Sachem Capital Corp. 7.125% Preferred Stock

Company Overview

Business Model: Sachem Capital Corp. is a Connecticut-based real estate finance company specializing in originating, underwriting, funding, servicing, and managing a portfolio of short-term (typically three years or less) loans. These loans are primarily secured by first mortgage liens on real property, often with additional collateral such as other real estate, pledges of ownership interests, and/or personal guarantees from principals. The typical borrower is a real estate investor or developer utilizing loan proceeds for the acquisition, renovation, rehabilitation, development, or improvement of residential or commercial properties held for investment or sale. The company's loans are referred to as "hard money loans" due to their real estate asset collateral. Revenue is primarily generated from interest paid on loans and various fees related to loan origination, maintenance, service, modification, and extension. Sachem Capital Corp. operates as a self-managed Real Estate Investment Trust (REIT) since 2017, requiring it to distribute at least 90% of its taxable income annually. The primary objective is to grow the loan portfolio while preserving capital, aiming for attractive risk-adjusted returns to shareholders through dividends, achieved by accelerating profitable growth and driving operational excellence.

Market Position: Sachem Capital Corp. operates in a highly competitive real estate finance market, facing competition from traditional lending institutions (e.g., regional and local banks, savings and loan institutions, credit unions) and non-traditional lenders (e.g., non-bank real estate companies, hedge funds, private equity funds, insurance companies, specialty finance companies, other REITs, investment banks, family offices, and high net worth individuals). Many competitors possess greater financial resources, name recognition, and established customer relationships. Sachem Capital Corp. has carved a niche among small and mid-size real estate developers, owners, and contractors, leveraging its experience, reputation, size, and ability to structure loans flexibly and act quickly. The company is developing a brand identity, particularly along the eastern seaboard, and is known for offering reasonable terms and superior customer service.

Recent Strategic Developments:

• Management Change: Jeffery C. Walraven was appointed Interim Chief Financial Officer in December 2024, following the resignation of Nicholas Marcello.
• Loan Portfolio Strategy: Sachem Capital Corp. continued its strategy of funding larger loans secured by higher-quality properties from more stable and successful borrowers, aiming to reduce future problem loans.
• Underwriting Enhancements: Underwriting guidelines were strengthened to improve documentation and collateral positions on loans.
• Strategic Loan Sale: In December 2024, the company sold 32 mortgage loans, primarily classified as pending/pre-foreclosure, with an aggregate unpaid principal balance of $55.8 million. This transaction generated $36.1 million in net proceeds (64.7% of the unpaid principal balance), intended to raise working capital, eliminate future credit loss provisions, and repay Notes maturing in December 2024.
• Credit Facility Refinancing: On March 20, 2025 (subsequent event), the existing $65 million revolving credit facility with Needham Bank was terminated and replaced with a new $50 million facility. The new facility designates SN Holdings LLC, a wholly owned subsidiary, as the borrower, with Sachem Capital Corp. as the guarantor. This action resolved a prior non-compliance with a debt service coverage ratio covenant.
• Dividend Adjustment: The dividend payable to shareholders was reduced in 2024, primarily due to limited access to growth capital. This adjustment did not jeopardize the company's REIT status as taxable income also decreased.
• Equity Compensation Remediation: An over-authorization of 420,168 restricted Common Shares to John L. Villano under the 2016 Equity Compensation Plan was identified and remediated, with Mr. Villano voluntarily forfeiting the excess shares.
• Bylaws Amendment: On March 25, 2025, the Board adopted Amended and Restated Bylaws, which include updated advance notice requirements for shareholder proposals and nominations, clarified powers of the meeting chair, and conformed certain provisions to New York Business Corporation Law.

