Making Markets

Tony Cappell: Underwriting the Cannabis Industry - [Making Markets, EP.31]

May 31, 2024

Tony Cappell, Co-founder at Chicago Atlantic Group, discusses underwriting in the Cannabis industry. Topics include challenges in Cannabis lending, market segmentation, state regulations, credit risk, life cycle of a Cannabis deal, and overall private credit market dynamics.

51:24

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Episode guests

Tony Cappell

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Episode notes

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Quick takeaways

Establishing largest lender in cannabis credit market, innovative lending structures, and appeal of higher returns.

Impact of state regulations on cannabis market dynamics, operational excellence for businesses, and interstate competition challenges.

Regulatory issues like federal legalization impact, potential removal of 280E provision, and strategic expansion into esoteric lending categories.

Deep dives

Evolution of Chicago Atlantic Group's Private Credit Business in Cannabis Industry

Tony Kapel, the co-founder of the Chicago Atlantic Group, shares the journey of establishing the largest lender within the cannabis private credit space. Starting from the early days of Chicago Atlantic, Tony delves into the challenges of underwriting in the cannabis industry. Despite the federal illegality of cannabis, innovative financial structures and the appeal of higher returns made lending in this industry compelling.

Introduction

5min

Navigating Banking Challenges and Fundraising in the Cannabis Industry

3min

Segmentation and Operational Intensity in the Cannabis Loan Market

16min

Brand Power and Regulatory Landscape in the Cannabis Industry

4min

Navigating 280E and Future Trends in Cannabis Industry Financing

19min

Private Credit Distress Cycle and Potential Outcomes for Lenders and Equity Holders

2min

Navigating Uncertainty and Market Volatilities in Private Equity and Real Estate Sectors

2min

My guest today is Tony Cappell, the Founding Partner at Chicago Atlantic. In 2018, Tony saw an opportunity to do private credit in Cannabis and has since built Chicago Atlantic is the largest lender in the space. We start by talking about the early days of Chicago Atlantic. We then move on to the challenges of underwriting in Cannabis, his views on the industry and on competition from other lenders. We end with a discussion on the overall private credit market. Please enjoy this conversation with Tony Cappell.

For the full show notes, transcript, and links to the best content to learn more, check out the episode page HERE.

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Show Notes

(00:00:00) Welcome to Making Markets

(00:02:31) Entering the Cannabis Private Credit Market

(00:04:54) Challenges and Opportunities in Cannabis Lending

(00:08:12) Market Segmentation and State Regulations

(00:11:51) Credit Risk and Market Dynamics

(00:15:12) The Life Cycle of A Cannabis Deal

(00:20:12) Diversification Across State Regulations

(00:23:47) Brand Power and Regulatory Concerns

(00:28:13) Impact of 280E and Rescheduling

(00:33:13) Private Credit and Investment Strategies

(00:36:44) Challenges and Opportunities in Cannabis Lending

(00:45:12) Private Credit Market Outlook

(00:50:31) Entering Into an Agreed Asent in Cannabis Investing

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Making Markets

Tony Cappell: Underwriting the Cannabis Industry - [Making Markets, EP.31]

Episode guests

Podcast summary created with Snipd AI

Quick takeaways

Deep dives

Evolution of Chicago Atlantic Group's Private Credit Business in Cannabis Industry

Unique Market Dynamics in Limited License States for Cannabis Lending

Navigating Regulatory Uncertainties and Tax Challenges in Cannabis Lending

Expansion into Esoteric Industries and Alternative Investment Opportunities

Assessment of Private Credit Landscape and Market Sentiment

Remember Everything You Learn from Podcasts