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What changed in Sachem Capital Corp.'s 10-K — 2023 vs 2024

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Paragraph-level year-over-year comparison of Sachem Capital Corp.'s 2023 and 2024 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2024 report.

+339 added−567 removedSource: 10-K (2025-03-31) vs 10-K (2024-04-01)

Top changes in Sachem Capital Corp.'s 2024 10-K

339 paragraphs added · 567 removed · 181 edited across 6 sections

Item 1. Business

Business — how the company describes what it does

39 edited+36 added−179 removed23 unchanged
Biggest changeThe table below gives a breakdown of our mortgage loan portfolio by loan size as of December 31, 2023: ​ ​ ​ ​ ​ ​ ​ ​ ​ Aggregate ​ Number of ​ Principal Amount Loans Amount $100,000 or less 27 ​ $ 1,788,697 $100,001 to $250,000 65 ​ 11,362,020 $250,001 to $500,000 56 ​ 20,255,276 $500,001 to $1,000,000 50 ​ 38,625,744 Over $1,000,000 113 ​ 427,203,634 Total 311 ​ $ 499,235,371 ​ Most of our loans are funded in full at closing.
Biggest changeThe table below gives a breakdown of our loans held for investment by loan size as of December 31, 2024: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Aggregate Gross ​ ​ ​ Number of ​ ​ ​ Principal ​ ​ ​ Amount Loans Percentage Amount Percentage ​ ​ ​ ​ ​ ​ ​ ​ (in thousands) ​ ​ ​ $1,000,000 or less 75 ​ 47.8 % $ 30,629 ​ 8.1 % $1,000,001 to $5,000,000 65 ​ 41.4 % 146,939 ​ 39.0 % $5,00,001 to $10,000,000 8 ​ 5.1 % 51,831 ​ 13.7 % $10,000,001 or more 9 ​ 5.7 % 147,592 ​ 39.2 % Total 157 ​ 100.0 % $ 376,991 ​ 100.0 % ​ Most of our loans are funded in full at closing.
If we were required to register as an investment company under the Investment Company Act, we would become subject to substantial regulation with respect to our capital structure (including our ability to use leverage), management, operations, transactions with affiliated persons (as defined in the Investment Company Act), portfolio composition, including restrictions with respect to diversification and industry concentration, and other matters.
If we were required to register as an investment company under the Investment Company Act, we would be subject to substantial regulation with respect to our capital structure (including our ability to use leverage), management, operations, transactions with affiliated persons (as defined in the Investment Company Act), portfolio composition, including restrictions with respect to diversification and industry concentration, and other matters.
In addition, there are numerous “hard money” lenders of significant size serving the markets in which we currently operate and those in which we plan to operate in the future. Many of these competitors enjoy competitive advantages over us, including greater name recognition, established lending relationships with customers, financial resources, and access to capital.
In addition, there are numerous lenders of significant size serving the markets in which we currently operate and those in which we plan to operate in the future. Many of these competitors enjoy competitive advantages over us, including greater name recognition, established lending relationships with customers, financial resources, and access to accretive capital.
As a REIT, we are also subject to federal excise taxes and minimum state taxes. Finally, we intend to operate our business in a manner that will permit us to maintain our exemption from registration under the Investment Company Act.
As a REIT, we are also subject to federal excise taxes and minimum state taxes. We intend to continue to operate in a manner that will permit us to maintain our exemption from registration under the Investment Company Act.
In addition, we may rely on exemptions from various requirements of the Securities Act of 1933, as amended (the “Securities Act”), the 19 Table of Contents Exchange Act, the Investment Company Act and ERISA. These exemptions are sometimes highly complex and may in certain circumstances depend on compliance by third parties who we do not control.
In addition, we may rely on exemptions from various requirements of the Securities Act of 1933, as amended (the “Securities Act”), the Investment Company Act and ERISA. These exemptions are sometimes highly complex and may in certain circumstances depend on compliance by third parties who we do not control.
Our typical borrower is a real estate investor or developer who uses the proceeds of the loan to fund its acquisition, renovation, rehabilitation, development and/or improvement of residential or commercial properties and that are held for investment or sale. The mortgaged property may or may not be income producing. We do not lend to owner-occupants.
Our typical borrower is a real estate investor or developer who uses the proceeds of the loan to fund its acquisition, renovation, rehabilitation, development and/or improvement of residential or commercial properties and that are held for investment or sale. The mortgaged property may or may not be income producing.
The factors we will consider include the additional collateral provided by the borrower, the credit profile of the borrower, our previous relationship, if any, with the borrower, the nature of the property, the geographic market in which the property is located and any other information we deem appropriate. Loan-to-Cost Ratio.
The factors we will consider include the additional collateral provided by the borrower, the credit profile of the borrower, our previous relationship, if any, with the borrower, the nature of the property, the geographic market in which the property is located and any other information we deem appropriate. Interest rate.
Although we have no pre-set guidelines in terms of leverage ratio, the amount of leverage we will deploy will depend on our assessment of a variety of factors, which may include the liquidity of the real estate market in which most of our collateral is located, employment rates, general economic conditions, the cost of funds relative to the yield curve, the potential for losses and extension risk in our portfolio, the gap between the duration of our assets and liabilities, our opinion regarding the creditworthiness of our borrowers, the value of the collateral underlying our portfolio, and our outlook for interest rates and property values.
The amount of leverage we deploy depends on our assessment of a variety of factors, which may include the liquidity of the real estate market in which most of our collateral is located, employment rates, general economic conditions, the cost of funds relative to the yield curve, the potential for losses and extension risk in our portfolio, the gap between the duration of our assets and liabilities, our opinion regarding the creditworthiness of our borrowers, the value of the collateral underlying our portfolio, and our outlook for interest rates and property values.
Business Overview We are a Connecticut-based real estate finance company that specializes in originating, underwriting, funding, servicing and managing a portfolio of short-term ( i.e., typically three years or less) loans secured by first mortgage liens on real property located primarily in the northeastern and southeastern sections of the United States.
Business Overview and Investment Strategy We are a Connecticut-based real estate finance company that specializes in originating, underwriting, funding, servicing and managing a portfolio of short-term ( i.e., typically three years or less) loans secured by first mortgage liens on real property.
