Leonard Tannenbaum, Founding father of Fifth Road, Returns to Direct Lending with Hashish REIT IPO

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With Fifth Road Asset Administration nearing completion, founder Leonard Tannenbaum has simply gone public together with his new firm AFC Gamma with the purpose of increasing direct lending within the hashish trade.

AFC Gamma valued its IPO at $ 19 a share to lift $ 118.8 million, based on its advert after the market closes on March 18. Shares of the true property funding belief, based by Tannenbaum final 12 months to offer loans to US hashish firms, started buying and selling on the worldwide Nasdaq market on Friday beneath the ticker image “AFCG”.

AFC Gamma is “the primary legally listed hashish lender” on a US inventory trade, Tannenbaum, managing director of the business actual property finance firm, mentioned in a phone interview on Friday. “Till now, the one solution to finance hashish firms has been via sale and leaseback.”

The REIT gives another supply of funding and has already “mapped out” many of the loans it should fund from the proceeds of the IPO, Tannenbaum mentioned. AFC Gamma will lend cash to companies via loans secured by their money movement, actual property and licenses, he mentioned.

Tannenbaum – which turned its earlier funding agency Fifth Road right into a direct lender with $ 5 billion in belongings – now sees the potential for AFC Gamma to supervise billions of {dollars} in belongings as properly. Hashish is “one of many quickest rising industries” in the USA as states more and more legalize it, creating a necessity for funding, he defined.

His REIT turned public on the prime of his goal worth vary, finishing an IPO greater than three years after Tannenbaum offered the belongings of the Fifth Road enterprise growth agency to Oaktree Capital Administration of Howard Marks. Oaktree purchased Fifth Road belongings for $ 320 million in October 2017, turning into the funding advisor of its two BDCs, Fifth Road Finance Corp. and Fifth Road Senior Floating Fee Corp.

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Fifth Road Asset Administration is now virtually totally liquidated and has no staff, Tannenbaum mentioned. For the reason that sale to Oaktree, Fifth Road has made no investments, has no revenue and can be dissolved by the tip of June, based on AFC Gamma’s IPO prospectus.

The IPO paperwork additionally cite Fifth Road’s settlement with the Securities and Alternate Fee over alleged violations associated to its enterprise growth firms. SEC stop and desist order of December 2018, alleged that Fifth Road misallocated bills amongst its former BDC shoppers and failed the valuation assessment of two of the corporate’s investments held by one in all its BDCs. As a part of the SEC settlement, Fifth Road has neither admitted nor denied the allegations.

“We settled it efficiently,” Tannenbaum mentioned. “Our relationship with Oaktree is nice.”

Tannenbaum mentioned AFC Gamma had often been requested concerning the settlement throughout the IPO roadshow, which was carried out via Zoom with greater than 70 consecutive conferences. The provide created robust demand from institutional traders, he mentioned, including that the overwhelming majority of conferences resulted in orders to take part within the oversubscribed IPO.

Shares of AFC Gamma jumped 21% after they debuted on Friday, closing at $ 23.

Previous to the IPO, Tannenbaum had already began increase the belongings of AFC Gamma. As of February 15, the West Palm Seashore, Florida-based REIT had created and funded roughly $ 135 million in loans to firms working within the hashish trade and was actively reviewing a pipeline of potential loans totaling $ 561.8 million. {dollars}, as amended. IPO paperwork filed on March 16.

Considered one of AFC Gamma’s largest offers after the IPO will happen in New Jersey, which just lately legalized marijuana, Tannenbaum mentioned. He defined that the mortgage will assist a state licensee construct infrastructure similar to crops and distributors. AFC stands for “superior flower capital,” he famous, saying the REIT goals to turn out to be companions with the leaders that may emerge in the USA.

“The trade goes to consolidate rapidly,” Tannenbaum mentioned.



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