Sachem Capital Corp. ((SACH)) has held its Q4 earnings call. Read on for the main highlights of the call.
Sachem Capital Corp.’s recent earnings call painted a picture of a company navigating through significant financial challenges in 2024. The sentiment expressed during the call was one of cautious optimism, as the company faces a substantial increase in non-performing loans, a notable net loss, and a decreased book value. Despite these hurdles, Sachem Capital is taking strategic steps to stabilize its portfolio and diversify its business model. Successful loan sales and strategic partnerships offer some positive outlook, although the overall sentiment remains overshadowed by financial losses and ongoing challenges.
Diversified Business Model
Sachem Capital has made strides in diversifying its business model, introducing three verticals: everyday lending, multifamily workforce specialization through Shem Creek, and in-house construction expertise. This diversification is designed to strengthen the company as a whole, providing cash flow stability and potential growth opportunities.
Successful Loan Sales
In the fourth quarter, Sachem Capital successfully closed a $56 million UPB sale of non-performing loans, resulting in $36.1 million in cash proceeds. This strategic move helped stabilize the company’s portfolio and set the stage for future growth.
Strategic Partnerships
The partnership with Shem Creek Capital has proven fruitful, with investments totaling $48.9 million across 28 projects. This collaboration generated approximately $5.1 million in revenue, offering an attractive low-risk double-digit yield.
New Credit Facility
Sachem Capital secured a new credit facility with Needham Bank, providing up to $50 million of committed available liquidity. This new facility replaces the previous one and resolves a loan covenant matter, enhancing the company’s financial flexibility.
Non-Performing Loans
The non-performing loan book increased by $18.3 million year-over-year, reaching $102.9 million. The company continues to face challenges with non-performing loans, particularly from the 2021 and 2022 vintages.
Significant Net Loss
Sachem Capital reported a GAAP net loss of $39.6 million for 2024, with a net loss available to common shareholders of $43.9 million. This significant loss has adversely impacted the company’s book value.
Interest and Financing Challenges
The company incurred $53.8 million in non-cash losses from CECL, valuation allowances, and realized losses on loan sales. High interest rates and financing challenges have affected borrowers’ ability to refinance.
Decreased Book Value
The book value per share decreased from $3.83 in 2023 to $2.64 in 2024, reflecting a $1.19 reduction per share. This decline is primarily due to non-cash unrealized and realized losses.
Forward-Looking Guidance
Looking ahead, Sachem Capital Corp. remains focused on resolving its real estate-owned (REO) and non-performing loans (NPLs). The company plans to continue securing affordable capital to support future growth while maintaining a robust pipeline of potential opportunities. Despite the challenges, Sachem Capital is confident in its financial position, with a book value of $2.64 per share and a strong yield from its partnership with Shem Creek Capital.
In conclusion, Sachem Capital Corp.’s earnings call highlighted a company facing significant financial challenges but taking strategic steps to stabilize and diversify its operations. While successful loan sales and strategic partnerships offer some positive outlook, the overall sentiment is tempered by financial losses and ongoing challenges. Investors and market watchers will be keen to see how Sachem Capital navigates these hurdles in the coming year.