Qualification for exclusion from the definition of an investment company under the Investment Company Act will limit our ability to make certain investments. In addition, complying with the tests for such exclusion could restrict the time at which we can acquire and sell assets. ​ 20 Table of Contents
Qualification for exclusion from the definition of an investment company under the Investment Company Act will limit our ability to make certain investments. In addition, complying with the tests for such exclusion could restrict the time at which we can acquire and sell assets. Available Information We maintain a website at www.sachemcapitalcorp.com .
Financing Strategy Overview To continue to grow our business, we must increase the size of our loan portfolio, which requires that we use our existing working capital to fund new loans and raise additional capital either by selling shares of our capital stock or by incurring additional indebtedness.
Financing Strategy Overview To continue to grow our business, we must increase the size of our loan portfolio, which requires that we use our existing working capital to fund new loans and raise additional debt and/ or equity capital.
Notwithstanding intense competition and some of our competitive disadvantages, we believe we have carved a niche for ourselves among small and mid-size real estate developers, owners and contractors in the markets in which we operate because we are well-capitalized, we have demonstrated flexibility to structure loans to suit the needs of the individual borrower and we can act quickly.
Our principal competitive advantages include our experience, our reputation, our size and our ability to address the needs of borrowers in terms of timing and structuring loan transactions. 10 Table of Contents Notwithstanding intense competition and some of our competitive disadvantages, we believe we have carved a niche for ourselves among small and mid-size real estate developers, owners and contractors in the markets in which we operate because we are well-capitalized, we have demonstrated flexibility to structure loans to suit the needs of the individual borrower and we can act quickly.
We will continue to selectively originate loans and carefully manage our loan portfolio in a manner designed to generate attractive risk-adjusted returns across a variety of market conditions, economic cycles and high-growth geographies.
We will continue to selectively originate loans and carefully manage our loan portfolio in a manner designed to generate attractive risk-adjusted returns across a variety of market conditions, economic cycles and high-growth geographies. Management John L. Villano, CPA, is our founder, Chairman, President and Chief Executive Officer.
Intellectual Property Our business does not depend on exploiting or leveraging any intellectual property rights. To the extent we own any rights to intellectual property, we rely on a combination of federal, state and common law trademarks, service marks and trade names, copyrights and trade secret protection.
To the extent we own any rights to intellectual property, we rely on a combination of federal, state and common law trademarks, service marks and trade names, copyrights and trade secret protection. We have not registered any trademarks, trade names, service marks or copyrights in the United States Patent and Trademark Office.
We have also adopted a policy that limits the maximum amount of our exposure to a single borrower or a group of affiliated 4 Table of Contents borrowers to 10% of the aggregate amount of our loan portfolio, unless otherwise approved by the Board of Directors (the “Board”).
The typical terms of our loans are as follows: Principal amount. We have a policy that limits the maximum amount of our exposure to a single borrower or a group of affiliated borrowers to 10% of the aggregate amount of our loan portfolio, unless otherwise approved by the Board.
Regulation Our operations are subject, in certain instances, to supervision and regulation by state and federal governmental authorities and may be subject to various laws and judicial and administrative decisions imposing various requirements and restrictions.
See Item 1A – Risk Factors for additional REIT qualification and tax status information. 11 Table of Contents Regulation Our operations are subject, in certain instances, to supervision and regulation by state and federal governmental authorities and may be subject to various laws and judicial and administrative decisions imposing various requirements and restrictions.
We do not have a policy limiting the amount of indebtedness that we may incur. Thus, our operating income in the future will depend on how much debt we incur and the spread between our cost of funds and the yield on our loan portfolio.
Our operating income in the future will depend on how much capital we raise and the spread between our cost of capital and the effective yield on our loan portfolio.
We do not have any formal policy limiting the amount of indebtedness we may incur, but we are limited to a 150% asset coverage ratio from our debt covenants. Depending on various factors we may, in the future, decide to take on additional debt to expand our mortgage loan origination activities to increase the potential returns to our shareholders.
Depending on various factors we may, in the future, decide to take on additional debt to expand our mortgage loan origination activities to increase the potential returns to our shareholders.
Our loans are referred to in the real estate finance industry as “hard money loans” primarily because they are secured by “hard” ( i.e., real estate) assets. Our principal place of business is located in Branford, Connecticut and, since inception, our lending activity was concentrated almost exclusively in Connecticut and a few surrounding states.
Our loans are referred to in the real estate finance industry as “hard money loans” primarily because they are secured by “hard” ( i.e., real estate) assets. Our mortgage loans are structured to fit the needs and business plans of the borrowers.
In addition, a principal source of new transactions has been repeat business from prior customers and their referral of new leads. Over the past two years, we have created a pipeline of originating loans via a digital marketing strategy and multiple marketing campaigns. Online marketing and advertising is a productive and cost-effective approach to generate leads.
In addition, a principal source of new transactions has been repeat business from prior customers and their referral of new leads. We have established a comprehensive digital marketing strategy to drive loan origination through multiple targeted campaigns. Digital marketing and online advertising have proven to be effective and cost-efficient methods for lead generation.
Payment terms. Interest only is payable monthly in arrears. Principal is due in a “balloon” payment at the maturity date. Escrow. Generally, none required. Reserves. Depending on the particular cash flow of a property, we may require the borrower to establish reserves for interest, taxes and/or insurance. This has been particularly true with respect to larger loans. Security.
Escrow. Generally, none required. Reserves. Depending on the particular cash flow of a property, we may require the borrower to establish reserves for interest, taxes and/or insurance, particularly with respect to larger loans. Security. Each loan is evidenced by a promissory note, which is secured by a first mortgage lien on real property owned by the borrower.
However, in all instances the properties are held only for investment by the borrowers and may or may not generate cash flow.
However, in all instances the properties are held only for investment by the borrowers and may or may not generate cash flow. 7 Table of Contents As of December 31, 2024, the primary markets in which we were exposed were Connecticut, Florida, Massachusetts and New York.
Borrowers pay an application fee, an inspection fee, wire fee, bounced check fee and, in the case of construction loans, check requisition fee for each draw from the loan. Starting in 2022, we added a construction servicing fee of 1% to 2% of the construction budget for construction loans.
Borrowers are responsible for various fees associated with securing a loan, which may include an application fee, inspection fee, wire fee, and a bounced check fee. In the case of construction loans, borrowers are also subject to check requisition fee for each draw made from the loan.
In terms of the borrower and its principals, we obtain third party credit reports from one of the major credit reporting services, background checks from LexisNexis, and personal financial statements provided by the borrower and its principals.
