Q1 2025 Sachem Capital Corp Earnings Call
Inflation should anyone require operator assistance during the conference. Please press star zero on your telephone keypad. As a reminder, this conference is being recorded it is now my pleasure to hand, it over to Investor Relations. Thank you you may begin.
Speaker Change: Good morning, and thank you for joining the <unk> Capital Corp, 's first quarter 2025 earnings conference call on.
John Bolano: On the call from <unk> capital Today is Chief Executive Officer, John Bolano CPA.
Speaker Change: Interim Chief Financial Officer, Jeff Walraven. This.
Speaker Change: This morning, the company announced its operating and financial results for the quarter ended March 31, 2025. The press release is posted on the Companys website Www Dot <unk> capital Corp Dot com.
Jeffery Walraven: on dividends. First note, we declared and paid our first quarter 2025 dividend during March of 2025. Our board regularly evaluates our dividend distribution policy on an ongoing basis, balancing our operational performance, federal tax requirements, and the importance of maintaining long-term financial flexibility.
Speaker Change: In addition, the company filed its Form 10-Q today, which can be accessed on the company's website as well as the Sec's website at Www Dot SEC Gov.
Speaker Change: As a reminder remarks made on today's conference call May include forward looking statements.
Speaker Change: We're looking statements are subject to risks and uncertainties that may cause actual results to differ materially from those discussed today.
Jeffery Walraven: As a reminder, going forward, the company has aligned the timing of its common dividend declarations and payments to be in line with the timing of our Series A preferred stock dividend. therefore occurring in March, June, September and December.
Speaker Change: We do not undertake any obligation to update our forward looking statements in light of new information or future events.
Speaker Change: 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.
John Villano: I will now turn the call back to John for closing comments. Thanks, Jeff. We are excited with our recent performance and believe Sachem is positioned to be a market leader in small balance real estate finance. We look forward to resolving our remaining NPLs to unlock capital for growth and accessing new sources of accreted capital to refill our loan pipeline. While our recovery is well underway, more time is needed to be fully back on track. We will continue to manage our business, grow book value, and our dividend with the ultimate goal to produce value for our shareholder.
Speaker Change: During this call the company will be discussing certain non-GAAP financial measures.
Operator: Should anyone require operator assistance during the conference, please press star zero on your telephone keypad. As a reminder, this conference is being recorded.
Speaker Change: More information about these non-GAAP financial measures and the reconciliations to the most directly comparable GAAP financial measures are contained in our SEC filings.
Operator: It is now my pleasure to hand it over to Investor Relations. Thank you. You may begin.
John Bolano: With that I'll turn the call over to John.
Speaker Change: Thank you and thanks to everyone for joining US today, we will begin by reviewing our operating and financial results for the first quarter and discuss the future as we continue working towards growing our lending platform and restoring bottom line profits to the company.
John Villano: Good morning, and thank you for joining Sachem Capital Corp's first quarter 2025 earnings conference.
John Villano: On the call from Sachem Capital today is Chief Executive Officer John Villano, CPA, and Interim Chief Financial Officer Jeff Walraven. This morning, the company announced its operating and financial results for the quarter ended March 31st, 2025. The press release is posted on the company's website, www.sachemcapitalcorp.com. In addition, the company file that's Form 10-Q today, which can be accessed on the company's website as well as the SEC's website at www.sec.gov.
Unknown Executive: Thank you, and we will now open the call to questions from our analysts. Thank you.
Speaker Change: The difficulties of last fall, coupled with our desire to protect our balance sheet from non accretive finance set the stage for stability this quarter.
Unknown Executive: We will now be conducting a question and answer session. If you would like to ask a question, please press star 1 on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star 2 if you would 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.
Speaker Change: Further illuminated the path of a recovery to the second quarter of 2025.
Speaker Change: We continue to search for accretive capital to build our business.
Speaker Change: As of today, we have two signed term sheets with well respected lenders. We will keep you informed of our progress on these financing transactions.
John Villano: 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.
Unknown Executive: One moment, please while we pull for questions.
Speaker Change: In 2025, our portfolio is now performing as expected.
Gaurav Mehta: The first question is from Gaurav Mehta from Alliance Global Partners, please go ahead. Thank you. Good morning. I wanted to follow up on your comments around two term sheets with different lenders, and just wanted to get some details. So if you were to execute on those two term sheets, so that would provide funds to address the upcoming debt maturity, or would that provide more funds than that to maybe allocate toward loan origination?
Speaker Change: As stated during our last earnings call our post Covid loan fundings are performing famously.
Speaker Change: While we still have $153 million of nonperforming loans are $124 million of Npls net compared to $103 million of nonperforming loans net as of December 31 2024.
