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United States securities and exchange commission logo
December 17, 2020
Leonard Tannenbaum
Chief Executive Officer
AFC Gamma, Inc.
525 Okeechobee Blvd.
Suite 1770
West Palm Beach, FL 33401
Re: AFC Gamma, Inc.
Draft Registration
Statement on Form S-1
Submitted November
20, 2020
CIK No. 0001822523
Dear Mr. Tannenbaum:
We have reviewed your draft registration statement and have the
following comments. In
some of our comments, we may ask you to provide us with information so
we may better
understand your disclosure.
Please respond to this letter by providing the requested
information and either submitting
an amended draft registration statement or publicly filing your
registration statement on
EDGAR. If you do not believe our comments apply to your facts and
circumstances or do not
believe an amendment is appropriate, please tell us why in your
response.
After reviewing the information you provide in response to these
comments and your
amended draft registration statement or filed registration statement, we
may have additional
comments.
Draft Registration Statement filed November 20, 2020
General
1. We note that you and
your subsidiaries intend to operate your business in a manner that
will permit you to
maintain exemptions from registration under the Investment Company
Act of 1940. Please
provide us with a detailed analysis of these exemptions and how your
investment strategy
will support these exemptions. Further, please note that we will refer
your response to the
Division of Investment Management for further review.
Leonard Tannenbaum
FirstName LastNameLeonard Tannenbaum
AFC Gamma, Inc.
Comapany17,
December NameAFC
2020 Gamma, Inc.
December
Page 2 17, 2020 Page 2
FirstName LastName
2. We note that you intend to operate in a manner that will allow you to
qualify as a real
estate investment trust. You state on page 59 that you intend to use
the net proceeds from
the offering to acquire your target assets in a manner consistent with
your investment
strategy. It does not appear that you have identified any
mortgage-related assets to
acquire with a significant portion of the net proceeds of the
offering. As a result, your
offering appears to constitute a "blind pool" offering. Accordingly,
please tell us how you
considered the applicability of Industry Guide 5, or revise to provide
the disclosure
required by Industry Guide 5. See Securities Act Release 33-6900 (June
17, 1991),
Industry Guide 5 and CF Disclosure Guidance: Topic No. 6 for guidance.
Cover Page
3. Please add a summary risk factor to disclose if true, that there is no
limit on the amount of
leverage you may incur, and also that you may pay distributions from
offering proceeds,
borrowings, or the sale of assets to the extent distributions exceed
earnings or cash flows
from operations.
Prospectus Summary
Overview, page 1
4. We note your disclosure on page 70 that, in addition to originating
loans, you may acquire
loans. Additionally, we note your statement on page 25 that your
borrowers may incur
debt obligations that are senior to your position. Please revise your
disclosure to discuss
these aspects of your business.
Our Portfolio, page 4
5. For each entity that you have loaned money to, please tell us what
consideration you gave
to disclosing the names of the entities and the states in which they
operate, to the extent
the information has been omitted. Additionally, to the extent an
entity has an associated
PIK interest payment to make, please explain how they intend to pay
this interest "in
kind." Please ensure that you define all acronyms where you first use
them, such as IRR
and YTM. For loans made for the purposes of construction, please
clearly identify those
loans and disclose the anticipated completion date(s).
Our Growth Strategy, page 9
6. We note that you have retained Murray Devine as your independent
third-party valuation
firm. Please file the consent for this firm. Please refer to Section
7(a) and Rule 436 of the
Securities Act. Additionally, we note on page 12 that you refer to a
third-party valuation
firm that is not identified. Please tell us what consideration you
have given to identifying
the third party expert and filing its consent.
Leonard Tannenbaum
FirstName LastNameLeonard Tannenbaum
AFC Gamma, Inc.
Comapany17,
December NameAFC
2020 Gamma, Inc.
December
Page 3 17, 2020 Page 3
FirstName LastName
COVID-19, page 12
7. We note your disclosure that the entities to which you have made loans
were considered
essential. Please disclose clearly whether Covid-19 has impacted the
ability of any of
your borrowers to repay their loans in a timely fashion, and if any
have not been able to
make timely payments, to the extent material, please quantify the
amount they are in
arrears and disclose whether you have granted any concessions.
Use of Proceeds, page 59
8. We note your disclosure that you intend to use proceeds from this
offering to repay the
Revolving Credit Facility. However, your disclosure on page 2 and
elsewhere indicates
that there are no borrowings outstanding as of November 15, 2020.
Please update your
disclosure as appropriate to address this discrepancy.
Dilution, page 62
9. Please revise your table on page 62 to show the increase in net
tangible book value that
results from the pro forma transactions separately from the increase
attributable to this
offering.
