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    REFI
    Earnings call· Jun 2026(Q2 FY26)

    Chicago Atlantic Real Estate Finance Q2 FY26 earnings call REFI

    Aug 11, 2026 Source

    Executive summary

    Chicago Atlantic Real Estate Finance Q2 FY26 — Strategic Merger and Coach Capital Transaction Drive Evolution

    Chicago Atlantic Real Estate Finance delivered a productive quarter marked by strategic evolution, including a planned merger with Chicago Atlantic BDC and a significant second lien financing deal with Coach Capital. While distributable earnings were impacted by capital redeployment timing, the company maintains a strong cannabis loan pipeline and a high-yielding portfolio. The Coach Capital transaction diversifies revenue streams and offers potential for enhanced returns, positioning the company for future growth amidst an evolving regulatory landscape.

    Highlights

    5

    • Loan portfolio principal increased approximately $40 million quarter-to-quarter.

    • Pipeline of cannabis opportunities stands at $649 million, with $204 million backed by real estate collateral.

    • Coach Capital transaction involved issuing 4.3 million new common shares at a 1% premium to book value, preserving cash liquidity.

    • The Coach Capital transaction diversifies revenue streams and provides exposure to a different asset class with longer durations, offering potential for significant yield upside beyond the 12% blended annual rate through exit fees.

    • Weighted average yield to maturity of the loan portfolio remained strong at 15.8%, consistent with Q1 FY26.

    Concerns

    3

    • Distributable earnings of $0.44 per basic weighted average common share came in below the $0.47 dividend.

    • Income growth was affected by a capital redeployment timing gap, as $16.3 million of loans were prepaid early in the quarter with capital redeployed later.

    • Total leverage increased to 47% of book equity at June 30, compared with 38% as of March 31.

    Guidance & targets

    2
    CategoryTargetConfidence
    Merger Closing
    Q4 2026
    high materiality
    High
    Dividend Payout Ratio
    90% to 100%
    medium materiality
    High

    Operational metrics

    27
    Distributable earnings per basic weighted average common share
    $0.44below $0.47 dividend
    Q2 FY26

    Reflects timing of capital redeployment rather than material change in business or portfolio quality.

    Distributable earnings per fully diluted weighted average common share
    $0.43
    Q2 FY26
    Loan portfolio principal
    $453 millionincreased approximately $40 million quarter-to-quarter
    as of June 30, 2026

    Includes loans held for investment and loans at fair value.

    Weighted average yield to maturity
    15.8%consistent with Q1 FY26
    Q2 FY26
    Repayments
    $19.7 million
    Q2 FY26

    Offset originations during the quarter.

    Portfolio risk rated 4 or higher
    10.8%compared with 10.7% as of March 31, 2026
    as of June 30, 2026

    Slight shift due to change in total portfolio amount, not change in ratings on loans.

    CECL reserves on new loans
    $0.6 million
    Q2 FY26

    Reflected reserves on two new loans.

    Portfolio on non-accrual status
    3.7%decrease from approximately 4.8% as of March 31, 2026
    as of June 30, 2026
    Fixed rate loans
    37.5%
    as of June 30, 2026

    Portion of total portfolio.

    Floating rate loans
    62.5%
    as of June 30, 2026

    Portion of total portfolio.

    Current prime rate
    6.75%
    current

    100% of prime rate loans are at their floors.

    Loan principal exposed to further rate declines
    3.6%
    total portfolio

    Floating rate loans are not exposed to interest rate caps, combined with rate floor protections.

    Net interest income
    $12.8 milliondecreased $0.3 million or 2.2% from Q1
    Q2 FY26

    Decrease attributed to timing of redeployments and decrease in one-time non-recurring fee income.

    One-time non-recurring fee income
    $0.8 millioncompared with $1.1 million during Q1
    Q2 FY26
    Total interest expense
    $2.4 millionincrease from $2 million in Q1
    Q2 FY26
    Weighted average borrowings on revolving loan
    $67.5 millionincreased from $48 million during Q1
    Q2 FY26
    CECL reserve on loans held for investment
    $9.4 million
    as of June 30, 2026
    Portfolio weighted average real estate coverage
    1.2x
    Q2 FY26
    Portfolio weighted average loan-to-enterprise value ratio
    46%
    Q2 FY26
    Dividend distributed
    $0.47
    Q2 FY26

    Per common share, declared by board in June, distributed in July.

    Dividends distributed since inception
    $9.41
    since inception
    Book value per common share outstanding
    $14.15
    as of June 30, 2026
    Common shares outstanding (fully diluted)
    21.7 million
    as of June 30, 2026
    New common shares issued (Coach transaction)
    4.3 million
    July 9th, 2026

    Issued in exchange for second lien notes with Coach Capital.

    Common shares outstanding (pro forma for Coach transaction, fully diluted)
    26 million
    pro forma
    Coach notes aggregate principal balance
    $62.5 million
    July 9th, 2026

    Second lien notes received in exchange for common stock issuance.

    Available liquidity on senior credit facility
    $15 million
    as of August 11, 2026

    Largely representative of available liquidity for new deployments.

    Industry KPIs

    3
    MetricValueDetails
    Investment volume closed$56.8 millionUSD
    Net debt adjusted EBITDA47%%
    Ffo core ffo normalized ffo per share$0.44USD

    Orderbook & backlog

    1
    Cannabis opportunities pipeline$649 millionJune 30, 2026

    Only $204 million is backed by real estate collateral.