John Villano: 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 Villano: During this call, the company will be discussing certain non-GAAP financial measures. More information about these non-GAAP financial measures and the reconciliations to the most directly comparable GAAP financial measures are contained in our SEC filings.
We did not incur any material incremental markdowns during the quarter.
Speaker Change: The net increase in Npls was due to our Naples, Florida mortgage moving from performing to nonperforming during the quarter as well as other loans totaling $25 million.
John Villano: Hi, Gaurav, good morning. The facility that you're talking about comes in two components. There's an initial funding and a delayed draw. The initial funding will provide some work in capital for us to build our business. The second, the delayed draw will provide funds directly related to the payment of the unsecured notes in September. Okay, so it's so it's not like it won't be like a like a like a note, it's going to be like a credit line. No, it is a term note.
John Villano: With that, I'll turn the call over to John. Thank you and thanks to everyone for joining us today. We will begin by reviewing our operating and financial results for the first quarter and discuss the future as we continue working towards growing our lending platform and restoring bottom line profits to the company.
Speaker Change: Further significant progress has been made as we continue to work through all problem assets.
Speaker Change: We realized a significant part of our dividend growth plan is directly tied to unlocking our nonperforming loans.
Speaker Change: As of March 31, our book value stood at $2 57 per share down less than 3% from year end 2024.
John Villano: The difficulties of last fall, coupled with our desire to protect our balance sheet from non-accretive finance, set the stage for stability this quarter, and further illuminated the path of our recovery to the second quarter of 2025. We continue to search for accretive capital to build our business. As of today, we have two signed term sheets with well-respected lenders. We will keep you informed of our progress on these financing transactions. In 2025, our portfolio is now performing as expected. As stated during our last earnings call, our post COVID loan fundings are performing famously. While we still have $153 million of non-performing loans, or $124 million of NPL's net compared to $103 million of non-performing loans net as of December 31, 2024, we did not incur any material incremental markdowns during the quarter.
Speaker Change: Further we have successfully diversified our business model and cash flow sources through two successful partnerships. These partnerships not only adds stability to our income but create opportunities for further growth.
John Villano: Okay, understood. Gaurav, I'll add real quick. One of the two is the term, as John just described, and we're reserving a portion of that to avoid balance sheet compression via the delay draw. The other facility is a new facility, similar to like a Churchill and others, that would provide other growth on kind of really a direct match of use of those funds for growth assets. So there is a significant component of the two facilities that is related to give us expansionary growth, while a portion of the one is protection, basically liquidity protection from a compression perspective on the The Reduction of the Bond Incident.
Speaker Change: For <unk>, New Haven brings expertise in real estate development and construction services and overseas, our construction loan servicing and asset management. Additionally.
Speaker Change: Additionally, they have added significant expertise to further enhance our underwriting guidelines as well as our construction service policies and procedures.
Speaker Change: <unk> our target is to build a pipeline of development projects, where we can better control risks and returns and Ctrip can benefit from interest on invested capital potential asset appreciation over time.
Speaker Change: As I mentioned on our last call. We currently have four urban real estate development projects underway.
John Villano: The net increase in NPLs was due to our Naples, Florida mortgage moving from performing to non-performing during the quarter, as well as other loans totaling $25 million. Further, significant progress has been made as we continue to work through all problem aspects.
Speaker Change: One in Westport, Connecticut, and three in Coconut Grove, Florida.
Gaurav Mehta: Okay, understood.
Christopher Nolan: Maybe on the macro environment, you touched upon some headwinds in the market.
Speaker Change: We will continue to provide updates as these projects advance toward completion and lease up.
John Villano: I was wondering if you would maybe comment on what you guys saw in April in the loan market as far as credit spreads and loan origination opportunities. Yeah, you know, and you've heard me say this countless times, we are never at a loss of opportunity. We have a significant pipeline. As we discussed, we have more opportunities than we have capital available, seems to be the nature of our business.
Speaker Change: Second <unk> capital a commercial real estate finance platform that provides that capital solutions to multifamily workforce housing and industrial real estate owners aligns with our focus on multifamily housing is a strong credit product, especially in the current high cost environment, where Purdue.
John Villano: We realize a significant part of our dividend growth plan is directly tied to unlocking our non-performing loans. As of March 31st, our book value stood at $2.57 per share, down less than 3% from year-end 2024. Further, we have successfully diversified our business model and cash flow sources through two successful partnerships. These partnerships not only add stability to our income, but create opportunities for further growth. Urbana-New Haven brings expertise in real estate development and construction services and oversees our construction loan servicing and asset management. Additionally, they have added significant expertise to further enhance our underwriting guidelines, as well as our construction service policies and procedures.
Speaker Change: <unk>, new residential supply is increasingly challenging and homeownership is less affordable.
