Sachem Capital Corp (SACH) 2019 Q4 法說會逐字稿

Good day, ladies and gentlemen, and welcome to the Sachem Capital Fourth Quarter and Full Year Conference Call. (Operator Instructions) At this time, it is my pleasure to turn the floor over to your host, Natalya Rudman, Crescendo Communication. Natalya, the floor is yours.

Thank you, Kat. Good morning, and thank you for joining Sachem Capital Corp's Year-end 2019 Conference Call. On the call with us today is John Villano, CPA, Chief Executive Officer and Chief Financial Officer of Sachem Capital. Yesterday, March 30, the company announced its operating results for the year ended December 31, 2019, and its financial condition as of that date. The press release is posted on the company's website at www.sachemcapitalcorp.com.

In addition, the company filed its year-end report on Form 10-K with the U.S. Securities and Exchange Commission on March 30, which can also be accessed on the company's website as well as the SEC website at www.sec.gov. If you have any questions after the call or would like any additional information about the company, please contact Crescendo Communications at (212) 671-1021.

Before Mr. Villano reviews the company's operating results for 2019 and the company's financial condition at December 31, 2019, we would like to remind everyone that this conference call may contain forward-looking statements. All statements other than statements of the historical fact contained in this conference call, including statements regarding our future results of operation 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 in other words and terms of similar expressions are intended to identify forward-looking statements.

These forward-looking statements are based largely on the company's current expectations and projections about future events and trends that it believes may affect its financial condition, results of operation, strategy, short-term and long-term business operations and objective and financial needs. These forward-looking statements are subject to several risks and uncertainties and assumptions as described in the company's Form 10-K filed on March 30, 2020. Because of these risks and uncertainties and assumptions, the forward-looking events and circumstances discussed in this conference call 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 the company believes that expectations reflected in the forward-looking statements are reasonable, they cannot guarantee future results, level of activity, performance or achievements.

In addition, neither the company nor any other person assumes responsibility for the accuracy and completeness of any of these forward-looking statements. The company disclaims any duty to update any of these forward-looking statements. All forward-looking statements attributable to the company are expressly qualified in their entirety by these cautionary statements as well as other made in this conference call. You should evaluate all forward-looking statements made by the company in the context of these risks and uncertainties. With that, I will now turn the call over to John Villano. Please go ahead.

Thank you, Natalya, and thanks to everyone for joining us today. I am pleased to report that Sachem Capital achieved record revenue of $12.7 million and generated net income of $6.2 million for 2019 despite onetime charges related to the termination of our credit facility and recent financing. Even more important, 2019 was a transformative year for the company. Specifically, we raised gross proceeds of approximately $31.4 million in equity capital and $58.2 million of debt capital. The net proceeds from these financing transactions were used to pay off the entire outstanding balance on our $35 million credit facility, which was then terminated on June 25, 2019. Excess proceeds have been used to grow our loan portfolio and for working capital.

In connection with the termination of the credit facility, we incurred approximately $800,000 of termination costs, of which approximately $440,000 represented noncash charges or deferred financing costs. Although these termination costs had a material adverse impact on our 2019 operating results, we believe the restructuring of our balance sheet will have long-term benefits that will enhance our operating performance for the following reasons.

First, we replaced senior secured variable debt with unsecured fixed-rate term notes; second, we have greater flexibility to incur additional indebtedness or to refinance the fixed-rate term notes on more favorable terms; third, we eliminated the significant banking charges and fees associated with the credit facility; fourth, we reduced our credit exposure from a single asset class, the residential fix-and-flip market; and finally, the fixed-rate notes have fewer covenants and fewer restrictions, thereby providing us with greater flexibility to lend on assets with compelling loan-to-value profile.

Unlike the Webster credit facility, which had a number of covenants that restricted our ability to operate, the notes have one single covenant, an asset coverage ratio of 150%, which gives us plenty of flexibility in terms of the size of the mortgage loans we choose to make, the markets in which we choose to operate and the nature of the collateral. In addition, the Webster credit facility was secured by a first priority lien on all our assets, whereas the notes are unsecured. Lastly, we are well within compliance guidelines on our asset coverage ratio covenant.

