Chicago Atlantic Real Estate Finance, Inc. (REFI) FY 2021 MD&A

Item 7. Management’s Discussion and Analysis
of Financial Condition and Results of Operations

The following discussion and analysis of
our financial condition and results of operations should be read together with the consolidated financial statements and related
notes that are included elsewhere in this annual report on Form 10-K. This discussion contains forward-looking statements that
reflect our current expectations and views of future events, which involve risks and uncertainties. Our actual results and the
timing of selected events could differ materially from those anticipated in such forward-looking statements. Factors that could
cause or contribute to those differences include, but are not limited to, those discussed above in “Risk Factors” and
those identified below and elsewhere in this annual report on Form 10-K. See “Forward-Looking
Statements.”

Overview

We are a recently-formed commercial real estate
finance company. Our primary investment objective is to provide attractive, risk-adjusted returns for stockholders over time primarily
through consistent current income dividends and other distributions and secondarily through capital appreciation. We intend to achieve
this objective by originating, structuring and investing in first mortgage loans and alternative structured financings secured by commercial
real estate properties. Our current portfolio is comprised primarily of senior loans to state-licensed operators in the cannabis industry,
secured by real estate, equipment, receivables, licenses or other assets of the borrowers to the extent permitted by applicable laws and
regulations governing such borrowers. We intend to grow the size of our portfolio by continuing the track record of our business and the
business conducted by our Manager and its affiliates by making loans to leading operators and property owners in the cannabis industry.
There is no assurance that we will achieve our investment objective.

We believe that cannabis operators’ limited
access to traditional bank and non-bank financing has provided attractive opportunities for us to make loans to companies that exhibit
strong fundamentals but require more customized financing structures and loan products than regulated financial institutions can provide
in the current regulatory environment. We believe that continued state-level legalization of cannabis for medical and adult use creates
an increased loan demand by companies operating in the cannabis industry and property owners leasing to cannabis tenants. Furthermore,
we believe we are differentiated from our competitors because we seek to target operators and facilities that exhibit relatively lower-risk
characteristics, which we believe include generally limiting exposure to ground-up construction, lending to cannabis operators with operational
and/or profitable facilities, diversification of geographies and distribution channels, among other factors. We expect cannabis lending
will continue to be a principal investment strategy for the foreseeable future; however, we expect to also lend to or invest in companies
or properties that are not related to the cannabis industry if they provide return characteristics consistent with our investment objective.
From time to time, we may also invest in mezzanine loans, preferred equity or other forms of joint venture equity to the extent consistent
with our exemption from registration under the Investment Company Act and maintaining our qualification as a REIT. We may enter into credit
agreements with borrowers that permit them to incur debt that ranks equally with, or senior to, the loans we extend to such companies
under such credit agreements. As of December 31, 2021, our portfolio includes one loan that is subordinate to a first mortgage that comprises
approximately 6.9% of our total assets as of such date.

Our Manager and its affiliates seek to originate
real estate loans between $5 million and $200 million, generally with one- to five-year terms and amortization when terms exceed three
years. We generally act as co-lenders in such transactions and intend to hold up to $30 million of the aggregate loan amount, with the
remainder to be held by affiliates or third party co-investors. We may revise such concentration limits from time to time as our loan
portfolio grows. Other investment vehicles managed by our Manager or affiliates of our Manager may co-invest with us or hold positions
in a loan where we have also invested, including by means of splitting commitments, participating in loans or other means of syndicating
loans. We will not engage in a co-investment transaction with an affiliate where the affiliate has a senior position to the loan held
by us. To the extent that an affiliate provides financing to one of our borrowers, such loans will be working capital loans or loans that
are subordinate to our loans. We may also serve as co-lenders in loans originated by third parties and, in the future, we may also acquire
loans or loan participations. Loans that have a one to two year maturity are generally interest only loans.

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Our loans are secured by real estate and, in addition,
when lending to owner-operators in the cannabis industry, other collateral, such as equipment, receivables, licenses or other assets of
the borrowers to the extent permitted by applicable laws and regulations. In addition, we seek to impose strict loan covenants and seek
personal or corporate guarantees for additional protection. As of December 31, 2021, 47.6% of the loans held in our portfolio are backed
by personal or corporate guarantees. We aim to maintain a portfolio diversified across jurisdictions and across verticals, including cultivators,
processors, dispensaries, as well as ancillary businesses. In addition, we may invest in borrowers that have equity securities that are
publicly traded on the Canadian Stock Exchange (“CSE”) in Canada and/or over-the-counter in the United States.

As of December 31, 2021, our portfolio is comprised
primarily of first mortgages to established multi-state or single-state cannabis operators or property owners. We consider cannabis operators
to be established if they are state-licensed and are deemed to be operational by the applicable state regulator. We do not own any stock,
warrants to purchase stock or other forms of equity in any of our portfolio companies that are involved in the cannabis industry, and
we will not take stock, warrants or equity in such issuers until permitted by applicable laws and regulations, including U.S. federal
laws and regulations.

Our Manager’s Investment Committee, which
is comprised of John Mazarakis, Anthony Cappell, Dr. Andreas Bodmeier, and Peter Sack, advises and consults with our Manager and its investment
professionals with respect to our investment strategy, portfolio construction, financing and investment guidelines and risk management
and approves all of our investments. The investment professionals of our Manager have over 100 years of combined experience in private
credit, real estate lending, retail, real estate acquisitions and development, investment advice, risk management, and consulting. Collectively,
the investment professionals have originated, underwritten, structured, documented, managed, or syndicated over $8.0 billion in credit
and real estate transactions, which includes loans to cannabis operators, loans to companies engaged in activities unrelated to cannabis,
as well as commercial real estate loans. In addition, our investment professionals have substantial workout and foreclosure experience
across over 80 loans amounting to over $1 billion of aggregate face value. The depth and breadth of the management and investment team
allows our Manager to address all facets of our operations.

We are an externally managed Maryland corporation
that intends to elect and qualify to be taxed as a REIT under Section 856 of the Code, commencing with our taxable year ending December 31,
2021. We believe that our proposed method of operation will enable us to qualify as a REIT. However, no assurances can be given that our
beliefs or expectations will be fulfilled, since qualification as a REIT depends on us continuing to satisfy numerous asset, income and
distribution tests, which in turn depend, in part, on our operating results. We also intend to operate our business in a manner that will
permit us and our subsidiaries to maintain one or more exclusions or exemptions from registration under the Investment Company Act.

