Chicago Atlantic Adds Koach Notes, Lifts Distributable Earnings

The Tip Desk · November 10, 2026 · 4 min read

Distributable earnings were $0.49 a share after the company began counting Koach Notes income that GAAP records in equity.

Chicago Atlantic Real Estate Finance, Inc. (REFI), a commercial mortgage real estate investment trust that lends primarily to state-licensed cannabis operators, reported distributable earnings of $12.56 million, or $0.49 a share on a diluted basis, for the three months ended September 30, 2026, up from $9.29 million, or $0.43 a share, in the prior quarter.

The company said the increase began including interest income, paid-in-kind interest, exit fees and other amounts earned under the Koach Notes, which GAAP records directly in stockholders’ equity rather than in net income because the notes were received as consideration for a share issuance. Diluted weighted average shares outstanding rose to 25.65 million from 21.71 million in the second quarter after the July 9 private placement of 4,306,754 shares.

GAAP results moved the other way. Net interest income was $12.47 million, or $0.49 a share, down from $12.83 million, or $0.59 a share, in the second quarter and from $13.69 million, or $0.64 a share, a year earlier. Net income was $6.43 million, or $0.25 a share. The provision for current expected credit losses widened to $2.77 million, or $0.11 a share, from $0.55 million, or $0.03 a share, in the prior quarter. Regular dividends declared were $0.47 a share.

On July 9 the company issued common stock to Koach in exchange for approximately $62.6 million of second lien promissory notes. As of September 30 the outstanding balance on those notes was about $59.1 million. Total loan principal outstanding rose to $527.70 million from $453.13 million at June 30, including the $59.09 million of Koach Notes that were zero in both the prior quarter and a year earlier. Loans held for investment principal were $468.61 million. Portfolio companies increased to 28 from 26; the company said 31 Koach Notes secured by 31 retail properties were presented as one portfolio company.

Net change in loan principal outstanding was $74.58 million in the third quarter, after $39.54 million in the second quarter. Principal advances were $88.00 million, including $80.38 million to six new portfolio companies and $7.62 million to existing companies. Scheduled principal repayments were $3.85 million. Unscheduled repayments were $9.58 million. Unfunded commitments fell to zero from $2.36 million at June 30.

Gross unlevered weighted average yield to maturity declined to 14.8% from 15.8% at June 30 and 16.5% a year earlier. The share of the loan portfolio bearing a variable interest rate fell to 56.8% from 62.5% at June 30. Adjusted book value per share (as-paid) was $14.12. Debt/equity rose to 47.5% from 46.6% at June 30.

Co-Chief Executive Officer Peter Sack said the real estate secured cannabis pipeline had decreased from approximately $204 million to $174 million since last quarter end, and that the company believed its credit fundamentals compared favorably to peers. He said the Koach transaction positioned the company for long-term success.

During the quarter the company increased available borrowing capacity on its revolving loan from $110.0 million to $117.5 million. Drawn leverage was $144.4 million, including $94.4 million on the secured revolver and $50.0 million of senior unsecured notes due 2028. As of November 10, 2026, the company had $15.2 million available on the secured revolving credit facility and total liquidity, net of estimated liabilities, of approximately $12.0 million.

The company reiterated a full-year 2026 dividend payout ratio of approximately 90% to 100% of distributable earnings per weighted average diluted share. That outlook assumes the company continues to operate on a standalone basis and does not reflect the effects of the pending merger. The current outlook omits the special-dividend statement made in the first-quarter release.

On June 17, 2026, the company entered into a merger agreement with Chicago Atlantic BDC, Inc. (LIEN), an affiliated business development company. REFI will merge with and into LIEN, with LIEN continuing as the surviving company. Based on March 31, 2026 NAVs and excluding the Koach transaction, former REFI stockholders would be expected to own approximately 50.5% of LIEN immediately following the merger. Completion is subject to stockholder approvals, including REFI’s election to be regulated as a business development company, regulatory approvals and other customary closing conditions. Assuming those conditions are satisfied, the merger is expected to close in 2027.