Geographic Footprint: Sachem Capital Corp. primarily operates in the northeastern and southeastern United States. As of December 31, 2024, the loan portfolio exhibited significant geographic concentration:

• Connecticut: 34.4% of the aggregate gross amount outstanding ($129.8 million)
• Florida: 30.6% of the aggregate gross amount outstanding ($115.2 million)
• Massachusetts: 12.2% of the aggregate gross amount outstanding ($46.1 million)
• New York: 8.8% of the aggregate gross amount outstanding ($33.2 million) Other states with exposure include California, Georgia, Maine, Maryland, New Jersey, North Carolina, Pennsylvania, Rhode Island, South Carolina, Tennessee, and Washington D.C.

Financial Performance

Revenue Analysis

Profitability Metrics:

• Operating Margin: -31.0% (2024), 23.2% (2023)
• Net Margin: -68.9% (2024), 24.6% (2023)

Investment in Growth:

• Capital Expenditures: $3.102 million (2024), $11.629 million (2023) (includes property and equipment purchases and improvements in rental real estate)
• Strategic Investments: $18.271 million (2024), $13.896 million (2023) (investments in limited liability companies)

Business Segment Analysis

Sachem Capital Corp. operates as a single operating and reporting segment. The company's investment objective is to generate current income and capital appreciation through its investments in real estate mortgage loans and real estate. The Chief Operating Decision Maker (CODM) assesses the company's performance and makes operating decisions on a consolidated basis, primarily utilizing net income as a key determinant for dividend distributions.

Capital Allocation Strategy

Shareholder Returns:

• Share Repurchases: Sachem Capital Corp. repurchased 581,745 Common Shares at a total cost of $1.5 million in 2024, compared to 71,000 Common Shares at a cost of $0.2 million in 2023.
• Dividend Payments: Total dividends declared and paid to common shareholders were $11.4 million in 2024. Dividends paid on Series A Preferred Stock amounted to $4.304 million in 2024 and $3.795 million in 2023.
• Future Capital Return Commitments: A quarterly dividend of $0.484375 per share on 7.75% Series A Preferred Stock was declared on February 24, 2025, payable March 31, 2025. A quarterly dividend of $0.05 per Common Share was declared on March 5, 2025, payable March 31, 2025. A new stock repurchase plan, authorized on October 10, 2024, allows for the repurchase of up to $5,802,959 of Common Shares.

Balance Sheet Position:

• Cash and Equivalents: $18.066 million (2024), $12.598 million (2023)
• Total Debt: $304.9 million (2024), $371.687 million (2023)
• Net Cash Position: $(286.834) million (2024), $(359.089) million (2023)
• Credit Rating: The company's Notes have a private rating of BBB+ from Egan-Jones Ratings Company, and its Series A Preferred Stock has a private rating of BBB from the same agency.
• Debt Maturity Profile:
  • Notes: $56.4 million due September 30, 2025; $51.8 million due December 30, 2026; and $122.125 million due across March 30, 2027, June 30, 2027, and September 30, 2027.
  • Needham Credit Facility: Expires March 2, 2026, with a right to extend.
  • NHB Mortgage: Principal payments range from $47,000 to $59,000 annually over the next five years, with the remaining balance due March 1, 2038.

Cash Flow Generation:

• Operating Cash Flow: $12.890 million (2024), $21.851 million (2023)

Operational Excellence

Production & Service Model: Sachem Capital Corp. specializes in originating and managing short-term "hard money loans" for real estate investors and developers. The underwriting process is primarily driven by the evaluation of the property's value, supported by thorough due diligence on the property, borrower, and principals. This includes independent appraisals, Automated Valuation Models, financial statements, rent rolls, and market data. For properties undergoing renovation, the asset management team reviews project scope and timelines and monitors progress. Legal due diligence involves title, lien, and judgment searches. Borrower evaluation includes third-party credit reports, background checks, and personal financial statement verification. Loan commitments are issued after executive management review, with exceptions requiring specific approval. Loan terms typically include fixed interest rates (10.0% to 13.0% per annum, up to 24% default rate), origination fees (1% to 3%), and a term of one to three years with a balloon principal payment at maturity. Most loans are fully funded at closing, with construction loans funded in draws against documentation.