We are an “emerging growth company,”
as defined in the JOBS Act, and we are eligible to take advantage of certain exemptions from various reporting requirements that are applicable
to other public companies that are not “emerging growth companies” including, but not limited to, not being required to comply
with the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act, reduced disclosure obligations regarding executive
compensation in our periodic reports and proxy statements, and exemptions from the requirements of holding a non-binding advisory vote
on executive compensation and shareholder approval of any golden parachute payments not previously approved. In addition, Section 107
of the JOBS Act also provides that an “emerging growth company” can take advantage of the extended transition period provided
in Section 7(a)(2)(B) of the Securities Act for complying with new or revised accounting standards. In other words, an “emerging
growth company” can delay the adoption of certain accounting standards until those standards would otherwise apply to private companies.
We have elected to take advantage of the extended transition period to comply with new or revised accounting standards and to adopt certain
of the reduced disclosure requirements available to emerging growth companies. As a result of the accounting standards election, we will
not be subject to the same implementation timing for new or revised accounting standards as other public companies that are not emerging
growth companies which may make comparison of our financials to those of other public companies more difficult. Additionally, because
we have taken advantage of certain reduced reporting requirements, the information contained herein may be different from the information
you receive from other public companies in which you hold stock. See “Risk Factors — Risks Related to Ownership of Our
Common Stock and This Offering — We are an “emerging growth company,” and we cannot be certain if the reduced disclosure
requirements applicable to emerging growth companies will make shares of our common stock less attractive to investors” for
certain risks related to our status as an emerging growth company.

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We could remain an “emerging growth company”
for up to five years, or until the earliest of (i) the last day of the first fiscal year in which our annual gross revenues exceed
$1.07 billion, (ii) the date that we become a “large accelerated filer” as defined in Rule 12b-2 under the Exchange
Act, which would occur if the market value of our common stock that is held by non-affiliates exceeds $700 million as of the last
business day of our most recently completed second fiscal quarter, or (iii) the date on which we have issued more than $1.0 billion
in non-convertible debt during the preceding three year period.

Revenues

We operate as one operating segment and are primarily
focused on financing senior secured loans and other types of loans for established state-licensed operators in the cannabis industry.
These loans are generally held for investment and are secured by real estate, equipment, licenses and other assets of the borrowers to
the extent permitted by the applicable laws and the regulations governing such borrowers.

We generate revenue primarily in the form of interest
income on loans. As of December 31, 2021, approximately 53.2% of our portfolio was comprised of floating rate loans, and 46.8% of our
portfolio was comprised of fixed rate loans. As of December 31, 2021, none of our loans earn interest at a variable rate tied to the London
Inter-bank Offered Rate (“LIBOR”). Interest on our loans is generally payable monthly. The principal amount of our loans and
any accrued but unpaid interest thereon generally become due at the applicable maturity date. In some cases, our interest income includes
a PIK component for a portion of the total interest. The PIK interest, computed at the contractual rate specified in each applicable loan
agreement, is accrued in accordance with the terms of such loan agreement and capitalized to the principal balance of the loan and recorded
as interest income. The PIK interest added to the principal balance is typically amortized and paid in accordance with the applicable
loan agreement. In cases where the loans do not amortize, the PIK interest is collected and recognized upon repayment of the outstanding
principal. We also generate revenue from OID, which is also recognized as interest income from loans over the initial term of the applicable
loans. Delayed draw loans may earn interest or unused fees on the undrawn portion of the loan, which is recognized as interest income
in the period earned. Other fees, including prepayment fees and exit fees, are also recognized as interest income when received. Any such
fees will be generated in connection with our loans and recognized as earned in accordance with GAAP.

Expenses

Our primary operating expense is the payment of
Base Management Fees and Incentive Compensation under our Management Agreement with our Manager and the allocable portion of overhead
and other expenses paid or incurred on our behalf, including reimbursing our Manager for a certain portion of the compensation of certain
personnel of our Manager who assist in the management of our affairs, excepting only those expenses that are specifically the responsibility
of our Manager pursuant to our Management Agreement. We bear all other costs and expenses of our operations and transactions, including
(without limitation) fees and expenses relating to:

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Income Taxes

We are a Maryland corporation that intends to elect
and qualify to be taxed as a REIT under the Code, commencing with our taxable year ending December 31, 2021. We believe that our
proposed method of operation will enable us to qualify as a REIT. However, no assurances can be given that our beliefs or expectations
will be fulfilled, since qualification as a REIT depends on us satisfying numerous asset, income and distribution tests which depends,
in part, on our operating results.

To qualify as a REIT, we must meet a number of organizational
and operational requirements, including a requirement that we distribute annually to our stockholders at least 90% of our REIT taxable
income prior to the deduction for dividends paid. To the extent that we distribute less than 100% of our REIT taxable income in any tax
year (taking into account any distributions made in a subsequent tax year under Sections 857(b)(9) or 858 of the Code), we will pay tax
at regular corporate rates on that undistributed portion. Furthermore, if we distribute less than the sum of 1) 85% of our ordinary income
for the calendar year, 2) 95% of its capital gain net income for the calendar year, and 3) any undistributed shortfall from its prior
calendar year (the “Required Distribution”) to our stockholders during any calendar year (including any distributions declared
by the last day of the calendar year but paid in the subsequent year), then we are required to pay a non-deductible excise tax equal to
4% of any shortfall between the Required Distribution and the amount that was actually distributed. The 90% distribution requirement does
not require the distribution of net capital gains. However, if we elect to retain any of our net capital gain for any tax year, we must
notify our stockholders and pay tax at regular corporate rates on the retained net capital gain. Our stockholders must include their proportionate
share of the retained net capital gain in their taxable income for the tax year, and they are deemed to have paid the REIT’s tax
on their proportionate share of the retained capital gain. Furthermore, such retained capital gain may be subject to the nondeductible
4% excise tax. If it is determined that our estimated current year taxable income will be in excess of estimated dividend distributions
(including capital gain dividend) for the current year from such income, we will accrue excise tax on estimated excess taxable income
as such taxable income is earned. The annual expense is calculated in accordance with applicable tax regulations. Excise tax expense is
included in the line item income tax expense. For the period from March 30, 2021 (commencement of operations) through December 31, 2021
we did not incur excise tax expense.

Factors Impacting our Operating Results

The results of our operations are affected by a
number of factors and primarily depend on, among other things, the level of our net interest income, the market value of our assets and
the supply of, and demand for, commercial real estate debt and other financial assets in the marketplace. Our net interest income, which
includes the accretion and amortization of OID, is recognized based on the contractual rate and the outstanding principal balance of the
loans we originate. Interest rates will vary according to the type of loan, conditions in the financial markets, creditworthiness of our
borrowers, competition and other factors, some of which cannot be predicted with any certainty. Our operating results may also be impacted
by credit losses in excess of initial anticipations or unanticipated credit events experienced by borrowers.

Changes in Market Interest Rates and Effect on Net Interest Income

Interest rates are highly sensitive to many factors,
including fiscal and monetary policies and domestic and international economic and political considerations, as well as other factors
beyond our control. We will be subject to interest rate risk in connection with our assets and our related financing obligations.

