Sachem Capital Corp. Liquidation Value

Sachem Capital Corp. (SACH) is a non-bank mortgage REIT originating short-term first-mortgage bridge loans on residential and commercial real estate. As of December 31, 2025, total assets were $460.0M against total liabilities of $285.1M, producing GAAP book equity of $174.9M. Under a liquidation lens, recovery to common equity is deeply negative, consistent with the MFFAIS CLV of approximately -$75.6M.

The primary asset is loans held for investment (gross $377.4M, net of $15.9M CECL allowance = ~$361.6M carrying value). Under a 65-75% liquidation haircut applicable to non-bank real estate loan portfolios—particularly given that $117.6M (31% of gross) is on nonaccrual and collateral dependent loans total $120.3M—the asset-side recovery is sharply reduced. Applying a conservative 70% gross recovery to the loan portfolio yields approximately $264M, before expenses. The CECL reserve of $15.9M is inadequate relative to the NPL stack and ongoing charge-offs ($14.8M written off in 2025); an additional liquidation discount is warranted.

Equity method investments in Shem Creek LLC vehicles ($39.1M carrying, down from $53.9M at year-end 2024) are non-redeemable at holder request and are carried at cost less impairment. These are illiquid minority interests in unlisted CRE lending vehicles; under liquidation, recovery is uncertain and likely discounted significantly below carrying value.

On the liability side, face-value claims are substantial and senior: $171.3M unsecured notes (SCCD/SCCE/SCCF/SCCG, maturing Dec 2026 through Sept 2027), $86.6M of senior secured notes (due June 2030, 9.875% fixed, issued at the Holdings subsidiary level), $19.0M Needham Credit Facility, and ~$0.9M NHB Mortgage. Total funded debt at face is approximately $277.8M. The Churchill repurchase facility was terminated in Q4 2025 ($33.7M outstanding at year-end 2024, now zero—a material positive change). Series A Preferred Stock has a $25/share liquidation preference; 3,307,860 shares outstanding implies approximately $82.7M in preferred claims ahead of common equity.

With total debt face value ~$277.8M plus ~$82.7M preferred plus ~$3.3M AP/accrued liabilities = ~$363.8M in face-value claims, against a haircut-adjusted asset pool that MFFAIS places at negative CLV, common equity receives zero recovery under liquidation. The ~$21M reduction in Shem LLC investments year-over-year, continued high nonperforming loans at 31% of gross, $22.1M of REO inflows via foreclosure in 2025, and $1.1M of REO impairment charges all confirm credit deterioration is ongoing. Loan modification volume ($74.3M term-extended in 2025, representing 20.4% of portfolio) has declined meaningfully from $108M (30.1%) in 2024, indicating some stabilization in stressed borrower volume, but the nonaccrual balance at $117.6M remains elevated. Filing discusses borrower financial difficulty modifications extensively in MD&A but does not separately tag the aggregate nonperforming loan balance in XBRL; it is disclosed as $117.6M in the notes. The Senior Secured Notes ($86.6M net of deferred costs; $90M drawn of $100M facility) were issued June 2025 and represent a structurally senior secured claim that further subordinates common equity recovery.