Q2 2025 Sachem Capital Corp Earnings Call
Good day and welcome to the sum Capital corpse second quarter 2025 earnings conference call. All participants will be listed only mode. Should you need assistance please single a conference specialist by pressing the star key followed by zero. After today's presentation there will be an opportunity to ask questions to ask a question. You may press star then 1 on your telephone keypad to withdraw your question. Please. Press start then 2. Please note. This event is being recorded. I would like now.
To to turn the conference over to Stephen sweat investor relations. Please go ahead.
Good morning and thank.
You joining satyam, Capital Corps, second quarter 2025 earnings conference call.
On the call from stage of capital, today is Chief Executive Officer. John Bono CPA, an interim, Chief Financial Officer, Jeff Paul Raven.
This morning, the company announced its operating and financial results for the quarter ended June 30, 2025.
The press release is posted on the company's website. Www.sam capital corp.com.
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.sec.gov
As a reminder, remarks made on today's conference call may include forward-looking statements.
It may cause actual results to different materially from those discussed today.
these include the risks detailed in our annual Forum, 10K and this form 10q such as those related to non-performing loans, credit losses, and market conditions,
We do not undertake any obligation to update our forward-looking statements in light of new information or future events.
For more in 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 filings
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,
With that, I'll now 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 second quarter and provide an update on our strategic progress.
During the quarter we continue to working towards growing our lending platform and taking decisive steps to strengthen our financial position.
The efforts we made in late 2024 and early this year to protect our balance sheet from non-accredited financing positioned us well for continued stabilization in the second quarter.
Building on the momentum from the first quarter, we remained focused on sourcing a creative Capital to support our growth.
We are pleased with the closing of our new $100 million senior secured notes, due June 2030.
this new financing provides significant financial flexibility, for satyam, allowing us to repay, existing, obligations, and accelerate, the origination of new accredited loans resulting in asset growth for the first time in 5 quarters,
Moving forward, we will continue to evaluate additional Capital sources to further. Strengthen our liquidity position and grow, our earning asset base.
During the first half of the Year, our portfolio continued to perform in line with expectations while. We still have a proximately 119.6 million. Gross unpaid principal balance of non-performing loans in loans held for investment or 107 million net compared to 107.6 million gross and 94.3 million net. As of March, 3122 we continue to make meaningful progress, working through these Legacy assets, which we believe is critical to unlocking value and supporting future dividend growth.
as of June 3025, our book value was $2.54, per share representing, just a 1.2% decrease from March, 31 2025,
Additionally, I'd like to provide a brief update on our significant exposure to a single borrower in the south Florida region.
Specifically, there are 2 cross-collateralized loans in Naples totaling approximately $50.4 million as of June 30, 2025, representing 13.1% of our mortgage loan portfolio and 42.1% of our non-performing loan (NPL) balance, down from $55 million at year-end 2024, primarily due to proceeds from the sale of 1 of 4 completed condominium units earlier this year.
There were no further unit sales in the second quarter which aligns with the typically slow summer season for property transactions, in the Naples area, due to seasonal factors like heat and reduced buyer activity.
As discussed in our prior calls, this Legacy 2021 investment has faced ongoing challenges, including permitting delays, hurricane impacts from two separate weather events, contractor and borrower performance issues, legal disputes with the city of Naples, and further legal disputes with former capital partners that have led to bankruptcy proceedings to protect against its junior liens.
A judge ordered mediation event with the former Capital Partner. Lender holding a second mortgage position which has been set aside multiple times by the bankruptcy court. But sustained through repetitive appeals is scheduled for this week.
A positive outcome, we believe, would clear the path forward for resolution. This would enable the sale of the remaining completed units, the completion of an additional four condo buildings on one site, and the development or sale of the other site.
We remain in non-accrual status on this loan, currently on an opportunity cost basis, impacting monthly earnings by about 450,000.
Of outstanding netbook, UPB we've recorded on our balance sheet as of June 30th.
And we are optimistic about recovering capital as these resolutions progress.
Last quarter, we mentioned the current development projects that our partner Urbane New Haven is helping us work through to provide an update on this progress, our 4 Urbane real estate developments 1 office with a residential component and 3 high-end single family homes have made strong progress in our progressing on schedule.
Our Westport office assets are 50% leased with gap, rental income of approximately 1.3 million annually.
A portion of the Westport office asset was partitioned and is now approved for 10 residential homes, of which 2 are deemed affordable.
The Westport residential component is approved and in the development planning stage.
Our 3, high end homes in Coconut Grove, Florida are in various stages of construction, with sales planned for late 2025, and the first half of 2026.