2019 was a highly competitive year for Sachem with increased competition from well-capitalized market participants, aggressive pricing and generally less stringent lending criteria. Quite simply, our competitors were flooding the market with cheap money. With that said, Sachem funded approximately $65 million in loans, clearly our best effort to date.

During the first 2 months of 2020, our mortgage loan portfolio increased approximately $15 million. We also started to expand our geographic focus. Sachem was establishing relationships to help identify high-quality transactions beyond Connecticut and New York that meet our strict underwriting and loan criteria. Our plan for boots on the ground was ready to take flight. Suddenly, it seemed like overnight, economic activity came to an abrupt halt. Our competition, the low-cost financing and aggressive LTVs have all but vanished. The widespread COVID-19 health crisis has turned into a worldwide economic crisis. Our tremendous enthusiasm and great expectation for loan growth in 2020 has been put on hold. Realistically, loan growth can only resume when we can clearly see risk and market uncertainty is gone.

On a positive note, in the event the market shows prolonged signs of weakness, we are experienced operators and well positioned to capitalize on potentially attractive opportunities within the distressed debt market. As I have stated in the past, Sachem was formed to take advantage of difficult credit markets, and today, less than 1% of our assets are secured by creditors. This equates to great staying power during difficult times.

In light of current market conditions and the impact of COVID-19, we believe we are uniquely positioned as the go-to nonbank real estate lender to serve the less-than-traditional finance market while others tighten their lending criteria or flee this segment of the market. We're now seeing liquidity tighten, and we're getting calls from borrowers to save financing transactions. This allows us to cultivate new borrowers and build our brand.

Meanwhile, we continue to be highly selective as we review lending opportunities. Effective April 1, 2020, our underwriting guidelines have been adjusted to reflect these difficult times. We are limiting new loan activity to the level of loan payoffs, reducing our LTV from 70% to 50%, implementing an interest reserve and director review on larger loans. Sachem is currently honoring all lending commitments through March 31, 2020.

Our loan portfolio remains solid with over $140 million of assets backing $55 million in bonds. As of December 31, 2019, of the 438 mortgage loans in our portfolio, 9, or approximately 2.1%, were in the process of foreclosure. In comparison, at December 31, 2018, of the 403 mortgage loans in our portfolio, 13, or approximately 3.2%, were in the process of foreclosure. Under normal circumstances, we find foreclosure procedures painfully slow with time delays putting a strain on our LTV. Currently, housing coursing -- housing courts in Connecticut are closed due to COVID until further notice, putting even more pressure on existing LTVs.

During the fourth quarter and the first 2 months of 2020, in addition to our traditional markets, we began lending against properties located in Phoenix, Arizona; Austin, Texas; Littleton, Colorado and Charleston, South Carolina, reflecting a recent change in our growth strategy. Despite the unknowns associated with COVID, the demand for our products and services remained strong giving us tremendous confidence in terms of revenue growth and profitability as well as strength of our portfolio. We have built a highly scalable business model to drive increased revenue and cash flow, which will continue to grow profitability and dividends in the years ahead.

Turning to our operating results. Total revenue for the year ended December 31, 2019, was approximately $12.7 million compared to approximately $11.7 million for the year ended December 31, 2018. This represents an increase of approximately $1 million or 8.3%. The increase in revenue was due to: an increase in our lending operations. For 2019, interest income was approximately $9.8 million; origination fees were approximately $1.5 million; late and other fees were approximately $265,000; processing fees were approximately $167,000; net rental income was approximately $69,000; and other income was approximately $827,000.

In comparison, in 2018: Interest income was approximately $9 million; origination fees were approximately $1.4 million; late and other fees were approximately $189,000; processing fees were approximately $138,000; net rental income was approximately $102,000; and other income was approximately $837,000.

Total operating cost and expenses for the year ended December 31, 2019, were approximately $6.5 million compared to approximately $3.9 million for 2018. Year-over-year, this represents an increase of approximately $2.6 million or 64.5%. The increase in operating cost and expenses is due to an increase in our lending operation and our financing activities during the year. Interest expense and amortization of deferred financing costs increased approximately 76.4% in 2019 versus '18.

