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Completed Fund
Diversified
AFC GAMMA - Cannabis Mortgage REIT
Nationwide
INVESTMENT STRATEGY
INVESTMENT TYPE
Fund
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100% funded
Offered By AFC Gamma Inc.
18.38%* TARGET IRR 18.38%-%
18.38%* TARGET AVG CASH ON CASH
* TARGET EQUITY MULTIPLE
Estimated Hold Period 5 Years
Estimated First Distribution 1/2019
Minimum Investment 75000
*Please carefully review the Disclaimers section below, including regarding Sponsor’s assumptions and target returns
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Project Summary
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Overview
Advanced Flower Capital "AFC" Gamma Inc. is a cannabis-focused commercial mortgage REIT that originates senior secured loans to established cannabis firms in states where medicinal or adult-use cannabis is legal.
Market

As of March 2020, the U.S. Retail cannabis market is expected to generate between $15.5 and $18.9 billion by the end of 2020, an increase of ~40% over 2019.  Total U.S. sales could rise as high as $37 billion by 2024.

High Barriers to Entry

Limited access to equity capital or traditional bank lending has driven operators to seek alternative sources of financing to complete commitments, which allows lenders to demand strong risk-adjusted returns backed by significant collateral. 

Potential Efficiencies

AFC's lending structure provides more security and flexibility to redeploy capital than owning the land or property directly.

Investment Highlights
As of September 1, 2020, an AFC affiliate has funded approximately $47 million of transactions to cannabis operators, committed to approximately $65 million in additional loans and commitments from existing loans, and has approximately $368 million of potential deals in the pipeline.
The management team of AFC and the investment committee members of the Manager have over 80 combined years of lending industry experience. The teams have also directly structured over $10 billion in loan transactions and taken five companies public.
AFC’s loans will primarily be secured by real property and certain personal property, including, licenses, equipment, and other assets to the extent permitted by applicable laws.
As of September 1, 2020, the members of AFC’s management team and the investment committee members of AFC have reviewed over one hundred (100) deals, funded six (6) deals, committed to three (3) additional transactions for AFC, and are currently reviewing twenty-five (25) deals. Given the employment of stringent underwriting standards, of the deals reviewed, we have passed on ninety-seven (97) deals primarily due to lack of collateral, lack of cash flows, the stage of the company, lack of prior experience, or state regulatory dynamics.
Although there can be no guarantees, AFC intends to list on the NASDAQ or NYSE as soon as practicable, once either exchange begins approving applications for cannabis-linked companies. If AFC is not a publicly-traded company within 5 years, the Company will automatically begin the process of dissolution and winding up.
*The IRR and CoC projections are the same as all revenue is projected to come from interest and fees on debt. The REIT is exclusively invested in debt so there is no future appreciation expected. These target returns reflect an assumption of 50% leverage. The use of leverage is not guaranteed and is not expected to be incurred until 9 months post-close. AFC Gamma expects distributions to initially begin in January 2021 at a minimum of 10% annualized gross to AFCG RM 1, LLC, increasing over time as the portfolio matures and leverage is utilized. The 18.38% is an average net levered return over three years. There can be no guarantees that the fund is public or wound up by year three.
Management
Cumulative Distributions

AFC Gamma Inc.

AFC was founded in 2020 by a veteran team of investment professionals to pursue activities in financing senior secured loans and other investments for established cannabis industry operators in states that have legalized medicinal and/or adult-use cannabis. As states continue to legalize cannabis for medical and even adult use, more and more cannabis operators currently need debt capital to complete infrastructure projects and further expand their business due to the constrained cannabis equity market environment, and AFC believes it is the financing partner of choice given its size and scale of operations, incumbency and institutional infrastructure. As of September 1, 2020, members of AFC’s management have sourced deals worth approximately $2.9 billion across the cannabis industry in various states while maintaining a robust pipeline of potentially actionable opportunities. 

AFC Gamma is lead by CEO Leonard Tannenbaum.  Leonard is formerly the Founder and CEO of Fifth Street Asset Management, a $5 billion credit asset manager which he took public and eventually sold to Oaktree in 2017.  Leonard started Fifth Street in 1998.  The firm completed approximately $10 billion of loans since inception.

*Len and Jonathan have had prior litigation that was disclosed to RealtyMogul. There is no outstanding litigation against Len.  The two outstanding litigations against Jonathan pertain to a deed in lieu of foreclosure and a former employee suing him.