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Our operating results will depend in large part
on differences between the income earned on our assets and our cost of borrowing. The cost of our borrowings generally will be based on
prevailing market interest rates. During a period of rising interest rates, our borrowing costs generally will increase (a) while the
yields earned on our leveraged fixed-rate loan assets will remain static, and (b) at a faster pace than the yields earned on our leveraged
floating-rate loan assets, which could result in a decline in our net interest spread and net interest margin. The severity of any such
decline would depend on our asset/liability composition at the time as well as the magnitude and duration of the interest rate increase.
Further, an increase in short-term interest rates could also have a negative impact on the market value of our target investments. If
any of these events happen, we could experience a decrease in net income or incur a net loss during these periods, which could adversely
affect our liquidity and results of operations.

Interest Rate Cap Risk

We currently own and intend to acquire in the future
floating-rate assets. These are assets in which the loans may be subject to periodic and lifetime interest rate caps and floors, which
limit the amount by which the asset’s interest yield may change during any given period. However, our borrowing costs pursuant to
our financing agreements may not be subject to similar restrictions. Therefore, in a period of increasing interest rates, interest rate
costs on our borrowings could increase without limitation by caps, while the interest-rate yields on our floating-rate assets would effectively
be limited. In addition, floating-rate assets may be subject to periodic payment caps that result in some portion of the interest being
deferred and added to the principal outstanding. This could result in our receipt of cash income from such assets in an amount that is
less than the amount that we would need to pay the interest cost on our related borrowings.

These factors could lower our net interest income
or cause a net loss during periods of rising interest rates, which would harm our financial condition, cash flows and results of operations.
As of December 31, 2021, all of our floating rate loans have interest rate floors, and none of our loans are subject to interest rate
caps.

Interest Rate Mismatch Risk

We may fund a portion of our origination of loans,
or of loans that we may in the future acquire, with borrowings that are based on the prime rate or a similar measure, while the interest
rates on these assets may be fixed or indexed to the prime rate or another index rate. Accordingly, any increase in the prime rate will
generally result in an increase in our borrowing costs that would not be matched by fixed-rate interest earnings and may not be matched
by a corresponding increase in floating-rate interest earnings. Any such interest rate mismatch could adversely affect our profitability,
which may negatively impact distributions to our stockholders.

Our analysis of risks is based on our Manager’s
experience, estimates, models and assumptions. These analyses rely on models which utilize estimates of fair value and interest rate sensitivity.
Actual economic conditions or implementation of decisions by our Manager and our management may produce results that differ significantly
from the estimates and assumptions used in our models and the projected results.

Market Conditions

We believe that favorable market conditions, including
an imbalance in supply and demand of credit to cannabis operating companies, have provided attractive opportunities for non-bank lenders,
such as us, to finance commercial real estate loans and other loans that exhibit strong fundamentals but also require more customized
financing structures and loan products than regulated financial institutions can presently provide. Additionally, to the extent that additional
states legalize cannabis, our addressable market will increase. We intend to continue our track record of capitalizing on these opportunities
and growing the size of our portfolio.

Credit Risk

We are subject to varying degrees of credit risk
in connection with our loans and interest receivable. Our Manager seeks to mitigate this risk by seeking to originate loans, and may in
the future acquire loans, of higher quality at appropriate prices given anticipated and unanticipated losses, by employing a comprehensive
review and selection process and by proactively monitoring originated and acquired loans. Nevertheless, unanticipated credit losses could
occur that could adversely impact our operating results. None of our borrowers are now, or have previously been, in default under their
respective loan agreements with us.

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We expect to be subject to varying degrees of credit
risk in connection with holding our portfolio of loans. We will have exposure to credit risk on our commercial real estate loans and other
targeted types of loans. Our Manager will seek to manage credit risk by performing deep credit fundamental analysis of potential assets
and through the use of non-recourse financing, when and where available and appropriate.

Credit risk will also be addressed through our Manager’s
on-going review, and loans will be monitored for variance from expected prepayments, defaults, severities, losses and cash flow on a quarterly
basis.

Our Manager or affiliates of our Manager have originated
all of our loans and intend to continue to originate our loans, but we may in the future also acquire loans from time to time. Our Investment
Guidelines are not subject to any limits or proportions with respect to the mix of target investments that we make or that we may in the
future acquire other than as necessary to maintain our exemption from registration under the Investment Company Act and our qualification
as a REIT. Our investment decisions will depend on prevailing market conditions and may change over time in response to opportunities
available in different interest rate, economic and credit environments. As a result, we cannot predict the percentage of our capital that
will be invested in any individual target investment at any given time.

Our loan portfolio as of December 31, 2021 was concentrated
with the top three borrowers representing approximately 34.6% of the funded principal and approximately 31.9% of the total commitments
to borrowers. The largest loan represented approximately 15.0% of the funded principal and approximately 12.8% of the total commitments
as of December 31, 2021.

Our largest borrower, the borrower for Loan #2 (“Borrower #2”),
as of December 31, 2021 is a vertically integrated multi-state operator with operations in 14 different states. The senior term loan provided
to Borrower #2 had $30.0 million outstanding principal as of December 31, 2021, of which $0 was unfunded. This senior term loan was advanced
in three tranches, of which the first tranche ($4.0 million), second tranche ($16.0 million), and third tranche ($10.0 million) accrue
interest at a rate of 15.25%, 9.75%, and 8.5% per annum, respectively, payable in cash. This senior term loan was funded with OID of 1.0%,
3.25%, and 2.4% on the first tranche, second tranche, and third tranche, respectively. The loan also requires the payment of a monthly
agency fee paid to our Manager of 15 basis points, 12 basis points, and 5 basis points on the outstanding principal balance of the first
tranche, second tranche, and third tranche, respectively. The loan also has a 1.0% exit fee, and certain prepayment fees, including 1.0%
for prepayments occurring within 9 months of the advance date. This senior term loan contains certain representations and warranties,
affirmative covenants, negative covenants and conditions that are customarily required for similar financings, including covenants that
limit the borrower’s ability to incur, create, or assume certain unsecured indebtedness, and borrower’s ability to engage
in certain mergers, consolidations, and asset sales. This senior term loan also requires Borrower #2 to comply with certain financial
maintenance covenants (measured at the end of each fiscal quarter), including a minimum consolidated adjusted EBITDA, minimum liquidity,
and minimum fixed charge coverage ratio. This senior term loan also contains customary events of default (subject, in certain instances,
to specified grace periods) including, but not limited to, the failure to make payments of interest or premium, if any, on, or principal
under the loans, the failure to comply with certain covenants and agreements specified in the credit agreement, defaults in respect of
certain other indebtedness and certain events relating to bankruptcy or insolvency. If any event of default occurs, the principal, premium,
if any, interest and any other monetary obligations on all the then outstanding amounts under the senior term loans may become due and
payable immediately. Upon the occurrence of an event of default, a default interest rate of an additional 3.0%, or 6.0% for material events
of default, may be applied to the outstanding principal balance, and our Manager may declare all outstanding obligations immediately due
and payable (subject, in certain instances, to specified grace periods) and take such other actions as set forth in the credit agreement.
Upon the occurrence of certain bankruptcy and insolvency events, the obligations under the credit agreement would automatically become
due and payable.

