TDR Exclusive: Chicago Atlantic Co-CEO Peter Sack on Q1 Earnings

The TDR Three Key Takeaways regarding Chicago Atlantic’s Q1 2024 Results:

  1. Chicago Atlantic sees a 7.14% YoY revenue drop.
  2. Peter Sack, the Co-CEO, expresses optimism for Chicago Atlantic and the cannabis industry.
  3. The company increases its debt/equity profile from 18% to 21%.

Chicago Atlantic Real Estate Finance (US Ticker: REFI) is a company focused on providing loans to established cannabis operators. The company’s revenue experienced a decline over the past year. The company reported total revenue of $16.52 million in March 2023, which remained relatively stable at $16.53 million in December 2023 before decreasing to $15.34 million in March 2024. This represents a year-over-year (YoY) decline of 7.14% and a quarter-over-quarter (QoQ) decline of 7.20%. Looking forward, Peter Sack, the co-CEO of Chicago Atlantic, commented on this situation, saying, “Seeing a lot of strategic optimism. Even before the scheduling announcement, there was renewed optimism in the face of depressed equity valuations, recognizing that we still have to grow.” He added, “I think that’s just a sense of optimism that I don’t think was there in 2023.”

Chicago Atlantic’s cash position fluctuated over the past year, initially increasing from $4.60 million in March 2023 to $7.90 million in December 2023 before decreasing to $6.90 million in March 2024. The QoQ change in cash was -12.66%, indicating a reduction in the company’s liquidity. Chicago Atlantic’s credit profile, though, remains strong.

Despite the decline in revenue, Chicago Atlantic’s total assets grew from $359.23 million in December 2023 to $383.65 million in March 2024, reflecting a QoQ increase of 6.80%. This indicates that the company has been investing in assets, which could potentially lead to future growth opportunities. The REIT’s debt increased by $15.25M while its assets increased by $24.42M. Previously, the debt-to-equity ratio was 18%, and now it has increased to 21%. This is an increased leverage profile that should be noted.

Peter elaborated on Chicago Atlantic’s ongoing strategy during these challenging times: “Yeah, we focus on doing the same thing that we’ve been doing since our inception nearly six years ago. And that’s in a volatile, emerging industry, creating an investment product that attributes principal protection and attractive, reliable yield while funding the growth of some of the best operators across the country. And so when we think about asset and investment growth, it’s always with a constant thought to the opportunity set and the ability to deploy, raising capital and deploying it to attractive opportunities.”

He further expressed enthusiasm for new markets: “We’re very excited about prospects in the South. Besides Florida, we’re excited about mason markets in Georgia, Alabama, and Mississippi. And then we like the rumblings that we hear about Virginia”.

Peter also highlighted potential growth drivers: “New equity dollars coming into the industry. For us, that means more projects, more growth to finance, and better credit quality among borrowers. So it will create a huge new source of demand for debt capital and safer debt capital.”Chicago Atlantic has encountered a challenging period with declining revenue after years of growth and paying consistent dividends. But, as we see from our interview with Peter, the management of Chicago Atlantic remains upbeat about the company and industry future. To keep up with all of TDR’s research and news, subscribe to our daily Baked In newsletter.

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