Sachem Capital Achieves Record Revenue of $12.7 Million and Generates $6.2 Million of Net Income for 2019

Solid balance sheet with cash and short-term marketable securities of approximately $34.8 million and stockholders’ equity of $82.6 million as of December 31, 2019

Company will defer decision on further 2020 dividends until July

Conference Call and Webcast to be Held at 11:00 AM EST on Tuesday, March 31st

BRANFORD, Conn.--(BUSINESS WIRE)-- Sachem Capital Corp. (NYSE American:SACH) announces its financial results for the year ended December 31, 2019. In addition, the company will host a conference call on Tuesday, March 31st at 11:00 a.m. Eastern Standard Time to discuss in greater detail its financial condition and operating results for the year ended December 31, 2019 and its outlook for 2020, including dividend payments.

Results of operations

Total revenue for 2019 was $12.7 million compared to approximately $11.7 million for 2018, an increase of approximately $1.0 million, or 8.3%. Interest income increased approximately 8.8% and origination fee income increased approximately 7.7%.

Total operating costs and expenses for 2019 were approximately $6.5 million compared to approximately $3.9 million for 2018, an increase of approximately $2.6 million, or 64.5%. Interest and amortization of deferred financing costs increased by approximately 76.4%, reflecting higher levels of indebtedness, which, in turn contributed to increased income and the growth in our mortgage loan portfolio. Total operating costs and expenses included approximately $439,000 of deferred financing costs, non-cash expenses, as well as an additional $340,000 of expenses relating to the termination of the Webster credit facility in May 2019. In addition, 2019 operating expenses also included a $417,000 impairment loss attributable to real estate owned.

Net income for 2019 was approximately $6.2 million compared to approximately $7.8 million for 2018 due primarily to the increase in operating costs and expenses. As a result of the reduction in net income and the increase in the weighted number of common shares outstanding, net income per share for 2019 was $0.32 compared to $0.50 for 2018.

Financial Condition

At December 31, 2019, total assets were $141.2 million compared to $82.0 million at December 31, 2018. Most of this increase was attributable to increases in cash, cash equivalents and marketable securities ($34.6 million), mortgage loans receivable ($16.3 million) and real estate owned ($5.3 million).

Total liabilities at December 31, 2019 were $58.7 million compared to $33.2 million reflecting a higher level of indebtedness.

Shareholders’ equity at December 31, 2019 was $82.6 million compared to $52.8 million at December 31, 2018. The increase reflects the net proceeds of $30.9 million realized from sales of common shares in 2019.

Dividends

In 2019, the Company paid a total of $9.7 million of dividends, of which $6.7 million represented 2019 taxable income. In addition, in January 2020 the Company paid a dividend of $0.12 per share, or $2.65 million in the aggregate, which will be applied to 2020 taxable income. In light of the uncertain outlook for 2020 due to COVID-19, out of an abundance of caution and a desire to preserve liquidity, the company has decided to defer any decision regarding further 2020 dividends until after the end of the second quarter of 2020. The Company currently operates and qualifies as a Real Estate Investment Trust (REIT) for federal income taxes and intends to continue to qualify and operate as a REIT. Under federal income tax rules, a REIT is required to distribute a minimum of 90% of taxable income each year to its shareholders and the company intends to comply with this requirement for the current year.

John Villano, CPA, the company’s chief executive and chief financial officer stated: “As previously discussed, 2019 was a transformative year for the Company – we raised over $90 million of fresh capital, which was used to pay off the entire outstanding balance on our $35 million credit facility and to expand our mortgage portfolio. Although the expenses relating to these transactions had a material adverse impact on our 2019 operating results, we believe the long-term benefits will enhance our operating performance. Given recent developments, our strategy has put us in a much better position to deal with the impact of COVID-19. We started 2020 with tremendous enthusiasm and great expectations given the $34.8 million of liquid assets available to us. However, like many others, we were not prepared for the pervasive impact of the COVID-19 that is not only a health crisis, but which has also created an economic crisis. We have reoriented our focus from growth to preservation of capital until we can accurately assess the impact COVID-19 will have on our business. Thus, we intend to tighten our lending criteria and to, temporarily, table our expansion strategy to reduce our risk. We think in the short-term there will be plenty of opportunities for us in the geographic markets in which we traditionally operated. We have experienced tremendous growth over the last three years and our shareholders have benefitted accordingly. However, our primary concern, aside from the health and safety of our employees, is to maintain and preserve everything we have achieved to date so that we will be well-positioned to take advantage of new market opportunities once the pandemic subsides. We believe this is the best course of action for Sachem and its shareholders.”

