Sachem Capital (SACH) 14 Nov 242024 Q3 Earnings call transcript

Greetings, and welcome to Sachem Capital Corp.

Third Quarter 2024 Earnings Conference Call. [Operator Instructions].

As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Mr. Stephen Swett, Investor Relations. Mr. you, Thank Swett.

begin. You may

everyone, Corp.'s and joining morning, you thank Quarter XXXX Capital Third Sachem Earnings Good for Conference Call.

from company's CPA; as date. is Officer, September XX, On Officer, of operating results the that call Sachem and website, quarter is its on today posted the ended the Chief company John announced Villano, release Marcello. its and The Nick Financial XXXX, www.sachemcapitalcorp.com. press for Chief the This morning, Capital Executive financial condition

conference today's on may made include remarks reminder, a statements. call forward-looking As

subject statements may of not light our Forward-looking today. from and cause update actual to in do are risks those new uncertainties information results undertake We materially to statements that any or obligation to future differ forward-looking discussed events.

factors please quarter company's affect the For recent that our may refer our this for a filings. results, more and release to SEC earnings most the discussion to detailed of

reconciliations information the comparable measures. During non-GAAP the to financial this non-GAAP contained turn are With certain call, SEC and John. financial over the discussing in the filings. will that, these about financial be measures to I'll most call More company measures GAAP directly

you, us thanks to today. Thank everyone joining and for

our are noted, construction to small environment challenges macroeconomic the around balance interest previously and rates pressure secure elevated and rise, substantial has stricter significant to lenders. uncertainties posed ultimately have completion, we project credit As difficult labor current costs borrowers continue increased Borrowers facing from for requirements imposed to which that for by made banks. others, These challenges, long-term led amongst have financing. it

year. and will door of following in for the lenders points reduced the for know, need. encouraging rates financing the access XX interest to open optimism September This a spur consistency basis they alike and is point you and and Reserve positive XX-basis cuts just decrease borrowers many trend rate borrower the As Federal of this by

once. through XX% the to this balance. unpaid anticipated was recovery we return to of dilutive navigate expected capital years, activity. taking measures of XXXX origination low began a loans to when the approach we environment, the rates to pool originated our of raises. million costs mortgage to were XXXX uphold of avoid end, and in Unfortunately, a sooner. inflated principal approximately are during combination loans material $XX.X lower X diligent reduced In an of originations Subsequent the were real rates combination of the projects unviable. period period regarding estate This to generally sale This For underwriting Sachem stabilize rise at prudent many interest with our negotiations and borrowers accretive and this rapid and growth last while has and were of and hit approximately necessary the rendered with all continuing costs as we unprecedented quarter labor

sale million prefer, book to we diversified not to loan housing capital and flow investment is provide produce makes will environment, believe Sachem this While resilient extremely credit foreclosure thesis $X.X in it us loans these before into high-cost us an of Further, workforce Shem uncertainty of towards Shem a generate which asset amount of broadening private will assets. and or market is reinvested Shem Creek to outcome we credit nonaccrual payable the additional as allowing in and on in the our $X.X the is and environment. business cleared accretive XX% represents into Nick details an September that million Capital, assets. in product, strategic quarter strongly proactive flexibility invested model call. due further to of membership the the the funds management reinvest cost any initial is quarter, strong cash our of difficult in manager investment during a This and the XXXX. Creek's lower particularly new expect on reduce Also, a of remain supply. We Creek interest. and gives most step We third-party with cash in acquired later performing the invested loans,

in that a the This our extension criteria a quarter, we reflecting have in rigorous change primarily revenue, which, year, quarter fees, re-underwriting have income. origination the and generated traditionally of mentioned, same but for a to reserves. Loan source those to modification income due only approximately made company, portion $XX.X million last capital and fees sufficient borrowers to a remain meet available are of compared decrease our as up significant

fee a ability and modifications our to in This $X.X loans. nonperforming in million quarter, we manage loans, primarily loan added Year-to-date, million we only reflecting efficiently REO, extensions. income from earned result of $X.X

Our coupled staying borrower on with knowledge nonperforming sidelines. increases Opportunities to the still the that with our loan we a probability our move hands-on approach, our can of Shifting pipeline. especially sector remains to first-hand strong, banks from performing. a within

leverage to the Nick? third the and strong and to expertise to our to I excited to hand Nick a time. like are corner rebuild would over quarter over experience to that, We turn financials. With call return dividend and our discuss

