Sachem Capital (SACH) risk factors, FY2024 10-K

Risks Related to Our Current Financial Condition

1. 01We incurred a net loss attributable to common shareholders for 2024 and we cannot assure you that we will be profitable for 2025
2. 02Concurrently with the decline in our operational performance, we have reduced the dividend payable to shareholders
3. 03The price of our publicly traded securities has declined significantly
4. 04As of December 31, 2024, we were not in compliance with one of our loan covenants
5. 05Notes having an aggregate outstanding principal amount of $56.4 million are due and payable in full on September 30, 2025
6. 06We are subject to the “baby shelf” rules, which limits the amount of securities we can sell pursuant to an S-3 Registration Statement
7. 07The illiquidity of our loan portfolio could significantly impede our ability to respond to adverse changes in economic, financial, investment and other conditions

Risks Related to Our Business and Our Company

1. 08Declining real estate valuations have resulted in impairment charges or provisions for credit losses, the determination of which involves a significant amount of judgment on our part. Any future impairment or provision could have a material adverse effect on us
2. 09We have experienced a significant increase in the number of non-performing loans
3. 10A high level of defaults, particularly among larger mortgage loans, could have a material adverse impact on our business, operations and financial condition
4. 11Difficult conditions in the mortgage and real estate markets, the financial markets and the economy generally have caused and may cause us to experience losses in the future
5. 12Increases in interest rates could adversely affect our ability to generate income and pay dividends
6. 13Adverse geopolitical developments could have a material adverse impact on our business
7. 14Prepayment rates can change, adversely affecting the performance of our assets
8. 15Many of our loans are not funded with interest reserves and our borrowers may be unable to pay the interest accruing on the loans when due, which could have a material adverse impact on our financial condition
9. 16Many of the properties securing our mortgage loans are not income producing, thus increasing the risks of delinquency and foreclosure
10. 17Our due diligence may not reveal all the risks associated with a mortgage loan or the property that will be mortgaged to secure the loan, which could lead to losses
11. 18Residential mortgage loans are subject to increased risks
12. 19Our real estate assets are subject to risks particular to real property
13. 20We may be adversely affected by the economies and other conditions of the markets in which we operate, particularly in Connecticut, Florida and New York, where we have a high concentration of our loans
14. 21Competition could have a material adverse effect on our business, financial condition and results of operations
15. 22We may be adversely affected by deficiencies in foreclosure practices as well as related delays in the foreclosure process
16. 23We may be unable to identify and complete acquisitions on favorable terms or at all, which may inhibit our growth and have a material adverse effect on us

Risks Related to Our Operations, Structure and Change in Control Provisions

1. 24We have significant unfunded commitments to existing borrowers. If we are unable to fund these commitments, we may be subject to borrower legal claims
2. 25Interruptions in our ability to provide our products and our service to our customers could damage our reputation, which could have a material adverse effect on us
3. 26The loss of key personnel, such as one of our executive officers, could have a material adverse effect on us
4. 27Our inability to recruit or retain qualified personnel or maintain access to key third-party service providers and software developers, could have a material adverse effect on us
5. 28The stock ownership limit imposed by our charter may inhibit market activity in our Common Shares and may restrict our business combination opportunities
6. 29If we sell or transfer mortgage loans to a third party, including a securitization entity, we may be required to repurchase such loans or indemnify such third party if we breach representations and warranties

Risks Related to Debt Financing

1. 30If we cannot access external sources of capital on favorable terms or at all, our ability to execute our business and growth strategies will be impaired
2. 31We are leveraged. If we default on our obligations, we may suffer adverse consequences
3. 32Despite our current debt levels, we may incur substantially more debt or take other actions which could have the effect of diminishing our ability to make payments on our indebtedness when due and distributions to our shareholders