  • Leonard Tannenbaum
    Partner, Chief Executive Officer of AFC
  • Jonathan Kalikow
    Partner, Head of Real Estate
  • Thomas Geoffroy
    Chief Financial Officer
  • Robyn Tannenbaum
    Partner, Head of Originations, Marketing, IR
Leonard Tannenbaum
Partner, Chief Executive Officer of AFC
- Responsible for the overall management of AFC
- Will lead the firm’s Investment Committee, overseeing investment processes including origination, credit underwriting, risk analysis and investment approvals
- Formerly, Founder and CEO of Fifth Street Asset Management, a $5Bn credit asset manager which has sold to Oaktree in 2017
 
Fifth Street Capital
Leonard Tannenbaum founded the Fifth Street platform in 1998, which had a core focus on disciplined credit investing across multiple economic cycles. Fifth Street was a leading loan origination platform with a multifaceted deal sourcing strategy, disciplined investment process, and in-house portfolio management with proprietary systems in place. The firm completed approximately $10 billion of loans since inception and grew from $32 million of assets under management to $5 billion of assets under management in 2017, when it was sold to Oaktree. Fifth Street has made flexible investments across the capital structure to growing middle market companies primarily in conjunction with private equity sponsors. It had the ability to hold up to $250MM and structure and syndicate up to $500MM. 
Jonathan Kalikow
Partner, Head of Real Estate
- 30+ years’ experience in finance and real estate
- President and Founder of Gamma Real Estate, a boutique commercial real estate firm that owns a portfolio of 5,000 apartments, several office properties in the Southeastern U.S., and real estate developments, including a 850 unit residential building on Sutton Place in Manhattan
- Prior to co-founding Gamma Real Estate, Mr. Kalikow spent 18 years on Wall Street
 
Gamma Real Estate
Gamma Real Estate was formed in 2010 and is a boutique commercial real estate firm based in New York City, although the Kalikow family has been investing in New York City real estate since 1922. Owned and operated by the Kalikow family, Gamma Real Estate boasts a forty-five-year history of success as both lenders and owners of commercial real estate. The firm runs three operations: Gamma Lending–direct loans for commercial real estate assets in the U.S, Gamma Multifamily –investing in multifamily properties in primary and secondary markets of the American Southeast, Gamma Development –unique projects and special situations in catalyst driven markets with high barriers to entry. 
Thomas Geoffroy
Chief Financial Officer

- 20+ years experience as a CPA with expertise in financial reporting and internal controls for the financial services industry including investment fund experience

- Formerly, was CFO and Finance Operations Principal for United Capital Markets, as well as Vice President, Controller at Ares Management and Vice President of Fund Administration at S.A.C. Capital Advisors

Robyn Tannenbaum
Partner, Head of Originations, Marketing, IR
- 12+ years experience focusing on M&A, leveraged loans and investor relations within the finance industry
- Formerly was Head of Investor Relations at Fifth Street Asset Management and a Vice President in Healthcare M&A at CIT Group
Track Record

Business Plan

Investors will be investing into AFCG RM 1, LLC which will subsequently invest into AFC Gamma, Inc. The Investment objective of AFC Gamma, Inc., an externally managed commercial mortgage REIT, is to achieve an 18.38% gross IRR from interest and fees by lending to the cannabis industry, secured by real estate, cash flows, and licenses.  The Manager’s rigorous investment process on behalf of AFC will enable AFC to provide senior secured loans to established cannabis industry players in states that have legalized medicinal and/or adult-use cannabis. AFC’s management team and Board are attuned to the macro-environment and political environment as they relate to the lending and cannabis industry. AFC intends to list on the NASDAQ or NYSE as soon as practicable, once either exchange begins approving applications for cannabis-linked companies. If AFC is not a publicly-traded company with equity securities listed on a securities exchange by the five-year anniversary of the Initial Closing Date, September 2020, the Company will automatically begin the process of dissolution and winding up, with the intention of completing the process in 3-5 years. 

Borrower Status Date AFC Loan, net of Syndication % of Total AFCW Total Funded Debt Issuance AFCW % of the Total Loan Est Real Estate Value (1) Real Estate Collateral Coverage Implied Real Estate Collateral for AFCW AFCW Real Estate Collateral Coverage
Public Co. A(2) Funded 8/5/2019 $6,940,000 6.1% $50,000,000 13.9% $107,000,000 2.14x $14,851,600 2.14x
Public Co. B(3) Funded 1/14/2020 $7,000,000 6.2% $300,000,000 2.3% $109,904,000 0.37x $2,564,427 0.37x
Public Co. C(4) Funded 1/31/2020 $5,000,000 4.4% $20,000,000 25.0% $53,100,000 2.66x $13,275,000 2.66x
Sub. of Public Co. D(5) Funded 2/12/2020 $15,000,000 13.3% $15,000,000 100.0% $24,678,600 1.65x $24,678,600 1.65x
Sub of Public Co. D - Bridge(6) Funded 4/17/2020 $5,000,000 4.4% $5,000,000 100.0% $6,500,000 1.30x $6,500,000 1.30x
Private Co. A(7) Funded 5/8/2020 $32,000,000 28.3% $40,000,000 80.0% $51,384,281 1.28x $41,107,425 1.28x
Private Co. B(8) Anticipated 9/2/2020 $8,000,000 7.1% $8,000,000 100.0% $10,983,164 1.37x $10,983,164 1.37x
Private Co. C(9) Anticipated 9/11/2020 $12,000,000 10.6% $12,000,000 100.0% TBD n/a TBD n/a
Private Co. D(10) Anticipated 10/1/2020 $22,000,000 19.5% $22,000,000 100.0% $26,713,833 1.21x $26,713,833 1.21x
      $112,940,000 100% $472,000,000 23.9% $390,263,878 0.83x $140,674,049 $1.25

