Good day, and welcome to the Chicago Atlantic Real Estate Finance, Inc. 4th Quarter 2025 Earnings Call. All participants will be in listen-only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star then 1 on a touch-tone phone. To withdraw your question, please press star then 2. Please note this event is being recorded. I would now like to turn the call over to Tripp Sullivan of SCR Partners. Tripp, please go ahead.

Thank you, Bailey. Good morning. Welcome to the Chicago Atlantic Real Estate Finance Conference call to review the company's results. On the call today will be Peter Sack, Co-Chief Executive Officer, David Kite, President and Chief Operating Officer, and Phil Silberman, Chief Financial Officer. Our results were released this morning in our earnings press release, which can be found on the Invest Relations section of our website, along with our supplemental file with the SEC. A live audio webcast of this call is being made available today. For those who listened to the replay of this webcast, we remind you that the remarks made herein rather than today would not be updated subsequent to this call. During this call, certain comments and statements we make may be deemed forward-looking statements within the meaning prescribed by the securities laws, including statements related to the future performance of our portfolio, our pipeline and potential loans, and other investments, future dividends, and financing activity. All forward-looking statements represent Chicago Atlantic's judgment as of the date of this conference call, and are subject to risk and uncertainties that can cause actual results to differ materially from our current expectations. Investors are urged to carefully review various disclosures made by the company, including the risk and other information disclosed in the company's filings with the SEC. We will also discuss certain non-GAAP measures, including but not limited to distributable earnings. Definitions of these non-GAP measures and reconciliations to the most comparable GAP measures are included in our filings with ASCC. I'll now turn the call over to Peter Sack. Please go ahead.

Thank you, Tripp, and good morning, everyone. Chicago Atlantic operates within a unique intersection of real estate, credit, and the emerging sector of the U.S. cannabis industry.

Our thesis is simple.

We apply best-in-class sector expertise, highly developed relationship-based sourcing capabilities, and fundamental credit and real estate investment principles to make debt investments in an industry with limited sources of debt capital. We take advantage of limited lending competition to structure first what we believe to be differentiated downside risk of senior secured positions, and second, a highly outsized return profile relative to the broader credit and real estate lending portfolios. Most lending companies are limited in their ability to invest in underwriting and originations expertise in any one particular sector. They become masters of none and they're price takers, investing in whatever the next investment banker or private equity sponsor offers. Because we focus on one sector with limited lending competition, we have the luxury of investing in a highly respected originations team made up of the best-known leaders in our space. We maintain an outsized underwriting, real estate, and analytics team that specializes solely in this unique niche of cannabis. We directly originate and agent nearly all of our investments. We maintain a team of over 100 professionals overseeing only $2.3 billion in capital under management because we know that with limited lending competition, our investment in expertise and execution capabilities translates directly into alpha the generation for our investors. Our discipline, our focus, and institutional investment platform built for the long run is reflected in the execution of Chicago Atlantic real estate finance in 2025. And already nearly three months into 2026, we're exceeding our expectations and more enthusiastic than ever about our opportunity set for the coming year. Thank you for indulging me in this reprisal of the fundamentals of Chicago Atlantic's differentiation. It's important to reinforce this in the context of the investor community's recent reconsideration of risk and reward in the broader private credit ecosystem. Our portfolio has extremely limited overlap with other private credit markets. The drivers of current private credit market pressure simply are not relevant to us. We have no exposure to software, receivables factoring, nor recent examples of fraud in syndicated facilities. Our sector has not experienced an over-allocation of capital, leading to compressed yields that is happening across other sectors of private credit. Our strategy is built on a disciplined focus on credit and collateral. We work collaboratively with our borrowers to create value, and our work is executed by a team of originators and underwriters with deep industry and rigorous risk management expertise. I spoke last quarter about how optimistic we are about our current environment. The pipeline remains strong and currently stands at $616 million. We continue to get first looks on the largest opportunities within the cannabis sector, but we're also leading when it comes to creative solutions for our borrowers as well. For example, during the fourth quarter, the Chicago Atlantic Platform closed on a credit facility to support the largest cannabis ESOP completed to date. We've talked about ESOPs as a compelling opportunity, and we believe this loan highlights our capabilities to trailblaze, bringing financial solutions common in broader lending markets to the more nascent cannabis lending market. Over recent months, there's been positive momentum in cannabis policy, with bills introduced in several states to change the legality of the product. In December 2025, President Trump signed an executive order directing his administration to reclassify cannabis from a Schedule I to a Schedule III regulated product. While this is not federal legalization, rescheduling would represent the most significant federal policy change in years. We highlight on a slide in this quarter supplemental how this sets the stage for improved industry economics without opening the door for increased lending competition. We believe Chicago Atlantic is well positioned to benefit from these developments, but the success of our strategy is not dependent on these changes. As we mentioned in previous quarters, we underwrite every investment assuming no regulatory driven credit improvements. We continue to create a differentiated and low levered risk return profile that is insulated from cannabis equity volatility and outperforms our industry agnostic mortgage reapiers. As David will break down for you in a moment, because we have structured our floating rate loans with high interest rate floors and no caps, only 9% of our total loan portfolio is exposed to further rate declines based on the prevailing prime rate. That discipline provides a meaningful measure of protection to the portfolio.

