Chicago Atlantic Real Estate Finance: Q4 and FY Financial Results

The TDR Three Key Takeaways for Chicago Atlantic Earnings:

  1. Chicago Atlantic increased net interest income by 8.0% in Q4.
  2. Portfolio expansion leads to $9.4 million in net income for Q4.
  3. Anticipates maintaining a dividend payout ratio of 90-100% for 2024.

Chicago Atlantic Real Estate Finance, Inc. (NASDAQ: REFI), a commercial mortgage real estate investment trust based in Chicago, disclosed its financial results for the fourth quarter and the fiscal year ended December 31, 2023, yesterday. 

The fourth quarter saw Chicago Atlantic achieving a net interest income of approximately $14.8 million, marking an 8.0% increase compared to the previous quarter. This uptick reflects the company’s effective interest income strategies, despite a minor sequential rise in interest expenses. The company’s total loan commitments reached roughly $378.8 million across 27 portfolio investments by the year-end, illustrating a dynamic yet strategic approach to loan origination and portfolio diversification.

Chicago Atlantic’s operational strategies and growth initiatives have played roles in its financial performance. John Mazarakis, Executive Chairman, highlighted the positive impact of regulatory improvements on investment opportunities, especially in the cannabis sector. This optimistic outlook, combined with strategic loan origination practices, has fortified Chicago Atlantic’s position in its niche market. Furthermore, the company’s management and incentive fees saw an increase, primarily contributing to the total expenses of about $5.8 million before provision for current expected credit losses. Despite this, Chicago Atlantic reported a net income of approximately $9.4 million or $0.51 per weighted average diluted share, amidst rising operational costs.

Investment and capital activities were key focus areas in the fourth quarter. Chicago Atlantic continued to grow, with gross originations totaling $24.7 million, balanced by principal repayments and non-recurring fee income from early repayments. The amendment of the secured revolving credit facility, extending its maturity to June 2026 and increasing the accordion feature to up to $150 million, underpins the company’s strategy for seizing upcoming opportunities.

Chicago Atlantic’s dividend payouts underscore its commitment to shareholder returns. The company paid a regular quarterly cash dividend of $0.47 per share and a special dividend of $0.29 per share for the fourth quarter of 2023. These dividends reflect the company’s financial strength and its strategy to maximize shareholder value.

Looking ahead to 2024, Chicago Atlantic anticipates maintaining a dividend payout ratio based on Distributable Earnings per weighted average diluted share of approximately 90% to 100%.

Despite the challenges, including an increase in net management and incentive fees, Chicago Atlantic has managed to maintain consistent growth through strategic loan origination, effective cost management, and an adaptive approach to changing market conditions. The company’s focus on the cannabis sector, with potential regulatory improvements and a strategic approach to lending, positions it well for future growth. Want to keep up to date with all of TDR’s research, subscribe to our daily Baked In newsletter.   

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