Investor Conference Call

The company will host a conference call on March 31, 2020 at 11:00 a.m., Eastern Standard Time, to discuss in greater detail its financial results for the year ending December 31, 2019 as well as its outlook for 2020 and strategy for dealing with the impact of the COVID-19 pandemic. Interested parties can access the conference call by calling 844-602-0380 for U.S. callers, or +862-298-0970 for international callers. The call will be available on the company’s website via webcast at https://www.sachemcapitalcorp.com. John Villano, the company’s Chief Executive and Chief Financial Officer will lead the conference call.

The 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 11:00 a.m. on April 14, 2020, and can be accessed by calling: 877-481-4010 for U.S. callers or +919-882-2331 for international callers and entering conference ID: 33917.

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 2019 filed with the U.S. Securities and Exchange Commission on March 30, 2020. 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.

SACHEM CAPITAL CORP.

BALANCE SHEETS

 

December 31,

2019

 

2018

Assets

 

Assets:

 

Cash and cash equivalents

$

18,841,937

 

 

$

99,310

 

Cash - restricted

 

-

 

 

 

59,549

 

Short-term marketable securities

 

15,949,802

 

 

Escrow deposits

 

-

 

 

 

12,817

 

Mortgages receivable

 

94,348,689

 

 

 

78,011,653

 

Mortgages receivable, affiliate

 

-

 

 

 

879,457

 

Interest and fees receivable

 

1,370,998

 

 

 

1,397,038

 

Other receivables

 

141,397

 

 

 

155,000

 

Due from borrowers

 

840,930

 

 

 

695,218

 

Prepaid expenses

 

24,734

 

 

 

14,866

 

Property and equipment, net

 

1,346,396

 

 

 

1,180,107

 

Deposits on property and equipment

 

71,680

 

 

 

12,000

 

Real estate owned

 

8,258,082

 

 

 

2,943,438

 

Deferred financing costs

 

16,600

 

 

 

553,597

 

   

Total assets

$

141,211,245

 

 

$

86,014,050

 

 

 

 

   

Liabilities and Shareholders' Equity

 

Liabilities:

 

 

 

Notes payable (net of deferred financing costs of $2,687,190)

$

55,475,810

 

 

$

-

 

Line of credit

 

-

 

 

 

27,219,123

 

Mortgage payable

 

784,081

 

 

 

290,984

 

Accounts payable and accrued expenses

 

249,879

 

 

 

316,413

 

Security deposits held

 

7,800

 

 

 

7,800

 

Advances from borrowers

 

848,268

 

 

 

317,324

 

Due to shareholder

 

-

 

 

 

1,200,000

 

Deferred revenue

 

1,205,740

 

 

 

1,058,406

 

Notes payable

 

75,433

 

 

 

-

 

Dividend payable

 

-

 

 

 

2,624,566

 

Accrued interest

 

3,416

 

 

 

176,619

 

Total liabilities

 

58,650,427

 

 

 

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; 100,000,000 shares authorized; 22,117,301 and 15,438,621 issued and outstanding

 

22,117

 

 

 

15,439

 

Paid-in capital

 

83,856,308

 

 

 

53,192,859

 

Accumulated other comprehensive loss

 

(50,878

)

 

 

-

 

Accumulated deficit

 

(1,266,729

)

 

 

(405,483

)

Total shareholders' equity

 

82,560,818

 

 

 

52,802,815

 

Total liabilities and shareholders' equity

$

141,211,245

 

 

$

86,014,050

 

SACHEM CAPITAL CORP.