We will continue to provide updates as these projects move toward completion.
Additionally, at quarter end, we had invested an aggregate of $41.2 million in projects managed by Shem Creek Capital through six investment funds.
As a reminder, Shem Creek Capital is a commercial real estate finance platform that provides debt and capital solutions to multifamily properties and allows us to participate in multifamily finance with strong borrower sponsorship.
during the 6 months, ended June, 30 2025, these Investments generated, approximately 3 million in revenue of which 1 million was for the current quarter ending, June 30th representing an attractive low-risk double-digit yield
Turning to the macro environment, our industry continues to navigate a challenging landscape of both obstacles and opportunities.
The Federal Reserve has maintained a steady stance, with rates remaining elevated.
In the single family, housing market mortgage rates, continue to dampen demand while existing home sales remain, well, below, historical averages.
Single-family construction loan rates are at the highest levels in years, with interest rates more than 10%.
Existing homeowners in many instances are tied to their current home. As Co era interest rates, make it unaffordable to move to larger or new homes.
The demand for new construction is significant, but higher construction costs, burdensome permitting regulations, and higher interest rate charges make a new home purchase unattainable for many.
Fix and Flip residential faces similar challenges, as property value has increased reducing developer margins.
While these challenges create headwinds for the broader market, they also present meaningful opportunities for selective and experienced lenders like Satyam, who can provide capital solutions where traditional financing remains constrained.
As noted in our 10-Q, this environment has contributed to our revenue decline due to lower net originations and elevated NPLs in REO, but we are positioned to capitalize on it.
due to the ongoing constraints, for many traditional lenders, like banks are pipeline of new origination opportunities continues to exceed, our current capacity,
We remain committed to our disciplined approach in evaluating new loans and maintaining our focus on single-family and multifamily residential assets in markets with strong underlying fundamentals.
Our underwriting standards continue to emphasize highly experienced and creditworthy sponsors.
Our post-covid era loan. Originations continue to perform exceptionally. Well.
As we move into the second half of 2025, we remain confident in our strategic Direction and our ability to capitalize on the opportunities ahead.
With the addition of our new 100 million financing facility, we have strengthened our balance sheet and enhanced our capacity to support growth initiatives.
We will continue to focus on working through our Legacy npl assets and pursuing a creative growth opportunities that align with our risk management principles.
We are very excited about the opportunity ahead and I will now turn the call over to Jeff.
Thank you, John. I'll walk through Sachem Capital's financial highlights for the second quarter ended June 30, 2025.
1 million in the second quarter of 2024.
The change in revenue is primarily due to the cumulative effect on interest income from loans resulting from materially lower net new loan origination over the last 12 months. This has resulted in a year-over-year reduction in the unpaid principal balance of loans held for investment of $121.2 million.
In addition to a currently elevated amount of non-performing loans loans held for sale and real estate owned
As a result interesting come from loans, was 7.5 million down from 1 1. 8 1.
On the other hand, other income increased significantly increasing by a half a million dollars. This was driven by the recognition of rental income from 1 Project in 2025 which contributed the half million dollars during this quarter. No, such rental income was recorded in the prior quarter or year.
Turning to operating expenses total operating costs and expenses. For the second quarter of 2025 were 9.67 million compared to 18.3 million in the same quarter last year.
The primary contributor to this decrease was the reduction in the provision for credit losses related to loans held for investment, which declined by 7.6 million or 89.1%.
This change was driven by a decrease in direct allowances related to foreclosures and non-performing loans.
Additionally the change was due to reductions in interest in amortization expense of 0.8 million compensation and employee benefits provision for credit losses related to loans. Held for sale and other expenses, totaling 1 million overall, this reflects our progress and managing risks and reducing financing costs through debt repayments.
The net results. This resulted in a gaap, net, income of 1.9 million and after payment of the series, a preferred stock dividends of 1.1 million, net, income attributable, to Common shareholders was 0.8 million or 2 cents per share compared to net loss attributable to Common shareholders of 4.1 million or 9 cents per share for the second quarter of 2024.
Looking at her balance sheet position, total assets increased to 501.8 million from 492 million at December, 31 2024.
Specific to our loan portfolio as of June 3005, first mortgage loans on residential and Commercial Real Estate primarily for investment.
With an unpaid principal balance of 382.1 million that of 2.6 million and deferred loan fees.
After an allowance for credit losses of 17.6 million, the net carrying value was 364.5 Million.
Up from 356.6 million at year end 2024, but down 121.2 million from 485.7 million a year ago.