Supply Chain Architecture: Key Suppliers & Partners:

• Third-Party Professionals: Appraisers, engineers, title insurers, and attorneys are engaged for due diligence and loan closing processes.
• Digital Marketing Vendor: A single third-party vendor is utilized for Search Engine Optimization (SEO) and Google advertisement analysis, with internal marketing department approval required for all efforts.
• Cybersecurity Partners: Industry-recognized cybersecurity providers and technology consultants assist with systems inventory management, vulnerability testing, user management, network protection, data backups, infrastructure maintenance, and cyber risk advisory.
• Financial Partners: Needham Bank, Churchill MRA Funding I LLC, and New Haven Bank provide credit facilities and mortgage financing.

Facility Network:

• Principal Office: The company's headquarters is located at 568 East Main Street, Branford, Connecticut, which it owns and where all operations are conducted.
• Investment Property: Sachem Capital Corp. owns a commercial property at 1 Glendinning Place, Westport, Connecticut, held as an investment in rental real estate.

Operational Metrics:

• Loans disbursed: $134.298 million (2024), $204.885 million (2023)
• Loans repaid: $190.971 million (2024), $167.036 million (2023)
• Principal of loans sold: $55.838 million (2024), $0 (2023)
• Number of loans sold: 32 (2024), 0 (2023)
• Principal of loans transferred to real estate owned: $28.639 million (2024), $1.749 million (2023)
• Number of loans transferred to real estate owned: 22 (2024), 4 (2023)
• Number of loans held for investment outstanding: 157 (2024), 311 (2023)
• Gross principal amount of loans held for investment: $376.991 million (2024), $499.235 million (2023)
• Weighted average contractual interest rate: 12.53% (2024), 12.56% (2023)
• Weighted average term to maturity (in months): 4 (2024), 6 (2023)
• Unfunded commitments under existing loans: $49.9 million (2024)
• Non-performing loans (90+ days in arrears): 35 loans with an aggregate outstanding balance of $87.0 million (2024), compared to 71 loans with $84.6 million (2023).
• Loans in foreclosure: 34 loans with an aggregate outstanding balance of $52.1 million (2024), compared to 56 loans with $55.7 million (2023). Of the 2024 foreclosure loans, $15.9 million were held for sale.

Market Access & Customer Relationships

Go-to-Market Strategy: Sachem Capital Corp. employs a multi-faceted go-to-market strategy. A significant portion of new transactions originates from repeat business with existing and former borrowers, as well as referrals from strategic partners such as banks, brokers, and attorneys. The company also utilizes a comprehensive digital marketing strategy, including targeted online advertising and Search Engine Optimization (SEO), to generate leads and engage potential borrowers actively seeking lending solutions. Strategic partnerships with various online platforms further enhance market presence and differentiate services.

Customer Portfolio: The company's customer base primarily consists of small and mid-size real estate developers, owners, and contractors. While specific customer concentration metrics are not disclosed, the company acknowledges customer concentration as a risk factor. Loans to known shareholders totaled $17.2 million in 2024 and $25.6 million in 2023, with a significant portion ($17.0 million in 2024 and $25.0 million in 2023) related to Mod 21, LLC, an entity wholly owned by the company's Senior Vice President of Asset Management and Vice President of Asset Management. All related party loans are performing.

Geographic Revenue Distribution: The company's loan portfolio exhibits the following distribution by gross amount outstanding as of December 31, 2024:

• Connecticut: 34.4%
• Florida: 30.6%
• Massachusetts: 12.2%
• New York: 8.8% Other regions collectively account for the remaining 14.0% of the portfolio.

Competitive Intelligence

Market Structure & Dynamics

Industry Characteristics: The real estate finance markets in which Sachem Capital Corp. operates are highly competitive and influenced by general economic conditions, the state of capital and credit markets, interest rates, inflation, geopolitical conflicts, and public health issues. The financial services industry is experiencing consolidation, leading to larger, better-capitalized, and more geographically diverse companies. Non-traditional lenders have increasingly entered the market as traditional banks have scaled back. There is a strong correlation between real estate values and mortgage loan delinquencies, making the business particularly sensitive to economic slowdowns or market dislocations.