Speaker Change: The <unk> partnership allows us to participate in multifamily finance with strong borrowers borrower sponsorship, but learning great risk adjusted returns.
John Villano: The Significant Pricing Differences That We Are Noticing. is single family and multifamily are commanding better pricing. There is a push in the world today where they are the most sought after asset class in our industry. So lenders are aggressive. with respect to mixed-use development. You know, residential with a retail component on the first floor. We're able to really maintain our standard pricing, which is 12 and 2, 12, 12% interest, 2% origination. And if there's a construction component, we still need to get our construction service fee. And we expect to see further rate compression in the single family, multifamily space.
Speaker Change: Prior to <unk>. This market was not available to us due to our elevated cost of capital.
Speaker Change: At March 31, 2025, we invested an aggregate of $51 4 million in projects managed by <unk> six investment funds and the funds manager.
John Villano: Together, our target is to build a pipeline of development projects where we can better control risk and returns, and Sachem can benefit from interest on invested capital and potential asset appreciation over time. As I mentioned on our last call, we currently have four urban real estate development projects underway, one in Westport, Connecticut, and three in Coconut Grove, Florida. We will continue to provide updates as these projects advance toward completion and lease up. Second, Themcrete Capital, a commercial real estate finance platform that provides debt capital solutions to multifamily, workforce housing, and industrial real estate owners, aligns with our focus on multifamily housing as a strong credit product, especially in the current high cost environment where producing new residential supply is increasingly challenging and home ownership is less affordable.
Speaker Change: In the first quarter these investments generated approximately $2 million in revenue.
Speaker Change: Presenting an attractive low risk double digit yield.
Speaker Change: Turning to the macro environment, our industry continues to face a wide range of headwinds.
Speaker Change: Ongoing tariff uncertainty has contributed to renewed volatility of financial markets, making cost projections and incremental capital sources less predictable.
Gaurav Mehta: Again, it's just the preferred asset class. And a good portion of the industry's capital is flowing into that Okay, thank you.
Speaker Change: Further many real estate construction projects will be affected by increased cost for materials and supplies originating from outside of the U S.
Speaker Change: We do expect product shortages, resulting from supply chain issues.
Gaurav Mehta: That's all I have. Thank you.
Speaker Change: Expectations are for interest rates to decline during 2025 however.
Christopher Nolan: The next question is from Christopher Nolan from Lattinburg, Salmon. Please go ahead. Thank you guys. On the new facilities that you guys mentioned, are they fixed rate or would you benefit if interest rates were increased? We would benefit if rates are cut on one of the facilities. Our delayed draw facility will be a fixed rate. Great. And then what sort of advance rates are you getting on these various facilities, including Up until recently, Churchill was kind of all over the board and they seem to have stabilized a bit. We are getting between 60 and 70 percent advance rates.
Speaker Change: However breakthrough.
Speaker Change: Rates remained elevated as the markets look for stability moving forward.
Speaker Change: While the volume of real estate transactions is gradually recovering its still well below the levels. We saw in the immediate post pandemic pandemic period.
John Villano: The Shem partnership allows us to participate in multifamily finance with strong borrower sponsorship while earning great risk-adjusted return.
Speaker Change: Pricing for many property types and across many markets continues to trend downward as buyers struggle with high real estate costs and costly financing.
John Villano: Prior to SHEM, this market was not available to us due to our elevated cost of capital. At March 31, 2025, we invested an aggregate of $51.4 million in projects managed by Shem Creek through six investment funds and the funds manager. In the first quarter, these investments generated approximately $2 million in revenue, representing an attractive, low-risk, double-digit yield.
Speaker Change: Also.
Speaker Change: Restrictive bank lending policies are still limiting the amount of capital our borrowers can access for takeout financing.
Speaker Change: While these challenges persist they also create meaningful opportunities for ctrip.
John Villano: They are becoming a little more specific with asset type and quality. One of our potential facilities could have advance rates up to 75 or 80 percent. which is very attractive to us, but it is a very specific asset class. It'll be resi and multifamily specifically. The Delayed Draw Facility has a lot more flexibility with advance. you know, in our in our world, we're at 70% LTV. So, you know, we're getting much less than the amount needed to close these things. So, you know, we have to maintain our liquidity to do this. So we're basically getting, in most cases, 70 percent on seven.
Speaker Change: Considering the constraints in the broader lending markets, our pipeline of new origination opportunities remain remains robust and well beyond what we have the capacity to take on today.
