Advanced Flower Capital Inc. (AFCG) Earnings Call Transcript & Summary

Good day, and thank you for standing by. Welcome to the AFC Gamma, Inc. Fourth Quarter 2021 Earnings Conference Call. [Operator Instructions] Please be advised that today's conference is being recorded. [Operator Instructions] I would now like to hand the conference over to Gabriel Katz, Chief Legal Officer. Please go ahead.

Good morning, and thank you all for joining AFC Gamma's earnings call for the fourth quarter and full year 2021. I'm joined this morning by Leonard Tannenbaum, our Chief Executive Officer; Jonathan Kalikow, our Head of Real Estate; Robyn Tannenbaum, our Head of Originations and Investor Relations; and Brett Kaufman, our Chief Financial Officer. Before we begin, I would like to note that this call is being recorded. Replay information is included in our March 10, 2022 press release and is posted on the Investor Relations section of the AFC Gamma website at afcgamma.com, along with our fourth quarter and annual 2021 earnings release and investor presentation. Today's conference call includes forward-looking statements and projections that reflect the company's current views with respect to, among other things, future market growth and developments, financial performance and projections and originations in 2022. These statements are subject to the inherent uncertainties in predicting future results and conditions and certain factors could cause actual results to differ materially from those projected in these forward-looking statements. New risks and uncertainties arise over time and it is not possible for the company to predict those events or how they may affect these statements. Therefore, you should not place undue reliance on these forward-looking statements. Please refer to AFC Gamma's most recent filings with the SEC for certain significant factors that could cause actual results to differ materially from these forward-looking statements and projections. During the call, we also refer to distributable earnings, which is a non-GAAP financial measure. Reconciliations of net income, the most comparable GAAP measure to distributable earnings can be found in AFC Gamma's earnings release and investor presentation available on AFC Gamma's website. The format for today's call is as follows: Len will provide introductory remarks and overview of our fourth quarter and full year 2021 performance and strategic commentary, John will discuss AFC Gamma's portfolio, Robyn will discuss the origination pipeline, and Brett will summarize our financial results. We will then open the line for Q&A. With that, I will now turn the call over to our Chief Executive Officer, Leonard Tannenbaum.