Competitive Positioning Matrix:

Direct Competitors

Primary Competitors: Sachem Capital Corp. faces competition from a broad range of entities, including other "hard money" lenders, mortgage REITs, specialty finance companies, savings and loan associations, banks, mortgage banks, insurance companies, mutual funds, pension funds, private equity funds, hedge funds, institutional investors, investment banking firms, non-bank financial institutions, governmental bodies, family offices, and high net worth individuals. Many of these competitors are substantially larger and possess greater financial, technical, and marketing resources.

Emerging Competitive Threats: The company acknowledges the presence of new entrants, disruptive technologies, and alternative solutions as potential competitive threats within the evolving financial landscape.

Competitive Response Strategy: Sachem Capital Corp. aims to maintain its competitive advantage by capitalizing on existing relationships with borrowers and brokers, expanding its borrower base through attractive loan products, competitive pricing and terms, and superior service. The company leverages its experience, reputation, size, and flexibility to structure loans and respond quickly to market demands. A strategic shift towards larger loans and more sophisticated borrowers is also part of its competitive response.

Risk Assessment Framework

Strategic & Market Risks

Market Dynamics:

• Declining Real Estate Valuations: The company incurred a $0.5 million impairment charge on real estate owned, a $26.9 million provision for credit loss related to loans held for investment, and a $4.9 million valuation allowance for loans held for sale in 2024, stemming from declining real estate valuations. Future declines could materially impact financial condition.
• Difficult Market Conditions: Business performance is materially affected by conditions in residential and commercial mortgage and real estate markets, financial markets, and the broader economy. Economic slowdowns, recessions, or market dislocations, particularly when accompanied by declining real estate values and defaults, exacerbate risks.
• Interest Rate Increases: Potential future interest rate increases could adversely affect the company's ability to borrow, increase its cost of funds, and potentially lead to a rise in non-performing loans if higher rates cannot be passed on to borrowers.
• Geopolitical Developments: Ongoing armed conflicts in Europe and the Middle East, heightened US-China tensions, and other international issues contribute to market volatility, increased costs for basic goods, and cybersecurity threats, indirectly impacting the company's domestic operations and borrowers.
• Prepayment Rates: Unpredictable prepayment rates, influenced by interest rates and other factors, can lead to reinvestment in lower-yielding mortgage loans, potentially reducing future income.
• Illiquidity of Loan Portfolio: The relative illiquidity of the loan portfolio limits the company's ability to respond promptly to changing economic conditions. REIT tax laws also impose restrictions on property dispositions, potentially forcing the company to forego or defer advantageous sales.
• Geographic Concentration: A high concentration of mortgage loans in Connecticut (34.4%), Florida (30.6%), and New York (8.8%) exposes the company to adverse economic and market conditions specific to these regions.

Operational & Execution Risks

Supply Chain Vulnerabilities:

• Third-Party Service Provider Failure: Reliance on third-party service providers (e.g., appraisers, attorneys) for critical functions exposes the company to risks of errors, negligence, or fraud, which could result in losses, reputational damage, and loss of business.
• Cybersecurity Threats: The company faces risks from cyber incidents, including unauthorized access, data disruption, corruption, or theft, which could lead to operational interruptions, private data exposure, and damage to business relationships or reputation. A cyber risk management program is in place, but its effectiveness cannot be guaranteed.
• Unfunded Commitments: As of December 31, 2024, the company had $49.9 million in unfunded commitments under existing loans. There is a risk that borrower demand for funding could exceed available working capital, potentially leading to legal claims and reputational harm.

