Sachem Capital Reports Financial Results for the Second Quarter of 2019

Posted by Business Wire August 14, 2019

Company Restructures Balance Sheet to Promote Growth and Expansion

Conference Call and Webcast to be Held at 8:00 AM EDT on Friday,
August 16, 2019

BRANFORD, Conn.–(BUSINESS WIRE)–Sachem Capital Corp. (NYSE American:SACH) today announced its financial
results for the second quarter ended June 30, 2019. In addition, the
Company announced that it will host a conference call on Friday, August
16, 2019 at 8:00 a.m. Eastern Daylight Time.

John Villano, CPA, co-chief executive officer and chief financial
officer of Sachem Capital Corp., stated:

“We made substantial progress during the second quarter of 2019, both
financially and operationally, which we believe has helped build a solid
foundation for growth and improved profitability in the second half of
2019. Most notably, we raised net proceeds of $21.7 million through a
public bond offering of 7.125% unsecured, unsubordinated notes. We also
raised net proceeds of approximately $15.5 million in the first half of
2019 through our at-the-market (ATM) offering facility. As a result, on
June 25, 2019 we repaid the entire outstanding balance on our $35
million revolving credit facility, including principal, accrued but
unpaid interest and other fees, and terminated the facility.

“By replacing our secured, variable rate revolving credit facility with
unsecured fixed rate notes, we believe we have greater flexibility to
incur additional indebtedness on more favorable terms, reduced
significant banking charges related to the servicing of the credit
facility and, most importantly, reduced credit exposure to a single
asset class (i.e., residential fix-and-flip) that we feel is
highly fluid (high loan turnover) and overpriced compared to other
opportunities. We now have the flexibility to lend capital where we have
compelling loan to value prospects.

“In total, $30.6 million was paid towards principal on the credit
facility during the second quarter of 2019 and accordingly, these loan
repayments temporarily slowed the growth of our mortgage loan portfolio.
Additionally, our earnings per share were adversely impacted in the
second quarter of 2019 due to the increased share count and substantial
non-recurring costs associated with the termination of our prior credit
facility, the majority of which was a non-cash expense. Total
termination charges were approximately $780,000, or $0.04 per common
share (based on the weighted average number of shares outstanding at
June 30, 2019.) Nevertheless, we now have a much stronger balance sheet
and greater flexibility to originate new loans, which we expect to help
drive cash flow as well as shareholder value going forward. Even with
the termination costs, net cash provided by operations in the first half
of 2019 increased approximately 27.6% to $3.7 million, compared to the
first six months of 2018.

“Looking ahead, we view debt offerings similar to our recent notes
offering as an attractive option to raise flexible non-dilutive capital
on favorable terms, if and when needed, in order to further scale the
business and take advantage of market conditions as appropriate. We may
also consider a more limited revolving credit facility if the terms are
reasonable. In the meantime, we recently completed a $10 million public
offering of common shares, which is intended to fund new real estate
loans going forward and provide us additional working capital. We also
have the ability to raise additional working capital by selling equity
under our existing at-the-market offering facility. Given the strength
of our balance sheet, (as of June 30, 2019, our equity-to debt ratio was
approximately 3:1, which does not take into account the recent $10
million equity offering), we believe we now have a more flexible,
expandable platform to grow business operations. As a result, we remain
encouraged by the outlook for the second half of the year, as well as
the long-term prospects for the business.”

On July 11, 2019, the Company declared a dividend of $0.12 per common
share, which was paid on July 29, 2019 to shareholders of record on July
22, 2019. The total amount of the dividend payment was approximately
$2.35 million.

Results of operations – three months ended June 30, 2019

Total revenue for the three months ended June 30, 2019 was approximately
$3.07 million compared to approximately $3.04 million for the three
months ended June 30, 2018, an increase of approximately 1%. Compared to
the 2018 period, for the 2019 period, interest income was lower by about
$60,000 and other income was lower by approximately $25,000. These
reductions were offset by increase of approximately $94,000 in fee
income and $13,000 in rental income.

Total operating costs and expenses for three months ended June 30, 2019
were approximately $1.9 million compared to $832,000 for the three
months ended June 30, 2018 period. The increase in operating costs and
expenses is primarily attributable to $780,000 of expense incurred in
connection with the termination of our $35 million revolving credit
facility. In addition to being a non-recurring charge, $439,446
represents the write-off of unamortized deferred financing costs, a
non-cash item. Interest and amortization of deferred financing costs
increased approximately $70,000 reflecting the increase in the mortgage
loan portfolio.

