SACH New Investor presentation - May 2021 - FINAL SACHEM CAPITAL CORP.
Investor Presentation May 2021 NYSE: SACH
Safe Harbor
This presentation includes forward-looking statements. All statements in this presentation, other than statements of historical facts, 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," "expectation," 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 a number of risks, uncertainties and assumptions, some of which cannot be quantified and some of which are beyond our control. In light of these risks, uncertainties and assumptions, the forward-looking events and circumstances discussed in this presentation may not occur, and our actual operating and financial 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 after the date of this presentation to confirm these statements in relationship to actual results or revised expectations.
All forward-looking statements attributable to us are expressly qualified in their entirety by these cautionary statements as well as others made in this presentation. You should evaluate all forward-looking statements made by us in the context of these risks and uncertainties.
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Company Overview
· Sachem Capital Corp. is a mortgage REIT headquartered in Branford, Connecticut
· Intimate knowledge of real estate market and ability to respond quickly to customer needs · 19 highly skilled and tenured industry professionals
· Specializing in originating, investing, underwriting, funding, servicing & managing a portfolio of short-term, high yielding real estate loans; historically targeting the "fix-and-flip" and real estate development markets
· Disciplined underwriting and extensive due diligence - focusing primarily on value of underlying collateral · All loans secured by first lien mortgages with conservative max 70% loan-to-value ratio; personal guarantee by the
principals of the borrowers · Lending platform that is solid and sustainable due to strict underwriting criteria and extensive due diligence
· Highly scalable business model to drive increased revenue, cash flow, profits and dividends · As a REIT, Sachem distributes 90%+ of the Company's taxable income to shareholders as quarterly dividends
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Market Overview: Sustainable Fix & Flip Activity
Home Flipping Gross Profits
$80,000
$70,000
$60,000
$50,000
$40,000
$30,000
$20,000
$10,000
$-
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
Source: ATTOM Data Solutions
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Market Overview: Favorable Home Prices
· Sachem's primary market (Connecticut) has benefitted from several trends accelerated by COVID-19:
· Movement out of dense urban locations, including New York City, to suburban neighborhoods · As workers adjust to a greater proportion of remote work, increased demand for larger, more spacious housing · Lower interest rates, which improved mortgage affordability for home purchasers
AVERAGE HOME PRICE 3 YEAR TREND
$350k
Average Connecticut Home Price
$330k
$310k
$290k
$270k
$250k
$230k
$210k
$190k
$170k
$150k 10/17
01/18
04/18
07/18
10/18
01/19
04/19
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Average U.S. Home Price
Connecticut: · 2.9% CAGR · 7.4% 1-Year Price
Return
Total U.S. : · 5.5% CAGR · 6.7% 1-Year Price
Return
07/19
10/19
01/20
04/20
07/20
10/20
Source: Zillow
Sachem Loan Products
Fix & Flip Loans
New Construction Loans NYSE: SACH
Distressed / Foreclosure Loans
Mission: To create value for our clients and shareholders with tailored solutions across real estate assets, that help build
better communities.
