BRANFORD, Conn. - Sachem Capital (NYSE:SACH) Corp. (NYSE American: SACH), a mortgage REIT, has acquired a 20% membership interest in Shem Creek Capital, LLC, a commercial real estate finance company. The $5 million investment, announced today, also includes an option for Sachem to increase its stake by an additional 10% by early 2027 at a predetermined valuation.
Shem Creek Capital, established in 2008, specializes in providing debt capital solutions, focusing on first mortgage loans secured by commercial real estate, particularly in the multifamily, workforce housing, and industrial sectors in the Northeastern United States.
John Villano, CEO of Sachem Capital, highlighted the successful track record of their investments with Shem, which have generated double-digit returns without losses over the past four years. He emphasized the strategic diversification and the potential for expansion that this investment represents for Sachem's business model and asset management capabilities.
Scott Goldberg, President of Shem Creek Capital, expressed his satisfaction with the transaction and anticipates that the partnership will enable significant growth and strong risk-adjusted returns for investors of both firms.
Sachem Capital Corp . focuses on originating, underwriting, funding, servicing, and managing a portfolio of first mortgage loans. It provides short-term, secured, non-banking loans to real estate investors for property acquisition and improvement. Their underwriting approach emphasizes a conservative loan-to-value ratio, with each loan backed by a first mortgage lien and a personal guarantee from the borrower.
This investment is part of Sachem's broader strategy to make opportunistic real estate purchases and expand its loan portfolio. The company has disclosed that the information is based on a press release statement and has cautioned that forward-looking statements involve risks and uncertainties. Sachem Capital advises investors not to rely solely on these forward-looking statements due to these risks.
In other recent news, Sachem Capital Corp. reported a net loss of $4.1 million on revenues of $15.1 million in the second quarter. The real estate investment trust also announced changes to its executive compensation and declared a dividend for its preferred stockholders. Chief Financial Officer Nicholas M. Marcello's new compensation package includes a $300,000 annual base salary, a one-time $20,000 payment, and annual restricted stock awards valued at $125,000 starting January 1, 2025. The Board authorized a dividend of $0.484375 per share on the 7.75% Series A Cumulative Redeemable Preferred Stock.
Despite a lower than expected GAAP earnings per share (EPS), Sachem Capital achieved an adjusted EPS of $0.09 due to an $8.5 million credit loss provision. This led to a reduction in the price target for Sachem Capital by Oppenheimer, although the firm maintained an Outperform rating. Jones Trading also maintained a Hold rating on Sachem Capital, attributing the deviation from expected GAAP EPS to a higher-than-anticipated credit loss provision.
The company is expected to adopt a cautious stance on new loan originations, focusing on protecting the existing loan portfolio. Sachem Capital plans for a net portfolio growth of approximately $20 million for the remainder of the year and is considering share buybacks and potentially increasing its credit facility with Needham Bank. These are recent developments that provide investors with an updated perspective on Sachem Capital's performance and expected future earnings.
InvestingPro Insights
As Sachem Capital Corp. (NYSE American: SACH) forges ahead with its strategic investment in Shem Creek Capital, it's important to consider key metrics and insights that could influence the company's financial health and investment attractiveness. According to InvestingPro data, Sachem Capital has a market capitalization of $116.34 million, which provides a sense of the company's size in the competitive mortgage REIT market. The company's P/E ratio stands at 43.16, indicating a high earnings multiple that suggests investors may expect higher future earnings growth compared to the broader market.
Investors looking for income-generating assets might find Sachem Capital's significant dividend yield of 13.01% appealing, especially in the current economic environment where stable income streams are highly valued. This is complemented by an InvestingPro Tip highlighting that Sachem pays a substantial dividend to shareholders, which may be particularly attractive to income-focused investors.
Despite a challenging market, with revenue growth showing a decline of 36.17% over the last twelve months as of Q2 2024, Sachem's stock price has experienced some recovery with a 1-month price total return of 6.03%. This could indicate a potential turning point for the company, as suggested by another InvestingPro Tip that analysts predict the company will be profitable this year. Investors should note that the stock price has been quite volatile, which could impact both the risk and return profile of their investment.
For those interested in further insights and analysis, InvestingPro offers additional tips on Sachem Capital, which can be accessed through their platform, providing a deeper look into the company's financials and market performance.
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