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What changed in Chicago Atlantic Real Estate Finance, Inc.'s 10-K — 2024 vs 2025

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Paragraph-level year-over-year comparison of Chicago Atlantic Real Estate Finance, Inc.'s 2024 and 2025 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2025 report.

+512 added−487 removedSource: 10-K (2026-03-12) vs 10-K (2025-03-12)

Top changes in Chicago Atlantic Real Estate Finance, Inc.'s 2025 10-K

512 paragraphs added · 487 removed · 281 edited across 7 sections

Item 1. Business

Business — how the company describes what it does

60 edited+80 added−81 removed149 unchanged
Biggest changeOur loans are generally secured by real estate and, when lending to owner-operators in the cannabis industry, also other collateral, such as equipment, receivables, intellectual property, licenses or other assets of the borrowers to the extent permitted by applicable laws and regulations governing such borrowers.
Biggest changeAdditionally, the Manager seeks to invest in transactions that tend to be attractively priced and have stronger than normal covenants and amortization due to complexity of the industry and in cannabis companies that it believes have some or all of the following characteristics: • Growth or earnings before interest, income taxes, deprecation and amortization ("EBITDA") positive entities • Companies that require capital but do not want to dilute their equity • Companies that demonstrate strong cash flow performance with low leverage profiles • Low debt to enterprise value ratios 1 Our loans are generally secured by real estate and, when lending to owner-operators in the cannabis industry, also other collateral, such as equipment, receivables, intellectual property, licenses or other assets of the borrowers to the extent permitted by applicable laws and regulations governing such borrowers.
Our Manager’s Investment Committee, which is comprised of John Mazarakis, Anthony Cappell, Andreas Bodmeier, David Kite and Peter Sack, advises and consults with our Manager and its investment professionals with respect to our investment strategy, portfolio construction, financing, investment guidelines, and risk management, and approves all of our investments.
Our Manager’s Investment Committee, which is comprised of John Mazarakis, Anthony Cappell, Peter Sack, Andreas Bodmeier, and David Kite, advises and consults with our Manager and its investment professionals with respect to our investment strategy, portfolio construction, financing, investment guidelines, and risk management, and approves all of our investments.
Our Manager will use its commercially reasonable efforts to perform its duties under our Management Agreement. The Management Agreement had a three-year initial term that expired on April 30, 2024.
Our Manager will use its commercially reasonable efforts to perform its duties under the Management Agreement. The Management Agreement had a three-year initial term that expired on April 30, 2024.
Our current portfolio is comprised primarily of senior loans to state-licensed operators in the cannabis industry, secured by real estate, equipment, receivables, licenses or other assets of the borrowers to the extent permitted by applicable laws and regulations governing such borrowers.
Our current portfolio is comprised primarily of senior loans to state-licensed operators in the cannabis industry, secured by real estate, equipment, receivables, licenses or other assets of the borrowers to the extent permitted by applicable laws and regulations governing such borrowers.
For violations due to reasonable cause rather than willful neglect that are in excess of the de minimis exception described above, we may avoid disqualification as a REIT, after the 30-day cure period, by taking steps including (i) the disposition of sufficient assets to meet the asset test within six months after the last day of the quarter in which the failure to satisfy the asset tests is discovered, (ii) paying a tax equal to the greater of (a) $50,000 or (b) the highest corporate tax rate multiplied by the net income generated by the non-qualifying assets, and (iii) disclosing certain information to the IRS.
For violations due to reasonable cause rather than willful neglect that are in excess of the de minimis exception described above, we may avoid disqualification as a REIT, after the 30-day cure period, by taking steps including (i) the disposition 15 of sufficient assets to meet the asset test within six months after the last day of the quarter in which the failure to satisfy the asset tests is discovered, (ii) paying a tax equal to the greater of (a) $50,000 or (b) the highest corporate tax rate multiplied by the net income generated by the non-qualifying assets, and (iii) disclosing certain information to the IRS.
For more information, see “ Risk Factors — Certain assets of our borrowers may not be used as collateral or transferred to us due to applicable state laws and regulations governing the cannabis industry, and such restrictions could negatively impact our profitability .” 5 We may diversify our portfolio by also lending or investing in properties that are not related to the cannabis industry if they provide return characteristics consistent with our investment objective.
For more information, see “ Risk Factors — Certain assets of our borrowers may not be used as collateral or transferred to us due to applicable state laws and regulations governing the cannabis industry, and such restrictions could negatively impact our profitability .” We may diversify our portfolio by also lending or investing in properties that are not related to the cannabis industry if they provide return characteristics consistent with our investment objective.
Notwithstanding our qualification as a REIT, we will be subject to U.S. federal income tax as follows: • we will be taxed at normal corporate rates on any undistributed net income (including undistributed net capital gains); • if we fail to satisfy either the 75% or the 95% gross income tests (discussed below), but nonetheless maintain our qualification as a REIT because other requirements are met, we will be subject to a 100% tax on the greater of (1) the amount by which we fail the 75% test and (2) the amount by which we fail the 95% test, in either case, multiplied by a fraction intended to reflect our profitability; • if we should fail to satisfy the asset tests or other requirements applicable to REITs, as described below, yet nonetheless maintain our qualification as a REIT because there is reasonable cause for the failure and other applicable requirements are met, we may be subject to an excise tax; • we will be subject to a tax of 100% on net income from any “prohibited transaction”; • we will be subject to tax, at the highest corporate rate, on net income from (1) the sale or other disposition of “foreclosure property” (generally, property acquired by us through foreclosure or after a default on a loan secured by the property or a lease of the property and for which an election is in effect) that is held primarily for sale to customers in the ordinary course of business or (2) other non-qualifying income from foreclosure property; • if we fail to distribute during each calendar year at least the sum of (1) 85% of our REIT ordinary income for the year, (2) 95% of our REIT capital gain income for the year and (3) any undistributed taxable income from prior years, we will be subject to a 4% excise tax on the excess of the Required Distribution over the sum of (a) the amounts actually distributed plus (b) the amounts with respect to which certain taxes are imposed on us; • if we acquire any asset from a “C corporation” (that is, a corporation generally subject to the full corporate level tax) in a transaction in which the basis of the asset in our hands is determined by reference to the basis of the asset in the hands of the C corporation, and we recognize gain on the disposition of the asset during a five-year period beginning on the date that we acquired the asset, then the asset’s “built-in” gain generally will be subject to tax at the highest regular corporate rate; • if we fail to qualify for taxation as a REIT because we failed to distribute by the end of the relevant year any earnings and profits we inherited from a taxable C corporation during the year (e.g., by tax-free merger or tax-free liquidation), and the failure is not due to fraud with intent to evade tax, we generally may retain our REIT status by paying a special distribution, but we will be required to pay an interest charge on 50% of the amount of undistributed non-REIT earnings and profits; • a 100% tax may be imposed on certain transactions between us and our taxable REIT subsidiaries (“TRSs”) that do not reflect arm’s length terms; • we may be required to pay monetary penalties to the IRS in certain circumstances, including if we fail to satisfy the record keeping requirements intended to monitor our compliance with rules relating to the ownership of our common stock; • certain of our subsidiaries, if any, may be C corporations, the earnings of which could be subject to federal corporate income tax; and • we and our subsidiaries, if any, may be subject to a variety of taxes, including state and local income taxes, property taxes and other taxes on our assets and operations and could also be subject to tax in situations and on transactions not presently contemplated.
Notwithstanding our qualification as a REIT, we will be subject to U.S. federal income tax as follows: • we will be taxed at normal corporate rates on any undistributed net income (including undistributed net capital gains); • if we fail to satisfy either the 75% or the 95% gross income tests (discussed below), but nonetheless maintain our qualification as a REIT because other requirements are met, we will be subject to a 100% tax on the greater of (1) the amount by which we fail the 75% test and (2) the amount by which we fail the 95% test, in either case, multiplied by a fraction intended to reflect our profitability; • if we should fail to satisfy the asset tests or other requirements applicable to REITs, as described below, yet nonetheless maintain our qualification as a REIT because there is reasonable cause for the failure and other applicable requirements are met, we may be subject to an excise tax; • we will be subject to a tax of 100% on net income from any “prohibited transaction”; • we will be subject to tax, at the highest corporate rate, on net income from (1) the sale or other disposition of “foreclosure property” (generally, property acquired by us through foreclosure or after a default on a loan secured by the property or a lease of the property and for which an election is in effect) that is held primarily for sale to customers in the ordinary course of business or (2) other non-qualifying income from foreclosure property; • if we fail to distribute during each calendar year at least the sum of (1) 85% of our REIT ordinary income for the year, (2) 95% of our REIT capital gain income for the year and (3) any undistributed taxable income from prior years, we will be subject to a 4% excise tax on the excess of the Required Distribution over the sum of (a) the amounts actually distributed plus (b) the amounts with respect to which certain taxes are imposed on us; • if we acquire any asset from a “C corporation” (that is, a corporation generally subject to the full corporate level tax) in a transaction in which the basis of the asset in our hands is determined by reference to the basis of the asset in the hands of the C corporation, and we recognize gain on the disposition of the asset during a five-year period beginning on the date that we acquired the asset, then the asset’s “built-in” gain generally will be subject to tax at the highest regular corporate rate; • if we fail to qualify for taxation as a REIT because we failed to distribute by the end of the relevant year any earnings and profits we inherited from a taxable C corporation during the year (e.g., by tax-free merger or tax-free liquidation), and the 12 failure is not due to fraud with intent to evade tax, we generally may retain our REIT status by paying a special distribution, but we will be required to pay an interest charge on 50% of the amount of undistributed non-REIT earnings and profits; • a 100% tax may be imposed on certain transactions between us and our taxable REIT subsidiaries (“TRSs”) that do not reflect arm’s length terms; • we may be required to pay monetary penalties to the Internal Revenue Service (the "IRS") in certain circumstances, including if we fail to satisfy the record keeping requirements intended to monitor our compliance with rules relating to the ownership of our common stock; • certain of our subsidiaries, if any, may be C corporations, the earnings of which could be subject to federal corporate income tax; and • we and our subsidiaries, if any, may be subject to a variety of taxes, including state and local income taxes, property taxes and other taxes on our assets and operations and could also be subject to tax in situations and on transactions not presently contemplated.
However, the Ninth Circuit’s opinion, which only applies in the states of Alaska, Arizona, California, Hawaii and Idaho, also held that persons who do not strictly comply with all state laws and regulations regarding the distribution, possession and cultivation of medical-use cannabis have engaged in conduct that is unauthorized, and in such instances the DOJ may prosecute those individuals.
However, the Ninth Circuit’s opinion, which only applies in the states of Alaska, Arizona, California, Hawaii and Idaho, also held that persons who do not strictly comply with all state laws and regulations regarding the distribution, possession and 18 cultivation of medical-use cannabis have engaged in conduct that is unauthorized, and in such instances the DOJ may prosecute those individuals.
At least 75% of our gross income (excluding gross income from prohibited transactions, income from certain hedging transactions and certain foreign currency gains) must consist of income derived directly or indirectly from investments relating to real property or mortgages on real property (generally including rents from real property, dividends from other REITs, and interest on obligations secured by mortgages on real property or on interests in real property), or some types of temporary investment income. • 95% Gross Income Test .
At least 75% of our gross income (excluding gross income from prohibited transactions, income from certain hedging transactions and certain foreign currency gains) must consist of income derived directly or indirectly from investments relating to real property or mortgages on real property (generally including rents from real property, dividends from other REITs, and interest on obligations secured by mortgages on real property or on interests in real property), or some types of temporary investment income. 13 • 95% Gross Income Test .
This guidance essentially characterized use of federal law enforcement resources to prosecute those complying with state laws allowing the use, manufacture and distribution of cannabis as an inefficient use of such federal resources where states have enacted laws legalizing cannabis in some form and have also implemented strong and effective regulatory and enforcement systems to control the cultivation, 11 processing, distribution, sale and possession of cannabis.
This guidance essentially characterized use of federal law enforcement resources to prosecute those complying with state laws allowing the use, manufacture and distribution of cannabis as an inefficient use of such federal resources where states have enacted laws legalizing cannabis in some form and have also implemented strong and effective regulatory and enforcement systems to control the cultivation, processing, distribution, sale and possession of cannabis.
Some of our competitors are substantially larger and have considerably greater financial, technical and marketing resources than we do. Several of our competitors, including other REITs, have raised, or may raise, significant amounts of capital and may have investment objectives that overlap with our investment objective, which may create additional competition for lending and other investment opportunities.
Some of our competitors are substantially larger and have considerably greater financial, technical and marketing 11 resources than we do. Several of our competitors, including other REITs, have raised, or may raise, significant amounts of capital and may have investment objectives that overlap with our investment objective, which may create additional competition for lending and other investment opportunities.
We believe we qualify for the exemption under this section and our current intention is to continue to focus on originating and 18 investing in loans collateralized by real estate so that at least 55% of our assets are “qualifying interests” and no more than 20% of our assets are miscellaneous assets.
We believe we qualify for the exemption under this section and our current intention is to continue to focus on originating and investing in loans collateralized by real estate so that at least 55% of our assets are “qualifying interests” and no more than 20% of our assets are miscellaneous assets.
These cannabis-related SARs are divided into three categories – cannabis limited, cannabis priority, and cannabis terminated – based on the financial institution’s belief that the business in question follows state law, is operating outside of compliance with state law, or where the banking relationship has been terminated, respectively.
These cannabis-related SARs are divided into three categories – cannabis limited, cannabis priority, and cannabis terminated – based on the financial institution’s belief that 19 the business in question follows state law, is operating outside of compliance with state law, or where the banking relationship has been terminated, respectively.
We will not engage in a co-investment transaction with an affiliate where the affiliate has a senior position to the loan held by us. To the extent that an affiliate provides financing to one of our borrowers, such loans will be working capital loans or loans that are subordinate to our loans.
We generally will not engage in a co-investment transaction with an affiliate where the affiliate has a senior position to the loan held by us. To the extent that an affiliate provides financing to one of our borrowers, such loans will be working capital loans or loans that are subordinate to our loans.
Pursuant to our Management Agreement with our Manager, our Manager manages our loan portfolio and our day-to-day operations, subject at all times to the further terms and conditions set forth in our Management Agreement and such further limitations or parameters as may be imposed from time to time by our board of directors (our “Board”).
Pursuant to the Management Agreement, our Manager manages our loan portfolio and our day-to-day operations, subject at all times to the further terms and conditions set forth in our Management Agreement and such further limitations or parameters as may be imposed from time to time by our board of directors (our “Board”).
Under our Management Agreement, our Manager has contractual responsibilities to us, including to provide us with a management team (whether our Manager’s own employees or individuals for which our Manager has contracted with other parties to provide services to its clients), who will be our executive officers, and the Manager’s Investment Committee.
Under our Management Agreement, our Manager has contractual responsibilities to us, including to provide us with a management team (whether our Manager’s own employees or individuals for which our Manager has contracted with other parties to provide services to its clients), who will be our executive 2 officers, and the Manager’s Investment Committee.
We believe by carefully assessing specific challenges and 4 because we possess the ability to understand and quantify the risks involved, we are able to effectively capitalize on market inefficiencies. We believe these types of assets provide an attractive, and often overlooked, investment opportunity. Nimble Execution.
We believe by carefully assessing specific challenges and because we possess the ability to understand and quantify the risks involved, we are able to effectively capitalize on market inefficiencies. We believe these types of assets provide an attractive, and often overlooked, investment opportunity. Nimble Execution .
Concurrently with the FinCEN Memorandum, the DOJ issued supplemental guidance directing federal prosecutors to consider the federal enforcement priorities enumerated in the Cole Memo with respect to federal money laundering, unlicensed money transmitter and Bank Secrecy Act offenses based on cannabis-related violations of the CSA.
Concurrently with the FinCEN Guidance, the DOJ issued supplemental guidance directing federal prosecutors to consider the federal enforcement priorities enumerated in the Cole Memo with respect to federal money laundering, unlicensed money transmitter and Bank Secrecy Act offenses based on cannabis-related violations of the CSA.
However, structuring a mezzanine loan to meet the requirements of the safe harbor may not 15 always be practical. To the extent that any of our mezzanine loans do not meet all of the requirements for reliance on the safe harbor, such loans might not be properly treated as qualifying loans for REIT purposes.
However, structuring a mezzanine loan to meet the requirements of the safe harbor may not always be practical. To the extent that any of our mezzanine loans do not meet all of the requirements for reliance on the safe harbor, such loans might not be properly treated as qualifying loans for REIT purposes.
Our TRSs may incur significant amounts of U.S. federal, state and local income taxes and, if doing business or owning property outside of the United States, significant non-U.S. taxes. Relief Provisions for Failing the 75% or the 95% Gross Income Tests.
Our TRSs may incur significant amounts of U.S. federal, state and local income taxes and, if doing business or owning property outside of the United States, significant non-U.S. taxes. 14 Relief Provisions for Failing the 75% or the 95% Gross Income Tests.
Further, from time to time, we may be allocated a share of net capital gain attributable to the sale of depreciated property that exceeds our allocable share of 17 cash attributable to that sale. Additionally, we may incur cash expenditures that are not currently deductible for tax purposes.
Further, from time to time, we may be allocated a share of net capital gain attributable to the sale of depreciated property that exceeds our allocable share of cash attributable to that sale. Additionally, we may incur cash expenditures that are not currently deductible for tax purposes.
We believe our focus on identifying opportunities in such markets provides for commensurate returns relative to risk. Our relentless pursuit of all relevant information in connection with each transaction is a discrete focus of our investment team.
We believe our focus on identifying opportunities in such markets provides for commensurate returns relative to risk. Our relentless pursuit of 5 all relevant information in connection with each transaction is a discrete focus of our investment team.
That means that the federal government may enforce U.S. drug laws against companies operating in accordance with state cannabis laws, creating a climate of legal uncertainty regarding the production and sale of cannabis.
That means that the federal government may enforce U.S. drug laws against companies operating in accordance with state cannabis laws, creating a climate of legal uncertainty regarding the production and sale of 17 cannabis.
We must satisfy the following tests relating to the nature of our assets at the close of each quarter of our taxable year: • at least 75% of the value of our total assets must be represented by real estate assets (including (1) our allocable share of real estate assets held by partnerships in which we own an interest, (2) stock or debt instruments held for not more than one year purchased with the proceeds of our stock offering or long-term (at least five years) debt offering, cash and government securities, (3) stock in other REITs and (4) certain mortgage-backed securities and loans); 16 • not more than 25% of our total assets may be represented by securities other than those in the 75% asset class; • of the investments included in the 25% asset class, the value of any one issuer’s securities owned by us may not exceed 5% of the value of our total assets (unless the issuer is a TRS), and we may not own more than 10% of the vote or value of any one issuer’s outstanding securities (unless the issuer is a TRS or we can avail ourselves of the rules relating to certain securities and “straight debt” summarized below); • not more than 20% of the value of our total assets may be represented by securities of one or more TRS; and • not more than 25% of the value of our total assets may be represented by debt instruments of publicly offered REITs that are not secured by mortgages on real property or interests in real property.
We must satisfy the following tests relating to the nature of our assets at the close of each quarter of our taxable year: • at least 75% of the value of our total assets must be represented by real estate assets (including (1) our allocable share of real estate assets held by partnerships in which we own an interest, (2) stock or debt instruments held for not more than one year purchased with the proceeds of our stock offering or long-term (at least five years) debt offering, cash and cash items (including receivables), and government securities, (3) stock in other REITs and (4) certain mortgage-backed securities and loans); • not more than 25% of our total assets may be represented by securities other than those in the 75% asset class; • of the investments included in the 25% asset class, the value of any one issuer’s securities owned by us may not exceed 5% of the value of our total assets (unless the issuer is a TRS), and we may not own more than 10% of the vote or value of any one issuer’s outstanding securities (unless the issuer is a TRS or we can avail ourselves of the rules relating to certain securities and “straight debt” summarized below); • not more than 25% of the value of our total assets may be represented by securities of one or more TRS; and • not more than 25% of the value of our total assets may be represented by debt instruments of publicly offered REITs that are not secured by mortgages on real property or interests in real property.
Termination Fee Equal to three times the sum of (i) the annualized average quarterly Base Management Fee and (ii) the annualized average quarterly Incentive Compensation, in each case, earned by our Manager during the 24-month period immediately preceding the most recently Upon specified 3 completed fiscal quarter prior to the date of termination.
Termination Fee Equal to three times the sum of (i) the annualized average quarterly Base Management Fee and (ii) the annualized average quarterly Incentive Compensation, in each case, earned by our Manager during the 24-month period immediately preceding the most Upon specified 4 recently completed fiscal quarter prior to the date of termination.
Our current portfolio as of December 31, 2024 has a weighted average maturity of 2.2 years with significant prepayment protections, whereas we believe that certain competitors with typical equity REIT land ownership models often have long-term leases averaging 10 years or more.
Our current portfolio as of December 31, 2025 has a weighted average maturity of 2.2 years with significant prepayment protections, whereas we believe that certain competitors with typical equity REIT land ownership models often have long-term leases averaging 10 years or more.