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Bridge Loans
Commercial Real Estate Development
Loan Portfolio Overview/Diversification
Diversified portfolio of 479 loans with total principal
balance of $157M:
Principal Amount Loan to Value Ratio
Term Origination Fee
Interest Rate Payment Terms
Range of $100,000 to $10 million Up to 70% loan-to-value 1 to 3 years 2.0% to 5.0% Fixed rate between 5.0% and 13.0% Interest only monthly with principal at maturity
Loan Amount
6%
22%
40%
20% 12%
Over $1,000,000 $500,001 to $1,000,0 00 $250,001 to $500,000 $100,001 to $250,000 $100,000 or less
Maturities by Year
7%
2021
39%
54%
2022
2023
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Loan Portfolio Overview
Loan Breakdown by State
77%
Connecticut Florida Masschusetts Texas Rhode Island Arizona M ai ne
New York Cali for nia Tennessee
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Loan Breakdown by Real Estate Type
5% 5% 26%
64%
Residential Commercial Land Mixed Use
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The Sachem Advantage
Over 1,400 transactions completed
Conduct lending services in 10 states
More than $350M in origination
Operations in 3 states: TX, CT & FL
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Favorable competitive landscape:
· Sachem is able to structure loans to meet the unique needs and business plans of its borrowers
· Many banks and other traditional lenders still have restrictive lending criteria
· Many non-traditional lenders are undercapitalized
· Competitor policies inhibit borrower's repeat business
Sachem Growth Strategy
Take advantage of positive trends within the real estate sector Capitalize on opportunities due to structural changes that limit competitive lending Grow loan portfolio beyond Connecticut, with a focus on Texas and Florida Expand to additional asset classes and higher value loans (e.g., larger multi-family and higher-end fix-and-flip)
Target larger-value commercial loans with financially stable, experienced sponsors
Goal: To deploy larger amounts of capital with potentially higher returns, better sponsorship, and lower risk
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Successful Initiatives
2018
Multi-State Expansion
2021
6 States
Increase Loan Size
10 States
Avg. loan: $196,000
Avg. loan: $314,000
Higher Loan Turnover
Avg. term maturity: 11 months*
Avg. term maturity: 8 months*
Loan Origination / Net Fee Growth
Loan origination:
$42 Million / $1.4M Net
*Resulting from Sachem's effective underwriting criteria
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Loan origination:
$117 Million / $1.9M Net
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Loan Portfolio Performance
($ in Thousands) Total Assets Number of Loans in Portfolio Principal Amount of Loans in Portfolio Interest Income Origination Fee Income, Net Weighted Avg. Contractual Interest Rate(1) Average Outstanding Loan Balance Weighted Average Term to Maturity (months) Foreclosures In Process
12/31/2018 $86,014 403 $78,891 $8,961 $1,411 12.85% $196 11 13
Year-Ending 12/31/2019
$141,211 438
$94,349 $9,752 $1,519 12.42% $215
10 9
12/31/2020 $226,670 495 $155,616 $13,821 $1,893 11.79% $314 8 16
($ thousands)
$250,000
Total assets
$200,000
$150,000
$100,000
$50,000
$0 2018
2019
2020
(1) Weighted average contractual interest rate does not include origination fee income.
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Financial Performance
$20,000,000 $18,000,000 $16,000,000 $14,000,000 $12,000,000 $10,000,000
$8,000,000 $6,000,000 $4,000,000 $2,000,000
$-
2018
Revenue
2019 Net Income
2020
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Access to Capital
· Cash and short-term marketable securities of approximately $54.7 million as of March 31, 2021 · Low interest line of credit with Wells Fargo, secured by short-term securities
· The credit line bears interest at a rate of 1.5%, which is 1.75% below prime as of March 31, 2021
· Raised approximately $56M of unsecured, unsubordinated notes in 2020 @ 7.75%
· Provides liquidity to fuel growth despite the impact of COVID · Although these notes have higher interest rate, they provide greater liquidity and financial flexibility
· Given the strength of the loan portfolio and solid track record, Sachem is exploring additional financing alternatives, which may provide a lower cost of capital than the notes
· Sachem is careful about the debt it takes on and will not over-lever the portfolio to garner high leveraged returns
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Balance Sheet Summary