The Company measures current
expected credit losses (“CECL”) for loans held for investment based on Accounting Standards Update (“ASU”) No.
2016-13, Financial Instruments – Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments (“ASU
2016-13). The Company early adopted ASU 2016-13 at formation, which introduces a new credit loss methodology which requires earlier recognition
of credit losses, while also providing additional transparency about credit risk. The CECL methodology utilizes a lifetime “expected
credit loss” methodology for the recognition of credit losses for loans and other receivables at the time the financial asset is
originated or acquired. CECL amended the previous credit loss model to reflect a reporting entity’s current estimate of all expected credit
losses, not only based on historical experience and current conditions, but also by including reasonable and supportable forecasts incorporating
forward-looking information. The allowance for credit losses (the “CECL Reserve”) required under ASU 2016-13 is deducted from
the respective loans’ amortized cost basis on the Company’s Consolidated Balance Sheets. The allowance for credit losses attributed
to unfunded loan commitments is included in “Accounts payable and accrued expenses” on the Consolidated Balance Sheets. The
expected credit losses are adjusted each period for changes in expected lifetime credit losses.

Refer to footnote 3 to our consolidated financial
statements for the period March 30, 2021 to December 31, 2021, titled “Loans Held for Investment, net” for more information
on CECL.

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Risk Management

To the extent consistent with maintaining our REIT
qualification and our exemption from registration under the Investment Company Act, we seek to manage risk exposure by closely monitoring
our portfolio and actively managing the financing, interest rate, credit, prepayment and convexity (a measure of the sensitivity of the
duration of a loan to changes in interest rates) risks associated with holding our portfolio of loans. Generally, with the guidance and
experience of our Manager:

Recent Developments

Updates to Our Loan Portfolio

On January 7, 2022, January 12, 2022, and January
13, 2022, we funded additional advances on three existing borrowers’ credit facilities in the amounts of $4.0 million, $93,769,
and $17.3 million, respectively. Additionally, on January 18, 2022, we closed and funded a loan to a new borrower for an aggregate commitment
of $25.0 million, $10.0 million of which was advanced at closing. Further, on January 25, 2022, we funded an additional advance on an
existing borrower’s credit facility in the amount of $545,000. On February 3, 2022, we closed and funded a loan to a new borrower
for an aggregate commitment of $30.0 million, all of which was advanced at closing. On March, 2, 2022, March 9, 2022, and March 17, 2022,
we funded additional advances to three existing borrowers’ credit facilities in the amounts of $1.8 million, $490,000, and $5.0
million, respectively. Lastly, on March 11, 2022, we closed and funded a loan to a new borrower for an aggregate commitment of $20.0 million,
$17.5 million of which was advanced at closing.

Dividends Declared Per Share

For the period from March 30, 2021 (inception) through
June 30, 2021, we declared a cash dividend of $0.29 per share of our common stock, relating to the period since our inception through
the second quarter of 2021, which was paid on July 15, 2021 to stockholders of record as of the close of business on June 30, 2021. The
total amount of the cash dividend payment was approximately $1,068,551.

For the period from July 1, 2021 through September
30, 2021, we declared a cash dividend of $0.51 per share of our common stock, relating to the third quarter of 2021, which was paid on
October 20, 2021 to stockholders of record as of the close of business on September 30, 2021. The total amount of the cash dividend payment
was approximately $4,067,521.

For the period from October 1, 2021 through December
31, 2021, we declared a cash dividend of $0.26 per share of our common stock, relating to the fourth quarter of 2021, which was paid on
January 14, 2022 to stockholders of record as of the close of business on December 31, 2021. The total amount of the cash dividend payment
was approximately $4,512,329.

The payment of these dividends is not indicative
of our ability to pay such dividends in the future.

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COVID-19

The spread of a novel strain of COVID-19 has caused
significant business disruptions in the United States beginning in the first quarter of 2020 and has resulted in governmental authorities
implementing numerous measures to try to contain the virus, such as quarantines, shelter-in-place or total lock-down orders and business
limitations and shutdowns (subject to exceptions for certain “essential” operations and businesses). Over the course of the
COVID-19 pandemic, medical cannabis companies have been deemed “essential” by almost all of states with legalized cannabis
and stay-at-home orders. Consequently, the impact of the COVID-19 pandemic and the related regulatory and private sector response on our
financial and operating results for the period ended December 31, 2021 was somewhat mitigated as all of our borrowers were permitted to
continue to operate during this pandemic and we have not experienced any payment default by our borrowers nor have we made any concessions
on any payments due, in each case, related to the COVID-19 pandemic.

Regardless, the full extent of the economic impact
of the business disruptions caused by COVID-19 is uncertain. The outbreak of COVID-19 has severely impacted global economic activity and
caused significant volatility and negative pressure in financial markets. The global impact of the outbreak has been rapidly evolving,
and many countries, including the United States, have reacted by instituting quarantines, mandating business and school closures and restricting
travel. As a result, the COVID-19 pandemic is negatively impacting almost every industry directly or indirectly, including the regulated
cannabis industry. Although some of these measures have been lifted or scaled back, a recent resurgence of COVID-19 in certain parts of
the world, including the United States, has resulted in the re-imposition of certain restrictions and may lead to more restrictions to
reduce the spread of COVID-19. The extent of any effect that these disruptions may have on our operations and financial performance will
depend on future developments, including possible impacts on the performance of our loans, general business activity, and ability to generate
revenue, which cannot be determined. For more information see “Risk Factors — Risks Related to Our Business and Growth
Strategy — The current outbreak of COVID-19, or the future outbreak of any other highly infectious or contagious diseases, could
materially and adversely impact or cause disruption to our borrowers and their operations, and in turn our ability to continue to execute
our business plan.”

Results of Operations

For the period
of March 30, 2021 (inception) to December 31, 2021

We commenced operations on March 30, 2021 and, therefore,
have no period to compare results for the period from March 30, 2021 (inception) to December 31, 2021. Our net income allocable to our
common stockholders for the period ended December 31, 2021 was approximately $9.5 million or $1.47 per basic weighted average common share.
Net income of approximately $9.5 million for the period ended December 31, 2021, was comprised of approximately $10.7 million of interest
income, $325,648 of prepayment fee income, offset by management fees of $905,123, general and administrative expenses of 195,087, organizational
expenses of $167,591, change in the provision for current expected credit losses of 147,949, professional fees of $57,458, and stock based
compensation expense of $29,611. Interest income for the period ended December 31, 2021 was comprised of approximately $9.3 million of
cash interest, $798,000 of PIK interest, $596,000 of OID amortization, and $61,000 of unused fee income.