    Deals & partnerships

    2
    Chicago Atlantic BDC Inc. (Lean)Agreement to merge ReFi with and into Lean in an all-stock, adjusted NAV-for-NAV transaction, with Lean continuing as the surviving company. ReFi will first elect to be treated as a business development company (BDC).

    Both boards have unanimously approved the transaction. Subject to required stockholder and regulatory approvals, lender consents, and other customary closing conditions.

    Affiliates of Coach CapitalSecond lien financing of 32 retail properties across the United States that are managed by affiliates of Coach Capital. ReFi issued approximately 4.3 million new common shares in exchange for second lien mortgage notes.$62.5 million

    Each of the 32 retail properties, leased to cannabis tenants, is individually secured by the second lien mortgage notes. The transaction closed on July 9, 2026. For GAAP purposes, the Coach Notes are expected to be presented as a reduction of stockholders' equity rather than as loans held for investment, and associated cash flow recorded through stockholders' equity. For REIT qualification, they are expected to be treated as qualifying real estate assets.

    Risks & headwinds

    3
    Distributable earnings below dividendQ2 FY26

    Distributable earnings of $0.44 per basic weighted average common share came in below the $0.47 dividend.

    Mitigation: Management stated this largely reflects the timing of capital redeployment rather than any material change in underlying business or portfolio quality. They expect to distribute all or nearly all distributable earnings through the merger date.

    Capital redeployment timing gapQ2 FY26

    $16.3 million of loans were prepaid early in the quarter, and the capital wasn't redeployed until later, affecting income growth.

    Mitigation: The company's expertise in the cannabis ecosystem allows quicker redeployment than typical mortgage REITs, but underwriting discipline and stringent risk standards are maintained.

    Increased leverageQ2 FY26

    Total leverage equaled 47% of book equity at June 30, compared with 38% as of March 31.

    What to watch in Q3 FY26

    5

    Merger with Chicago Atlantic BDC (Lean) Progress

    Q4 2026
    CurrentPreliminary registration statement (Form N-14) filed.
    TargetShareholder and regulatory approvals, lender consents, and customary closing conditions met.

    Why it matters

    The merger is expected to unlock significant value, increase diversification, and improve liquidity for stockholders, fundamentally reshaping the company's structure and opportunities.

    We currently expect the transaction to close in the fourth quarter of 2026, subject to the required lien and refi stockholder approvals, lender consents, regulatory approvals, and other customary closing conditions.

    Q&A highlights

    8

    How is ReFi managing the timing issues with prepayments and capital redeployment to cushion distributable EPS relative to the dividend, especially before the merger?

    Peter Sack stated that through the completion of the merger with Lean, ReFi expects to distribute all or nearly all of its distributable earnings through its taxable income up to the merger date.

    “through the completion of the merger with Lean, I think today we're only prepared to say that we expect to distribute... all or nearly all of ReFi's distributable earnings through its taxable income through the merger date.”

    asked by Aaron Grey · answered by Peter Sack

    2 min read6 chapters

    Detailed Narrative

    01

    Q2 Performance & Capital Redeployment

    ReFi reported distributable earnings of $0.44 per share, below its $0.47 dividend, primarily due to the timing of📎 capital redeployment. Approximately $16.3 million in loans were prepaid early in the quarter, with capital redeployed later, impacting income growth despite a $40 million increase in portfolio principal. Management emphasized that this timing gap, rather than a change in underlying business or portfolio quality, was the main factor.

    02

    Strategic Merger with Chicago Atlantic BDC

    The company announced an agreement to merge with Chicago Atlantic BDC (Lean) in an all-stock, adjusted NAV-for-NAV transaction, expected to close in Q4 2026. This merger aims to unlock value through increased portfolio diversification, improved scale, and enhanced stock liquidity, driving market visibility and capital market opportunities. Both boards have unanimously approved the transaction, which is subject to stockholder and regulatory approvals, and lender consents.

    03

    Coach Capital Second Lien Financing

    Subsequent to quarter-end, ReFi closed a second lien financing deal with affiliates of Coach Capital, involving 32 retail properties leased to cannabis tenants. This $62.5 million transaction, funded by issuing 4.3 million new common shares at a 1% premium to book value, provides notes bearing 12% annual interest (10% cash, 2% PIK) and includes exit fees offering convexity from potential cap rate compression. This deal diversifies revenue streams and provides exposure to a different asset class with longer durations.

    04

    Evolving Regulatory Environment

    Management noted progress in federal cannabis policy changes, including the Department of Justice's rescheduling of certain medical marijuana products and the uplisting of two cannabis-related companies on the NYSE. An administrative hearing for recreational adult use rescheduling concluded on July 15th, with next steps pending. While encouraged, the company maintains a conservative outlook, stating its strategy does not depend on these changes but is positioned to benefit from market evolution.

    05

    Portfolio & Credit Quality

    The loan portfolio principal totaled approximately $453 million across 26 portfolio companies, maintaining a weighted average yield to maturity of 15.8%. Originations during the quarter amounted to $56.8 million, offset by $19.7 million in repayments. The percentage of the portfolio on non-accrual status decreased to 3.7% from 4.8% in the prior quarter, and 10.8% of the portfolio is risk-rated 4 or higher.

    06

    Debt & Liquidity

    Total leverage increased to 47% of book equity at June 30, up from 38% as of March 31. The company had $90.1 million outstanding on its senior secured revolving credit facility and $49.5 million outstanding on its unsecured term loan. Approximately $15 million remained available on the senior credit facility for new deployments.

    AI-generated summary of the company’s earnings call. Not investment advice.