Additionally, we review financial and operational data provided by the borrower and its principals, focusing on how they manage and maintain the property. To evaluate the borrower and its principals, we obtain third-party credit reports from a major credit reporting agency, conduct background checks through LexisNexis, and request personal financial statements.
Finally, any loan with an original principal amount exceeding $5 million must be approved by the Board. Our primary objective is to grow our loan portfolio while protecting and preserving capital in a manner that provides for attractive risk-adjusted returns to our shareholders over the long term through dividends.
Revenue is generated primarily from the interest borrowers pay on our loans and fees related to the origination, maintenance, service, modification, and extension of loans. Our primary objective is to grow our loan portfolio while protecting and preserving capital in a manner that provides for attractive risk-adjusted returns to our shareholders over the long term through dividends.
Advances under these loans are funded against requests supported by all required documentation (including lien waivers) as and when needed to pay contractors and other costs of construction. 10 Table of Contents At December 31, 2023, approximately 59.2% of the loans in our portfolio (representing approximately 39.8% of the aggregate outstanding principal balance of our loan portfolio) were secured by properties located in Connecticut.
At December 31, 2024, our loan portfolio included 63 loans with future funding obligations, having a funded outstanding principal amount of $316.5 million and $49.9 million unfunded pending borrower performance. Advances under these loans are funded against requests supported by all required documentation (including lien waivers) as and when needed to pay contractors and other costs of construction.
We also receive leads for new business from banks, brokers, attorneys, and web-based advertising. 14 Table of Contents When underwriting a loan, the primary focus of our analysis is the value of a property securing the loan.
A primary source of new transactions is repeat business from existing and former borrowers, along with referrals of new business. Additionally, we generate leads through strategic partnerships with banks, brokers, attorneys, and targeted web-based advertising. When underwriting a loan, our primary focus is evaluating the value of the property that will secure the loan.
Our underwriting guidelines provide that the original principal amount of a loan should not exceed 85% of the total cost of the project. Interest rate. Currently, a fixed rate typically between 10.0% to 13.0% per annum with a default rate of up to 24% per annum. Origination fees. Generally, range from 1% to 3%.
Currently, a fixed rate is typically between 10.0% to 13.0% per annum with a default rate of up to 24% per annum. 5 Table of Contents Origination fees. Generally, the range is from 1% to 3%. In addition, if the term of the loan is extended, additional points are payable upon the extension. Term.
Competition is becoming more of a factor as we implement our strategy to focus on larger loans and more sophisticated borrowers. Given recent developments regarding mid-size regional banks, we believe competition from traditional banks will abate in 2023 rather than increase.
Competition The real estate finance markets in which we operate are highly competitive. Competition is becoming more of a factor as we implement our strategy to focus on larger loans and more sophisticated borrowers.
We have a policy that limits the maximum amount of our exposure to a single borrower or a group of affiliated borrowers to 10% of the aggregate amount of our loan portfolio, unless otherwise approved by the Board. Finally, any loan with an original principal amount exceeding $5 million must be approved by the Board. Loan-to-Value Ratio.
Finally, any loan with an original principal amount exceeding $5 million must be approved by our board of directors (the “Board”). Loan-to-Value Ratio; Loan to Cost Ratio. Our underwriting guidelines provide that the original principal amount of a loan should not exceed 70% of the fair market value of the property securing the loan.
Finally, as is typical in real estate finance transactions, the borrower pays all expenses relating to obtaining the loan including the cost of a property appraisal, the cost of an environmental assessment report, if any, the cost of a credit report and all title, recording fees and legal fees.
These expenses include, but are not limited to, the cost of a property appraisal, environmental assessment report (if applicable), credit report, and any title, recording, or legal fees incurred during the loan process.
In most cases, a borrower may prepay the loan at any time without premium or penalty. Covenants. To timely pay all taxes, insurance, assessments, and similar charges with respect to the property; to maintain hazard insurance; to maintain and protect the property. Events of default. Include: (i) failure to make payment when due; or (ii) breach of a covenant.
In most cases, a borrower may prepay the loan at any time without premium or penalty. Covenants. To promptly pay real estate taxes, property insurance, general liability insurance, builder’s risk insurance, flood insurance (if applicable), and any similar charges related to the subject and collateral properties.
Also, in the case of construction loans, the loan-to-value ratio is based on the post-construction value of the property. We rely on readily available market data, including appraisals, automated valuation models (AVMs), recent sales transactions and brokers to evaluate the value of the collateral.
We rely on readily available market data, including independent appraisals, Automated Valuation Models, trailing twelve month financial statements, rent rolls (if applicable), recent sales transactions, and broker insights, to assess the value of the collateral. Additionally, the asset management team reviews the construction aspects of the project.
In comparison, at the end of 2022, approximately 61.3% of the loans in our portfolio (representing approximately 43.5% of the aggregate outstanding principal balance of our loan portfolio) were secured by properties located in Connecticut. Most of the properties we finance are residential investment or commercial and have a construction component.
Most of the properties we finance are residential or commercial investment and have a construction component.
Our underwriting guidelines provide that the original principal amount of a loan should not exceed 70% of the fair market value of the property securing the loan. In the case of properties undergoing renovation, the estimated fair market value of the property after the renovations have been completed.
In the case of properties undergoing renovation, our underwriting guidelines provide that the original principal amount of a loan should not exceed 85% of the total cost of the project. However, we make exceptions to this guideline if the facts and circumstances support the incremental risk.
Our loan commitments are generally issued subject to receipt by us of title documentation and title report, in a form satisfactory to us, for the underlying property. Additionally, any loan with an original principal amount exceeding $5 million must be approved by the Board.
Loan commitments are issued following a comprehensive review and approval process by our executive management team. In the event of any deviations from our standard guidelines, an exception report must be signed by the executive management team. Loan commitments are typically contingent upon thorough underwriting and the receipt of satisfactory title documentation and title reports for the underlying property.
However, as traditional banks exit the lending market, non-traditional lenders, such as non-bank real estate companies, hedge funds, private equity funds and insurance companies, are likely to step into the void. Our principal competitive advantages include our experience, our reputation, our size and our ability to address the needs of borrowers in terms of timing and structuring loan transactions.
Over the last few years, as banks have pulled back from the lending market, non-traditional lenders, such as non - bank real estate companies, hedge funds, private equity funds and insurance companies, have stepped into the void.
