Chicago Atlantic’s Distributable Earnings Fell Amid Faster Loan Growth

The Tip Desk · October 18, 2026 · 3 min read

The cannabis lender reported $0.43 a share in diluted distributable earnings for the second quarter, below its $0.47 regular dividend.

Chicago Atlantic Real Estate Finance, Inc. (REFI), a commercial mortgage real estate investment trust focused on cannabis operators, expanded its loan book faster in the second quarter while distributable earnings declined. Net loan growth reached $39.54 million in the three months ended June 30, against $2.51 million in the first quarter, marking a pickup in portfolio expansion.

Co-Chief Executive Officer Peter Sack said repayments early in the quarter and loan deployments later in the period hurt earnings. The company finished June with more capital deployed, but that expansion did not translate into higher quarterly distributable earnings. Those earnings totaled $9.29 million, down from $9.83 million in the first quarter. Net interest income was $12.83 million.

The quarter’s lending went predominantly to new portfolio companies. Of $59.20 million in principal advances, $56.23 million went to new portfolio companies. Chicago Atlantic ended June with $453.13 million in outstanding loan principal across 26 portfolio companies. The advance figures included any paid-in-kind interest or fees capitalized into loan balances, rather than representing only fresh cash lending. The portfolio’s gross unlevered weighted average yield to maturity was 15.8%.

Credit-loss provisions presented a different picture from distributable earnings. The quarterly provision fell to $551,294 from $3.84 million in the first quarter. Net income was $7.47 million, or $0.34 a diluted share. Chicago Atlantic excluded credit-loss provisions, stock compensation and certain other adjustments when calculating distributable earnings, its supplemental non-GAAP measure. The two earnings measures therefore treated the provision differently.

The regular dividend of $0.47 a share exceeded diluted distributable earnings of $0.43 a share. For full-year 2026, the company expects a dividend payout ratio of approximately 90% to 100% of diluted distributable earnings. That outlook assumes continued standalone operations and excludes the effects of its pending merger, including dividend restrictions under the merger agreement. The company also expects a fourth-quarter special dividend if taxable-income distribution requirements call for payments beyond the regular dividend, subject to board authorization and the merger agreement.

Liquidity narrowed during the period covered by the latest update. Total liquidity, net of estimated liabilities, totaled approximately $16 million on August 11, against approximately $54 million on May 7. At the June quarter-end, drawn leverage totaled $141.1 million, comprising borrowings under the revolving credit facility and senior unsecured notes. The debt-to-equity ratio was 46.6%.

After quarter-end, Chicago Atlantic added another investment through a share exchange. On July 9, it issued stock representing approximately 16.8% of the shares outstanding immediately after the transaction in exchange for approximately $62.5 million of second-lien notes from Koach entities. The notes carried a 12% aggregate annual interest rate and were secured by mortgages on 32 retail and related properties leased to cannabis operators. They ranked behind senior first-lien debt totaling approximately $39 million as of the Koach transaction’s closing date.

That issuance also became part of the pending merger’s exchange-ratio calculation. Chicago Atlantic agreed in June to merge into affiliated Chicago Atlantic BDC, with the BDC surviving. Under the agreement, Chicago Atlantic stockholders are to receive BDC shares based on the companies’ adjusted net asset values shortly before closing. The Koach shares would enter that calculation, so the ownership estimate based on March net asset values did not establish the final ownership split.

Chicago Atlantic expects the merger to close in the fourth quarter of 2026, subject to shareholder approvals, regulatory approvals, third-party consents and other conditions. Required shareholder votes include approval of Chicago Atlantic’s election to be regulated as a business development company and a new investment advisory agreement—decisions governing its proposed transition from a standalone mortgage REIT.