Our Growth Strategy Objective Our primary investment objective is to provide attractive, risk-adjusted returns for stockholders over time, primarily through consistent current income dividends and other distributions and secondarily through capital appreciation.
Our Business and Growth Strategy 8 Our primary investment objective is to provide attractive, risk-adjusted returns for stockholders over time, primarily through consistent current income dividends and other distributions and secondarily through capital appreciation.
We will continue to focus on operators with strong collateral, in the form of real estate, equipment and receivables owned by the borrower, and may opportunistically invest in “all asset lien” cash flow loans, to the extent that allows us to maintain our qualification as a REIT, with a strict focus on adhering to conservative underwriting criteria.
We will continue to focus on operators with strong collateral, in the form of real estate, equipment, intellectual property, receivables, and other assets owned by the borrower, and may opportunistically invest in “all asset lien” cash flow loans, to the extent that allows us to maintain our qualification as a REIT, with a strict focus on adhering to conservative underwriting criteria.
The rescission of the Cole Memo has not yet affected the status of the FinCEN Memorandum, nor has the Department of the Treasury given any indication that it intends to rescind the FinCEN Memorandum itself. Although the FinCEN Memorandum remains intact, it is unclear whether the current administration will continue to follow the guidelines of the FinCEN Memorandum.
The rescission of the Cole Memo has not affected the status of the FinCEN Guidance, nor has the Department of the Treasury given any indication that it intends to rescind the FinCEN Guidance itself. Although the FinCEN Guidance remains intact, it is unclear whether the current administration will continue to follow the guidelines of the FinCEN Guidance.
Our senior management team is provided by our Manager and includes John Mazarakis, our Executive Chairman, Anthony Cappell, our Co-Chief Executive Officer, Peter Sack, our Co-Chief Executive Officer, Dr. Andreas Bodmeier, our President and Chief Investment Officer, David Kite, our Chief Operating Officer and Phil Silverman, our Chief Financial Officer.
Our senior management team is provided by our Manager and includes John Mazarakis, our Executive Chairman, Anthony Cappell, our Co-Chief Executive Officer, Peter Sack, our Co-Chief Executive Officer, David Kite, our President and Chief Operating Officer and Phil Silverman, our Chief Financial Officer.
Type Description Payment Base Management Fees An amount equal to 0.375% (1.50% on an annualized basis) of our Equity (as defined below), determined as of the last day of each quarter, reduced by an amount equal to 50% of the pro rata amount of origination fees, structuring fees, or underwriting fees earned and paid to our Manager during the applicable quarter for loans that were originated on our behalf by our Manager.
To date, all fees have been paid in cash. 3 Type Description Payment Base Management Fees An amount equal to 0.375% (1.50% on an annualized basis) of our Equity (as defined below), determined as of the last day of each quarter, reduced by an amount equal to 50% of the pro rata amount of origination fees, structuring fees, or underwriting fees earned and paid to our Manager during the applicable quarter for loans that were originated on our behalf by our Manager.
Key elements of our strategy include: • Targeting loans for origination and investment that typically have the following characteristics: • principal balance greater than $5 million; • real estate collateral coverage of at least one times the principal balance; • secured by commercial real estate properties, including cannabis cultivation facilities, processing facilities and dispensaries; and • well-capitalized operators with substantial experience in particular real estate sectors and geographic markets. • Diversifying our financing sources with increased access to equity and debt capital, which may provide us with a lower overall cost of funding and the ability to hold larger loan sizes, among other things.
Key elements of our strategy include: • Targeting loans for origination and investment that typically have the following characteristics: • real estate collateral coverage of at least one times the principal balance; • secured by commercial real estate properties, including cannabis cultivation facilities, processing facilities and dispensaries; • well-capitalized operators with substantial experience in particular real estate sectors and geographic markets; and • operations in limited license jurisdictions contributing to lower loan to value ratios • Diversifying our financing sources with increased access to equity and debt capital, which may provide us with a lower overall cost of funding and the ability to hold larger loan sizes, among other things.
Our Management Agreement may be terminated by us or our Manager under certain specified circumstances. 2 The following table summarizes the compensation, fees and expense reimbursements that we pay to our Manager under our Management Agreement. A portion or all of the fees may be paid in shares of our common stock, at the sole discretion of our Manager.
Management Compensation The following table summarizes the compensation, fees and expense reimbursements that we pay to our Manager under our Management Agreement. A portion or all of the fees may be paid in shares of our common stock, at the sole discretion of our Manager.
Summary Compensation Table Year ended December 31, 2024 Year ended December 31, 2023 Base Management Fees $ 4,138,401 $ 4,046,398 Incentive Fees 3,923,495 4,736,436 Expense Reimbursement 4,821,373 4,799,210 Total $ 12,883,269 $ 13,582,044 Our Competitive Strengths We expect demand for financing in the cannabis market to continue to rise due to recent and future state legalization of cannabis for recreational and medical use, while federal prohibition on cannabis use and commercialization hampers certain commercial and financial activities.
Summary Compensation Table Year ended December 31, 2025 Year ended December 31, 2024 Base Management Fees $ 4,485,313 $ 4,138,401 Incentive Fees 3,716,823 3,923,495 Expense Reimbursement 4,930,489 4,821,373 Total $ 13,132,625 $ 12,883,269 Our Competitive Strengths We expect demand for financing in the cannabis market to continue to rise due to recent and future state legalization of cannabis for recreational and medical use, while federal prohibition on cannabis use and commercialization hampers certain commercial and financial activities.
To qualify as a REIT for U.S. federal income tax purposes, we must elect to be treated as a REIT and must meet various (a) organizational requirements, (b) gross income tests, (c) asset tests and (d) annual distribution requirements. Organizational Requirements.
We will use the calendar year both for U.S. federal income tax purposes and for financial reporting purposes. Requirements for Qualification. To qualify as a REIT for U.S. federal income tax purposes, we must elect to be treated as a REIT and must meet various (a) organizational requirements, (b) gross income tests, (c) asset tests and (d) annual distribution requirements.
In addition, the Audit Committee of our Board may assist our Board in its oversight of the determination of loss reserves and/or the fair value of assets, as applicable, that are not publicly traded or for which current market values are not readily available by evaluating various subjective and objective factors, including input provided by an independent valuation firm that we currently retain to provide input on the valuation of such assets.
As part of this process, the Manager’s Investment Committee must approve each loan before term sheets or other commitment papers are issued. 9 In addition, the Audit Committee of our Board (the "Audit Committee") may assist our Board in its oversight of the determination of loss reserves and/or the fair value of assets, as applicable, that are not publicly traded or for which current market values are not readily available by evaluating various subjective and objective factors, including input provided by an independent valuation firm that we currently retain to provide input on the valuation of such assets.
The FinCEN Memorandum sets forth extensive requirements for financial institutions to meet if they want to offer bank accounts to cannabis-related businesses and echoed the enforcement priorities of the Cole Memo.
The FinCEN Guidance sets forth extensive requirements for financial institutions to meet if they choose to offer banking services to cannabis-related businesses and echoed the enforcement priorities of the Cole Memo.
Chicago Atlantic Group, LP (our “Sponsor”) and its affiliates have originated and closed more than 90 loans totaling approximately $2.1 billion to companies operating in the cannabis industry, making their first loan to a cannabis operator in April 2019.
Our Manager and its affiliates have originated and closed more than 100 loans totaling approximately $2.6 billion to companies operating in the cannabis industry, making the first loan to a cannabis operator in April 2019.
We may enter into credit agreements with borrowers that permit them to incur debt that ranks equally with, or senior to, the loans we extend to such companies under such credit agreements. There is no assurance that we will achieve our investment objective. We commenced operations on March 30, 2021 and completed our initial public offering (“IPO”) in December 2021.
We may enter into credit agreements with borrowers that permit them to incur debt that ranks equally with, or senior to, the loans we extend to such companies under such credit agreements. There is no assurance that we will achieve our investment objective.
Department of the Treasury’s Financial Crimes Enforcement Network (“FinCEN”) issued a memorandum on February 14, 2014 (the “FinCEN Memorandum”) outlining the pathways for financial institutions to bank state-sanctioned cannabis businesses in compliance with federal enforcement priorities.
Department of the Treasury’s Financial Crimes Enforcement Network (“FinCEN”) issued a guidance document on February 14, 2014 (the “FinCEN Guidance”) outlining the expectations for financial institutions who choose to provide banking services to state-sanctioned cannabis businesses in compliance with federal enforcement priorities.
Although we believe our Manager’s expertise and our flexible funding structure provide us with valuable competitive advantages, we may not be able to achieve our business goals or expectations due to the competitive risks that we face.
Although we believe our Manager’s expertise and our flexible funding structure provide us with valuable competitive advantages, we may not be able to achieve our business goals or expectations due to the competitive risks that we face. For additional information concerning these competitive risks, see “ Risk Factors — Risks Related to Our Business and Growth Strategy .” U.S.
The Audit Committee of our Board is also responsible for the approval and pricing as it relates to all related party transactions, including those relating to loan portfolio transactions.
The Audit Committee is also responsible for the approval and pricing as it relates to all related party transactions, including those relating to loan portfolio transactions. Our Manager's investment process is described below. Investment Originations; New Opportunities Referred.
After the initial term, the management agreement is automatically renewed for one-year periods unless the Company or the Manager elects not to renew in accordance with the terms of the Management Agreement. On April 30, 2024, the Management Agreement was automatically renewed.
After the initial term, the Management Agreement automatically renews for one-year periods unless the Company or the Manager elects not to renew in accordance with the terms of the Management Agreement. On April 30, 2025, the Management Agreement was automatically renewed. Our Management Agreement may be terminated by us or our Manager under certain specified circumstances.
This model also allows our borrowers to retain control of their real estate assets, which is important to their businesses and allows for more flexibility regarding their capital structure.
This model also allows our borrowers to retain control of their real estate assets, which is important to their businesses and allows for more flexibility regarding their capital structure. Cannabis Market Overview The cannabis industry has experienced significant growth over the last several years.
As of December 31, 2024, the yield to maturity (“YTM”) IRR on our loans is 17.2% on a weighted average basis and ranges from 11.0% to 31.2% through coupons, OID, unused fees, exit fees, and other yield-enhancing fees, as applicable.
As of December 31, 2025, the yield to maturity (“YTM”) IRR on our loans is 16.3% on a weighted average basis and ranges from 9.7% to 26.9% through coupons, OID, unused fees, exit fees, and other yield-enhancing fees, as applicable. Disciplined, “Credit-First” Underwriting Process.
Any change in the federal government’s enforcement posture with respect to state-licensed cannabis operators, including the enforcement postures of individual federal prosecutors in judicial districts where our borrowers operate, would result in our inability to execute our business plan, and we would likely suffer significant losses with respect to our investments, which would adversely affect the trading price of our securities. 12 State Laws Applicable to the Cannabis Industry In most states that have legalized cannabis in some form, the growing, processing and/or dispensing of cannabis generally requires that the operator obtain one or more licenses in accordance with applicable state requirements.
Any change in the federal government’s enforcement posture with respect to state-licensed cannabis operators, including the enforcement postures of individual federal prosecutors in judicial districts where our borrowers operate, would result in our inability to execute our business plan, and we would likely suffer significant losses with respect to our investments, which would adversely affect the trading price of our securities.
We are required to comply with the applicable laws and regulations in the states in which we do business. We actively monitor proposed changes to relevant legal and regulatory requirements in order to maintain our compliance.
We are required to comply with the applicable laws and regulations in the states in which we do business. We actively monitor proposed changes to relevant legal and regulatory requirements in order to maintain our compliance. The Dodd-Frank Act The Dodd-Frank Wall Street Reform and Consumer Protection Act (the "Dodd-Frank Act") made significant structural reforms to the financial services industry.
Competition We operate in a competitive market for the origination and acquisition of attractive lending opportunities. We compete with a variety of institutional investors, including other REITs, debt funds, specialty finance companies, savings and loan associations, banks, mortgage bankers, insurance companies, institutional investors, investment banking firms, financial institutions, private equity and hedge funds, and other entities.
From time to time, we may compete with a variety of institutional investors, including other REITs, debt funds, specialty finance companies, savings and loan associations, local banks and credit unions, mortgage bankers, insurance companies, investment banking firms, financial institutions, private equity and hedge funds, and other entities.
In addition, many states regulate various aspects of the growing, processing and/or dispensing of cannabis. Local governments in some cases also impose rules and regulations on the manner of operating cannabis businesses.
Local governments in some cases also impose rules and regulations on the manner of operating cannabis businesses.
However, to capitalize on the appropriate loan opportunities at different points in the economic and real estate investment cycle, we may modify or expand our growth strategy from time to time.
However, to capitalize on the appropriate loan opportunities at different points in the economic and real estate investment cycle, we may modify or expand our growth strategy from time to time. Investment Processes The Manager’s Investment Committee which oversees the loan origination and portfolio monitoring processes is focused on managing our credit risk through a comprehensive investment review process.
Certain regulations have already been adopted and others remain under consideration by various governmental agencies, in some cases past the deadlines set in the Dodd-Frank Act for adoption.
For example, pursuant to the Dodd-Frank Act, various federal agencies have promulgated, or are in the process of promulgating, regulations with respect to various issues that may affect our Company. Certain regulations have already been adopted and others remain under consideration by various governmental agencies, in some cases past the deadlines set in the Dodd-Frank Act for adoption.
We do not own any warrants or other forms of equity in any of our portfolio companies that are involved in the cannabis industry, and we will not take warrants or equity in such issuers until permitted by applicable laws and regulations, including U.S. federal laws and regulations.
We will not own any warrants or other forms of equity in any of our portfolio companies involved in the cannabis industry, unless the portfolio companies are listed on a national securities exchange, such as the New York Stock Exchange ("NYSE") or NASDAQ, and such ownership is permitted by applicable U.S. federal laws and regulations, including those applicable to NYSE or NASDAQ issuers, as the case may be.
We believe that we have qualified as a REIT and that our method of operation will enable us to continue to qualify as a REIT.
The Company believes that it has qualified as a REIT and that its method of operation will enable it to continue to qualify as a REIT.
Seasonality 13 Our business has not been, and we do not expect it to become subject to, material seasonal fluctuations. U.S. Federal Income Tax Considerations We have elected to be taxed as a REIT under Sections 856 through 860 of the Code, commencing with our taxable year ended December 31, 2021.
Federal Income Tax Considerations We have elected to be taxed as a REIT under Sections 856 through 860 of the Code, commencing with our taxable year ended December 31, 2021. We believe that we have qualified as a REIT and that our method of operation will enable us to continue to qualify as a REIT.
We are an externally managed Maryland corporation that elected to be taxed as a REIT under Section 856 of the Internal Revenue Code of 1986, as amended (the “Code”), commencing with our taxable year ended December 31, 2021.
The Company has elected to be taxed as a REIT for United States federal income tax purposes under the Internal Revenue Code of 1986, as amended (the “Code”), commencing with its taxable year ended December 31, 2021.
ITEM 1. B USINESS Overview We are a commercial mortgage real estate investment trust ("REIT"). Our primary investment objective is to provide attractive, risk-adjusted returns for stockholders over time primarily through consistent current income dividends and other distributions and secondarily through capital appreciation.
All of the Company’s investment decisions are made by the investment committee of the Manager (the "Manager's Investment Committee"), subject to oversight by the Company’s board of directors (the “Board”). Overview Our primary investment objective is to provide attractive, risk-adjusted returns for stockholders over time primarily through consistent current income dividends and other distributions and secondarily through capital appreciation.
As of December 31, 2024, the Company is in compliance with all financial covenants with respect to the Unsecured Notes. Government Regulation Our operations are subject to regulation, supervision, and licensing under various United States, state, provincial, and local statutes, ordinances and regulations.
Regulatory Environment 16 Our operations are subject to regulation, supervision, and licensing under various Canadian provincial, and United States, state and local statutes, ordinances and regulations.
For additional information concerning these competitive risks, see “ Risk Factors — Risks Related to Our Business and Growth Strategy .” Human Capital We are externally managed by our Manager pursuant to the Management Agreement between our Manager and us. Our officers also serve as officers or employees of our Manager and/or its affiliates. We do not have any employees.
Seasonality Our business has not been, and we do not expect it to become subject to, material seasonal fluctuations. Human Capital We are externally-managed by our Manager and do not have any employees. Our officers also serve as officers or employees of our Manager and/or its affiliates.
We are externally managed by Chicago Atlantic REIT Manager, LLC (our “Manager”). Our Manager and its affiliates seek to originate real estate loans between $5 million and $200 million, generally with one- to five-year terms and amortization when terms exceed three years.
Our Manager seeks to originate real estate mortgage loans between $5 million and $200 million, generally with one- to five-year terms and often include required amortization payments throughout the term of the loan.
We impose strict loan covenants and seek personal or corporate guarantees for additional protection. As of December 31, 2024, 36.5% of the loans held in our portfolio based on outstanding principal, are backed by personal or corporate guarantees. We aim to maintain a diversified portfolio across jurisdictions and across verticals, including cultivators, processors, dispensaries, and other businesses ancillary thereto.
We aim to maintain a diversified portfolio across jurisdictions and verticals, including cultivators, processors, dispensaries, and other businesses ancillary thereto.
Removed
As of December 31, 2024, our portfolio is comprised primarily of first mortgage loans to established multi-state or single-state cannabis operators or property owners. We consider cannabis operators to be established if they are state-licensed and are deemed to be operational and in good standing by the applicable state regulator.
Added
ITEM 1. B USINESS Organization Chicago Atlantic Real Estate Finance, Inc., and its wholly owned consolidated financing subsidiary, Chicago Atlantic Lincoln, LLC (“CAL”) (collectively the “Company”, “we”, "us" or “our”), is a commercial mortgage real estate investment trust (“REIT”) incorporated in the state of Maryland on March 30, 2021.
Removed
In addition, we may invest in borrowers that have equity securities that are publicly traded on the Canadian Stock Exchange (“CSE”) in Canada and/or over-the-counter in the United States.
Added
The Company generally will not be subject to United States federal income taxes on its REIT taxable income if it annually distributes to stockholders at least 90% of its REIT taxable income prior to the deduction for dividends paid and complies with various other requirements as a REIT. See “— U.S.
Removed
However, no assurances can be given that our beliefs or expectations will be fulfilled, since qualification as a REIT depends on us continuing to satisfy numerous asset, income 1 and distribution tests described under “— U.S. Federal Income Tax Considerations — Taxation”, which in turn depend, in part, on our operating results.
Added
Federal Income Tax Considerations .” Additionally, the Company is an “emerging growth company,” as defined in the Jumpstart Our Business Startups Act of 2012 (the "JOBS Act"), and intends to take advantage of certain exemptions for emerging growth companies allowing us to temporarily forego the auditor attestation requirements of Section 404(b) of the Sarbanes-Oxley Act of 2002.
Removed
We also intend to operate our business in a manner that will permit us and our subsidiaries to maintain one or more exclusions or exemptions from registration under the Investment Company Act. Our Manager We are externally managed by our Manager pursuant to our Management Agreement.
Added
The Company commenced operations on March 30, 2021 and completed its initial public offering ("IPO") in December 2021.
Removed
Our loans are primarily secured by real property and certain personal property, including licenses, equipment, and other assets to the extent permitted by applicable laws and the regulations governing our borrowers. Disciplined, “Credit-First” Underwriting Process.
Added
The Company is externally managed by Chicago Atlantic REIT Manager, LLC (the “Manager”), a Delaware limited liability company, pursuant to the terms of the management agreement dated May 1, 2021, as amended in October 2021, by and among the Company and the Manager (the "Management Agreement").
Removed
Manager’s Investment Committee The Manager’s Investment Committee overseeing the loan portfolio and the loan origination process for us is focused on managing our credit risk through a comprehensive investment review process. As part of the investment process, the Manager’s Investment Committee must approve each loan before term sheets or other commitment papers are issued.
Added
Our loans to portfolio companies operating in the cannabis industry may include companies that we determine, based on our due diligence, are licensed in and in compliance with, state-regulated cannabis programs, regardless of their status under U.S. federal law, so long as the investment itself is designed to be compliant with all applicable laws and regulations in the jurisdiction in which the investment is made or to which we are otherwise subject, including U.S. federal law.
Removed
Our Portfolio Overview As of December 31, 2024, loans to 30 different borrowers comprise our portfolio, totaling approximately $410.2 million in total principal amount, of which $404.7 million is designated as held for investment and carried at amortized cost and $5.5 million is reported at fair value on the consolidated balance sheets.
Added
We also seek personal or corporate guarantees for additional credit protection on our loans. Generally, the loans we invest in have a complete set of financial maintenance covenants, which are used to proactively address materially adverse changes in a portfolio company’s financial performance. However, we occasionally invest in “covenant-lite” loans.
Removed
Additionally, the Company has approximately $20.9 million in unfunded commitments to existing borrowers, of which $14.9 million and $6.0 million relate to loans held for investment and loans at fair value, respectively.
Added
We use the term “covenant-lite” to refer generally to loans that do not have a complete set of financial maintenance covenants.
Removed
As of December 31, 2024, our loan portfolio had a weighted-average yield-to-maturity internal rate of return (“YTM IRR”) of 17.2% and was secured by real estate and, with respect to certain of our loans, substantially all assets in the borrowers and certain of their subsidiaries, including equipment, receivables, and licenses.
Added
Generally, “covenant-lite” loans provide borrower companies more freedom to negatively impact lenders because their covenants are incurrence-based, which means they are only tested and can only be breached following an affirmative action of the borrower, rather than by a deterioration in the borrower’s financial condition.
Removed
The YTM IRR on our loans is designed to present the total annualized return anticipated on the loans if such loans are held until they mature, which is consistent with our operating strategy.
Added
Accordingly, to the extent we invest in “covenant-lite” loans, we may have fewer rights against a borrower and may have a greater risk of loss on such investments as compared to investments in or exposure to loans with a complete set of financial maintenance covenants.