Net income for the three months ended June 30, 2019 was approximately
$1.1 million, or $0.06 per share, compared to $2.2 million, or $0.14 per
share for the three months ended June 30, 2018.

Results of operations – six months ended June 30, 2019

Total revenue for the six months ended June 30, 2019 was approximately
$6.4 million compared to approximately $5.8 million for the six months
ended June 30, 2018, an increase of approximately 11.3%. The increase in
revenue represents an increase in lending operations. For the 2019
period, interest income was approximately $5.1 million and net
origination fees were approximately $705,000. In comparison, for the six
months ended June 30, 2018, interest income was approximately $4.3
million and net origination fees were approximately $689,000. Finally,
fee income increased by approximately $109,000. These increases were
offset, in part, by a reduction in other income of $203,000.

Total operating costs and expenses for six months ended June 30, 2019
were approximately $3.2 million compared to $1.6 million for the six
months ended June 30, 2018 period, an increase of approximately 104%.
The increase in operating costs and expenses is primarily attributable
to $780,000 of expense incurred in connection with the termination of
the credit facility, interest and amortization of deferred financing
costs, which increased approximately $469,000 reflecting the increase in
our mortgage loan portfolio as well as an increase in the interest rate
on our credit facility, a $312,000 increase in compensation expense
(including stock-based compensation) and a $107,000 increase in general
and administrative expenses.

Net income for the six months ended June 30, 2019 was approximately $3.2
million, or $0.19 per share. In comparison, net income for the six
months ended June 30, 2018 was $4.2 million, or $0.27 per share.

Investor Conference Call

The Company will host a conference call on Friday, August 16,
2019 at 8:00 a.m., Eastern Daylight Time, to discuss the Company’s
financial results for the second quarter ending June 30, 2019 as well as
the Company’s corporate progress and other meaningful developments.

Interested parties can access the conference call by calling
844-369-8770 for U.S. callers, or +862-298-0840 for international
callers. The call will be available on the Company’s website via webcast
at https://www.sachemcapitalcorp.com.
John Villano, Co-Chief Executive Officer and Chief Financial Officer
will lead the conference call and other Sachem Capital executives will
also be available to answer questions.

A webcast will also be archived on the Company’s website and a telephone
replay of the call will be available approximately one hour following
the call, through 8:00 a.m. on Friday, August 30, 2019, and can be
accessed by calling: 877-481-4010 for U.S. callers or +919-882-2331 for
international callers and entering conference ID: 53272.

About Sachem Capital Corp.

Sachem Capital Corp. specializes in originating, underwriting, funding,
servicing and managing a portfolio of first mortgage loans. It offers
short term (i.e., three years or less) secured, non­banking loans
(sometimes referred to as “hard money” loans) to real estate investors
to fund their acquisition, renovation, development, rehabilitation or
improvement of properties located primarily in Connecticut. The Company
does not lend to owner occupants. The Company’s primary underwriting
criteria is a conservative loan to value ratio. The properties securing
the Company’s loans are generally classified as residential or
commercial real estate and, typically, are held for resale or
investment. Each loan is secured by a first mortgage lien on real
estate. Each loan is also personally guaranteed by the principal(s) of
the borrower, which guaranty may be collaterally secured by a pledge of
the guarantor’s interest in the borrower. The Company also makes
opportunistic real estate purchases apart from its lending activities.
The Company believes that it qualifies as a real estate investment trust
(REIT) for federal income tax purposes and has elected to be taxed as a
REIT beginning with its 2017 tax year.

Forward Looking Statements

This press release may contain forward-looking statements. All
statements other than statements of historical facts contained in this
press release, including statements regarding our future results of
operations and financial position, strategy and plans, and our
expectations for future operations, are forward-looking statements. The
words “anticipate,” “estimate,” “expect,” “project,” “plan,” “seek,”
“intend,” “believe,” “may,” “might,” “will,” “should,” “could,”
“likely,” “continue,” “design,” and the negative of such terms and other
words and terms of similar expressions are intended to identify forward-
looking statements.

We have based these forward-looking statements largely on our current
expectations and projections about future events and trends that we
believe may affect our financial condition, results of operations,
strategy, short-term and long-term business operations and objectives
and financial needs. These forward-looking statements are subject
to several risks, uncertainties and assumptions as described in our
Annual Report on Form 10-K for 2018 filed with the U.S. Securities and
Exchange Commission on March 29, 2019. Because of these risks,
uncertainties and assumptions, the forward-looking events and
circumstances discussed in this press release may not occur, and actual
results could differ materially and adversely from those anticipated or
implied in the forward-looking statements.

