10 Cheap REITs with Huge Upside

7. Chicago Atlantic Real Estate Finance, Inc. (NASDAQ:REFI)

Average Upside Potential: 16.96%

Forward P/E: 7.47

Number of Hedge Funds: 7

Chicago Atlantic Real Estate Finance, Inc. (NASDAQ:REFI) is a commercial mortgage real estate investment trust that originates senior secured loans primarily to state-licensed cannabis operators in limited-license states in the United States.

Chicago Atlantic Real Estate Finance, Inc. (NASDAQ:REFI) has a growing loan portfolio diversified across geographies, operators, and asset types with strong real estate collateral coverage and additional collateral. The firm is chosen by operators on the basis of its strong brand reputation, strong ties to financial sponsors active in the cannabis space, deep industry knowledge, and execution on a timely basis.

The market opportunity for the firm remains promising considering that sales of the US cannabis industry are to rival beer, wine, and spirits by 2030. The trends of state legalization of cannabis for medical and adult use, and increased consumer adoption will continue to drive the demand for financing in the cannabis market. Furthermore, the firm faces limited competition in a highly fragmented market due to the federal prohibition on cannabis use and commercialization restricting commercial and financial activities.

In the second quarter, Chicago Atlantic Real Estate Finance, Inc. (NASDAQ:REFI) recorded a net interest income of approximately $13.2 million which was consistent with the first quarter of 2024. Net income and distributable earnings declined sequentially. During the quarter, the REIT had total gross originations of $20.9 million out of which $11.2 million and $9.7 million was funded to new borrowers and existing borrowers respectively. Furthermore, the firm increased the size of the revolving credit facility to $105 million in total and raised over $6 million of capital through the ATM program.

In short, Chicago Atlantic Real Estate Finance, Inc. (NASDAQ:REFI) serves as the lender of choice to cannabis industry operators through a proprietary sourcing network, a growing portfolio with attractive risk-adjusted returns, a strong record of identifying market inefficiencies, and favorable industry conditions.