We are focused on outperforming delivering a consistent yield to our shareholders despite volatile industry sentiment the pipeline is expanding and we have already established strong momentum to kick off 2026. david why don't you take it from here thank you peter as of december 31 our loan portfolio principal totaled approximately 411 million across 26 portfolio companies with a weighted average yield to maturity of 16.3% compared with 16.5% for the third quarter. Gross originations during the quarter were approximately 19 million of principal funding, of which 5 million was advanced to a new borrower and 14 million was advanced to existing borrowers. As anticipated, all the loans that had maturities at the end of 2025 were extended with new contractual maturities in 2026. During the quarter, we made significant progress on loan number nine. We funded in advance for the borrower to acquire three additional dispensaries in Pennsylvania, bringing their total to six operating dispensaries. In connection with this advance, the company received all past due interest from the borrower, which brought the loan current as of December 31, 2025. We expect the six dispensaries to provide sufficient free cash flow to enable the borrower will remain current on its outstanding indebtedness and applicable covenants. Despite being brought current, which resulted in a risk rating upgrade from four to three, we maintained the loan on non-accrual status as of December 31, 2025. We expect to restore the loan to accrual status once the operator demonstrates sustained performance and continued timely debt service payments. As of December 31, 2025, our portfolio consisted of 37.6% fixed-rate loans and 62.4% floating-rate loans. The floating-rate portion is primarily benchmarked to the prime rate. Following December's 25 basis-point rate reduction, which brought the prime rate to 6.75%, only 9% of our portfolio remains exposed to further rate declines. The remaining 91% is either fixed rate or protected by prime rate floors of 6.75% or higher. Importantly, our floating rate loans are not exposed to interest rate caps. This structural advantage, combined with our rate floor protections, positions our portfolio favorably compared to most mortgage REITs. We've included a slide in our supplemental presentation that highlights how well we safeguard our portfolio from interest rate volatility you'll note that based on the current portfolio as of december 31 a hypothetical 100 basis point decline in benchmark rates is estimated to result in a mere 14 000 decrease to net investment income and a 200 basis point decline would actually result in an increase to net investment income all else remaining equal This is primarily the result of minimal exposure to rate declines within our asset portfolio, offset by the positive impact of interest rate expense declines resulting from a revolver loan bearing a prime rate floor of 3.25%. Should rates begin to move back up, then of course we should expect to see material gains in net investment income. Total leverage equal 32% of book equity at December 31 compared with 33% as of September 30. As of December 31, we had $49.1 million outstanding on our senior secured revolving credit facility and $49.3 million outstanding on our unsecured term loan. As of today, we have approximately $53 million available on the senior credit facility and total liquidity. Net of estimated liabilities of approximately $50 million. I'll now turn it over to Phil.