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Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

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Biggest changeThe required recognition of non-cash income, including PIK and OID interest, for U.S. federal income tax purposes may have a negative impact on liquidity because it represents a non-cash component of our taxable income that must, nevertheless, be distributed to investors to avoid us being subject to corporate level taxation.
Biggest changeThe required recognition of non-cash income, including PIK and OID interest, for U.S. federal income tax purposes may have a negative impact on liquidity because it represents a non-cash component of our taxable income that must, nevertheless, be distributed to investors to avoid us being subject to corporate level taxation. 35 Changes in laws or regulations governing our operations, including laws and regulations governing cannabis and REITs, changes in the interpretation thereof or newly enacted laws or regulations and any failure by us to comply with these laws or regulations, could require changes to certain of our business practices, negatively impact our operations, cash flow or financial condition, impose additional costs on us or otherwise adversely affect our business.
We cannot assure you that we will be able to operate our business successfully or profitably, or implement our operating policies.
We cannot assure you that we will be able to operate our business profitably or successfully implement our operating policies.
Pursuant to the terms of our Management Agreement, our Manager receives Base Management Fees that are calculated and payable quarterly in arrears in cash, in an amount equal to 0.375% (1.50% on an annualized basis) of our Equity, subject to certain adjustments, including any agency fees relating to our loans, but excluding the Incentive Compensation and any diligence fees paid to and earned by our Manager and paid by third parties in 50 connection with our Manager’s due diligence of potential loans.
Pursuant to the terms of our Management Agreement, our Manager receives Base Management Fees that are calculated and payable quarterly in arrears in cash, in an amount equal to 0.375% (1.50% on an annualized basis) of our Equity, subject to certain adjustments, including any agency fees relating to our loans, but excluding the Incentive Compensation and any diligence fees paid to and earned by our Manager and paid by third parties in connection with our Manager’s due diligence of potential loans.
Incurring substantial debt could subject us to many risks that, if realized, would materially and adversely affect us, including, but not limited to, the risks that: • our cash flow from operations may be insufficient to make required payments of principal of and interest on the debt we incur or we may fail to comply with all of the other covenants contained in such debt, which is likely to result in (i) acceleration of such debt (and any other debt containing a cross-default or cross-acceleration provision) that we may be unable to repay from internal funds or to refinance on favorable terms, or at all, (ii) our inability to borrow unused amounts under our financing arrangements, even if we are current in payments on borrowings under those arrangements, and/or (iii) the loss of some or all of our assets to foreclosure or sale; • we may be unable to borrow additional funds as needed or on favorable terms, or at all; • to the extent we borrow debt that bears interest at variable rates, increases in interest rates could materially increase our interest expense; • our default under any loan with cross-default provisions could result in a default on other indebtedness; • incurring debt may increase our vulnerability to adverse economic and industry conditions with no assurance that loan yields will increase with higher financing costs; • we may be required to dedicate a substantial portion of our cash flow from operations to payments on the debt we may incur, thereby reducing funds available for operations, future business opportunities, stockholder distributions, including distributions currently contemplated or necessary to satisfy the requirements for REIT qualification, or other purposes; and • we are not able to refinance debt that matures prior to the loan it was used to finance on favorable terms, or at all.
Incurring substantial debt could subject us to many risks that, if realized, would materially and adversely affect us, including, but not limited to, the risks that: • our cash flow from operations may be insufficient to make required payments of principal of and interest on the debt we incur or we may fail to comply with all of the other covenants contained in such debt, which is likely to result in (i) acceleration of such debt (and any other debt containing a cross-default or cross-acceleration provision) that we may be unable to repay from internal funds or to refinance on favorable terms, or at all, (ii) our inability to borrow unused amounts under our financing arrangements, even if we are current in payments on borrowings under those arrangements, and/or (iii) the loss of some or all of our assets to foreclosure or sale; • we may be unable to borrow additional funds as needed or on favorable terms, or at all; 44 • to the extent we borrow debt that bears interest at variable rates, increases in interest rates could materially increase our interest expense; • our default under any loan with cross-default provisions could result in a default on other indebtedness; • incurring debt may increase our vulnerability to adverse economic and industry conditions with no assurance that loan yields will increase with higher financing costs; • we may be required to dedicate a substantial portion of our cash flow from operations to payments on the debt we may incur, thereby reducing funds available for operations, future business opportunities, stockholder distributions, including distributions currently contemplated or necessary to satisfy the requirements for REIT qualification, or other purposes; and • we are not able to refinance debt that matures prior to the loan it was used to finance on favorable terms, or at all.
Our Charter and Bylaws include, among others, provisions that: 43 • authorize our Board, without stockholder approval, to cause us to issue additional shares of our common stock or to raise capital through the creation and issuance of our preferred stock, debt securities convertible into common stock, options, warrants and other rights, on terms and for consideration as our Board in its sole discretion may determine; • authorize “blank check” preferred stock, which could be issued by our Board without stockholder approval, subject to certain specified limitations, and may contain voting, liquidation, dividend and other rights senior to our common stock; • specify that only our Board, the chairman of our Board, our chief executive officer or president or, upon the written request of stockholders entitled to cast not less than a majority of the votes entitled to be cast, our secretary can call special meetings of our stockholders; • establish advance notice procedures for stockholder proposals to be brought before an annual or special meeting of our stockholders, including proposed nominations of individuals for election to our Board; • provide that a majority of directors then in office, even though less than a quorum, may fill any vacancy on our Board, whether resulting from an increase in the number of directors or otherwise; and • provide our Board the exclusive power to adopt, alter or repeal any provision of our Bylaws and to make new Bylaws.
Our Charter and Bylaws include, among others, provisions that: • authorize our Board, without stockholder approval, to cause us to issue additional shares of our common stock or to raise capital through the creation and issuance of our preferred stock, debt securities convertible into common stock, options, warrants and other rights, on terms and for consideration as our Board in its sole discretion may determine; • authorize “blank check” preferred stock, which could be issued by our Board without stockholder approval, subject to certain specified limitations, and may contain voting, liquidation, dividend and other rights senior to our common stock; • specify that only our Board, the chairman of our Board, our chief executive officer or president or, upon the written request of stockholders entitled to cast not less than a majority of the votes entitled to be cast, our secretary can call special meetings of our stockholders; • establish advance notice procedures for stockholder proposals to be brought before an annual or special meeting of our stockholders, including proposed nominations of individuals for election to our Board; • provide that a majority of directors then in office, even though less than a quorum, may fill any vacancy on our Board, whether resulting from an increase in the number of directors or otherwise; and • provide our Board the exclusive power to adopt, alter or repeal any provision of our Bylaws and to make new Bylaws.
Unless publicly traded, these companies and their financial information are generally not subject to the regulations that govern public companies, and we may be unable to uncover all material information about these companies, which may prevent us from making a fully informed lending decision and cause us to lose money on our loans; • they generally have less predictable operating results and may require substantial additional capital to support their operations, finance expansion or maintain their competitive position; • we, our executive officers and directors and our Manager may, in the ordinary course of business, be named as defendants in litigation arising from our loans to such borrowers and may, as a result, incur significant costs and expenses in connection with such litigation; • changes in laws and regulations, as well as their interpretations, may have a disproportionate adverse effect on their business, financial structure or prospects compared to those of larger and more established companies; and • they may have difficulty accessing capital from other providers on favorable terms or at all.
Unless publicly traded, these companies and their financial information are generally not subject to the regulations that govern public companies, and we may be unable to uncover all material information about these companies, which may prevent us from making a fully informed lending decision and cause us to lose money on our loans; • they generally have less predictable operating results and may require substantial additional capital to support their operations, finance expansion or maintain their competitive position; • we, our executive officers and directors and our Manager may, in the ordinary course of business, be named as defendants in litigation arising from our loans to such borrowers and may, as a result, incur significant costs and expenses in connection with such litigation; • changes in laws and regulations, as well as their interpretations, may have a disproportionate adverse effect on their business, financial structure or prospects compared to those of larger and more established companies; and 25 • they may have difficulty accessing capital from other providers on favorable terms or at all.
To the extent that we invest in non-U.S. real estate-related assets, we may be subject to certain risks associated with international investment generally, including, among others: • currency exchange matters, including fluctuations in currency exchange rates and costs associated with conversion of investment principal and income from one currency to another; • less developed or efficient financial markets than in the United States, which may lead to potential price volatility and relative illiquidity; • the burdens of complying with international regulatory requirements and prohibitions that differ between jurisdictions; • changes in laws or clarifications to existing laws that could impact our tax treaty positions, which could adversely impact the returns on our investments; 28 • a less developed legal or regulatory environment, differences in the legal and regulatory environment or enhanced legal and regulatory compliance; • political hostility to investments by foreign investors; • higher inflation rates; • higher transaction costs; • difficulty enforcing contractual obligations; • fewer investor protections; • potentially adverse tax consequences; or • other economic and political risks.
To the extent that we invest in non-U.S. real estate-related assets, we may be subject to certain risks associated with international investment generally, including, among others: • currency exchange matters, including fluctuations in currency exchange rates and costs associated with conversion of investment principal and income from one currency to another; • less developed or efficient financial markets than in the United States, which may lead to potential price volatility and relative illiquidity; • the burdens of complying with international regulatory requirements and prohibitions that differ between jurisdictions; • changes in laws or clarifications to existing laws that could impact our tax treaty positions, which could adversely impact the returns on our investments; • a less developed legal or regulatory environment, differences in the legal and regulatory environment or enhanced legal and regulatory compliance; • political hostility to investments by foreign investors; • higher inflation rates; • higher transaction costs; • difficulty enforcing contractual obligations; • fewer investor protections; • potentially adverse tax consequences; or • other economic and political risks.
Changes in general economic conditions will affect the creditworthiness of borrowers and/or the value of underlying real estate collateral relating to our investments and may include economic and/or market fluctuations, changes in environmental, zoning and other laws, casualty or condemnation losses, regulatory limitations on rents, decreases in property values, changes in the appeal of properties to tenants, changes 29 in supply and demand of real estate products, fluctuations in real estate fundamentals, energy and supply shortages, various uninsured or uninsurable risks, natural disasters, changes in government regulations (such as rent control, zoning restrictions, building code mandates, etc.), changes in real property tax rates and operating expenses, changes in interest rates, changes in the availability of debt financing and/or mortgage funds which may render the sale or refinancing of properties difficult or impracticable, increased mortgage defaults, increases in borrowing rates, negative developments in the economy and/or real estate values generally and other factors that are beyond our control.
Changes in general economic conditions will affect the creditworthiness of borrowers and/or the value of underlying real estate collateral relating to our investments and may include economic and/or market fluctuations, changes in environmental, zoning and other laws, casualty or condemnation losses, regulatory limitations on rents, decreases in property values, changes in the appeal of properties to tenants, changes in supply and demand of real estate products, fluctuations in real estate fundamentals, energy and supply shortages, various uninsured or uninsurable risks, natural disasters, changes in government regulations (such as rent control, zoning restrictions, building code mandates, etc.), changes in real property tax rates and operating expenses, changes in interest rates, changes in the availability of debt financing and/or mortgage funds which may render the sale or refinancing of properties difficult or impracticable, increased mortgage defaults, increases in borrowing rates, negative developments in the economy and/or real estate values generally and other factors that are beyond our control.
Such joint venture investments may involve risks not otherwise present when we originate or acquire investments without partners, including the following: • we may not have exclusive control over the investment or the joint venture, which may prevent us from taking actions that are in our best interest; • joint venture agreements often restrict the transfer of a partner’s interest or may otherwise restrict our ability to sell the interest when we desire and/or on advantageous terms; • any future joint venture agreements may contain buy-sell provisions pursuant to which one partner may initiate procedures requiring the other partner to choose between buying the other partner’s interest or selling its interest to that partner; • we may not be in a position to exercise sole decision-making authority regarding the investment or joint venture, which could create the potential risk of creating impasses on decisions, such as with respect to acquisitions or dispositions; • a partner may, at any time, have economic or business interests or goals that are, or that may become, inconsistent with our business interests or goals; 47 • a partner may be in a position to take action contrary to our instructions, requests, policies or objectives, including our policy with respect to maintaining our qualification as a REIT and our exclusion or exemption from registration under the Investment Company Act; • a partner may fail to fund its share of required capital contributions or may become bankrupt, which may mean that we and any other remaining partners generally would remain liable for the joint venture’s liabilities; • our relationships with our partners are contractual in nature and may be terminated or dissolved under the terms of the applicable joint venture agreements and, in such event, we may not continue to own or operate the interests or investments underlying such relationship or may need to purchase such interests or investments at a premium to the market price to continue ownership; • disputes between us and a partner may result in litigation or arbitration that could increase our expenses and prevent our Manager and our officers and directors from focusing their time and efforts on our business and could result in subjecting the investments owned by the joint venture to additional risk; or • we may, in certain circumstances, be liable for the actions of a partner, and the activities of a partner could adversely affect our ability to maintain our qualification as a REIT or our exclusion or exemption from registration under the Investment Company Act, even though we do not control the joint venture.
Such joint venture investments may involve risks not otherwise present when we originate or acquire investments without partners, including the following: • we may not have exclusive control over the investment or the joint venture, which may prevent us from taking actions that are in our best interest; • joint venture agreements often restrict the transfer of a partner’s interest or may otherwise restrict our ability to sell the interest when we desire and/or on advantageous terms; • any future joint venture agreements may contain buy-sell provisions pursuant to which one partner may initiate procedures requiring the other partner to choose between buying the other partner’s interest or selling its interest to that partner; • we may not be in a position to exercise sole decision-making authority regarding the investment or joint venture, which could create the potential risk of creating impasses on decisions, such as with respect to acquisitions or dispositions; • a partner may, at any time, have economic or business interests or goals that are, or that may become, inconsistent with our business interests or goals; • a partner may be in a position to take action contrary to our instructions, requests, policies or objectives, including our policy with respect to maintaining our qualification as a REIT and our exclusion or exemption from registration under the Investment Company Act; • a partner may fail to fund its share of required capital contributions or may become bankrupt, which may mean that we and any other remaining partners generally would remain liable for the joint venture’s liabilities; • our relationships with our partners are contractual in nature and may be terminated or dissolved under the terms of the applicable joint venture agreements and, in such event, we may not continue to own or operate the interests or investments underlying such relationship or may need to purchase such interests or investments at a premium to the market price to continue ownership; • disputes between us and a partner may result in litigation or arbitration that could increase our expenses and prevent our Manager and our officers and directors from focusing their time and efforts on our business and could result in subjecting the investments owned by the joint venture to additional risk; or 50 • we may, in certain circumstances, be liable for the actions of a partner, and the activities of a partner could adversely affect our ability to maintain our qualification as a REIT or our exclusion or exemption from registration under the Investment Company Act, even though we do not control the joint venture.
Because this debt generally allows the borrower to make a large lump-sum payment of principal at the end of the loan term, there is a risk of loss if the borrower is unable to pay the lump sum or refinance the amount owed at maturity. • For accounting purposes, any cash distributions to stockholders representing OID and PIK-income are not treated as coming from paid-in capital, but rather retained earnings derived from REIT taxable income. • In certain cases, our taxable income may exceed our net cash provided by operating activities, as a result, we may have difficulty meeting the annual distribution requirement necessary to maintain our tax treatment as a REIT.
Because this debt generally allows the borrower to make a large lump-sum payment of principal at the end of the loan term, there is a risk of loss if the borrower is unable to pay the lump sum or refinance the amount owed at maturity. 34 • For accounting purposes, any cash distributions to stockholders representing OID and PIK-income are not treated as coming from paid-in capital, but rather retained earnings derived from REIT taxable income. • In certain cases, our taxable income may exceed our net cash provided by operating activities, as a result, we may have difficulty meeting the annual distribution requirement necessary to maintain our tax treatment as a REIT.
Some of the factors that could negatively affect or result in fluctuations in the market price of our common stock include: • our actual or projected operating results, financial condition, cash flows and liquidity or changes in business strategy or prospects; • changes in governmental policies, regulations or laws; • loss of a major funding source or inability to obtain new favorable funding sources in the future; • equity issuances by us, or share resales by our stockholders, or the perception that such issuances or resales may occur; 55 • actual, anticipated or perceived accounting or internal control problems; • publication of research reports about us, the real estate industry or the cannabis industry; • our value of the properties securing our loans; • changes in market valuations of similar companies; • adverse market reaction to any increased indebtedness we may incur in the future; • additions to or departures of the executive officers or key personnel supporting or assisting us from our Manager or its affiliates, including our Manager’s investment professionals; • speculation in the press or investment community about us or other similar companies; • our failure to meet, or the lowering of, our earnings estimates or those of any securities analysts; • increases in market interest rates, which may lead investors to demand a higher distribution yield for our common stock (if we have begun to make distributions to our stockholders) and which could cause the cost of our interest expenses on our debt to increase; • failure to qualify or maintain our qualification as a REIT or exclusion from the Investment Company Act; • price and volume fluctuations in the stock market generally; and • general market and economic conditions, including the state of the credit and capital markets.
Some of the factors that could negatively affect or result in fluctuations in the market price of our common stock include: • our actual or projected operating results, financial condition, cash flows and liquidity or changes in business strategy or prospects; • changes in governmental policies, regulations or laws; • loss of a major funding source or inability to obtain new favorable funding sources in the future; • equity issuances by us, or share resales by our stockholders, or the perception that such issuances or resales may occur; • actual, anticipated or perceived accounting or internal control problems; • publication of research reports about us, the real estate industry or the cannabis industry; 58 • our value of the properties securing our loans; • changes in market valuations of similar companies; • adverse market reaction to any increased indebtedness we may incur in the future; • additions to or departures of the executive officers or key personnel supporting or assisting us from our Manager or its affiliates, including our Manager’s investment professionals; • speculation in the press or investment community about us or other similar companies; • our failure to meet, or the lowering of, our earnings estimates or those of any securities analysts; • increases in market interest rates, which may lead investors to demand a higher distribution yield for our common stock (if we have begun to make distributions to our stockholders) and which could cause the cost of our interest expenses on our debt to increase; • failure to qualify or maintain our qualification as a REIT or exclusion from the Investment Company Act; • price and volume fluctuations in the stock market generally; and • general market and economic conditions, including the state of the credit and capital markets.
Moreover, we strategically benefit from the cannabis industry’s currently constrained access to U.S. capital markets and if such access is broadened, 21 including if the New York Stock Exchange (the “NYSE”) and/or the Nasdaq Stock Market were to permit the listing of plant-touching cannabis companies in the U.S., the demand among U.S. cannabis companies for private equity investments and debt financings, including our target loans, may materially decrease and could result in our competing with financial institutions that we otherwise would not.
Moreover, we strategically benefit from the cannabis industry’s currently constrained access to U.S. capital markets and if such access is broadened, including if the New York Stock Exchange (the “NYSE”) and/or the Nasdaq Stock Market were to permit the listing of plant-touching cannabis companies in the U.S., the demand among U.S. cannabis companies for private equity investments and debt financings, including our target loans, may materially decrease and could result in our competing with financial institutions that we otherwise would not.
In certain situations, we may: • acquire investments subject to rights of senior classes, special servicers or collateral managers under intercreditor, servicing agreements or securitization documents; • pledge our investments as collateral for financing arrangements; • acquire only a minority and/or a non-controlling participation in an underlying investment; • co-invest with others through partnerships, joint ventures or other entities, thereby acquiring non-controlling interests; or • rely on independent third-party management or servicing with respect to the management of an asset.
In certain situations, we may: • acquire investments subject to rights of senior classes, special servicers or collateral managers under intercreditor, servicing agreements or securitization documents; • pledge our investments as collateral for financing arrangements; • acquire only a minority and/or a non-controlling participation in an underlying investment; • co-invest with others through partnerships, joint ventures or other entities, thereby acquiring non-controlling interests; or 30 • rely on independent third-party management or servicing with respect to the management of an asset.
In addition, due to a number of factors (including, but not limited to, potentially greater clarity and/or unification of the laws and regulations governing cannabis by states and the federal government, including through federal legislation or descheduling of cannabis, which may, in turn, encourage additional federally-chartered banks to provide their services to cannabis-related businesses), the number of entities and the amount of funds competing to provide suitable capital may increase, resulting in loans with terms less favorable to investors.
In addition, due to a number of factors (including, but not limited to, potentially greater clarity and/or unification of the laws and regulations governing cannabis by states and the federal government, including through federal legislation or descheduling of cannabis, which may, in turn, encourage additional federally-chartered banks to provide their services to cannabis-related 22 businesses), the number of entities and the amount of funds competing to provide suitable capital may increase, resulting in loans with terms less favorable to investors.
Subject to the approval of our Manager, our Board (which must include a majority of our independent directors) may change our investment strategies or guidelines, financing strategies or leverage policies with respect to loans, originations, acquisitions, growth, 32 operations, indebtedness, capitalization and distributions at any time without the consent of our stockholders, which could result in a loan portfolio with a different risk profile than that of our existing portfolio or of a portfolio comprised of our target loans.
Subject to the approval of our Manager, our Board (which must include a majority of our independent directors) may change our investment strategies or guidelines, financing strategies or leverage policies with respect to loans, originations, acquisitions, growth, operations, indebtedness, capitalization and distributions at any time without the consent of our stockholders, which could result in a loan portfolio with a different risk profile than that of our existing portfolio or of a portfolio comprised of our target loans.
Under current Maryland law and our Charter, our directors and officers will not have any liability to us or our stockholders for money damages other than liability resulting from: • actual receipt of an improper benefit or profit in money, property or services; or • active and deliberate dishonesty by the director or officer that was established by a final judgment and is material to the cause of action adjudicated.
Under current Maryland law and our Charter, our directors and officers will not have any liability to us or our stockholders for money damages other than liability resulting from: 49 • actual receipt of an improper benefit or profit in money, property or services; or • active and deliberate dishonesty by the director or officer that was established by a final judgment and is material to the cause of action adjudicated.
For several years, the U.S. government has not enforced those laws against cannabis companies complying with state law and their vendors. We would likely be unable to execute our business plan if the federal government were to reverse its long-standing hands-off approach to the state legal cannabis markets, described below, and start strictly enforcing federal law regarding cannabis.
For several years, the U.S. government generally has not enforced those laws against cannabis companies complying with state law and their vendors. We would likely be unable to execute our business plan if the federal government were to reverse its long-standing hands-off approach to the state legal cannabis markets, described below, and start strictly enforcing federal law regarding cannabis.
Loans or investments involving international real estate-related assets are subject to special risks that we may not manage effectively, which would have a material adverse effect on our results of operations and our ability to make distributions to our stockholders. Our investment guidelines permit investments in non-U.S. assets, subject to the same guidelines as investments in U.S. assets.
Loans or investments involving international real estate-related assets are subject to special risks that we may not manage effectively, which would have a material adverse effect on our results of operations and our ability to make distributions to our stockholders. 29 Our investment guidelines permit investments in non-U.S. assets, subject to the same guidelines as investments in U.S. assets.
We believe that any disclosure controls and procedures or internal controls and procedures, no matter how well-conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. These inherent limitations include the realities that judgments in decision-making can be faulty, and that breakdowns can occur because of simple error or mistake.
We believe that any disclosure controls and procedures or internal controls and procedures, no matter how well-conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. 62 These inherent limitations include the realities that judgments in decision-making can be faulty, and that breakdowns can occur because of simple error or mistake.
In addition, our ability to refinance all or any debt we may incur in the future, on acceptable terms or at all, is subject to all of the above factors, and will also be affected by our future financial position, results of operations and cash flows, which additional factors are also subject to significant uncertainties, and therefore we may be unable to refinance any debt we may incur in the future, as it matures, on acceptable terms or at all.
In addition, our ability to refinance all or any debt we may incur in the future, on acceptable terms or at all, is subject to all of the above factors, and will also be affected by our future financial position, results of operations and cash flows, which additional factors are also subject to significant uncertainties, and therefore we may be unable to refinance any debt we may incur in the future, 43 as it matures, on acceptable terms or at all.
Depending on market conditions, we could incur substantial realized and/or unrealized losses, which could have a material adverse effect on our business, financial condition or results of operations. The loans and other assets we obtain may be subject to impairment charges, and we may experience a decline in the net carrying value of our assets.
Depending on market conditions, we could incur substantial realized and/or unrealized losses, which could have a material adverse effect on our business, financial condition or results of operations. 28 The loans and other assets we obtain may be subject to impairment charges, and we may experience a decline in the net carrying value of our assets.
In addition, we will be 53 subject to a 4% nondeductible excise tax on the amount, if any, by which distributions paid by us in any calendar year are less than the sum of 85% of our ordinary income, 95% of our capital gain net income and 100% of our undistributed income from prior years.
In addition, we will be subject to a 4% nondeductible excise tax on the amount, if any, by which distributions paid by us in any calendar year are less than the sum of 85% of our ordinary income, 95% of our capital gain net income and 100% of our undistributed income from prior years.
In certain limited cases (e.g., in connection with a workout, restructuring and/or foreclosing proceedings involving one or more of our investments), the success of our investment strategy with respect thereto will depend, in part, on our ability to effectuate loan 30 modifications and/or restructure and improve the operations of the borrower entities.
In certain limited cases (e.g., in connection with a workout, restructuring and/or foreclosing proceedings involving one or more of our investments), the success of our investment strategy with respect thereto will depend, in part, on our ability to effectuate loan modifications and/or restructure and improve the operations of the borrower entities.
