Sachem Capital Corp. (SACH) stock intrinsic value fair value estimate & owner earnings analysis

Sachem Capital is a Connecticut-based lender that makes short-term (one to three year) first-mortgage loans to real estate investors who are buying, renovating or developing properties. Its loans are concentrated in Connecticut, Florida, Massachusetts and New York. It funds them with unsecured listed notes, a $100 million issue of 9.875% senior secured notes due 2030 ($90 million drawn at the end of 2025), a bank credit line, and 7.75% Series A preferred stock with a $57.8 million liquidation value that must be paid before common shareholders. Our estimates are $0.95 (bear), $1.50 (base) and $1.80 (bull) per common share. What has changed. Sachem's loan book peaked at $508.9 million in June 2024 and has been shrinking since. In 2024 it lost $39.6 million, driven by $26.9 million of loan-loss provisions and a $22.0 million loss on selling a $55.8 million pool of troubled loans. 2025 was a small profit of $6.3 million, but only $1.8 million after preferred dividends ($0.04 per share). Net interest margin fell from 4.4% to 3.1% because cheaper unsecured notes were replaced with 9.875% secured notes and because loans that stopped paying interest averaged $107.1 million during 2025. In the first half of 2026 the company lost $11.5 million, with second-quarter items including $2.6 million of costs for a pending transaction with Industrial Realty Group and $2.6 million of loan-loss provisions on three loans, and a $3.9 million non-cash fair-value adjustment on a restructured loan in the six-month total. The quarterly common dividend has been cut to $0.01 per share (paid June 30, 2026); common dividends were $9.5 million in 2025. How we measured earnings. We started from cash generated by operations, removed swings in working capital (borrower advances, deferred fees, receivables), subtracted stock compensation, and subtracted only the upkeep portion of capital spending (mainly improvements to rental property Sachem owns). For a lender we made two further judgements. First, loan losses and property write-downs are subtracted, because they are real costs that never appear in operating cash flow (loans are funded and repaid in the investing section of the cash flow statement). Second, dividends on the preferred stock are subtracted, because they must be paid before common holders receive anything. We treated the $10.8 million invested in rental real estate in 2023 as a purchase of an earning asset, comparable to making loans, rather than as upkeep. On this basis owner earnings per common share were $0.38 (2017), $0.45 (2018), $0.29 (2019), $0.33 (2020), $0.45 (2021), $0.58 (2022), $0.33 (2023), -$0.94 (2024) and -$0.11 (2025). In 2025 owner earnings per share improved by about $0.84 from 2024 but were still negative. As a cross-check, operating cash flow after working-capital changes matched net income plus non-cash charges in the years we tested (2018, 2024 and 2025). We did not use the median of 2021 to 2025 ($0.33) as the earnings level for valuation. The 2021 to 2023 profits were earned with low-cost funding and before the credit losses that arrived in 2024 and 2025, so those conditions have reversed. Today, about $254 million of performing loans earn an 11.4% yield (second quarter 2026), but they sit alongside roughly $306 million of debt at June 30, 2026, including the 9.875% secured notes, and about $16 million of annual operating expenses (compensation, administration and other, 2025). Our own rough estimate of that run rate is a loss of about $5 million a year before preferred dividends of about $4.5 million. That is consistent with negative operating cash flow of $2.8 million in the first half of 2026. For year one we therefore assume owner earnings no better than the trailing actual (negative), not a rebound. No growth is credited: the loan book is shrinking, new lending depends on capital and funding costs the company does not control, and no signed contract adds earnings. What we can evidence is the loan book itself. Loans are short (one to three years) and secured by real estate, so the balance sheet converts to cash over roughly two years. Common shareholders' equity was $117.1 million ($2.46 per share) at December 31, 2025. We estimate roughly $102 million (about $2.15 per share) by mid-2026 after the first-half loss and preferred dividends; this mid-year figure is our estimate, not a reported number. Each case starts there and subtracts named costs. Bear ($0.95). The troubled loans and repossessed properties lose about 30% of a $100 million pool, below the roughly 39% loss ($22.0 million on $55.8 million) Sachem took on the pool it sold in 2024, costing about $30 million. Operating shortfalls plus preferred dividends run at about $10 million a year for two years ($20 million). That leaves about $52 million, or $1.09 per share, which we discount at 6% over the roughly two and a half years it takes to realize to about $0.95. Nothing after that is credited because no named driver produces earnings above funding costs. Base ($1.50). About 12% of the troubled pool is lost (about $12.8 million), a pace roughly in line with loan-loss provisions of $3.3 million in 2025 and $2.6 million in the second quarter of 2026 alone, and shortfalls average about $5 million a year for two years as non-earning loans are resolved and redeployed at yields near 11% to 12%. That leaves roughly $79 million, or $1.65 per share, discounted at 6% to about $1.50. After troubled loans are redeployed, we estimate the spread between roughly 11% loan yields and funding costs as high as 9.875% on the newest secured notes leaves close to zero for common holders after credit costs and preferred dividends, so we assign no going-concern premium above what the loan book converts to. Bull ($1.80). Sachem's own levers work: 2025 gains of $4.1 million on real estate sold above its carrying value show properties can be resolved at or above the book values used, so only about 5% of the pool is lost ($5 million), and shortfalls last one year ($5 million). That leaves about $92 million, or $1.92 per share, discounted to about $1.80. We include no value for new lending growth because it is not secured or proven under current funding costs. Pending transaction not valued. Sachem has announced a proposed combination with Industrial Realty Group (IRG), in which IRG would contribute 98 industrial properties and the combined company would be named IRG Realty Trust. The proxy statement has not yet been filed, shareholder approval is required, and no closing date or ownership split has been established in filings we can rely on, so we assign it no value. If completed, Sachem shareholders would hold a different business, and this analysis would need to be redone. What could make these estimates wrong. The estimates rest on the 2024 sale as the guide to losses; a stronger resolution of troubled loans would push value toward or above the $2.46 book value, while larger losses or another forced sale would push it below the bear case. Unsecured notes ($172.0 million at June 30, 2026), with several series due in 2027, must be refinanced or repaid, which could raise funding costs further. The second-quarter 2026 details come from the company's press release; we could not review the full quarterly report text, so the $3.9 million adjustment was not reconciled in detail.