash over the course of this month.
That comment was tempered when AFC cautioned, “Although the borrower is trending in a positive direction, we still view this loan as risky and continue to closely monitor it.”
High interest rates have affected many in this economy, and cannabis feels the sting as well. AFC noted that higher interest costs have made certain construction projects uneconomical.
“Given the noticeable pullback by regional banks from the commercial real estate market, we are seeing quality deal flow, yet believe there is a longer time frame to deploy capital, which may lead to additional cash drag,” the company noted.
AFC Gamma declared a quarterly dividend for the quarter ending June 30 of 48 cents per outstanding share of common stock, payable on July 14 to the common stockholders of record on June 30, 2023. The company said it believes the June quarterly dividend represents a sustainable dividend level on the current portfolio, assuming no significant non-accruals and without any additional investments. Last quarter, AFC paid a dividend of 56 cents.
The statement said, “The $0.48 dividend level takes into account recent repayments we have received and cash drag associated with the current liquidity on our balance sheet, including from those recent repayments. We remain focused on deploying capital into deals with strong risk adjusted returns both in cannabis and traditional real estate loans, but expect reduced earnings until the cash is deployed and leverage is drawn.”