 

Note: Information as of August 31, 2020
1 - Real estate value based on appraised cannabis value, where available. In addition, if loan funds acquisition and/or construction, figure includes expected total basis on future construction and/or acquisitions plus appraised value
2 - Public Company A real estate based on cost basis
3 - Public Company B Real Estate Collateral is from the Company's 3Q19 quarterly report for PP&E
4 - Public Company C real estate is shown at basis
5 - Subsidiary of Public Company D real estate based on completed, stabilized value of to be built facility
6 - Bridge Advance for existing client to help fund their business plan more rapidly. Additional collateral, namely the Company's primary cultivation property, was added to the collateral pool. Draws on the Company's other facility from AFC are paused until the Bridge Advance is paid off
7 - Private Company A Real Estate based on appraised value plus future basis
8 - Real Estate collateral value based on total cost basis, as completed
9 - Real Estate appraisals in process
10 - Real Estate collateral value based on total cost basis of owned properties only. Leased property TI’s were not included

Property
Photos
Financials
Distributions

Historical Return Breakdown  
Gross historical IRR* 21.15%
Management Fee -1.75%
Estimated Agent & Structuring Fee Add-Back 1.00%
Direct REIT Expenses -1.00%
Admin Cost -1.00%
Structuring & Other Expenses -1.00%
Gross Return on Equity 17.40%
Incentive Fee** -3.48%
Net Unlevered Return on Equity 13.92%
Net Leverage Benefit 4.46%
Net Levered Return on Equity 18.38%

1 - Note: As of 8/31/2020. Weighted average IRR of 6 closed loans and 3 loans anticipated to be closed. Past performance is not indicative of future results.
2 - 20% allocation of profits above a hurdle rate of 7% with a 50% catch up
3 - Assumes 0.5x leverage with 8% cost of debt

Fees

Certain fees and compensation will be paid over the life of the transaction; please refer to AFC materials for details. The following fees and compensation will be paid(1)(2)(3).

  Recurring Fees
Type of Fee Amount of Fee Received By Paid From
Management Fee

1.75% gross annual management fee on equity to the Manager, payable quarterly, which shall be reduced by any additional fees that the Manager earns, including any Co-Investment Management Fees, syndication fees or agency fees.

AFC Management, LLC AFC Gamma Inc.
Incentive Fee 20% allocation of net income, computed in accordance with generally accepted accounting principles (“GAAP”), to the Manager, payable quarterly, above a hurdle rate of 7%, with a 50% catch up. AFC Management, LLC AFC Gamma Inc.
Administrative Services Fee 1.0% of the amount invested into AFC(3) RM Admin(2) Distributable Cash

(1) Fees may be deferred to reduce the impact to investor distributions

(2) RM Technologies operates the RealtyMogul platform. RM Technologies charges a fixed, non-percentage based fee for real estate companies to use the marketplace. This fee may be capitalized into the transaction at the discretion of the Manager. 

(3) RM Admin will be providing the following services:(a) responding to inbound investor inquiries regarding how to subscribe to the Project, (b) distribution of all annual tax forms (after receipt of same from Project Sponsor), (c) processing distributions that are payable from AFCG RM1, LLC to Investors, however, RM Admin will not be deemed to have custody of client funds, (d) distribution of all quarterly reports (after receipt of same from Project Sponsor) and (e) summarizing sponsor information on property performance, responding to investor inquiries regarding sponsor performance information as well as the real estate market generally.

Disclaimers/FAQs
Disclaimers

Please read the offering prospectus in its entirety and consult your tax and/or legal counsel before considering an investment in this offering. Past performance of the Sponsor, its affiliates, and their previous offerings is not indicative of future results.

There is no guarantee that the Investments or the Fund will be successful or that Fund manager will be successful in executing the Fund’s objectives. In the event of a market downturn, the likely outcome is lengthened illiquidity and possible delay and/ or disruption in distributions while we await more favorable exit conditions that may never come. This Investment relies upon the decisions of the Fund manager.