Thank you, Gabe, and Good morning, and welcome to AFC Gamma's earnings call for the fourth quarter fiscal year 2021. I would like to thank our analysts and investors for joining us today to discuss our fourth quarter and fiscal year results. Before turning to our fourth quarter results, I would like to briefly discuss what our goals were for 2021 and what we accomplished. During the year, AFC Gamma completed its initial public offering and began operating as a public REIT. This step has allowed us to accomplish several goals, including valuable access to public debt and equity markets, which provides AFC Gamma with an attractive cost of capital relative to its peers. We ended the year in a leadership position as one of the largest institutional lenders in cannabis with a reputation for being a consistent relationship lender. Looking at our goals from the beginning of last year, we accomplished almost everything we set out to do, and I'm extremely proud of our team for their hard work and dedication. First, we targeted $300 million of gross originations and exceeded that goal by generating $341 million of gross originations in 2021. Second, our goal is to increase book value, driving return for our shareholders. We increased book value per share by 12% from $14.83 on December 31, 2020, to $16.61 on December 31, 2021. This increase does not include the positive impact of the accretive offering completed in Q1 2022. Third, our goal is to declare increased dividends quarter-over-quarter. We declared an initial dividend per share of $0.38 for Q2 2021 and increased that by approximately 32% to $0.50 in Q4 2021. Over the year, we further augmented our in-house capabilities to continue providing our borrowers with customized financing solutions. We are proud of our growing platform with over 25 employees headquartered in West Palm Beach, Florida. We are also pleased to have 7 research analysts covering AFCG, providing valuable information to our investors and the broader investment community. Looking forward to 2022, we remain very excited about the supporting the rapidly growing cannabis industry and the opportunities ahead of us. Although we had a slow start to the year with $47 million of gross originations, we remain confident in our active pipeline and the targets we have set for ourselves in 2022. During Q1 2022, AFC Gamma made the decision not to close 2 deals because of issues that surfaced during due diligence, which we could not overcome. At this time, we believe that during 2022, we will generate between 500 and $700 million of gross originations, with anticipated repayments between 100 and $200 million. bringing us to a net originations target range of $300 million to $600 million. We intend to fund these commitments with a combination of debt and equity and are currently targeting a debt-to-equity ratio of approximately 0.5x at the end of 2022. We continue to remain focused on developing the best cost of capital among the limited number of alternative lenders in the industry. I believe we have all the necessary components in place to scale this business and serve the rapidly growing industry. During the fourth quarter, we continued to execute on our pipeline, which led to record originations. We closed on new commitments of $127 million and had net funding of $121 million during the fourth quarter. Our portfolio of over $400 million resulted in distributable earnings of $0.52 per basic weighted average share. This increase in earnings drove a 16% increase in our quarterly dividend from $0.43 per share in the third quarter to $0.50 in the fourth quarter. Since going public in each of the last 3 quarters, we have generated earnings in excess of our dividend. For 2021, AFC Gamma distributed approximately 91% of distributable earnings, which resulted in carrying over $2.1 million forward into 2022, which as a REIT, we can do on a tax-free basis. Moving on to our portfolio. As of March 4, 2022, we have 14 borrowers operating in 16 states. We remain focused on creating a portfolio that's diversified across states and borrowers. Currently, our portfolio is comprised of 100% first-lien loans. We are pleased that at this time, we have no loans that are -- we have no loans -- pleased that at this time, we have no loans that aren't -- all our loans are current and performing. When evaluating which states to lend to, we prefer lending to operators in limited license markets as we believe licenses in those states have additional value as a form of security. Additionally, during our underwriting, we evaluate the supply and demand dynamic into each state and where pricing per pound is trending. Currently, AFC Gamma has not lent to any borrowers with primary operations in California, Washington, Oregon or Oklahoma, 4 states that have continuously experienced pricing pressure and have unlimited licenses. Due to adverse market conditions in these states, we believe that many operators may experience declining earnings, which mean negatively impact lenders in these states. Earnings may be lumpy quarter-over-quarter. Due to difficulty in the potential deal repayments -- in the estimating potential deal repayments and forecasting the times of deal closings. Repayments tend to cause an increase in income due to a write-up of OID as well as the receipt of an exit and/or prepayment penalties. As I stated earlier, in 2022, we are currently expected to experience between 100 and $200 million of repayments as the portfolio continues to mature. We are pleased that our Board has declared a quarterly dividend of $0.55 a share for the first quarter of this year payable on April 15 to shareholders of record on March 31. This dividend represents a 10% increase over the prior quarter and is the third consecutive quarterly increase in our dividend as a public company. Consistent with the past 3 quarters, we expect to generate distributable earnings at or above this dividend level in the first quarter of 2022. On an annual basis, our dividend policy is to pay between 85% and 100% of distributable earnings over the year. I will now turn the call over to John.

Thank you, Len. As the portfolio has begun to evolve and mature, we wanted to begin highlighting certain portfolio management aspects of AFC Gamma's operations. The goal of our portfolio management is several fold: first, to maintain a strong relationship with our borrowers. We monitor their operations and credit strength over time through regular dialogue, financial reporting and covenant testing. Along with ensuring that the company's loan is performing, regular dialogue with each borrower allows us to be able to act quickly should a borrower need to modify or expand a loan. For example, we recently were able to increase loans to 3 existing borrowers, Verano, Nature's Medicines and Natrabis to finance their new growth initiatives. Second, we want to make sure we can anticipate any potential issues with the borrower. For instance, monitoring the financial covenants of the company provides us with knowledge as to the trajectory of their business and provides our team with the ability to look ahead towards issues that may arise in the future. In scenarios where a company may not be performing, as expected, we can work with them to diagnose the issue and find a remedy, a remedy which may include borrowers investing additional equity, changing or delaying future plans or posting additional collateral. Third, our portfolio management team must understand the market dynamics in the states in which our borrowers operate as this will help inform our origination decisions and pricing. We remain focused on lending in limited license states and monitoring the supply-demand dynamics in each state, which are ever evolving. Portfolio management remains a cornerstone of what we do and we are pleased to announce that at this time, all of the loans in our portfolio are current and are performing. I will now turn the call over to Robyn.

