Sachem Capital Reports Results for Q1 2017
Revenue and net income up 46.7% and 31.3%, respectively
BRANFORD, Conn.--(BUSINESS WIRE)--Sachem Capital Corp. (NYSE MKT:SACH) announced today financial results for the three-month period ended March 31, 2017. Revenue and net income for the first quarter of 2017 were approximately $1.3 million and $897,000, respectively, representing increases of 46.7% and 31.3%, respectively, in comparison to the first quarter of 2016. These increases were due principally to an increase in the company’s lending activity, which was driven, in part, by the completion of the company’s initial public offering in February 2017. In the offering, the company sold 2,600,000 common shares at $5.00 per share, or $13 million of gross proceeds. The company used a portion of the net proceeds from the offering, approximately $11.1 million, to pay down in full the outstanding balance on its revolving credit facility. Prior to the initial public offering, the company operated as a Connecticut limited liability company.
Total revenue for the three months ended March 31, 2017 was approximately $1.3 million compared to approximately $878,000 for the three months ended March 31, 2016, an increase of $411,000, or 46.7%. The increase in revenue represents an increase in lending operations. For the 2017 period, interest income was approximately $1.04 million and net origination fees were approximately $97,500. In comparison, for the three months ended March 31, 2016, interest income was approximately $800,000 and net origination fees were approximately $29,000. Prior to the completion of the company’s IPO, 75% of gross origination fees were paid to JJV, LLC, the managing member of Sachem Capital Partners, LLC. Accordingly, net origination fee income is net of the amounts payable to JJV, LLC and other adjustments. For the 2017 period, only the portion of gross origination fees earned prior to the IPO is net of the portion payable to JJV, LLC.
Total operating costs and expenses for the 2017 period were approximately $392,000 compared to approximately $195,000 for the 2016 period, an increase of approximately 100%. The increase in operating costs and expenses is primarily attributable to the following: (i) an increase in compensation and taxes of approximately $75,000; (ii) an increase in professional fees of approximately $59,000; (iii) an increase in general and administrative expenses of approximately $44,000; and (iv) an increase in interest expense and amortization of deferred financing costs of approximately $14,000. These increases are primarily due to the increase in our lending activity, our initial public offering and our conversion from a privately-held limited liability company to a publicly-held corporation.
Net income for the first quarter of 2017 was approximately $897,000 compared to $683,000 for the first quarter of 2016. Net income per share for the period beginning February 9, 2017 (i.e., the effective date of the company’s initial public offering) and ending March 31, 2017 was $0.06. The company does not report net income per share data for periods prior to its IPO when it operated as a limited liability company.
At March 31, 2017, total assets were approximately $44.7 million compared to approximately $38.4 million at December 31, 2016. The company’s loan portfolio at March 31, 2017 and December 31, 2016 was approximately $40.1 million and $33.75 million, respectively.
At March 31, 2017, total liabilities were approximately $6.1 million, including $4.15 million outstanding under the company’s line of credit with Bankwell Bank and a $308,000 outstanding balance on a term loan secured by a first mortgage lien on the company’s new office building. In comparison, at December 31, 2016, total liabilities were approximately $9.9 million, including $8.1 million outstanding under the Bankwell line of credit and a $310,00 outstanding balance on the term loan.
Shareholders’ equity at March 31, 2017 was approximately $38.6 million compared to members’ equity at December 31, 2016 of approximately $28.5 million.
John Villano CPA, Chairman and co-Chief Executive Officer of Sachem Capital Corp., stated: “We are pleased with our performance during the first quarter of 2017. Enhanced marketing efforts, coupled with customer retention and acquisition efforts will continue to strengthen our market presence. Now, with our IPO behind us, we are well positioned to meet the capital requirements of real estate investors in Connecticut and surrounding markets.”
The company also announced that it will extend the filing date for its Quarterly Report on Form 10-Q for the three-month period ended March 31, 2017 to May 22, 2017.
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 and may also be secured with additional real estate collateral. 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. SCC believes that it qualifies as a real estate investment trust (REIT) for federal income tax purposes and intends to make the election to be taxed as a REIT when it files its 2017 federal income tax return.