Thank you, David. Our net interest income of $14.2 million for the fourth quarter represented a 4% increase from $13.7 million during the third quarter of 2025. The increase was primarily attributable to the collection of past due unaccrued interest on loan number nine, totaling $1.7 million, which was recognized upon receipt. This was offset by the impact of the multiple benchmark prime rate cuts in the fourth quarter totaling 50 basis points 25 each in october and december 2025. total interest expense including non-cash amortization of financing costs for the fourth quarter was approximately 1.8 million an increase from 1.6 million in the third quarter the weighted average borrowings on our revolving loan increased to 33.6 million compared to 14 million during the third quarter. Our CECL reserve on our loans held for investment as of December 31 was approximately 5.1 million. On a relative size basis, our reserve for expected credit losses represents 1.23 percent of our outstanding principal of our loans held for investment. The reserve remained consistent with prior quarter. On a weighted average basis, our portfolio maintains strong real estate coverage of 1.2 times. Our loans are secured by various forms of other collateral in addition to real estate, including UCC1 all-asset liens on our borrower credit parties. These other collateral types contribute to overall credit quality and lower loan-to-value ratios. Our portfolio has a loan-to-enterprise value ratio on a weighted average basis of 44.2 percent as of December 31, 2025, calculated as senior indebtedness of the borrower divided by the fair value of total collateral to refi. Distributable earnings per weighted average share on a basic and fully diluted basis were approximately 44 cents and 43 cents for the fourth quarter and $1.92 and $1.88 respectively for the year. And in January, we distributed the fourth quarter dividend of 47 cents per common share declared by our board in December. Since inception, we've distributed $8.47 per common share in dividends, which represents an annualized yield on cost of approximately 12.4% when measured against our IPO price. Our book value per common share outstanding was $14.60 as of December 31, 2025, and there were approximately 21.5 million common shares outstanding on a fully diluted basis as of such date. During the subsequent period from January 1, 2026 through today, the company has advanced new gross loan principal of approximately $51.1 million, comprised of $16.2 million advanced to one new borrower and $34.9 million to existing borrowers on delayed draw and revolving credit facilities. Additionally, the company received a total of $40.4 million in loan repayments, comprised of $3.1 million of scheduled amortization payments and $37.3 million in early prepayments, which included the full repayment of loan number one and loan number 27. We expect to continue to maintain dividend payout ratio based on our basic distributable earnings per share of 90 to 100 percent for the 2026 tax year. If our taxable income requires additional distributions in excess of the regular quarterly dividend to meet our taxable income requirements, we expect to meet that with a special dividend in the fourth quarter. Operator, we're now ready to take questions.

We will now begin the question and answer session. To ask a question, you may press star then 1 on a touchtone phone. If you are using a speakerphone, please pick up your handset before pressing the keys. If at any time your question has been addressed and you would like to withdraw, please press star then 2. At this time, we will pause momentarily to assemble our roster. Our first question comes from Erin Gray with Alliance Global Partners. Please go ahead.

Hi, good morning, and thank you for the questions. First question, you know, it's encouraging to hear the commentary on demand for growth capital that you're seeing. In terms of the pipeline, can you provide maybe some general line of sight as to, you know, when some of those originations might come to fruition? And how many of those are maybe at the later stage of being finalized? And then secondly, can you provide comfort in being able to potentially deliver another year of net portfolio growth?

And thank you. We are still targeting net portfolio growth for this year. I think we have a fairly high degree of confidence in our ability to execute on the pipeline. And I think it's helpful to put in context that as of March 12th, we have about 50 million of liquidity available. And this, frankly, just isn't as much as we would like relative to the pipeline that we have. That amount of liquidity can be deployed relatively quickly. The bigger unknown at this part earlier in the year is what repayments in the portfolio will occur between now and December 31st.

And that's difficult to forecast. I appreciate the color, Peter, and can to understand some of the uncertainty in terms of, you know, the repayments. So maybe a second question, you know, outside of that, can you talk about maybe the outlook in terms of current yields for potential deals in the pipeline? And has rescheduling, you know, been coming into play on, you know, rate negotiations, the underwriting process, or has that largely been, you know, not quite taking rescheduling into account yet? Thanks.

Hi, can you guys still hear me here? oh apologies um we are um rescheduling has driven increases in demand for debt capital that we're seeing in the market operators accelerating investment decisions and accelerating merger and acquisition decisions it has not changed the conversation around pricing nor has it changed how we underwrite and evaluate risk that's largely due to the fact that reschedule the announcement of rescheduling and even the execution of rescheduling has yet to lead to new lenders entering the market from the vantage point that we set up.

