AFC Gamma Closes Two Syndicated Commercial Real Estate Loans
AFC Gamma, Inc. committed $56.4 million for two commercial real estate mezzanine loans in January 2024. The loans were originated by Southern Realty Trust Inc. and are projected to have high-teens and mid-teens yields to maturity. The first loan was funded to DC Partners for a mixed-use project in Houston, Texas, while the second loan was committed to Belpointe PREP, LLC for a multi-family community development in downtown Sarasota, Florida. AFC Gamma's CEO, Daniel Neville, expressed excitement about the capital deployment and highlighted the alignment with the company's investment strategy.
The commitment of $56.4 million for two commercial real estate mezzanine loans by AFC Gamma indicates a strategic move into high-yield real estate investments. Mezzanine financing is a hybrid of debt and equity financing that gives the lender the rights to convert to an ownership or equity interest in the company if the loan is not paid back in time and in full. It is generally subordinated to debt provided by senior lenders such as banks and venture capital companies.
The projected high-teens to mid-teens yield to maturity on these loans is notably higher than the average commercial real estate loan yields, reflecting both the risk and the opportunity associated with mezzanine financing. For stakeholders, this could signal an aggressive growth strategy focused on high-return investments. However, it also implies a higher risk profile, as mezzanine loans are closer to equity on a company's balance sheet and are often unsecured.
Investors should note that the success of such investments heavily relies on the performance of the underlying real estate projects. The Allen and Aster & Links developments are positioned in the luxury residential and retail sectors, which can be volatile and sensitive to economic cycles. The involvement of experienced real estate investors from SRT may mitigate some risks, but market conditions will ultimately influence the performance of these investments.
The announcement by AFC Gamma can be interpreted by the market as a positive indicator of the company's liquidity and capital allocation strategy . Engaging in mezzanine financing allows AFC Gamma to diversify its portfolio and potentially increase its return on investment, which could be attractive to investors looking for growth in the commercial real estate sector.
However, the specificity of mezzanine financing also introduces a layer of complexity to the company's financial structure. It is essential for investors to consider the balance between the high yields and the increased risk of default associated with mezzanine loans. Furthermore, the performance of AFC Gamma's stock may be influenced by the market's perception of the company's risk management capabilities and the success of the funded projects.
Long-term implications for stakeholders include the potential for these investments to contribute to the company's earnings growth, provided the real estate projects perform well. Conversely, if the projects encounter difficulties, the impact on AFC Gamma's financials could be significant due to the subordinated and potentially unsecured nature of mezzanine financing.
The investment in commercial real estate mezzanine loans by AFC Gamma reflects broader economic trends. The luxury real estate market , often seen as a bellwether for economic confidence, appears to be an area where AFC Gamma sees growth potential. This could be indicative of underlying economic strength or a targeted bet on specific geographic markets, like Houston, Texas and Sarasota, Florida.
Furthermore, the decision to extend these loans during a period of economic uncertainty could suggest that AFC Gamma has a contrarian view or unique insights into the commercial real estate market's trajectory. As an economist, one would also consider the potential impact of interest rate changes on the value of these loans. A rise in interest rates could increase borrowing costs for real estate developers, potentially affecting the yield to maturity of these mezzanine loans.
From a macroeconomic perspective, the successful deployment of capital into high-yield investments can stimulate economic activity in the regions concerned, although the scale of AFC Gamma's investments is unlikely to have a significant impact on the broader economy.
02/07/2024 - 04:05 PM
Commercial Real Estate Transactions Totaling $56.4 million during January 2024
WEST PALM BEACH, Fla., Feb. 07, 2024 (GLOBE NEWSWIRE) -- AFC Gamma, Inc. (NASDAQ:AFCG) (“AFC Gamma” or the “Company”) today announced it committed $56.4 million for two commercial real estate mezzanine loans in January 2024. Southern Realty Trust Inc. (“SRT”), an affiliated fund, originated the loans and is lead agent with AFC Gamma acting as a syndicate partner.
In the first transaction, AFC Gamma funded a $28.2 million mezzanine loan to DC Partners as sponsor of The Allen, a 35-story mixed-used project situated on Allen Parkway and the Buffalo Bayou Park in Houston, Texas. The Allen is comprised of luxury residential condominiums, a Thompson-flagged hotel (Hyatt), various restaurants and retail. The loan is projected to have a high-teens yield to maturity.
In the second transaction, AFC Gamma committed $28.2 million to a mezzanine loan, with $20.7 million funded, to Belpointe PREP, LLC (NYSE American: OZ) as sponsor of Aster & Links, a premier multi-family community development with ground floor retail located in downtown Sarasota, Florida. Aster & Links is comprised of two distinct luxury 10-story residential buildings with more than 51,000 square feet of ground floor retail. The loan is projected to have a mid-teens yield to maturity.
“In addition to recommitting to cannabis, we are excited to have put AFC Gamma’s capital to work with these two loans, which align with our strategy to opportunistically invest in high-quality commercial real estate deals that provide compelling risk-adjusted returns,” said Daniel Neville, Chief Executive Officer of AFC Gamma. “On these loans, we were pleased to work with the SRT team, which is led by veteran real estate investors with decades of experience.”
About AFC Gamma, Inc.
AFC Gamma, Inc. (NASDAQ:AFCG) is a publicly-traded, institutional lender that originates, structures and underwrites loans secured by commercial real estate and other types of financing solutions. AFC Gamma targets direct lending and bridge loan opportunities typically ranging from $5 million to $100 million across multiple real estate sectors, with a specialization in lending to state-law compliant cannabis operators. It is based in West Palm Beach, Florida.
Forward-Looking Statements
This news release contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 that reflect the company’s current views and projections with respect to, among other things, loan yields and financial performance. All statements other than historical facts, are forward-looking statements. Words such as “believes,” “expects,” “will,” “intends,” “plans,” “guidance,” “estimates,” “projects,” “anticipates,” and “future” or similar expressions are intended to identify forward-looking statements. These forward-looking statements are subject to the inherent uncertainties in predicting future results and conditions and are not guarantees of future performance, conditions or results. Certain factors, risks and uncertainties discussed under the caption “Risk Factors” and elsewhere in AFC Gamma’s most recently filed periodic reports on Form 10-K and Form 10-Q and subsequent filings, could cause actual results and performance to differ materially from those projected in these forward-looking statements.
AFC GAMMA, INC. INVESTOR CONTACT:
Robyn Tannenbaum & Lana Pingir@advancedflowercapital.com www.afcgamma.com
AFC GAMMA, INC. MEDIA CONTACT:
Profile Advisorsrmyers@profileadvisors.com
What is the total amount committed by AFC Gamma for the two commercial real estate mezzanine loans in January 2024?
AFC Gamma committed $56.4 million for the two commercial real estate mezzanine loans in January 2024.
Who originated the loans for AFC Gamma?
The loans were originated by Southern Realty Trust Inc.
What is the projected yield to maturity for the first loan funded by AFC Gamma?
The first loan is projected to have a high-teens yield to maturity.
What is the projected yield to maturity for the second loan committed by AFC Gamma?
The second loan is projected to have a mid-teens yield to maturity.
Who is the lead agent for the loans?
Southern Realty Trust Inc. is the lead agent with AFC Gamma acting as a syndicate partner.
