Company Overview

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 has built a reputation for its disciplined approach to underwriting and its expertise in the New York metropolitan area real estate market.

Founded in 1989, Manhattan Bridge Capital has a long and successful history in the short-term, secured, non-banking lending space, also known as “hard money loans.” The company provides financing to real estate investors to fund the 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. Over the years, Manhattan Bridge Capital 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. The company has relied heavily on repeat business from prior customers and referrals of new business. In addition, the company’s chief executive officer has spent a significant portion of his time on new business development.

In 2014, Manhattan Bridge Capital satisfied all of the requirements to be taxed as a real estate investment trust (REIT) and elected to be taxed as a REIT starting that year. As a REIT, the company is required to distribute each year at least 90% of its REIT taxable income in order to maintain its qualification for taxation as a REIT and avoid any excise tax on its net taxable income.

Lending Strategy

The company’s lending strategy is focused on originating first mortgage loans that are principally secured by collateral consisting of real estate and accompanied by personal guarantees from the borrowers’ principals. Manhattan Bridge Capital’s loans typically have a maximum initial term of 12 months and bear interest at fixed rates ranging from 9% to 13.5% per year. In addition, the company 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.

Over the years, Manhattan Bridge Capital has maintained a disciplined credit and due diligence culture, which has enabled the company to navigate various market conditions and economic cycles. The company’s deep understanding of the New York metropolitan area real estate market, combined with its flexibility and ability to structure loans that address the needs of its borrowers, has been a key factor in its success.

Financials

In terms of financial performance, Manhattan Bridge Capital has demonstrated consistent profitability. For the year ended December 31, 2023, the company reported net income of $5.48 million, or $0.48 per diluted share, compared to $5.21 million, or $0.45 per diluted share, for the year ended December 31, 2022, an increase of 5.1%. Total revenue for 2023 was approximately $9.80 million, compared to $9.36 million in 2022, an increase of 4.6%.

For the nine months ended September 30, 2024, Manhattan Bridge Capital reported net income of $4.29 million, or $0.37 per diluted share, compared to $4.13 million, or $0.36 per diluted share, for the same period in 2023, an increase of 3.8%. Total revenue for the nine-month period ended September 30, 2024 was approximately $7.33 million, compared to $7.23 million for the same period in 2023, an increase of 1.4%.

For the most recent quarter (Q3 2024), the company reported revenue of $1.78 million and net income of $1.40 million. Operating cash flow (OCF) for the quarter was $1.36 million, while free cash flow (FCF) stood at $1.35 million. Compared to Q3 2023, the company experienced year-over-year decreases across these metrics. Revenue decreased by 5.0%, net income by 3.3%, and both OCF and FCF by 6.3%. These decreases were primarily attributed to a reduction in loans receivable and reduced origination fees, although partially offset by higher interest rates.

Liquidity

The company’s balance sheet remains strong, with total assets of $76.43 million as of December 31, 2023, and $70.70 million as of September 30, 2024. Manhattan Bridge Capital’s liquidity position is also robust, with cash and cash equivalents of $1.69 million as of December 31, 2023, and $167,860 as of September 30, 2024.

As of Q3 2024, the company’s debt-to-equity ratio stood at 0.5801. Manhattan Bridge Capital has a $32.5 million credit line with Webster, Flushing Bank, and Mizrahi, secured by assignments of mortgages and other collateral. The outstanding balance on this credit line was $19.17 million as of Q3 2024, providing the company with additional liquidity if needed.

Portfolio Diversification and Risk Management

One of the key factors contributing to Manhattan Bridge Capital’s success is its focus on maintaining a diversified portfolio of loans. As of September 30, 2024, the company’s loans receivable consisted of loans to residential, commercial, and mixed-use real estate developers, with no single entity having loans outstanding representing more than 10% of the total balance of the loans outstanding.

Additionally, Manhattan Bridge Capital has implemented a comprehensive risk management framework, which includes stringent underwriting standards, regular monitoring of loan performance, and a disciplined approach to loan extensions and renewals. This approach has enabled the company to minimize loan losses, with no foreclosures to date, except for one instance in June 2023 where a deed transfer from a borrower to a buyer occurred without the company’s consent. The issue was subsequently resolved in October 2023 with the full payoff of the loan, including all unpaid fees.

Future Outlook and Potential Risks

Looking ahead, Manhattan Bridge Capital remains well-positioned to capitalize on the continued demand for short-term, secured real estate loans in the New York metropolitan area and Florida. The company’s management team is committed to maintaining its disciplined approach to lending and exploring strategic opportunities to further grow and diversify its loan portfolio.

One potential risk factor for Manhattan Bridge Capital is its reliance on the continued strength of the real estate market in its core geographic regions. A significant downturn in the New York or Florida real estate markets could adversely impact the company’s loan origination activities and the performance of its existing loan portfolio.

Additionally, the company’s dependence on a limited number of large borrowers, with the largest four borrowers accounting for approximately 40% of its total loan portfolio as of September 30, 2024, represents a concentration risk that warrants close monitoring.

Despite these risks, Manhattan Bridge Capital’s consistent financial performance, strong balance sheet, and specialized expertise in the hard money lending market position the company well to navigate the evolving real estate landscape and continue delivering value to its shareholders.

Product Segments and Business Activities

Manhattan Bridge Capital’s core product is its commercial loan offerings, specifically short-term, secured, non-banking commercial loans known as “hard money loans.” These loans are provided to real estate investors primarily in the New York metropolitan area, including New Jersey and Connecticut, as well as in Florida.

The loan amounts typically range from $40,000 to a maximum of $3.6 million, with a lending policy that limits the maximum loan to the lower of 9.9% of the aggregate loan portfolio or $4 million. For the nine months ended September 30, 2024, the company originated $29.36 million in new commercial loans and received $33.75 million in collections from borrowers. As of September 30, 2024, Manhattan Bridge Capital had $68.71 million in loans receivable on its consolidated balance sheet.

The company reported $6.13 million in interest income from these commercial loans for the nine-month period ending September 30, 2024, representing the majority of its total revenue of $7.33 million. This underscores the importance of the commercial loan segment to Manhattan Bridge Capital’s overall business model and financial performance.

Geographic Markets

Manhattan Bridge Capital primarily operates in the New York metropolitan area, including New Jersey and Connecticut, and has expanded its operations to include Florida. As a small-cap company, it does not have significant operations outside of these regions in the United States.

Recent Developments

In June 2023, the company faced a unique situation when it filed a foreclosure lawsuit relating to one property due to a deed transfer from the borrower to a buyer without the company’s consent. The buyer had suffered a data breach which resulted in a failure to remit the payoff funds. However, this issue was successfully resolved in October 2023 when Manhattan Bridge Capital received the full payoff amount, including all unpaid fees.

This incident highlights the company’s ability to navigate complex situations and protect its interests while maintaining strong relationships with its borrowers. It also underscores the importance of the company’s risk management practices and its commitment to resolving issues promptly and effectively.

Disclaimer: This article is for informational purposes only. It does not constitute financial, legal, or other types of advice. While every effort has been made to ensure the accuracy of the information presented here, the author and the publisher do not make any guarantees about the completeness, reliability, and accuracy of this information.