In addition, we intend to seek debt investments in the secondary market that represent attractive risk-adjusted returns, 33 taking into account both stated interest rates and current market discounts to par value. Such market discounts may be included in income before we receive any corresponding cash payments.
In addition, we intend to seek debt investments in the secondary market that represent attractive risk-adjusted returns, taking into account both stated interest rates and current market discounts to par value. Such market discounts may be included in income before we receive any corresponding cash payments.
Under various federal, state and local laws, an owner or operator of real property may become liable for the costs of removal of certain hazardous substances released on its property. These laws often impose liability without regard to whether the owner or operator knew of, or was responsible for, the release of such hazardous substances.
Under various federal, state and local laws, an owner or operator of real property may become liable for the costs of removal of certain hazardous substances released on its property. These laws often impose liability without regard 42 to whether the owner or operator knew of, or was responsible for, the release of such hazardous substances.
Our Bylaws contain a provision exempting from the Maryland Control Share Acquisition Act any and all acquisitions by any person of shares of our stock. There can be no assurance that this exemption will not be amended or eliminated at any time in the future.
Our Bylaws contain a 47 provision exempting from the Maryland Control Share Acquisition Act any and all acquisitions by any person of shares of our stock. There can be no assurance that this exemption will not be amended or eliminated at any time in the future.
If our Manager overestimates the yields or incorrectly prices the risks of our loans, we may experience losses. Our Manager values our potential loans based on yields and risks, taking into account estimated future losses and the collateral securing a potential loan, if any, and the estimated impact of these losses on expected future cash flows, returns and appreciation.
If our Manager overestimates the yields or incorrectly prices the risks of our loans, we may experience losses. 27 Our Manager values our potential loans based on yields and risks, taking into account estimated future losses and the collateral securing a potential loan, if any, and the estimated impact of these losses on expected future cash flows, returns and appreciation.
In addition, our Board has granted conditional exceptions to the ownership limits to affiliates of our Sponsor, which may limit our Board’s power to increase the ownership limits or grant further exemptions in the future. Maintenance of our exemption from registration under the Investment Company Act may impose significant limits on our operations.
In addition, our Board has granted conditional exceptions to the ownership limits to affiliates of our Sponsor, which may limit our Board’s power to increase the ownership limits or grant further exemptions in the future. 48 Maintenance of our exemption from registration under the Investment Company Act may impose significant limits on our operations.
If we cease to qualify as a REIT, we would become subject to U.S. federal income tax on our net taxable income and we generally would no longer be required to distribute any of our net taxable income to our stockholders, which may have adverse consequences on the total return to our stockholders.
If we cease to qualify as a REIT, we would become subject to U.S. federal income tax on our net taxable income and we generally would 57 no longer be required to distribute any of our net taxable income to our stockholders, which may have adverse consequences on the total return to our stockholders.
Our ability to vary our portfolio in response to changes in economic, regulatory and other conditions or changes in our strategic plan may therefore be relatively limited, which could adversely affect our results of operations and financial condition. Our real estate investments are subject to risks particular to real property.
Our ability to vary our portfolio in response to changes in economic, regulatory and other conditions or changes in our strategic plan may therefore be relatively limited, which could adversely affect our results of operations and financial condition. Our investments are subject to risks particular to real property.
Risks Related to Sources of Financing Our Business Our growth depends on external sources of capital, which may not be available on favorable terms or at all. 40 We intend to grow by expanding our portfolio of loans, which we intend to finance primarily through newly issued equity or debt.
Risks Related to Sources of Financing Our Business Our growth depends on external sources of capital, which may not be available on favorable terms or at all. We intend to grow by expanding our portfolio of loans, which we intend to finance primarily through newly issued equity or debt.
There can be no assurance that any procedural protections will be sufficient to ensure that these transactions will be made on terms that will be at least as favorable to us as those that would have been obtained in an arm’s-length transaction. Fees and expenses.
There can be no assurance that any procedural protections will be sufficient to ensure that these transactions will be made on terms that will be at least as favorable to us as those that would have been obtained in an arm’s-length transaction. 52 Fees and expenses.
The ability of a borrower to repay a loan secured by an income-producing property typically is dependent primarily upon the successful operation of the property rather than upon the existence of independent income or assets of the borrower. If the net operating income of 25 the property is reduced, the borrower’s ability to repay the loan may be impaired.
The ability of a borrower to repay a loan secured by an income-producing property typically is dependent primarily upon the successful operation of the property rather than upon the existence of independent income or assets of the borrower. If the net operating income of the property is reduced, the borrower’s ability to repay the loan may be impaired.
In the event of any default under transitional loans that may be held by us, we bear the risk of loss of principal and non-payment of interest and fees to the extent of any deficiency between the value of the mortgage collateral and the principal amount and unpaid interest of the transitional loan.
In the event of any default under transitional loans that may be held by us, we bear the risk of loss of principal and non-payment of interest and fees to the extent of any deficiency between the value of the mortgage collateral and the principal amount and unpaid interest of 31 the transitional loan.
If we participate in a co-investment with an investment vehicle managed by our Manager or an affiliate of our Manager 49 and such vehicle fails to fund a future advance on a loan, we may be required to, or we may elect to, cover such advance and invest additional funds.
If we participate in a co-investment with an investment vehicle managed by our Manager or an affiliate of our Manager and such vehicle fails to fund a future advance on a loan, we may be required to, or we may elect to, cover such advance and invest additional funds.
Our Manager has great latitude in determining the types of loans that are proper for us, which could result in loan returns that are substantially below expectations or that result in losses, which would materially and adversely affect our business operations and results.
Our Manager has great latitude in determining the types of loans that are proper for us, which could result in loan returns that are substantially below expectations or that result in losses, which would 54 materially and adversely affect our business operations and results.
In certain cases, we may, and may continue to, obtain unsecured guarantees from the parent entities or subsidiaries of our borrowers in addition to the collateral provided by such borrowers and such guarantees may be effectively subordinated to any secured debt of any such entities and/or structurally subordinated to any debt of such 31 subsidiaries.
In certain cases, we may, and may continue to, obtain unsecured guarantees from the parent entities or subsidiaries of our borrowers in addition to the collateral provided by such borrowers and such guarantees may be effectively subordinated to any secured debt of any such entities and/or structurally subordinated to any debt of such subsidiaries.
There is no guarantee that the policies and procedures adopted by us, the terms and conditions of the Management Agreement or the policies and procedures adopted by our Manager and its affiliates, will enable us to identify, adequately address or mitigate these conflicts of interest.
There is no guarantee that the policies and procedures 51 adopted by us, the terms and conditions of the Management Agreement or the policies and procedures adopted by our Manager and its affiliates, will enable us to identify, adequately address or mitigate these conflicts of interest.
The FDA could turn its attention to the cannabis industry in the future, and will do so if cannabis is rescheduled, effectively moving it from primary DEA oversight (as a Schedule I drug) to primary FDA oversight (as a Schedule III drug).
The FDA could turn its attention to the cannabis industry in the future, and will do so if cannabis is rescheduled, effectively moving it from primary 39 DEA oversight (as a Schedule I drug) to primary FDA oversight (as a Schedule III drug).
The providers of bank credit facilities may also require us to maintain a certain amount of cash or set aside assets sufficient to maintain a specified liquidity position that would allow us to satisfy our collateral obligations.
The providers of bank credit facilities may also require us to maintain a certain amount of cash or set aside assets sufficient to maintain a specified liquidity position that would allow us to satisfy our collateral 45 obligations.
We believe that our organization and method of operation will enable us to continue to meet the requirements for qualification and taxation as a REIT. 52 However, we cannot assure you that we will qualify as such.
We believe that our organization and method of operation will enable us to continue to meet the requirements for qualification and taxation as a REIT. However, we cannot assure you that we will qualify as such.
To the extent that some of our loans may be rated by rating agencies such as Moody’s Investors Service, Fitch Ratings, Standard & Poor’s, 27 DBRS, Inc. or Realpoint LLC.
To the extent that some of our loans may be rated by rating agencies such as Moody’s Investors Service, Fitch Ratings, Standard & Poor’s, DBRS, Inc. or Realpoint LLC.
Foreclosing on pledged equity is subject to approval by the applicable state regulator as it would trigger a change of control, 39 which has to be approved by the state regulator, in its discretion.
Foreclosing on pledged equity is subject to approval by the applicable state regulator as it would trigger a change of control, which has to be approved by the state regulator, in its discretion.
Accordingly, because of the inherent limitations in our control system, misstatements due to error or fraud may occur and not be detected. 59 Item 1B. Unresolved Staff Comments Not applicable.
Accordingly, because of the inherent limitations in our control system, misstatements due to error or fraud may occur and not be detected. Item 1B. Unresolved Staff Comments Not applicable.
Controlled Substances Act of 1970, as amended (the “CSA”), which relates to, among other things, the management or control of properties that are used for the manufacturing, distributing or using of any controlled 23 substances.
Controlled Substances Act of 1970, as amended (the “CSA”), which relates to, among other things, the management or control of properties that are used for the manufacturing, distributing or using of any controlled substances.
At the same time, the 42 interest income we earn on our fixed-rate loans would not change, the duration and weighted average life of our fixed-rate loans would increase and the market value of our fixed-rate loans would decrease.
At the same time, the interest income we earn on our fixed-rate loans would not change, the duration and weighted average life of our fixed-rate loans would increase and the market value of our fixed-rate loans would decrease.
Mazarakis has agreed to recuse himself from all matters that involve us, Vireo, and other target portfolio companies ancillary thereto; including as it relates to any actions that would arise, including exercise of rights and remedies under our credit agreements, if Vireo were to default on its obligations to us or if a similar material event occurred that presented a direct conflict between us and Vireo.
Mazarakis has agreed to recuse himself from all matters that involve us, Vireo, and other target portfolio companies ancillary thereto; including as it relates to any actions that would arise, including exercise of rights and remedies under our credit agreements, if Vireo were to default on any potential obligations to us or if a similar material event occurred that presented a direct conflict between us and Vireo.
There are no guarantees that we or our borrowers will be able to find insurance now or in the future, or that such insurance will be available on economically viable terms.
There are no guarantees that we 33 or our borrowers will be able to find insurance now or in the future, or that such insurance will be available on economically viable terms.
As a result, if we foreclose on properties securing our loans, we may have difficulty selling such properties and may be forced to sell a property to a lower quality operator.
As a result, if we foreclose on properties securing our loans, we may have difficulty selling 41 such properties and may be forced to sell a property to a lower quality operator.
In addition, our contracts would 46 be unenforceable unless a court required enforcement, and a court could appoint a receiver to take control of such entity and liquidate its business.
In addition, our contracts would be unenforceable unless a court required enforcement, and a court could appoint a receiver to take control of such entity and liquidate its business.
Risks Related to Our Organization and Structure 20 • There are various conflicts of interest in our relationship with our Manager, including conflicts created by our Manager’s compensation arrangements with us, which could result in decisions that are not in the best interests of our stockholders. • Maintenance of our exemption from registration under the Investment Company Act may impose significant limits on our operations.
Risks Related to Our Organization and Structure 21 • There are various conflicts of interest in our relationship with our Manager, including conflicts created by our Manager’s compensation arrangements with us, which could result in decisions that are not in the best interests of our stockholders. • Maintenance of our exemption from registration under the Investment Company Act may impose significant limits on our operations.
The Incentive Compensation payable to our Manager under the Management Agreement may cause our Manager to select riskier loans to increase its Incentive Compensation. In addition to the Base Management Fees, our Manager is entitled to receive Incentive Compensation under our Management Agreement.
The Incentive Compensation payable to our Manager under the Management Agreement may cause our Manager to select riskier loans to increase its Incentive Compensation. 53 In addition to the Base Management Fees, our Manager is entitled to receive Incentive Compensation under our Management Agreement.
We expect the principal amount of the loans we originate to increase and that we will need to raise additional equity and/or debt to increase our liquidity in the future.
We expect the principal amount of the loans we originate to increase and that we will need to raise additional equity 59 and/or debt to increase our liquidity in the future.
Former Attorney General William Barr testified in his confirmation hearing on January 15, 2019, that he would not upset “settled expectations,” “investments,” or other “reliance interest[s]” arising as a result of the Cole Memo, and that he did not intend to use federal resources to enforce federal cannabis laws in states that have legalized cannabis “to the extent people are complying with the state laws.” He stated: “My approach to this would be not to upset settled expectations and the reliance interest that have arisen as a result of the Cole Memorandum and investments have been made and so there has been reliance on it, so I don’t think it’s appropriate to upset those 35 interests.” He also implied that the CSA’s prohibitions of cannabis may be null in states that have legalized cannabis: “[T]he current situation … is almost like a back door nullification of federal law.” Industry observers generally have not interpreted Attorney General Barr’s comments to suggest that the DOJ would proceed with cases against participants who entered the state-legal industry after the Cole Memo had been rescinded.
Former Attorney General William Barr testified in his confirmation hearing on January 15, 2019, that he would not upset “settled expectations,” “investments,” or other “reliance interest[s]” arising as a result of the Cole Memo, and that he did not intend to use federal resources to enforce federal cannabis laws in states that have legalized cannabis “to the extent people are complying with the state laws.” He stated: “My approach to this would be not to upset settled expectations and the reliance interest that have arisen as a result of the Cole Memorandum and investments have been made and so there has been reliance on it, so I don’t think it’s appropriate to upset those interests.” He also implied that the CSA’s prohibitions of cannabis may be null in states that have legalized cannabis: “T]he current situation … is almost like a back door nullification of federal law.” Industry observers generally did not interpret Attorney General Barr’s comments to suggest that the DOJ would proceed with cases against participants who entered the state-legal industry after the Cole Memo had been rescinded.
These developments, along with the United States government’s credit and deficit concerns, global economic uncertainties and market volatility and the impacts of any current or future global health pandemics, could cause interest rates to be volatile, which may negatively impact our ability to access the capital markets on favorable terms .
These developments, along with the United States government’s credit and deficit concerns, global economic uncertainties and market volatility and the impacts of any current or future global health pandemics, could cause interest rates to be fluctuate, which may negatively impact our ability to access the capital markets on favorable terms .
If any of the foregoing risks were to materialize, they could adversely affect our results of operations and financial condition. While our investment guidelines permit investments in non-U.S. real estate assets, as of December 31, 2024, none of our loans were made to non-U.S. borrowers nor collateralized by non-U.S. real estate assets.
If any of the foregoing risks were to materialize, they could adversely affect our results of operations and financial condition. While our investment guidelines permit investments in non-U.S. real estate assets, as of December 31, 2025, none of our loans were made to non-U.S. borrowers nor collateralized by non-U.S. real estate assets.
If some investors find our common stock less attractive as a result, there may be a less active trading market for our common stock and our stock price 57 may be more volatile. We may take advantage of these reporting exemptions until we are no longer an emerging growth company and/or smaller reporting company, as applicable.
If some investors find our common stock less attractive as a result, there may be a less active trading market for our common stock 60 and our stock price may be more volatile. We may take advantage of these reporting exemptions until we are no longer an emerging growth company and/or smaller reporting company, as applicable.
Some statements in the following risk factors constitute forward-looking statements. Risk Factors Summary 19 The following is a summary of the principal risks and uncertainties that could adversely affect our business, cash flows, financial condition and/or results of operations, and these adverse impacts may be material.
Some statements in the following risk factors constitute forward-looking statements. Risk Factors Summary 20 The following is a summary of the principal risks and uncertainties that could adversely affect our business, cash flows, financial condition and/or results of operations, and these adverse impacts may be material.
To the extent we suffer such losses with respect to these transitional loans, it could adversely affect our results of operations and financial condition. As of December 31, 2024, we had no investments in transitional loans.
To the extent we suffer such losses with respect to these transitional loans, it could adversely affect our results of operations and financial condition. As of December 31, 2025, we had no investments in transitional loans.
As of December 31, 2024, none of our loans were rated by ratings agencies. As a result, a substantial portion of our portfolio may result in an above average amount of risk and volatility or loss of principal.
As of December 31, 2025, none of our loans were rated by ratings agencies. As a result, a substantial portion of our portfolio may result in an above average amount of risk and volatility or loss of principal.
Recent bankruptcy rulings have denied bankruptcies for dispensaries upon the justification that businesses cannot violate federal law and then claim the benefits of federal bankruptcy for the same activity and upon the justification that courts cannot ask a bankruptcy trustee to take possession of, and distribute cannabis assets as such action would 38 violate the CSA.
Past bankruptcy rulings have denied bankruptcies for dispensaries upon the justification that businesses cannot violate federal law and then claim the benefits of federal bankruptcy for the same activity and upon the justification that courts cannot ask a bankruptcy trustee to take possession of, and distribute cannabis assets as such action would violate the CSA.
Equipment, receivables, and cash in deposit accounts may be collected under state Uniform Commercial Code ( “UCC” ). In all states, we are permitted for non-real estate collateral (e.g., equipment) to pursue a judicial action and execute on a judgment via sheriffs’ sale.
Equipment, receivables, and cash in deposit accounts may be collected under state Uniform Commercial Code ( “ UCC ” ). In all states, we are permitted for non-real estate collateral (e.g., equipment) to pursue a judicial action and execute on a judgment via sheriffs’ sale.
Any change in the federal government’s enforcement posture with respect to state-licensed cultivation of cannabis, including the enforcement postures of individual federal prosecutors in judicial districts where we make our loans, would result in our inability to execute our business plan, and we would likely suffer significant losses with respect to our loans to cannabis industry participants in the United States, which would adversely affect our operations, cash flow and financial condition.
Any change in the federal government’s enforcement posture with respect to state-licensed cultivation, distribution, sale or use of cannabis, including the enforcement postures of individual federal prosecutors in judicial districts where we make our loans, would result in our inability to execute our business plan, and we would likely suffer significant losses with respect to our loans to cannabis industry participants in the United States, which would adversely affect our operations, cash flow and financial condition.
Cannabis facilities are currently regulated by state and local governments. In the event that some or all of these federal enforcement and regulations are imposed, we do not know what the impact would be on the cannabis industry, including what costs, requirements and possible prohibitions may be enforced.
Cannabis facilities are currently regulated by state and local governments. In the event that some or all of these federal enforcement and regulations are imposed, we do not know what the impact would be on the cannabis industry, including what costs, requirements and possible prohibitions may be enforced or how state legal markets may be impacted.
For example, Mr. Mazarakis, who serves as our Executive Chairman of the Board, was appointed in December 2024 to serve as Chief Executive Officer and Co-Executive Chairman of the Board of Vireo Growth Inc. (“Vireo”) which is one of our portfolio companies and a related party.
For example, Mr. Mazarakis, who serves as our Executive Chairman of the Board, was appointed in December 2024 to serve as Chief Executive Officer and Co-Executive Chairman of the Board of Vireo Growth Inc. (“Vireo”), which was previously one of our portfolio companies and a related party during 2025.
There can be no assurance that the Internal Revenue Service (“IRS”) would not challenge our estimates of the loan values of the real property. We may in the future enter into credit agreements with borrowers that may permit them to incur debt that ranks equally with, or senior to, the loans we extend to such companies under such credit agreements.
There can be no assurance that the IRS would not challenge our estimates of the loan values of the real property. We may in the future enter into credit agreements with borrowers that may permit them to incur debt that ranks equally with, or senior to, the loans we extend to such companies under such credit agreements.
However, through the 2025 tax year, individual U.S. stockholders may be entitled to claim a deduction in determining their taxable income of 20% of ordinary REIT dividends (dividends other than capital gain dividends and dividends attributable to qualified dividend income received by us, if any).
However, individual U.S. stockholders may be entitled to claim a deduction in determining their taxable income of 20% of ordinary REIT dividends (dividends other than capital gain dividends and dividends attributable to qualified dividend income received by us, if any).
Our founders could therefore exert substantial influence over our corporate matters, such as electing directors and approving material mergers, acquisitions, strategic partnerships or other business combination transactions, as applicable.
The founders of Chicago Atlantic could therefore exert substantial influence over our corporate matters, such as electing directors and approving material mergers, acquisitions, strategic partnerships or other business combination transactions, as applicable.
We are subject to laws and regulations at the local, state and federal levels, including laws and regulations governing cannabis and REITs by state and federal governments.
We and our portfolio companies are subject to laws and regulations at the local, state and federal levels, including laws and regulations governing cannabis and REITs by state and federal governments.
Department of the Treasury, clarified how financial institutions can provide services to cannabis-related businesses consistent with their obligations under the Bank Secrecy Act. While the federal government has not initiated financial crimes prosecutions against state-law compliant cannabis companies or their vendors, the government theoretically could, at least against companies in the adult-use markets.
Department of the Treasury, clarified how financial institutions can provide services to cannabis-related businesses consistent with their obligations under the Bank Secrecy Act. While the federal government has not initiated financial crimes prosecutions against state-law compliant cannabis companies or their vendors, the government theoretically could do so.
Such events, including trade tensions between the United States and other countries, such as Canada, Mexico, and China, other uncertainties regarding actual and potential shifts in U.S. and foreign trade, economic and other policies with other countries, the Russia-Ukraine war and the Israel-Hamas war and health epidemics and pandemics, could adversely affect our business, financial condition, cash flows and results of operations.
Such events, including trade tensions and tariffs between the United States and other countries, such as Canada, Mexico, and China, other uncertainties regarding actual and potential shifts in U.S. and foreign trade, economic and other policies with other countries, the conflicts in Europe, Ukraine and the Middle East and health epidemics and pandemics, could adversely affect our business, financial condition, cash flows and results of operations.
In determining “intended use,” the FDA has traditionally looked beyond a product’s label to statements made on websites, on social media, or orally by the company’s representatives. While the FDA has not yet enforced against the cannabis industry, it has sent numerous warning letters to sellers of CBD, Delta-8, and intoxicating hemp products.
In determining “intended use,” the FDA has traditionally looked beyond a product’s label to statements made on websites, on social media, or orally by the company’s representatives. The FDA has sent numerous warning letters to sellers of CBD, Delta-8, and intoxicating hemp products.
Such loans may raise potential conflicts of interest between us and such other investment vehicles. To the extent such investment vehicles seek to acquire the same target assets as us, subject to the internal policies of our Manager and its affiliates described above, the scope of opportunities otherwise available to us may be adversely affected and/or reduced.
To the extent such investment vehicles seek to acquire the same target assets as us, subject to the internal policies of our Manager and its affiliates described above, the scope of opportunities otherwise available to us may be adversely affected and/or reduced.
As of December 31, 2024, we had no investments in mezzanine loans, B-Notes or other investments that are subordinated or otherwise junior in an issuer’s capital structure.
As of December 31, 2025, we had no investments in mezzanine loans, B-Notes or other investments that are subordinated or otherwise junior to other material indebtedness in an issuer’s capital structure.
Our Board is authorized, without stockholder approval, to cause us to issue additional shares of our common stock and to raise capital through the creation and issuance of preferred stock, debt securities convertible into common stock, options, warrants and other rights, on terms and for consideration as our Board in its sole discretion may determine. 58 Sales of substantial amounts of our capital stock or other securities convertible into our capital stock could cause the valuation of our capital stock to decrease significantly.
Our Board is authorized, without stockholder approval, to cause us to issue additional shares of our common stock and to raise capital through the creation and issuance of preferred stock, debt securities convertible into common stock, options, warrants and other rights, on terms and for consideration as our Board in its sole discretion may determine.
Accordingly, any change in these laws or regulations, changes in their interpretation, or newly enacted laws or regulations and any failure by us to comply with these laws or regulations, could require changes to certain of our business practices, negatively impact our operations, cash flow or financial condition, impose additional costs on us or otherwise adversely affect our business.
Accordingly, any change in these laws or regulations, changes in their interpretation, or newly enacted laws or regulations and any failure by us to comply with these laws or regulations, could require changes to certain of our business practices, negatively impact our operations, cash flow or financial condition, impose additional costs on us or otherwise adversely affect our business. 40 Applicable state laws may prevent us from maximizing our potential income.
Loans to cannabis businesses may be forfeited to the federal government. Any assets used in conjunction with the violation of federal law are potentially subject to federal forfeiture, even in states that have legalized cannabis.
Any assets used in conjunction with the violation of federal law are potentially subject to federal forfeiture, even in states that have legalized cannabis.
However, in approving a transaction, the board of directors may provide that its approval is subject to compliance, at or after the time of approval, with any terms and conditions determined by the board of directors. 44 After the expiration of the five-year period described above, any business combination between a Maryland corporation and an interested stockholder must generally be recommended by the board of directors of such corporation and approved by the affirmative vote of at least: • 80% of the votes entitled to be cast by holders of the then-outstanding shares of voting stock of such corporation; and • two-thirds of the votes entitled to be cast by holders of voting stock of such corporation, other than shares held by the interested stockholder with whom or with whose affiliate the business combination is to be effected, or held by an affiliate or associate of the interested stockholder.
After the expiration of the five-year period described above, any business combination between a Maryland corporation and an interested stockholder must generally be recommended by the board of directors of such corporation and approved by the affirmative vote of at least: • 80% of the votes entitled to be cast by holders of the then-outstanding shares of voting stock of such corporation; and • two-thirds of the votes entitled to be cast by holders of voting stock of such corporation, other than shares held by the interested stockholder with whom or with whose affiliate the business combination is to be effected, or held by an affiliate or associate of the interested stockholder.
Any provision of our Charter or Bylaws that has the effect of delaying or deterring a change in control could limit your opportunity to receive a premium for your shares of our common stock, and could also affect the price that some investors are willing to pay for our common stock.
These provisions, alone or together, could delay or prevent hostile takeovers and changes in control or changes in our management. 46 Any provision of our Charter or Bylaws that has the effect of delaying or deterring a change in control could limit your opportunity to receive a premium for your shares of our common stock, and could also affect the price that some investors are willing to pay for our common stock.
If one or more of these analysts cease coverage of us or fails to regularly publish reports on us, we could lose visibility in the market and interest in our stock could decrease, which in turn could cause our stock price or trading volume to decline and may also impair our ability to expand our business with existing customers and attract new customers.
If one or more of these analysts cease coverage of us or fails to regularly publish reports on us, we could lose visibility in the market and interest in our stock could decrease, which in turn could cause our stock price or trading volume to decline and may also impair our ability to expand our business with existing customers and attract new customers. 61 Future sales of our capital stock or other securities convertible into our capital stock could cause the value of our common stock to decline and could result in dilution of your shares of our common stock.