($ in Thousands) Assets Cash and cash equivalents Short-term marketable securities Mortgages receivable Interest and fees receivable Due from borrowers Property and equipment, net Real estate owned Other assets Total Assets Equity & Liabilities
Unsecured unsubordinated fixed rate notes
Line of Credit Mortgage Payable Notes Payable Total Debt Other Liabilities Equity Total Equity and Liabilities Total Debt / Equity Total Debt / Assets Asset Coverage
March 31, 2021 December 31, 2020
18,345,654 36,305,439 156,771,704
1,722,611 2,525,039 1,449,653 8,624,044 2,528,308 $228,272,452
19,408,028 37,293,703 155,616,300
1,820,067 2,025,663 1,433,388 8,861,609
211,426 $226,670,184
109,884,797
28,160,988 -
49,050 138,094,835
5,695,898 84,481,719 $228,272,452
163.5% 60.5% 165%
109,640,692
28,055,648 767,508 54,682
138,518,530 4,577,137
80,919,540 $226,670,184
171.2% 61.1%
163.6%
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Dividends Paid
0.18
0.17
0.16
0.14
0.12 0.12 0.105 0.105 0.105 0.105 0.11
0.1
0.12 0.12 0.12 0.12
0.12 0.12 0.12 0.12
0.08
0.06
0.04
0.02
0* 0
Q2'2017 Q3'2017 Q4'2017 Q1'2018 Q2'2018 Q3'2018 Q4'2018 Q1'2019 Q2'2019 Q3'2019 Q4'2019 Q1'2020 Q2'2020 Q3'2020 Q4'2020 Q1'2021
90+% of all taxable income distributed to shareholders
*Conservative policy due to COVID-19 pandemic
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Senior Management Team
John L. Villano CPA, Chairman, Chief Executive Officer, Chief Financial Officer, President and Treasurer John has been our Chairman and Chief Executive Officer since our inception in 2010. Mr. Villano is responsible for overseeing all aspects of our business operations, including loan origination and servicing, investor relations, brand development and business development. He was previously engaged in the private practice of accounting and auditing for almost 30 years. Mr. Villano is a Certified Public Accountant and holds a Bachelor's Degree in Accounting from the University of Rhode Island.
Dr. Peter J. ("Pete") Cuozzo, Executive Vice President and Chief Operating Officer Pete is an experienced business executive and professional educator with over 35 years diverse background. Over his career Pete held cross-functional roles in Information Technology, Finance, Operations, Human Resources, Transportation/Logistics, and Sourcing in such companies as GE, Sachem Capital Partners, Syngenta, HP, Stanley Black & Decker, Hess Corporation, and TBC Corporation, the last five companies as vice president of learning, talent management, and organizational effectiveness.
William C. ("Bill") Haydon, Chief Investment Officer and Director of Investor Relations Bill is a talented and seasoned executive with over 25 years of experience in financial services and investment banking. He brings expertise in areas such as lending, securities asset management, initial public offerings, investment banking, and financial strategy and long-term planning. Bill is responsible for the company's liquid reserves and securities portfolio and he oversees Sachem's underwriting team. Prior to joining Sachem Capital Corp. in 2021, Bill served as a Portfolio Manager at Wells Fargo Advisors Financial, a VP within the Wealth Management division of UBS Financial Services and Managing Director of Northern Mortgage Company, LLC.
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Investment Highlights
ü Sachem's loan portfolio has grown to $156.8M as of March 31, 2021 from $33.8M at year-end 2016
· Favorable competitive landscape with robust loan pipeline · Disciplined underwriting with a conservative loan-to-value ratio
ü Opportunistically expanding the geographic footprint of our mortgage loan portfolio beyond Connecticut, including Texas and Florida
ü Diversifying mortgage portfolio:
· Additional asset classes, such as larger multi-family and higher-end fix-and-flip properties · Targeting larger-value commercial loans with financially stable, experienced sponsors
ü Record annual revenue of $18.6M and net income of $9.0M for 2020 despite the COVID-19 pandemic
· Revenue increased 33% to $5.7M in Q1 2021, compared to $4.3M for Q1 2020; achieved 56% increase in interest income on the loan portfolio
ü Ability to leverage low-cost debt financing to support growth in the loan portfolio while minimizing dilution
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Key Statistics
NYSE American: Share price (as of 5/24/2021): Common Shares Outstanding: Market Capitalization: Shareholders' Equity: Dividends (TTM): Fiscal Year-End: Insider Ownership (fully diluted):
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SACH $5.19 24.6 M $127.5 M $84.6M $0.48 December 31 7.5%
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