Thank you, John.

year. third recorded XXXX, in Sachem to quarter million revenue the the same of of compared quarter For the million $XX.X $XX.X prior

declined partnership Interest previously loan the during Shem from prudent XXXX. and from reduction John reduced as due the due. to impact income to income same recent XXXX, short-term mentioned, investments remain originations in debt coming with rose investment of is Creek fee while to period compared in loans the the As we attributable mainly

X delivering returns past the losses million no invested has Over date. to has been double-digit approximately $XX which with Sachem years, in attractive Shem,

it million the the the to approximately Total costs million increase $XX.X $X.X was and and factors, million million CECL diversification quarter. additional compared including reserves in to The by partnership approximately approximately excited $XX.X prior driven provides in operating the this expenses. multiple year many leverage totaling third expenses G&A $X.X are our synergies brings XXXX appreciate of for model. were business and to quarter We

a our decreased relative charges, within of receivable our uncertainty are million that notes due due Most XXXX. Interest losses since of our expenses as approximately G&A costs real on amortization ongoing professional activism, value quarter September against reflecting hold primarily to came resolved. are a shareholder which payable the estate fees or from industry principal provisions compared of increased June XX, approximately same been As higher its held XXXX, reserves basis. to financing of commercial unsecured and broader balance. to of in repayment a unpaid continues XX% credit portfolio loan XXXX, assets to $XX.X deferred by and allowance have current our the This reminder, X.X% has at puts on the the primarily the these stemming economy. for residential now portfolio in noncash for mortgage due mortgage

loss or share to As share comparing a year $X.XX for the was diluted $X.X common attributable third prior negative of result, shareholders per XXXX compared quarter $X.X million million net in to per diluted $X.XX period. or the

As shareholders XX, our On declared prior in performance, of discussed per Board the policy our of record requirements operational federal quarters, November $X.XX distribution an our a dividend long-term and basis, evaluates regularly balancing dividend X, importance for tax November on ongoing flexibility. financial share of XXXX. the quarterly as maintaining Board of

its with the timing to future Going fourth dividend to financial and/or forward, quarterly of first release concurrently and quarter, it with end will better the declarations either concurrently X anticipated the results. its respect company information. disclose that earnings respect is release the with of at quarters with This fiscal the year-end align with year of will the our

portfolio activities. to Turning

XXXX, previous originations quarters in challenged. As loan remained with

stay sidelines the financing on as and we expect remaining banks environment. remain the with capital to markets However, to persisting, challenges selective current our highly due pipeline robust even we

Our continues metrics where residential multifamily and favorable. to in primary be growing small focus markets remain single-family on the assets

paydowns. fundings $XX.X loans, we including net had million modifications of the by loan $XX.X construction of mortgage offset draws quarter, million approximately that approximately For and were from principal

a XX third resulted quarter, of loans. the the modifications total extended company fee of These $X.X income or modified million. gross in During

unpaid of million, XX, but default with a XXX interest approximately As balance fees. comprised rates, average rate weighted of of excluding of loans September of portfolio our principal inclusive XX.X%, XXXX, total was a $XXX.X

portfolio Northeast. in covering is focus states in with balanced the growth Southeast, XX loan Our the a with markets markets stable geographically diverse, on more

end, rental our are million representing balance $XX.X owned Additionally, but estate which by balance, including approximately had principal the in only held and the $X.X $XXX was September for nonaccrual unpaid XX, accrued of in million investments of of charges. XX.X% company, borrower At loans $X.X we principal outstanding million status, for a in $X.X with held quarter properties. interest approximately million office Real as XXXX, foreclosure includes of including XX million sale. loans and

are priority maintaining emerging, to our balance sheet to expensive. financial on remains when is valuable capital time opportunities move during let's liquidity prepared a a stay position, Now but where and

$X.X offset by of As including we cash million securities, of million had cash, $X.X of and $XXX.X total September equivalents XXXX, investment outstanding. XX, million debt assets in million, total of $XXX.X