Okay, great. So, yeah, increase demand, but you're not seeing more competition come to the market. Okay. That's helpful color there, Peter. Thanks very much. I'll jump back in the queue.

Our next question comes from Chris Muller with Citizens Capital Markets. Please go ahead.

Hey, guys. Thanks for taking the question. And I guess I'll stay on a similar line of questioning here. So, nice slide you guys have on the regulatory reform in the deck there. On the point about not seeing increased competition, is that as we sit today or does that assume Schedule 3 gets finalized? And then maybe a second layer to that question, what do you think would increase competition in the space?

As we said today, we've not seen new lenders enter the market due to, on the follow-on of Trump's announcement of rescheduling. We also have not heard of lenders or significant lenders sitting on the sidelines and saying, well, when rescheduling happens, we're ready to deploy X amount of capital, and we're gathering opportunities to be able to do that. We have not observed that in the market. But what do I think would be required to support a large influx of new lenders into the cannabis market? I think there's a series of reforms that would be very helpful, and we, in general, look forward to that. There is, I think, one full legalization would open up. Cannabis would open up really the broader way of private credit market participants to enter. A regulatory framework under which existing cannabis operators could produce, market, and distribute cannabis as a Schedule III substance perhaps would do that. I think it would be helpful to have cannabis companies listed on New York Stock Exchange and NASDAQ. It would be helpful to have the broader pieces of the financial ecosystem open to service in cannabis companies. That includes major accounting firms, major law firms, major custodians. There's a lot of, I think, little steps that individually don't seem like big hurdles, but are very important for opening up access to capital markets that are required and that I think still are going to take a long time to evolve in terms of how broader participants in our financial system approach and view cannabis as a market. And that process perhaps hasn't even begun yet.

Got it. Very helpful. And then I guess changing gears a little bit, it looks like there's two new non-accrual loans. Both of them are in Arizona. Are these loans to the same sponsor, or is it something market-specific in Arizona going on there?

They are loans related to the same sponsor. Arizona is having a challenging pricing environment that our borrower in this case is navigating in close collaboration with us.

Appreciate you guys taking the questions today.

Our next question comes from Pablo Zuanic with Zuanic and Associates.

Please go ahead. thank you and good morning everyone can we just go back to a loan number nine i know you gave a little color there but i'm just trying to understand i think the principle the combined principle end of september was 19 million and now it's 29 million so you decided to lend more money to a borrower that's in trouble right so i'm just just trying to understand the logic of that and then if you can provide more color in terms of what's going on with that borrower Please, thank you. I know you gave some color in the call.

You know, I think this is an opportunity. I think this is a, number nine has been a good example of really the full toolkit that Chicago Atlantic can bring to the table in addressing challenging credit situations and challenging workout and restructuring opportunities. In this position, we completed a full foreclosure on the assets and change of control and change of control of the assets in 2025 over the course and a recapitalization of the business. Over the course of 2025, the business reorganized its operations, improved its cash flow and revenue significantly. And at the end of 2025, Chicago Atlantic supported the company's acquisition of and, excuse me, of additional dispensaries within its market. And it did so both with capital from Chicago Atlantic Real Estate Financing and additional junior capital behind Chicago Atlantic Real Estate Financing. And it dramatically changed the operating profile of the business, the cash flow of the business, and it permits the company to become current on all of its interest in 2025. And so we hold this loan in, you know, I think as we said at the end of December 31, 2025, it's in a little bit of a gray area from an accounting position on how we need to present this loan. I say gray area because as of December 31, 2025, the loan is current on all interest, but we've chosen not to formally take it off non-accrual. I think that represents a high level of conservatism in how we view the portfolio and how we present the portfolio, which I think is important in this environment of private credit investor skepticism. but I think that those series of events make us confident or hopeful that we'll be revisiting that non-accrual status in shortly in 2026.

Yeah, and Peter, maybe if I could just chime in as well, Pablo, just to be clear, despite the loan being a non-accrual, the borrower made their January and February payments, and we recognize those as income on a cash basis. So despite the loan not being accrued, to Peter's point and for the reasons noted, we still are recognizing income as it's received in cash.