Capacity Constraints:

• Non-Performing Loans: The company experienced a significant increase in non-performing loans (35 loans, $87.0 million outstanding in 2024) and loans in foreclosure (34 loans, $52.1 million outstanding in 2024), which has materially impacted operational performance and financial condition.
• Larger Loan Defaults: A strategic shift towards making larger loans increases the risk profile, as a high level of defaults among these larger loans could have a material adverse impact.
• Non-Income Producing Properties: Many loans are secured by properties under construction or renovation that are not income-producing, increasing the risks of delinquency and foreclosure, as repayment often depends on future sale or refinancing.
• Due Diligence Limitations: Due diligence processes may not uncover all relevant risks, and borrower circumstances or market conditions can change significantly during the loan term, potentially leading to losses.
• Residential Mortgage Loan Risks: A substantial portion of the loan portfolio (56.2% of loans, 49.4% of UPB) is secured by residential real property without government guarantees, increasing exposure to property value fluctuations, borrower creditworthiness, and lien enforceability.
• Real Estate Assets Risks: Direct ownership of real estate (acquired through foreclosure or as investments) subjects the company to risks such as natural disasters, adverse economic conditions, regulatory changes, tenant mix issues, and increased operating expenses.
• Foreclosure Process Deficiencies: The foreclosure process has become lengthier and more expensive due to increased documentation standards, borrower lawsuits, and judicial backlogs, increasing costs and delaying the liquidation of underlying properties.

Financial & Regulatory Risks

Market & Financial Risks:

• Capital Access: The company's ability to execute its business and growth strategies is impaired by its reliance on external capital and recent difficulties in accessing capital markets due to the interest rate environment in 2023 and 2024.
• Debt Levels & Leverage: Substantial outstanding indebtedness ($304.9 million at December 31, 2024) and financial covenants (e.g., asset coverage ratio of at least 150%) restrict business activities, cash flow, and dividend distributions. Leverage magnifies potential gains or losses.
• Debt Maturity: Notes with an aggregate principal amount of $56.4 million are due September 30, 2025. Inability to repay these could trigger cross-defaults on other credit facilities (Churchill Credit Facility, NHB Mortgage).
• "Baby Shelf" Rules: With a public float less than $75 million, the company is limited to selling securities under an S-3 Registration Statement up to one-third of its public float in any 12-month period, hindering capital raising efforts.
• Subordination of Notes: Unsecured Notes ($230.2 million outstanding) are effectively subordinated to all existing and future secured indebtedness.
• Subordination to Subsidiaries' Liabilities: The Notes are obligations of Sachem Capital Corp. exclusively and are structurally subordinated to the indebtedness and other liabilities of its subsidiaries.
• Limited Indenture Protection: The indenture governing the Notes offers limited protection, not restricting the company's ability to incur additional debt, sell assets, or engage in certain corporate transactions.
• Preferred Stock Subordination: Series A Preferred Stock effectively ranks junior to all indebtedness and other liabilities of the company and its subsidiaries.
• Preferred Stock Market Price Volatility: The trading price of Series A Preferred Stock is subject to fluctuations based on market interest rates, valuations of similar securities, general economic conditions, and company performance.
• Common Share Price Volatility: The market price and trading volume of Common Shares are volatile, influenced by operating results, financial condition, equity issuances, interest rates, and general economic conditions.
• No Minimum Common Dividend: There is no established minimum dividend payment level for Common Shares, and future dividends are at the Board's discretion, dependent on earnings and financial condition.
• Dilution from Future Offerings: Future issuances of preferred shares or debt securities would rank senior to Common Shares for liquidation and dividend purposes, potentially diluting existing common shareholders' interests.
• NYSE American Delisting Risk: Failure to comply with NYSE American listing standards could lead to delisting, adversely affecting financing, trading liquidity, and market value of securities.

Regulatory & Compliance Risks:

• REIT Qualification: Maintaining REIT status involves complex requirements under the Code. Failure to qualify could result in corporate income tax, penalties, and disqualification for four years, potentially forcing the company to forgo attractive investments.
• Investment Company Act Exemption: Reliance on the Section 3(c)(5)(C) exemption from the Investment Company Act requires maintaining specific asset compositions (at least 55% in qualifying real estate interests). Failure to meet these requirements could necessitate registration as an investment company, leading to substantial regulatory burdens.
• Commercial Real Estate Lending Regulation: Operations are subject to state and federal supervision, including limitations on interest rates, collection practices, licensing requirements, and compliance with acts like the Equal Credit Opportunity Act, USA PATRIOT Act, and OFAC regulations.
• New York Law Dividend Limits: The ability to pay dividends is constrained by New York Business Corporation Law, which imposes solvency and asset tests.
• Tax Changes: Adverse legislative or regulatory tax changes, such as those from the Tax Cuts and Jobs Act of 2017, could indirectly affect the company and its shareholders, potentially reducing the market price of Common Shares.
• Legal Proceedings: The company is involved in various pending and threatened legal proceedings, including tax foreclosure actions. While management does not anticipate material aggregate ultimate liability, outcomes could materially affect results in future periods.