Ultimately, our decision is based primarily on our conclusions regarding the value of the property, which takes into account factors such as the neighborhood in which the property is located, the current use and potential alternative use of the property, current and potential net income from the property, the local market, sales information of comparable properties, existing zoning regulations, the creditworthiness of the borrower and its principals and their experience in real estate ownership, construction, development and management.
This evaluation encompasses factors such as the local market conditions, the current and potential alternative uses of the property, the existing and projected net incomes, sales data for comparable properties, applicable zoning regulations, and the creditworthiness of the borrower and principals.
Additionally, we test personal financial statements by requesting supporting documents such as bank and brokerage statements and mortgage documents for other property they own, if applicable. We analyze all this information carefully prior to making a final determination.
We verify these statements by requesting supporting documents such as bank and brokerage statements, along with mortgage statements for any properties listed on their “Schedule of Real Estate Owned”, which is part of our loan application. All of this information is carefully analyzed before making a final decision.
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However, over the last few years, we have extended our geographic footprint significantly. While most of our loans, by number and amount, are still made in Connecticut, the percentages have declined. At December 31, 2023, our mortgage loan portfolio was spread across fifteen states.
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He is responsible for overseeing all aspects of our business operations, including investor relations, brand development and business development. Prior to starting Sachem, Mr. Villano was engaged in the private practice of accounting and auditing for almost 30 years. In December 2024, Jeffery C. Walraven was appointed to serve as our Interim Chief Financial Officer. Mr.
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Connecticut loans represented approximately 59.2% of our portfolio measured by number of loans, but only approximately 39.8% measured by the loan balances. Similarly, historically our primary focus has been on small loans – less than $1 million. Over the last few years our strategy shifted, and we began to actively pursue larger loans.
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Walraven joined us in August 2024 as a member of the Board. Prior to his appointment as Interim Chief Financial Officer, he was also a member of the Audit, Compensation and Nominating and Corporate Governance Committees of the Board. In connection with this appointment, he resigned as a member of all the committees.
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We believe larger loans often have better collateral in addition to better sponsors with stronger personal balance sheets. At December 31, 2023, loans having an outstanding principal balance of $1 million or less represented approximately 63.7% of the number of our loans in our portfolio, but these loans only account for approximately 14.4% of the amount of our loan portfolio.
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He has extensive experience with private and public real estate companies working on matters including capital markets, accounting and finance. 4 Table of Contents Our Origination Process and Underwriting Criteria Our executive management team possesses extensive experience in both residential and commercial mortgage lending, navigating various economic and market conditions with expertise.
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Our loans typically have a maximum initial term of one to three years and typically bear interest at a fixed rate of 10.0% to 13.0% per year and a default rate of up to 24% per year.
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Before making a final decision on a loan application, we conduct thorough due diligence on both the property, the borrower, and if the borrower is an entity, the principals of the borrower.
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We usually receive origination fees, or “points,” generally ranging from 1% to 3% of the original principal amount of the loan as well as other fees relating to underwriting, funding and managing the loan. We also receive additional “points” and other loan-related fees in connection with a renewal or extension of an existing mortgage loan.
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This team meets with the borrower, its principals, and the General Contractor to understand the project scope, timelines, and any potential constraints. The asset management team continues to monitor and oversee the project until its completion. We conduct thorough due diligence by ordering title, lien, and judgement searches.
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Interest is always payable monthly in arrears. Recently, as loan sizes have increased, we have required most of our borrowers to establish an interest reserve funded with a minimum of one year’s interest payments, from which we draw monthly.
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In most cases, we also perform an on-site visit to assess the subject property, as well as the surrounding real estate market. If an on-site visit is not feasible, we rely on an independent appraisal to evaluate the property’s as-is or after-repair value.
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Generally, we limit the amount of a loan to 70% of the value of the property securing the loan and 85% of the total cost of the project. However, we will consider loans with a higher loan to value ratio or higher loan to cost if there are other factors that we believe mitigate the risk.
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Our decision to proceed with the funding of the loan is primarily driven by our comprehensive evaluation of the property’s value.
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Those other factors could be additional collateral, the credit profile of the borrower, any prior history that we have with the borrower, the quality of the property or the nature of the local real estate market in which the property is located.
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Additionally, we assess the experience and qualifications of the borrower and their principals in real estate ownership, construction, development, and project management. As part of our due diligence, we engage third-party professionals and experts, including appraisers, engineers, title insurers, and attorneys, to ensure a thorough and informed decision- making process.
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In summary, we built our business on a foundation of intimate knowledge of the Connecticut real estate market, our ability to respond quickly to customer needs and demands and a disciplined underwriting and due diligence culture that focuses primarily on the value of the underlying collateral and that is designed to protect and preserve capital.
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The loan term typically ranges from one to three years, with early termination allowed in the event of a refinance or property sale. Extensions may be granted if the borrower complies with all covenants and the loan meets our current underwriting criteria. Extensions are generally for one year, but may vary based on the loan’s circumstances. Prepayments.
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As we implement our growth strategy, we apply the same rigor and discipline to geographies beyond Connecticut and to larger, more experienced borrowers.
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Additionally, the borrower and its principals are responsible for ensuring the property remains secure and is not subject to deterioration, damage, or blight. Events of default. Includes: (i) failure to make payment when due; and (ii) breach of a covenant. Payment terms. Interest only is payable monthly in arrears. Principal is due in a “balloon” payment at the maturity date.
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We believe that our flexibility in terms of meeting the needs of borrowers without compromising our standards on credit risk, our in-house expertise, our intimate knowledge of real estate in the geographic markets we serve, and our focus on newly originated first mortgage loans, have defined our success until now and should enable us to continue to achieve our objectives.
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Additionally, a construction servicing fee, ranging from 1% to 2% of the total construction budget, may apply. As is customary in real estate finance transactions, borrowers are expected to cover all expenses related to obtaining the loan.
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The Market Opportunity In general, we believe that there is a significant market opportunity for a well-capitalized “hard money” lender to originate attractively priced loans to small- and mid-scale real estate developers with good collateral, particularly in markets where, traditionally, real estate values are stable, where, historically, substandard properties are improved, rehabilitated, and renovated and under-developed markets that are experiencing rapid growth due to population shifts.
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We do not have any formal policy limiting the amount of indebtedness we may incur, but under the terms of the loan documents related to our various credit facilities, including the indenture covering our unsecured unsubordinated five-year notes (the “Notes”), we are required to maintain total assets exceeding 150% of our total liabilities.