In 2019, the total amount was approximately $2.9 million, including the write-off of approximately $440,000 of deferred financing costs relating to the termination of our credit facility. Our inability to put the November '19 note funding to work immediately cost the company approximately $300,000 in interest cost. Close proximity to December holidays was partly to blame and significant loan repayments kept us from making a dent in the net proceeds.

In 2018, the total interest expense was approximately $1.7 million, including approximately $137 million of amortization of deferred financing costs. Professional fees in 2019 were approximately $543,000 compared to $417,000 in 2018. The increase was due to incremental services incurred in the connection with the resignation of Jeff Villano, other financing transactions that were not consummated and other activities. In addition, we also incurred approximately $340,000 of expenses related to the termination of the credit line. Compensation expense increased approximately $286,000 due to the increase in the number of employees necessitated by the growth of our operations.

G&A expenses were approximately $479,000 in 2019 compared to $437,000 in 2018. In addition, in 2019, we recorded an impairment loss of $417,000 compared to an impairment loss of $67,500 in 2018. The increase was due to reduction in fair value of our real estate-owned compared to its cost.

Net income for 2019 was approximately $6.2 million compared to approximately $7.8 million for 2018 due primarily to the increase in our operating costs and expenses. As a result of the reduction in our 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 in 2018.

Turning now to our balance sheet and liquidity. Total assets at December 31, 2019, were approximately $141 million compared to approximately $86 million at December 31, 2018. Year-over-year, this represents an increase of approximately $55.2 million -- excuse me, or 62% -- or 64.2%. The increase was due primarily to the growth in our mortgage portfolio approximately $94.3 million at December 31, '19, compared to approximately $78.9 million at December '18. An increase in cash and short-term marketable securities, approximately $34.8 million versus approximately $159,000 in 2018; an increase in property and equipment, approximately $1.35 million in 2019 compared to approximately $1.2 million in 2018; and lastly, an increase in real estate-owned, approximately $8.3 million in 2019 compared to approximately $2.9 million in 2018. REO increased $3 million from September 30, 2019, levels.

Total liabilities at December 31, 2019, were approximately $58.7 million compared to approximately $33.2 million at December 31, '18. Year-over-year, the increase is approximately $25.5 million or approximately 76.6%. Total indebtedness at December 31, 2019, was approximately $58.9 million compared to approximately $27.5 million at December 31, 2018. The only other significant liability at December 31, '19, was deferred revenue of approximately $1.2 million compared to approximately $1.1 million at December 31, '18.

Total shareholders' equity at December 31, '19, was approximately $82.6 million compared to approximately $52.8 million at December 31, '18. The year-over-year increase of $29.8 million was due primarily to net income of $6.2 million, net proceeds of $30.5 million from the sale of our common shares, which was offset by dividends paid. Net cash provided by operating activities in 2019 was $8.1 million, compared to $6.2 million in 2018.

On January 7, 2020, we declared a dividend of $2.7 million or $0.12 per share. At the time of the announcement, this dividend payout reflected, not only our financial performance, but also our continued confidence in the outlook for our business. As mentioned in our recent press release, we have deferred any decision with respect to further 2020 dividends until after the end of the second quarter. Let's not forget Sachem has paid 100% of its taxable income from the date of our IPO through 2019 in the form of dividends.

To wrap up, I am pleased with our operating results for the year, having achieved record revenue of $12.7 million and $6.2 million of net income despite significant onetime expenses. Our restructured balance sheet, now with our assets free and clear, is properly positioned in these difficult times.

At year-end, we had approximately $35 million of available cash. And this is after taking into account the proceeds of our recent note offering. These funds will provide stability to our company as COVID-19 works its way through the credit markets. In light of COVID-19, we believe our lending platform is solid and sustainable given our strict underwriting criteria and extensive due diligence. The demand for our loan products and services remains strong. However, with an abundance of caution, we have changed our focus from growth to preservation of capital until the storm clouds have subsided and normal risk levels return. We are encouraged by the outlook for our business and look forward to reestablishing our growth plans. As always, we remain fully committed to our goal of providing investors attractive risk-adjusted returns.