Due to lower net. Originations elevated non-performing assets and cumulative, aggregate corporate debt reductions due to maturities.
We also had 8.8 million in loans held for sale. Net of a half a million dollar valuation allowance
This quarter. I wanted to add to this balance sheet discussion further Financial contacts on our investments in Sharm Creek funds.
While our investment is carried at cost on our balance sheet in accordance with us. Gaap, our 41.2 million members Equity invested supports over 600 million in Gross loans, held for Investments by those funds.
On a pro rata proforma basis, our approximate 39% of the total funds members Equity participation.
Represents approximately 234 million of deployed levered capital.
Total liabilities increased to $323.9 million, primarily due to the initial draw at closing of the private placement of five years. Senior secured notes are due June 11, 2030.
Our aggregate outstanding debt at June 30th, 2025 was 315.5 Million.
Resulting total asset to Total liability coverage is 1.55 times.
Shareholders Equity stands at 177.9 million.
Equity ratio of 1.8 times or 64.6% debt and 35.4% equity.
Looking at Book value. As John mentioned earlier, our book value was stable this quarter and as expected
Book value per common share at June 30, 2025, was $2.54 compared to $2.64 at year-end 2024 and $2.57 at March 31, 2020.
The year to date decrease of 10 cents is solely driven by the 4.2 million net aggregate preferred and common dividends paid in excess of 2.8 million in book, net earnings.
As the market continues to involve and impact the entire industry. We do remain confident that the major issues are behind us as we look to return to growth.
On liquidity and capital resources, cash and cash equivalents increase to 22.5 million from 18.1 million at the start of the year.
For the first half of 2025, we have dispersed 81 million in principle for drawers on existing loans. And new loans while collecting 71.4 million in repayments
Leading to a net outflow of about 9.6 million in loan related, investing activities.
This reflects our disciplined approach to originations in the challenging environment with collections helping maintain liquidity.
Additionally, during the second quarter, we completed a hundred million dollar private placement of 5 year. Senior secured notes that mature on June 11th of 2030 and we drew an initial 50 million at closing and can tap the remaining 50 million at any time. Before May 15th 2026.
We continue to maintain solid liquidity with a focus on prudent management of debt maturities, and funding requirements.
Regarding our 56.3 million notes, maturing this quarter. At the end of September, we expect to be able to fully repay the notes from draw Downs on our existing credit facilities. Primarily the recent senior secured notes facility and retained cash from principal repayments on our mortgage loan that would fully provide proceeds to repay and replace the maturing Bond principal without requiring additional balance sheet and Loan portfolio compression.
As detailed in our 10q, our liquidity is supported by principal interest payments on loans sales of real property and our credit facilities.
On dividends 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.
We continue to monitor this closely amid our focus on MPL resolution and growth as a, reminder going forward. The company has aligned its intended. Timing of, its common dividend, and series, a preferred dividend, declaration and payment thereof to occur. In the months of March, June September, and December.
I will now turn the call back to John for closing comments.
Thanks Jeff.
We believe Satan is positioned to be a 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 accretive 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 growth Book value and our dividend with the goal of producing value for our shareholders.
Thank you and we'll now open the call to questions from our analysts.
We will now begin the question and answer session to ask a question. You may press star then 1 on your telephone keypad. If you are using a speaker-phone please pick up your handset before pressing the keys.
If at any time your question has been addressed and you would like to withdraw your question, please press star. Then 2 at this time we will pause momentarily to assemble our Rouser.
again, if you have a question, please press star then 1
The first question is from the line of Chris Mueller, with Citizens Capital markets. Please go ahead.
Is what caused that dip? And what's the outlook for Urbane and Shem Creek, and the back half of the year?
Okay, good morning Chris. Um,
So Urbane as, as we've talked about, in in our uh, just recent uh, scripts, uh read.
You know we we've got projects going on. Um 1 in Connecticut, 3 in Florida, that are in various stages of progress are building in Westport Connecticut. Which is an office uh a significant office building. It is uh, 50% least.
Uh, we've talked about a 1.3 million gap rental income for the year, uh, which does provide a rate of return to sum and then further the efforts of Urbane Capital have. Uh, they split off a section of the property uh, to really build a residential Community, um, as part of the parcel.