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Notwithstanding the foregoing, our business is not without its challenges. The last few years, including 2023 have been particularly challenging and we expect a continuation of this trend throughout 2024 due to the following factors: Uncertain interest rate environment. Over the past four years, our cost of capital has increased significantly as the U.S.
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At December 31, 2024, debt represented 62.0% of our total capital compared to 60.4% at December 31, 2023.
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Federal Reserve Bank (the “Fed”) raised rates as a countermeasure to stem the rapid rise in inflation. As a result, as of December 31, 2023, overall, our weighted average cost of debt capital, excluding amortization of deferred financing costs, was 7.22% compared to 7.07% as of December 31, 2022.
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We expect to maintain our current level of debt and are always looking to attempt to reduce our cost of capital. 6 Table of Contents Our Loan Portfolio The following table highlights certain information regarding our real estate lending activities for the periods indicated: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ As of and For the Years Ended ​ ​ ​ December 31, ​ ​ ​ (in thousands, except number of loans and weighted averages) ​ ​ 2024 2023 Loans disbursed ​ $ 134,298 ​ $ 204,885 ​ Loans repaid ​ $ 190,971 ​ $ 167,036 ​ Principal of loans sold ​ $ 55,838 ​ $ — ​ Number of loans sold ​ ​ 32 ​ ​ — ​ Principal of loans transferred to real estate owned ​ $ 28,639 ​ $ 1,749 ​ Number of loans transferred to real estate owned ​ ​ 22 ​ ​ 4 ​ Number of loans held for investment outstanding ​ 157 ​ 311 ​ Gross principal amount of loans held for investment ​ $ 376,991 ​ $ 499,235 ​ Weighted average contractual interest rate (1) ​ 12.53 % 12.56 % Weighted average term to maturity (in months) (2) ​ 4 ​ 6 ​ (1) Includes default interest.
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As a result, we were forced to increase the rates we charge on our mortgage loans in order to maintain our margins. Normally, one would have expected that higher borrowing costs would have disincentivized potential borrowers from our products.
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(2) Does not give effect to extensions. At December 31, 2024, our outstanding mortgage loan portfolio included loans ranging in size from $35,000 to $42.9 million.
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However, because traditional banks significantly reduced their lending operations and non-traditional lenders were adversely impacted by the high cost of capital, whether equity or debt, assuming capital was even available (our last debt offering was consummated in August 2022), our business remained robust. In 2023, the Fed ceased raising rates due to a significant decrease in the rate of inflation.
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The table below gives a breakdown of our loans held for investment by state as of December 31, 2024: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Number of ​ Gross Amount ​ State ​ Loans ​ Percentage ​ Outstanding ​ Percentage ​ ​ ​ ​ ​ ​ ​ (in thousands) ​ ​ ​ California 1 ​ 0.6 % $ 4,101 1.1 % Connecticut 84 ​ 53.6 % 129,787 34.4 % Florida ​ 23 ​ 14.7 % ​ 115,232 ​ 30.6 % Georgia ​ 1 ​ 0.6 % ​ 3,840 ​ 1.0 % Maine ​ 1 ​ 0.6 % ​ 1,625 ​ 0.4 % Maryland ​ 1 ​ 0.6 % ​ 864 ​ 0.2 % Massachusetts 9 ​ 5.8 % 46,121 12.2 % New Jersey 1 ​ 0.6 % 2,240 0.6 % New York 21 ​ 13.5 % 33,166 8.8 % North Carolina 4 ​ 2.5 % 7,764 2.1 % Pennsylvania 2 ​ 1.3 % 4,850 1.4 % Rhode Island 3 ​ 1.9 % 1,888 0.5 % South Carolina 4 ​ 2.5 % 12,461 3.3 % Tennessee ​ 1 ​ 0.6 % ​ 11,868 ​ 3.1 % Washington D.C. ​ 1 ​ 0.6 % ​ 1,184 ​ 0.3 % Total 157 ​ 100.0 % $ 376,991 100.0 % ​ The following table details our loans held for investment as of December 31, 2024 by year of origination: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Aggregate Gross ​ ​ ​ Number of ​ ​ Principal ​ ​ ​ Year of Origination Loans Percentage Amount Percentage ​ ​ ​ ​ ​ ​ ​ ​ (in thousands) ​ ​ ​ 2024 36 22.9 % $ 46,786 ​ 12.4 % 2023 31 ​ 19.7 % ​ 83,704 ​ 22.2 % 2022 34 ​ 21.7 % 80,349 ​ 21.3 % 2021 33 ​ 21.0 % 148,773 ​ 39.5 % 2020 8 ​ 5.1 % 9,879 ​ 2.6 % 2019 ​ 6 ​ 3.9 % ​ 3,752 ​ 1.0 % 2018 and prior 9 ​ 5.7 % 3,748 ​ 1.0 % Total 157 ​ 100.0 % $ 376,991 ​ 100.0 % ​ The following tables set forth information regarding the types of properties securing loans held for investment at December 31, 2024 and 2023: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ At December 31, ​ ​ 2024 ​ 2023 ​ ​ ​ (in thousands) ​ ​ ​ Aggregate Gross Principal ​ ​ ​ Aggregate Gross Principal ​ ​ ​ ​ Amount Percentage Amount Percentage ​ Residential ​ $ 211,939 ​ 56.2 % $ 246,520 ​ 49.4 % Commercial ​ ​ 95,509 ​ 25.3 % 186,524 ​ 37.4 % Pre-Development Land ​ 23,466 ​ 6.2 % 35,920 ​ 7.2 % Mixed Use ​ 46,077 ​ 12.3 % 30,271 ​ 6.0 % Total ​ $ 376,991 ​ 100.0 % $ 499,235 ​ 100.0 % ​ 8 Table of Contents Allowance for Credit Losses Our allowance for credit losses is influenced by historical loss experience, current exposure by geographical region, current expected credit losses on loans in foreclosure based on fair value less cost to sell, non-performing status, and other supportable forecasts of economic conditions.
Removed
However, the Fed has yet to reduce interest rates, although many analysts believe that will occur at some point in 2024 but opinions vary as to when the Fed will begin and how quickly those reductions will be implemented. Accordingly, accretive capital remains scarce, and the cost of available capital remains high. Uncertain capital markets.
Added
A loan is considered non-performing once it has been delinquent on its monthly payments past 90 days.