STATEMENTS OF COMPREHENSIVE INCOME

Years Ended

December 31,

2019

 

2018

Revenue:

 

Interest income from loans

$

9,751,733

 

 

$

8,960,883

Investment income

 

81,111

 

 

 

-

Origination fees

 

1,519,294

 

 

 

1,411,100

Late and other fees

 

265,310

 

 

 

189,078

Processing fees

 

167,070

 

 

 

138,317

Rental income, net

 

69,300

 

 

 

101,789

Other income

 

826,688

 

 

 

837,339

Net gain on sale of real estate

 

-

 

 

 

74,864

 

Total revenue

 

12,680,506

 

 

 

11,713,370

 

 

 

Operating costs and expenses:

 

 

 

Interest and amortization of deferred financing costs

 

2,938,237

 

 

 

1,665,891

Professional fees

 

542,920

 

 

 

417,312

Compensation, fees and taxes

 

1,534,447

 

 

 

1,248,107

Exchange fees

 

44,192

 

 

 

33,535

Other expenses and taxes

 

90,412

 

 

 

20,707

Excise tax

 

-

 

 

 

19,000

Depreciation

 

63,566

 

 

 

32,529

Expense in connection with termination of credit facility

 

340,195

 

 

 

-

General and administrative expenses

 

478,513

 

 

 

437,011

Net loss on sale of real estate

 

34,919

 

 

 

-

Impairment loss

 

417,094

 

 

 

67,493

 

 

 

Total operating costs and expenses

 

6,484,495

 

 

 

3,941,585

 

 

 

Net income

 

6,196,011

 

 

 

7,771,785

 

Other comprehensive loss:

 

 

 

Unrealized loss on investment securities

 

(50,878

)

 

 

-

 

Comprehensive income

$

6,145,133

 

 

$

7,771,785

 

 

 

Basic and diluted net income per common share outstanding:

 

 

 

Basic

$

0.32

 

 

$

0.50

Diluted

$

0.32

 

 

$

0.50

 

 

 

 

 

 

Weighted average number of common shares outstanding:

 

 

 

Basic

 

19,415,237

 

 

 

15,425,772

Diluted

 

19,415,237

 

 

 

15,425,772

SACHEM CAPITAL CORP.

STATEMENTS OF CASH FLOW

 

Years Ended

December 31,

2019

2018

CASH FLOWS FROM OPERATING ACTIVITIES

Net income

$

6,196,011

 

$

7,771,785

 

Adjustments to reconcile net income to net cash provided by operating activities:

Write-off and amortization of deferred financing costs

 

722,580

 

 

137,241

 

Depreciation expense

 

63,566

 

 

32,529

 

Stock based compensation

 

43,147

 

 

37,589

 

Impairment loss

 

417,094

 

 

67,493

 

Loss on sale of real estate

 

34,919

 

 

(74,864

)

Abandonment of office furniture

 

12,000

 

 

-

 

Unrealized (gain) loss on investments

 

-

 

Changes in operating assets and liabilities:

(Increase) decrease in:

Escrow deposits

 

12,817

 

 

98,372

 

Interest and fees receivable

 

(154,196

)

 

(994,900

)

Other receivables

 

13,603

 

 

234,570

 

Due from borrowers

 

385,424

 

 

(243,423

)

Prepaid expenses

 

(9,868

)

 

(10,346

)

Deposits

 

(59,680

)

 

(12,000

)

(Decrease) increase in:

Due to note purchaser

 

-

 

 

(723,478

)

Accrued interest

 

(173,203

)

 

136,027

 

Accounts payable and accrued expenses

 

(66,535

)

 

(74,345

)

Deferred revenue

 

147,334

 

 

(49,994

)

Advances from borrowers

 

530,944

 

 

(116,207

)

Total adjustments

 