You should not rely upon forward-looking statements as predictions of
future events. Although we believe that the expectations reflected in
the forward-looking statements are reasonable, we cannot guarantee
future results, level of activity, performance or achievements. In
addition, neither we nor any other person assumes responsibility for the
accuracy and completeness of any of these forward-looking statements.
We disclaim any duty to update any of these forward-looking
statements.

All forward-looking statements attributable to us are expressly
qualified in their entirety by these cautionary statements as well as
others made in this press release. You should evaluate all
forward-looking statements made by us in the context of these risks and
uncertainties.

 

BALANCE SHEETS

  June 30,       December 31,
2019 2018
(Unaudited) (Audited)
Assets
Assets:
Cash $ 3,095,818 $ 99,310
Cash – restricted – 59,549
Escrow deposits – 12,817
Mortgages receivable 82,588,863 78,011,653
Mortgages receivable, affiliate 869,627 879,457
Interest and fees receivable 1,492,256 1,397,038
Other receivables 130,000 155,000
Due from borrowers 1,211,361 695,218
Prepaid expenses 62,879 14,866
Property and equipment, net 1,320,707 1,180,107
Deposits on property and equipment 189,481 12,000
Real estate owned 4,936,787 2,943,438
Deferred financing costs   31,942   553,597
 
Total assets $ 95,929,721 $ 86,014,050
 
Liabilities and Shareholders’ Equity
Liabilities:

Unsecured unsubordinated fixed rate notes
(net of deferred
financing costs of $1,270,000)

$ 21,730,000 $ –
Line of credit – 27,219,123
Mortgage payable 792,053 290,984
Accounts payable and accrued expenses 310,712 316,413
Security deposits held 7,800 7,800
Advances from borrowers 262,764 317,324
Due to shareholder 2,217,000 1,200,000
Deferred revenue 1,108,494 1,058,406
Notes payable 12,203 –
Capital leases payable 72,622 –
Dividend payable – 2,624,566
Accrued interest   –   176,619
Total liabilities   26,513,648   33,211,235
 
Commitments and Contingencies
 
Shareholders’ equity:
Preferred shares – $.001 par value; 5,000,000 shares authorized; no
shares issued 		– –
Common stock – $.001 par value; 50,000,000 shares authorized;
18,905,586 and 15,438,621 issued and outstanding 18,906 15,439
Paid-in capital 68,658,030 53,192,859
Retained earnings (accumulated deficit)   739,137   (405,483 )
Total shareholders’ equity   69,416,073   52,802,815
Total liabilities and shareholders’ equity $ 95,929,721 $ 86,014,050
 

STATEMENTS OF OPERATIONS

(unaudited)

       
Three Months Six Months
Ended June 30, Ended June 30,
2019       2018 2019       2018
Revenue:
Interest income from loans $ 2,315,325 $ 2,375,797 $ 5,066,405 $ 4,338,170
Origination fees, net 340,823 340,052 705,540 688,600
Late and other fees 140,537 49,986 187,033 84,083
Processing fees 41,805 37,670 76,600 70,800
Rental income, net 47,255 33,975 72,904 77,730
Other income 179,391 204,781 296,531 499,528
Net gain on sale of real estate       –   7,149   –
 
Total revenue   3,065,136   3,042,261   6,412,162   5,758,911
 
Operating costs and expenses:
Interest and amortization of deferred financing costs 452,406 381,964 1,073,454 604,920
Stock based compensation 4,107 – 8,214 –
Professional fees 70,215 42,137 154,222 158,459
Compensation, fees and taxes 465,193 299,729 849,420 545,304
Exchange fees 11,219 – 21,507 16,667
Other expenses and taxes 17,139 21,121 31,332 55,601
Expense in connection with termination of LOC 779,641 – 779,641 –
Excise tax – – – 19,000
Depreciation 18,164 5,834 25,667 13,468
General and administrative expenses   103,909   81,297   269,358   162,660
 
Total operating costs and expenses   1,921,993   832,082   3,212,815   1,576,079
 
Net income $ 1,143,143 $ 2,210,179 $ 3,199,347 $ 4,182,832
 
Basic and diluted net income per common share outstanding:
Basic $ 0.06 $ 0.14 $ 0.19 $ 0.27
Diluted $ 0.06 $ 0.14 $ 0.19 $ 0.27
 
Weighted average number of common shares outstanding:
Basic   18,499,531   15,415,737   17,144,104   15,417,737
Diluted   18,499,531   15,415,737   17,144,104   15,415,737
 

STATEMENTS OF CASH FLOW

(unaudited)