John Villano: Turning to the macro environment, our industry continues to face a wide range of headwinds. Ongoing tariff uncertainty has contributed to renewed volatility of financial markets, making cost projections and incremental capital sources less predictable. Further, many real estate construction projects will be affected by increased costs from materials and supplies originating from outside of the U.S. We do expect product shortages resulting from supply chain issues. Expectations are for interest rates to decline during 2025. However, rates remain elevated as the markets look for stability moving forward. While the volume of real estate transactions is gradually recovering, it's still well below the levels we saw in the immediate post-pandemic period.
Speaker Change: We will continue to stay highly selective in pursuit of new loans, and we will remain focused on single family and multifamily residential assets in growing markets, where market fundamentals remained strong.
Speaker Change: Our underwriting process continues to pursue highly experienced creditworthy sponsors.
Speaker Change: As I stated earlier, our ability to work through the remaining $124 million net npls on our book.
Speaker Change: <unk> significant capital to drive earnings and cash flow growth.
Speaker Change: Our success in this area will directly benefit our earnings and increase dividends to our shareholders.
Speaker Change: We will continue to seek incremental sources of accretive capital to strengthen our balance sheet and support further growth.
John Villano: So, you know, it sucks up our cash pretty quick, but it does give us a nice amount of leverage and it does work with our loan covenants at one and a half times. And then what do all these changes I mean, I know the baby bonds impose, you know, leverage limits on you guys.
John Villano: Pricing for many property types and across many markets continues to trend downward as buyers struggle with high real estate costs and costly finance. Also, restrictive bank lending policies are still limiting the amount of capital our borrowers can access for takeout finance.
Jeff Walraven: We are very excited with the opportunity ahead, and I will now turn the call over to Jeff.
Jeff Walraven: Thank you John I'll walk you through sanction capital's financial highlights for the first quarter ended March 31 2025.
Jeffery Walraven: As those mature and pay off, should we expect the leverage levels of the balance sheet to start to go up or stay around? That's an interesting question. You know, our new facilities, specifically one of our facilities will have a one and a half times asset coverage. Jeff, if you'd like to expand on that, it does look like we're going to be tied to a one and a half times asset coverage ratio going forward. Yeah, so for at the collateral level, it, it, as John's mentioned, it's at a one and a half times. I mean, even when you do look at the baby bonds, the last You know, the maturity of the baby bonds, we have the 930 maturity, our next maturity is out at 12, 1231 of 26.
Jeff Walraven: Starting with revenues total revenue for the first quarter was $11 4 million compared to $16 8 million for the same period in 2024.
John Villano: While these challenges persist, they also create meaningful opportunities for Sachem. Considering the constraints in the broader lending markets, our pipeline of new origination opportunities remains robust and well beyond what we have the capacity to take on today. We will continue to stay highly selective in pursuit of new loans, and we will remain focused on single-family and multi-family residential assets in growing markets. where market fundamentals remain strong. Our underwriting process continues to pursue highly experienced and creditworthy sponsors. As I stated earlier, our ability to work through the remaining $124 million of our net NPLs on our book can unlock significant capital to drive earnings and cash flow growth.
Jeff Walraven: The 31, 9% decrease primarily reflects the cumulative effect of fewer loan originations over the past 15 months, resulting in a compression in our earning unpaid principle loan balanced portfolio.
Jeff Walraven: Alongside elevated levels of nonperforming loans and conversion of loans through foreclosure to real estate owned.
Jeff Walraven: On a positive note income from our preferred membership in ship Creek LLC investment earnings increased approximately 71, 7% as compared to the first quarter of 2024.
Jeff Walraven: Turning to expenses.
Jeffery Walraven: And then we have a first quarter, second quarter and third quarter maturity in 27. So unless we were to do some kind of financing, you know, even just relative to the baby bonds, we have the one and a half times, you know, coverage on those bond debentures all the way out to June 30 of 27. So sans an early payoff of, you know, or redemption of those bonds.
Jeff Walraven: Total operating expenses were $10 4 million down from $12 5 million in the prior year's quarter, a 16, 9% reduction.
John Villano: Our success in this area will directly benefit our earnings and increase dividends to our shareholders. We will continue to seek incremental sources of accretive capital to strengthen our balance sheet and support further growth.
Jeff Walraven: The primary drivers were low interest in <unk>, lower interest and amortization expenses due to the repayment of $58 2 million in unsecured retail notes in 2024, as well as reductions in compensation and employee benefits and in credit loss provisions.
John Villano: We are very excited with the opportunity ahead, and I will now turn the call over to Jeff.
Christopher Nolan: Okay, that's it for me. Thank you.
Jeffery Walraven: Thank you, John.
Jeffery Walraven: I'll walk you through Sachem Capital's financial highlights for the first quarter ended March 31, 2025. Starting with revenues, total revenue for the first quarter was $11.4 million compared to $16.8 million for the same period in 2024. The 31.9% decrease primarily reflects the cumulative effect of fewer loan originations over the past 15 months. resulting in a compression in our earning unpaid principal loan balance portfolio, alongside elevated levels of non-performing loans and conversion of loans through foreclosure to real estate owned. On a positive note, income from our preferred membership in Shem Creek LLC investment earnings increased approximately 71.7% as compared to the first quarter of 2024.