Thank you, John. As a reminder, AFC Gamma is an institutional lender to the cannabis industry. The loans that we make are typically secured by 3 pillars: cash flow, licenses and real estate. The companies that we lend to are domestic single and multistate operators, which include those that are privately held as well as those listed on the Canadian exchanges. We see ourselves as a relationship lender, financing cannabis operators to build successful businesses. Our origination platform is focused on both expanding loans with a variety of our existing borrowers and continually sourcing new borrowers. From January 2020, through March 4, 2022, we have sourced over $13 billion of transactions, which represents over 500 deals. We continue to expand our lending platform while maintaining a high degree of selectivity. When sourcing deals, incumbency has proven to give us an important edge. To date, during the first quarter of 2022, we increased commitments to 3 existing borrowers by $47 million. The pipeline remain strong with an active pipeline as of March 4th of over $1 billion, yet it remains difficult to predict both the timing of converting those deals and closing those deals. The active pipeline may fluctuate quarter-over-quarter as we close transactions, especially as larger transactions move from active to closed. The origination team continues to work hard to ensure the pipeline remains robust and we are evaluating many deals in the market. Before turning the call over to Brett, I would like to highlight a little bit about AFC Foundation. AFC Gamma's 3 founding partners have personally pledged to donate $250,000 to the AFC Foundation over the course of 2022. Since cannabis is a regional business where operators become rooted in their local communities, AFC Foundation collaborates with AFC's borrowers to identify charities positively impacting lives in the states they operate in. As President of AFC Foundation in collaboration with organic remedies of vertically-integrated cannabis company that operates under a clinical registered license in Pennsylvania, I'm excited to announce that AFC Foundation's first donation was made this quarter to the Pennsylvania Court Appointed Special Advocate Association or PA CASA. PA CASA's mission is to grow, strengthen and unite local cost of programs as they work toward ensuring that every neglected child in Pennsylvania has access to the service and support of a trained cost of volunteer. AFC Foundation and organic remedies are pleased to support PA CASA as they advocate for underserved Pennsylvania use. I look forward to highlighting another deserving organization and borrower next quarter. I will now turn it over to Brett to review our financials.

