Chicago Atlantic Real Estate Finance, Inc. (NASDAQ: REFI) announced its results for the first quarter ending March 31, 2023. The commercial real estate company reported net interest income increased slightly by1% to approximately $14.9 million. The company attributed the increase to approximately $1 million of interest income from prepayment fees and acceleration of original issue discounts, the increase in the prime rate from 7.50% to 8.00%, and improved yield terms on facilities amended and/or restructured during the quarter. These increases were said too be partially offset by the impact of timing of early principal repayments.
Chicago Atlantic recorded net income of approximately $10.7 million, or $0.60 per weighted average diluted common share. This was a sequential increase of 46.3%. Total expenses were roughly $4.1 million before provision for current expected credit losses, representing a sequential decrease of 18.0%; primarily attributable to a $1.2 million decrease in net management and incentive fees.
“The better-than-anticipated results reflect the benefit of four principal paydowns during the quarter and the timing of our redeployment of the proceeds,” said John Mazarakis, Executive Chairman. “We are entering what we believe will be a period of favorable demand for capital from a proven lending platform such as ours. With our fortress balance sheet, we have purposefully reined in our originations to continue to focus on higher yielding investments and funding vertically integrated operators with the strongest credit profile.”
The company had distributable earnings of approximately $11.1 million, or $0.62 per weighted average diluted common share, representing a sequential increase of 10.6%. The company reaffirmed its outlook that was issued in March. Back then Chicago Atlantic said it expected to maintain a dividend payout ratio of approximately 90% to 100% on a full year basis. The regular quarterly common dividend is expected to be a minimum of $0.47 per weighted average diluted share.
Tony Cappell, Chief Executive Officer, added, “Our portfolio has continued to perform well with the percentage of floating rate loans increasing to 88%, the weighted average yield to maturity remaining above 19% and our loan to values well below the rest of the lenders in the industry. The balance sheet is under levered, and we have over $50 million of liquidity available to selectively fund the best operators in the cannabis industry.”
During the first quarter, Chicago Atlantic said it had total gross originations of $34.1 million, of which $33.3 million and $0.8 million were funded to new borrowers and an existing borrower, respectively. New originations were offset by principal repayments of $59.2 million, of which $57.8 million was attributable to unscheduled early repayments and sales.
The company reported no defaults upon senior securities. As of March 31, 2023, total loan commitments of approximately $328.1 million ($313.9 million funded, $14.2 million in future fundings) across 24 portfolio companies.