And that has significant upside to us. It is uh, we're moving through the planning stages. Um, so we do have approvals, we are now planning the development of the parcel. Uh, we expect that to occur in, in, in the next 6 to 9 months, um, unfortunately these things take time
There is also some preliminary discussions of further leasing of the main office building from our significant tenant. Um those discussions are ongoing
With respect to the properties in Florida. Um, we have recently inspected those properties and they are moving along famously. Uh, we expect a, you know, I don't want to say a cash out event, but we expect a sales, uh, perhaps in the fourth quarter of 2025, with further sales, in the first half of 26 for the remaining 2 units. Um, the buildings are of excellent quality, they are in Coconut Grove Florida, they fit in with the um the revitalization and rebuild of the community. Um and we have a local, well established Builder, handling the process with us.
Uh, with respect to Shem Creek. Um,
With our Shem Creek Investments. Um, and you do know that we have a 20% ownership interest in the manager. Um, our cash flows are subject to certain waterfalls with respect to the loans that we participate in. And in many cases we don't, we don't know exactly how those are going to flow to us. But overall, um, we do maintain a double-digit yield on our investments with Shem. Um, they are excellent in terms of underwriting, multi
Family.
And Workforce, uh, loan opportunities. And it's something that we can't handle here. It's hm. Because our cost of capital is just a bit too high to be effective in in, in that lending space. So it's a way for us to get uh, portfolio diversification with with um, great sponsors, great Underwriters and and we look forward to building our relationship with Shen uh over the coming years.
Got it. I'm very helpful and sorry, go ahead.
I said the 1 piece I would add on to John's commentary just give you a couple numbers behind it. You know the 1 uh
we've been getting return of capital on the Champs Creek, right? There's been continuing turnover in those assets. So there's when you look from year end through June 30th about a 7 million dollars, return of capital relative to just specifically invested in the funds in shm Creek, setting aside the the manager and as John mentioned relative to the waterfalls, there was some timing difference uh that occurred between second and third first quarter and second quarter. So I on the 1 as I would not caution. Just annualizing the uh 3 months ended June 30 because there was a, a little bit of a Twist. I would continue to focus in on, you know, the total Shen Creek Investments relative to the funds, which is approximately 41.2 million and our, you know, still current
Earnings on that is in that uh, low double, you know, low double digit, you know, 10 to 12%.
Uh, return on that invested funds.
Got it. It's very helpful and then I guess on on our Bay and more specifically, what what is the pipeline look for new projects there? Or are they kind of at capacity uh with the existing uh book?
Rolling off our books. Every every quarter.
And and that's going to be quite us to uh, invest further dollars with them, uh, going forward. And, you know, we we've had a bump in the road over over the past year, or so, 24 was difficult for us. So we've slowed down the pursuit of opportunities with her being. Um however it is a topic of discussion every day and we are looking to get back uh back on that horse and and begin building our our portfolio with them again.
Got it. That's very helpful and just 1 other 1. If I could throw it out there it looks like. The Aro is pretty stable on the quarter. Um, can you just give us some insight into that bucket? Were their sales and new additions or was aerio activity? Pretty muted in the quarter.
Um, we we are making significant progress working through, um, the, the npls and the Rio, um, unfortunately, the process takes a, a whole lot of time and a whole lot of effort. Um, Jeff. If you would like to share some of the, um, the improvements we've made during the quarter and expected improvements in the third quarter. Um, that would be a good time to to talk about that.
And and Chris relative to our specifically. There is a footnote on page 33, actually in the mdna section that actually gives you a asset by asset breakdown, uh, of Ariel. And it indicates when it was actually, you know, the when it was added into the portfolio, uh, so year to date, you know, there's been movement while the REO, 18 million, 18.5 million rounded, you know, in change looks flat. You know, we added 2.3 million, we've taken away. There's also another footnote that I was trying to find it exactly, uh, where we reconcile the, the movement in Aro, uh, that is in the footnotes and I can find that 1 specifically for you here in a minute. Now, uh, we'll take the quick opportunity relative to just, you know, when you kind of look at npls and Loans held for investment the loans held for sale and
REO, uh, on an aggregate basis, like since June 30th, the resolutions we've been talking about are focus on the resolution and they, the resolutions are continuing to accelerate even though I'll call it net. Uh, we believe we're at the peak, uh, as of June 30. But uh, post June 30th in that category of, uh, of approximately 5 million and before
Before we get through the end of just third quarter, we're expecting an additional resolution. I'll call it in the category of
of npls loans help for sale and REO of another 12 and a half million. Um we we really do expect the velocity of resolutions to to pick up in the second half of the year.
With all the work and focus we've had on it.
Got it. That's all very helpful. Thanks for taking the questions.
Thanks Chris.
Our next question is from the line of Christopher Nolan with ladin Burke to please. Go ahead.