Removed
Our growth and profitability depend on our ability to raise additional capital through the sale of equity and debt securities. In 2022, we raised approximately $161.4 million from the sale of equity and debt securities through various public offerings. In 2023, the aggregate amount raised from the sale of equity and debt securities through public offerings was only $23.0 million.
Added
The following table presents the allowance for credit losses against unpaid principal balance of loans held for investment: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ At December 31, ​ ​ 2024 2023 ​ ​ (in thousands ) ​ ​ ​ ​ ​ ​ ​ ​ Percentage of ​ ​ ​ ​ ​ ​ ​ Percentage of ​ ​ Aggregate Gross ​ ​ ​ ​ Respective ​ Aggregate Gross ​ ​ ​ ​ Respective ​ ​ Principal Amount ​ Allowance Principal Principal Amount ​ Allowance Principal ​ Performing & Non-performing – General reserve ​ $ 282,910 ​ $ (5,147) ​ 1.8 % $ 350,922 ​ $ (2,360) ​ 0.7 % Non-performing – Direct reserves ​ ​ 57,808 ​ ​ (7,265) ​ 12.6 % 84,592 ​ ​ — ​ — % Non-performing in Foreclosure – Direct reserves ​ 36,273 ​ (6,058) 16.7 % 63,721 ​ (5,163) 8.1 % Total ​ $ 376,991 ​ $ (18,470) ​ ​ ​ $ 499,235 ​ $ (7,523) ​ ​ For further information, see Note 4 – Loans and Allowance for Credit Losses.
Removed
As mentioned above, our last public debt offering was in August 2022. The decrease from 2023 to 2022 was due solely to the fact that capital markets were all but inaccessible in 2023. We compensated for this decline in capital origination by drawing upon our existing credit facilities and opening a new credit facility with Needham Bank.
Added
Investment in Rental Real Estate As of December 31, 2024, we owned one property that was purchased for the sole purpose of an investment in rental real estate, and is currently in final phases of construction renovation. On February 15, 2025, we commenced a lease agreement for approximately 51% of the gross leasable space of 49,041 square feet.
Removed
As a result, our indebtedness under our three credit facilities ( i.e., Churchill, Needham and Wells Fargo, all as described below), increased by $42.1 million. This increased our total indebtedness from $335.3 million as of December 31, 2022 to $377.7 million as of December 31, 2023.
Added
This property also has an approved residential development component, which as of the date of this report, is currently in the planning stage.
Removed
While we still have significant availability under the Churchill and Needham credit facilities, the Wells Fargo Loan only has approximately $1.0 million of availability as of December 31, 2023. In addition, in 2024, approximately $58.2 million of principal of our unsecured unsubordinated notes are maturing.

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Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

113 edited+85 added−62 removed181 unchanged
Biggest changeThe Churchill Facility is secured by a first priority security interest on the mortgage loans pledged as collateral under the facility; the Wells Fargo Loan is collateralized by our portfolio of short-term securities held at Wells Fargo; the NHB Mortgage is secured by a first mortgage lien on the property located at 568 East Main Street, Branford, Connecticut; and all amounts borrowed under the Needham Credit Facility are secured by a first priority lien on virtually all our assets, not including real estate owned by us (other than real estate acquired pursuant to foreclosure) and mortgages sold under the Churchill Facility.
Biggest changeThe Needham Credit Facility is secured by a first priority lien on virtually all our assets excluding real estate owned by us (other than real estate acquired pursuant to foreclosure) and mortgages sold under the Churchill Credit Facility. The Churchill Credit Facility is secured by a first priority security interest on the mortgage loans pledged as collateral under the facility.
Within those guidelines, management has discretion to significantly change the composition of our loan portfolio. In addition, in conducting periodic reviews, the directors may rely primarily on information provided to them by management.
Within those guidelines, management has the discretion to significantly change the composition of our loan portfolio. In addition, in conducting periodic reviews, the directors may rely primarily on information provided to them by management.
In general, any adverse event that threatens the confidentiality, integrity, or availability of our information resources or the information resources of our third-party service providers is considered a cyber- attack. More specifically, a cyber-incident is an intentional attack or an unintentional event that can include gaining unauthorized access to systems to disrupt operations, corrupt data, or steal confidential information.
In general, any adverse event that threatens the confidentiality, integrity, or availability of our information resources or the information resources of our third-party service providers is considered a cyber incident. More specifically, a cyber incident is an intentional attack or an unintentional event that can include gaining unauthorized access to systems to disrupt operations, corrupt data, or steal confidential information.
All amounts borrowed under the Needham Credit Facility are secured by a first priority lien on virtually all our assets excluding real estate owned by us (other than real estate acquired pursuant to foreclosure) and mortgages sold under the Churchill Facility.
All amounts borrowed under the Needham Credit Facility are secured by a first priority lien on virtually all our assets excluding real estate owned by us (other than real estate acquired pursuant to foreclosure) and mortgages sold under the Churchill Credit Facility.
For example, COVID-19 contributed significantly to the supply chain issues in the real estate sector that have affected our borrowers, ultimately slowing construction and driving up costs. In addition, we cannot assure that similar or a completely different set of adverse conditions will not arise in the future.
For example, COVID-19 contributed significantly to the supply chain issues in the real estate sector that have affected our borrowers, ultimately slowing construction and driving up costs. In addition, we cannot assure that similar or completely different set of adverse conditions will not arise in the future.
The trading price of the Series A Preferred Stock will depend on many factors, which may change from time to time, including the following: ● prevailing interest rates, increases in which may have an adverse effect on the market price of the Series A Preferred Stock; ● market prices of common and preferred equity securities issued by REITs and other real estate companies; ● the annual yield from distributions on the Series A Preferred Stock as compared to yields on other financial instruments; ● general economic and financial market conditions; ● government action or regulation; ● the financial condition, performance and prospects of us and our competitors; 42 Table of Contents ● changes in financial estimates or recommendations by securities analysts with respect to us, our competitors or our industry; ● our issuance of additional common equity or debt securities; ● our issuance of additional series or classes of preferred securities; and ● actual or anticipated variations in quarterly operating results of us and our competitors.
The trading price of the Series A Preferred Stock will depend on many factors, which may change from time to time, including the following: ● increases in prevailing interest rates, which may have an adverse effect on the market price of the Series A Preferred Stock; ● market prices of common and preferred equity securities issued by REITs and other real estate companies; ● the annual yield from distributions on the Series A Preferred Stock as compared to yields on other financial instruments; ● general economic and financial market conditions; ● government action or regulation; ● the financial condition, performance and prospects of us and our competitors; ● changes in financial estimates or recommendations by securities analysts with respect to us, our competitors or our industry; 32 Table of Contents ● our issuance of additional common equity or debt securities; ● our issuance of additional series or classes of preferred securities; and ● actual or anticipated variations in quarterly operating results of us and our competitors.
