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United States securities and exchange commission logo
October 5, 2021
Anthony Cappell
Chief Executive Officer
Chicago Atlantic Real Estate Finance, Inc.
420 North Wabash Avenue, Suite 500
Chicago, IL 60611
Re: Chicago Atlantic
Real Estate Finance, Inc.
Amendment No. 1 to
Draft Registration Statement on Form S-11
Submitted September
16, 2021
CIK No. 0001867949
Dear Mr. Cappell:
We have reviewed your amended draft registration statement and
have the following
comments. In some of our comments, we may ask you to provide us with
information so we
may better understand your disclosure.
Please respond to this letter by providing the requested
information and either submitting
an amended draft registration statement or publicly filing your
registration statement on
EDGAR. If you do not believe our comments apply to your facts and
circumstances or do not
believe an amendment is appropriate, please tell us why in your
response.
After reviewing the information you provide in response to these
comments and your
amended draft registration statement or filed registration statement, we
may have additional
comments.
Amendment No. 1 to Draft Registration Statement on Form S-11
General
1. We note your response
to comment 1. At this time, it does not appear that you have
sufficiently identified
75% of the intended use of proceeds. In this respect, we note that a
significant portion of
the assets identified relate to non-binding term sheets. We continue
to believe that Guide 5
appears to apply to this offering. Please revise to provide the
disclosures required by
Guide 5, such as prior performance information, including any
adverse business
developments experienced by your sponsor or its affiliates. To the
extent that you do not
believe that your sponsor or its affiliates have sponsored prior
programs, please tell
us and clarify whether your manager and/or its affiliates have
sponsored any
investment funds or other vehicles that primarily have invested in real
Anthony Cappell
FirstName LastNameAnthony CappellInc.
Chicago Atlantic Real Estate Finance,
Comapany
October NameChicago Atlantic Real Estate Finance, Inc.
5, 2021
October
Page 2 5, 2021 Page 2
FirstName LastName
estate or real estate-related investments.
2. We note your response to comment 3. In your response, you state:
The Commission and
its Staff, in interpretive guidance and no-action letters, have
indicated that whole
mortgage loans that are fully secured by real property, certain
participations in whole
mortgage loans, and certain other types of real-estate related loans
in which the Company
may invest are qualifying assets, along with fee interests in real
property. To ensure that
the Company will be eligible for the Section 3(c)(5)(C) exemption, the
Company intends
to conduct its operations so that it will primarily own investments of
the types listed above
consistent with the limits the Staff has established in no-action
letters and other
interpretive guidance. Please supplement your response (and ensure
that the disclosure
in your prospectus is consistent with your supplemental analysis) by:
Identifying and describing, with specificity, each type of asset
that the company
intends to hold, including its classification as qualifying
interest or other real-
estate type interest and the specific basis for the company
s treatment of each such
type of asset (such as applicable no-action letters or other
guidance of the
Commission or its staff). In addition, to the extent that such
assets consist of real
estate loans, please specify the extent to which such loans are
secured by real estate.
Discussing the anticipated allocation of such qualifying
interests and real-estate
type interests as a percentage of the company s assets.
Additionally, please review any reference to 3(c)(5)(C) to ensure that
it is properly
characterized as an exclusion from the definition of investment
company under the
Investment Company Act and any reference to interpretive positions
under 3(c)(5)(C) to
ensure that such references are properly characterized as originating
from the Commission
or the Commission staff, as applicable.
Overview, page 1
3. We note your response to comment 4 and reissue our comment. We note
your disclosure
on page 78 that, in addition to originating loans, you may acquire
loans. Additionally, we
note your disclosure on page 33 that your borrowers may incur debt
obligations that are
senior to your position. Please revise your disclosure in this section
to discuss these
aspects of your business. In this respect, please discuss in greater
detail your policy and
practices regarding the co-investments that you have made with
affiliates and the
criteria and other considerations made when entering into a
co-investment arrangement.