Hey guys, um hey the Naples loan, what's the amount? Please.
The principal balance. Yes, please.
I think it's 44 million.
If I understand your comments earlier John that, you think you, you potentially could see a court driven resolution this week.
Um, we have a uh, mediation event scheduled for tomorrow.
and you know, we have ongoing discussions with our borrower and as we talked about uh, in our script reading um
We have a second mortgage holder that is being difficult and they are in a terrible position and they're fighting for their life. And this thing should be coming to an end relatively quickly.
But again you know, when your hands are in the the judge's hands it, it takes time. So we are optimistic and we are working it towards the exit. It it's just taking longer than we would like and you know as we discussed you know it's it does cost it's hitting earnings right? It hits earnings off, 450,000 dollars a month. It's painful
okay, so there is the the pathway for
Some sort of resolution where, you know, there's a restructuring, which could be a third-quarter realized gain or loss, I mean, and something along those lines. But something is likely to happen on this.
it's, it's finding a a middle ground with all parties, where we can proceed in, unlock our capital,
Gotcha. Um, and then if I'm correct that this counts for roughly
Roughly 1/3 of your non-performance in the quarter. Is that correct?
Uh, that's correct.
Okay? And then you've got to take it. Chris, they're working to there were 2 loans within the Naples to the same borrower. And so as you'll see disclosed there's a 50.4 million that book value, uh, on there and that 50.4 is 50 point 50.4 of 119 million. So, yes,
Oh, oh, a little more than, uh, okay. Okay. And then a broader thing. I noticed that your reserves, your allowance reserves, at the percentage of...
Your mortgages has gone down and it looks like your non-accrual volumes have gone down. I mean it looks like you guys have sort of I wouldn't say you stabilize in terms of the asset quality Trends putting aside Naples for a second just in the second quarter results. Is that a fair read of it?
Um that is fair. Um you know there is a cleansing of the portfolio that's been ongoing. Uh you know, we've talked about this prior um we're we're not big fans of extend and pretend you know any loan that's coming up for renewal.
You've got to meet our updated underwriting guidelines, if not, you know, it ends up in in a non situation. So we're we're doing our very best to cleanse the portfolio. Um, like I've said, it's it's quite painful but it's it's it's what we want to show our shareholders that we're managing the portfolio, the best we can, we're trying to manage the assets and the money we have invested. And we're we're trying to push some of these weaker loans to the door as quickly as we can.
Okay, the final question. The leverage ratio is quite High. Um should we start seeing more loan sales and just um
You know, just trying to, um, process originate loans, then sell them. Is that going to be more of an activity.
Um we have no loan sales planned. I mean we do have some we have loans for sale on our balance sheet loans held for sale. Um but we are not planning a significant sale. Like you saw in the fourth quarter of 24,
Thank you. Uh, just talk to you guys later.
Thanks Chris.
Again, if you have a question, please press star then 1
The final question is from the line of gurav mea with Alliance Global Partners. Please go ahead.
Thank you. Good morning.
Good morning.
I wanted to get some more clarity on the second crunch of the hundred million dollar note offering. So so the withdrawal of that, crunch it uh between now and I guess you know may of 26 that depends on new loan origination opportunities that you guys see during this time,
Throughout that that is correct. And I want to add this as well. Um as you know, we have notes coming due in September or September 30 of of this quarter of the third quarter um funds are available for that through our Church Hill facility cash on hand as well as our need them credit facility. So you know that
The, the the Unruh on 50 is available for our notes, um, or it could be for growth, but we're going to see how the quarter progresses, you know, taking into account loan payoffs and things like that.
Okay. Uh and I guess during this quarter, I don't know if I missed you in your comments. Should you provide a number on new loan, origination and Loan payoffs?
Yes, we did. We have, you know, that is in a quality opening section of the MD&A for the quarter. I was just trying to get to my specific numbers for the quarter. We originated, you know, or put out new loan disbursements relative to either draws on existing loans or brand new loans of $39.7 million, and loans repaid were $23.7 million.
Okay. And then lastly maybe on the on the yields on the new loans that you guys are seeing is it still 12 and 2 or are. Are you guys seeing a different number in the market?
Uh graph. We're doing our best to stay with 12 and 2. Um,
Uh, we're not we're not getting into below 10 in any case.
Okay, thank you. That's all I have.
Thank you.
This concludes our question and answer session. I would like to turn the conference back over to management for any closing remarks. Thank you.
Thanks everyone for joining us today. We look forward to informing you uh next quarter.
Conference has now concluded, thank you for attending today's presentation. You may now disconnect