Sachem Capital (SACH) Revenue Down 29%

Sachem Capital (SACH), a real estate finance company and Real Estate Investment Trust (REIT) specializing in short-term loans to real estate developers, released its results for the quarter ended June 30, 2025, on August 7. The headline news was a return to profitability, with GAAP EPS of $0.02—a reversal from a $0.09 per share loss a year earlier. However, revenue (GAAP) came in at $10.8 million—down from $15.1 million in the prior-year period and below analyst expectations of $11.3 million. The release highlights ongoing challenges in loan portfolio growth and revenue, balanced by improvements in cost control and access to capital. The company’s quarter reflects stabilization but also underlines the need for progress addressing nonperforming loans and revitalizing lending volume.

Source: Analyst estimates for the quarter provided by FactSet.

Sachem Capital’s Business and Recent Focus

Sachem Capital operates as a non-bank lender, focusing on originating and managing short-term secured loans for small and mid-sized real estate developers. It primarily lends against first mortgage liens on real property, generating income through interest and fees for these financing products. As a REIT, the company must distribute at least 90 % of taxable income each year, offering investors exposure to real estate-backed loan yields without direct property ownership.

Recently, Sachem Capital has concentrated on maintaining compliance with its REIT obligations, managing the health of its loan book, and strengthening its capital structure. The company’s performance depends heavily on originating high-quality loans, controlling defaults, and keeping the cost of capital below the yields it generates on its lending business. Its key success factors include effective credit risk management, disciplined loan underwriting, and managing the tension between required dividend payouts and capital reinvestment for growth.

Key Developments in the Quarter: Financials, Credit, and Portfolio

The second quarter saw Sachem Capital return to profitability, reporting $0.8 million in net income attributable to common shareholders (GAAP). This compares to a GAAP net loss of $4.1 million a year earlier. While the EPS result of $0.02 (GAAP) exceeded consensus, revenue (GAAP) fell short, coming in at $10.8 million—a 28.5% drop from the year-ago quarter. Management attributed the revenue decline to a substantial reduction in loan originations and an ongoing elevated level of nonperforming loans and real estate owned. This decline translated directly to a lower loan portfolio balance, which was $364.5 million as of June 30, 2025, compared to $485.7 million a year earlier.

Provision for credit losses—a measure of the funds set aside for potentially bad or uncollectible loans—fell by $7.6 million, or 89.1%, compared to the prior-year quarter. This large drop reflected fewer allowances for foreclosures and nonperformers, indicating some success in stabilizing asset quality. Operating costs and expenses also dropped significantly to $9.7 million from $18.3 million a year ago (GAAP). Management highlighted that while the level of nonperforming loans remains elevated, incremental progress in resolving these assets should create capacity for future lending and support improved results if sustained.

On the capital side, Sachem Capital closed a private placement of $100 million in senior secured notes. Total indebtedness reached $315.5 million, up slightly compared to year-end 2024, dominated by unsecured notes and senior secured debt. Shareholders’ equity dipped to $177.9 million, with the change reflecting the payment of dividends outpacing current net income. Book value per common share declined by $0.10 over the six months ended June 30, 2025, largely because of dividends required to maintain REIT status—$7.0 million in payouts, or $0.15 per common share, during the period. This pressure on book value highlights the trade-off faced by the firm between rewarding shareholders and retaining earnings for growth.

Sachem Capital continues to position itself in a competitive market by focusing on quick-decision lending for small and mid-sized developers—a niche that management claims is supported by a “robust and well beyond what we have the capacity to take on” pipeline. New loan deployment, however, could not offset principal reductions and legacy problem assets, resulting in portfolio shrinkage and associated revenue declines. Alongside its main lending business, the company earned $0.5 million in rental income from a single project, a new revenue source recognized during the quarter.

Looking Forward: Guidance and Dividend Policy

Management did not offer specific forward guidance for the next quarter or for fiscal 2025. Instead, the company reiterated its focus on prudent capital allocation and maintaining a strong liquidity position to support new lending opportunities when market conditions allow. Leadership referenced continued work to resolve nonperforming assets as central for unlocking additional capital and reigniting loan portfolio growth. Investors should monitor progress in portfolio rotation, new loan origination rates, ongoing credit trends, and any further changes in capital structure that may affect dividend sustainability or book value.

The quarterly dividend of $0.05 per common share was maintained and paid on June 30, 2025, and the $0.484375 per Series A Preferred share was also declared. While the dividend affirms Sachem Capital’s REIT status, it continues to exceed the amount generated by net income, contributing to book value erosion. The future dividend trend will likely depend on the pace of improvement in loan originations, the resolution of nonperformers, and ongoing access to efficient financing.

Revenue and net income presented using U.S. generally accepted accounting principles (GAAP) unless otherwise noted.