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Item 1C. Cybersecurity

Cybersecurity — threats and controls disclosure

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Biggest changeIn particular, the audit committee of our board of directors (the “audit committee”) has the responsibility to consider and discuss our major financial risk exposures and the steps our Manager takes, or is required to take, to monitor and control these exposures, including guidelines and policies to govern the process by which risk assessment and management is undertaken.
Biggest changeIn particular, the Audit Committee has the responsibility to consider and discuss 63 our major financial risk exposures and the steps our Manager takes, or is required to take, to monitor and control these exposures, including guidelines and policies to govern the process by which risk assessment and management is undertaken.
The Manager's cybersecurity program is aligned to the National Institute of Standards of Technology (NIST) Cybersecurity Framework. Our Manager's cybersecurity risk management processes include technical security controls, policy enforcement mechanisms, monitoring systems, tools and related services, which include tools and services from third-party providers, and management oversight to assess, identify and manage risk from cybersecurity.
Our Manager's cybersecurity program is aligned to the National Institute of Standards of Technology (NIST) Cybersecurity Framework. Our Manager's cybersecurity risk management processes include technical security controls, policy enforcement mechanisms, monitoring systems, tools and related services, which include tools and services from third-party providers, and management oversight to assess, identify and manage risk from cybersecurity.
Risk Factors— General Risk Factors—We rely on information technology in our operations, and security breaches and other disruptions in our systems could compromise our information and expose us to liability, which would cause our business and reputation to suffer.” Governance and Oversight of Cybersecurity Risks Our cybersecurity program is managed by IT Manager and our IT consultant , which together, are responsible for enterprise-wide cybersecurity strategy, policies, standards, engineering, architecture and processes.
Risk Factors— General Risk Factors —We rely on information technology in our operations, and security breaches and other disruptions in our systems could compromise our information and expose us to liability, which would cause our business and reputation to suffer.” Governance and Oversight of Cybersecurity Risks Our cybersecurity program is managed by our Manager's IT Manager and our IT consultant , which together, are responsible for enterprise-wide cybersecurity strategy, policies, standards, engineering, architecture and processes.
Annual briefings of the audit committee by employees of the Manager and/or the IT Consultant may include topics such as risk assessment, risk management and control decisions, service provider arrangements, test results, security incidents and responses, and recommendations for changes and updates to policies and procedures. 60
Annual briefings of the Audit Committee by employees of the Manager and/or the IT Consultant may include topics such as risk assessment, risk management and control decisions, service provider arrangements, test results, security incidents and responses, and recommendations for changes and updates to policies and procedures.
Our board of directors has responsibility for the direction and oversight of our risk management. Our board of directors administers this oversight function directly, with support from its committees.
Our Board has responsibility for the direction and oversight of our risk management. Our Board administers this oversight function directly, with support from its committees.
Our audit committee also monitors compliance with legal and regulatory requirements. With respect to cybersecurity, the audit committee engages in discussions with management regarding the Company’s significant financial risk exposures and the measures implemented to monitor and control these risks, including those that may result from material cybersecurity threats.
The A udit Committee also monitors compliance with legal and regulatory requirements. With respect to cybersecurity, the Audit Committee engages in discussions with management regarding the Company’s significant financial risk exposures and the measures implemented to monitor and control these risks, including those that may result from material cybersecurity threats.
However, future incidents could have a material impact on our business strategy, results of operations or financial condition. For additional discussion of the risks posed by cybersecurity threats, see “Item 1A.
However, future incidents could have a material impact on our business strategy, results of operations or financial condition. For additional discussion of the risks posed by cybersecurity threats, see “ Item 1A.
As part of its collective risk management process, our Manager engages a third party information technology consultant (“IT Consultant ”) to evaluate risks associated with the Manager’s information and technology system(s), network and physical devices.
As part of its collective risk management process, our Manager has engaged a third party information technology consultant (“IT Consultant ”) to evaluate risks associated with our Manager’s information and technology system(s), network and physical devices.

Item 3. Legal Proceedings

Legal Proceedings — active lawsuits and investigations

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Biggest changeFurthermore, third-parties may try to seek to impose liability on us in connection with our loans. While the outcome of these legal proceedings cannot be predicted with certainty, we do not expect that these proceedings will have a material effect upon our financial condition or results of operations. Item 4. Mi ne Safety Disclosures Not applicable. 61 PA RT II
Biggest changeFurthermore, third-parties may try to seek to impose liability on us in connection with our loans. While the outcome of these legal proceedings cannot be predicted with certainty, we do not expect that these proceedings will have a material effect upon our financial condition or results of operations. Item 4. Mi ne Safety Disclosures Not applicable. 64 PA RT II

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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Biggest changeThere were 53 holders of record of our common stock as of March 7, 2025. This number does not include beneficial owners who hold shares of our common stock in street name. There were no unregistered sales of equity securities during the years ended December 31, 2024 and 2023.
Biggest changeThere were 52 holders of record of our common stock as of March 6, 2026. This number does not include beneficial owners who hold shares of our common stock in street name.
Item 5. Ma rket for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities Our common stock is listed for trading on the Nasdaq Global Market under the symbol “REFI.” On March 7, 2025, the closing price of our common stock, as reported on the Nasdaq Global Market, was $16.15 per share.
Item 5. Ma rket for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities Our common stock is listed for trading on the Nasdaq Global Market under the symbol “REFI.” On March 6, 2026, the closing price of our common stock, as reported on the Nasdaq Global Market, was $12.27 per share.
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However, because many of our common shares are held by brokers and other institutions, we believe that there are many more beneficial holders of our common shares than record holders. There were no unregistered sales of equity securities during the years ended December 31, 2025 and 2024.