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 prospectus, dated February 9, 2017. In light 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.|
|March 31, 2017||December 31, 2016|
|Mortgages receivable, affiliate||-||1,229,022|
|Interest and fees receivable||498,423||478,928|
|Due from borrowers||153,923||81,911|
|Property and equipment, net||494,619||397,448|
|Real estate owned||1,177,291||1,222,454|
|Deposits on property||32,000||-|
|Deferred financing costs||66,567||67,475|
|Liabilities and Stockholders'/Members’ Equity|
|Line of credit||$||4,150,100||$||8,113,943|
|Notes payable, other||169,338||-|
|Security deposit held||800||800|
|Advances from borrowers||671,430||291,875|
|Due to stockholders||25,568||656,296|
|Preferred shares - $.001 par value; 5,000,000 shares authorized; no shares issued||-||-|
|Common stock - $.001 par value; 50,000,000 authorized; 11,103,237 issued||11,103||-|
|Additional paid-in capital||37,980,133||-|
|Total stockholders'/members’ equity||38,601,914||$||28,485,615|
|Total liabilities and stockholders'/members’ equity||$||44,658,164||$||38,369,421|
|SACHEM CAPITAL CORP.|
|STATEMENTS OF OPERATIONS|
|Ended March 31,|
|Interest income from loans||$||1,036,840||$||803,484|
|Origination fees, net||97,461||28,823|
|Late and other fees||29,982||33,255|
|Rental income, net||27,383||-|
|Gain on sale of real estate||26,478||-|
|Operating costs and expenses:|
|Interest and amortization of deferred financing costs||116,270||102,209|
|Compensation to manager||35,847||61,456|
|Other fees and taxes||105,839||4,862|
|General and administrative expenses||45,587||1,959|
|Total operating costs and expenses||392,438||195,229|
|Basic and diluted net income per common share outstanding:|
|Weighted average number of common shares outstanding:|
* Net income per share for the period beginning February 9, 2017 (i.e., the effective date of the company’s initial public offering) and ending March 31, 2017.
|SACHEM CAPITAL CORP.|
|STATEMENT OF CHANGES IN SHAREHOLDERS’/MEMBERS’ EQUITY|
March 31, 2017
|Beginning balance, January 1, 2017||2,220,000||$||2,220||$||(2,220||)||$||-||$||28,485,615|
|Net income for the period January 1, 2017 - February 9, 2017||286,100|
|Conversion of members' equity into common stock||6,283,237||6,283||26,958,953||(26,965,236||)|
|Initial public offering||2,600,000||2,600||11,023,400|
|Net income for the period February 10, 2017 - March 31, 2017||610,678|
|Balance, March 31, 2017||11,103,237||$||11,103||$||37,980,133||$||610,678||$||-|
|SACHEM CAPITAL CORP.|
|STATEMENTS OF CASH FLOW|
|Ended March 31,|
|CASH FLOWS FROM OPERATING ACTIVITIES|
|Adjustments to reconcile net income to net|
|cash provided by operating activities:|
|Amortization of deferred financing costs||14,559||12,996|
|Gain on sale of real estate||(26,478||)||-|
|Changes in operating assets and liabilities:|
|(Increase) decrease in:|
|Interest and fees receivable||(19,495||)||(50,601||)|
|(Decrease) increase in:|
|Due to member||(630,728||)||58,132|
|Advances from borrowers||307,543||(11,954||)|
|NET CASH PROVIDED BY OPERATING ACTIVITIES||339,481||695,316|
|CASH FLOWS FROM INVESTING ACTIVITIES|
|Proceeds from sale of real estate owned||90,123||-|
|Acquisitions of and improvements to real estate owned||(18,482||)||(85,746||)|
|Purchase of furniture and equipment||(102,327||)||-|
|Principal disbursements for mortgages receivable||(10,091,528||)||(5,113,384||)|
|Principal collections on mortgages receivable||3,938,601||3,376,109|
|NET CASH USED FOR INVESTING ACTIVITIES||(6,215,613||)||(1,823,021||)|
|CASH FLOWS FROM FINANCING ACTIVITIES|
|Proceeds from line of credit||7,595,766||600,000|
|Repayment of line of credit||(11,559,609||)||(1,600,000||)|
|Principal payments on mortgage payable||(1,657||)||-|
|Proceeds from IPO||13,000,000||-|
|SACHEM CAPITAL CORP.|
|STATEMENTS OF CASH FLOW (Continued)|
|Pre-offering costs incurred||(1,544,197||)||(73,500||)|
|Financing costs incurred||(13,650||)||(65,050||)|
|NET CASH PROVIDED BY FINANCING ACTIVITIES||5,670,174||487,805|
|NET DECREASE IN CASH||(205,958||)||(639,900||)|
|CASH - BEGINNING OF PERIOD||1,561,863||1,834,082|
|CASH - END OF PERIOD||$||1,355,905||$||1,194,182|
|SUPPLEMENTAL DISCLOSURES OF CASH FLOWS|
|SUPPLEMENTAL DISCLOSURES OF NONCASH INVESTING AND FINANCING ACTIVITIES|
|As of March 31, 2016, the Company is obligated for the repayment of certain expenses|
paid by the managing member on behalf of the Company for certain borrowers in the amount of $101,094.
|During the three months ended March 31, 2017, the company issued notes payable|
|in the amount of $169,338 for the acquisition of mortgages receivable.|
|On February 8, 2017, Sachem Capital Partners, LLC transferred all its assets and liabilities to|
|the Company in exchange for 6,283,237 shares of the company's Common stock.|