Release Date: May 01, 2025

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

• $Sachem Capital Corp(SACH-A)$ (SACH) has two signed term sheets with well-respected lenders, indicating potential for future financing transactions.
• The company has successfully diversified its business model and cash flow sources through partnerships with Urbane New Haven and Shem Creek Capital.
• Income from preferred membership in Shem Creek LLC investment earnings increased by approximately 71.7% compared to the first quarter of 2024.
• Total operating expenses decreased by 16.9% compared to the prior year's quarter, reflecting cost management efforts.
• Sachem Capital Corp (SACH) maintains solid liquidity with cash and cash equivalents increasing to $24.4 million from $18.1 million at the start of the year.

Negative Points

• Total revenue for the first quarter decreased by 31.9% compared to the same period in 2024, primarily due to fewer loan originations and elevated levels of non-performing loans.
• The company still holds $153 million of non-performing loans, with a net increase due to certain loans moving from performing to non-performing status.
• Net loss attributable to common shareholders was $0.2 million, compared to $3.6 million of income for the first quarter of 2024.
• Book value per common share decreased from $2.64 at year-end 2024 to $2.57, driven by dividends paid in excess of book net earnings.
• The macro environment presents challenges such as ongoing tariff uncertainty, increased costs from materials, and restrictive bank lending policies.

Q & A Highlights

• Warning! GuruFocus has detected 3 Warning Sign with SACH.

Q: Can you provide details on the two term sheets with different lenders and how they will address the upcoming debt maturity? A: CEO John Vanno explained that the facility comes in two components: an initial funding for working capital and a delayed draw for the payment of unsecured notes in September. CFO Jeff Wallraven added that one facility is a term note, while the other is similar to a credit line for growth assets.

Q: What are the current credit spreads and loan origination opportunities in the market? A: CEO John Vanno noted that there is a significant pipeline of opportunities, particularly in single-family and multi-family assets, which are commanding better pricing. The company maintains standard pricing for mixed-use developments and expects further rate compression in the preferred asset classes.

Q: Are the new facilities fixed rate, and how would they be affected if interest rates were cut? A: CEO John Vanno stated that one of the facilities would benefit from rate cuts, while the delayed draw facility will be at a fixed rate.

Q: What are the advance rates on the various facilities, including Churchill? A: CEO John Vanno mentioned that advance rates are between 60% and 70%, with potential rates up to 75% or 80% for specific asset classes like residential and multi-family. The delayed draw facility offers more flexibility.

Q: With the maturity of baby bonds, should we expect leverage levels on the balance sheet to change? A: CEO John Vanno and CFO Jeff Wallraven explained that new facilities will have a 1.5 times asset coverage ratio, and the company will maintain this ratio going forward. The maturity of baby bonds is spread out, with the next major maturity in December 2026.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.