I would like to thank you all for joining our call today. At this point, I would like to open the call to questions.

(Operator Instructions) And our first question comes from Ben Zucker from Aegis Capital.

Can you hear me all right? I'm on a headset.

Yes, Ben. Good morning to you as well.

Great. So listen, I might be bouncing around here a little bit, but I just want to kind of get a little handle on everything. Did you mention -- did I hear you right that you were looking to match, going forward, new originations kind of with the level of repayments?

That is correct. What we're doing is we're playing very close to the vest. And what I tried to touch on is that we were picking up speed. We were doing well. We have boots on the ground, and then suddenly, things change. So as we stay today, we have significant cash levels, approximately $21 million. We do have construction commitments to our borrowers, but let's talk frank. I mean we don't know the duration of this. We don't know our borrowers' ability to repay, and we're just going to play very tight to the vest until I could see the light at the end of the tunnel. So yes, we're going to try to match inflows with outflows while keeping a very substantial cash cushion.

Understood. And I think the defensive mentality makes sense, but that's definitely helpful commentary for our model. So we know not to kind of deploy and grow your portfolio based off your robust cash position, but we might actually see kind of a steadying out of the portfolio and you guys really just trying to lean back on that robust cash position just to maintain flexibility. So I totally get that.

When you said to reduce your LTV to 50%, are you saying that the new capital that you lend out, that will be at like a 50% loan-to-value of the as-appraised value?

That is correct. And really up through the middle of February, we were lending at a 70% LTV, and this has been an increased level for Sachem for approximately 2 years now. And part of it was driven by our former bank, which gave us the ability to lend up that high. And then also the market competition was offering our borrowers significant more cash at closing than we were. And even at 70%, we're not as aggressive as they are, but the 70% number is really important in 2 aspects for us. One, it allows us to still remain competitive and it's kind of like a line in the sand if a loan should turn bad or if the borrower should have some form of difficulty. And that extra 30%, between 70% and 100%, that's our safety net.

And in Connecticut, the courts are slow and the attorneys defend their borrowers. And unfortunately, as I mentioned, the courts are closed. And -- so we're kind of in a holding pattern here. So as I sit here, I'm looking at our LTVs and we could have some exposure there. I just -- I can't put a finger on it. Historically, we have been very good, but times have changed here a little bit. And the key for us, Ben, and we have ACHs hitting tomorrow. And who knows? Are half of those going to come back with no payment? Or are we going to lose 10% of them? That's the big issue for us as a lender. We are getting calls for people looking for assistance, and we don't know the extent of it. We do have guidelines in-house as to how we're going to proceed with it, but again, we don't know how deep this is going to reach into our portfolio.

I don't want to put words in your mouth, but I mean it sounds like, if I'm understanding this right, is prior to the virus, the market was getting really competitive. There were people offering loans at higher than 70% LTV and maybe taking a little bit lower coupon. But if I'm understanding that you now think you might be able to put some money out at 50% LTVs. Would the implication be, and you might have touched on this in your prepared remarks, that maybe one of the benefits of the virus is it's pulled a lot of your -- what was your competition out of the market while people who don't have the liquidity position you guys have are now just like kind of totally out of the market and not making new loans, so the competitor set might have gotten a little bit more favorable for you guys?

You're exactly right. And we have heard that some big platforms have stopped lending. That doesn't mean they're going away. They have stopped lending. Some of our smaller participants in Connecticut, we've been on the phone with them. They don't have the capital that we do or the ability for -- like Sachem to source capital. They're in a little different spot.

They have been contacting us to buy some paper, perhaps even join forces. And now is not the time to do anything crazy. This is really close to the vest. We think in a way the surviving entities here will do unbelievably well. And with that in our mind, it's play small and preserve -- in effect, preserve your bullets. This is going to be a long battle and the man with the cash is going to win.

I absolutely agree. And I'd even add to that when you're in the business of really just making -- of making loans, you're kind of in the business where you're not looking for any home runs. There's really no such thing as the home-run loan.

You're just trying to hit singles, make a loan and get your money back. I'm curious, what was the kind of activity looking like for the first half of the quarter through like mid, late February before the virus picked up?