Thanks, Robyn. Hello, everyone, and thank you again for joining us here for AFC Gamma's earnings call. We are pleased to report strong results in the fourth quarter and fiscal 2021. Beginning with our quarterly results for the fourth quarter ended December 31, 2021, we had GAAP net income of $7 million or earnings of $0.43 per basic weighted average common share. For the 3 months ended December 31, 2021, we generated net interest income of $13 million and distributable earnings of $8.5 million or $0.52 per basic weighted average common share. We ended the fourth quarter of 2021 with total assets of $465 million as compared to $304 million at September 30, 2021. On an annual basis, for the year ended December 31, 2021, we earned GAAP net income of $21 million or earnings of $1.57 per basic weighted average common share. In 2021, we generated net interest income of $37 million and distributable earnings of $24.7 million or $1.85 per basic weighted average common share. We ended the fourth quarter of 2021 with $366 million of principal outstanding spread across our 16 borrowers. As of December 31, 2021, AFC Gamma's portfolio consisted of $419 million of current commitments with $364 million funded. So far in 2022, we've closed an additional $46.9 million of new commitments, we sold a $15 million short-term debt security investment and also funded $49.4 million of our new and existing commitments. As of March 4, 2022, we had $430 million of current commitments with $381 million of principal outstanding across our 14 borrowers. The weighted average portfolio yield to maturity, which is measured for each loan over the life of such loan was approximately 19% as of December 31, 2021, compared to the weighted average yield to maturity of a portfolio of approximately 21% as of September 30, 2021. Currently, the weighted average portfolio yield to maturity is still approximately 19%. As mentioned on our last earnings call, we believe providing distributable earnings is helpful to stockholders in assessing the overall performance of AFC Gamma's business. Distributable earnings represents the net income computed in accordance with GAAP, excluding noncash items such as equity compensation expense, any unrealized gains or losses, provision for current expected credit losses, also known as CECL, or other noncash items recorded in net income or loss for the period. As of December 31, 2021, the CECL reserve represents approximately 1.2% of our loans at carrying value. On January 14, 2022, AFC Gamma paid a dividend of $0.50 per common share for the fourth quarter to our shareholders of record as of December 31, 2021, which represents an increase of 16% from the third quarter. During 2021, AFC Gamma declared dividends of $22.6 million in aggregate, which represents approximately 91% of AFC Gamma's distributable earnings in 2021. Earlier today, AFC Gamma announced its upcoming dividend of $0.55 per common share for the first quarter of 2022 to be paid on April 15, 2022, to shareholders of record as of March 31, 2022, which represents an increase of 10% from the previous quarter. At the end of the fourth quarter, our total stockholders' equity was $273 million and our book value per share was $16.61 as compared to $14.83 as of December 31, 2020. The increase in our book value per share as of December 31, 2021, compared to the end of 2020 was primarily attributable to our IPO and follow-on equity offering in the first and second quarter of 2021 respectively, each of which were accretive to our book value. During the December quarter, we received an increase in our credit rating from Egan-Jones, moving us to a BBB+ investment-grade rating. On November 3, 2021, we closed our 144A debt offering of $100 million aggregate principal amount of senior unsecured notes. These notes have a fixed cash interest rate of 5.75% and do not mature until 2027. We also completed our second equity offering since the IPO in January of this year, issuing approximately 3.3 million shares of common stock, which provided AFC Gamma with approximately $63 million of deployable capital. Last year's IPO was a significant milestone, in particular, because as a NASDAQ-listed public company, we're able to utilize both public and private debt and equity markets as we work to maintain and improve our cost of capital. As we approach the one-year anniversary of our IPO, shelf registration eligibility is another tool that may assist in strategically executing more efficient, lower cost capital markets transactions. With that, we will now open the call to questions. I will now turn it back over to the operator to start the Q&A. Operator?

[Operator Instructions] Our first question comes from Gaurav Mehta with E.F. Hutton.

The first question on your loan commitment. I think in your prepared remarks, you talked about slower start to the year with $47 million of gross originations as of March and then you gave a range of $500 million to $700 million for gross originations for 2022. So, what do you attribute the slow start to the year to? Is that just the timing? And then the range that you guys gave $500 million to $700 million, it seems like that range compares to the $700 million number that you provided on the last call. So anything changed in your view of the loan commitments or it's just a range that you guys didn't provide last quarter?

Okay. So just good -- great questions. As I said earlier in the call, there were 2 deals that we expected to close that were in documentation and during our diligence period, which is extensive, we decided not to do those 2 deals for a variety of reasons. And so being very selective is important to us, especially in this environment. And so that's one reason why this quarter is a bit lighter. And -- but at the same time, we're with a lot of confidence because we have a great pipeline and -- that we've built over time. And as a reputation, we're getting a lot of referrals and re-ups from our existing parties. So, we feel confident currently that we can hit this $500 million to $700 million number. You probably can draw the conclusion that if we've only done $47 million to date, that has to pick up pretty -- a lot in the next 10 months. So, I think that's a natural conclusion to do. But you are right, we did take -- effectively take down our estimate from $700 million to $500 million to $700 million of gross originations from the last time. So, I do think it moved down and we wanted to give a range, it could get to $700 million, but I'm less confident that that happens, partially because the turbulence in the markets, we want to be careful about how we issue equity and how we raise equity. And so, we really care about increasing value for our shareholders, increasing and maintaining our dividend and trying to increase book value over time. And that may -- in this market environment that may not allow us to raise a lot of equity this year, so we have to be more selective on the deals that we do, which is actually really good for the portfolio.