We stock amount the preferred maturities, of the will million the principal from notes repayments current on under XXXX. ATM September from utilize potential hand, mortgage loans, facilities, of our to loans credit continue principal our our debt and cash due sale unsecured from to on of from program existing $XX.X proceeds proceeds upcoming notably the drawdowns manage mortgage sale unsubordinated XX,

days Selling sale loans these million considered anticipating sale principal mentioned, balance loans John over are the XX $XX.X that to as XX provide unpaid Currently, are XX% on Sachem. or from of nonaccrual of past the are due of loan recovery the of these loans approximately on of close to of Finally, million are unpaid targeting we advantages several Of loans we $XX.X balance. payment. principal approximately pool. loans,

the professional capital the bankruptcy related and and eliminate including expenses fees, to risk of to other we projects relating foreclosure to costs providing First, REO. finish the significant process,

The of in to capital regularly constrains directed limits the of we areas take capital years complete X particularly significant, when cost over foreclosures lend reclaim could and is lengthy, many often in. that Second, process the judicial assets which opportunity resources that towards business. to be is states other our our

where onboarding in chance significant loans drag liquidity us the a capital gives provide dilutive and avoid capital best Selling earnings. time loans these Lastly, eliminates expensive. these remains on a to

back the is remarks. As regrow sale the step to closing the such, and for we call our I start to direct John most to path regain now dividend. will turn believe our

Nick. Thanks,

our projects. estate forward are loan refilling We market to leader We in finance. pipeline real funding Sachem look to and reposition small accretive excited a balance as

Our goal and our shareholders. restore to our is reward balance our derisk dividend sheet,

challenging and macroeconomic We support for the are shareholder grateful industry-specific continued through conditions.

you. enhance underway, Sachem And are is now transition Thank our and book value. heartfelt we to to I team Our performance. operator to entire my work, and for dividend gratitude the invaluable lending to for contributions extend will currently excited our call over their increase turn continuous hard operations, we dedication protecting our want while to the the questions.

Instructions]. [Operator

comes with line Mehta question the first of from Global The Gaurav Partners. Alliance

wanted you're ask on loans to the nonaccrual you loans mortgage and sell. your I to that planning

nonaccrual, nonaccruals So, the than you higher be to I number prepared last the in think in quarter. million remarks, which $XXX of the seems for said

So, pool color on loans, more then want that hoping to on the selling sale. of nonaccruals. more And some get mortgage the to so expected sale I and the of some mortgage get you're color that of loans timing

one, take can that I Yes. Gaurav.

is related with The second Florida. nonaccrual, outcome up mentioned, to theme of $XX that the million to was with assets actively the months. made slowing a another than And and we're of nonperforming pool probably $XXX-plus the second It's pool have -- underlying that mortgage There's like been number. but holder general the scheduled, majority to that sizable the to sale, litigation nonaccrual QX. are project, of some you asset of the more has I down portion the in think credit hope there's working in up sales as an want the over Relating some nonaccrual, of another and QX So, is which portion working sort a issues mortgage the the million sold sponsorship with slowed on. a that actively a A that's loans that. sizable that in sale. what between aspect. suppose that's but deal I a coming redeploy completion either the the issue, the in is other little has through spike that near Naples, note clear into issue, loan loan that being products better particular perhaps we're because in we the there's holder entire is spike to ourselves been pool the

would some suppose generally prior were So, the get we're the sale commercial anticipate selling, asset performing quarter that projects capital loans get projects, speaking. XXXX. if the process the that of I you process but is to add say, on closing We back assets. into commercial of into residential XX, not excited executed majority There a sort full I to are just December off kicked close, and I that after majority and a would the these it go we're base, of that small assets. to

one in ties thing like other that, the performance. our quarters of last kind to few to add I'd Gaurav, of which

if to downward and loans quite been we As that on though out. it's probably a prolonged then drag certainly we've all nice we these but what has These the close to have our dividend kind our where very to most time. nonaccrual, nonaccruals to to known, to we of period here is but today. is end, the dividend we fight need we a an for effort And In a just some, restore these was it of to feel And these internally, us. were our eliminate dividend. hurting honestly, have money, earnings, of up, help do even we doesn't the best would tracked it back would get of these clearing drag reduced of dividend loans job a

Okay.

pool follow-up, million a are million as nonaccrual included is in and $XXX $XX that $XX million in the that Just total so number.