If we are unable to leverage our assets to the extent we currently anticipate, the returns on certain of our assets could be diminished, which may limit or eliminate our ability to make distributions to our shareholders. A key element of our growth strategy is to use leverage to increase the size of our loan portfolio to enhance our returns.
A key element of our growth strategy is to use leverage to increase the size of our loan portfolio to enhance our returns. If we are unable to leverage our assets to the extent we currently anticipate, the returns on our loan portfolio could be diminished, which may limit or eliminate our ability to make distributions to our shareholders.
In addition, these restrictions could have takeover defense effects and could reduce the possibility that a third party will attempt to acquire control of us, which could adversely affect the market price of the Series A Preferred Stock. The Series A Preferred Stock shareholders will have extremely limited voting rights.
In addition, these restrictions could have takeover defense effects and could reduce the possibility that a third party will attempt to acquire control of us, which could adversely affect the market price of the Series A Preferred Stock. The Series A Preferred Stock shareholders has extremely limited voting rights.
Except in limited circumstances, the terms of the indenture and the Notes do not restrict our ability to: ● issue securities or otherwise incur additional indebtedness or other obligations, including (i) any indebtedness or other obligations that would be equal in right of payment to the Notes, (ii) any indebtedness or other obligations that would be secured and therefore rank effectively senior in right of payment to the Notes to the extent of the values of the assets securing such debt, (iii) indebtedness that we incur that is guaranteed by one or more of our subsidiaries and which therefore is structurally senior to the Notes and (iv) securities, indebtedness or obligations issued or incurred by our subsidiaries that would be senior to our equity interests in those entities and therefore rank structurally senior to the Notes with respect to the assets of these entities; ● pay dividends on, or purchase or redeem or make any payments in respect of, capital stock or other securities ranking junior in right of payment to the Notes, including subordinated indebtedness; ● sell assets (other than certain limited restrictions on our ability to consolidate, merge or sell all or substantially all of our assets); ● enter into transactions with affiliates; ● create liens or enter into sale and leaseback transactions; ● make investments; or ● create restrictions on the payment of dividends or other amounts to us from our subsidiaries.
Except in limited circumstances, the terms of the indenture and the Notes do not restrict our ability to: ● issue securities or otherwise incur additional indebtedness or other obligations, including (i) any indebtedness or other obligations that would be equal in right of payment to the Notes, (ii) any indebtedness or other obligations that would be secured and therefore rank effectively senior in right of payment to the Notes to the extent of the values of the assets securing such debt, (iii) indebtedness that we incur that is guaranteed by one or more of our subsidiaries and which therefore is structurally senior to the Notes and (iv) securities, indebtedness or obligations issued or incurred by our subsidiaries that would be senior to our equity interests in those entities and therefore rank structurally senior to the Notes with respect to the assets of these entities; ● pay dividends on, or purchase or redeem or make any payments in respect of, capital stock or other securities ranking junior in right of payment to the Notes, including subordinated indebtedness; ● sell assets (other than certain limited restrictions on our ability to consolidate, merge or sell all or substantially all of our assets); ● enter into transactions with affiliates; 28 Table of Contents ● create liens or enter into sale and leaseback transactions; ● make investments; or ● create restrictions on the payment of dividends or other amounts to us from our subsidiaries.
Despite our current debt levels, we may still 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.
Despite 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.
We may also compete with companies that partner with and/or receive government financing. Many of our competitors are substantially larger and have considerably greater financial, technical, marketing and other resources than we do.
We may also compete with companies that partner with and/or receive government financing. Many of our competitors are substantially larger than us and have considerably greater financial, technical, marketing and other resources than we do.
Therefore, the value of the underlying property, the creditworthiness and financial position of the borrower and the priority and enforceability of the lien will significantly impact the value of such mortgage. In the event of foreclosure, we may assume direct ownership of the underlying real estate.
Therefore, the value of the underlying property, the creditworthiness and financial position of the borrower and the priority and enforceability of our lien will significantly impact the value of such mortgage. In the event of foreclosure, we may assume direct ownership of the underlying real estate.
Acquisitions, in general, involve a high degree of risk including the following: ● we could incur significant expenses for due diligence, document preparation and other pre-closing activities and then fail to consummate the acquisition; ● we could overpay for the business or assets acquired; ● there may be hidden liabilities that we failed to uncover prior to the consummation of the acquisition; ● the demands on management’s time related to the acquisition will detract from their ability to focus on the operation of our business; and ● challenges or difficulties in integrating the acquired business or assets into our existing platform.
Acquisitions, in general, involve a high degree of risk including the following: ● we could incur significant expenses for due diligence, document preparation and other pre-closing activities and then fail to consummate the acquisition; ● we could overpay for the business or assets acquired; ● there may be hidden liabilities that we failed to uncover prior to the consummation of the acquisition; ● the demands on management’s time related to the acquisition will detract from their ability to focus on the operation of our business; and 22 Table of Contents ● challenges or difficulties in integrating the acquired business or assets into our existing platform.
In general, real estate assets are subject to various risks, including: ● acts of God, including earthquakes, floods and other natural disasters, which may result in uninsured losses; ● acts of war or terrorism, including the consequences of terrorist attacks, such as those that occurred on September 11, 2001, social unrest and civil disturbances; ● adverse changes in national and local economic and market conditions; and 23 Table of Contents ● changes in governmental laws and regulations, fiscal policies, zoning ordinances and environmental legislation and the related costs of compliance with laws and regulations, fiscal policies and ordinances.
In general, real estate assets are subject to various risks, including: ● acts of God, including earthquakes, floods and other natural disasters, which may result in uninsured losses; ● acts of war or terrorism, including the consequences of terrorist attacks, such as those that occurred on September 11, 2001, social unrest and civil disturbances; ● adverse changes in national and local economic and market conditions; and ● changes in governmental laws and regulations, fiscal policies, zoning ordinances and environmental legislation and the related costs of compliance with laws and regulations, fiscal policies and ordinances.