Jeff Walraven: Net results. This resulted in GAAP net income of $9 million and after payment of our series a preferred stock dividends of $1 1 million net loss attributable to common shareholders was <unk>.
Unknown Executive: This concludes the question and answer session and today's teleconference. You may disconnect your lines at this time. Thank you for your participation.
Jeff Walraven: $2 million or zero cents per share compared to $3 6 million of income or <unk> <unk> per share for the first quarter of 2024.
Jeff Walraven: On balance sheet position total assets were 491 4 million nearly flat compared to $492 million at December 31, 2024.
Jeff Walraven: Total liabilities increased just slightly to $312 1 million, mainly due to higher repurchase agreements, partially offset by reductions in lines of credit and accounts payable.
Jeff Walraven: Our outstanding debt at March 31 was $306 million.
Jeffery Walraven: turn into expenses. Total operating expenses were $10.4 million down from $12.5 million in the prior year's quarter, a 16.9% reduction. The primary drivers were low interest and lower interest in amortization expenses. due to the repayment of $58.2 million in unsecured retail notes in 2024, as well as reductions in compensation and employee benefits and credit loss provision.
Jeff Walraven: This resulting in total assets total liability coverage of 157 times.
Jeff Walraven: Our shareholders' equity stands at $179 3 million.
Jeff Walraven: Resulting in debt to equity ratio of one seven times or 62, 3% debt and 37, 7% equity.
Jeff Walraven: On book value as John mentioned earlier, our book value was very stable in the quarter as expected.
Jeffery Walraven: On net results, this resulted in gap net income of $0.9 million. And after payment of the Series A preferred stock dividends of $1.1 million, net loss attributable to common shareholders was $0.2 million, or zero cents per share, compared to $3.6 million of income, or eight cents per share for the first quarter of 2021.
Jeff Walraven: Book value per common share at March 31, 2025 was $2 57.
Jeff Walraven: This is down from $2.64 at year ended 2024.
Jeff Walraven: This decrease.
Jeff Walraven: Decrease was nearly solely driven by $3 5 million in preferred and common dividends paid during the first quarter that is in excess of book net earnings.
Jeffery Walraven: On balance sheet position, total assets were $491.4 million, nearly flat compared to $492 million at December 31, 2024. Total liabilities increased just slightly to $312.1 million, mainly due to higher repurchase agreements, partially offset by reductions in lines of credit and accounts payable. Our outstanding debt at March 31st was $306 million. This resulting in total asset to total liability coverage of 1.57 times. Our shareholder's equity stands at $179.3 million. resulting in debt to equity ratio of 1.7 times or 62.3% debt and 37.7% equity.
Jeff Walraven: The stability of our book value demonstrates the work we continue to complete to resolve delinquencies sell nonperforming loans and clear Oreo off our books.
Jeff Walraven: While the market continues to evolve impacting the entire industry. We are confident that the major issues are behind us as we look to return to growth.
Jeff Walraven: On liquidity and capital resources cash and cash equivalents increased to $24 4 million from $18 1 million at the start of the year.
Jeff Walraven: During the first quarter, we closed on a replacement credit facility with Needham Bank.
Jeff Walraven: This facility is nearly identical to the previous credit facility and provides for up to $50 million of committed available liquidity for ctrip at an attractive interest rate.
Jeff Walraven: Subject to an assigned and pledged borrowing base assets.
Jeff Walraven: We continue to maintain solid liquidity with a focus on prudent management of debt maturities and funding requirements.
Jeffery Walraven: On book value, as John mentioned earlier, our book value was very stable in the quarter, Book value per common share at March 31 2025 was $2.57. This is down from $2.64 that year ended 2024. This seven cent decrease was nearly solely driven by $3.5 million in preferred and common dividends paid during the first quarter that is in excess of book net earnings. The stability of our book value demonstrates the work we continue to complete to resolve delinquencies, sell non-performing loans, and clear REO off our books.
Jeff Walraven: Specifically with regard to our $56 million in retail notes coming due in September.
Jeff Walraven: We would expect to be able to fully repay the notes from drawdowns from our existing credit facilities and retained cash on hand.
Jeff Walraven: From principal repayments from our mortgage loans, we are in advanced stages of definitive document negotiation on two separate credit facilities, one of which will have committed term loan funds available to us that would provide proceeds to repay replace the maturing bond principal avoiding any.
Jeff Walraven: <unk> balance sheet and loan portfolio compression.
