Advanced Flower Capital Inc. (NASDAQ: AFCG) completed its conversion from a real‑estate investment trust to a business development company (BDC) effective January 1, 2026, a change that broadens the firm’s investment mandate beyond real‑estate‑backed loans into operating businesses in the cannabis sector and related ancillary markets.
The BDC structure removes the REIT’s restriction on non‑real‑estate assets, allowing AFCG to pursue a wider array of opportunities, including equity stakes in cannabis operators, ancillary service providers, and potentially non‑cannabis middle‑market companies. This diversification is intended to reduce sector‑specific risk, create new revenue streams, and enhance long‑term shareholder value by providing greater flexibility in capital deployment.
Prior to the conversion, AFCG reported a GAAP net loss in Q3 2025 and faced credit challenges, including a significant provision for credit losses in Q2 2025 and underperforming legacy loans. These financial pressures underscored the need for a more flexible investment vehicle that could better manage credit risk and capitalize on growth opportunities outside the real‑estate‑backed loan niche.
Chairman Leonard M. Tannenbaum said the company “enters 2026 with a deep and compelling pipeline of investment opportunities under evaluation, which we believe will help position the Company to generate attractive risk‑adjusted returns for our shareholders.” The statement signals management’s confidence that the BDC structure will unlock higher returns while maintaining disciplined risk management.
The conversion positions AFCG to tap into the broader cannabis finance market and related ancillary services, while also opening the door to non‑cannabis middle‑market investments. Although the company will continue to focus on senior secured lending to state‑compliant cannabis operators, the BDC framework allows it to allocate capital to operating businesses that can deliver higher margins and growth potential. However, the firm must navigate ongoing credit headwinds and regulatory uncertainties that could impact loan performance and the valuation of its new investment portfolio.
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