1,919,946

 

 

(1,555,736

)

NET CASH PROVIDED BY OPERATING ACTIVITIES

 

8,115,957

 

 

6,216,049

 

 

CASH FLOWS FROM INVESTING ACTIVITIES

Purchase of investments and marketable securities

 

(16,000,680

)

 

-

 

Proceeds from sale of real estate owned

 

1,087,004

 

 

1,848,558

 

Acquisitions of and improvements to real estate owned, net

 

(1,266,949

)

 

(541,525

)

Purchase of property and equipment

 

(241,855

)

 

(710,815

)

Security deposits

 

-

 

 

5,250

 

Principal disbursements for mortgages receivable

 

(64,742,552

)

 

(42,078,191

)

Principal collections on mortgages receivable

 

43,347,362

 

 

24,641,469

 

NET CASH USED FOR INVESTING ACTIVITIES

 

(37,817,670

)

 

(16,835,254

)

 

CASH FLOWS FROM FINANCING ACTIVITIES

Proceeds from line of credit

 

42,720,829

 

 

77,564,529

 

Repayment of line of credit

 

(69,939,952

)

 

(60,187,019

)

Proceeds from notes sold to shareholder

 

1,017,000

 

 

-

 

Repayment of notes sold to shareholder

 

(2,217,000

)

 

-

 

Principal payments on mortgage payable

 

-

 

 

(10,117

)

Dividends

 

(9,681,823

)

 

(6,787,795

)

Costs in connection with ATM

 

-

 

 

(160,479

)

Financing costs incurred

 

(2,872,774

)

 

(595,278

)

Proceeds from mortgage payable

 

795,000

 

 

-

 

Prepayment of mortgage payable

 

(301,903

)

 

-

 

Proceeds from notes payable, net

 

75,434

 

 

-

 

Proceeds from issuance of common stock

 

30,544,945

 

 

-

 

Proceeds from exercise of warrants

 

82,035

 

Proceeds from issuance of notes

 

58,163,000

 

 

-

 

 

NET CASH PROVIDED BY FINANCING ACTIVITIES

 

48,384,791

 

 

9,823,841

 

 

NET INCREASE(DECREASE) IN CASH AND RESTRICTED CASH

 

18,683,078

 

 

(795,364

)

 

CASH AND RESTRICTED CASH- BEGINNING OF YEAR

 

158,859

 

 

954,223

 

 

CASH AND RESTRICTED CASH - END OF YEAR

$

18,841,937

 

$

158,859

 

SACHEM CAPITAL CORP.

STATEMENTS OF CASH FLOW (Continued)

   
 

Years Ended

 

December 31,

 

2019

 

2018

   

SUPPLEMENTAL DISCLOSURES OF CASH FLOWS INFORMATION

   

Taxes paid

 

$

-

 

$

53,191

Interest paid

 

$

2,237,240

 

$

1,370,714

   

SUPPLEMENTAL INFORMATION-NON-CASH

   

Dividends declared and payable

 

$

-

 

$

2,624,566

   

SUPPLEMENTAL DISCLOSURES OF NONCASH INVESTING AND FINANCING ACTIVITIES

 
   

During the year ended December 31, 2018, the Company issued notes payable in the amount of $169,338 for the acquisition of mortgages receivable.

   

During the year ended December 31, 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 year ended December 31, 2018 amounted to $3,173,963.

 

 

Assignment of mortgage receivable to shareholder in the amount of $1,200,000, during the year ended December 31, 2018.

 

 

   

The reversal of previously accrued capitalized costs during the year ended December 31, 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 year ended December 31, 2019 amounted to $5,406,477.

 

During the year ended December 31, 2019, mortgages receivable, affiliate in the amount of $879,457 were reduced to $0 as the underlying loans were transferred to the Company and are included in mortgages receivable.

 

Investors & Media:
Crescendo Communications, LLC
Email: sach@crescendo-ir.com
Tel: (212) 671-1021

Source: Sachem Capital Corp.