Jeffery Walraven: While the market continues to evolve, impacting the entire industry, we are confident that the major issues are behind us as we look to return to growth.
On dividends I'll first note, we declared and paid our first quarter 2025 dividend during March of 2025.
Jeffery Walraven: on liquidity and capital resources. Cash and cash equivalents increased to $24.4 million from $18.1 million at the start of the year. During the first quarter, we closed on a replacement credit facility with Needham Bank. This facility is nearly identical to the previous credit facility and provides for up to $50 million of committed available liquidity for Sachem at an attractive interest rate, subject to an assigned and pledged borrowing base asset. We continue to maintain solid liquidity with a focus on prudent management of debt maturities and funding requirements.
Jeff Walraven: Our board regularly evaluates our dividend distribution policy on an ongoing basis balancing our operational performance federal tax requirements and the importance of maintaining long term financial flexibility.
Jeff Walraven: As a reminder, going forward the company has aligned the timing of its common dividend declarations and payments to be in line with the timing of our series a preferred stock dividends. Therefore occurring in March June September and December.
John Bolano: I will now turn the call back to John for closing comments.
John Bolano: Thanks, Jeff.
Jeffery Walraven: specifically with regard to our 56 million in retail notes coming due in September. While we would expect to be able to fully repay the notes from drawdowns from our existing credit facilities and retained cash on hand, from principal repayments from our mortgage loans. We are in advanced stages of definitive document negotiation on two separate credit one of which will have committed turn loan funds available to us that would provide proceeds. to repay replace the maturing bond principle avoiding any additional balance sheet and loan portfolio compression.
Jeff Walraven: We're excited with our recent performance and believe <unk> is positioned to be a market leader in small balance real estate finance, we look forward to resolving our remaining npls to unlock unlock capital for growth and accessing new sources of accretive capital to refill our loan pipeline.
Jeff Walraven: While our recovery is well underway more time is needed to be fully back on track. We will continue to manage our business grow book value and our dividend, but the ultimate goal to produce value for our shareholders.
Jeff Walraven: Thank you and we will now open the call to questions from our analysts.
Jeff Walraven: Thank you we will now be conducting a question and answer session. If he would 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. You May press star two if he would like to remove your question from the queue.
Jeffery Walraven: on dividends. First note, we declared and paid our first quarter 2025 dividend during March of 2025. Our board regularly evaluates our dividend distribution policy on an ongoing basis, balancing our operational performance, federal tax requirements, and the importance of maintaining long-term financial flexibility. As a reminder, going forward, the company has aligned the timing of its common dividend declarations and payments to be in line with the timing of our Series A preferred stock dividend. therefore occurring in March, June, September, and December.
Jeff Walraven: For participants using speaker equipment and may be necessary to pick up your handset before pressing the star keys.
Jeff Walraven: Please poll for questions.
Speaker Change: The first question is from Gaurav Mehta from Alliance Global Partners. Please go ahead.
Gaurav Mehta: Thank you good morning, I wanted to follow up on your comments around.
Speaker Change: Two of them she has been different lenders.
Speaker Change: And just wanted to get some detail. So if you were to execute on those two term sheets.
John Villano: I will now turn the call back to John for closing comments. Thanks, Jeff. We are excited with our recent performance and believe Sachem is positioned to be a market leader in small balance real estate finance. We look forward to resolving our remaining NPLs to unlock unlock capital for growth and accessing new sources of accreted capital to refill our loan pipeline.
Speaker Change: That provide funds to address the upcoming debt majority or would that provide more fun than that Joe maybe allocate towards loan originations.
Speaker Change: Hydro Ralph good morning.
Speaker Change: The facility that you were talking about comes in two components. There was an initial funding in a delayed draw the.
John Villano: While our recovery is well underway, more time is needed to be fully back on track. We will continue to manage our business, grow book value, and our dividend with the ultimate goal to produce value for our shareholders.
Speaker Change: The initial funding will provide some working capital for us to build our business.
Speaker Change: The second.
Speaker Change: The delayed draw will provide funds directly related to the payment of the unsecured notes in September.
John Villano: Thank you, and we will now open the call to questions from our analysts. Thank you.
Speaker Change: Okay. So it's not like.
Speaker Change: It won't be like a like.
Speaker Change: No it's going to be like a credit line right.
Operator: We will now be conducting a question and answer session. If you would like to ask a question, please press star 1 on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star 2 if you would 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. One moment please while we poll for questions.
Speaker Change: It is a term loan a term note.
Speaker Change: Okay understood.
Speaker Change: Correct.
Gaurav Mehta: Brook I'll add real quick one of one of the two is the term as John just described and we were reserving a portion of that to avoid balance sheet compression via the delayed draw. The other facility is a is a new facility similar to like a Churchill and others that would provide other growth.