Geopolitical & External Risks

Geopolitical Exposure:

• Global Conflicts: Ongoing armed conflicts in Europe and the Middle East, along with heightened tensions between major global powers, can lead to unpredictable and wide-ranging effects on domestic and global financial markets, including market volatility, increased costs, and cybersecurity threats. These conditions indirectly impact the company's borrowers and business operations.

Innovation & Technology Leadership

Research & Development Focus: Sachem Capital Corp.'s core business is real estate finance, and the filing does not detail specific research and development focus areas or significant investments in technology innovation beyond operational support.

Intellectual Property Portfolio: The company's business does not depend on exploiting or leveraging intellectual property rights. It relies on a combination of federal, state, and common law trademarks, service marks, trade names, copyrights, and trade secret protection. Sachem Capital Corp. has not registered any trademarks, trade names, service marks, or copyrights with the United States Patent and Trademark Office.

Technology Partnerships: Sachem Capital Corp. utilizes a single third-party vendor for Search Engine Optimization (SEO) and Google advertisement analysis. Additionally, it partners with industry-recognized cybersecurity providers and technology consultants to manage IT assets, conduct vulnerability testing, implement user management, ensure network protection, manage data backups, maintain infrastructure, and provide cyber risk advisory services.

Leadership & Governance

Executive Leadership Team

• Leadership Change: Jeffery C. Walraven was appointed Interim Chief Financial Officer in December 2024, following the resignation of Nicholas Marcello.
• Loan Portfolio Shift: The company continued its strategy to fund larger loans secured by higher-quality properties from more stable and successful borrowers, aiming to reduce future problem loans.
• Underwriting Enhancements: Underwriting guidelines were strengthened to improve documentation and collateral positions.
• Strategic Loan Sale: In December 2024, Sachem Capital Corp. sold 32 mortgage loans, primarily non-performing, with an aggregate unpaid principal balance of $55.8 million, generating $36.1 million in net proceeds. This sale aimed to raise working capital, eliminate future credit loss provisions, and repay maturing Notes.
• Credit Facility Refinancing: On March 20, 2025 (subsequent event), the company replaced its $65 million Needham Credit Facility with a new $50 million facility, resolving a prior covenant non-compliance.
• Dividend Adjustment: Dividends to shareholders were reduced in 2024 due to limited access to growth capital, though REIT status was maintained.
• Equity Compensation Remediation: An over-authorization of restricted Common Shares to John L. Villano was identified and remediated, with Mr. Villano voluntarily forfeiting the excess shares. Geographic Footprint: Sachem Capital Corp.'s primary markets are concentrated in Connecticut, Florida, Massachusetts, and New York. As of December 31, 2024, Connecticut accounted for 34.4% of the aggregate gross amount outstanding, Florida for 30.6%, Massachusetts for 12.2%, and New York for 8.8%.

Financial Performance

Revenue Analysis

Profitability Metrics:

• Operating Margin: -31.0% (2024), 23.2% (2023)
• Net Margin: -68.9% (2024), 24.6% (2023)

Investment in Growth:

• Capital Expenditures: $3.102 million (2024)
• Strategic Investments: $18.271 million (2024) in limited liability companies

Business Segment Analysis

Sachem Capital Corp. operates as a single operating and reporting segment. The company's Chief Operating Decision Maker (CODM) assesses performance and makes operating decisions on a consolidated basis, primarily based on net income.

