Exclusive Interview with Advanced Flower Capital CEO Leonard Tannenbaum
The last time Advanced Flower Capital Gamma (AFC Gamma) (NASDAQ: AFCG) CEO Leonard Tannenbaum spoke with New Cannabis Ventures, the company had committed to over $100 million in deals. Since then, AFC Gamma’s deal flow has expanded significantly. Now, Tannenbaum spoke with New Cannabis Ventures about the company’s NASDAQ IPO, recent investments and the company’s actionable pipeline. The audio of the entire conversation is available at the end of this written summary.
Consistent Leadership and a Growing Team
The core leadership team at AFC Gamma has remained consistent. Tannenbaum leads the company as CEO, working closely with Head of Origination Robyn Tannenbaum and Head of Real Estate Jonathan Kalikow.
The company has continued to add to its team, which now includes 18 employees, and it is expanding its offices in West Palm Beach, Florida.
AFC Gamma currently has 11 funded deals. The company has $166 million in current loans and a total of $204 million deployed. The company has been repaid on some loans and sold others.
Among the company’s recent investments is Justice Cannabis Co. AFC Gamma provided a $22 million senior secured credit facility to fund the company’s cultivation and dispensary build-out. Tannenbaum thinks there are approximately a billion dollars of build-out needed in New Jersey to fully meet the market’s cannabis demand.
AFC Gamma has also made a recent loan supporting a cultivator in Ohio. That state recently allowed more dispensary licenses, which means cultivation will likely be important for supply.
AFC Gamma raised $119 million with its IPO and became the first legal listed lender on the NASDAQ. The NASDAQ listing gives the company access to a wider capital base and a lower cost of capital, according to Tannenbaum. He expects that AFC Gamma could achieve strong low-cost debt capital as well. He points to the success Innovative Industrial Properties (NYSE: IIPR) has had through listing on a U.S. exchange. AFC Gamma is positioning to be a leading, NASDAQ-listed capital provider serving multi-state operators.
Many of the investors involved in the IPO were institutional investors. Most of the stock was allocated to the top 17 institutions in the deal, according to Tannenbaum.
The company continues to select investments based on its original model. AFC Gamma lends to companies supported by cash flow, licenses and real estate. It focuses primarily on limited license states. Thus far, the company has not done any lending in states like California, Oregon or Washington.
Over the past year, AFC Gamma has gained a stronger market presence and great access to capital, enabling it to start lending into the top 10 MSOs. This will continue to be a priority for the company; next year it will focus on lending to those big MSOs as well as their targets and smaller single-state operators.
Legalization in the U.S.
Tannenbaum expects federal legalization of cannabis to verify states’ rights in whatever form it takes. When legalization happens, cannabis players will have more access to banking. Tannenbaum sees this move making the industry, and lenders, healthier.
As AFC Gamma considers the prospect of federal legalization and its investment opportunities, vertical operators remain the focus.
AFC Gamma has investments across 12 states, and it is looking at additional exciting markets for future investment. Once New York begins to award licenses, Tannenbaum expects the AFC Gamma pipeline to be full of deals in that market, which will be rich with demand. He expects New York to be similar to the Michigan market in terms of being an unlimited license state.
The company is also bullish on the Florida market. It has done deals there, and the state’s medical market continues to grow.
AFC Gamma recently invested in a company in Texas, Cansortium, serving as the lead investor in a $71 million senior secured loan. The market only has three licenses, and it just expanded its medical use profile, according to Tannenbaum. AFC Gamma sees Texas as a large, untapped state with an exciting license profile. The company is also excited about the prospect of the Georgia market.
AFC Gamma supported the Bluma Wellness construction project in Florida, which was ultimately acquired by Cresco Labs. The company has also seen success in the Pennsylvania market. It backed Organic Remedies, helping to fund the build-out of the company’s 250,000-square-foot grow facility. Watching the company go from a distributor to a vertical operator penetrating the Pennsylvania market has been a big success story for AFC Gamma, according to Tannenbaum.
$500 Million Pipeline and Outlook on the Future
AFC Gamma has a $500 million actionable pipeline. In the first six weeks of this quarter, the company has deployed $50 million in capital. The company is looking at a wide variety of states in its pipeline, challenging the team to learn about new markets, new supply and demand dynamics and new regulations. The company is likely going to increase its investments in states like Massachusetts and Missouri.
The amount of time it takes to a close new investment – three to nine months – is a challenge. With direct deals, it takes time to get to know operators and develop comfort with one another. Tannenbaum does expect other companies to follow in AFC Gamma’s path and list on the NASDAQ. But, it will take time for competitors to develop relationships and their pipelines. Additionally, the company has generally taken the approach of collaborating with other good underwriters, working together to serve the cannabis industry, according to Tannenbaum.
To learn more, visit the Advanced Flower Capital website. Listen to the entire interview: