Q4 2024 Sachem Capital Corp Earnings Call
Operator: Greetings, and welcome to the Sachem Capital Corp. 4th Quarter 2024 Earnings Call. At this time, all participants are in a listen-only mode.
Greetings and welcome to the <unk> Capital Corp, fourth quarter 2024 earnings call.
At this time all participants are in a listen only mode. A question and answer session will follow the formal presentation. If an engine if anyone should require operator assistance. During the conference. Please press star zero on your telephone keypad.
Operator: A question-and-answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press star zero on your. As a reminder, this conference is being recorded.
As reminder, this conference is being recorded I would now like to turn the conference over to your host Mr. Steve Swett Investor Relations for Stadium Capital Corp. Thank you you may begin.
Steve Swett: I would now like to turn the conference over to your host, Mr. Steve Swett, Investor Relations for Sachem Capital Corp. Thank you. You may begin.
Steve Swett: Good morning, everyone. Thank you for joining Sachem Capital Corp's full year 2024 conference call.
John Bill: Good morning, everyone and thank you for joining stay tuned capital Corp's full year 2024 conference call on the call for <unk> capital Today is Chief Executive Officer, John Bill on CPA, and interim Chief Financial Officer, Jeff Walraven.
Steve Swett: On the call from Sachem Capital today is Chief Executive Officer John Villano, CPA, and Interim Chief Financial Officer Jeff Walraven.
Steve Swett: This morning, the company announced its operating results for the year ended December 31st, 2024, and its financial condition as of that date. The press release is posted on the company's website, www.sachemcapitalcorp.com.
John Bill: This morning, the company announced its operating results for the year ended December 31st 2024, and its financial condition as of that date. The press release is posted on the company's website Www Dot <unk> capital Corp Dot com.
Steve Swett: As a reminder, remarks made on today's conference call may include forward-looking statements. Forward-looking statements are subject to risks and uncertainties that may cause actual results to differ materially from those discussed today. We do not undertake any obligation to update our forward-looking statements in light of new information or future events.
John Bill: As a reminder remarks made on today's conference call May include forward looking statements.
John Bill: These statements are subject to risks and uncertainties that may cause actual results to differ materially from those discussed today we.
John Bill: We do not undertake any obligation to update our forward looking statements in light of new information future events.
Steve Swett: For a more detailed discussion of the factors that may affect the company's results, please refer to our earnings release for this quarter and to our most recent SEC filing.
John Bill: For a more detailed discussion of the factors that may affect the Companys results. Please refer to our earnings release for this quarter and to our most recent SEC filings.
Steve Swett: During this call, the company will be discussing certain non-GAAP financial measures. More information about these non-GAAP financial measures and reconciliations to the most directly comparable GAAP financial measures are contained in our SEC filings.
John Bill: During this call the company will be discussing certain non-GAAP financial measures more information about these non-GAAP financial measures and reconciliations to the most direct directly comparable GAAP financial measures are contained in our SEC filings with that ill turn the call over to John.
John Villano: With that, I'll turn the call over to John. Thank you, and thanks to everyone for joining us today. The theme of our call today is past, present, and future. Let's start with the past. 2024 was a difficult year for the lending community, and Sachem was not immune to the dislocations within our industry. Restrictive bank lending policies, occupancy and valuation fears within the commercial real estate sector, interest rate uncertainty, coupled with higher completion costs for ongoing construction projects, impacted our borrowers significantly. These challenges increased uncertainty around project completions, making it difficult for borrowers to secure takeout or long-term finance.
John Bill: Thank you and thanks to everyone for joining us today the theme of our call today is past present and future.
Speaker Change: Let's start with the past.
Speaker Change: 2024 was a difficult year for the lending community and <unk> was not immune to the dislocations within our industry.
Speaker Change: Restrictive bank lending policies occupancy and valuation fierce within the commercial real estate sector interest rate uncertainty, coupled with higher completion costs for ongoing construction projects impacted our borrowers significantly.
Speaker Change: These challenges increased uncertainty around project completions, making it difficult for borrowers to secure take out our long term financing.
John Villano: Provide additional perspective of these challenges. Our non-performing loan book grew year over year by $18.3 million net to $102.9 million, and we foreclosed or took a deed in lieu converting loans to real estate owned by approximately $25.6 million gross or $14.6 million net. We also incurred approximately $53.8 million in non-cash losses from CECL, valuation allowances, and realized losses on loan sales. We took proactive actions in 2024 as we removed non-performing loans as well as weaker troubled borrowers from our loan portfolio. But importantly, these actions enabled us to stabilize our portfolio and position Sachem for future opportunities.
Speaker Change: To provide additional perspective of these challenges.
Speaker Change: Our nonperforming loan book grew year over year by $18 3 million net to $102 9 million and we foreclose or took a deed in lieu.
Speaker Change: <unk> loans to real estate owned by approximately $25 6 million gross or 14.6 million net.
Speaker Change: We also incurred approximately $53 8 million noncash losses from seasonal valuation allowances and realized losses on loan sales.
Speaker Change: We took proactive actions in 2024, as we remove nonperforming loans as well as weaker troubled borrowers from our loan portfolio.
Speaker Change: Importantly, these actions enabled us to stabilize our portfolio and position <unk> for future opportunities.
John Villano: I want to provide some additional context on these challenge development loans. First, most are from 2021 and 2022 vintages that were underwritten in a near historic low interest rate environment marked by relatively no inflation. As work progressed on these projects, COVID-related labor and material cost inflation jumped drastically, impacting construction costs, which, coupled with higher interest rates, made our borrowers' ability to refinance an impossibility. These construction loans were a significant part of our non-performing loan portfolio in 2024. These loans have largely been worked through, and our confidence in our remaining book of net assets is very high.
Speaker Change: I wanted to provide some additional context on these challenged development loans.
Speaker Change: First most of our from 2021 and 2022 vintages that were underwritten in a near historic low interest rate environment marked by relatively no inflation.
Speaker Change: That's work progressed on these projects corporate related labor and material cost inflation jumped drastically impacting construction cost, which coupled with higher interest rates and our borrower's ability to refinance at an impossibility.
Speaker Change: These construction loans for a significant part of our nonperforming loan portfolio in 2024.
Speaker Change: These loans have largely been worked through and our confidence in our remaining book of net assets is very high.
John Villano: During the fourth quarter, we closed on a $56 million UPB sale of non-performing loans, receiving $36.1 million in cash proceeds. While these non-performing assets were properly collateralized, we needed to sell the loans to pay off our notes due December 2024. We also utilized proceeds to begin to recycle stagnant capital and to lower some of the earnings drag associated with these loans. This decision positioned us to be able to renew our search for accretive financing sources to restart the growth of our business. We believe this sale was the most direct path to stabilize our portfolio and start the process to grow our dividend as we look ahead.
Speaker Change: During the fourth quarter, we closed on a $56 million <unk> sale of nonperforming loans, receiving $36 1 million in cash proceeds while these nonperforming assets for properly collateralized, we needed to sell the loans to pay off our notes due December 2024, we also utilized proceeds to begin to recycle stag.
Speaker Change: <unk> capital and to lower some of the earnings drag associated with these loans. This decision positioned us to be able to renew our search for accretive financing sources can we start the growth of our business.
Speaker Change: We believe this sale was the most direct path to stabilize our portfolio sorry, the process to grow our dividend as we look ahead.
John Villano: At year-end 2024, loans held in our investment portfolio included 157 loans with gross principal value of $377 million and a weighted average contractual interest rate of 12.53 percent. During the year, we had funded approximately $134 million in loans, modifications, and extensions. Our portfolio is diversified across 14 states and the District of Columbia, and over 56 percent of our principal balance is in residential real estate.
Speaker Change: At year end 2024 loans held in our investment portfolio included 157 allowance with gross principal value of $377 million and a weighted average contractual interest rate of 12 five 3% during.
Speaker Change: During the year, we had funded approximately 134 million in loans modifications and extensions our portfolio is diversified across 14 states and the district of Columbia and over 56% of our principal balances invested actual real estate.
John Villano: Let's move on to the present. These strategic steps I just shared, although painful, have put many of our challenges behind us and our portfolio of assets is now significantly stabilized. Additionally, over the past couple of years, we have successfully diversified our business model and resulting cash flows.
Speaker Change: Let's move on to the present.
Speaker Change: These strategic steps I just shared although painful.
Speaker Change: Many of our challenges behind us and our portfolio of assets is now significantly stabilized.
Speaker Change: Additionally over the past couple of years, we have successfully diversified our business model and resulting cash flows.
John Villano: An important part of our diversification is Urbane New Haven, which strengthens our expertise in real estate development and construction services. Urbain oversees construction loan servicing, asset management, and our investments held in real estate. Urbain has continued to be a critical part of our efforts to enhance our underwriting guidelines and our construction service policies and procedures.
Speaker Change: An important part of our diversification is there a band new Haven with strengthens our expertise in real estate development and construction services.
We're being overseas construction loan servicing asset management, and our investments held in real estate.
Speaker Change: <unk> has continued to be a critical part of our efforts to enhance our underwriting guidelines and our construction service policies and procedures.
John Villano: As we move forward, we will selectively build a pipeline of development projects whereby completion risk is minimized, market rate earnings are captured, and Sachem can benefit from asset appreciation should any occur. We currently have four urbane real estate development projects underway, one in Westport, Connecticut, and three in Coconut Grove, Florida. One notable example of these projects is our Watermark Project in Westport, Connecticut. Watermark is a 15 acre parcel on which we are renovating a 50,000 square foot office building and plan to build 10 luxury residential homes on the site. The office component is already 50% pre-leased, with an expected completion date in the first half of 2025.
Speaker Change: As we move forward, we will selectively build a pipeline of development projects whereby completion risk is minimized market rate earnings are captured and say to them can benefit from asset appreciation should any occur.
Speaker Change: We currently have four urbane real estate development projects underway, one in Westport, Connecticut, and three in Coconut Grove, Florida.
Speaker Change: One. Notable example of these projects is our watermark project in Westport, Connecticut.
Speaker Change: Watermark is a 15 acre parcel on which we are renovating a 50000 square foot office building and plan to build 10 luxury residential homes on the site.
Speaker Change: The office component is already 50% pre leased with an expected completion date in the first half of 2025.
John Villano: The sale of the residential component of this project will significantly reduce our investment in the overall project, and our existing tenant is well-known, financially stable, and paying a market rate of approximately $1.4 million annually on a 10-year straight-line recognition basis. Lastly, we expect Urbane to contribute to consolidated earnings as all of our in-process construction loans pay us a construction service fee of 1-2% of construction costs. This income is expected to increase when we return to a more robust lending environment.
Speaker Change: The sale of the residential component of this project will significantly reduce our investment in the overall project.
Speaker Change: And our existing tenants as well now financially stable and paying a market rate of approximately $1 4 million annually on a 10 year straight line recognition basis.
Speaker Change: Lastly, we expect <unk> to contribute to consolidated earnings as all of our in process construction loans payoffs, a construction service fee of 1% to 2% of construction costs.
Speaker Change: Net income is expected to increase when we returned to a more robust lending environment.
John Villano: We have also continued to grow our previously established partnership with Shemcrete Capital, a commercial real estate finance platform that provides debt capital solutions to multifamily, workforce housing, and industrial real estate owners, with a portfolio diversified across the northeastern United States. This investment aligns with our belief in multi-family housing as a strong credit product, especially in the current high-cost environment where producing new residential supply is challenging. At year-end 2024, we had invested an aggregate of $48.9 million in 28 projects managed by Shem Krieg through six SPE funds. In 2024, these multifamily investments generated approximately $5.1 million in revenue, representing an attractive low-risk, double-digit yield.
Speaker Change: We have also continued to grow our previously established partnership with Sham Creek capital a commercial real estate finance platform that provides that capital solutions to multifamily workforce housing and industrial real estate owners with a portfolio of diversified across the northeastern United States.
Speaker Change: This is this investment aligns with our belief in multifamily housing as a strong credit product, especially in the current high cost environment, where producing new residential supply is challenging.
Speaker Change: At year end 2024, we had invested an aggregate of $48 9 million and 28 projects managed by Shannon Curry grew six SPE funds.
Speaker Change: In 2020 for these multifamily investments generated approximately $5 1 million in revenue, representing an attractive low risk double digit yield.
John Villano: Sachem also invested $2.5 million last year, and subsequently in the first quarter of 2025, an additional $2.5 million into Shem Creek, bringing our ownership and the manager to 20%, further solidifying our desire to grow the Shem relationship.
Speaker Change: <unk> also invested $2 5 million last year and subsequently in the first quarter of 2025, and additional $2 5 million into <unk>, bringing our ownership in the manager to 20% further solidifying our desire to grow the sham relationship.
John Villano: Now let's move on to the future. We are pleased that we closed on the termination of our old and replacement with our new credit facility with Needham Bank. eliminating the previously disclosed loan covenant matter that existed on the Needham facility. This replacement facility is nearly identical to the previous credit facility and provides for up to $50 million of committed available liquidity for Sachem, subject to an assigned and pledged borrowing base and an attractive interest rate.
Speaker Change: Now, let's move on to the future.
Speaker Change: We are pleased that we closed on the termination of our old and replacement with our new credit facility with Needham Bank.
Speaker Change: Eliminating the previously disclosed loan covenant matter that existed on the Needham facility.
Speaker Change: This replacement facility is nearly identical to the previous credit facility and provides for up to $50 million of committed available liquidity for CGM subject to an assigned and pledged borrowing base and an attractive interest rate.
John Villano: We will continue to seek affordable capital to shift to a more offensive strategy, but until additional capital can be sourced, we must protect our liquidity, knowing this measure comes at a cost, potentially impacting near-term earnings. That said, we will continue our pursuit of a creative capital that will allow us to compete for the best loans and engage with more experienced sponsors. We are confident in our financial position as we move through 2025. Our low leverage compared to our peers gives us stability during difficult times. Last year, Sachem retired two issuances of our unsecured, unsubordinated notes, totaling 58.3 million without having to issue any significant dilutive equity.
Speaker Change: We will continue to seek affordable capital to shift to a more offensive strategy.
Speaker Change: Until additional capital can be sourced we must protect our liquidity knowing this measure it comes at a cost potentially impacting near term earnings.
Speaker Change: That said, we will continue our pursuit of accretive capital that will allow us to compete for the best loans and engaged with more experienced sponsors.
Speaker Change: We are confident in our financial position as we move through 2025, our low leverage compared to our peers gives us stability during difficult times.
Speaker Change: Last year <unk> retired two issuances of our unsecured and subordinated notes totaling $58 3 million without having to issue any significant dilutive equity.
John Villano: Additionally, we reduced our other aggregate outstanding debt on lines of credit and repurchase agreements by $14.5 million.
Speaker Change: Additionally, we reduced our other aggregate outstanding debt on lines of credit and repurchase agreements by $14 5 million.
John Villano: Compressing our balance sheet is never without pain, but we felt this outcome was preferable than raising the wrong capital. At year-end 2024, our book value was $2.64 per share. We have stress-tested our book value, and we believe most of the material losses and reserves of the past couple of years are largely behind us. Regarding our $56.6 million in unsecured notes due September 2025, we are confident that our current business assets, existing credit facilities, and operations will generate enough cash to comfortably satisfy these notes when they become due. These notes would be satisfied from cash on hand, liquidity from our Needham facility, and ongoing portfolio cash flows from our business.
Speaker Change: Compressing our balance sheet has never without pain, but we felt this outcome was preferable than raising the wrong capital.
Speaker Change: At year end 2024, our book value was $2 64 per share.
Speaker Change: We have stress tested our book value and we believe most of the material losses and reserves over the past couple of years are largely behind us.
Speaker Change: Regarding our $56 6 million in unsecured notes due September of 2025, we are confident that our current business assets existing credit facilities and operations will generate enough cash to comfortably satisfy these notes when they come to you.
Speaker Change: These notes will be satisfied from cash on hand liquidity from our Needham facility and ongoing portfolio cash flows from our business.
John Villano: If we are able to source additional cost-effective capital earlier, a road to recovery and portfolio growth will occur sooner. We expect to continue to resolve our REO and non-performing loans.
Speaker Change: If we are able to source additional cost effective capital earlier, a road to recovery and portfolio growth will occur sooner.
Speaker Change: We expect to continue to resolve our Oreo and nonperforming loans.
John Villano: However, we will focus on one-off sales to maximize value rather than a portfolio sale to achieve the best outcome for our shareholders. For an important reference point, though, we would note that during 2024, we did successfully resolve $25.1 million of net UPB and fees for $31.1 million in cash collected. On this same point, prior to finalizing our fourth quarter loan sale efforts, we did pull about $10.9 million in assets from the loan sale pool. We saw other near-term avenues to maximize principal recovery through individual sales rather than a discounted wholesale sale. We have appropriately reserved these loans and expect to recycle this stagnant capital during 2025.
Speaker Change: Over we will focus on one off sales to maximize value rather than a portfolio sale to achieve the best outcome for our shareholders.
Speaker Change: For an important reference point, though we would note that during 2024, we did successfully resolved $25 1 million of net <unk> and fees for $31 1 million in cash collected.
Speaker Change: On the same point prior to finalizing our fourth quarter loan sale efforts, we did pull about $10 9 million in assets from the loan sale pool.
Speaker Change: Saw other near term avenues to maximize principle recovery through individual sales rather than a discounted wholesale sales.
Speaker Change: We have appropriately reserve these loans and expect to recycle the stagnant capital during 2025.
John Villano: The conversion of our REO and NPLs to cash are instantly accretive to cash flow and earnings per share.
Speaker Change: The conversion of our RVO and Npls to cash are instantly accretive to cash flow and earnings per share.
Jeff Walraven: I will now turn the call over to Jeff to discuss our 2024 financial results in more detail. Thank you, John. Let me start by summarizing our consolidated numbers with a view from the top. I'll start with the results from our 2024 Annual Statement of Operations. revenue totaled $57.5 million, including $43.2 million in interest income, $8.6 million in fees from loans and $5.2 million from our LLC partnership investment. Operating and other costs totaled $97.1 million, including $15.5 million in G&A expenses, inclusive of compensation and benefits, which was outsized by approximately $2 million in one-time professional fees.
Speaker Change: I will now turn the call over to Jeff to discuss our 2020 for our financial results in more detail.
Jeff: Thank you John let me start by summarizing our consolidated numbers with a view from the top.
Speaker Change: I'll start with the results from our 2024 annual statement of operations.
Speaker Change: Revenue totaled $57 5 million, including $43 2 million in interest income $8 6 million in fees from loans and $5 2 million from our LLC partnership investments.
Speaker Change: Operating and other costs totaled $97 1 million, including $15 5 million and G&A expenses inclusive of compensation and benefits, which was outsized by approximately $2 million in one time professional fees.
Jeff Walraven: $27.8 million in debt service interest costs. $32 million in unrealized losses from aggregate feasible general and specific reserves and valuation allowances, and lastly, $22 million of realized losses. from the fourth quarter loan sale. Net, this resulted in gap net loss of $39.6 million. And after payment of the Series A preferred stock dividends of $4.3 million, a bottom line of net loss available to common shareholders of $43.9 million for the year.
Speaker Change: $27 8 million in debt service interest costs.
Speaker Change: $32 million in unrealized losses from aggregate seasonal general and specific reserves and valuation allowances and lastly, $22 million of realized losses.
Speaker Change: From the fourth quarter loan sale.
Speaker Change: Net this resulted in GAAP net loss of $39 6 million and after payment of the series a preferred stock dividends.
Speaker Change: $3 million of bottom line of net loss available to common shareholders of $43 9 million for the year.
Jeff Walraven: I'll take a minute and highlight here that adjusting on a pro forma basis, the $39.6 million net loss for the $54 million of total non-cash unrealized and realized loan portfolio losses taken in 24, we would otherwise be reflecting $14.4 million of GAF net income as compared to the same adjusted number for 2023 of $21.5 million. This adjusted net income view is further validated and supported when you consider our 2024 cash flows present net cash provided by operating activities of $12.8 million.
Speaker Change: I'll take a minute and highlight here that adjusting on a pro forma basis, the $39 6 million net loss for the $54 million of total noncash unrealized and realized loan portfolio losses taken in 'twenty, four we would otherwise be reflecting $14 4 million of GAAP net income.
Speaker Change: As compared to the same adjusted number for 2023 of $21 5 million.
Speaker Change: This adjusted net income view is further validated and supported when you consider our 2020 for cash flows present net cash provided by operating activities of $12 8 million.
Jeff Walraven: I'll move on to covering our 2024 year-end balance sheet. Total assets were $492 million, consisting of $19.5 million in cash and investments, $466.2 million in mortgage loan and real estate assets, and $6.3 million of other assets. Total liabilities were $310 million, consisting of $301 million of aggregate outstanding debt and $9 million of other liabilities. Total shareholders net equity was 182 million with a book value of common share per $2.64 adjusted for the preferred share liquidation value.
Speaker Change: I'll move on to covering our 2024 year end balance sheet.
Speaker Change: Total assets were $492 million, consisting of $19 5 million in cash and investments.
Speaker Change: 406, $466 2 million in mortgage loan and real estate assets and $6 3 million of other assets.
Speaker Change: Total liabilities were 310 million consisting of $301 million of aggregate outstanding debt and $9 million of other liabilities.
Speaker Change: Total shareholders' net equity was $182 million with a book value of common share or $2.64.
Speaker Change: Thats it for the preferred share liquidation value.
Jeff Walraven: Now, let me hit the cash flow highlights. As mentioned earlier, we did generate cash provided by operating activities at $12.8 million. And as previously mentioned, the primary reconciling impact from the net loss of the $39.6 is the $54 million in recorded non-cash loss adjustments. Otherwise, all other operating changes were status quo in nature.
Speaker Change: Now, let me hit the cash flow highlights as mentioned earlier, we did generate cash provided by operating activities of $12 8 million.
Speaker Change: As previously mentioned the primary reconciling impact from the net loss of $39 six.
Speaker Change: Is the $54 million and recorded noncash loss adjustments otherwise all other operating changes were status quo in nature.
Jeff Walraven: On investing activities, we generated net cash provided by such activities of $80.1 million. The primary factors of this result were the net aggregate proceeds from purchase and sale of investment securities during the year of $36 million, net aggregate proceeds of all loan portfolio activities of $59 million, and a net aggregate additional investments made into LLC partnerships of $11 million.
Speaker Change: On investing activities, we generated net cash provided by such activities of $80 1 million.
Speaker Change: The primary factors of this result were the net aggregate proceeds from purchase and sale of investment securities during the year of $36 million net.
Speaker Change: Net aggregate proceeds of all loan portfolio activities of $59 million.
Speaker Change: And in net aggregate additional investments made into LLC partnerships of $11 million.
Jeff Walraven: on financing activities. We ultimately used net cash of $87.5 million. The primary factors of this net usage was net debt repayments of $73 million over the year and aggregate cash paid in dividends for the year of $21 million. that included $5 million of accrued dividends at the prior 2023 year-end.
Speaker Change: On financing activities, we ultimately used net cash of $87 5 million.
Speaker Change: Primary factors of this net usage was net debt repayments of $73 million over the year and aggregate cash paid in dividends for the year of $21 million.
Speaker Change: That included $5 million of accrued dividends at the prior 2023 year end.
Jeff Walraven: As John and I both mentioned, our book value available to common shareholders at the end of 24 was $124,000,000 or $2.64 per share as compared to the prior year of $179,000,000 or $3.83 per share. This is a change of year over year in book value of $1.19.
Speaker Change: So as John and I, both mentioned our book value available to common shareholders at the end of 'twenty, four was $124 million or $2 64.
Speaker Change: <unk> share as compared to the prior year of $179 million or $3 83 per share.
Speaker Change: This is a change of year over year and book value of $1 19, now the reconciliation of that change in book value is primarily as follows.
Jeff Walraven: Now the reconciliation of that change in book value is primarily as follows. $54 million or $1.15 per share reduction in book value related to the non-cash unrealized and realized losses that are included in operating results. $11.4 million or 24 cents per share reduction in book value related to cash dividends paid to the common shareholders in 2024. and then $10.1 million or a $0.22 per share increase in book value looking at the pro forma adjusted net income adjusted for the losses available to common shareholders of $14.4 million. Now, still to provide a little more color on book value from asset common size point of view, our book value is supported by 4% of cash in investments in marketable securities, about 57.9% by our performing loan book and its related receivables, and about 16.8% on our non-performing loans.
Speaker Change: $54 million or $1 15 per share reduction in book value related to the noncash unrealized and realized losses that are included in operating results.
Speaker Change: 11, 4 million or <unk> 24 per share reduction in book value related to cash dividends paid to the common shareholders in 2024.
Speaker Change: Then $10 1 million or <unk> 22 cents per share increase in book value.
Speaker Change: Looking at the pro forma adjusted net income adjusted for the losses available to common shareholders of $14 4 million.
Speaker Change: Phil will provide a little more color on book value from asset common size point of view our book value is supported by.
Speaker Change: 4% cash invest and investments in marketable securities about 57, 9% by our performing loan book and its related receivables and about 16, 8% on our nonperforming loans. So in aggregate 74, 7% by our total active loan book on a net basis.
Jeff Walraven: So, in aggregate, 74.7% by our total active loan book on a net basis. About 13.8% by our investments in LLC partnerships and investments in real estate. About 6% by our aggregate loans held for sale and REO.
Speaker Change: About 13, 8% by our investments in LLC partnerships and investments in real estate.
Speaker Change: About 6% by our aggregate loans held for sale in Oreo.
Jeff Walraven: And lastly, the remainder is 1.5% in PP&E and other assets.
Speaker Change: And lastly, the remainder is one 5% in PP&E and other assets.
Jeff Walraven: With the broader lending market maintaining its status quo, we expect our new origination pipeline to remain robust beyond what we have the capacity to meet within our existing capital constraints and will stay highly selective due to the current capital markets environment. As a result, our primary focus will continue to be on single-family and multifamily residential assets in growing markets where the market's metrics remain favorable.
Speaker Change: But the broader lending market maintaining its status quo, we expect our new origination pipeline to remain robust beyond what we have the capacity to meet within our existing capital constraints and we will stay highly selective due to the current capital markets environment.
Speaker Change: As a result, our primary focus will continue to be on single family and multifamily residential assets in growing markets or the markets metrics remained favorable.
Jeff Walraven: I want to focus on and reiterate a few key points regarding 2024. Notwithstanding the change in net revenue and the net loss attributable to common shareholders for the year, again, we reported net positive cash flow from Ops of $12.8 million for the year. We continue to pay common and preferred dividends.
Speaker Change: I want to focus on and reiterate a few key points regarding 2024.
Speaker Change: Notwithstanding the change in net revenue and the net loss attributable to common shareholders for the year again, we reported net positive cash flow from ops of $12 one.
Speaker Change: $12 8 million for the year.
Speaker Change: We continue to pay the common and preferred dividends.
Jeff Walraven: We raised an aggregate of $7.8 million of additional capital from the sale of common shares, Series A preferred stock, through our at-the-market offering early on this year. We then funded $134.3 million of mortgage loans, including loan modifications and construction draws, net of construction holdback.
We raised an aggregate of $7 8 million of additional capital from the sale of common shares of series a preferred stock.
Speaker Change: Our at the market offering early on this year.
Speaker Change: We then funded $134 3 million of mortgage loans, including loan modifications and construction draws net of construction hold back.
Jeff Walraven: We maintained our leverage ratio, thereby mitigating the risks should economic conditions deteriorate, where at December 31, 2024, our capital structure was 62% debt and 38% equity, compared to 60.4% debt and 39.6% equity at December 31, 2023. We maintain our strategy to fund larger loans than we have in the past that are secured by what we believe are higher quality properties and that are being developed by borrowers that we deem to be more stable and successful. We believe the migration to these larger loans and better capitalized sponsors will reduce future problems. We also continue to enhance our underwriting guidelines to strengthen our documentation and our collateral position on each of our loans.
Speaker Change: We maintained our leverage ratio, thereby mitigating the risks should economic conditions deteriorate were at December 31, 2020 for our capital structure was 62% debt and 38% equity compared to 64% debt and 39, 6% equity at December 31.
Speaker Change: 23.
Speaker Change: We maintained our strategy to find larger loans than we have in the past that are secured by what we believe are higher quality properties.
Speaker Change: Being developed by borrowers that we deem to be more stable and successful.
Speaker Change: We believe the migration to these larger loans and better capitalized sponsors will reduce future problem loans.
Speaker Change: We also continue to enhance our underwriting guidelines to strengthen our documentation and our collateral position each of our lines.
Jeff Walraven: Closing out my comments here, as discussed in prior quarters, our board regularly evaluates our dividend distribution policy on an ongoing basis. balancing our operational performance, federal tax requirements, and the importance of maintaining our long term financial flexibility.
Speaker Change: Closing out my comments here as discussed in prior quarters, our board regularly evaluates our dividend distribution policy on an ongoing basis.
Speaker Change: Our operational performance federal tax requirements and the importance of maintaining our long term financial flexibility.
Jeff Walraven: Reminding here that on March 6, 2025, the board declared a quarterly common dividend of five cents per share for shareholders of record as of March 17, 2025, payable on March 31, 2025. Going forward, it is anticipated that the company will align the timing of our future common dividend declarations to be in the same timing cadence as our Series A preferred stock dividend payments, meaning each respective quarter, both common and preferred dividend activity will occur in March, June, September, and December.
Speaker Change: <unk> here is that on March 625, the board declared a quarterly common dividend of <unk> <unk> per share for shareholders of record as of March 17th 2025.
Speaker Change: On March 31, two.
Speaker Change: <unk> thousand 25.
Speaker Change: Going forward. It is anticipated that the company will align the timing of our future common dividend declarations to be in the same timing cadence as our series a preferred stock dividend payments.
Speaker Change: In each respective quarter, both common and preferred dividend activity will occur in March June September and December.
John Villano: I'll now turn the call back to John for closing comments.
Speaker Change: I'll now turn the call back to John for closing comments.
John Villano: Thanks, Jeff. As I wrap up our prepared comments, I would like to reiterate important points during our call today as they relate to Sachem moving forward in 2025. First, we now have a stabilized portfolio, and we are well-positioned for future opportunities. Our business is diversified with three verticals, our everyday lending business, a multi-family workforce specialization through Shem Creek, and an in-house construction expertise supplementing our construction loan business and development opportunities. Our partnerships work together to strengthen our business as a whole, providing cash flow stability, potential growth opportunities, and ultimately a stabilized portfolio with diversified cash flow stream.
John Bill: Thanks, Jeff.
John Bill: As I wrap up our prepared comments I would like to reiterate important points during our call today as they relate to <unk> moving forward in 2025.
John Bill: We now have a stabilized portfolio and we are well positioned for future opportunities.
John Bill: Our business is diversified with three verticals are everyday lending business.
John Bill: Multifamily workforce special specialization through Sham Creek, and an in house construction expertise supplementing our construction loan business development opportunities.
John Bill: Our partnerships worked together to strengthen our business as a whole providing cash flow stability potential growth opportunities and ultimately a stabilized portfolio with diversified cash flow streams.
John Villano: We are confident our current business operations will generate enough cash flow to satisfy our September notes when they come due. Our current lending approach, which encompasses protection of liquidity and strict loan selection, will continue to impact earnings until we secure cost-efficient capital and a tight funding environment begins to ease. Furthermore, without new loan originations, our origination fee income will continue to be negatively affected. We have extensive expertise navigating different investment and capital markets environments, and our underwriting and management teams are experienced and cycle-tested with post-COVID loan originations performing well with 113 loans, totaling $192.4 million in new loan originations and only $2.2 million in default status, representing approximately 1% of new originations.
John Bill: We are confident in our current business operations will generate enough cash flow to satisfy our September notes when they come to you.
John Bill: Our current lending approach, which encompasses protection of liquidity and strict strict loan selection will continue to impact earnings until we secure cost efficient capital and a tight funding environment begins to ease.
John Bill: Furthermore, without new loan originations, our origination fee income will continue to be negatively affected.
We have extensive expertise navigating different investment and capital markets environments, and our underwriting and management teams are experienced and cycle tested with post COVID-19 loan originations performing well with 113 loans totaling $192 $4 million in new loan originations.
John Bill: And only $2 2 million in default status, representing approximately 1% of new originations.
John Villano: And lastly, our pipeline of potential opportunities remains robust, even as we continue to be prudent with capital deployment. We are excited to reposition Sachem as a market leader in small balance real estate finance. While we expect additional challenges to emerge in our industry, we look forward to refilling our loan pipeline and funding a creative project.
John Bill: And lastly, our pipeline of potential opportunities remains robust even as we continue to be prudent with capital deployment.
John Bill: We are excited to reposition <unk> as a market leader in small balance real estate finance.
John Bill: While we expect additional challenges to emerge in our industry, we look forward to refilling, our loan pipeline and funding accretive projects.
John Villano: While it will take time, we expect to grow book value and raise our dividend as we work to reward our shareholders.
John Bill: While it will take time, we expect to grow book value and raise our dividend as we work to reward our shareholders. Thank.
Operator: Thank you, and we will now open the call to questions from our analysts. Thank you. If you'd like to ask a question, please press star 1 on your telephone keypad. A confirmation tone will indicate your line is in the question...
John Bill: Thank you and we will now open the call to questions from our analysts.
John Bill: Thank you if you'd like to ask a question. Please press star one on your telephone keypad, a confirmation tone will indicate your line is in the question queue.
Operator: You may press star 2 if you'd like to remove your question from the For participants using speaker equipment, it may be necessary to pick up your handset before pressing the start button.
John Bill: You May press star two if you'd like to remove your question from the queue for participants using speaker equipment. It may be necessary to pick up your handset before pressing the star keys.
Gaurav Mehta: Our first question comes from the line of Gaurav Mehta with Alliance Global Partners. Please proceed with your question. Thank you. Good morning.
Speaker Change: Our first question comes from the line of Gaurav Mehta with Alliance Global Partners. Please proceed with your question.
Gaurav Mehta: Thank you good morning.
John Villano: I wanted to ask, I'm not sure if I missed this in the call, can you remind us what's the balance for the loans in non-accrual and foreclosure status as a 4Q? Okay, what I'll do here is non-performing loans are approximately $100 million as of December 31st. We are making inroads with respect to the non-performings. However, Gaurav, it does take time. We have been able to resolve a significant portion of our NPLs during 2024, where we resolved $25.1 million of unpaid principal for $31.1 million in cash. So our non-performings are still elevated. They are being worked on, they are coming down.
Gaurav Mehta: Mark I wanted to ask.
Gaurav Mehta: I'm not sure if I missed this on the call can you remind us what's the balance for the loans in nonaccrual and foreclosure that is at La <unk>.
Gaurav Mehta: Okay.
Gaurav Mehta: Well, what I'll do here is.
Gaurav Mehta: Nonperforming loans of approximately $100 million.
Gaurav Mehta: As of December 31, we are making inroads with respect to the nonperforming. However, grab it does it does take time.
Gaurav Mehta: We have been able to resolve a significant portion of our npls during 2024, where we resolved $25 1 million of unpaid principle for $31 $1 million in cash.
Gaurav Mehta: So our nonperforming are still elevated.
Gaurav Mehta: They are being worked on they are coming down the process is working.
John Villano: The process is working.
John Villano: And with respect to our existing NPL balance, we have a significant loan in Florida that is the majority part of that.
Gaurav Mehta: And with respect to our existing.
Gaurav Mehta: NPL balance.
Gaurav Mehta: We have a significant loan in Florida that is the majority part of that and I will be happy to explain further.
John Villano: And I will be happy to explain further.
Jeff Walraven: But what I will do now is I will ask Jeff Walraven, our interim CFO, to provide a little more color on the NPLs, and then I'll dig into our Florida assets. Yeah, thanks, John. As John mentioned, the 102.9 million is the total NPLs in the Active loan book as of 12-31-24 and relative I think whatever you asked us specifically about foreclosure. The UTD basis of the $102.9 million is $36.3 million is non-performing in the foreclosure process. On a net basis, when you look at the allowance rate, if you look on our balance sheet, there's approximately an $18.5 million total reserves against the active loan book.
Speaker Change: But what I will do now is I will ask Jeff Walraven, our interim CFO to provide a little more color on the Mpls and then I will dig into our Florida assets.
Gaurav Mehta: Okay.
Jeff Walraven: Yes, Thanks, John as John mentioned, the X $102 9 million is the total npls and the.
Jeff Walraven: Active loan book as of 12 31 24.
Jeff Walraven: And relative I think wherever you asked specifically about foreclosures.
Jeff Walraven: The UTD basis of the $102 $9 million was 36.3 million is in the foreclosure as nonperforming in the foreclosure process on a net basis. When you look at the allowance rate. If you look on our balance sheet. There is approximately $18 $5 million total.
The reserves against the active loan book.
Jeff Walraven: Approximately 6.1 million of that is specific to non-performing and foreclosure assets.
Jeff Walraven: <unk> six.
Jeff Walraven: $1 million of that is specific to nonperforming and foreclosure assets.
Jeff Walraven: Thank you, Jeff.
Jeff Walraven: Thank you Jeff.
John Villano: And further discussion is warranted with respect to our significant Florida asset in Naples, Florida, and I don't want to get off track here, Gaurav, but I think this provides a little bit of additional color for our group. So we have a project in Naples, Florida. Sachem Capital has invested approximately $50 million in two parcels of property in downtown Naples. Currently the project is in process. There have been four completed units. One has been recently sold. The building is permitted and being marketed for sale. We expect to receive in the vicinity of $20 million net from the sale of the remaining three units.
Jeff Walraven: And further discussion is warranted with respect to our significant Florida asset.
Jeff Walraven: In Naples, Florida and.
Jeff Walraven: Not that I don't want to get off track here ground, but I think just provides a little bit of additional color.
Jeff Walraven: For our group here.
Jeff Walraven: So we have a project in Naples, Florida.
Jeff Walraven: <unk> capital has invested approximately $50 million.
Jeff Walraven: And two parcels of property.
Jeff Walraven: In downtown Naples.
Jeff Walraven: Currently the project is in process.
Jeff Walraven: There are there have been four completed units one has been recently sold the building is permitted and and being marketed for sale, we expect to receive in the vicinity of $20 million net.
Jeff Walraven: Net from the sale of the remaining three units.
John Villano: The, uh, an additional parcel, uh, just adjacent to that is, is permitted for four units. Uh, we feel that there's a land value there between 10 and $12 million, perhaps a little bit more, um, based on the selling prices of the current North. In addition, we also have a piece of property on the waterfront that is going through final permitting. We believe the value of that property is $25 million, give or take. There have been some interested parties, according to our borrower, and there is a possibility that that asset may be sold.
Jeff Walraven: The <unk>.
Jeff Walraven: An additional parcel just adjacent to that is permitted for four units.
Jeff Walraven: We feel that there is a land value there between 10 and $12 million.
Jeff Walraven: Perhaps a little bit more based on the selling prices of the current north building.
Jeff Walraven: In addition, we also have a piece of property on the waterfront.
Jeff Walraven: That is going through final permitting.
Jeff Walraven: We believe the value of that property is $25 million.
Jeff Walraven: Give or take there have been some interested parties.
Jeff Walraven: According to our borrower.
Jeff Walraven: And there is a possibility that that asset may be sold.
John Villano: This project has had a bumpy path. Some clarity needs to be spoken here. First and foremost, there were significant permitting issues with respect to the city of Naples and the architecture and design of the building, causing significant delay problems. The property has gone through two hurricanes. We are also concerned with general contractor performance and also the performance of our borrower. The project has taken way too long to get to where it is now today and needless to say time is money. In addition, there are former partners of the borrower that have impacted the property by ongoing delays and legal costs.
Jeff Walraven: This project has had a bumpy past.
Jeff Walraven: Some clarity needs to be spoken.
Jeff Walraven: First and foremost.
Jeff Walraven: There were significant permitting issues with <unk> with respect to the city of Naples.
Jeff Walraven: And the architecture and design of the building.
Jeff Walraven: Causing significant delay problems.
Jeff Walraven: The property is going through two hurricanes.
Jeff Walraven: We are also concerned with.
Speaker Change: General contractor performance and also the performance of our borrower. The project has taken way too long to get to where it is now today and needless to say time is money.
Speaker Change: In addition, there are former partners of the borrower that have.
Speaker Change: Impacted the property by ongoing delays in legal costs.
John Villano: where our borrower is forced to, in effect, reside in bankruptcy court in order to fend off the second mortgage. Needless to say, all of these delays have hindered the eventual sale of the properties. Currently, a unit has been sold. We received 5.3 million dollars, maybe 5.5. A well-known individual, a significant individual with knowledge of real estate was the buyer. So we're optimistic that the rest of these units can be sold and this project can begin to move on.
Speaker Change: Where our borrowers forced to in effect.
Speaker Change: Yeah.
Speaker Change: Reside in bankruptcy court in order to fend off the second mortgage.
Needless to say all of these delays have.
Speaker Change: Endured the eventual sale of the properties.
Speaker Change:
Currently a unit has been sold.
Speaker Change: We received $5 $3 million, maybe five 5%.
Speaker Change: A well known individual.
Speaker Change: A significant individual with knowledge of real estate was the buyer. So we're optimistic that the rest of these units can be sold and this project can begin you begin to move on.
Speaker Change: Sure.
John Villano: So in any case, it's been a troubled past. I will say that our initial investment into that project was $20 million for really the three parcels. Sachem has earned approximately $14 million in interest and fees over the term of this project. And when you look at our NPLs historically and company-wide, this loan is a 2021 loan. It's a COVID issue, just like the stuff that was sold in our loan sale. We had accelerated construction costs. We had permitting. We had slowness of delays in completion.
Speaker Change: So in any case, it's been a troubled past.
Speaker Change: I will say that.
Speaker Change: Initially our initial investment into that project was.
Speaker Change: $20 million.
Speaker Change: Really the three parcels.
Speaker Change: <unk> has earned approximately $14 million.
Speaker Change: Just in fees over the term.
Speaker Change: This project.
Speaker Change: And then when you look at our NPL historically and companywide.
Speaker Change: This loan is a 2021 loan.
Covid issue just like our <unk>.
Speaker Change: <unk> that was sold in our loan sale.
Speaker Change: We had accelerated construction costs, we had permitting we had slowness delays in completion.
John Villano: So if there's a perfect storm, Gaurav, this is it. So we are optimistic. We are not accruing income on the loan, which is impacting earnings. And that's around $450,000 a month, so it hurts. But I do think we're getting to a point where this thing can start to turn over and get some of our capital back. It has taken too long, and when you're dealing with expensive money, as we've all talked about before, delays are extremely painful and debilitating to project success. Jeff, any further comments on our Naples asset?
Ed: If there is if there was a perfect storm Gaurav this is Ed.
Ed: We are optimistic we are not accruing income on the loan.
Ed: Which is impacting earnings.
Ed: That's around $450000 a month.
Ed: It hurts.
Ed: But I do think we're getting to a point, where this thing could start to turn it over and get some of our capital back.
Ed: It has taken too long.
Ed: And when youre dealing with expensive money as we've all talked about before.
Ed: Delays are extremely painful.
Ed: Debilitating.
Ed: <unk> success.
Ed: Jeff any further comments on our Naples asset.
Jeff Walraven: No, I think you've covered that one quite well. Thank you. That's great color.
Jeff Walraven: No I think you've covered that quite well at this point.
Ed: Okay.
Speaker Change: Thank you that's.
Ed: That's great color.
Gaurav Mehta: Maybe one more on the unfunded loan commitments. Can you remind us where that number stands and how much of that is expected to be funded this year? So, Gaurav's number... Gaurav, that number has been coming down because we're not lending as robustly as we have in the past. So, in the past, it was north of $100 million, it is now mostly half of that, and Jeffrey can give you the exact details of where we stand, and it is continuing to be reduced. Yeah, in total, Gaurav, we have approximately $49.9 million in unfunded commitments as of 12-31-24 on the basic loan lines.
Ed: Maybe one more on the unfunded loan commitments can you remind us where that number stands and how much of that is expected to be funded this year.
Brian: So glad that I'm Brian.
Brian: And Jeffrey I'm going to I'll turn it over to you in a SEC.
Brian: That number has been coming down because we're not lending as robustly as we have in the past.
Brian: So in the past it was north of $100 million is now mostly half of that.
Brian: Geoffrey can give you the exact details of where we stand.
Speaker Change: And it is continuing to be reduced.
Jan: Go ahead Jan total garage, we had approximately 49 9 million in unfunded commitments as of 12 31 24.
Jan: The basic online. We also do have approximately $4 $4 5 million of unfunded commitments relative to our.
Jeff Walraven: We also do have approximately $4-4.5 million of unfunded commitments relative to our The investments and partnerships and stuff that we are doing with Shem Creek and so in total about 54 million in unfunded commitments when you kind of spread that out as far as when they that would occur. It's really you know right almost rateably over the year and even bleeds over a little bit into first quarter 26 as far as Intended Unfunded Commitment.
Speaker Change: The investments in partnerships and stuff that we are doing with <unk> Creek and so in total about $54 million in unfunded commitments, when you kind of spread that out as far as when that would occur.
Jan: It's really almost.
Jan: Almost ratably over the year and even bleeds over a little bit into first quarter 2006 as far as.
Jan: Intended unfunded commitments at this point.
Gaurav Mehta: Okay, thank you.
Jan: Okay. Thank you that's all I had.
Gaurav Mehta: That's all I have. Thank you.
Jan: Thank you.
Speaker Change: Thank you, ladies and gentlemen, as a reminder, if you'd like to join the question queue. Please press star one on your telephone keypad.
Operator: Ladies and gentlemen, as a reminder, if you'd like to join the question queue, please press star 1 on your telephone.
Chris Muller: Our next question comes from the line of Chris Muller with Citizens. Please proceed with your question. Hey, John, thanks for taking the questions. So I wanted to ask about the loan sales. Can you guys give us some specifics on how many loans were sold and what the average percent of par was that you sold them at? And I think I just missed some of the numbers that John gave in his remarks. And then just to follow up on that, is the market for loan sales pretty active? Are you guys having to do a lot of work to find buyers out there for some of these loans?
Speaker Change: Our next question comes from the line of Chris Miller with citizens. Please proceed with your question.
Chris Miller: Hey, John Thanks for taking my questions.
Chris Miller: So wanted to ask about the loan sales can you guys give us some specifics on how many loans were sold.
Chris Miller: What the average percent of par was that you sold them out I think I just missed some of the numbers that John gave in his remarks, and then just a follow up on that is the market for loan sales pretty active are you guys having to do a lot of work to find buyers out there for some of these bonds.
John Villano: Chris, I'll give you the basics and Jeff will give you the the nuts and bolts of what happened. So, first and foremost, entering into a note sale arrangement Not only is it difficult, it's certainly not fun. Positive outcomes are hard to get. And in our loan sale, because we had the December unsecured notes maturing and really in our face, we were selling property. with 100% of fair value. in the 70% range. Boy, that's not fun. That is not fun at all. So the process is difficult. It is lengthy. There is constant retrading of commitments. And hopefully, it's not something we have to do in the near future, right?
Chris Miller: Chris I'll give you the basics and Jeff will give you the nuts and bolts of what happened.
Chris Miller: So first and foremost.
Jeff Walraven: Entering into a note sale arrangement.
Jeff Walraven: Not only is it difficult, it's certainly not fun.
Jeff Walraven: Positive outcomes are hard to get.
Jeff Walraven: And in our loan sale.
Jeff Walraven: Because we had the December unsecured notes maturing in really in our face.
Jeff Walraven: We were selling.
Jeff Walraven: Properties.
Jeff Walraven: With 100% of fair value and the.
Jeff Walraven: The 70% range.
Jeff Walraven: Hmm.
Jeff Walraven: That's not fun that is not fun at all so the process is difficult it is lengthy.
Jeff Walraven: There is constant re trading of commitments.
Jeff Walraven: And hopefully it's not something we have to do in the near future right.
Jeff Walraven: But anyway, Jeff, if you'd like to give the details on the note sale, well, feel free. Yeah, so Chris, the total UPB in the loan sale was 55.8 million. And that comprised of 32 loans in total. When you kind of spread across the, you know, the call it the net realization, that average realization before dealing with call it charge-offs relative to just what was remaining fees, and then the cost of the sale itself was around 68% net net net, you know, relative to the math that we are publishing of, you know, 55.8 million UPP for approximately 36 million in total proceeds is about a 65% rounded net realization on those loan sales.
Jeff Walraven: Anyway.
Jeff Walraven: Jeff if you'd like to give the details on the note sale.
Speaker Change: Well feel free.
Chris Miller: Yes, so Chris the total.
Chris Miller: The <unk> and the loan sale was 50 point $55 8 million.
Chris Miller: And that comprised of 32 loans in total.
Chris Miller: When you kind of spread across the.
Chris Miller: Call. It the net realization that average realization before dealing with call it charge offs relative to just.
Chris Miller: Was remaining fees and then the cost of the sale itself was around 68%.
Chris Miller: Net net net relative to the math that we're publishing of $55 8 million <unk> for approximately $36 million in total proceeds.
Chris Miller: It's about a 65% rounded net realization on those loan sales.
Jeff Walraven: I think you asked about I mean, from a there was, I believe, you know, I was not here during the actual portion of that sale that sale was completed before I stepped into the role. There was decent and robust activity on it. and it was run by a group mission that's part of Marcus Millichap. They were very professional about it. There was a good bit of activity.
Chris Miller: I think you asked about I mean from there was I believe.
Chris Miller: Not here during the actual portion of that sale of that sale was completed before I stepped into the role.
Chris Miller: There was decent and robust activity on it.
Chris Miller: Yes.
Chris Miller: It was run by group mission, that's part of the Marcus <unk> Millichap. They were very professional about it there was a good bit of activity.
Jeff Walraven: We are not at the moment pursuing that avenue any further as far as any kind of a bulk portfolio sale or group sales. The remaining assets on the balance sheet, you would see we have loans for sale on a net basis of $10.1 million. Those are net of evaluation allowance that we've taken so far, $4.9 million. That's a small number of loans that are in that, but we are not marketing that as a package. We are handling that ourselves on individual interactions with interested parties. And quite honestly, we are getting inbound, direct inbound inquiries as to whether we have interest in what we may be willing to sell.
Chris Miller: We are not at the moment is pursuing that avenue any further as far as any kind of a bulk portfolio sale or group sales.
Chris Miller: The remaining assets.
Chris Miller: On the balance sheet, you would see we have loans for sale on a net basis of $10 1 million. Those are net of a valuation allowance that we've taken so far are $4 9 million.
Chris Miller: There is a small number of loans that are in that but we are not marketing that as a package we are.
Chris Miller: Handling that ourselves on.
Chris Miller: Individual interactions with interested parties and quite honestly, we are getting inbound direct inbound inquiries as to whether we have interest in <unk> and what we may be willing to sell.
Jeff Walraven: But right now, those assets that we have are the ones that we have officially classified as loan for sale and are taking.
Chris Miller: But right now those those assets that we have are the ones that.
Chris Miller: We have officially classified as loans for sale and are taking conversations on.
Chris Muller: That helpful, Chris. Very helpful.
Chris Miller: That's helpful. Chris Okay very.
John Villano: And then I see, yeah, I see the held for sale loans and then the pickup in REO. So do you guys have any expectation on the timing of sales of the REO or those held for sale loans? And does getting those sold sooner allow you to start new lending sooner? Or do you want to get new financing in place before you start picking up on new lending?
Speaker Change: Very helpful and then I see I see the held for sale loans and then pick up in Oreo. So do you guys have any expectation on the timing of sales of the Rio or those held for sale loans and does getting those sold sooner allow you to start new lending sooner or do you want to get new financing in place before you start picking up on your London.
Chris Miller: Okay.
Chris Miller: So Chris Here's I'm actually.
John Villano: I'm actually flipping some papers here. So yes, we had a large increase in the REO. What you're going to see out of this, it's around 18 and a half million. What you're going to see here are these things starting to fall off the books relatively quick. The issue here is getting title and then being able to do some form of diligence on the asset. So we had this pile of loans come in, these assets come in, and we're working through them. In any case, what we're finding is there are buyers out there, and there are buyers at reasonable prices.
Chris Miller: Flipping some papers here.
Speaker Change: So yes, we have a we had a large increase in the Oreo.
Chris Miller: Sure.
Chris Miller: What youre going to see out of this.
Chris Miller: Around $18 $5 million.
Chris Miller: What youre going to see here in these things starting to fall off the books relatively quickly.
Chris Miller: The issue here is is getting title.
Chris Miller: And then being able to do some form of diligence on the asset. So we had this this pile of loans come in these assets come in and we're working through them.
Chris Miller: In any case, what we're finding is there are buyers out there and there are buyers at reasonable prices. These properties do have value.
John Villano: properties do have value. And at some point, we will realize a significant portion of our invested capital. It's just an unbelievably slow process, but at least now, you know, we have the control as opposed to trying to get the control from our borrowers. Yeah, so I think overall, we're going to start seeing this start to wind down. We've got some very interesting projects here within our REO that could, in fact, turn into equity participations with significant developers. And we're quite excited about that. It's a project that is really being spearheaded by our Urbane group. So we're excited to clear out some of these things.
Chris Miller: And at some point, we will realize a significant portion of our invested capital.
Chris Miller: Just an unbelievably slow process, but at least now we.
Chris Miller: We have the control as opposed to <unk>.
Chris Miller: Trying to get the control from our borrowers.
Chris Miller: Yes, so I think overall, we're going to start seeing this start to wind down.
Chris Miller: That's some very interesting projects here within our Oreo.
Could in fact turn into equity participations with significant developers and we're quite excited about that.
Chris Miller: Project and its really being spearheaded by our by our Bank group.
Chris Miller: So we're excited.
Chris Miller: To clear out some of these things and.
John Villano: And, hey, these things may turn into profit centers.
Chris Miller: Hey.
Chris Miller: Things may turn into profit centers at some point.
Chris Miller: Okay.
John Villano: Got it. It's all very helpful.
Chris Miller: Got it Thats all very helpful. Thanks for taking the questions and look forward to watching the story play out over 2005.
Chris Muller: Thanks for taking the questions and look forward to watching the story play out over 25. Thanks.
Chris Miller: Thanks.
John Villano: Thank you ladies and gentlemen that concludes our question and answer session.
Speaker Change: Thank you, ladies and gentlemen that concludes our question and answer session I'll turn the floor back to Mr. Valvano for any final comments.
John Villano: I'll turn the phone back to Mr. Villano for any Thank you all for joining us today. Please stay in touch. Any questions or further comments on RK or our discussion here today, feel free to email the company. We will get back to you. We're happy to discuss where we are, where we're going forward, and thank you for staying with us. Thanks again. Thank you.
Chris Miller: Thank you all for joining us today, please stay in touch.
Speaker Change: Any questions or further comments on our K oar.
Chris Miller: Sure.
Chris Miller: Our discussion here today feel free to email the company you'll get back to you. We are happy to discuss where we are where we're going forward.
Chris Miller: Thank you for staying with us thanks.
Chris Miller: Thanks again.
Chris Miller: Thank you. This concludes today's conference call you may disconnect. Your lines at this time. Thank you for your participation.
Operator: This concludes today's conference call. You may disconnect your lines at this time. Thank you for your...