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

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Biggest changeThe following tables summarize our loans held for investment as of December 31, 2024 and 2023: As of December 31, 2024 Outstanding Principal Original Issue Discount Carrying Value Weighted Average Remaining Life (Years) (1) Senior Term Loans $ 404,721,554 $ (2,244,508 ) $ 402,477,046 2.2 Current expected credit loss reserve - - (4,346,869 ) Total loans held at carrying value, net $ 404,721,554 $ (2,244,508 ) $ 398,130,177 As of December 31, 2023 Outstanding Principal Original Issue Discount Carrying Value Weighted Average Remaining Life (Years) (1) Senior Term Loans $ 355,745,305 $ (2,104,695 ) $ 353,640,610 2.1 Current expected credit loss reserve - - (4,972,647 ) Total loans held at carrying value, net $ 355,745,305 $ (2,104,695 ) $ 348,667,963 (1) Weighted average remaining life is calculated on the carrying value of the loans as of December 31, 2024 and 2023, respectively. 73 The following tables present changes in loans held for investment at carrying value as of and for the years ended December 31, 2024 and 2023: Principal Original Issue Discount Current Expected Credit Loss Reserve Carrying Value Balance at December 31, 2023 $ 355,745,305 $ (2,104,695 ) $ (4,972,647 ) $ 348,667,963 New fundings 161,289,523 (1,836,952 ) - 159,452,571 Principal repayment of loans (102,461,111 ) - - (102,461,111 ) Accretion of original issue discount - 1,697,139 - 1,697,139 Transfer of loan held for investment to loan held for sale (19,000,000 ) 213,913 (18,786,087 ) PIK Interest 9,147,837 - - 9,147,837 Decrease in provision for current expected credit losses - - 411,865 411,865 Balance at December 31, 2024 $ 404,721,554 $ (2,244,508 ) $ (4,346,869 ) $ 398,130,177 Principal Original Issue Discount Current Expected Credit Loss Reserve Carrying Value Balance at December 31, 2022 $ 343,029,334 $ (3,755,796 ) $ (3,940,939 ) $ 335,332,599 New fundings 93,533,516 (1,332,340 ) - 92,201,176 Principal repayment of loans (76,876,048 ) - - (76,876,048 ) Accretion of original issue discount - 2,983,441 - 2,983,441 Transfer of loan held for investment to loan held for sale (13,399,712 ) - - (13,399,712 ) PIK Interest 9,458,215 - - 9,458,215 Increase in provision for current expected credit losses - - (1,031,708 ) (1,031,708 ) Balance at December 31, 2023 $ 355,745,305 $ (2,104,695 ) $ (4,972,647 ) $ 348,667,963 We may make modifications to loans, including loans that are in default.
Biggest changeAs of December 31, 2025 and 2024, our portfolio had the following interest rate floors: 70 As of December 31, 2025 As of December 31, 2024 Rate Floor Outstanding Principal Weighted Average Cash Coupon Percentage of Portfolio Outstanding Principal Weighted Average Cash Coupon Percentage of Portfolio 8.50% $ 44,642,571 13.3 % 10.9 % $ 51,068,629 13.6 % 12.6 % 8.00% 1,380,000 15.5 % 0.3 % 7,620,000 14.7 % 1.9 % 7.75% - 0.0 % 0.0 % 16,880,308 18.1 % 4.2 % 7.50% 62,121,045 14.1 % 15.1 % 42,839,358 14.4 % 10.6 % 7.00% 89,852,341 10.7 % 21.9 % 75,902,295 11.1 % 18.8 % 6.25% 15,771,067 13.3 % 3.8 % 19,324,557 14.0 % 4.8 % 5.50% - 0.0 % 0.0 % 580,000 18.0 % 0.1 % 4.00% 20,427,778 12.5 % 5.0 % - 0.0 % 0.0 % 3.72% 5,000,000 14.0 % 1.2 % - 0.0 % 0.0 % 3.25% - 0.0 % 0.0 % 18,966,668 27.1 % 4.7 % 0.00% 17,200,000 13.3 % 4.2 % 17,400,000 14.0 % 4.3 % Fixed-rate 154,680,286 11.9 % 37.6 % 154,139,739 12.4 % 38.1 % $ 411,075,088 12.3 % 100.0 % $ 404,721,554 13.6 % 100.0 % The following tables present changes in loans held for investment at carrying value as of and for the years ended December 31, 2025 and 2024: Principal Original Issue Discount Current Expected Credit Loss Reserve Carrying Value Balance at December 31, 2024 $ 404,721,554 $ (2,244,508 ) $ (4,346,869 ) $ 398,130,177 Purchase of investments 79,412,079 (2,062,541 ) - 77,349,538 Principal repayment of loans (79,221,108 ) - - (79,221,108 ) Accretion of original issue discount - 2,187,528 - 2,187,528 Capitalized PIK Interest 6,162,563 - - 6,162,563 Increase in provision for current expected credit losses - - (715,916 ) (715,916 ) Balance at December 31, 2025 $ 411,075,088 $ (2,119,521 ) $ (5,062,785 ) $ 403,892,782 Principal Original Issue Discount Current Expected Credit Loss Reserve Carrying Value Balance at December 31, 2023 $ 355,745,305 $ (2,104,695 ) $ (4,972,647 ) $ 348,667,963 Purchase of investments 161,289,523 (1,836,952 ) - 159,452,571 Principal repayment of loans (102,461,111 ) - - (102,461,111 ) Accretion of original issue discount - 1,697,139 - 1,697,139 Transfer of loan held for investment to loan held for sale (19,000,000 ) 213,913 (18,786,087 ) Capitalized PIK Interest 9,147,837 - - 9,147,837 Increase in provision for current expected credit losses - - 411,865 411,865 Balance at December 31, 2024 $ 404,721,554 $ (2,244,508 ) $ (4,346,869 ) $ 398,130,177 Portfolio Asset Quality Our Manager uses an ongoing investment risk rating system to characterize and monitor our outstanding loans.
Based on a 5-point scale, our loans are rated “1” through “5,” from less risk to greater risk, which ratings are defined as follows: Rating Definition 1 Very low risk 2 Low risk 3 Moderate/average risk 4 High risk/potential for loss: a loan that has a risk of realizing a principal loss 5 Impaired/loss likely: a loan that has a high risk of realizing principal loss, has incurred principal loss or an impairment has been recorded The risk ratings are primarily determined based on current and historical performance metrics specific to each portfolio company, as well as consideration of future economic conditions and each borrower’s estimated ability to meet debt service requirements.
Based on a 5-point scale, our loans are rated “1” through “5,” from less risk to greater risk, which ratings are defined as follows: 71 Rating Definition 1 Very low risk 2 Low risk 3 Moderate/average risk 4 High risk/potential for loss: a loan that has a risk of realizing a principal loss 5 Impaired/loss likely: a loan that has a high risk of realizing principal loss, has incurred principal loss or an impairment has been recorded The risk ratings are primarily determined based on current and historical performance metrics specific to each portfolio company, as well as consideration of future economic conditions and each borrower’s estimated ability to meet debt service requirements.
Additionally, we had cash inflows related to draw downs on our Revolving Loan of $159.0 million, and inflows related to proceeds from notes payable of $50.0 million, which were offset by approximately $170.0 million in repayments on our Revolving Loan, approximately $41.6 million in dividends paid, approximately $1.1 million in debt issuance costs paid, and approximately $1.2 million in offering costs paid associated with the ATM offering.
Additionally, we had cash inflows related to draw downs on our Revolving Loan of $159.0 million, and inflows related to proceeds from notes payable of $50.0 million, which were offset by approximately $170.0 81 million in repayments on our Revolving Loan, approximately $41.6 million in dividends paid, approximately $1.1 million in debt issuance costs paid, and approximately $1.2 million in offering costs paid associated with the ATM offering.
Additionally, the Company must comply with certain financial and non-financial covenants including but not limited to: (1) minimum stockholders' equity of $200.0 million, (2) maximum aggregate indebtedness of $225.0 million, subject to increase from time to time based upon ratable increases in stockholders' equity, and (3) maintenance of a credit rating.
Additionally, the Company must comply with certain financial and non-financial covenants including but not limited to: (1) minimum stockholders' equity of $200.0 million, (2) 80 maximum aggregate indebtedness of $225.0 million, subject to increase from time to time based upon ratable increases in stockholders' equity, and (3) maintenance of a credit rating.
Estimating the CECL Reserve also requires significant judgment with respect to various factors, including (i) the appropriate historical loan loss reference data, (ii) the expected timing of loan repayments, (iii) calibration of the likelihood of default to reflect the risk characteristics of our loan portfolio, and (iv) our current and future view of the macroeconomic environment.
Estimating the CECL Reserve also requires significant judgment with respect to various factors, including (i) the appropriate historical loan loss reference data, (ii) the expected timing of loan repayments, (iii) calibration of the likelihood of default to reflect 83 the risk characteristics of our loan portfolio, and (iv) our current and future view of the macroeconomic environment.
We bear all other costs and expenses of our operations and transactions, including (without limitation) fees and expenses relating to: • organizational and offering expenses; • quarterly valuation expenses; • fees payable to third parties relating to, or associated with, making loans and valuing loans (including third-party valuation firms); • fees and expenses associated with investor relations and marketing efforts (including attendance at investment conferences and similar events); • accounting and loan servicing fees from our third-party fund administrator; • audit and tax compliance fees and expenses from our independent registered public accounting firm; • federal and state registration fees; • any exchange listing fees; • federal, state and local taxes; • independent directors’ fees and expenses; 64 • brokerage commissions; • costs of proxy statements, stockholders’ reports and notices; and • costs of preparing government filings, including periodic and current reports with the SEC.
We bear all other costs and expenses of our operations and transactions, including (without limitation) fees and expenses relating to: • organizational and offering expenses; • quarterly valuation expenses; • fees payable to third parties relating to, or associated with, making loans and valuing loans (including third-party valuation firms); • fees and expenses associated with investor relations and marketing efforts (including attendance at investment conferences and similar events); • accounting and loan servicing fees from our third-party fund administrator; • audit and tax compliance fees and expenses from our independent registered public accounting firm; • federal and state registration fees; • any exchange listing fees; • federal, state and local taxes; • independent directors’ fees and expenses; 68 • brokerage commissions; • costs of proxy statements, stockholders’ reports and notices; and • costs of preparing government filings, including periodic and current reports with the SEC.
Leverage Policies 77 Although we are not required to maintain any particular leverage ratio, we expect to employ prudent amounts of leverage and, when appropriate, to use debt as a means of providing additional funds for the acquisition of loans, to refinance existing debt or for general corporate purposes.
Leverage Policies Although we are not required to maintain any particular leverage ratio, we expect to employ prudent amounts of leverage and, when appropriate, to use debt as a means of providing additional funds for the acquisition of loans, to refinance existing debt or for general corporate purposes.
The following discussion addresses the accounting estimates that we believe apply to us based on the nature of our operations. Our most critical accounting estimates involve a significant level of estimation 78 uncertainty that have had or are reasonably likely to have a material impact on our financial conditions and results of operations.
The following discussion addresses the accounting estimates that we believe apply to us based on the nature of our operations. Our most critical accounting estimates involve a significant level of estimation uncertainty that have had or are reasonably likely to have a material impact on our financial conditions and results of operations.
Distributable Earnings is one of many factors considered by our Board in authorizing dividends and, while not a direct measure of net taxable income, over time, the measure can be considered a useful indicator of our dividends. 74 Distributable Earnings should not be considered as substitutes for GAAP net income.
Distributable Earnings is one of many factors considered by our Board in authorizing dividends and, while not a direct measure of net taxable income, over time, the measure can be considered a useful indicator of our dividends. Distributable Earnings should not be considered as substitutes for GAAP net income.
These estimates may change in 79 future periods based on available future macro-economic data and might result in a material change in the Company’s future estimates of expected credit losses for its loan portfolio.
These estimates may change in future periods based on available future macro-economic data and might result in a material change in the Company’s future estimates of expected credit losses for its loan portfolio.
Additionally, the Company must comply with certain financial covenants including: (1) maximum capital expenditures of $150,000, (2) maintaining a debt service coverage ratio greater than 1.35 to 1, and (3) maintaining a leverage ratio less than 1.50 to 1. As of December 31, 2024, the Company is in compliance with all financial covenants with respect to the Revolving Loan.
Additionally, the Company must comply with certain financial covenants including: (1) maximum capital expenditures of $150,000, (2) maintaining a debt service coverage ratio greater than 1.35 to 1, and (3) maintaining a leverage ratio less than 1.50 to 1. As of December 31, 2025, the Company is in compliance with all financial covenants with respect to the Revolving Loan.
Our Shelf Registration Statement on Form S-3 became effective on January 19, 2023, allowing us to sell, from time to time in one or more offerings, up to $500 million of our securities, including common stock, preferred stock, debt securities, warrants and rights (including as part of a unit) to purchase shares of our common stock, preferred stock, or debt securities.
Our Shelf Registration Statement on Form S-3 became effective on January 19, 2023 (the "Previous Registration Statement"), allowing us to sell, from time to time in one or more offerings, up to $500 million of our securities, including common stock, preferred stock, debt securities, warrants and rights (including as part of a unit) to purchase shares of our common stock, preferred stock, or debt securities.
ASC 740 also provides guidance on derecognition, classification, interest and penalties, accounting in interim periods, disclosure, and transition. We have analyzed our various federal and state filing positions and believe that our income tax filing positions and deductions are documented and supported as of December 31, 2024 and 2023.
ASC 740 also provides guidance on derecognition, classification, interest and penalties, accounting in interim periods, disclosure, and transition. We have analyzed our various federal and state filing positions and believe that our income tax filing positions and deductions are documented and supported as of December 31, 2025 and 2024.
The risk ratings shown in the following table as of December 31, 2024 and 2023 consider borrower specific credit history and performance and reflect a quarterly re-evaluation of overall current macroeconomic conditions affecting the Company’s borrowers, specifically those designated as held for investment.
The risk ratings shown in the following table as of December 31, 2025 and 2024 consider borrower specific credit history and performance and reflect a quarterly re-evaluation of overall current macroeconomic conditions affecting the Company’s borrowers, specifically those designated as held for investment.
The Manager utilizes a third-party valuation appraiser to assist with the Company’s valuation process primarily using comparable transactions to estimate enterprise value of its portfolio companies and supplement such analysis with a multiple-based approach to enterprise value to revenue multiples of publicly-traded comparable companies obtained from Bloomberg and S&P Capital IQ as of December 31, 2024, to which the Manager may apply a private company discount based on the Company’s current borrower profile.
The Manager utilizes a third-party valuation appraiser to assist with the Company’s valuation process primarily using comparable transactions to estimate enterprise value of its portfolio companies and supplement such analysis with a multiple-based approach to enterprise value to revenue multiples of publicly-traded comparable companies obtained from sources such as Bloomberg and/or S&P Capital IQ as of December 31, 2025, to which the Manager may apply a private company discount based on the Company’s current borrower profile.
Excise tax expense, if any, is included in the line item, income tax expense. For the years ended December 31, 2024 and 2023, we did not incur excise tax expense.
Excise tax expense, if any, is included in the line item, income tax expense. For the years ended December 31, 2025 and 2024, we did not incur excise tax expense.
Record Date Payment Date Common Share Distribution Amount Taxable Ordinary Income Return of Capital Section 199A Dividends Regular cash dividend 3/28/2024 4/15/2024 $ 0.47 $ 0.47 $ - $ 0.47 Regular cash dividend 6/28/2024 7/15/2024 $ 0.47 $ 0.47 $ - $ 0.47 Regular cash dividend 9/30/2024 10/15/2024 $ 0.47 $ 0.47 $ - $ 0.47 Regular cash dividend 12/31/2024 1/13/2025 $ 0.47 $ 0.47 $ - $ 0.47 Special cash dividend 12/31/2024 1/13/2025 $ 0.18 $ 0.18 $ - $ 0.18 Total cash dividend $ 2.06 $ 2.06 - $ 2.06 Record Date Payment Date Common Share Distribution Amount Taxable Ordinary Income Return of Capital Section 199A Dividends Regular cash dividend 3/31/2023 4/14/2023 $ 0.47 $ 0.47 $ - $ 0.47 Regular cash dividend 6/30/2023 7/14/2023 $ 0.47 $ 0.47 $ - $ 0.47 Regular cash dividend 9/29/2023 10/13/2023 $ 0.47 $ 0.47 $ - $ 0.47 Regular cash dividend 12/29/2023 1/12/2024 $ 0.47 $ 0.47 $ - $ 0.47 Special cash dividend 12/29/2023 1/12/2024 $ 0.29 $ 0.29 $ - $ 0.29 Total cash dividend $ 2.17 $ 2.17 $ - $ 2.17 Critical Accounting Estimates Our consolidated financial statements are prepared in accordance with GAAP which requires the use of estimates and assumptions that involve the exercise of judgment as to future uncertainties.
Record Date Payment Date Common Share Distribution Amount Taxable Ordinary Income Return of Capital Section 199A Dividends Regular cash dividend 3/31/2025 4/15/2025 $ 0.47 $ 0.47 $ - $ 0.47 Regular cash dividend 6/30/2025 7/15/2025 $ 0.47 $ 0.47 $ - $ 0.47 Regular cash dividend 9/30/2025 10/15/2025 $ 0.47 $ 0.47 $ - $ 0.47 Regular cash dividend 12/31/2025 1/15/2026 $ 0.47 $ 0.47 $ - $ 0.47 Total cash dividend $ 1.88 $ 1.88 - $ 1.88 Record Date Payment Date Common Share Distribution Amount Taxable Ordinary Income Return of Capital Section 199A Dividends Regular cash dividend 3/28/2024 4/15/2024 $ 0.47 $ 0.47 $ - $ 0.47 Regular cash dividend 6/28/2024 7/15/2024 $ 0.47 $ 0.47 $ - $ 0.47 Regular cash dividend 9/30/2024 10/15/2024 $ 0.47 $ 0.47 $ - $ 0.47 Regular cash dividend 12/31/2024 1/13/2025 $ 0.47 $ 0.47 $ - $ 0.47 Special cash dividend 12/31/2024 1/13/2025 $ 0.18 $ 0.18 $ - $ 0.18 Total cash dividend $ 2.06 $ 2.06 $ - $ 2.06 Critical Accounting Estimates Our consolidated financial statements are prepared in accordance with GAAP which requires the use of estimates and assumptions that involve the exercise of judgment as to future uncertainties.
Incentive fees decreased approximately $0.8 million primarily attributable to the year over year decrease in Core Earnings, as defined in the Management Agreement, of $2.4 million, the base on which the incentive fees are earned. • General and administrative expense increased by approximately $0.1 million and professional fees decreased by approximately $0.3 million for the year ended December 31, 2024 compared to the year ended December 31, 2023.
Incentive fees decreased approximately $0.2 million primarily attributable to the year over year decrease in Core Earnings, as defined in the Management Agreement, of $0.8 million, the base on which the incentive fees are earned. • General and administrative expense decreased by approximately $0.1 million and professional fees increased by approximately $0.1 million for the year ended December 31, 2025 compared to the year ended December 31, 2024.
Inc. (each a “Sales Agent” and together the “Sales Agents”) under which the Company may, from time to time, offer and sell shares of common stock, having an aggregate offering price of up to $75.0 million.
(each a “Sales Agent” and together the “Previous Sales Agents”) under which the Company may, from time to time, offer and sell shares of common stock, having an aggregate offering price of up to $75.0 million.
Dividends Declared Per Share The following tables summarize the Company’s dividends declared during the years ended December 31, 2024 and 2023: Record Date Payment Date Common Share Distribution Amount Taxable Ordinary Income Return of Capital Section 199A Dividends Regular cash dividend 3/28/2024 4/15/2024 $ 0.47 $ 0.47 $ - $ 0.47 Regular cash dividend 6/28/2024 7/15/2024 $ 0.47 $ 0.47 $ - $ 0.47 Regular cash dividend 9/30/2024 10/15/2024 $ 0.47 $ 0.47 $ - $ 0.47 Regular cash dividend 12/31/2024 1/13/2025 $ 0.47 $ 0.47 $ - $ 0.47 Special cash dividend 12/31/2024 1/13/2025 $ 0.18 $ 0.18 $ - $ 0.18 Total cash dividend $ 2.06 $ 2.06 - $ 2.06 Record Date Payment Date Common Share Distribution Amount Taxable Ordinary Income Return of Capital Section 199A Dividends Regular cash dividend 3/31/2023 4/14/2023 $ 0.47 $ 0.47 $ - $ 0.47 Regular cash dividend 6/30/2023 7/14/2023 $ 0.47 $ 0.47 $ - $ 0.47 Regular cash dividend 9/29/2023 10/13/2023 $ 0.47 $ 0.47 $ - $ 0.47 Regular cash dividend 12/29/2023 1/12/2024 $ 0.47 $ 0.47 $ - $ 0.47 Special cash dividend 12/29/2023 1/12/2024 $ 0.29 $ 0.29 $ - $ 0.29 Total cash dividend $ 2.17 $ 2.17 $ - $ 2.17 The payment of these dividends is not indicative of our ability to pay such dividends in the future.
Dividends Declared Per Share The following tables summarize the Company’s dividends declared during the years ended December 31, 2025 and 2024: 75 Record Date Payment Date Common Share Distribution Amount Taxable Ordinary Income Return of Capital Section 199A Dividends Regular cash dividend 3/31/2025 4/15/2025 $ 0.47 $ 0.47 $ - $ 0.47 Regular cash dividend 6/30/2025 7/15/2025 $ 0.47 $ 0.47 $ - $ 0.47 Regular cash dividend 9/30/2025 10/15/2025 $ 0.47 $ 0.47 $ - $ 0.47 Regular cash dividend 12/31/2025 1/15/2026 $ 0.47 $ 0.47 $ - $ 0.47 Total cash dividend $ 1.88 $ 1.88 - $ 1.88 Record Date Payment Date Common Share Distribution Amount Taxable Ordinary Income Return of Capital Section 199A Dividends Regular cash dividend 3/28/2024 4/15/2024 $ 0.47 $ 0.47 $ - $ 0.47 Regular cash dividend 6/28/2024 7/15/2024 $ 0.47 $ 0.47 $ - $ 0.47 Regular cash dividend 9/30/2024 10/15/2024 $ 0.47 $ 0.47 $ - $ 0.47 Regular cash dividend 12/31/2024 1/13/2025 $ 0.47 $ 0.47 $ - $ 0.47 Special cash dividend 12/31/2024 1/13/2025 $ 0.18 $ 0.18 $ - $ 0.18 Total cash dividend $ 2.06 $ 2.06 $ - $ 2.06 The payment of these dividends is not indicative of our ability to pay such dividends in the future.
Under the terms of the Sales Agreement, the Company has agreed to pay the Sales Agents a commission of up to 3.0% of the gross proceeds from each sale of common stock sold through the Sales Agents.
Under the terms of the Previous Sales Agreement, the Company agreed to pay the Previous Sales Agents a commission of up to 3.0% of the gross proceeds from each sale of common 79 stock sold through the Previous Sales Agents.
Additionally, we recognized approximately $3.2 million of interest income from prepayment fees and acceleration of original issue discounts and other upfront fees during the year ended December 31, 2024, as compared to $3.5 million for the year ended December 31, 2023, contributing to $0.3 million of the decline.
Additionally, we recognized approximately $5.2 million of interest income from prepayment fees and acceleration of original issue discounts and other upfront fees during the year ended December 31, 2025, as compared to $3.2 million for the year ended December 31, 2024.
Recent Accounting Pronouncements Refer to footnote 2 to our consolidated financial statements for the year ended December 31, 2024, titled “ Significant Accounting Policies ” for information on recent accounting pronouncements. 82
Recent Accounting Pronouncements Refer to footnote 2 to our consolidated financial statements for the year ended December 31, 2025, titled “ Significant Accounting Policies ” for information on recent accounting pronouncements. 85
Interest on our loans is generally payable monthly. The principal amount of our loans and any accrued but unpaid interest thereon generally become due at the applicable maturity date. In some cases, our interest income includes a paid-in-kind (“PIK”) component for a portion of the total interest.
Revenues We generate revenue primarily in the form of interest income on loans which is generally payable monthly. The principal amount of our loans and any accrued but unpaid interest thereon generally become due at the applicable maturity date. In some cases, our interest income includes a paid-in-kind (“PIK”) component for a portion of the total interest.
Net Cash Provided/(Used in) by Financing Activities For the years ended December 31, 2024 and 2023, we reported “Net cash provided by/(used in) financing activities” of $34.6 million and $(24.3) million, respectively. For the year ended December 31, 2024, cash inflows of approximately $39.6 million related to proceeds received from sales of our common stock through the ATM offering.
Net Cash Provided/(Used in) by Financing Activities For the years ended December 31, 2025 and 2024, we reported “Net cash (used in)/provided by financing activities” of $(49.0) million and $34.6 million, respectively. For the year ended December 31, 2025, cash inflows of approximately $1.0 million related to proceeds received from sales of our common stock through the ATM offering.
Subsequent Updates to Our Loan Portfolio in 2025 During the period from January 1, 2025 through March 12, 2025, we advanced approximately $1.1 million of principal to existing borrowers under delayed draw term loan facilities.
Subsequent Updates to Our Loan Portfolio in 2026 During the period from January 1, 2026 through March 12, 2026, we advanced approximately $51.1 million of principal to existing borrowers under delayed draw and revolving loan facilities.
As of December 31, 2024 and 2023, all of our cash was unrestricted and totaled approximately $26.4 million and $7.9 million, respectively.
As of December 31, 2025 and 2024, all of our cash was unrestricted and totaled approximately $14.9 million and $26.4 million, respectively.
To the extent that our cash available for distribution is less than the amount required to be distributed under the REIT provisions of the Code, we may be required to fund distributions from working capital or through equity, equity-related or debt financings or, in certain circumstances, asset sales, as to which our ability to consummate transactions in a timely manner on favorable terms, or at all, cannot be assured, or we may make a portion of the Required Distribution in the form of a taxable stock distribution or distribution of debt securities.
To the extent that our cash available for distribution is less than the amount required to be distributed under the REIT provisions of the Code, we may be required to fund distributions from working capital or through equity, equity-related or debt financings or, in certain circumstances, asset sales, as to which our ability to consummate transactions in a timely manner on favorable terms, or at all, cannot be assured, or we may make a portion of the Required Distribution in the form of a taxable stock distribution or distribution of debt securities. 82 The following table summarizes the Company’s dividends declared during the years ended December 31, 2025 and 2024.
During the years ended December 31, 2024 and 2023, the Company sold an aggregate of 2,489,290 and 79,862 shares of the Company’s common stock under the Sales Agreement, respectively, which generated which generated proceeds, net of commissions and offering expenses of approximately $38.4 million and $1.2 million, during the comparable periods.
During the years ended December 31, 2025 and 2024, the Company sold an aggregate of 64,557 and 2,489,290 shares of the Company’s common stock under the Sales Agreements, respectively, which generated which generated proceeds, net of commissions and offering expenses of approximately $0.9 million and $38.4 million, during the comparable periods.
The applicable margin is derived from a floating rate grid based upon the ratio of debt to equity of CAL and increases from 0% at a ratio of 0.25 to 1 to 1.25% at a ratio of 1.5 to 1.
The applicable margin is derived from a floating rate grid based upon the ratio of debt to equity of CAL and increases from 0% at a ratio of 0.25 to 1 to 1.25% at a ratio of 1.5 to 1. The Revolving Loan has a maturity date of June 30, 2028.
The Revolving Loan has a maturity date of June 30, 2026. 75 The Revolving Loan provides for certain affirmative covenants, including requiring us to deliver financial information and any notices of default, and conducting business in the normal course.
The Revolving Loan provides for certain affirmative covenants, including requiring us to deliver financial information and any notices of default, and conducting business in the normal course.
For the year ended December 31, 2024, we had net repayments of $11.0 million against the Revolving Loan. As of December 31, 2024, we had $55.0 million available and $55.0 million outstanding under the Revolving Loan. Refer to Note 8 of the consolidated financial statements for additional information.
For the year ended December 31, 2025, we had net repayments of $5.9 million against the Revolving Loan. As of December 31, 2025, we had $60.9 million available and $49.1 million outstanding under the Revolving Loan. Refer to Note 8 of the consolidated financial statements for additional information.
Non-GAAP Measures and Key Financial Measures and Indicators As a commercial mortgage real estate investment trust, we believe the key financial measures and indicators for our business are Distributable Earnings, book value per share, and dividends declared per share.
We continuously evaluate the credit quality of each loan by assessing the risk factors of each loan. Non-GAAP Measures and Key Financial Measures and Indicators As a commercial mortgage real estate investment trust, we believe the key financial measures and indicators for our business are Distributable Earnings, book value per share, and dividends declared per share.
Additionally, we had cash inflows related to draw downs on our Revolving Loan of $82.0 million, which were offset by $74.0 million in repayments on our Revolving Loan, approximately $39.1 million in dividends paid, approximately $0.1 million in debt issuance costs paid, and approximately $0.3 million in offering costs paid associated with the registered direct offering and ATM offering.
Additionally, we had cash inflows related to draw downs on our Revolving Loan of $142.1 million, which was offset by approximately $148 million in repayments on our Revolving Loan, approximately $43.8 million in dividends paid, approximately $0.1 million in debt issuance costs paid, and approximately $0.2 million in offering costs paid associated with the ATM offering.
Net Cash Used in Investing Activities For the years ended December 31, 2024 and 2023, we reported “Net cash used in investing activities” of $39.3 million and $1.9 million, respectively.
Net Cash Provided/(Used in) by Investing Activities For the years ended December 31, 2025 and 2024, we reported “Net cash provided by/(used in) investing activities” of approximately $8.7 million and $(39.3) million, respectively.