Great. And second question on your portfolio yield to maturity is 19% as of March. Do you expect that you'll be able to maintain that kind of yield through the end of 2022?

So I've been really positively surprised, first of all, the market turbulence and the increase even in yielding in the high-yield markets, which is pretty obvious, really has helped us. If you look at Curaleaf bonds and how they trade and you guys can call the different brokers to see that. They were issued at par and they're trading somewhere between 96% and 98%. So, even one of the industry leaders has traded down somewhat. So, I think that should widen spreads across -- that's one of the industry leaders and everything sort of keys off of those types of high performance credits. And so I think we are going to be able to maintain better yields this year than I would have expected before. I can't tell you what that's going to be, but I was positively surprised to see it maintain at 19% quarter-over-quarter.

Our next question comes from Gerald Pascarelli with Cowen.

Len, can you talk a little bit more about your outlook for the prepayments? I'm still going through the K here and it looks like there's been a little over $1 million prepaid thus far in 1Q if I'm looking at that number, right? So number one, is that correct? And then number 2, I guess, what's driving your underlying assumptions for that to pick up? I would assume it's from maybe some of the top credits that are seeing lower interest rates now than maybe in the year ago period, but would just love you to provide any color on your expectations there?

So we're actually seeing -- so I expected last year, as we talked, that we would see lower interest rates this year versus last year, but I didn't -- we didn't know where the market environment was. So, I think this market environment and the constraints on the capital, but still the high demand for capital to build out -- to build out these states is allowing us to maintain yields for now in this really nice 19% range of yield to maturity. So, we're pretty pleased about that. We really don't want to get into the business, it is going to be difficult for you guys to forecast earnings. As you can -- as I said, we declared a $0.55 dividend and we earned at least $0.55 this quarter. And so that's great. And we want to continue paying dividends at or below our earnings and that's our goal over the course of the year. So we had a good -- we already know that first quarter is a good quarter. And obviously, some of that since is going to be from repayments. And we can see today that that's going to continue in the second quarter and the third quarter of this year. So my estimate of $100 million to $200 million, I feel pretty comfortable about that too, is that we're going to get that money back at us and be able to redeploy it, which really generates very high IRRs, which is great for our investors.

Got it. That's helpful. I guess given where the equity markets are and some of your previous commentary, it seems like future debt raises are likely in the cards here. Given the BBB+ rating, has anything changed in terms of your expectations on what your own cost of capital would be relative to your first debt raise? Or do you expect the rates to be -- the headline rates that is to be relatively similar to what you have on the books today?

Well, I want to layer in senior debt. And so one of the things we've talked about in the last couple of calls, we haven't yet executed on, but intend to execute on, is bringing in some really good banks to lend to us on the senior side and we're still in that process of working on that. And so I think that cost of debt is really great. We are somewhat limited and I would never -- I wouldn't go too high either on senior debt in terms of you could read our bond indenture and we can go up to 25% in senior, but it still leaves us a lot of room from zero today. And that debt should be even a lower cost than the bond. If I were to issue more bonds today in today's volatile market environment, my expectation is it would be very similar rates, similar pricing to the last raise. My hope was that it would be cheaper pricing, but I don't think that would happen in today's environment. I think all interest rates are a bit higher.

Our next question comes from Aaron Hecht with JMP Securities.

