Manhattan Bridge Capital, Inc. (NASDAQ:LOAN) is a New York-based real estate finance company that specializes in originating, servicing, and managing a portfolio of first mortgage loans. The company offers short-term, secured, non-banking loans, often referred to as "hard money" loans, to real estate investors to fund their acquisition, renovation, rehabilitation, or development of residential or commercial properties located primarily in the New York metropolitan area, including New Jersey and Connecticut, as well as in Florida.

Business Overview

The company's lending policy limits the maximum amount of any loan to the lower of (i) 9.9% of the aggregate amount of its loan portfolio (not including the loan under consideration) and (ii) $4 million. Its loans typically have a maximum initial term of 12 months and bear interest at a fixed rate of 9% to 13.5% per year. In addition, Manhattan Bridge Capital usually receives origination fees or "points" ranging from 0% to 2% of the original principal amount of the loan, as well as other fees relating to underwriting and funding the loan.

Since commencing its business in 2007, the company has never foreclosed on a property, except for one instance in June 2023 where it filed a foreclosure lawsuit relating to a property due to a deed transfer from the borrower to a buyer without the company's consent. In that case, the buyer suffered a data breach, resulting in the failure to remit the funds needed for the loan payoff. However, the company was able to rectify the situation and receive the entire payoff amount, including all unpaid fees, in October 2023.

Manhattan Bridge Capital's primary business objective is to grow its loan portfolio while protecting and preserving capital in a manner that provides for attractive risk-adjusted returns to its shareholders over the long term through dividends. The company has built its business on a foundation of intimate knowledge of the New York metropolitan area real estate market combined with a disciplined credit and due diligence culture designed to protect and preserve capital.

Financials

For the fiscal year ended December 31, 2023, the company reported annual net income of $5,476,171, annual revenue of $9,796,256, annual operating cash flow of $5,570,274, and annual free cash flow of $5,565,189. In the first six months of 2024, the company generated revenue of $5,016,293, net income of $2,885,264, and operating cash flow of $2,647,768.

The company's loan origination activities have been robust, with $19,677,520 and $28,122,249 lent during the six-month periods ended June 30, 2024 and 2023, respectively, offset by collections received from borrowers of $25,866,190 and $32,811,877, respectively. As of June 30, 2024, the company was committed to $9,057,307 in construction loans that can be drawn by its borrowers when certain conditions are met.

Liquidity

Manhattan Bridge Capital's financial position remains strong, with cash of $105,929 as of June 30, 2024, compared to $104,222 as of December 31, 2023. The company's Amended and Restated Credit and Security Agreement with Webster, Flushing Bank, and Mizrahi provides for a credit line of $32.5 million in the aggregate until February 28, 2026, secured by assignments of mortgages and other collateral. As of June 30, 2024, the outstanding amount under this credit line was $17,345,510, with an interest rate of approximately 8.9%, including a 0.5% agency fee.

In addition to its credit line, Manhattan Bridge Capital has $6,000,000 of outstanding principal amount of 6% senior secured notes due April 22, 2026, issued by its subsidiary, MBC Funding II. The notes are secured by a first priority lien on all of MBC Funding II's assets, including primarily mortgage notes, mortgages, and other transaction documents entered into in connection with first mortgage loans originated and funded by the company.

The company's financial ratios remain strong, with a debt ratio of 0.34, a debt-to-equity ratio of 0.54, and an interest coverage ratio of 3.86 as of June 30, 2024. These ratios demonstrate the company's prudent financial management and its ability to maintain a healthy balance sheet.

Geographic Focus

Manhattan Bridge Capital's geographic focus on the New York metropolitan area, including New Jersey and Connecticut, as well as Florida, has allowed it to leverage its deep market knowledge and expertise to identify attractive lending opportunities. The company's diversified portfolio of residential, commercial, and mixed-use property loans helps to mitigate concentration risk and provides a balanced approach to its lending activities.

Management

The company's management team, led by Chief Executive Officer Assaf Ran, has a proven track record of successfully navigating various market conditions and economic cycles. Mr. Ran's extensive experience and intimate knowledge of the real estate market have been instrumental in the company's ability to consistently generate attractive risk-adjusted returns for its shareholders.

Outlook

Looking ahead, Manhattan Bridge Capital remains cautiously optimistic about the market conditions and opportunities in its target regions. The company's disciplined approach to underwriting and risk management, combined with its flexible lending model, positions it well to continue delivering consistent returns to its shareholders. The company has not provided any specific guidance for the remainder of 2024, but it remains focused on prudently growing its loan portfolio while maintaining its commitment to capital preservation.

Conclusion

Overall, Manhattan Bridge Capital's diversified real estate lending business, strong financial position, and experienced management team make it an attractive investment opportunity for investors seeking exposure to the real estate finance sector. The company's consistent financial performance, prudent risk management, and commitment to shareholder returns position it well for continued success in the years ahead.