AFC Gamma Spin-off Notes

March 19, 2024 Update

On February 22, 2024, AFC Gamma (AFCG) announced that it is spinning off its commercial real estate debt business. The spin-off will be named Sunrise Realty Trust (SUNS). SUNS will focus on originating CRE debt investments and providing capital to high-quality borrowers and sponsors with transitional business plans in the Southern U.S., collateralized by CRE assets with opportunities for near-term value creation, as well as recapitalization opportunities. Today, SUNS consists of 2 funded CRO loans ($115MM of assets) that are yielding 16%.

RemainCo will be focused on cannabis loans. It currently consists of 12 funded cannabis loans ($330MM in assets) that are yielding 21%.  This spin-off probably makes sense as regulations are onerous for cannabis focused businesses. The company has already filed a Form 10 information statement and expects the transaction to be completed by mid 2024.

This could be an interesting situation and worth a trade, but I don’t think it will ever turn into a core position.