I sale loan you guess remaining like about of after in for similar so, would expect the the outcome pool, nonaccrual think should And the we what portfolio? the remain as nonaccrual mortgage

additional loan At respect secondary there with nonaccrual. no point, to this is sale the

sources the of December. you in that million about few on use balance address may maturity to capital talked the Okay. a $XX I And different you think lastly, debt sheet,

so of as you another source that any out sources, look to And those maturity? there the is prefer over you debt address

culmination the the we'll from expecting have of options. sale, we're what loan Gaurav,

with again to that build loans of be are notes, books. likely, will a loans Bank. those Our on the point, $XX.X full we of December that reduction in facility our putting And Most a our paydown business due start at Needham of it are course, million. credit can and

Next comes Matthew with line question JonesTrading. from the Erdner of

million kind million to percentage So, with I the office loan of gets that after around be the in size. $XX million of office? you What know outside $XX sale sales, portfolio remainder Do current what for would nonaccrual. think closes? this in of And $XXX loan then mentioned would $XXX be million me commercial that you

know back it just you So or $XXX through that kind if this towards Can reading I'm million, of correctly? give brings down take. let me

Okay.

portion I -- take I'll nonaccruals, condo. you nonaccruals respect Nick, office just are percentage, this with the the So, let to but of the residential significant

much see the So, don't we sale. we as see loan with devaluation

Regarding the there's the office sale million of to million properties. office, are $XX-plus $XX going the

we're portion So to continue assets that there's going like certainly, to exposure. sizable of office to that, selling are that that lower a be

view made capital Where best your another capital the helpful. this Got to question shares the it. at guys It allocation. in That's then X.X almost like with on you to quarter, Creek looks during regard And guys you repurchased capital. Shem point? do the turning the million investment return

We're our not near to shares think We're in that end do restored. even going it's XX.X% business, all, -- feel We all We shares still. we're still future, are through We in book Matt, respect to year. are still feel again, of not lending Right the of anything. shares Look, First lend. the with depressed be that loan we our light dividend cheap the this. the We're of value. the we're my only through going at our the think of now, to sale. managing opinion. will performing

will moving to new again. have. starting capital what going We're going be look of take begin -- a we're January, to and year we for Next in stock

your not still here. think answer great to our It's just We residential buy is projects. as question, stock a like So, lending. great we we're seeing many

can so, now. find it's sitting tight we a capital, for going just slow And play. to we're And be accretive until

from of comes question Next Oppenheimer Patri with line Co. the & Tyler

for This on is Tyler. Jonathan

now your that And curious you out. highlighted cut, a follow-up. the year on maybe of somewhat I'm next how deal election on moved John, latest can the me, thinking update if flow. rate you the past plays September for one But First and we've strong us

to you So, to pairing pedal next kind see do on back of step that, what the need year?

All right.

Board could talked to sale decision, I'm to We've I but happy. there So, again, happy, coming is that. through. We've our don't clear, So, want -- not not There shareholders dividend. cut of I another be and about possibly I'm expect our loan And happy. right? our be to be dividend the starting very at be. to a is, dividend. of could $X.XX quite Director excited to I quarter. this really It's the at just words. moving to light we forward. we're We're possible. the going the We're think used like despair. start we're looking I It's mince about again, in don't point, that company quite tunnel. a And looking second see want just It's to not end to the be,

I'm appreciate color. you've Creek have the guys satellite at past hard over in Okay. changed That's local you great. in we've rates And about months. light invested of the or interest in the lenders. past, and environment conversations in if And the few talked I in the partnership then quarter. money offices with seen become those the active Shem the the more curious all moves

great for a us. opportunity is It

lender excited through bit at we have step our mind line. business without heart. they we and what our unit. estate We're very to do out our do. a they for real and Urbane business. starting we're TRS the bring bottom our in to capital, However, of That's kind And more little a can to can what We're what development

new have fill which away kind from we normal is lender. opportunity it's at too adds us. will don't tremendous let are. the with ability they our and But rates stepped now a to business we have the your great from the attract very We said consistently, kind gains, we So, to mortgage capital our what the white the ability being of those spin are will Shem view. housing We of shareholders. point capital feel off a bit path. the that not is here, vanilla have pipeline, We they credibility And way a Creek come gains. we've interesting benefits far be straying our this it in mortgage little model workforce this for for Once lender. to be We're that in investment

very that team, could of them going huge excited business a think be have of our and we're as to we forward. part So, part our

from line Next JMP. question Muller Citizens the comes of Chris with

So, bulk guess, on lower modifications, the are I modifications steady modification-wise? where through quarters? about from there how another, the Or of expect at to the I Are guys of small guess you're what you fees over coming coming is through? you flow come feeling you