For the period presented, we incurred Base Management
Fees payable to our Manager of $905,123, which was net of a Base Management Fee Rebate of $187,028. Our Manager has incurred $244,720
in general and administrative expenses on our behalf and was reimbursed approximately $102,829 of such amount. Pursuant to Fee Waiver
Letter Agreements executed by our Manager, dated June 30, 2021 and September 30, 2021, all Base Management Fees that would have been payable
to our Manager for the period from May 1, 2021 to September 30, 2021 were voluntarily waived and are not subject to recoupment at a later
date. Additionally, Pursuant to Fee Waiver Letter Agreement executed by our Manager, dated December 31, 2021, all Incentive Compensation
that would have been payable to our Manager for the period from October 1, 2021 to December 31, 2021, as well as a portion of reimbursable
expenses incurred during the period from October 1, 2021 to December 31, 2021, were voluntarily waived and are not subject to recoupment
at a later date.

For the period of March 30, 2021 (inception) to
December 31, 2021, we recorded a provision for current expected credit loss of $147,949, or 6 basis points of our total loans held at
carrying value commitment balance of approximately $235.1 million and was bifurcated between (i) the current expected credit loss reserve
(contra-asset) related to outstanding balances on loans held at carrying value of $134,542 and (ii) a liability for unfunded commitments
of $13,407. The liability is based on the unfunded portion of loan commitments over the full contractual period over which we are exposed
to credit risk through a current obligation to extend credit. Management considered the likelihood that funding will occur, and if funded,
the expected credit loss on the funded portion. We continuously evaluate the credit quality of each loan by assessing the risk factors
of each loan.

In connection with the commencement of our operations, we acquired
a portfolio of loans from affiliated private funds managed by an affiliate of our Manager at fair value of approximately $9.9 million.
An original issue discount was recorded related to the portfolio of loans acquired at fair value. The original issue discount was approximately
equivalent to $81,187 of unaccreted OID associated with the underlying loans in the portfolio, which were originated prior to March 30,
2021 in arm’s-length transactions. We accrete or amortize any discounts or premiums on loans held for investment over the life of
the related loan held for investment utilizing a method which approximates the effective interest method. In circumstances where, in management’s
opinion, the difference between the straight-line and effective interest methods is immaterial, the straight-line method is used.

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Loan Portfolio

As of December 31, 2021, our portfolio included 21 loans held for investment
of approximately $197.0 million of loans receivable. The aggregate originated commitment under these loans was approximately $235.1 million
and outstanding principal was approximately $200.6 million as of December 31, 2021. As of December 31, 2021, our loan portfolio had a
weighted-average YTM IRR of 18.6% and was secured by real estate and, with respect to certain of our loans, substantially all assets in
the borrowers and certain of their subsidiaries, including equipment, receivables, and licenses. YTM IRR is calculated using various inputs,
including (i) cash and payment-in-kind (“PIK”) interest, which is capitalized and added to the outstanding principal balance
of the applicable loan, (ii) original issue discount (“OID”), (iii) amortization, (iv) unused fees, and (v) exit fees. Certain
of our loans have extension fees, which are not included in our YTM IRR calculations, but may increase YTM IRR if such extension options
are exercised by borrowers.

As of December 31, 2021, the Company did not have
any loans held for investment with floating interest rates tied to LIBOR. As of December 31, 2021, approximately 53.2% of its portfolio
was comprised of floating rate loans that pay interest at the prime rate plus an applicable margin, and were subject to a prime rate floor
of 3.25%. The below summarizes our portfolio as of December 31, 2021:

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The following tables summarize our loans held for
investment as of December 31, 2021:

During the period from March 30, 2021 (inception)
to December 31, 2021, we funded approximately $174.4 million of outstanding principal in addition to approximately $40.2 million of outstanding
principal contributed from affiliates of our Manager. We received approximately $9.8 million of payments applied to outstanding principal
balances, and we sold approximately $5.0 million of loans. The following table presents changes in loans held for investment at carrying
value as of and for the period from March 30, 2021 (inception) to December 31, 2021:

We may make modifications to loans, including loans
that are in default. Loan terms that may be modified include interest rates, required prepayments, maturity dates, covenants, principal
amounts and other loan terms. The terms and conditions of each modification vary based on individual circumstances and will be determined
on a case by case basis. Our Manager monitors and evaluates each of our loans held for investment and has maintained regular communications
with borrowers regarding the potential impacts of the COVID-19 pandemic on our loans.

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Key Financial Measures and Indicators

As a commercial real estate finance company, we
believe the key financial measures and indicators for our business are Distributable Earnings, Adjusted Distributable Earnings, book value
per share and dividends declared per share.

Distributable Earnings and Adjusted Distributable Earnings

In addition to using certain financial metrics prepared
in accordance with GAAP to evaluate our performance, we also use Distributable Earnings and Adjusted Distributable Earnings to evaluate
our performance. Each of Distributable Earnings and Adjusted Distributable Earnings is a measure that is not prepared in accordance with
GAAP. We define Distributable Earnings as, for a specified period, the net income (loss) computed in accordance with GAAP, excluding (i) non-cash
equity compensation expense, (ii) Incentive Compensation, (iii) depreciation and amortization, (iv) any unrealized gains,
losses or other non-cash items recorded in net income (loss) for the period, regardless of whether such items are included in other comprehensive
income or loss, or in net income (loss); provided that Distributable Earnings does not exclude, in the case of investments with a deferred
interest feature (such as OID, debt instruments with PIK interest and zero coupon securities), accrued income that we have not yet received
in cash, (v) provision for current expected credit losses and (vi) one-time events pursuant to changes in GAAP and certain non-cash
charges, in each case after discussions between our Manager and our independent directors and after approval by a majority of such independent
directors. We define Adjusted Distributable Earnings, for a specified period, as Distributable Earnings excluding certain non-recurring
organizational expenses (such as one-time expenses related to our formation and start-up).

We believe providing Distributable Earnings and
Adjusted Distributable Earnings on a supplemental basis to our net income as determined in accordance with GAAP is helpful to stockholders
in assessing the overall performance of our business. As a REIT, we are required to distribute at least 90% of our annual REIT taxable
income and to pay tax at regular corporate rates to the extent that we annually distribute less than 100% of such taxable income. Given
these requirements and our belief that dividends are generally one of the principal reasons that stockholders invest in our common stock,
we generally intend to attempt to pay dividends to our stockholders in an amount equal to our net taxable income, if and to the extent
authorized by our Board. Distributable Earnings is one of many factors considered by our Board in authorizing dividends and, while not
a direct measure of net taxable income, over time, the measure can be considered a useful indicator of our dividends.

Distributable Earnings and Adjusted Distributable
Earnings should not be considered as substitutes for GAAP net income. We caution readers that our methodology for calculating Distributable
Earnings and Adjusted Distributable Earnings may differ from the methodologies employed by other REITs to calculate the same or similar
supplemental performance measures, and as a result, our reported Distributable Earnings and Adjusted Distributable Earnings may not be
comparable to similar measures presented by other REITs.