We were doing quite well. We put about $15 million to work. Some of that was pent-up demand from the holidays and some of it was new relationships that we formed for the past 60 days. So we really were regaining our stride. The business was good. We are putting money to work. The problem, I mean if there was a problem with putting money to work, the issue in the environment in January and February was that we were not getting traction with our loans, meaning we would put out $1 million of loans in 1 week and get it back to the next, not that same $1 million, but payoffs and fundings where the money was moving too quickly, and we weren't getting any real-time on the money we were lending.

So we're getting cash back and the money was going out again. So we were not able to really earn the true interest revenue that we wanted to. During -- go ahead, Ben.

No. And I think that dovetails into what you were saying last quarter when we were talking after your third quarter results and you were speaking about moving into certain kind of assets or collateral, where you could get a little bit more duration protection. Is that right?

That is true. And for 2020, we lent approximately $65 million, and we had $45 million in loan repayments. So getting traction with our lending business, it's been a little difficult. And our origination fees are up, but we have to apportion those over the term of the loan and interest is more critical to us than the origination fees, and we just couldn't get the traction we wanted.

The last question, and then I won't -- I've been up a lot on the line, but obviously, there's a lot of information we're trying to cover. I'm curious about bank financing, not in the bridge loan space that you guys do, but I kind of think of them as the takeout source of financing once the borrower is done with the bridge loan. Could you offer any comments on what you're hearing or seeing from your borrowers?

Is there still an availability of bank financing? And are these borrowers kind of rushing to lock that in now, so we could maybe see repayments spike in the coming months? Are those banks really closing all types of lending, so the borrowers are kind of stuck with your loan or finding some other bridge loan? I'm just -- I'm curious about that kind of bank and permanent financing source right now.

This is a good question and it -- I'm kind of torn in my response. So I'm going to give you both sides. I think the drop in interest rates has created an awful lot of stimulus. Our friends at the banks are as terrified of what's going to happen here as anyone else. So I think the great rates will go to a select few borrowers. I think the process is going to be lengthy. So what I'm saying is I think the low rates is going to prop up the real estate. It's going to allow us to refi more and more property.

Now with that being said, we have seen some buyers walk from contracts and not to say that they won't return. We have put out pay off documents, and what we do is we give the borrower a call. And the real estate transaction has died on the buying basically. I think some of the borrowers are looking for better pricing, and they see this as an opportunity to squeeze. So it's hard to say. I hope -- long term, I think the lower rates will really grow the real estate business. I think it's going to put a floor on the real estate prices. And the thing that upsets the apple cart is a bank failure or a large real estate problem that will scare everybody away. But for right now, the refis have kind of slowed.

And our next question comes from Christopher Nolan from Ladenburg Thalmann.

John, looking at the dividend statement in the press release, it indicates that in January, a dividend of $0.12 per share was paid and then there'll be further consideration of the dividend at the end of the second quarter. Should we view this as being where there would be no dividend paid or declared in the first quarter or the second quarter?

Chris, I hate to say anything on that right now because I truly don't have the facts. A lot will be -- a lot will depend on collections. And everybody is looking at the current credit markets with a stern eye, and no one seems to know how this is going to play out. We are keenly aware that our shareholders have bought Sachem stock for its yield.

So we are aware -- we're keenly aware of how they feel, and really, the -- my best response to that is we intend on staying a REIT. If we earn, we're going to pay our dividends. So we've done that in the past. We've paid 100% of our earnings to our shareholders. If I don't pay 100%, it's going to be darn close, but our goal is really to turn money back over to our shareholders as soon as the storm clouds move away.

Okay. And then back to the question in terms of the lower interest rates. Based on your comments earlier, should we read that despite lower LIBOR, you're seeing relatively decent pricing for new investments, and how would pricing in terms of yields, investment coupons?

So on our end, the low-cost money has vanished. And some of our borrowers that were drinking from the other trough have come back and pricing is not an issue any longer. I think in the future it will be. But for right now, people are looking to close deals at any price. And I think pricing will come back to this market. I think some of the competition will move away from this space.