Gaurav Mehta: The first question is from Gaurav Mehta from Alliance Global Partners, please go ahead. Thank you. Good morning. I wanted to follow up on your comments around two term sheets with different lenders, and just wanted to get some details. So if you were to execute on those two term sheets, so that would provide funds to address the upcoming debt maturity, or would that provide more funds than that to maybe allocate to work loan origination?
Speaker Change: And kind of really a direct direct match of.
Speaker Change: Use of those funds for growth assets.
Speaker Change: So.
Speaker Change: There is a there is a significant component of the two facilities that is related to give us a expansionary growth while a portion of the one is protection basically liquidity protection against the from a compression perspective.
Speaker Change: <unk>.
Speaker Change: The redemption of the bond in September.
John Villano: Hi, Gaurav. Good morning. The facility that you're talking about comes in two components. There's an initial funding and a delayed draw. The initial funding will provide some working capital for us to build our business. The second, the delayed draw will provide funds directly related to the payment of the unsecured notes in September. Okay, so it's not like it won't be like a like a like a note, it's going to be like a credit line. No, it is a term note, a term note. Okay, understood. Gaurav, I'll add real quick, Gaurav, one of the two is the term as John just described, and we're reserving a portion of that to avoid balance sheet compression via the delay draw.
Speaker Change: Okay understood.
Speaker Change: Maybe on the macro environment, you've touched upon some headwinds in the market I was wondering if you would maybe comment on what you guys saw in April.
Speaker Change: In the loan market.
Speaker Change: As far as credit spreads and loan.
Speaker Change: As I mentioned opportunities.
Speaker Change: Yes.
Speaker Change: And you've heard me say this countless times.
Speaker Change: We're never at a loss for opportunity.
Speaker Change: We have a significant pipeline.
Speaker Change: As we discussed we have more opportunities than we have capital available seems to be the nature of our business.
Speaker Change: The significant pricing differences that we're noticing is single family and multifamily are commanding better pricing.
John Villano: The other facility is a new facility, similar to Leica, Churchill, and others, that would provide other growth on kind of really a direct match of use of those funds for growth assets. So, there is a significant component of the two facilities that is related to give us expansionary growth, while a portion of the one is protection, basically liquidity protection against the, from a compression perspective, on the The Redemption of the Bond in September.
Speaker Change:
Speaker Change: There is a push in the world today, where they are the most sought after asset class in our industry.
Speaker Change: So lenders are aggressive.
Speaker Change: With respect to <unk>.
Speaker Change: Mixed use mixed use development.
Speaker Change: Residential with a retail component on the first floor.
Speaker Change: We're able to really maintain our standard pricing, which is 12% to 12, 12% interest, 2% origination and if theres any construction component, we still need to get our construction service fee.
Gaurav Mehta: Okay, understood.
John Villano: Maybe on the macro environment, you touched upon some headwinds in the market. I was wondering if you would maybe comment on what you guys saw in April in the loan market as far as credit spreads and loan origination opportunities. Yeah, you know, and you've heard me say this countless times, we're never at a loss of for opportunity. We have a significant pipeline. As we discussed, we have more opportunities than we have capital available, seems to be the nature of our business. The significant pricing differences that we are noticing is single family and multifamily are commanding better pricing.
Speaker Change: And we expect to see further.
Speaker Change: Rate compression in the single family multifamily space.
Speaker Change: So again, it's just the preferred asset class.
Speaker Change: A good portion of the industry's capital is flowing into that area.
Speaker Change: Okay. Thank you that's all I had.
Speaker Change: Thank you.
Christopher Nolan: The next question is from Christopher Nolan from Ladenburg Thalmann. Please go ahead.
Hey, guys.
Christopher Nolan: On the new facilities that you guys.
Speaker Change: Mentioned are they fixed rate or would you benefit if interest rates were cut.
Speaker Change: We would we would benefit if rates are cut on one of the facilities.
Speaker Change: Our our delayed draw facility will be a fixed rate.
John Villano: There is a push in the world today where they are the most sought-after asset class in our So lenders are aggressive. With respect to mixed use, mixed use development, you know, residential with a retail component on the first floor, we're able to really maintain our standard pricing, which is 12 and 2, 12, 12% interest, 2% origination. And if there's a construction component, we still need to get our construction service fee. And we expect to see further rate compression in the single family, multifamily space. Again, it's just the preferred asset class. And a good portion of the industry's capital is flowing into that area.
Speaker Change: Great and then what sort of advance rate are you getting on these various facilities, including Churchill.
Speaker Change: Yeah.
Speaker Change: Up until recently Churchill was kind of all over the board and they seem to have stabilized a bit.
Speaker Change: We are getting between 60 and 70% advance rates.
