AFC Gamma: Attractive 7.2% Yield As Long As Federal Legislation Remains Unchanged

Summary

  • AFCG operates an extremely profitable business model of lending at high yields to state-licensed cannabis companies.
  • AFCG's spread between its cost of capital and its asset yields is one of the highest in REITdom.
  • However, this crucial spread would narrow considerably, and probably quite quickly, if federal legislation passed that allows institutional lenders to compete in the space.
  • Loan yields are already compressing for the highest credit borrowers.
  • AFCG currently trades at a 44% premium to book value.
  • Looking for a helping hand in the market? Members of High Yield Landlord get exclusive ideas and guidance to navigate any climate. Learn More »

Legal Cannabis Farm Greenhouse

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Thesis: The Goldilocks Environment Won't Last Forever

AFC Gamma (NASDAQ:AFCG) is a specialty mortgage REIT focused on lending to the fast-growing cannabis space. The mREIT's "high" yield (we'll get the obligatory marijuana joke out of the way early) of 7.2% is certainly

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This article was written by

20.43K Followers

Austin Rogers is a REIT specialist with a professional background in commercial real estate. He writes about high-quality dividend growth stocks with the goal of generating the safest growing passive income stream possible. Since his ideal holding period is "lifelong," his focus is on portfolio income growth rather than total returns.

Austin is a contributing author for the investing group High Yield Landlord, one of the largest real estate investment communities on Seeking Alpha, with thousands of members. It offers exclusive research on the global REIT sector, multiple real money portfolios, an active chat room, and direct access to the analysts. Learn more.

Analyst’s Disclosure:I/we have a beneficial long position in the shares of AFCG either through stock ownership, options, or other derivatives. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

Seeking Alpha's Disclosure: Past performance is no guarantee of future results. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. Any views or opinions expressed above may not reflect those of Seeking Alpha as a whole. Seeking Alpha is not a licensed securities dealer, broker or US investment adviser or investment bank. Our analysts are third party authors that include both professional investors and individual investors who may not be licensed or certified by any institute or regulatory body.

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