For the year ended December 31, 2023, cash inflows of approximately $7.2 million related to proceeds received from sales of our common stock through the registered direct offering and ATM offering of $6.0 million and $1.2 million, respectively.
For the year ended December 31, 2024, cash inflows of approximately $39.6 million related to proceeds received from sales of our common stock through the ATM offering.
Factors that could cause or contribute to those differences include, but are not limited to, those discussed above in “Risk Factors” and those identified below and elsewhere in this annual report on Form 10-K. See “Forward-Looking Statements.” Overview We are a commercial mortgage real estate investment trust.
Factors that could cause or contribute to those differences include, but are not limited to, those discussed above in “Risk Factors” and those identified below and elsewhere in this annual report on Form 10-K.
Risk Ratings We assess the risk factors of each loan, and assign a risk rating based on a variety of factors, including, without limitation, payment history, real estate collateral coverage, property type, geographic and local market dynamics, financial performance, enterprise value of the portfolio company, loan structure and exit strategy, and project sponsorship. This review is performed quarterly.
The Manager's investment committee, with input from the portfolio management team, assesses the risk factors of each loan, and assigns a risk rating based on a variety of factors, including, without limitation, payment history, real estate collateral coverage, property type, geographic and local market dynamics, financial performance, enterprise value of the portfolio company, loan structure and exit strategy, and project sponsorship.
The following table provides a reconciliation of GAAP net income to Distributable Earnings (in thousands, except per share data): Year ended Year ended December 31, 2024 December 31, 2023 Net Income $ 37,045,403 $ 38,710,248 Adjustments to net income Stock based compensation 3,058,674 1,479,736 Amortization of debt issuance costs 256,998 550,906 (Benefit) provision for current expected credit losses (583,298 ) 940,385 Change in unrealized loss (gain) on investments 240,604 (75,604 ) Distributable Earnings $ 40,018,381 $ 41,605,671 Basic weighted average shares of common stock outstanding (in shares) 19,279,501 18,085,088 Basic Distributable Earnings per Weighted Average Share $ 2.08 $ 2.30 Diluted weighted average shares of common stock outstanding (in shares) 19,713,916 18,343,725 Diluted Distributable Earnings per Weighted Average Share $ 2.03 $ 2.27 Book Value Per Share The book value per share of our common stock as of December 31, 2024 and 2023 was approximately $14.83 and $14.94, respectively.
The following table provides a reconciliation of GAAP net income to Distributable Earnings (in thousands, except per share data): 78 Year ended December 31, 2025 December 31, 2024 Net Income $ 36,010,478 $ 37,045,403 Adjustments to net income Stock based compensation 3,368,861 3,058,674 Amortization of debt issuance costs 406,663 256,998 Provision (benefit) for current expected credit losses 731,051 (583,298 ) Change in unrealized gain (loss) on investments (165,000 ) 240,604 Distributable Earnings $ 40,352,053 $ 40,018,381 Basic weighted average shares of common stock outstanding (in shares) 21,003,635 19,279,501 Basic Distributable Earnings per Weighted Average Share $ 1.92 $ 2.08 Diluted weighted average shares of common stock outstanding (in shares) 21,431,650 19,713,916 Diluted Distributable Earnings per Weighted Average Share $ 1.88 $ 2.03 Book Value Per Share The book value per share of our common stock as of December 31, 2025 and 2024 was approximately $14.60 and $14.83, respectively.
For the year ended December 31, 2023, cash outflows primarily related to $92.2 million used for the origination and funding of loans held for investment, partially offset by $13.4 million of cash received from the sale of loans and $76.9 million of cash received from the principal repayment of loans held for investment.
For the year ended December 31, 2025, cash outflows primarily related to $76.0 million used for the origination and funding of loans held for investment, offset by $84.7 million of cash received from the principal repayment of loans held for investment and loans at fair value.
Cash Flows The following table sets forth changes in cash and cash equivalents for the years ended December 31, 2024 and 2023, respectively: For the year ended December 31, 2024 2023 Net income $ 37,045,403 $ 38,710,248 Adjustments to reconcile net income to net cash used in operating activities and changes in operating assets and liabilities (13,886,027 ) (10,293,789 ) Net cash provided by operating activities 23,159,376 28,416,459 Net cash used in investing activities (39,296,863 ) (1,925,416 ) Net cash provided by/(used in) financing activities 34,639,895 (24,308,830 ) Change in cash and cash equivalents 18,502,408 2,182,213 Net Cash Provided by Operating Activities For the years ended December 31, 2024 and 2023, we reported “Net cash provided by operating activities” of approximately $23.2 million and $28.4 million, respectively.
Cash Flows The following table sets forth changes in cash and cash equivalents for the years ended December 31, 2025 and 2024, respectively: For the year ended December 31, 2025 2024 Net income $ 36,010,478 $ 37,045,403 Adjustments to reconcile net income to net cash used in operating activities and changes in operating assets and liabilities (7,217,870 ) (13,886,027 ) Net cash provided by operating activities 28,792,608 23,159,376 Net cash provided by/(used in) investing activities 8,736,720 (39,296,863 ) Net cash (used in)/provided by financing activities (48,980,892 ) 34,639,895 Change in cash and cash equivalents (11,451,564 ) 18,502,408 Net Cash Provided by Operating Activities For the years ended December 31, 2025 and 2024, we reported “Net cash provided by operating activities” of approximately $28.8 million and $23.2 million, respectively.
Net cash provided by operating activities decreased approximately $5.3 million, primarily attributable to a decrease in net income over the comparable period of approximately $1.7 million, a decrease in current expected credit losses of approximately $0.6 million, a decrease in interest receivable of approximately $0.5 million, a decrease in related party receivables of $3.3 million, a decrease in related party payables of 0.7 million, a decrease in redemption of debt securities of $1.6 million and a decrease in management and incentive fees payable of approximately $0.4 million.
Net cash provided by operating activities in 2025 increased approximately $5.6 million compared to 2024, primarily attributable to a decrease in related party receivables of approximately $5.4 million, a decrease in PIK interest of approximately $3.0 million, a decrease in the interest reserve of approximately $2.7 million, an increase in current expected credit losses of approximately $1.3 million, an increase in interest received through net settlement transactions of $1.4 million, an increase in management and incentive fees payable by $0.6 million, and an increase in stock based compensation of $0.3 million, These changes were offset by a decrease in net income over the comparable period of approximately $1.0 million, a decrease in interest receivable of approximately $2.1 million, a decrease in redemption of debt securities of $0.8 million, a decrease in accounts payable and accrued expenses of $0.8 million, a decrease in other receivables and assets by $0.7 million, and a decrease in related party payables of $0.1 million over the comparable period.
Credit Facilities Revolvin g Loan As of December 31, 2024, the Company's secured revolving credit facility (the “Revolving Loan”) has aggregate commitments of $110.0 million which may be increased to $150.0 million pursuant to its accordion feature.
As a result, we expect we will need to raise additional equity and/or debt funds to increase our liquidity in the near future. Credit Facilities Revolvin g Loan As of December 31, 2025, the Company's secured revolving credit facility (the “Revolving Loan”) has aggregate commitments of $110.0 million which may be increased to $150.0 million pursuant to its accordion feature.
We do not own any stock, warrants to purchase stock or other forms of equity in any of our portfolio companies that are involved in the cannabis industry, and we will not take stock, warrants or equity in such issuers until permitted by applicable laws and regulations, including U.S. federal laws and regulations.
We will not own any warrants or other forms of equity in any of our portfolio companies involved in the cannabis industry, unless the portfolio companies are listed on a national securities exchange, such as the New York Stock Exchange ("NYSE") or NASDAQ, and such ownership is permitted by applicable U.S. federal laws and regulations, including those applicable to NYSE or NASDAQ issuers, as the case may be.
The decrease in interest income is partially driven by the decrease in the Prime rate of 100 basis points during the year from 8.50% to 7.50%, which impacted the approximately 62.1% of the Company’s aggregate loan portfolio, which bears a floating rate as of December 31, 2024.
These increases were offset by the decrease in the Prime rate of 75 basis points during the year from 7.50% to 6.75%, which impacted approximately 62.4% of the Company’s aggregate loan portfolio, which bore a floating rate as of December 31, 2025.
As of December 31, 2024, the Company is in compliance with all financial covenants with respect to the Unsecured Notes. Capital Markets We may seek to raise further equity capital and issue debt securities in order to fund our future investments in loans.
Capital Markets We may seek to raise further equity capital and issue debt securities in order to fund our future investments in loans.
These loans are generally held for investment and are substantially secured by real estate, equipment, licenses and other assets of the borrowers to the extent permitted by the applicable laws and the regulations governing such borrowers. 63 We generate revenue primarily in the form of interest income on loans.
Our loans are generally classified as held for investment and carried at amortized cost on the consolidated balance sheets. Such loans are generally secured by real estate, equipment, licenses, intellectual property and other assets of the borrowers to the extent permitted by the applicable laws and the regulations governing such borrowers.
The impact of the declining yield was offset by the increase in outstanding principal balance of our portfolio which increased to $410.2 million as of December 31, 2024 from $355.7 million as of December 31, 2023. • Interest expense increased by approximately $1.4 million during the comparative period.
The increase in interest income was partially driven by the increase in outstanding principal balance of our portfolio, which increased to $411.1 million as of December 31, 2025 from $404.7 million as of December 31, 2024.
As of December 31, 2024 Total Principal Original Issue Discount Carrying Value Percentage of loans held for investment Fixed-rate loans $ 149,771,871 $ (545,081 ) $ 149,226,790 37.0 % Floating-rate loans 254,949,683 (1,699,427 ) 253,250,256 63.0 % Total $ 404,721,554 $ (2,244,508 ) $ 402,477,046 100.0 % As of December 31, 2024, the Company has one loan held at fair value with a principal balance of $5.5 million, which bears a fixed rate.
As of December 31, 2025 Total Principal Original Issue Discount Carrying Value Percentage of loans held for investment Fixed-rate loans $ 154,680,286 $ (803,019 ) $ 153,877,267 37.6 % Floating-rate loans 256,394,802 (1,316,502 ) 255,078,300 62.4 % Total $ 411,075,088 $ (2,119,521 ) $ 408,955,567 100.0 % As of December 31, 2024 Total Principal Original Issue Discount Carrying Value Percentage of loans held for investment Fixed-rate loans $ 149,771,871 $ (545,081 ) $ 149,226,790 37.1 % Floating-rate loans 254,949,683 (1,699,427 ) 253,250,256 62.9 % Total $ 404,721,554 $ (2,244,508 ) $ 402,477,046 100.0 % As of December 31, 2025, none of our loans were held at fair value.
Expenses Our primary operating expense is the payment of Base Management Fees and Incentive Compensation under our Management Agreement with our Manager and the allocable portion of overhead and other expenses paid or incurred on our behalf, including reimbursing our Manager for a certain portion of the compensation of certain personnel of our Manager who assist in the management of our affairs, excepting only those expenses that are specifically the responsibility of our Manager pursuant to our Management Agreement.
Year ended December 31, 2025 Interest income Percentage of loans held for investment Fixed-rate loans $ 23,605,873 37.6 % Floating-rate loans 39,330,167 62.4 % Total $ 62,936,040 100.0 % Year ended December 31, 2024 Interest income Percentage of loans held for investment Fixed-rate loans $ 23,506,855 37.9 % Floating-rate loans 38,597,237 62.1 % Total $ 62,104,092 100.0 % Expenses Our primary operating expenses are the payment of Base Management Fees and Incentive Compensation under our Management Agreement with our Manager and the allocable portion of overhead and other expenses paid or incurred on our behalf, including reimbursing our Manager for a certain portion of the compensation of certain personnel of our Manager who assist in the management of our affairs, excepting only those expenses that are specifically the responsibility of our Manager pursuant to our Management Agreement.
In July 2024, we entered into an amendment to Loan #3, which extended the maturity date to January 29, 2027 of two of the three tranches held. No other terms of the loan were modified in connection with this amendment.
Following the issuance of the Default Notice, Management began the process to exercise its rights and remedies under the loan documents. In June 2025, we entered into an amendment to Loan #16, which extended the maturity date to January 29, 2027. No other terms of the loan were modified in connection with this amendment.
The weighted average price for sales of our common stock in connection with the ATM program was $15.90 for the year ended December 31, 2024 and $15.78 for the year ended December 31, 2023. 76 As of December 31, 2024, the shares of common stock sold pursuant to the registered direct offering in February 2023 and under the ATM Program are the only offerings that have been initiated under the Shelf Registration Statement.
As of December 31, 2025, the shares of common stock sold pursuant to the registered direct offering in February 2023 and under the ATM Program are the only offerings that have been initiated under the Shelf Registration Statement. We may seek to raise further equity capital and issue debt securities in order to fund our future investments in loans.
Market Conditions We believe that favorable market conditions, including an imbalance in supply and demand of credit to cannabis operating companies, have provided attractive opportunities for non-bank lenders, such as us, to finance commercial real estate loans and other loans that exhibit strong fundamentals but also require more customized financing structures and loan products than regulated financial institutions can presently provide.
We believe that cannabis operators’ limited access to traditional bank and non-bank financing has provided attractive opportunities for us to make loans to companies that exhibit strong fundamentals but require more customized financing structures and loan products than regulated financial institutions can provide in the current regulatory environment.
Management fees increased by approximately $0.1 million, resulting from the increase in weighted average equity which increased to approximately $302.4 million from $283.5 million as of December 31, 2024 and 2023, respectively.
Management fees increased by approximately $0.3 million, resulting from the increase in Equity, as defined in the Management Agreement. Total stockholders' equity was $307.8 million and $309.0 million as of December 31, 2025 and 2024, respectively.
Additionally, the weighted average YTM IRR on our portfolio decreased from 19.4% to 17.2% during the year, as a result of certain re-pricing amendments relating to de-risking of our portfolio and the impact of the 100 basis point prime rate decline on our floating rate portfolio.
Additionally, the weighted average YTM IRR on our portfolio decreased from 17.2% to 16.3% during the year, as a result of certain re-pricing amendments relating to de-risking of our portfolio and new 2025 loan originations having a lower YTM IRR than the weighted average at December 31, 2024. • Interest expense increased by approximately $0.4 million during the comparative period.
Recent Developments Updates to Our Credit Facilities during Fiscal Year 2024 Revolving Loan On February 28, 2024, CAL entered into a Fifth Amended and Restated Loan and Security Agreement (the “Fifth Amendment and Restatement”).
Updates to Our Credit Facilities during Fiscal Year 2025 Revolving Loan On August 5, 2025, CAL entered into the First Amendment to the Sixth Amended and Restated Loan and Security Agreement (the "August 2025 Amendment"). The August 2025 Amendment extended the contractual maturity date from June 30, 2026 to June 30, 2028.
No other terms of the loan were modified in connection with this amendment. In June 2024, we entered into an amendment to Loan #4, which extended the maturity date from May 17, 2024 to June 17, 2026, and decreased the PIK rate from 15% to 0%.
No other terms of the loan were modified in connection with this amendment. 74 In December 2025, Loan #2 was amended, which extended the maturity date from December 31, 2025 to December 31, 2026.
Overhead expense reimbursements for costs incurred by the Manager, which are reflected in the General and administrative expense on the consolidated statement of operations, remained flat at $4.8 million for the year ended December 31, 2024 and 2023. 70 • Stock based compensation increased by approximately $1.6 million as a result of a full year of expense recognition on the grant of 323,452 restricted stock awards granted to employees of our Manager during the year ended December 31, 2023, as well as an additional 187,335 of restricted stock awards granted during the year ended December 31, 2024.
There were no significant or unusual direct or reimbursable expense changes during the year. • Stock based compensation increased by approximately $0.3 million as a result of a full year of expense recognition on the grant of 187,335 restricted stock awards granted to employees of our Manager during the year ended December 31, 2024, as well as an additional 187,157 of restricted stock awards granted during the year ended December 31, 2025.
The Notes Payable, which were not included in interest expense during the year ended December 31, 2023, contributed to approximately $1.0 million of the increase. Additionally, the weighted average borrowings under our Revolving Loan increased to $67.0 million from $60.6 million during the years ended December 31, 2024 and 2023, respectively.
This increase was offset by a decrease in interest expense on our Revolving Loan driven by a decrease in the weighted average borrowings from $67.0 million to $32.8 million during the years ended December 31, 2025 and 2024, respectively.
Additionally, we received approximately $1.8 million of scheduled principal repayments. 69 Results of Operations Comparison of the years ended December 31, 2024 and 2023 For the year ended December 31, Variance 2024 2023 Amount % Revenues Interest income $ 62,104,092 $ 62,900,004 $ (795,912 ) -1 % Interest expense (7,153,207 ) (5,752,908 ) (1,400,299 ) 24 % Net interest income 54,950,885 57,147,096 (2,196,211 ) -4 % Expenses Management and incentive fees, net 8,061,896 8,782,834 (720,938 ) -8 % General and administrative expense 5,388,967 5,260,287 128,680 2 % Professional fees 1,811,067 2,153,999 (342,932 ) -16 % Stock based compensation 3,058,674 1,479,736 1,578,938 107 % (Benefit) provision for current expected credit losses (583,298 ) 940,385 (1,523,683 ) -162 % Total expenses 17,737,306 18,617,241 (879,935 ) -5 % Change in unrealized (loss) gain on investments (240,604 ) 75,604 (316,208 ) 100 % Realized gain on debt securities, at fair value 72,428 104,789 (32,361 ) 100 % Net Income before income taxes 37,045,403 38,710,248 (1,664,845 ) -4 % Income tax expense - - - - Net Income $ 37,045,403 $ 38,710,248 $ (1,664,845 ) -4 % • Gross interest income decreased by approximately $0.8 million for the year ended December 31, 2024 compared to the year ended December 31, 2023.
Results of Operations for the years ended December 31, 2025 and 2024 For the year ended December 31, Variance 2025 2024 Amount % Revenues Interest income $ 62,936,040 $ 62,104,092 $ 831,948 1 % Interest expense (7,545,641 ) (7,153,207 ) (392,434 ) 5 % Net interest income 55,390,399 54,950,885 439,514 1 % Expenses Management and incentive fees, net 8,202,136 8,061,896 140,240 2 % General and administrative expense 5,304,451 5,388,967 (84,516 ) -2 % Professional fees 1,938,422 1,811,067 127,355 7 % Stock based compensation 3,368,861 3,058,674 310,187 10 % Provision (benefit) for current expected credit losses 731,051 (583,298 ) 1,314,349 -225 % Total expenses 19,544,921 17,737,306 1,807,615 10 % Change in unrealized gain (loss) on investments 165,000 (240,604 ) 405,604 NM Realized gain on debt securities, at fair value - 72,428 (72,428 ) 100 % Net Income before income taxes 36,010,478 37,045,403 (1,034,925 ) -3 % Income tax expense - - - - Net Income $ 36,010,478 $ 37,045,403 $ (1,034,925 ) -3 % 76 • Gross interest income increased by approximately $0.8 million for the year ended December 31, 2025, compared to the year ended December 31, 2024.
The increase in weighted average borrowings was offset by the decrease in the Revolving Loan interest rate, which is based off of the Prime Rate that decreased 100 basis points during 2024.
The increase in interest expense on our Notes Payable was also partially offset by the decrease in the Revolving Loan interest rate, which is based off of the Prime Rate that decreased 75 basis points during 2025. • Management and incentive fees increased approximately $0.1 million during the comparative periods ending December 31, 2025 and 2024.
In October 2024, we originated Loan #36, a $27.0 million term loan to an operator in Illinois, of which $25.0 million was funded at closing. The loan bears interest at a floating rate, based on the prime rate, and a spread of 6.25% subject to a 7.50% prime rate floor.
On December 31, 2025, we originated Loan #44, a $5.0 million term loan to a cannabis operator with primary operations in Missouri, of which $4.9 million was funded at closing. The loan bears interest at a floating rate, based on SOFR, and a spread of 10.24%, subject to a 3.72% SOFR floor. The loan is interest-only through the maturity date.
The Company sold shares of common stock directly, without the use of underwriters or placement agents, to institutional investors registered pursuant to its effective shelf registration statement. At-the-Market Offering Program (“ATM” Program”) On June 20, 2023, the Company entered into an At-the-Market Sales Agreement (the “Sales Agreement”) with BTIG, LLC, Compass Point Research & Trading, LLC and Oppenheimer & Co.
At-the-Market Offering Program (“ATM” Program”) On June 20, 2023, the Company entered into separate At-the-Market Sales Agreement (each, a "Sales Agreement" and together, the “Previous Sales Agreements”) with BTIG, LLC, Compass Point Research & Trading, LLC and Oppenheimer & Co. Inc.
Certain of our loans have extension fees, which are not included in our YTM IRR calculations, but may increase YTM IRR if such extension options are exercised by borrowers. The below table summarizes our portfolio of loans held for investment by rate type as of December 31, 2024 and 2023.
Certain of our loans have extension or amendment fees, which are not included in our YTM IRR calculations, but may increase YTM IRR if such extension options are exercised by borrowers. Our loans bear interest rates that are either fixed or determined periodically on the basis of Prime or SOFR plus a premium.
No other material terms were modified as a result of the execution of this amendment. Notes Payable On October 18, 2024, the Company entered into a Loan Agreement by and among the Company and the various financial institutions party thereto, for an aggregate commitment of $50.0 million in senior unsecured notes (the "Notes Payable").
No other material terms were modified as a result of the execution of this amendment, and the Company incurred approximately $0.1 million in financing costs relating thereto.
The Prime Rate during the years ended December 31, 2024 and 2023 was as follows: Effective Date Rate (1) December 19, 2024 7.50 % November 8, 2024 7.75 % September 19, 2024 8.00 % July 27, 2023 8.50 % May 4, 2023 8.25 % March 23, 2023 8.00 % February 2, 2023 7.75 % (1) Rate obtained from the Wall Street Journal’s “Bonds, Rates & Yields” table.
The below table summarizes changes in Prime and SOFR during the years ended December 31, 2025 and 2024: Prime Rate Effective Date Rate (1) December 11, 2025 6.75 % October 30, 2025 7.00 % September 18, 2025 7.25 % December 19, 2024 7.50 % November 8, 2024 7.75 % September 19, 2024 8.00 % (1) Rate obtained from the Wall Street Journal’s “Bonds, Rates & Yields” table. 67 SOFR Effective Date Rate (2) December 31, 2025 3.87 % September 30, 2025 4.45 % June 30, 2025 4.45 % March 31, 2025 4.41 % December 31, 2024 4.49 % September 30, 2024 4.96 % June 30, 2024 5.40 % March 31, 2024 5.35 % December 31, 2023 5.38 % (2) Rate obtained from the Federal Reserve Bank of New York's "Secured Overnight Financing Rate Data" table The below table summarizes the gross interest income derived from fixed and floating-rate loans during the years ended December 31, 2025 and 2024 based on portfolio composition as of the year end date.
In total, our loans held for investment, at carrying value, increased by $48.9 million, from $353.6 million at December 31, 2023 to $402.5 million as of December 31, 2024. In February 2024, we entered into an amendment to Loan #16, which modified certain financial covenants.
These increases were offset by proceeds from principal repayment of loans in the amount of $84.7 million. In total, our loans held for investment, at carrying value before CECL reserves, increased by approximately $6.5 million, from $402.5 million at December 31, 2024 to $409.0 million as of December 31, 2025.
We are an externally managed Maryland corporation that elected to be taxed as a REIT under Section 856 of the Code, commencing with our taxable year ended December 31, 2021. We believe that we have qualified as a REIT and that our method of operation will enable us to continue to qualify as a REIT.
We completed our initial public offering ("IPO") in December 2021 and have elected to be taxed as a REIT for United States federal income tax purposes under the Internal Revenue Code of 1986, as amended (the “Code”), commencing with our taxable year ended December 31, 2021.
No monetary terms of the loan were modified in connection with the amendment. 67 In February 2024, we entered into an amendment to Loan #6, which extended the maturity date to April 15, 2024. No other terms of the loan were modified in connection with this amendment.
On December 31, 2025, Loan #18 was amended, which extended the original maturity date from December 31, 2025 to December 31, 2026. No other terms of the loan were modified in connection with this amendment. We recognized $1.0 million of success fees that were due and payable on the original maturity date.
As of December 31, 2024 and 2023, 36.5% and 27.1%, respectively, of the loan principal held in our portfolio are backed by personal or corporate guarantees. We aim to maintain a portfolio diversified across jurisdictions and across verticals, including cultivators, processors, dispensaries, as well as ancillary businesses.
We aim to maintain a diversified portfolio across jurisdictions and verticals, including cultivators, processors, dispensaries, and other businesses ancillary thereto.
Our Investment Guidelines are not subject to any limits or proportions with respect to the mix of target investments that we make or that we may in the future acquire other than as necessary to maintain our exemption from registration under the Investment Company Act and our qualification as a REIT.
From time to time, we may also invest in mezzanine loans, preferred equity or other forms of joint venture equity to the extent consistent with our exemption from registration under the Investment Company Act of 1940, as amended (the “Investment Company Act”) and maintaining our qualification as a REIT.
In June 2024, we entered into an amendment to Loan #12, which extended the maturity date to April 30, 2025. Amortization payments began again on July 31, 2024 at $60,000 per month. No other terms of the loan were modified in connection with this amendment.
In December 2025, Loan #8 was amended, which extended the maturity date from December 31, 2025 to June 30, 2026. Further, the agreed upon interest rate increased 200 basis points to 12% as of the effective date. No other terms of the loan were modified in connections with this amendment.
Updates to Our Loan Portfolio during Fiscal Year 2024 For the year ended December 31, 2024, our cash loan fundings of loans held for investment, net of original issue discounts and other upfront fees were approximately $161.3 million. We received approximately $121.5 million of total proceeds from sales and principal amortization of loans of $19.0 million and $102.5 million, respectively.
Recent Developments Updates to Our Loan Portfolio during Fiscal Year 2025 For the year ended December 31, 2025, we advanced gross principal of $79.4 million, which resulted in cash advances of $77.3 million, net of upfront fees, including original issue discount of $2.1 million. Further, we capitalized $6.2 million of PIK interest during the year.
Removed
We intend to grow the size of our portfolio by continuing the track record of our business and the business conducted by our Manager and its affiliates by making loans to leading operators and property owners in the cannabis industry. There is no assurance that we will achieve our investment objective.
Added
See “Forward-Looking Statements.” Overview We were formed in March 2021 as a Maryland corporation and are structured as an externally managed mortgage real estate investment trust (“REIT”).
Removed
Our Manager and its affiliates seek to originate real estate loans between $5 million and $200 million, generally with one- to five-year terms and amortization when terms exceed three years.
Added
Our loans to portfolio companies operating in the cannabis industry may include companies that we determine, based on our due diligence, are licensed in and in compliance with, state-regulated cannabis programs, regardless of their status under U.S. federal law, so long as the investment itself is designed to be compliant with all applicable laws and regulations in the jurisdiction in which the investment is made or to which we are otherwise subject, including U.S. federal law.
Removed
We generally act as co-lenders in such transactions and intend to hold up to $50 million of the aggregate loan amount, with the remainder to be held by affiliates or third party co-investors. We may revise such concentration limits from time to time as our loan portfolio grows.
Added
We believe that continued state-level legalization of cannabis for medical and adult use creates an increased loan demand by companies operating in the cannabis industry and property owners leasing to cannabis tenants.
Removed
Other investment vehicles managed by our Manager or affiliates of our Manager may co-invest with us or hold positions in a loan where we have also invested, including by means of splitting commitments, participating in loans or other means of syndicating loans.

