Advanced Flower Capital’s leadership said the company spent 2025 actively managing underperforming credits, generating meaningful loan paydowns, and preparing for a strategic shift that broadened its investment universe. On the company’s fourth-quarter and full-year 2025 earnings call, executives also discussed the completion of a conversion from a REIT to a business development company (BDC) effective Jan. 1, 2026, along with early activity under the expanded lending mandate.
2025 priorities: credit remediation and a strategic reset
Robyn Tannenbaum, President and Chief Investment Officer of AFC Gamma (NASDAQ:AFCG), said the company’s focus during 2025 centered on reducing exposure to underperforming credits through active portfolio management and completing the conversion from a REIT to a BDC to expand the universe of transactions it can pursue.
Management framed the paydowns and redeployment effort as an opportunity to improve earnings power over time, noting that repayments from underperforming assets could be reinvested into performing credits.
Conversion to a BDC expands investable universe
Tannenbaum said the company completed its previously announced conversion from a REIT to a BDC as of Jan. 1, 2026. She said the change expands AFC’s investment flexibility beyond real estate-backed loans and enables a broader universe of operating businesses, which management said is aimed at enhancing long-term shareholder value.
During the Q&A, management attributed the increase in its active pipeline to the conversion, saying the REIT framework’s real-estate coverage requirements had limited the types of loans AFC could originate. Management said the BDC structure allows AFC to pursue cash-flow loans that are not fully covered by real estate.
Portfolio update: non-accrual loans and recovery efforts
CEO Daniel Neville said AFC has three loans on non-accrual and is focused on receiving paydowns from those positions to redeploy capital into performing credits.
Neville provided updates on several legacy situations:
- Private Company A: Neville said AFC has continued the liquidation process. From the beginning of 2025 through the call date, the company received $6.3 million of paydowns, with the borrower still in receivership. He said a pending motion seeks an additional $6.4 million distribution, and while the pace has been slow, all operating assets of the estate are under agreement. Management expects distributions to continue through 2026 as approvals and milestones are met.
- Private Company K: Neville said two of three Massachusetts dispensaries have signed purchase agreements that have been approved by the court and are awaiting regulatory approval to close. He said the third dispensary was expected to receive final letters of intent in the coming weeks, with the sale anticipated in 2026. Management said it believes it is “appropriately reserved” across the portfolio but did not break out reserves by individual loan.
- Justice Grown: Neville said that in February, one of Justice Grown’s claims was dismissed in the New Jersey action and that oral arguments were held on the appeal of the preliminary injunction. He said a ruling on the appeal is expected in coming months, and the Justice Grown loan matures on May 1, 2026. Management said it continues to actively manage the position, but did not provide additional detail beyond prior disclosures.
Neville cautioned that earnings could continue to be affected by underperformance in some legacy loans and any realized losses taken, while reiterating management’s view that repayments and redeployment into performing credits could improve earnings potential.
New originations: lower middle market loans and a larger pipeline
With the expanded strategy, Neville said AFC’s active pipeline totaled more than $1.4 billion as of the call date. He said the company is focused on lending to cash-flowing borrowers in the lower middle market, generally with $5 million to $50 million of EBITDA, and that financings are often used for expansion capital, acquisitions, refinancings, and recapitalizations.
Neville highlighted two loans closed in the first quarter of 2026:
- $60 million senior secured credit facility (January): AFC provided financing to support the combination of Stat and The Moresby Group, backed by Cambridge Capital. Neville described Stat as a revenue recovery specialist serving the Walmart, Target, and Amazon ecosystems, and Moresby as a procurement specialist focused on long-tail supplier negotiations and savings for Fortune 1000 clients. AFC’s loan financed the acquisition of Moresby and refinanced existing indebtedness.
- $30 million commitment to a $60 million senior secured term loan (February): AFC committed $30 million to support the acquisition and growth of a healthcare benefits platform tailored to hourly and sub-$50,000 salaried employees. Neville said AFC funded $20 million at closing.
Asked whether a roughly $100 million-per-quarter origination pace could be sustained, management said the company does not currently have capacity to maintain that level absent additional proceeds from non-accrual repayments, which it said are difficult to predict.
On potential cannabis lending, management said cannabis remains in the pipeline but reiterated that the bar for new cannabis loans is “very, very high,” citing limited incremental regulatory progress, a lack of equity capital over the last three years, and growing tax liabilities among operators.
Financial results, balance sheet, and dividend
Chief Financial Officer Brandon Hetzel reported that for the fourth quarter ended Dec. 31, 2025, AFC generated net interest income of $5.2 million and Distributable Earnings of -$2.8 million, or -$0.12 per basic weighted average common share. GAAP net income for the quarter was $900,000, or $0.04 per share.
For the full year 2025, the company generated net interest income of $24.6 million and Distributable Earnings of $8.7 million, or $0.39 per share, while posting a GAAP net loss of $20.7 million, or -$0.95 per share.
Tannenbaum said distributable earnings for the quarter and full year were impacted primarily by realized losses from two underperforming credits recognized during the year, and she said the company’s 2025 dividends were characterized as a return of capital, making 2025 distributions tax-free. She added that future dividends could receive similar treatment if additional losses are recognized in 2026.
Hetzel said AFC ended the fourth quarter with $317.4 million of principal outstanding across 15 loans. As of Feb. 25, 2026, the portfolio had $366.4 million of principal outstanding across 15 loans.
On capital structure, Hetzel said the company repurchased $13 million of its unsecured bonds during the quarter. He said $77 million of unsecured bonds remain outstanding, maturing in May 2027, and that AFC continues to evaluate refinancing options ahead of maturity.
As of Dec. 31, 2025, Hetzel reported a CECL reserve of $46.1 million, representing approximately 18.2% of loans at carrying value, and total unrealized loss on loans held at fair value of $27.7 million. He also reported total assets of $275.6 million, total shareholder equity of $175.6 million, and book value per share of $7.46.
Management said the board declared a first-quarter dividend of $0.05 per share, payable April 15, 2026 to shareholders of record March 31, 2026.
About AFC Gamma (NASDAQ:AFCG)
AFC Gamma, Inc is a specialty finance real estate investment trust that focuses on providing structured financing solutions to companies operating and developing digital infrastructure and life science real estate assets. As a REIT, AFC Gamma seeks to generate attractive risk-adjusted returns through a diversified portfolio of loans, preferred equity and other financing structures that are secured by tangible property collateral or contractual revenue streams.
The company’s primary business activities include originating, acquiring and managing secured loans and equity investments that support wireless and broadband network deployment, data center expansion, and life sciences facility development.
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