The following table provides a reconciliation of
GAAP net income to Distributable Earnings and Adjusted Distributable Earnings (in thousands, except per share data):

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Book Value Per Share

The book value per share of our common stock as of December 31, 2021
was approximately $15.13.

Dividends Declared Per Share

For the period from March 30, 2021 (inception) through June 30, 2021,
we declared a cash dividend of $0.29 per share of our common stock, relating to the period since our inception through the second quarter
of 2021, which was paid on July 15, 2021 to stockholders of record as of the close of business on June 30, 2021. The total amount of the
cash dividend payment was approximately $1,068,551.

For the period from July 1, 2021 through September
30, 2021, we declared a cash dividend of $0.51 per share of our common stock, relating to the third quarter of 2021, which was paid on
October 20, 2021 to stockholders of record as of the close of business on September 30, 2021. The total amount of the cash dividend payment
was approximately $4,067,521.

For the period from October 1, 2021 through December
31, 2021, we declared a cash dividend of $0.26 per share of our common stock, relating to the fourth quarter of 2021, which was paid on
January 14, 2022 to stockholders of record as of the close of business on December 31, 2021. The total amount of the cash dividend payment
was approximately $4,512,329.

The payment of these dividends is not indicative
of our ability to pay such dividends in the future.

Liquidity and Capital Resources

Liquidity is a measure of our ability to meet potential
cash requirements, including ongoing commitments to repay borrowings, fund and maintain our assets and operations, make distributions
to our stockholders and meet other general business needs. We use significant cash to invest in loans, repay principal and interest on
our borrowings, make distributions to our stockholders and fund our operations.

Our primary sources of cash generally consist of
unused borrowing capacity under our financing sources, the net proceeds of future offerings, payments of principal and interest we receive
on our portfolio of assets and cash generated from our operating results. We expect that our primary sources of financing will be, to
the extent available to us, through (a) credit facilities and (b) public and private offerings of our equity and debt securities. In the
future, we may utilize other sources of financing to the extent available to us. As the cannabis industry continues to evolve and to the
extent that additional states legalize cannabis, the demand for capital continues to increase as operators seek to enter and build out
new markets. We expect the principal amount of the loans we originate to increase and that we will need to raise additional equity and/or
debt funds to increase our liquidity in the near future.

As of December 31, 2021, all of our cash was unrestricted
and totaled approximately $80.2 million.

The sources of financing for our target investments
are described below.

Credit Facilities, Warehouse Facilities and Repurchase Agreements

In May 2021, in connection with our acquisition of our financing subsidiary,
CAL, we were assigned a secured revolving credit facility (the “Revolving Loan”). The Revolving Loan has an aggregate borrowing
base of up to $10,000,000 and bears interest, payable in cash in arrears, at a per annum rate equal to the greater of (x) Prime Rate plus
1.00% and (y) 4.75%. We incurred debt issuance costs of $100,000 related to the origination of the Revolving Loan, which were capitalized
and are subsequently being amortized through maturity. The maturity date of the Revolving Loan is the earlier of (i) February 12, 2023
and (ii) the date on which the Revolving Loan is terminated pursuant to terms in the Revolving Loan agreement.

On December 16, 2021, we amended the Revolving Loan
(the “First Amendment”). The First Amendment increased the loan commitment from $10,000,000 to $45,000,000, decreased the
interest rate, from the greater of the (1) Prime Rate plus 1.00% and (2) 4.75% to the greater of (1) the Prime Rate plus the applicable
margin and (2) 3.25%. The applicable margin depends on the ratio of debt to equity of CAL and increases from 0% at a ratio of 0.25 to
1 to 1.25% at a ratio of 1.5 to 1. The First Amendment also extended the maturity date from February 12, 2023 to the earlier of (i) December
16, 2023 and (ii) the date on which the Revolving Loan is terminated pursuant to terms in the Revolving Loan agreement. We incurred debt
issuance costs of $859,500 related to the First Amendment, which were capitalized and are subsequently being amortized through maturity.
As of December 31, 2021, unamortized debt issuance costs related to the Revolving Loan and First Amendment of $868,022 are recorded in
Other Assets on the Consolidated Balance Sheet.

The Revolving Loan incurs unused fees at a rate of 0.25% per annum.
During the period from March 30, 2021 (inception) to December 31, 2021, we incurred $17,916 of unused fees, recorded as General and Administrative
Expense on the Consolidated Statement of Operations. For the period from March 30, 2021 (inception) to December 31, 2021, we did not borrow
against the Revolving Loan and therefore no interest expense was incurred for the period then ended. In the future, we may use certain
sources of financing to fund the origination or acquisition of our target investments, including credit facilities and other secured and
unsecured forms of borrowing. These financings may be collateralized or non-collateralized and may involve one or more lenders. We expect
that these facilities will typically have maturities ranging from two to five years and may accrue interest at either fixed or floating
rates.

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During the period ended December 31, 2021, we did
not borrow against the Revolving Loan and had $0 outstanding under the Revolving Loan as of December 31, 2021.

Capital Markets

We may seek to raise further equity capital and
issue debt securities in order to fund our future investments in loans.

Cash Flows

The
following table sets forth changes in cash and cash equivalents for the period of March 30, 2021 (inception) through December
31, 2021:

Net Cash Provided
by (Used in) Operating Activities

For the period of March 30, 2021 (inception) through
December 31, 2021, net cash provided by operating activities totaled approximately $5.7 million. For the period of March 30, 2021 (inception)
through December 31, 2021, adjustments to net income related to operating activities primarily included accretion of deferred loan original
issue discount and other discounts of approximately $596,000, PIK interest of approximately $798,000, provision for current expected credit
losses of approximately $148,000, amortization of deferred financing costs relating to the revolving credit facility of approximately
$76,000, stock-based compensation expense of approximately $30,000, and changes in operating assets and liabilities of approximately $2.6
million.

Net Cash Provided by
(Used in) Investing Activities

For the period of March 30, 2021 (inception) through
December 31, 2021, net cash used in investing activities totaled approximately $145.2 million. The net cash used in investing activities
was primarily a result of the cash used for the origination and funding of loans held for investment of approximately $161.7 million,
exceeding the cash received from principal repayment of loans held for investment of approximately $9.8 million, cash received from the
sale of loans of approximately $4.9 million, purchase of debt securities of approximately $16.1 million, and investment payable to a related
party of approximately $1.8 million for the period of March 30, 2021 (inception) through December 31, 2021.

Net Cash Provided
by (Used in) Financing Activities

For the period of March 30, 2021 (inception) through
December 31, 2021, net cash provided by financing activities totaled approximately $219.7 million and related to proceeds from the issuance
of our common stock of approximately $226.0 million, less offering costs relating to our initial public offering of approximately $1.2
million, and less approximately $5.1 million in dividends paid.

Leverage Policies

Although we are not required to maintain any particular
leverage ratio, we expect to employ prudent amounts of leverage and, when appropriate, to use debt as a means of providing additional
funds for the acquisition of loans, to refinance existing debt or for general corporate purposes. Leverage is primarily used to provide
capital for forward commitments until additional equity is raised or additional medium- to long-term financing is arranged. This policy
is subject to change by management and our Board.

