Our rigorous, analytical investment process targets first-lien real-estate loans with projected yields in the mid-to-high teens.
From Origination to Management
Given our commitment to finding loans with high return potential and controlled risk, AFC Gamma is involved in all key phases of the lending process.
We maintain a direct-origination platform, which creates enhanced yields and allows us to put in greater controls by originating and structuring loans. The platform drives increased deal flow, which provides for improved selectivity.
Before we commit to funding, our Investment Committee focuses on managing credit risk via a comprehensive review process. Unanimous approval from the credit committee is required for each loan before commitment papers are issued.
Our investment team works alongside external counsel to negotiate loan documents, with an emphasis on financial covenants and a limitation of actions that may be adverse to lenders. Once the loan is funded, we monitor the company’s performance over its life (typically 18 months to five years).
Focus on the Best
We concentrate on cannabis leaders: companies with the wherewithal to make the best of the funds they borrow and the scale to succeed in a rapidly growing industry.
Companies with those characteristics can support loans with return targets in the mid-to-high teens.* Why so high despite company strengths? Given limited access to equity capital and traditional bank lending, operators are seeking alternative sources of financing, which allows lenders to demand strong risk-adjusted returns with significant collateral.
*There can be no assurance that these return targets will be achieved
We believe that understanding the borrower and the characteristics of each requested loan is at the heart of controlling risk. Through in-depth conversations with prospective borrowers as well as detailed research and on-site visits, we investigate:
- The borrower’s operations and brand
- The facility that the borrower intends to build or enhance
- The valuation of the borrower’s loan property
- The legislative environment the borrower is operating in, and
- The particulars of the loan and the cash flow it’s likely to generate for investors.
We can’t eradicate all risk, nor would we want to: Risk is what drives high returns. But central to our mission is circumscribing and managing risk.
We lend to companies, backed by cash flow, real estate and other collateral. In order to qualify, our borrowers need to secure their loans with substantial collateral. This is a critical risk-management tool. Typically, we hold first liens on much or all of the borrower’s real property used to produce cannabis and often the company’s production licenses as well.
AFC Gamma is supportive of the cannabis-producing community. We find and fund strong deals in everyone’s best interest—those of our investors, our borrowers and our own. However, our stringent loan-selection process means that most potential borrowers don’t make it past our review process.
As of September 1, 2020 of 131 potential deals, only 9 made it to funding or commitment, with an additional 25 under further review. We are selective lenders which helps to ensure that we invest in high quality borrowers in order to deliver strong risk-adjusted returns to our investors.
Please contact us for additional information about AFC Gamma and the solutions we can deliver for you.