Do not invest solely based on distributions that this Investment or any prospective investment may currently be generating or are projecting to be distributed. Any distributions will depend upon the successful syndication of the Assets by the Sponsor. Distribution payments are not guaranteed. This Investment is illiquid, and there can be no assurance that liquidity will be obtained at any point in the future or that a future liquidity event would be profitable. The results of this Investment may not be within our control to influence or materially adjust.

Please note that every real estate investment, including this Investment, carries downside risks due to variables such as illiquidity, potentially declining market values, re-leasing risk, interest rate risk, refinancing or financing risk, acts of God, and management and/or operations failures. It is important for each investor to carefully review the private placement memorandum in its entirety and weigh the potential risks and rewards of this Investment prior to considering an investment.

The principals of the Sponsor and Manager have conflicts of interest that could impact the management of this Investment based on the needs and investment opportunities of other companies. This may lead to a conflict of interest between their various roles, including conflicts with the investors regarding decisions related to the Fund and acquisition and management of the Fund. Prior successes by any previous investments or their principals, officers, or managers are not indicative of future performance, nor are they any guarantee of liquidity, of a shorter- or longer-term hold period, against loss, or against an interruption or reduction in income—all of which are risks of real estate, and real estate investments, including this Investment.

The Assets intended to be funded by advances from the Sponsor plan to utilize leverage, which may magnify the impact of any risks. Material economic disruption globally or especially in the United States could have a material impact on the value of this Investment and could significantly delay or thwart potential liquidity events. Shifts in local, regional, and national government policy may hinder the plans of the Manager and could significantly impact the ability of the Sponsor to redeem the Investment at par.

The information presented herein is proprietary and confidential information of AFC Gamma, Inc. and/or one of its affiliates. This presentation is not for distribution beyond the prospective investor to whom it has been provided by the company and is being provided solely for use by such prospective investor in connection with their consideration of an investment with the company.  This presentation may not be copied or reproduced in whole or in part.  By accepting delivery of this presentation, you agree to these restrictions.

This presentation contains forward-looking statements, which include, without limitation, statements concerning plans, objectives, goals, projections, strategies, markets, future events or performance, and underlying assumptions and other statements, which are not statements of historical facts. When used in this presentation, the words “anticipate,” “appears,” “foresee,” “intend,” “should,” “expect,” “estimate,” “target,” “project,”  “plan,” “may,” “could,” “will,” “are likely” and similar expressions are intended to identify forward-looking statements. These statements involve predictions of the company’s future financial condition, performance, and the results of its plans and strategies, and are thus dependent on a number of factors including, without limitation, assumptions and data that may be imprecise or incorrect. Forward-looking statements are subject to risks and uncertainties that could cause actual results to differ materially from those in such statements. The company cautions you not to place undue reliance on these forward-looking statements.  This presentation speaks as of the date on the first page hereof and the company undertakes no obligation to provide any revisions or updates to this presentation to reflect events or circumstances after the date of this presentation or to reflect the occurrence of subsequent events.

By receipt of this presentation, you confirm you are an “accredited investor” as defined under rule 506 of regulation d of the securities act of 1933, as amended (the “securities act”).  This presentation does not constitute an offer to sell, or a solicitation of an offer to buy, any securities of the company.  The sole purpose of this presentation is to assist prospective investors in deciding whether to proceed with a further investigation and evaluation of the company in connection with their consideration of an investment in the company.  This presentation does not purport to contain all information which may be material to an investor and recipients of this presentation should conduct their own independent evaluation and due diligence of the company. The company does not make any representation or warranty, express or implied, as to the accuracy or completeness of any of the information contained in this presentation.  Each recipient agrees, and the receipt of this presentation serves as an acknowledgment thereof, that if such recipient determines to engage in a transaction with the company, its determination will be based solely on the terms of the definitive agreement relating to such transaction and on the recipient’s own investigation, analysis and assessment of the company and the transaction.  The recipient acknowledges that any investment in securities of the company contains significant risks, including the possibility of loss of the entire investment. The recipient further acknowledges that any sale of securities will not be registered under the securities act.  As a result, the securities may not be offered or sold within the U.S. or to, or for the account of benefit of, U.S. persons (as defined under regulation s of the securities act) except pursuant to an exemption from, or in a transaction not subject to, the registration requirements of the securities act.

The company reserves the right, in its sole discretion, to reject any and all proposals made by or on behalf of any prospective investor with regard to an investment in the company, and to terminate further participation in the investigation and proposal process by, or any discussions or negotiations with, any prospective investor at any time. 

Prospective investors who decide not to pursue this matter are required to delete, destroy, or return this presentation (together with any other material relating to the company which may have been received from the company) to the company at their earliest convenience

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