But for the first couple of months of the year in the fourth quarter, I mean man, we were looking at 9% paper. And our borrowers were requesting the same. That has now changed a bit. So the next quarter is going to tell us how we're able to price. But for right now, it looks like we're still going to be able to lend under our normal rates and terms.

And our next question comes from Ian Ellis from Microcapital.

Two really related questions. And first of all, I'll preface it by saying, I greatly appreciate the decision to preserve liquidity here and only extend loans to the extent you're -- you have payoff proceeds. Sounds like a very smart decision. Just looking at term, your securities, which are in the public market here all selling at deep discounts, I acknowledge your aspiration to grow the business.

But do you see a situation where you're getting a much better, not just risk-adjusted return, but absolute return by repurchasing, say, the notes, for example? And then I apologize for being unfamiliar with the REIT structure. But if you were to say repurchase $10 million of notes for $6 million or $7 million, would that gain qualify as income that you would be required to distribute to the shareholders under the restructure?

It -- this is a great question, and the company and the Board, we've been discussing this for some time. The purchase of the notes represents a great opportunity, okay? All in all, the yield on the notes will be tremendous, as we all know. Now that they're trading at a discount, even more so. Our issue is really quite simple. There's not an awful lot of liquidity in the space. And then we are limited in our acquisition of those notes or the stock for that matter. We are limited in as to how much we can buy on a daily basis.

So for example, the other day, our stock traded down sharply. Sachem cannot go in there and buy every stock offered for sale, okay? There's rules and regulations that prohibit that on our end. So to really touch on your question, the bond -- yes, the bonds are a great investment. Our Board is looking at these. We have not made a final decision. We certainly could not do anything up to the issuance of our K. So even though the bonds were, I don't know, $8, we couldn't participate. And, yes.

Okay. So it's definitely on the table. It's not something that you're reluctant to consider.

No. It is on the table, and we're keenly aware of it.

And our next question comes from Paul Drees from Market Edge.

Just a -- one quick follow-up on the loan-to-value target going from 70% to 50%. Are you also doing anything on the valuation side? Are valuations being assessed differently or adjusted on properties given the crisis? Or is it too early to see that?

Yes. No, that question is on point if real -- with any kind of decline in valuation, our properties are appraised by our auditors. And appraisal results, if it doesn't -- if an appraiser doesn't agree with our findings of value, an impairment shows up. So right now, I believe the lower interest rates will help. We're still making the push for multiple pieces of collateral, larger downpayments. That, in fact, was really, as of the 1st of the year, we were considering all those things.

And -- not so much that we knew we would be here today. It's just that the value of properties was continuing to rise, and we're seeing -- it felt like we were walking up a wall of worry, right? The values keep going higher and higher. The appraiser comes back. He appraises a house on the street that was sold at a great price. And now all of a sudden, the selling prices are going up and we're getting caught up in that draft.

So we were working on this back in -- at the 1st of the year, looking for larger downpayments, looking for additional real estate collateral. And most of our properties do have multiple pieces of security.

Okay. And then a slightly different one. If we look forward, you mentioned that you're going through a market expansion into some new geographic targets, Phoenix, Charleston, et cetera. How are those selected?

We have people that run businesses in those areas and what's kind of nice is we don't have to commit people to the area. We're able to select, pick and choose the deals we'd like to do. Some areas, for example, a lot of our paper here in Connecticut has a 9% face on it. The loans out of -- coming out of Austin, Texas have a 12%. The one we did in South Carolina was 9%, but with a 50% LTV.

So we're -- we're able to pick and choose. This is, not that, we're going there hog wild, it's still on a loan-by-loan basis. And if we like what we see, we'll consider making the investment. We can also participate in the transaction, but again, it's not willy-nilly. It's specific and clearly property dependent.

And our next question -- can you hear me now? Sorry.

I can hear you.

And the next call is from [Richard Schultz] from Sachem Capital.

Yes. I'm not with Sachem Capital. I'm an individual investor. I think the -- I put the company name in there by mistake when they asked me for a company. At any rate, yes, John, I heard about -- what you said about moving to a more conservative approach going forward.