Capital Allocation Strategy

Shareholder Returns:

• Share Repurchases: $1.5 million (581,745 Common Shares) in 2024.
• Dividend Payments: $11.4 million to common shareholders in 2024; $4.304 million to Series A Preferred Stock shareholders in 2024.
• Future Capital Return Commitments: A new stock repurchase plan, authorized October 10, 2024, allows for repurchases of up to $5,802,959 of Common Shares. Quarterly dividends of $0.484375 per share on Series A Preferred Stock and $0.05 per Common Share were declared in March 2025.

Balance Sheet Position:

• Cash and Equivalents: $18.066 million (2024)
• Total Debt: $304.9 million (2024)
• Net Cash Position: $(286.834) million (2024)
• Credit Rating: Notes are privately rated BBB+ by Egan-Jones Ratings Company; Series A Preferred Stock is rated BBB.
• Debt Maturity Profile: $56.4 million in Notes due September 30, 2025; $51.8 million due December 30, 2026; and $122.125 million due across various dates in 2027. The Needham Credit Facility expires March 2, 2026, and the NHB Mortgage has principal payments of $47,000 to $59,000 annually over the next five years, with the full balance due March 1, 2038.

Cash Flow Generation:

• Operating Cash Flow: $12.890 million (2024)

Operational Excellence

Production & Service Model: Sachem Capital Corp. originates and manages short-term "hard money loans" primarily for real estate investors and developers. The underwriting process emphasizes property value, supported by due diligence on the property, borrower, and principals, including independent appraisals, market data, and financial reviews. For construction loans, an asset management team monitors project scope and timelines. Loan terms typically feature fixed interest rates (10.0% to 13.0% per annum), 1-3% origination fees, and a one-to-three-year term with a balloon payment. Loans are secured by first mortgage liens and often additional collateral.

Supply Chain Architecture: Key Suppliers & Partners:

• Third-Party Professionals: Appraisers, engineers, title insurers, and attorneys for due diligence and loan closing.
• Digital Marketing Vendor: A single third-party vendor for Search Engine Optimization (SEO) and Google advertisement analysis.
• Cybersecurity Partners: Industry-recognized cybersecurity providers and technology consultants for IT asset management, vulnerability testing, network protection, and cyber risk advisory.
• Financial Partners: Needham Bank, Churchill MRA Funding I LLC, and New Haven Bank for credit facilities and mortgage financing.

Facility Network:

• Principal Office: 568 East Main Street, Branford, Connecticut (owned).
• Investment Property: 1 Glendinning Place, Westport, Connecticut (commercial rental property).

Operational Metrics:

• Loans disbursed: $134.298 million (2024)
• Loans repaid: $190.971 million (2024)
• Principal of loans sold: $55.838 million (2024)
• Number of loans held for investment outstanding: 157 (2024)
• Gross principal amount of loans held for investment: $376.991 million (2024)
• Weighted average contractual interest rate: 12.53% (2024)
• Weighted average term to maturity (in months): 4 (2024)
• Unfunded commitments under existing loans: $49.9 million (2024)
• Non-performing loans (90+ days in arrears): 35 loans ($87.0 million outstanding) (2024)
• Loans in foreclosure: 34 loans ($52.1 million outstanding) (2024)

Market Access & Customer Relationships

Go-to-Market Strategy: Sachem Capital Corp. generates new business through repeat customers, referrals from banks, brokers, and attorneys, and a comprehensive digital marketing strategy. Digital initiatives include targeted online advertising and SEO, complemented by strategic partnerships with online platforms to enhance market presence.

Customer Portfolio: The company targets small and mid-size real estate developers, owners, and contractors. Loans to known shareholders totaled $17.2 million in 2024, with $17.0 million related to Mod 21, LLC, an entity owned by the company's Senior Vice President and Vice President of Asset Management. All related party loans are performing.

