Chicago Atlantic Real Estate Finance: Cannabis Lender Stuck Between Rock And Hard Place

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Investment Thesis

Chicago Atlantic Real Estate Finance (Nasdaq: NASDAQ:REFI) is a mortgage REIT that lends to state-licensed operators in the cannabis industry. On a valuation basis, REFI is trading at 1.1x P/B and yields 9%, which is not terribly attractive. On a more concerning note, the legal environment provides no margin of safety for cannabis investors, as REFI is not allowed to take title to the underlying real estate while it is being used to conduct cannabis-related activities. Such a statutory prohibition will not allow REFI to realize the full value of the “appraised” value. In addition, if cannabis is eventually legalized, such an event would be detrimental to REFI as larger, more traditional and established players would be able to move into the space.


REFI is a mortgage REIT that completed its IPO in December 2021. It focuses on originating senior (and occasionally mezz) loans to state-licensed operators in the cannabis industry. They are externally managed by Chicago Atlantic REIT Manager and seek to originate loans between $5-200m, generally with 1-5 year terms and amortization when terms exceed 3 years. They typically act as co-lenders in such transactions and intend to hold up to $30m of the aggregate loan amount.

The loans are secured by real estate (when lending to owner-operators) and other collateral (equipment, receivables, licenses, etc.). Some statistics on its current loan portfolio:

  • 23 loans…

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