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Dividends

We intend to elect to be taxed as a REIT for United
States federal income tax purposes and, as such, anticipate annually distributing to our stockholders at least 90% of our REIT taxable
income, prior to the deduction for dividends paid and our net capital gain. If we distribute less than 100% of our REIT taxable income
in any tax year (taking into account any distributions made in a subsequent tax year under Sections 857(b)(9) or 858 of the Code), we
will pay tax at regular corporate rates on that undistributed portion. Furthermore, if we distribute less than the sum of (i) 85%
of our ordinary income for the calendar year, (ii) 95% of our capital gain net income for the calendar year and (iii) any Required Distribution
to our stockholders during any calendar year (including any distributions declared by the last day of the calendar year but paid in the
subsequent year), then we are required to pay non-deductible excise tax equal to 4% of any shortfall between the Required Distribution
and the amount that was actually distributed. Any of these taxes would decrease cash available for distribution to our stockholders. The
90% distribution requirement does not require the distribution of net capital gains. However, if we elect to retain any of our net capital
gain for any tax year, we must notify our stockholders and pay tax at regular corporate rates on the retained net capital gain. The stockholders
must include their proportionate share of the retained net capital gain in their taxable income for the tax year, and they are deemed
to have paid the REIT’s tax on their proportionate share of the retained capital gain. Furthermore, such retained capital gain may
be subject to the nondeductible 4% excise tax. If we determine that our estimated current year taxable income (including net capital gain)
will be in excess of estimated dividend distributions (including capital gains dividends) for the current year from such income, we accrue
excise tax on a portion of the estimated excess taxable income as such taxable income is earned.

To the extent that our cash available for distribution
is less than the amount required to be distributed under the REIT provisions of the Code, we may be required to fund distributions from
working capital or through equity, equity-related or debt financings or, in certain circumstances, asset sales, as to which our ability
to consummate transactions in a timely manner on favorable terms, or at all, cannot be assured, or we may make a portion of the Required
Distribution in the form of a taxable stock distribution or distribution of debt securities.

Policies and Estimates

Our consolidated financial statements are prepared
in accordance with GAAP which requires the use of estimates and assumptions that involve the exercise of judgment as to future uncertainties.
In accordance with SEC guidance, the following discussion addresses the accounting policies that we believe apply to us based on the nature
of our initial operations. Our most critical accounting policies involve decisions and assessments that could affect our reported assets
and liabilities, as well as our reported revenues and expenses. We believe that all of the decisions and assessments used to prepare our
consolidated financial statements are based upon reasonable assumptions given the information available to us at that time. Our critical
accounting policies and accounting estimates will be expanded over time as we fully implement our strategy. Those accounting policies
and estimates that we believe are most critical to an investor’s understanding of our financial results and condition and require
complex management judgment are discussed below.

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CECL Reserve

In accordance with ASC 326, we record allowances
for our loans held for investment. The allowances are deducted from the gross carrying amount of the assets to present the net carrying
value of the amounts expected to be collected on such assets. We estimate our CECL Reserve using
a probability-weighted model that considers the likelihood of default and expected loss given default for each individual loan based on
the risk profile for approximately three years after which we immediately revert to use of historical loss data. Previously, we utilized
the weighted average remaining maturity ("WARM") method. For the period ended December 31, 2021, we concluded that the
probability-of-default/loss-given-default method is a more suitable for our portfolio and sustainable as part of our operations and ongoing
portfolio monitoring process. For the period ended December 31, 2021, there was no material difference in the loan loss reserve outcome
under this method, when compared to the previous method applied, and this constitutes a change in method of application of ASC 326, not
a change in accounting estimate. In the future, we may use other acceptable methods, such as a discounted cash flow method, WARM method,
or other methods permitted under ASC 326.

ASC 326 requires an entity to consider historical
loss experience, current conditions, and a reasonable and supportable forecast of the macroeconomic environment. We
evaluate our loans on a collective (pool) basis by aggregating on the basis of similar risk characteristics, primarily: (i) industry sector
of the borrower, (ii) risk ratings, (iii) collateral type, and (iv) term, among other characteristics. We make the judgment that loans
to cannabis-related borrowers with risk ratings indicating very low or low risk (1 and 2, respectively) that are fully collateralized
by real estate with short maturities of less than three years exhibit similar risk characteristics and are evaluated as a pool. Further,
loans that are not fully collateralized by real estate, but other forms of collateral, including equity pledges of the borrower, and otherwise
have similar characteristics as those collateralized by real estate are evaluated as a pool. All other loans are analyzed individually,
either because they operate in a different industry, have higher risk, or have maturities that extend beyond the forecast horizon for
which we are able to derive reasonable and supportable forecasts.

Estimating
the CECL Reserve also requires significant judgment with respect to various factors, including (i) the appropriate historical loan loss
reference data, (ii) the expected timing of loan repayments, (iii) calibration of the likelihood of default to reflect the risk characteristics
of our loan portfolio and (iv) our current and future view of the macroeconomic environment. From time to time, we may consider loan-specific
qualitative factors on certain loans to estimate our CECL Reserve, which may include (i) whether cash from the borrower’s operations
is sufficient to cover the debt service requirements currently and into the future, (ii) the ability of the borrower to refinance the
loan and (iii) the liquidation value of collateral. For loans where we have deemed the borrower/sponsor to be experiencing financial difficulty,
we may elect to apply a practical expedient, in which the fair value of the underlying collateral is compared to the amortized cost of
the loan in determining a CECL Reserve.

To estimate the historic loan losses relevant to
our portfolio, we evaluate our historical loan performance, which includes zero realized loan losses since our inception of operations.
Additionally, we analyzed our repayment history, noting we have limited “true” operating history, since the incorporation
date of March 30, 2021. However, our Sponsor has had operations for the past two fiscal years and has made investments in similar loans,
that have similar characteristics including; interest rate, collateral coverage, guarantees, and prepayment/make whole provisions, which
fall into the pools identified above. The Sponsor has experienced prepayment on six loans since its inception history, and in no such
case was an event of loss experienced. Given the similarity of the structuring of the credit agreements for the loans in our portfolio,
management considered it appropriate to consider the past repayment history of loans originated by the Sponsor in determining the extent
to which we should record a CECL reserve.