The question is the COVID-19 thing really kind of came up, as we know, in the last month, maybe a little earlier. And I guess my question is, have there been any thoughts, even though we knew revenue was probably going to be down for the first quarter, to just let chips fall where they may and maybe not pay a $0.12 dividend, maybe pay an $0.08 or $0.09 dividend based on actual results and then let that roll over to quarter 2 and see what -- -- obviously, quarter 2, I think, everybody is expecting that to be worse unless some miracle occurs, but is there any thought to just letting chips fall where they may with quarter 1?

Our dividend early January is, in reality, it's first quarter income. So it was a $0.12 dividend. We did consider declaring a dividend. But our dividends, as you all know, with the amount of shares we have, it's about $2.7 million. And what we think here is that holding on to this -- holding on to our money really for 3 months is just such a prudent thing to do. We understand the pain that this could cause some of our investors who really live off our income, and we're sorry about that, but our job is to protect the company.

No matter what, we need to protect the company, that it's here when this is over. And Rich, the thing is, if we run out of money, we can end up being a skeleton laying on the side of the street, and we can't let that happen. So we're hoping that we're able to make an announcement and pay some dividends at the end of June. And hopefully, there's a little bit of a catch-up in there. But let truth be told, we just don't know where -- we really don't know where we're standing as of yet. It's still too early for us.

Okay. As a follow-up to that then, I guess, I would say you should go about attracting really new investors since, essentially not really been viewed as a growth stock, really, as you mentioned earlier, just a stock that paid a very good dividend. So are there any thoughts along those lines to making the company more attractive to invest in?

Well, with REIT stocks and a good portion of our competition has been taken out to the woodshed here. They're operating with significant amounts of leverage, banks that are maybe not willing to go forward with them. We're not in that category. I think we got caught in the downdraft here, but the whole REIT space is under unbelievable credit watch.

I mentioned in the discussion, we have $141 million in assets supporting $55 million in bonds and it gives us a lot of room. These bonds are not secured. And if this turns into a firefight, I kind of like our chances. Will Sachem ever be a growth stock? I don't think so. And we're an income play.

Everything we earn, we pay to our shareholders, which keeps us from really growing our asset base. So sadly, our goal is to get the stock price back up through operations, and I think we'll get there. This year, we'll be testy at best, but we're going to do everything we can to make that happen.

And our next question comes from Jeff Moore, private investor.

I wanted to ask a little bit more about the LTVs. So when you're cutting those back to 50% LTV, is that of the purchase price of the property or the after-repair value of the property?

So that's always been the great issue with us. If it is a construction loan, we're looking at an after-repair value, okay? So it has to take into account the construction financing, the appreciation that the developer puts into the project, the purchase price of the property to begin with.

That's the tougher of the calculation. So it's 50% of the value. And if it's a non-construction loan, it's going to be 50% of the purchase price. And believe me, in today's day and age, a 50% LTV is going to be pretty tough to get. And that's self-imposed. We understand that. There's very few techniques we can use to prop up a transaction and it all comes down to the value at the end.

Okay. Yes. I appreciate the conservatism. And it seems like you guys have already addressed most of my other questions, but I would like to just kind of say to the guy that asked about the pricing on the bonds and whatnot, that was a good question. And I really appreciate that the Board has been discussing potential repurchases of those because they are trading for like $0.63 on the dollar.

That is exactly right.

Yes. Given this, are -- do you all foresee any insider transactions happening once your blackout window is over?

I would like to pass on that for now. That has been discussed with our Board as well.

Okay. And then another question. Can you give any color as to why Jeff kind of stepped out of his role with the company?

I would prefer not. I -- in truth, I'm not sure myself, and we have not received any written communication from him with explanations why. It's business as usual now. We had people in-house here that were able to just pick up the slack, and he'll be missed, but we need to move on and move forward.

Okay. And can you provide us with an update on some of your REOs? I noticed that those grew pretty candidly over the past year.

They did. And yes, I would very -- I'm glad you brought that up. Let me just -- I'm clicking on something here. So we increased our REO by one large project, and it's a project that is, in effect, in foreclosure. But as -- when we financed the project, we had deeds in lieu of foreclosure. So after discussions with our accountants, we decided to move it from the foreclosure list to the REO list. So it was really one big project.

