Chicago Atlantic Real Estate Finance, Inc. Liquidation Value

Chicago Atlantic Real Estate Finance, Inc. (REFI) is a cannabis-focused commercial real estate mortgage REIT operating as an externally managed BDC-adjacent structure. As of March 31, 2026, the liquidation posture is moderately positive relative to the prior period but carries meaningful asset-quality and structural risks that a liquidation lens must weight carefully.

Asset side: Total assets of $435.9M are dominated by loans held for investment at gross carrying value of $409.2M, net of a CECL reserve of $8.7M, yielding a net book carrying value of $400.6M. Under a liquidation haircut, these are senior secured loans to cannabis operators — a sector where REFI itself discloses it cannot take mortgagee-in-possession, cannot foreclose on cannabis licenses under UCC, and would need to sell the loan rather than take the collateral. The effective realizable value of the loan book in a distressed wind-down is therefore materially below book. Real estate collateral coverage is stated at 1.2x as of March 31, 2026, down from 1.1x a year prior but note that only 39% of the portfolio is fully secured by real estate (down from 50% at March 31, 2025). The remaining 61% relies on equity pledges and other-asset liens whose cannabis-specific enforceability is legally constrained. Applying a 60-70% recovery assumption to the $409M gross loan book yields estimated liquidation proceeds of roughly $245-$286M. Cash of $27.9M receives 100% credit.

Liability side at face value: Total liabilities of $132.5M comprise the Revolving Loan ($67.1M outstanding, $43M available), $50M in unsecured notes (maturing October 2028, 9% fixed, prepayment penalty until October 2026), dividends payable of $11.3M, and other accruals. The unsecured notes carry a 3% prepayment penalty until October 2026, adding approximately $1.5M to wind-down cost. Deferred debt issuance costs of $0.6M are non-recoverable. Stockholders' equity per book is approximately $303.4M, or $14.39/share.

Compared to the prior filing (10-K, December 31, 2025, book value $14.60/share), book value declined modestly. The CECL reserve grew materially — a $3.8M provision in Q1 2026 versus a $1.1M benefit in Q1 2025 — signaling deteriorating credit quality in the portfolio. Borrower concentration increased: top three borrowers represent 33.2% of principal outstanding versus 26.9% at year-end. Net income declined 52% year-over-year ($4.8M vs $10.0M) primarily due to the CECL provision and decreased interest income. Cash increased from $14.9M to $27.9M driven by $18M in revolving credit draws (net) providing financing inflows. The revolving facility balance increased from approximately $85M outstanding (implied by prior filings) to $67.1M after $18M in net repayments during Q1 2026 — this is a reduction, not an increase as noted in MD&A's discussion of $17.9M in net draws; the filing states net repayments of $18M for Q1 2026, which is internally inconsistent with the financing cash inflow disclosure — filing does not clearly reconcile this. OtherCommitment of $4.5M in unfunded loan commitments represents an additional contingent liability at face value in liquidation.