Speaker Change: They are becoming a little more specific with asset type and quality.
Speaker Change: One of our potential facilities could have advance rates up to 75 or 80%.
Speaker Change: Which is very attractive to us, but it's a very specific asset class it'll be razzia multifamily specifically.
Speaker Change:
Speaker Change: The delayed draw facility has a lot more flexibility.
Speaker Change: With advance.
Speaker Change: Yes.
Gaurav Mehta: Okay, thank you. That's all I have. Thank you.
Speaker Change: In our world, we're at 70% LTV.
Speaker Change: So we're getting much less than.
Christopher Nolan: The next question is from Christopher Nolan from Lattinburg, Fulman. Please go ahead. Thank you guys. On the new facilities that you guys mentioned, are they fixed rate or would you benefit if interest rates were increased? We would benefit if rates are cut on one of the facilities. Our delayed draw facility will be a fixed rate. Great. And then what sort of advance rates are you getting on these various facilities, including Up until recently, Churchill was kind of all over the board and they seem to have stabilized a bit. We are getting between 60 and 70 percent advance rates.
Speaker Change: The amount needed to close these things so we have to maintain our liquidity.
Speaker Change: To do this so we're basically getting in most cases, 70% on 70.
So it sucks up our cash pretty quick but it does give us.
A nice amount of leverage and if it does work with our with our loan covenants at one five times.
Speaker Change: And then what do all these change I mean, I know the baby bonds and post leverage limits on you guys.
Speaker Change: You know as those mature and pay off should we expect the leverage levels of the balance sheet to start to go up or stay around current levels.
Speaker Change: That's an interesting question.
Speaker Change: Our new facilities.
John Villano: They are becoming a little more specific with asset type and quality. One of our potential facilities could have advance rates up to 75 or 80 percent. which is very attractive to us, but it is a very specific asset class. It'll be resi and multifamily specifically. The Delayed Draw Facility has a lot more flexibility with advance. you know, in our in our world, we're at 70% LTV. So, you know, we're getting much less than the amount needed to close these things. So, you know, we have to maintain our liquidity to do this. So we're basically getting, in most cases, 70% on 70%.
Speaker Change: Specifically one of our facilities will have a one five times asset coverage ratio.
Jeff Walraven: Jeff if you'd like to expand on that.
Jeff Walraven: It does look like we're going to be tied to a one five times asset coverage ratio going forward.
Jeff Walraven: Yes still for.
Jeff Walraven: The collateral level.
Jeff Walraven: As Jonathan mentioned, it's at a one five times.
Jeff Walraven: Even when you do look at the baby bonds the last.
Jeff Walraven: The maturity of the baby bonds, we have the 930 maturity. Our next maturity is out at 12.
Jeff Walraven: 231 of 26, and then we have our first quarter second quarter and third quarter maturity in 2007.
Jeff Walraven: So unless we were to do some kind of financing or even just relative to the baby bonds. We have the one five times.
Jeff Walraven: Coverage on those bond debentures, all the way out to June 30 of 2007.
John Villano: So it sucks up our cash pretty quick, but it does give us a nice amount of leverage and it does work with our loan covenants at one and a half times.
Jeff Walraven: So.
Jeff Walraven: Sans and early pay off of.
Jeff Walraven: Or redemption of those bonds.
John Villano: And then what do all these change? I mean, I know the baby bonds impose, you know, leverage limits on you guys. As those mature and pay off, should we expect the leverage levels of the balance sheet to start to go up or stay around ? But that's an interesting question. You know, our new facilities, specifically one of our facilities, will have a one and a half times asset coverage ratio. You know, Jeff, if you'd like to expand on that, it does look like we're going to be tied to a one and a half times asset coverage ratio going forward.
Jeff Walraven: Okay. That's it for me thank you.
Jeff Walraven: Yeah.
Speaker Change: This concludes the question and answer session and todays teleconference. You may disconnect. Your lines at this time. Thank you for your participation.
Jeffery Walraven: Yeah, still for at the collateral level, it, it, as John's mentioned, it's at a one and a half times. I mean, even when you do look at the baby bonds, the last You know, the maturity of the baby bonds, we have the 930 maturity, our next maturity is out at 12, 1231 of 26. And then we have a first quarter, second quarter and third quarter maturity in 27. So unless we were to do some kind of financing, you know, even just relative to the baby bonds, we have the one and a half times, you know, coverage on those bond debentures all the way out to June 30 of 27.
John Villano: So sans an early payoff of, you know, or redemption of those bonds.
Christopher Nolan: Okay, that's it for me. Thank you.
Operator: This concludes the question and answer session and today's teleconference. You may disconnect your lines at this time. Thank you for your participation. LegalCrimson.com