Our Manager and our Management Agreement
Termination for Cause, page 110
10. We note your disclosure that you may terminate your manager for cause
upon 30 days
prior written notice and we further note clause (v) in the first
paragraph in this section.
Please add risk factor disclosure that your manager will remain on for
30 days even if it
commits fraud or engages in other criminal activities.
Management Compensation, page 114
11. Please provide a summary compensation table. In the table, please
ensure that you
disclose all fees to be paid to your manager, including, but not
limited to, the syndication
fee, structuring fee, diligence fee, monitoring fee, and agency fee.
Additionally, please
explain the services that the manager will provide in order to receive
these fees and how
these services are distinct from the services covered under the
management fee.
12. Given the complexity of the incentive fee calculation, please provide
a detailed
hypothetical example.
Principal Stockholders, page 118
13. Please disclose the natural person or persons who exercise the sole or
shared voting and/or
dispositive powers with respect to shares held by the entities listed
in the table.
Leonard Tannenbaum
FirstName LastNameLeonard Tannenbaum
AFC Gamma, Inc.
Comapany17,
December NameAFC
2020 Gamma, Inc.
December
Page 4 17, 2020 Page 4
FirstName LastName
Potential Conflicts of Interest, page 121
14. We note your disclosure on page 43 and elsewhere that the officers of
your manager
manage other investment vehicles and that those entities may compete
with you for
investments. Please add risk factor disclosure to address the risk of
your manager or its
officers being internalized or acquired by another entity for which
they provide services.
Exclusive Forum for Certain Litigation , page 136
15. We note your disclosure that certain litigation may only be brought in
specific courts in
Maryland. Please disclose whether this provision applies to actions
arising under the
Securities Act or Exchange Act. In that regard, we note that Section
27 of the Exchange
Act creates exclusive federal jurisdiction over all suits brought to
enforce any duty or
liability created by the Exchange Act or the rules and regulations
thereunder, and Section
22 of the Securities Act creates concurrent jurisdiction for federal
and state courts over all
suits brought to enforce any duty or liability created by the
Securities Act or the rules and
regulations thereunder. If the provision applies to Securities Act
claims, please also revise
your prospectus to state that there is uncertainty as to whether a
court would enforce such
provision and that investors cannot waive compliance with the federal
securities laws and
the rules and regulations thereunder. If this provision does not apply
to actions arising
under the Securities Act or Exchange Act, please also ensure that the
exclusive forum
provision in the governing documents states this clearly, or tell us
how you will inform
investors in future filings that the provision does not apply to any
actions arising under the
Securities Act or Exchange Act. Please add risk factor disclosure as
appropriate.
Index to the Financial Statements, page F-1
16. In light of your investments in loans collateralized by real estate,
please tell us what
consideration you gave to providing financial statements and/or a
narrative description of
the general character of the properties securing these loans.
Reference is made to SAB 1I.
2. Significant Accounting Policies
Interest reserves, page F-11
17. We note you recorded $1.4 million in interest reserves as of September
30, 2020. Please
clarify for us how you determined it was appropriate to reflect this
item as a liability and
to recognize income for this component. Further, please clarify for us
and in your filing
how you will record income for this component and tell us your basis
for this accounting.
Within your response, please reference the authoritative accounting
literature management
relied upon.
4. Loan receivable at carrying value, page F-13
18. Please revise to include the disclosures required by ASC 326-20-50 or
tell us how you
determined such disclosures are not necessary.
Leonard Tannenbaum
AFC Gamma, Inc.
December 17, 2020
Page 5
13. Related Party Transactions
Management Agreement, page F-18
19. We note your footnote disclosure that your management fee is equal to
0.4375% of the
Company's equity. This percentage does not appear to be consistent with
the 0.375%
disclosed on page 8 of your filing. Please revise or advise.
Investments in Loans, page F-19
20. We note your disclosure that you may receive the option to assign the
right to acquire
warrants and/or equity of the borrower. We further note your disclosure
that you sold
such rights in October and November of 2020. To the extent you held these
rights at
September 30, 2020, please tell us how you accounted for the rights at
September 30,
2020. Within your response, please reference the accounting literature
management relied
upon.
You may contact Babette Cooper at 202-551-3396 or Jennifer Monick at
202-551-3295 if
you have questions regarding comments on the financial statements and related
matters. Please
contact Stacie Gorman at 202-551-3585 or Maryse Mills-Apenteng at 202-551-3457
with any
other questions.
Sincerely,
FirstName LastNameLeonard Tannenbaum
Division of
Corporation Finance
Comapany NameAFC Gamma, Inc.
Office of Real Estate
& Construction
December 17, 2020 Page 5
cc: Jeeho M. Lee, Esq.
FirstName LastName