  Six Months
Ended June 30,
2019     2018
CASH FLOWS FROM OPERATING ACTIVITIES
Net income $ 3,199,347 $ 4,182,832
Adjustments to reconcile net income to net cash provided by
operating activities:
Amortization of deferred financing costs 94,323 43,614
Depreciation expense 25,667 13,468
Stock based compensation 8,214 –
Gain on sale of real estate (7,149 ) –
Abandonment of office furniture 12,000 –
Costs in connection with termination of line of credit 439,446 –
Changes in operating assets and liabilities:
(Increase) decrease in:
Escrow deposits 12,817 111,189
Interest and fees receivable (449,809 ) (570,404 )
Other receivables 25,000 180,830
Due from borrowers 780,320 (105,350 )
Prepaid expenses (48,013 ) (42,340 )
Deposits on property (177,481 ) (18,000 )
(Decrease) increase in:
Due to note purchaser (176,619 ) (723,478 )
Accrued interest – 84,661
Accrued expenses (5,706 ) (280,939 )
Deferred revenue 50,088 107,074
Advances from borrowers   (54,560 )   (50,166 )
Total adjustments   528,538   (1,249,841 )
NET CASH PROVIDED BY OPERATING ACTIVITIES   3,727,885   2,932,991
 
CASH FLOWS FROM INVESTING ACTIVITIES
Proceeds from sale of real estate owned 264,809 –
Acquisitions of and improvements to real estate owned (342,598 ) (61,166 )
Purchase of property and equipment (165,263 ) –
Principal disbursements for mortgages receivable (28,516,128 ) (30,263,339 )
Principal collections on mortgages receivable 21,098,466 18,982,298
Proceeds from sale of mortgage receivable   –   1,200,000
NET CASH USED FOR INVESTING ACTIVITIES   (7,660,714 )   (10,142,207 )
 
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from notes sold to shareholder 1,017,000 –
Proceeds from line of credit 42,720,829 45,727,947
Repayment of line of credit (69,939,952 ) (33,424,454 )
Principal payments on mortgage payable (2,947 ) (5,019 )
Dividends paid (4,679,293 ) (3,237,305 )
Financing costs incurred (12,113 ) (584,967 )
Proceeds from mortgage payable 795,000 –
Mortgage on office building paid (290,984 ) –
Proceeds from notes payable, net 71,820 –
Issuance of common stock-ATM, net 15,460,427 –
 
STATEMENTS OF CASH FLOW (continued)
(unaudited)
  Six Months

 

Ended June 30,

2019     2018
 
Gross proceeds from issuance of fixed rate notes 23,000,000 –
Financing costs incurred in connection with fixed rate notes   (1,270,000 )   –
 
NET CASH PROVIDED BY FINANCING ACTIVITIES   6,869,787   8,476,202
 
NET INCREASE IN CASH AND RESTRICTED CASH 2,936,959 1,266,986
 
CASH AND RESTRICTED CASH- BEGINNING OF YEAR   158,859   954,223
 
CASH AND RESTRICTED CASH – END OF PERIOD $ 3,095,818 $ 2,221,209
 
June 30, June 30,
2019 2018
(Unaudited) (Unaudited)
SUPPLEMENTAL DISCLOSURES OF CASH FLOWS
INFORMATION
Taxes paid $ – $ –
Interest paid $ 979,131 $ 561,307
 

SUPPLEMENTAL DISCLOSURES OF NONCASH INVESTING AND FINANCING ACTIVITIES

During the six months ended June 30, 2018, the Company purchased a
mortgage receivable from a third party at a discount in the amount of
$21,433.

Real estate acquired in connection with the foreclosure of certain
mortgages, inclusive of interest and other fees receivable during the
six months ended June 30, 2018 amounted to $1,439,244.

The reversal of previously accrued capitalized costs during the six
months ended June 30, 2018, amounted to $6,212.

Real estate acquired in connection with the foreclosure of certain
mortgages, inclusive of interest and other fees receivable during the
six months ended June 30, 2019 amounted to $1,962,669.

During the six months ended June 30, 2019, the Company purchased
equipment for $13,005 subject to a capital lease.

Contacts

Investor & Media:
Crescendo Communications, LLC
[email protected]
(212)
671-1021

Tags:
Business Wire
View More Posts

For more than 50 years, Business Wire has been the global leader in press release distribution and regulatory disclosure.

For the last half century, thousands of communications professionals have turned to us to deliver their news to the audiences most important to their business through the sources they trust most. Over that time, we've gone from a single office with one full time employee to more than 500 employees in 32 bureaus.