Risks Related to the Notes

1. 33Our outstanding fixed rate term notes are unsecured and therefore are effectively subordinated to any secured indebtedness we have incurred or may incur in the future
2. 34The Notes are subordinated to the indebtedness and other liabilities of our subsidiaries
3. 35The indenture under which the Notes are issued contains limited protection for holders of the Notes
4. 36In addition, the indenture does not require us to offer to purchase the Notes in connection with a change of control or any other event
5. 37An increase in market interest rates could result in a decrease in the value of the Notes
6. 38Although the Notes are listed on the NYSE American, an active trading market for the Notes may not develop, which could limit the ability of Noteholders to sell the Notes and/or the market price of the Notes
7. 39We may choose to redeem the Notes when prevailing interest rates are relatively low
8. 40We are not obligated to contribute to a sinking fund to retire the Notes and the Notes are not guaranteed by a third party
9. 41A downgrade, suspension or withdrawal of the credit rating assigned by a rating agency to us or the Notes, if any, could cause the liquidity or market value of the Notes to decline significantly

Risks Related to our Series A Preferred Stock

1. 42The Series A Preferred Stock effectively ranks junior to all our indebtedness and other liabilities and of our subsidiaries
2. 43We may issue additional shares of Series A Preferred Stock and additional series of preferred shares that rank on parity with the Series A Preferred Stock as to dividend rights, rights upon liquidation or voting rights
3. 44Market interest rates may materially and adversely affect the value of the Series A Preferred Stock
4. 45Our ability to pay dividends is limited by the requirements of New York law
5. 46The change of control conversion rights may not adequately compensate the holders of Series A Preferred Stock in the event we undergo a change of control. The change of control conversion rights may also make it more difficult for a party to acquire us or discourage a party from acquiring us
6. 47The trading price of the Series A Preferred Stock could be substantially affected by various factors
7. 48The Series A Preferred Stock shareholders has extremely limited voting rights
8. 49Future sales of substantial amounts of Series A Preferred Stock, or the possibility that such sales could occur, could adversely affect the market price of the Series A Preferred Stock
9. 50Although the Series A Preferred Stock received a private credit rating of BBB from Egan-Jones Ratings Company at the time of issuance, the Series A Preferred Stock may be downgraded, suspended or withdrawn as a result of the offering of additional shares of Series A Preferred Stock

Risks Relating to our Common Shares

1. 51The market price and trading volume of our securities may be volatile
2. 52We have not established a minimum dividend payment level for our Common Shares and there are no assurances of our ability to pay dividends to our common shareholders in the future
3. 53Future offerings of preferred shares or debt securities would rank senior to our Common Shares upon liquidation and for dividend purposes, would dilute the interests of our common shareholders and may adversely affect the market price of our Common Shares
4. 54An increase in interest rates may have an adverse effect on the market price of our Common Shares and our ability to make distributions to our shareholders
5. 55Your investment in and resulting interest in us may be diluted or lose value if we issue additional shares
6. 56If we fail to comply with the continued listing standards of the NYSE American, all or some of our securities that currently are listed on the NYSE American could be delisted. This would have a material adverse impact on the holders of that security and as us

Risks Related to Regulatory Matters

1. 57Maintenance of our Investment Company Act exemption imposes limits on our operations
2. 58Failure to qualify as a REIT would adversely affect our operations and ability to make distributions
3. 59Qualifying as a REIT involves highly technical and complex provisions of the Code and therefore, in certain circumstances, may be subject to uncertainty
4. 60Even if we qualify as a REIT, we will be subject to some taxes that will reduce our cash flow
5. 61The REIT distribution requirements could adversely affect our ability to grow our business and may force us to seek third-party capital during unfavorable market conditions
6. 62Dividends payable by REITs do not qualify for the reduced tax rates available for some dividends, which could depress the market price of our Common Shares if it is perceived as a less attractive investment
7. 63We may in the future choose to pay dividends in the form of Common Shares, in which case shareholders may be required to pay income taxes in the absence of cash dividends
8. 64Complying with REIT requirements may cause us to liquidate or forgo otherwise attractive investment opportunities
9. 65We may be subject to adverse legislative or regulatory tax changes that could reduce the market price of our Common Shares