So like an apartment complex or something?

No. It's about 27 building lots. The developer has left town. We have been working the project. Our impairment loss that we discussed is related to that. It's going to take some working on our end to get past it, but we're on it every day.

So are you all going to be -- the renovation -- or the construction of the lots?

As of right now, I think our plan is to stabilize the development and landlock it. It's -- we think it's valuable property. It had a very significant appraisal. But once again, I think homebuilding here in Connecticut is going to be a little tricky for a while. So we may just land bank it and figure out the value somewhere down the road.

Okay. So like in the construction of this, though, there haven't been like floaters or utilities round out to the individual lots, it sounds like. It's just literally kind of land that's been moved around?

That has been done. These are permitted lots. The road is in. There's utilities. It's just now just restabilizing the property and basically closing it down.

Okay. So there haven't been foundations or anything cored yet for the individual houses, though?

We have one house going up now. We're going to build one house at a time. If it sells, perfect. If it doesn't sell, there's no real damage. We're not going to go build 20 houses.

That's very helpful.

With respect to the REO, I just want to add this. We have 2 pieces of property, 2 REOs under contract, a single-family building lot for $525,000. We hope that the buyer, that's scheduled to close April 15. We have a commercial building. We have a contract in-house for $425,000. So we have almost $1 million under contract.

In the first quarter, we sold 2 pieces of property. One was a piece of land. We sold it for $220,000. Some of the loss you'll see on our financial statements relates to that property. So there's no further loss there. We then sold 2 pieces of property with respect to a note we bought about a year ago. Our net proceeds were about $850,000. Our investment in the note was $972,000, and we have 3 pieces of property left.

It's a -- no, we -- when you look at REO, it always looks bad, but this is an issue where we went out and we bought a piece of property. We bought a distressed note. We could be on the positive side of this relatively quickly. But once again, we just sold 2 properties and got most of our money back. We have 3 more to go.

And lastly, we have -- in our REO property list, we have a commercial building that we have just signed a triple net lease that will start in May of 2020. And so that -- it's just a nice lease, long term, pretty stable tenant. So it's time to move -- go ahead.

Will you be keeping that triple net lease as a rental? Or marketing it for sale?

It's a terrible thing. I mean there's not enough money in the rents to make compared to our 12% yield on our notes. So most likely with the tenant in place, this property will be marketed and sold. But in the meantime, the bleeding with respect to that property has now gone away.

Okay. Are there any questions that callers have not asked yet or that you kind of think should have been asked?

Well, there's like -- there's a lot of things in discussion and there's a lot of provisions coming out of Washington. And so I wanted to -- I want to say just this. We have not let any employees go. They're all getting paid. We are working on a rotating skeleton crew, and morale is good. So we're doing our very best to handle the social distancing. Our offices are locked.

Borrowers are only, upon acknowledgment, they're allowed to come into our vestibule, and that is basically it. So they're not allowed to walk through. We're doing our very best to conduct business while trying to protect our people. And so we have -- we really have no intention of letting these people go or to adjust their pay or any of that kind of stuff. And there are programs that will provide us maybe some relief from that. They're out there.

There may be programs that will protect us from these loan deferment programs. Right now, they're all tailored to homeowners. And you know what? I'm not a betting man, but I'll tell you, it's going to follow -- it's going to find its way into the commercial space. So there might be some programs that will take some of the impact of this off of us. But for right now, it's still too early to tell. We have hired someone to pull this -- pull these programs together for us, so we can see what's going on.

And if we're going -- if we think there's available money or if we qualify, we'll go after it. But our -- we're kind of powerful here. I don't think they're going to be giving money to people that have money in the bank and are operating strongly. So let's see how it goes. But once again, we're here. We're operating at a very low level, but we are operating.

Well, fantastic. It seems like you guys are doing a fantastic job. And if I was there in person and we were allowed to do it, I would give you a high five for your good work.

All right. I'd have to do with an elbow.

And, John, that appears to be our last question for today.

Okay. Thank you, all.

Thank you. This does conclude today's conference. We thank you for your participation. You may disconnect your lines at this time, and have a wonderful day.