Geographic Revenue Distribution: As of December 31, 2024, the gross amount outstanding of loans held for investment was distributed as follows:

• Connecticut: 34.4%
• Florida: 30.6%
• Massachusetts: 12.2%
• New York: 8.8%
• Other Regions/Countries: 14.0%

Competitive Intelligence

Market Structure & Dynamics

Industry Characteristics: The real estate finance market is highly competitive and sensitive to general economic conditions, capital and credit markets, interest rates, inflation, and geopolitical events. The industry is experiencing consolidation, leading to larger, more diversified competitors. Non-traditional lenders have increased their market presence.

Competitive Positioning Matrix:

Direct Competitors

Primary Competitors: Sachem Capital Corp. competes with other "hard money" lenders, mortgage REITs, specialty finance companies, banks, insurance companies, private equity funds, hedge funds, and high net worth individuals. Many of these competitors are larger and have greater financial and marketing resources.

Emerging Competitive Threats: The company acknowledges new market entrants, disruptive technologies, and alternative financing solutions as potential competitive threats.

Competitive Response Strategy: The company's strategy involves maintaining and expanding relationships with borrowers and brokers, offering attractive loan products with competitive pricing, and providing superior service. It also focuses on leveraging its experience and flexibility to target larger, more sophisticated borrowers.

Risk Assessment Framework

Strategic & Market Risks

Market Dynamics: Sachem Capital Corp. is exposed to risks from declining real estate valuations, which led to significant impairment charges and credit loss provisions in 2024. Its business is materially affected by general economic conditions, capital market volatility, and interest rate fluctuations. Geopolitical developments can indirectly impact borrowers and operations. The illiquidity of its loan portfolio and REIT tax restrictions limit its ability to respond to changing market conditions. High geographic concentration in Connecticut, Florida, Massachusetts, and New York exposes the company to regional economic downturns.

Operational & Execution Risks

Supply Chain Vulnerabilities: The company relies on third-party service providers (e.g., appraisers, attorneys), whose failures could lead to losses or reputational damage. Cybersecurity threats pose a risk of operational disruption and data compromise, despite a robust risk management program. Capacity Constraints: A significant increase in non-performing loans and foreclosures in 2024 has adversely impacted performance. The shift to larger loans increases the risk profile, and many non-income-producing properties securing loans heighten delinquency and foreclosure risks. Due diligence may not uncover all risks, and the lengthy foreclosure process can increase costs and delays.

Financial & Regulatory Risks

Market & Financial Risks: The company's ability to execute growth strategies is impaired by its reliance on external capital and recent difficulties in accessing capital markets. High leverage and debt covenants restrict business activities and dividend payments. Significant debt maturities in 2025 and 2026 pose refinancing risks, with potential cross-defaults. "Baby shelf" rules limit capital raising. Unsecured Notes and Preferred Stock are effectively subordinated to secured debt and subsidiary liabilities. Regulatory & Compliance Risks: Maintaining REIT status involves complex and technical requirements, and failure to comply would result in significant tax penalties. The company relies on an Investment Company Act exemption, which imposes operational limits. Commercial real estate lending is subject to various state and federal regulations, and New York law limits dividend payments. Legal proceedings, including tax foreclosures, are part of normal business, but material outcomes are not anticipated.

Geopolitical & External Risks

Geopolitical Exposure: Global conflicts and international tensions can lead to unpredictable effects on financial markets, increased costs, and cybersecurity threats, indirectly impacting the company's domestic business and borrowers.

Innovation & Technology Leadership

Research & Development Focus: Sachem Capital Corp. does not explicitly detail specific research and development focus areas or significant investments in technology innovation.

Intellectual Property Portfolio: The company's business does not rely on exploiting or leveraging intellectual property rights. It utilizes federal, state, and common law trademarks, service marks, trade names, copyrights, and trade secret protection, but has not registered any with the United States Patent and Trademark Office.

Technology Partnerships: Sachem Capital Corp. partners with a third-party vendor for Search Engine Optimization (SEO) and Google advertisement analysis. It also engages industry-recognized cybersecurity providers and technology consultants for IT asset management, vulnerability testing, network protection, data backups, and cyber risk advisory services.

Leadership & Governance

Executive Leadership Team