Right. Thank you. And then just moving on to the early repayments on loan number one and loan number 27. You know, when those things happen, I try to think in terms of, well, it could have been extended it, or maybe you did not want to extend it because of credit issues, or maybe that borrower had better alternatives out there. I don't know if you can give some color in terms of those two early repayments.

Loan number one was refinanced with a new credit facility in which Chicago Atlantic participated. it. So we did not extend the loan, but we executed or we participated and led a refinancing of the existing loan. Excuse me. Number 27, the loan did pay off and we opted not to pursue a refinancing for a number of decisions, some pricing, some credit related. But I think it's a healthy mix that you should expect to see that some loans will be refinanced, some loans will be extended. And in the case of a loan being refinanced and Chicago Atlantic not leading to refinancing, it doesn't mean that the relationship is over and that there won't be opportunities in the future.

Thank you. And then just a bigger picture, I was looking at the press release on the third quarter conference call. I think back then you talked about a pipeline of $415 million, and now it's $616, right? so obviously up $200 million, but on the other hand, you said, you know, no changes in pricing, no changes in terms of discussions. I'm just, I'm trying to reconcile the fact that the pipeline increased, you know, by 50%, and on the other hand, you're saying you're not changing the way you're evaluating risk based on rescheduling potential, and that there's no changes in pricing. I'm just trying to connect the tool.

Yep. You know, pipeline is a proxy for opportunity set, but there is, within that pipeline, there's a broad range of risk-reward of opportunities. As our capital becomes particularly constrained, and perhaps this is where you're going with your question, as our capital becomes constrained relative to the opportunity set, you obviously we'll see a forced change in selection and a forced change in the opportunities that we can fund and the risk-reward that we're funding. I think it's, and we're constantly evaluating what is the pricing that we can extract and how can we manage the levers of risk for the advantage of the funds. Um, and so, um, I do what I, I think I wanted to address more specifically is that rescheduling has not led us to change our, to lower the bar of underwriting, to decrease our credit underwriting standards, to increase, it's not leading us to increase the leverage at which we're willing to lend as another example. is not leading us to decrease the pricing at which we're deploying capital or it's not changing our willingness to deploy capital at lower levels. I hope that gives you some clarity on our mindset as we approach what is an evolving market opportunity.

Thank you. That's very helpful. And one last one, if I may. Obviously, thank you for all the callers you gave on the slide deck about the reform outlook and the positive impact for the industry. And, of course, I agree, but maybe playing a little bit devil's advocate, and I'm not pushing back, you know, I could make the argument that from a cash flow perspective, nothing changes for the companies because none of them, including Greensum, are paying 280E tax, right? So the only thing that could change is that share prices go up a lot and the companies are able to issue equity. But as we saw on December 18th, you know, the jump in share prices didn't last very long, right? So I'm afraid that we would have a situation, cash flow, we get rescheduling, but cash flow doesn't change, obviously, because they're not paying to ADE. And then we don't really have the ability for companies to issue equity because share prices don't go up so much. So from that perspective, you know, in practical terms, very little would change. I mean, I'm sure you would disagree with me, but if you can comment on that, Peter, that's my last question. Thanks.

Yeah, I think the fundamental disagreement is the fundamental piece that I would push back on is that is, I think, how you view the current environment, that the concept that companies are accruing a tax liability and not and are accruing a tax liability and not paying those taxes is not a particularly sustainable one in the long term. and it's an aspect of underwriting that we focus on very intensely when we're evaluating new opportunities. We're evaluating what amount of taxes are unpaid on their balance sheet today. If they're not current and not paying their 280 taxes, how might that balance grow over the life of our investment? And then what guardrails can we put in place from a covenant perspective and a loan agreement perspective to ensure that those balances don't grow and that those balances and their non-payment of taxes are factored into how we measure risk on a monthly basis when we receive their compliance certificates. And so we look at the current environment and to use, to paraphrase your words, we do not say, oh, they're not paying their taxes, so it doesn't matter. we look at that current environment with a very healthy amount of skepticism and factor it into how we underwrite our loans. And so when rescheduling does occur and those taxes are no longer being accrued because they're no longer due on a go-forward basis, that to us is a strong credit improvement.

Right. Thank you very much. That's great, Connor. Thanks.

This concludes our question and answer session. The conference is now concluded. Thank you for attending today's presentation. You may now disconnect.