Chris, -- now a point, and at down had to approximately modification XXX one we XXX. we're loans,

any number, these get guidelines the of notes A for is sheer our foreclosing. to and through have And to honestly, modifications a -- we commission. underwriting go, which process. bunch them selling greatly changed off We're us quarter every guys to of leads they done are going significant And longer. lot the It Just don't the a those single of portion what nowhere fit don't by have there's want the improved. if foreclosing quite we last these, we month. is or

known fit And continue we've been to And But cleansing of a if protect our to get the go ninth do they have our is best very kind to for borrowers. can't to of guidelines, them they sheet. We our of go. to balance our So, this inning come. part we many. to

it. Got

a of REO expect to couple next pickup the quarters? So, should in we see over

through interested our see good right? short A themselves, loans It's a of resolve foreclosure sale, either a I another party, don't in really refinance. it. portion

over in. last not grown Our whole REO this period. whole been struggle that X-year has This tremendously we've

New gives little for will I it. it to it get but REO, a keys ability have an it's not just will it's we hard to Artificially be quick So, to stuff don't some this do expect and sale. New Again, is us we control, trying it's of York cash transaction, mean add this If to but the control. control the Jersey, I get keeping. I the perform states, in especially a inflating REO, caveat. we're

some that I mission I'll are is clarify trying is back take John what think to that for Actually, we REO before to goes too, sale. it saying,

secondary the You alleviates if it market just get you better can to REO, convert execution in risk. the

a do trying to loan chance to be the us hand we're keys. pool what say, borrowers So, to front get with here's our is of in proactive the to hey,

into say, bunch sale. see to you'll that going subsequent that us discusses the that taking So, like, just of facilitate was sale done like strategically But disclosure again, the taking through, we're to that's REO amount REO Mission a that a the wasn't foreclosure.

That's you, Got my Nick. And guess helpful. it. for question very I then second is

sure you CECL reserves, in you that in break the reserves of the that of related I to specific I million can the for I Naples question? to me Is And are is correct With reserve then got and reserve asset. the that the those want that number? specific was guess, I just quarter, said most that total general make out think any $XX.X first.

of I the indirect remainder assets general to the sort in that got The roughly split reserve, Is reserve about would is say which helpful? the $XX -- pool. the relates performing is rest against that million of is bucket. nonperforming all in you've general of

you forward back look in guys shift some helpful. Very XXXX. to offense I to point at seeing

from comes question the Ladenburg of Christopher line Next Nolan Thalmann. with

just be realized Or loss a loan million going fourth to accounting-wise? the part $XX going recovery? that it is going to that be sale, How in to work the quarter? is reserve For is

point, effect your goes of like. that sale filing shortly out some forma reserve that's pro There's where then realized a sort for loan in into offset at. reserved by, it's looks were the loans You'll pool. executed will mass that recovery, Chris, against of in loss is a a it that what be coming And of to see our the

still you is for now? process? heard on I hand note, And do that guess, Okay. then cash December in have correctly, it you Or the maturing I cash the if

at draw so from is kept cash. availability ability But Needham of it. We the we notes. from we've the all relatively anticipated And be. have we what Chris, if We of our do then to also Needham the have have sale don't have have the some proceeds need low. we

Okay.

your So, it will be? facility credit cover if need

Yes.

question Capital the that the CapEx Shem of income flow at sheet of Or through balance a just on investment. is investment? final Did statement was all? type that And Okay. sort

That in did not statement transaction flow did income the We September. yet. through that early

are the year, too of So, effects a during say. in that fund. still in it co-invest let's investment short-lived that the partners -- been was oversees in rest the the to P&L majority the as outsized It's is funds quarter of economics the limited with we've vehicle or for is manager third-party our investing which the capital a

a amortized of look way to that at that expense does be investment? Is period that over time? So, the

No, it's investment. equity an

to and for John [Operator now floor end would Instructions]. over gentlemen, like Ladies comments. we turn have of Villano to the closing session. reached the I question-and-answer

you you, Thank of with updating us for filing today. the joining our everyone, forward look We to again. Thanks K.

concludes Thank teleconference. This you. today's

You your time. at lines may disconnect participation. your Thank for you this