Advanced Flower Capital Inc. 8-K

What Happened
Advanced Flower Capital Inc. (AFCG) completed its conversion from a REIT to a Business Development Company (BDC) around year-end 2025 and on the Conversion Date entered into a new Investment Advisory Agreement (effective January 1, 2026), an Administration Agreement, a Custody Agreement with East West Bank, a Transfer Agency Agreement with Equiniti, and a Services Agreement with PINE Advisors. The Company terminated its prior Amended and Restated Management Agreement (no termination fee). AFCG also filed a Certificate of Notice removing certain REIT-related ownership and transfer restrictions, adopted amended bylaws (including a majority voting standard in contested director elections), and adopted a new Code of Ethics for senior financial officers. The Company appointed Pete Sattelmair as assistant treasurer and principal financial officer effective March 16, 2026. A press release announcing the Conversion was issued December 31, 2025.

Key Details

• Investment Advisory fee: Base management fee = 1.50% annually of average gross assets (cash excluded); reduced by 50% for certain outside fees and reduced to 1.00% above a “Leverage Break Point” (assets > 200% of NAV).
• Incentive fees: Two-part structure — quarterly incentive based on trailing four quarters pre-incentive net investment income vs. a New Hurdle Rate (1.5% per quarter / 6.0% annualized) with a “catch-up” and a 17.5% carry above specified thresholds (detailed catch-up and thresholds in agreement).
• Agreement terms: Initial terms run through Dec 31, 2027, then renew annually subject to board and required independent director/stockholder approvals under the Investment Company Act of 1940.
• Service providers: Custodian = East West Bank; Transfer Agent = Equiniti Trust Company, LLC; PINE Advisors to provide PFO/CCO services (PFO begins March 16, 2026).

Why It Matters
The conversion to a BDC changes AFCG’s regulatory framework, governance, shareholder rights, and compensation structure for its manager — all material to investors. The new management and incentive fee terms (base fee, leverage breakpoint, and multi-part incentive) determine how much the manager earns relative to the Company’s assets and income, which can affect net returns to shareholders. Governance updates (bylaws, voting standards, Code of Ethics) and appointment of an experienced PFO aim to align AFCG with typical BDC compliance and oversight requirements. Investors should review the full agreements and the Company’s filings for details on fees, conflicts, and operational impacts.