In your pipeline, has the expected investment mix between MSOs and smaller operators changed at all? And are you seeing any divergence in yields across either of those segments versus the last quarter?

I think the pipeline mix is similar. It really hasn't changed much between MSOs, second-tier operators and the single state operators, which is how we divide up to 3 buckets. What I will tell you is MSOs that thought they could get such great yields and they have and executed really, I believe, in this market environment that's not sustainable. And you could see that in the way they're trading, even Trulieve is trading down, you have Curaleaf trading down. You have Columbia Care that sucked a lot of the wind out of the market, available capital out of the market on their last raise. So that's really good for us to have really the -- a lot of the institutional clients are full of cannabis. They don't want more cannabis exposure that have played in cannabis before. There really aren't a lot of new entrants to the market. So, this is a really good environment for the alternative lenders in general and I expect yields to hold up because of that.

Understood. And in terms of competition, have you seen any increase, I guess, especially on the smaller operator side?

No, I think the same players are in this market that were a year ago and we just haven't seen new entrants to the market in competition. I think one surprise, if there are any surprising competition, some of the banks are taking swings here on the $10 million to $20 million type bite size. And so sometimes, we're in a deal and we're like, wait, we can get $20 million at 6%. I say great, go take it. Now that comes with a lot of hooks and caveats and other things too. Look, I think, ultimately, if we see some legislative change at the end of the year, more banks will participate in the market and I think that's really healthy. But right now, that's the only -- it's not really a change, that's the only time we've really seen additional entrants.

Our next question comes from John Hecht with Jefferies.

Congratulations on finishing a busy year. Some of this stuff has been touched on one way or the other, but I'm just wondering maybe a high level, Len, how does inflation affect the operators you went to and just the overall industry construct?

So, I have given this enormous amount of thought because one of my favorite things to do is think of macroeconomic strategies and money flows and how things affect and especially as a lender with interest rates, how will those have offsetting effects which often happens. You'd expect -- I would expect and just thinking about this as a baseline comment that inflation should benefit an industry that is like anything that's to do with production of food or production of marijuana or production of whatever because inflation is good for that, right? You have a cost of capital that's already invested and you're able to get more for the product that comes out of that cost of capital. And even though there's a labor component, the labor component is not rising as fast as the inflation component and so much of it is fixed cost. But the inflation really benefits those operators that already have their infrastructure in place. It's actually really hurting those operators that are continuously building their infrastructure because I will -- I'm going to throw out some guesses of numbers, but it's based upon a lot of data points that we have here that cost of construction is up at least 30%, if not more. and the delays are substantial. And so what that's doing is to build that [ swinging ] indoor grow or greenhouse modified greenhouse grow cost you at least 30% more. So what that means is the existing operators that have existing infrastructure definitely benefit and it's harder and harder for new entrants to the market, which should start stabilizing and benefiting pricing. We haven't really seen the price turn yet, which I expected after October. But I can't -- there's a lot of marginal producers that are going out of business. And as that happens and new entrants can't build because the return on investments doesn't make sense, I do expect that prices will stabilize and/or increase during the remainder of the year.

Okay. That's a very good thoughtful help -- helpful thoughts. The second question was you guys mentioned you sold a small note I think about $15 million in the quarter. I'm wondering what -- how is the execution of that just to kind of give me a sense of how capital markets overall for your type of asset class compares to other more generic types?

So -- exactly. So we bought that note as sort of a cash management tool from an existing cannabis operator that we felt comfortable with and then turned around and sold the note when we had better ideas to deploy that capital at higher interest rates. Seaport executed both of those trades, and they do an excellent job -- in my opinion, Seaport does an excellent job trading, really creating market bids and offers and we have a very good sense of where the market is due to the really the depth of their contacts and book.

Okay. And then -- and final question, you did touch on this, Len, [indiscernible] there's possibly something at the federal level by year-end. But anything -- any changes at the state level that are worth noting or would cause you to move faster or so under sort of geography?