4. We note your disclosure on the top of page 2 indicates that you also
seek personal or
corporate guarantees for your loans. Please clarify what percentage of
the loans held in
your portfolio are also backed by personal or corporate guarantees in
addition to the
additional collateral noted.
Use of Proceeds, page 68
5. We note your response to comment 9. Please provide an updated analysis
once the
company has identified the size of the offering, including the
anticipated proceeds.
Anthony Cappell
Chicago Atlantic Real Estate Finance, Inc.
October 5, 2021
Page 3
6. Please explain what you mean by the phrase "Sole Discretion Advance
Loan."
Loan Portfolio, page 81
7. We note your response to comment 13. Please provide an updated
analysis to
us that considers offering proceeds once known. Your analysis should
address your loans
expected to be funded with offering proceeds in addition to each loan
in your portfolio at
June 30, 2021 and loans funded in the subsequent period and in the
immediate future.
Our Initial Portfolio
Collateral Overview, page 102
8. We note your response to comment 16 and the revisions made, including
the disclosure in
footnote (4). We note that you have quantified the additional implied
collateral in the
table for each loan, but have aggregated the three assets types that
comprise the total
additional implied collateral on a portfolio basis in the footnote.
Please explain to us what
consideration was given to providing disaggregated information
regarding the various
types of additional collateral assets on a per loan basis. In
addition, we note that it appears
that the majority of the additional implied collateral is comprised of
licenses. Please
provide additional detail regarding the type(s) of licenses that are
identified as
collateral and how the the valuation for those assets was calculated.
Given the
prominence of the additional implied collateral in your portfolio
disclosure, please revise
to discuss in more detail how you determined what additional
collateral to require for your
borrowers and what discretion you may have in selecting which
collateral to foreclose
upon to satisfy a loan default to the extent the real property
collateral is insufficient. In
this respect, please clarify, if true, that before foreclosing on
additional collateral, you will
first foreclose on the real property collateral. Please expand your
risk factor disclosure on
page 41 to describe in detail the risks associated with seeking to
collateralize these
various assets. In particular, please highlight with greater
specificity the
material regulatory and legal risks associated with the jurisdictions
(e.g., Arizona,
Arkansas, California, Florida, Maryland, Massachusetts, Michigan,
Nevada, New Jersey,
Ohio and Pennsylvania) in which your borrowers operate as it relates
to collateralization.
9. We note that the narrative disclosure in footnote (4) on page 102
indicates that additional
collateral may also include "ownership interests in licensed cannabis
companies," but you
have not identified any such collateral in the tabular disclosure that
follows. Please revise
or advise. Additionally, please identify the form of "ownership
interest" you may take
and reconcile such disclosure with your statement elsewhere that you
do not have, and do
not intend to take, an equity position in any of your borrowers.
Illustrative Description of Borrowers,
FirstName LastNameAnthony Cappellpage 103
Comapany
10. NameChicago
We note Atlantic
your response Real Estate
to comment 17. Finance, Inc. your initial
portfolio disclosure
Please revise
Octoberregarding your 3borrowers to describe in more detail their operating
history.
5, 2021 Page
FirstName LastName
Anthony Cappell
FirstName LastNameAnthony CappellInc.
Chicago Atlantic Real Estate Finance,
Comapany
October NameChicago Atlantic Real Estate Finance, Inc.
5, 2021
October
Page 4 5, 2021 Page 4
FirstName LastName
Report of Independent Registered Public Accounting Firm , page F-2
11. We note your response to comment 19. Please include a revised audit
report in your next
amendment.
Exhibits
12. We note you identified director nominees in your Management section on
page 108.
Please file the consent of each director nominee as an exhibit to your
registration
statement. See Rule 438 of Regulation C.
You may contact Paul Cline at 202-551-3851 or Shannon Menjivar at
202-551-3856 if
you have questions regarding comments on the financial statements and related
matters. Please
contact Stacie Gorman at 202-551-3585 or Erin E. Martin at 202-551-3391 with
any other
questions.
Sincerely,
Division of
Corporation Finance
Office of Real
Estate & Construction
cc: Owen J. Pinkerton, Esq.