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In addition, we review each loan on a quarterly
basis and evaluates the borrower’s ability to pay the monthly interest and principal, if required, as well as the loan-to-value
(LTV) ratio. In considering the potential current expected credit loss, the Manager primarily considered significant inputs
to our forecasting methods, which include (i) key loan-specific inputs such as the value of the real estate collateral, liens on
equity (including the equity in the entity that holds the state-issued license to cultivate, process, distribute, or retail cannabis),
presence of personal or corporate guarantees, among other credit enhancements, LTV ratio, loan-term,
geographic location, and expected timing and amount of future loan fundings, (ii) performance against the underwritten business plan and
our internal loan risk rating and (iii) a macro-economic forecast. Regarding real estate collateral, we cannot take the position
of mortgagee-in-possession as long as the property is used by a cannabis operator, but we can request that the court appoint a receiver
to manage and operate the subject real property until the foreclosure proceedings are completed. Additionally, while we cannot foreclose
under state Uniform Commercial Code (“UCC”) and take title or sell equity in a licensed cannabis business, a potential purchaser
of a delinquent or defaulted loan could. Estimating the enterprise value of our borrowers in
order to calculate LTV ratios is often a significant estimate. We rely primarily on comparable transactions to estimate enterprise value
of our portfolio companies and supplement such analysis with a multiple-based approach to enterprise value to revenue multiples of publicly-traded
comparable companies obtained from S&P CapitalIQ as of the relevant period end, to which we apply a private company discount based
on our current borrower profile. These estimates may change in future periods based on available future macro-economic data and might
result in a material change in our future estimates of expected credit losses for our loan portfolio.

In order to
estimate the future expected loan losses relevant to our portfolio, we utilize historical market loan loss data obtained from Federal
Reserve economic data for bank business loans, which we believe is a reasonably comparable and available data set to our loans. We
expect the period from 2018-2021 to be representative for future credit losses during the years of 2022-2024, as the cannabis industry
is maturing, consumer adoption is increasing, and demand for production and retail capacity is increasing. For
periods beyond the reasonable and supportable forecast period, we revert back to historical loss data. The measurement of expected
credit losses under CECL is applicable to financial assets measured at amortized cost, and off-balance sheet credit exposures such as
unfunded loan commitments.

All of the above assumptions, although made with
the most available information at the time of the estimate, are subjective and actual activity may not follow the estimated schedule.
These assumptions impact the future balances that the loss rate will be applied to and as such impact our CECL Reserve. As we acquire
new loans and our Manager monitors loan and borrower performance, these estimates will be revised each period.

Risk Ratings

We assess the risk factors of each loan, and assigns a risk rating
based on a variety of factors, including, without limitation, payment history, real estate collateral coverage, property type, geographic
and local market dynamics, financial performance, enterprise value of the portfolio company, loan structure and exit strategy, and project
sponsorship. This review is performed quarterly. Based on a 5-point scale, our loans are rated “1” through “5,”
from less risk to greater risk, which ratings are defined as follows:

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The risk ratings are primarily
based on historical data and current conditions specific to each portfolio company, as well as consideration of future economic conditions
and each borrower’s estimated ability to meet debt service requirements.

As of December 31, 2021, the carrying value of loans
held at carrying value and loans receivable at carrying value within each risk rating by year of origination is as follows:

Income Taxes

We are a Maryland corporation that intends to elect
to be taxed and qualify as a REIT under the Code, commencing with our taxable year ending December 31, 2021. We believe that our
proposed method of operation will enable us to qualify as a REIT. However, no assurances can be given that our beliefs or expectations
will be fulfilled, since qualification as a REIT depends on us satisfying numerous asset, income and distribution tests which depend,
in part, on our operating results.

To qualify as a REIT, we must meet a number of organizational
and operational requirements, including a requirement that we distribute annually to our stockholders at least 90% of our REIT taxable
income prior to the deduction for dividends paid and our net capital gain. To the extent that we distribute less than 100% of our REIT
taxable income in any tax year (taking into account any distributions made in a subsequent tax year under Sections 857(b)(9) or 858 of
the Code), we will pay tax at regular corporate rates on that undistributed portion. Furthermore, if we distribute less than the sum of
1) 85% of our ordinary income for the calendar year, 2) 95% of our capital gain net income for the calendar year, and 3) any Required
Distributions to our stockholders during any calendar year (including any distributions declared by the last day of the calendar year
but paid in the subsequent year), then we are required to pay a non-deductible excise tax equal to 4% of any shortfall between the Required
Distribution and the amount that was actually distributed. The 90% distribution requirement does not require the distribution of net capital
gains. However, if we elect to retain any of our net capital gain for any tax year, we must notify our stockholders and pay tax at regular
corporate rates on the retained net capital gain. The stockholders must include their proportionate share of the retained net capital
gain in their taxable income for the tax year, and they are deemed to have paid the REIT’s tax on their proportionate share of the
retained capital gain. Furthermore, such retained capital gain may be subject to the nondeductible 4% excise tax. If it is determined
that our estimated current year taxable income will be in excess of estimated dividend distributions (including capital gain dividend)
for the current year from such income, we accrue excise tax on estimated excess taxable income as such taxable income is earned. The annual
expense is calculated in accordance with applicable tax regulations. Excise tax expense is included in the line item income tax expense.

FASB ASC Topic 740, Income Taxes (“ASC 740”),
prescribes a recognition threshold and measurement attribute for the consolidated financial statement recognition and measurement of a
tax position taken or expected to be taken in a tax return. ASC 740 also provides guidance on derecognition, classification, interest
and penalties, accounting in interim periods, disclosure and transition. We have analyzed our various federal and state filing positions
and believe that our income tax filing positions and deductions are well documented and supported as of December 31, 2021. Based on our
evaluation, there is no reserve for any uncertain income tax positions. Accrued interest and penalties, if any, are included within other
liabilities in the balance sheets.

JOBS Act Accounting Election

As an emerging growth company under the Jumpstart
Our Business Startups Act of 2012, or the JOBS Act, we can take advantage of an extended transition period for complying with new or revised
accounting standards. This allows an emerging growth company to delay the adoption of certain accounting standards until those standards
would otherwise apply to private companies. We have elected to avail ourselves of this exemption from new or revised accounting standards
and, therefore, will not be subject to the same new or revised accounting standards as other public companies that are not emerging growth
companies. We intend to rely on other exemptions provided by the JOBS Act, including without limitation, not being required to comply
with the auditor attestation requirements of Section 404(b) of Sarbanes-Oxley. As a result, our consolidated financial statements may
not be comparable to companies that comply with new or revised accounting pronouncements as of public company effective dates.

We will remain an emerging growth company until
the earliest of (i) the last day of the fiscal year following the fifth anniversary of the consummation of this offering, (ii) the
last day of the fiscal year in which we have total annual gross revenue of at least $1.07 billion, (iii) the last day of the
fiscal year in which we are deemed to be a “large accelerated filer” as defined in Rule 12b-2 under the Exchange Act, which
would occur if the market value of our common stock held by non-affiliates exceeded $700.0 million as of the last business day of
the second fiscal quarter of such year, or (iv) the date on which we have issued more than $1.0 billion in non-convertible debt
securities during the prior three-year period.

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Recent Accounting Pronouncements

Refer to footnote 2 to our consolidated financial
statements for the period March 30, 2021 (inception) to December 31, 2021, titled “Significant Accounting Policies”
for information on recent accounting pronouncements.