Manhattan Bridge Capital, Inc.
Q2 2014 Earnings Call Transcript

Published: 14 Aug 2014

[Operator:]

Greetings and welcome to the Manhattan Bridge Capital Quarterly Conference Call. (Operator instructions.) As a reminder, this conference is being recorded. On today’s call will be Assaf Ran, CEO and Chairman of the Board; Vanessa Kao, Chief Financial Officer; and Stephen Zelnick, Legal Counsel for the company. It is now my pleasure to introduce your host, Assaf Ran. Thank you.

[Assaf Ran:]

Thank you, Devin. Thank you all for participating in this call. I appreciate your time and interest in Manhattan Bridge Capital. I will start with a brief introduction of the company operations and then I’ll proceed with the presentation of the financial results for Q2 2014. Following that we will entertain questions. Manhattan Bridge Capital is the leading hard money lender in the New York metropolitan area and New York metropolitan markets. Hard money lending is a lender to professional real estate developers in order to finance or help them finance their real estate transactions. We lend always against a first mortgage on a listed property as I mentioned in the New York metropolitan area. We insist on personal guarantees from the individuals, the real estate investors. And since the beginning of this line of business back in the beginning of 2007 we have managed to avoid trouble. We have a spotless portfolio with no defaults whatsoever. We focus on smaller transactions, $300,000 to $600,000 although in certain cases we went up to $1.3 million and as low as $50,000. A typical transaction size would be $300,000 to $600,000. Currently the portfolio we operate approximately 75 loans. That with the amounts as you can see, the money as you can see, the financial [results] as of June 30th is approximately $17 million. Though we charge higher rates, usually 12% to 15% annual interest and one to five initiation points, we insist on certain requirements that help avoid possible trouble in those seven and a half years of operation including the two years of the financial crisis. And we insist on as I mentioned personal guarantees, personal guarantors. We conduct rigorous due diligence. We check their credit, their backgrounds, their track record. We want to see that they have the financial capabilities to sustain unexpected challenges, to bear the monthly interest. We insist on the monthly interest; we never allow for interest reserve. We would like to see that they’re no overleveraged. We insist on certain types of deals that we have to qualify to our criteria. We’ve been [defiled] just like most banks on the individuals and then we insist on some equity if they’re going to participate in the deals. We will never finance 100%. We want to see that they come in with their own money even if they manage to purchase the property for a very low price, a below market price; even if their appraised value is much higher than their mortgage amounts, their loan amounts we will insist on equity participation, monthly interest payments, [adjustable mortgage] to make sure that the individual investor, the developer who is the investor is ultimately able to complete the deal and return the money. We focus on three types of deals. The most common is fix and flip where investors will buy real estate property, mostly residential, single- to three-family homes as I mentioned in the New York area – five boroughs, Long Island, West Chester; will quickly renovate it and sell it for profit. This would be the first and most common type. We of course will record a first mortgage on the property. We’ll take the investor’s personal guarantee, some other measures to deter him from turning his back to us in case of unexpected trouble. The second deal type would be small real estate new construction development projects. In most cases investors would purchase a small piece of land and quickly develop a small building on it, and then single- to three-family homes in most cases. These usually take about six to eight months to build and then will be offered for sale shortly and pay us off. The last type would be small income-producing properties. In those cases investors would purchase, enhance the rental income and pay us out by refinancing through a conventional bank. The deal flow is tremendous. We get a lot of potential deals, opportunities on a daily basis through the internet, through a network of mortgage brokers that we’re connected to, word of mouth, a lot of repeat business. We are one of very, very few hard money lenders that are not real estate investors themselves, so we are not competing with our clients who are borrowers and they like that. They are willing to pay us a little bit more for that and they will always prefer us rather than competition that might be their competition as well. And this allows us the opportunity to cherry pick the best opportunities. That is the reason why we managed to stay out of trouble and default free since the beginning and through the financial crisis. So we start spinning the opportunities out over the phone. We ask some basic questions

[Operator:]

Thank you. We will now be conducting a question-and-answer session. (Operator instructions.) Our first question comes from the line of Sam Robotski with SCR Asset Management. Please proceed with your question.

[Sam Robotsky:]

Good afternoon, Assaf.

[Assaf Ran:]

Good afternoon, Sam.

[Sam Robotsky:]

As far as the raise that you made you have $1.5 million to be lent out after June 30th. How quick do you expect to lend out the $4.3 million that you have plus extra? What is your timeframe?

[Assaf Ran:]

Well, I can’t really get into projections and into details that weren’t publicly disclosed. However, we were planning for this offering for 15 months. We spoke about it in public filings so we knew it’s coming and we have obviously as responsible people didn’t want to see the money sitting in a bank account. We have new shareholders; we have new shares that are entitled to the dividend so we are highly motivated to put the money to work. We had the time to prepare and I’m optimistic that the money will be deployed in time.

[Sam Robotsky:]

And as far as the money that you’re borrowing from Sterling, would your credit rating have been improved with that? Would the interest rate go down or would it stay the same?

[Assaf Ran:]

Again, that’s projections and information that wasn’t disclosed. However, obviously in the past Sterling increased their line as our own capital increased. We have good relationships with them. The line started about two years ago, two and a half years ago at $3.5 million; about six, seven months later it went up to $5.0 million and then a year later it’s gone up to $7.0 million. And we get nothing but compliments from Sterling so I’m hopeful that they will increase the line. As soon as it would happen obviously we would announce it.

[Sam Robotsky:]

Okay. So this sounds good and this would permit you to maintain the dividend or increase it according to the income because I guess with $0.08 and paying out $0.07 without the additional funds you’ve earned the money this particular quarter – that would appear possible with additional funds. You should be able to earn more than you earned in the June quarter.

[Assaf Ran:]

Well, when we announced the $0.28 per share we were comfortable with the number. We were carefully calculating our comfortable number and that was the number that we were obviously comfortable with, and therefore approved it and announced it. And hopefully we will be able to maintain it. I see that Q2 was on the dollar; in Q3 there are the new funds. And I’m comfortable with the number.

[Sam Robotsky:]

And currently your stock is yielding greater than 10% so it should be a good investment. Good luck, Assaf.

[Assaf Ran:]

Thank you, Sam.

[Operator:]

Thank you. (Operator instructions.) There appear to be no further questions at this time. I’d like to turn the floor back over to management for closing comments.

[Assaf Ran:]

Thank you, Devin. I hope this presentation was helpful. I appreciate your time and I’m thankful for your interest in Manhattan Bridge Capital.

[Operator:]

This concludes today’s teleconference. You may disconnect your lines at this time. Thank you for your participation.