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

14 edited+31 added−7 removed11 unchanged
Biggest changeBased on our outstanding balance as of December 31, 2024, we estimate that a hypothetical 100 basis points increase in the Prime Rate would result in an increase in annual cash interest expense, excluding unused fees, of approximately $0.6 million and a 100 basis points decrease in the Prime Rate would result in a decrease in annual interest expense of approximately $0.6 million.
Biggest changeAs of December 31, 2025, we had an outstanding balance of $49.1 million under the Revolving Loan, and an additional $60.9 million of availability which incurs an unused fee of 25 basis points. An increase in the Prime Rate is expected to result in an increase in interest expenses and therefore a decrease in net income.
Generally, with the guidance and experience of our Manager: • we manage our portfolio through an interactive process with our Manager and service our self-originated loans through our Manager’s servicer; • we invest in a mix of floating-rate and fixed-rate loans to mitigate the interest rate risk associated with the financing of our portfolio; • we actively employ portfolio-wide and asset-specific risk measurement and management processes in our daily operations, including utilizing our Manager’s risk management tools such as software and services licensed or purchased from third-parties and proprietary analytical methods developed by our Manager; and • we seek to manage credit risk through our due diligence process prior to origination or acquisition and through the use of non-recourse financing, when and where available and appropriate.
Generally, with the guidance and experience of our Manager: 89 • we manage our portfolio through an interactive process with our Manager and service our self-originated loans through our Manager’s servicer; • we invest in a mix of floating-rate and fixed-rate loans to mitigate the interest rate risk associated with the financing of our portfolio; • we actively employ portfolio-wide and asset-specific risk measurement and management processes in our daily operations, including utilizing our Manager’s risk management tools such as software and services licensed or purchased from third-parties and proprietary analytical methods developed by our Manager; and • we seek to manage credit risk through our due diligence process prior to origination or acquisition and through the use of non-recourse financing, when and where available and appropriate.
Market Conditions We provide loans to established companies operating in the cannabis industry which involves significant risks, including the risk of strict enforcement against our borrowers of the federal illegality of cannabis, our borrowers’ inability to renew or otherwise maintain 83 their licenses or other requisite authorizations for their cannabis operations, and such loans lack of liquidity, and we could lose all or part of any of our loans.
Market Conditions We provide loans to established companies operating in the cannabis industry which involves significant risks, including the risk of strict enforcement against our borrowers of the federal illegality of cannabis, our borrowers’ inability to renew or otherwise maintain their licenses or other requisite authorizations for their cannabis operations, and such loans lack of liquidity, and we could lose all or part of any of our loans.
In addition, with respect to any particular target investment, prior to origination or acquisition our Manager’s investment team evaluates, among other things, relative valuation, comparable company analysis, supply and demand trends, shape-of-yield curves, delinquency and default rates, recovery of various sectors and vintage of collateral.
In addition, with respect to any particular target investment, prior to origination or acquisition our Manager’s investment team evaluates, among other things, relative valuation, comparable company analysis, supply and demand trends, shape-of-yield curves, delinquency and default rates, recovery of various sectors and vintage of collateral. 90
In addition, decreases in property values reduce the value of the collateral and the potential proceeds available to a borrower to repay the underlying loan or loans, as the case may be, which could also cause us to suffer losses. 84
In addition, decreases in property values reduce the value of the collateral and the potential proceeds available to a borrower to repay the underlying loan or loans, as the case may be, which could also cause us to suffer losses.
Changes in Market Interest Rates and Effect on Net Interest Income Interest rates are highly sensitive to many factors, including fiscal and monetary policies and domestic and international economic and political considerations, as well as other factors beyond our control. We will be subject to interest rate risk in connection with our assets and our related financing obligations.
Interest Rate Risk Changes in Market Interest Rates and Effect on Net Interest Income Interest rates are highly sensitive to many factors, including fiscal and monetary policies and domestic and international economic and political considerations, as well as other factors beyond our control. We are subject to interest rate risk in connection with our assets and our related financing obligations.
Our operating results will depend in large part on differences between the income earned on our assets and our cost of borrowing. The cost of our borrowings generally will be based on prevailing market interest rates.
Our operating results depend in large part on differences between the income earned on our assets and our cost of borrowing. The cost of our borrowings is generally based on prevailing market interest rates. During periods of rising interest rates, our borrowing costs generally increase.
As of December 31, 2023, 69.7% of our portfolio is fully secured by real estate, 27.6% is partially secured by real estate, and 2.7% has no real estate collateral.
As of December 31, 2025, 51.7% of our portfolio is fully secured by real estate, 43.6% is partially secured by real estate, and 4.7% has no real estate collateral. Our portfolio on average had real estate collateral coverage of 1.2x as of December 31, 2025.
If any of these events happen, we could experience a decrease in net income or incur a net loss during these periods, which could adversely affect our liquidity and results of operations.
If any of these events happen, we could experience a decrease in net income or incur a net loss during these periods, which could adversely affect our liquidity and results of operations. As of December 31, 2025, we had 16 floating-rate loans, representing approximately 62.4% of our loan portfolio based on aggregate outstanding principal balances.
As of December 31, 2024, 50.0% of our portfolio is fully secured by real estate, 46.7% is partially secured by real estate, and 3.3% has no real estate collateral .
Our loans are generally secured by equity pledges of the borrower and all asset liens and our portfolio had a weighted average loan to enterprise value ratio of 44.2%. As of December 31, 2024, 50.0% of our portfolio is fully secured by real estate, 46.7% is partially secured by real estate, and 3.3% has no real estate collateral.
Our loans generally have a Prime Rate floor established at the prevailing Prime Rate at the time of origination. Refer to Note 3 for Prime Rate floor by loan. In addition, our Revolving Loan is exposed to similar market risks.
Refer to Note 3 for rate floor by loan. In addition, our Revolving Loan is exposed to similar interest rate risk. Our Revolving Loan bears interest at the greater of (1) the Prime Rate plus the applicable margin and (2) 3.25%.
Our portfolio on average had real estate collateral coverage of 1.1x as of December 31, 2024, and all of our loans are secured by equity pledges of the borrower and all asset liens.
Our portfolio on average had real estate collateral coverage of 1.1x as of December 31, 2024, and a weighted average loan to enterprise value ratio of 49.8%.
Our portfolio on average had real estate collateral coverage of 1.5x as of December 31, 2023, and all of our loans were secured by equity pledges of the borrower and all asset liens. Credit Risk We are subject to varying degrees of credit risk in connection with our loans and interest receivable.
Credit Risk We are subject to varying degrees of credit risk in connection with our loans and interest receivable, which include credit risk on our commercial real estate loans and other targeted types of loans.
For additional information regarding the credit risk associated with our loans and interest receivables, see “ Risk Factors— Loans to relatively new and/or small companies and companies operating in the cannabis industry generally involve significant risks.” Our Manager or affiliates of our Manager have originated all of our loans and intend to continue to originate our loans, but we may in the future also acquire loans from time to time.
Our Manager or affiliates of our Manager generally originate all of our loans and intend to continue to originate our loans, but we may also acquire loans from time to time.
Removed
Item 7A. Quantitative and Qualitative Disclosures about Market Risk We are exposed to market risks in the ordinary course of our business. These risks primarily relate to fluctuations in interest rates. Our loans are typically valued using a yield analysis, which is typically performed for performing loans to borrowers.
Added
Item 7A. Quantitative and Qualitative Disclosures about Market Risk Uncertainty with respect to the economic effects of political tensions in the United States and around the world have introduced significant volatility in the financial markets, and the effect of the volatility could materially impact our market risks, including those listed below.
Removed
Changes in market yields may change the fair value of certain of our loans. Generally, an increase in market yields may result in a decrease in the fair value of certain of our loans, however this is mitigated to the extent our loans bear interest at a floating rate.
Added
We are subject to certain financial market risks, including valuation risk, interest rate risk and credit risk.
Removed
As of December 31, 2024, we had 17 floating-rate loans, representing approximately 62.1% of our loan portfolio based on aggregate outstanding principal balances.
Added
Valuation Risk The Company’s results of operations and financial condition are subject to valuation risk related to its real estate–related investments, including mortgage loans, real estate owned, if any, and other financial assets measured at fair value or evaluated for impairment or credit loss.
Removed
We estimate that a hypothetical 100 basis points increase in the Prime Rate would result in an increase in annual cash interest income, excluding the effects of PIK interest, of approximately $2.6 million and a 100 basis points decrease in the Prime Rate would result in a decrease in annual interest income of approximately $0.9 million.
Added
The valuation of these assets involves the use of significant judgments, estimates, and assumptions, many of which are inherently subjective and may be impacted by changes in market conditions. We generally hold our investments as long-term loans classified as held for investment; however, we may occasionally classify some of our loans as held for sale.
Removed
Changes in market rates may change the fair value of our Revolving Loan as our loan bears interest at the greater of (1) the Prime Rate plus the applicable margin and (2) 3.25%. As of December 31, 2024, we had an outstanding balance of $55.0 million under the Revolving Loan.
Added
We may carry our loans at fair value or carrying value in our consolidated balance sheet. As of December 31, 2025 and 2024, zero and one of our loans were carried at fair value within loans held at fair value in our consolidated balance sheets, respectively, with changes in fair value recorded through earnings.
Removed
During a period of rising interest rates, our borrowing costs generally will increase (a) while the yields earned on our leveraged fixed-rate loan assets will remain static, and (b) at a faster pace than the yields earned on our leveraged floating-rate loan assets, which could result in a decline in our net interest spread and net interest margin.
Added
We evaluate our loans on a quarterly basis and fair value is determined by our Manager's Investment Committee. We use an independent third-party valuation firm to provide input in the valuation of all of our unquoted investments, which we consider along with other various subjective and objective factors in making our evaluations.
Removed
Our Manager seeks to mitigate this risk by seeking to originate loans, and may in the future acquire loans, of higher quality at appropriate prices given anticipated and unanticipated losses, by employing a comprehensive review and selection process and by proactively monitoring originated and acquired loans. Nevertheless, unanticipated credit losses could occur that could adversely impact our operating results.
Added
Valuations of real estate collateral are generally based on third-party appraisals, broker price opinions, or other valuation techniques that rely on assumptions regarding future cash flows, capitalization rates, discount rates, comparable sales, market absorption, and prevailing economic conditions.
Added
Appraisals and similar valuation metrics may not reflect current market conditions, particularly during periods of market volatility, reduced transaction activity, or declining property values. Actual realized values may differ materially from appraised or estimated values.
Added
In addition, with respect to the Company's loans held for investment, which are carried at amortized costs, the Manager applies judgment in estimating expected credit losses under its CECL valuation methodology. The determination of CECL reserves requires management to make assumptions regarding borrower performance, collateral values, historical loss experience, current conditions, and reasonable and supportable forecasts of future economic conditions.
Added
Changes in these assumptions, including adverse changes in real estate values, interest rates, occupancy levels, or macroeconomic conditions, could result in material increases in the Company’s allowance for credit losses. The Company reviews valuation methodologies, assumptions, and key inputs on an ongoing basis and may adjust valuations or credit loss estimates as market conditions evolve.
Added
However, there can be no assurance that such estimates will accurately reflect the prices at which assets could ultimately be sold or the actual credit losses that may be realized. As a result, changes in valuations or CECL assumptions could have a material adverse effect on the Company’s financial condition, results of operations, and liquidity.
Added
To the extent we fund fixed-rate investments with floating-rate borrowings, rising rates could reduce our net interest spread and net interest margin. For floating-rate investments, changes in yields may lag increases in borrowing costs due to interest rate floors, timing of rate resets, or differences in spreads, which could also adversely affect our net interest margin.
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The remaining 37.6% is represented by fixed rate loans. As of December 31, 2024, 62.1% and 37.9% of outstanding principal was represented by floating rate loans and fixed rate loans, respectively. Our loans generally 86 have a rate floor established at the prevailing benchmark rate, as applicable, at the time of origination.
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Based on our Consolidated Statement of Operations for the year ended December 31, 2025, the following table shows the estimated annualized impact on net income resulting from hypothetical benchmark rate changes on our floating-rate portfolio (considering interest rate floors, as applicable).
Added
Management estimates reflect the characteristics of its loan portfolio as of December 31, 2025 and exclude assumptions relating to unscheduled prepayments, deployment of unfunded commitments or new originations.
Added
Change in Interest Rates Increase (Decrease) in Interest Income Increase (Decrease) in Interest Expense Increase (Decrease) in Net Investment Income Increase of 300 basis points 7,691,844 1,473,000 6,218,844 Increase of 200 basis points 5,127,896 982,000 4,145,896 Increase of 100 basis points 2,563,948 491,000 2,072,948 Decrease of 100 basis points (505,133 ) (491,000 ) (14,133 ) Decrease of 200 basis points (931,411 ) (982,000 ) 50,589 Decrease of 300 basis points (1,306,619 ) (1,473,000 ) 166,381 Based on our Consolidated Statement of Operations for the year ended December 31, 2024, the following table shows the estimated annualized impact on net income resulting from hypothetical benchmark rate changes on our floating-rate portfolio (considering interest rate floors, as applicable).
Added
Change in Interest Rates Increase (Decrease) in Interest Income Increase (Decrease) in Interest Expense Increase (Decrease) in Net Investment Income Increase of 300 basis points 7,648,490 1,650,000 5,998,490 Increase of 200 basis points 5,098,994 1,100,000 3,998,994 Increase of 100 basis points 2,549,497 550,000 1,999,497 Decrease of 100 basis points (942,224 ) (550,000 ) (392,224 ) Decrease of 200 basis points (1,360,002 ) (1,100,000 ) (260,002 ) Decrease of 300 basis points (1,723,668 ) (1,650,000 ) (73,668 ) Interest Rate Floor and Cap Risk We currently own and intend to acquire in the future, floating-rate assets.
Added
These are assets in which the loans may be subject to periodic and lifetime interest rate caps and floors, which limit the amount by which the asset’s interest yield may change during any given period. However, our borrowing costs pursuant to our financing agreements may not be subject to similar restrictions.
Added
Therefore, in a period of increasing interest rates, interest rate costs on our borrowings could increase without limitation by caps, while the interest-rate yields on our floating-rate assets would effectively be limited. In addition, floating-rate assets may be subject to periodic payment caps that result in some portion of the interest being deferred and added to the principal outstanding.
Added
This could result in our receipt of cash income from such assets in an amount that is less than the amount that we would need to pay the interest cost on our related borrowings.
Added
These factors could lower our net interest income or cause a net loss during periods of rising interest rates, which would harm our financial condition, cash flows and results of operations.
Added
Interest Rate Mismatch Risk We may fund a portion of our origination of loans, or of loans that we may in the future acquire, with borrowings that are based on the Prime Rate or a similar measure, while the interest rates on these assets may be fixed or indexed to the Prime Rate or another index rate.
Added
Accordingly, any increase in the Prime Rate will generally result in an increase in our borrowing costs that would not be matched by fixed-rate interest earnings and may not be matched by a corresponding increase in floating-rate interest earnings. Any such interest rate mismatch could adversely affect our profitability, which may negatively impact distributions to our stockholders.
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Our analysis of risks is based on our Manager’s experience, estimates, models and assumptions. These analyses rely on models which utilize estimates of fair value and interest rate sensitivity.
Added
Actual economic conditions or implementation of decisions by our 87 Manager and our management may produce results that differ significantly from the estimates and assumptions used in our models and the projected results.
Added
Our Manager will seek to manage credit risk by performing deep credit fundamental analysis of potential assets and through the use of non-recourse financing, when and where available and appropriate.
Added
Credit risk will also be addressed through our Manager’s on-going review, and loans will be monitored for variance from expected prepayments, defaults, severities, losses and cash flow on a quarterly basis.
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Concentration Our loan portfolio as of December 31, 2025 and 2024 was concentrated with the top three borrowers representing approximately 26.9% and 24.0% of the funded principal. As of December 31, 2025 and 2024, the top three borrowers represented approximately 28.1% and 21.2% of interest income, respectively. The largest loan represented approximately 11.5% and 11.1% of the funded principal.
Added
Additionally, a core component of the Company's cannabis investment strategy is to seek investments in limited license states that have higher barriers to entry and less competition relative to other jurisdictions. The Company seeks to diversify its investments across geographies that balance portfolio risks that may be exposed to potential regulatory cannabis changes at the state level.
Added
The below table presents the Company's loan principal outstanding as of December 31, 2025 and 2024 based on collateral location or principal place of business, as applicable: As of December 31, 2025 As of December 31, 2024 Jurisdiction Outstanding Principal (1) Percentage of Our Loan Portfolio Jurisdiction Outstanding Principal (1) Percentage of Our Loan Portfolio Illinois $ 76,736,737 19 % Ohio $ 60,065,707 15 % Ohio 65,865,842 16 % Illinois 55,958,079 14 % Florida 56,317,033 14 % Florida 42,712,285 11 % Pennsylvania 46,114,129 11 % Missouri 38,208,259 9 % Michigan 31,237,041 8 % Pennsylvania 35,727,045 9 % California 27,316,846 7 % Michigan 32,068,629 8 % Arizona 26,326,748 6 % Arizona 28,023,340 7 % Missouri 26,139,970 6 % California 26,057,479 6 % New York 22,068,401 5 % New York 25,093,595 6 % Nebraska 17,200,000 4 % Maryland 21,835,901 5 % West Virginia 8,491,943 2 % Nebraska 17,400,000 4 % Other (2) 2,360,539 1 % West Virginia 8,491,943 2 % Texas 2,335,787 1 % Nevada 6,000,000 1 % Maryland 1,312,711 *% Texas 2,756,870 1 % Massachusetts 731,146 *% Massachusetts 2,626,423 1 % Nevada 225,199 *% Minnesota 1,116,000 *% Oregon 193,286 *% Oregon 580,000 *% Minnesota 101,730 *% Other (2) - *% Total $ 411,075,088 100 % Total $ 404,721,554 100 % 88 * Represents less than 1% (1) The principal balance of the loans not secured by real estate collateral are included in the jurisdiction representing the principal place of business.
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(2) The 'Other' jurisdiction includes loans with collateral in Connecticut, New Jersey, Washington. Refer to footnote 3 to our consolidated financial statements for the year ended December 31, 2025 titled “ Loans Held for Investment, net ” for more information on CECL.

Other REFI 10-K year-over-year comparisons