So that -- as the political cycle starts moving towards this critical year, my expectation -- my current expectation is that summer is going to pivot after 4/20 and push the SAFE Act and HOPE Act and the combination and that that has a reasonable chance of passing. We don't know what the components of the SAFE Act are at all, and capital markets is still not in there, but that's still my expectation for the fall. As for state by state, it is amazing to me how rapidly changing these states are. Take New Jersey, for example, which should have been racked 6 months ago and still can't get their act together. And now and now is saying May and then it's June. So it's always another month to get that rolled out or New York, which is still trying to put together their program and should have been racked also. But we're learning a lot about the different states that we're operating in. One of our real core competency is focusing on the data and focusing on the state-by-state supply and demand dynamic, but also how things are changing legislatively within the states. And so we continue to spend a lot of time talking to politicians, talking to governors directly and getting inputs into what's going on.

[Operator Instructions] Our next question comes from Mark Smith with Lake Street Capital.

Len, you called out some of the states where we're seeing weakness in the cannabis industry: California, Washington, Oregon, et cetera. Are you seeing any weakness in any other states? Are you seeing this bleed in anywhere else in the market?

For sure. I mean those states are going to have an enormous amount of defaults and problems. And with cannabis prices continuously depressed, I mean, we're talking about California pricing went under $300 a pound. And that's just beyond any marginal production. But of course, the spillover effect. You saw Arizona wholesale is probably down around $1,000. Michigan has become super competitive on the low end. What's amazing to me -- it's not amazing to me, what's sort of according to our thesis, the high end has held up. But even the high end gets hit when the mid-tier drops that far. But the high end is held up to at least double the base price of the mid-tier. And -- but retail in Arizona has done well, right? Retail has held up really well. So, I guess margins have increased on retail, if you're just in retail. We're really focused on making sure that we're vertically integrated as much as we can be in our borrowers. And I think the vertical integration is really important from that risk mitigation because as prices go down, it sometimes is a retail -- better retail environment. Sometimes if prices get constrained, it's much better to produce.

Okay. And might be reaching a little bit on this, but as we look at the deals that didn't close, can you talk about was this kind of issues within the states where they operated? Or was it more so specific just to the deal and why those didn't close?

I don't want to talk specifically to the deals, but I will say the things that we're -- we lend to, as Robyn said, is licenses, cash flows and real estate. And a lot -- and given the changing market environment, we're very focused on the ability of a company to repay its debt being lenders. And to the extent that we don't believe their business models and/or think they need additional liquidity and/or underestimating CapEx spend given this crazy environment where prices have gone up 30% plus and everything is delayed, we're really challenging those models and we're challenging those forecasts to make sure the company has adequate liquidity. And I think that's caused us to really be -- have a tighter filter until the bottlenecks and the delays start unraveling. I think we've got to be very careful about making sure companies have sustainable cash flow.

Okay. And then the last one from me. Just as we look at the growth that you kind of expect in the portfolio this year, can you wait kind of how you expect that coming from current partners versus kind of new partners that you bring in?

So, over time, when I manage the portfolio -- we managed a $5 billion portfolio for 15 years. And in the beginning, it was almost all new, obviously, because it's all new relationships. As a mature portfolio, we had about 50% of our loans come from existing partners and 50% were new. In fact, if you look at business development companies: Ares, Apollo, like any of them, they'll tell you, we originated whatever amount, let's call it $100 million. $50 million was from existing parties with 8 loans and then $50 million was new loans. And I think that's where a mature portfolio gets to. We're not there yet, but we definitely are trending in that direction because we're good partners to our clients.

And I'm currently showing no further questions at this time. I'd like to hand the conference back over to Mr. Leonard Tannenbaum for closing comments.

Well, thanks, everyone, for attending our call. We're really pleased with our results and excited about this year and we look forward to reporting to you again in 3 months.

Thank you for your participation in today's conference. You may now disconnect. Everyone, have a wonderful day.