Our substantial outstanding indebtedness, and the limitations imposed on us by our debt agreements, could have other significant adverse consequences, including the following: ● our cash flow may be insufficient to meet our required principal and interest payments; ● we may use a substantial portion of our cash flows to make principal and interest payments and we may be unable to obtain additional financing as needed or on favorable terms, which could, among other things, have a material adverse effect on our ability to capitalize upon acquisition opportunities, fund working capital, make capital expenditures, make cash distributions to our shareholders, or meet our other business needs; 31 Table of Contents ● we may be unable to refinance our indebtedness at maturity or the refinancing terms may be less favorable than the terms of our original indebtedness; ● we may be forced to dispose of assets, possibly on unfavorable terms or in violation of certain covenants to which we may be subject; ● our financial flexibility may be diminished as a result of various covenants including debt and coverage and other financial ratios; ● our vulnerability to general adverse economic and industry conditions may be increased; ● we may be at a competitive disadvantage relative to our competitors that have less indebtedness; ● our flexibility in planning for, or reacting to, changes in our business and the markets in which we operate may be limited and we may default on our indebtedness by failure to make required payments or violation of covenants, which would entitle holders of such indebtedness, and possibly other indebtedness, to accelerate the maturity of their indebtedness and to foreclose on our mortgages receivable that secure their loans.
Our substantial outstanding indebtedness, and the limitations imposed on us by our debt agreements, could have other significant adverse consequences, including the following: ● our cash flow may be insufficient to meet our required principal and interest payments; ● we may use a substantial portion of our cash flows to make principal and interest payments and we may be unable to obtain additional financing as needed or on favorable terms, which could, among other things, have a material adverse effect on our ability to capitalize upon acquisition opportunities, fund working capital, make capital expenditures, make cash distributions to our shareholders, or meet our other business needs; ● we may be unable to refinance our indebtedness at maturity or the refinancing terms may be less favorable than the terms of our original indebtedness; 25 Table of Contents ● we may be forced to dispose of assets, possibly on unfavorable terms or in violation of certain covenants to which we may be subject in order to pay debt obligations when due; ● our financial flexibility may be diminished as a result of various covenants including debt and coverage and other financial ratios; ● our vulnerability to general adverse economic and industry conditions may be increased; ● we may be at a competitive disadvantage relative to our competitors that have less indebtedness; and ● our flexibility in planning for, or reacting to, changes in our business and the markets in which we operate may be limited and we may default on our indebtedness by failure to make required payments or violation of covenants, which would entitle holders of such indebtedness, and possibly other indebtedness, to accelerate the maturity of their indebtedness and to foreclose on our mortgages receivable that secure their loans.
We may adopt new strategies, policies and/or procedures or change any 26 Table of Contents of our existing strategies, policies and /or procedures regarding financing, hedging, asset allocation, lending, operations and management at any time without the consent of shareholders, which could result in us originating and funding mortgage loans or entering into financing or hedging transactions with which we have no or limited experience or that are different from, and possibly riskier than our existing strategies and policies.
We may adopt new strategies, policies and/or procedures or change any of our existing strategies, policies and /or procedures regarding financing, hedging, asset allocation, lending, operations and management at any time without the consent of shareholders, which could result in us originating and funding mortgage loans or entering into financing or hedging transactions with which we have no or limited experience or that are different from, and possibly riskier than our existing strategies and policies.
These risks include, without limitation: ● declining real estate values; ● overbuilding; ● extended vacancies of properties; ● increases in competition; 24 Table of Contents ● increases in operating expenses such as property taxes and energy costs; ● changes in zoning laws; ● unemployment rates; ● environmental issues; ● public health issues (such as COVID-19); ● casualty or condemnation losses; ● uninsured damages from floods, hurricanes, earthquakes or other natural disasters; and ● changes in interest rates.
These risks include, without limitation: ● declining real estate values; ● overbuilding; ● extended vacancies of properties; ● increases in competition; ● increases in operating expenses such as property taxes and energy costs; ● changes in zoning laws; ● unemployment rates; ● environmental issues; ● public health issues (such as COVID-19); ● casualty or condemnation losses; ● uninsured damages from floods, hurricanes, earthquakes or other natural disasters; and ● changes in interest rates.
In order to maintain our REIT status and avoid the payment of income and excise taxes, we may be forced to seek third-party capital to meet the distribution requirements even if the then- prevailing market conditions are not favorable.
To maintain our REIT status and avoid the payment of income and excise taxes, we may be forced to seek third-party capital to meet the distribution requirements even if the then- prevailing market conditions are not favorable.
In addition, such a taxable share dividend could be viewed as equivalent to a reduction in our cash distributions, and that factor, as well as the possibility that a 37 Table of Contents significant number of our shareholders could determine to sell Common Shares to pay taxes owed on dividends, may put downward pressure on the market price of Common Shares.
In addition, such a taxable share dividend could be viewed as equivalent to a reduction in our cash distributions, and that factor, as well as the possibility that a significant number of our shareholders could determine to sell Common Shares to pay taxes owed on dividends, may put downward pressure on the market price of Common Shares.
In the event of the bankruptcy of a mortgage loan borrower, the mortgage loan to such borrower will be deemed to be secured only to the extent of the value of the underlying collateral at the time of bankruptcy (as determined by the bankruptcy court), and the lien securing the mortgage loan will be subject to the avoidance powers of the bankruptcy trustee or debtor-in-possession to the extent 22 Table of Contents the lien is unenforceable under state law.
In the event of the bankruptcy of a mortgage loan borrower, the mortgage loan to such borrower will be deemed to be secured only to the extent of the value of the underlying collateral at the time of bankruptcy (as determined by the bankruptcy court), and the lien securing the mortgage loan will be subject to the avoidance powers of the bankruptcy trustee or debtor-in-possession to the extent the lien is unenforceable under state law.
As a result of these competitive factors, we may not in the future be able to originate and fund mortgage loans at favorable spreads over our cost of capital, which could have a material adverse effect on our business, financial condition, results of operations and ability to make distributions to our shareholders.
As a result of these competitive factors, we may not be able to originate and fund mortgage loans at favorable spreads over our cost of capital, which could have a material adverse effect on our business, financial condition, results of operations and ability to make distributions to our shareholders.
The Series A Preferred Stock has a private credit rating of BBB from Egan-Jones Ratings Company. An explanation of the significance of ratings may be obtained from the rating agency. Generally, rating agencies base their ratings on such material and information, and such of their own investigations, studies and assumptions, as they deem appropriate.
At the time of issuance, the Series A Preferred Stock has a private credit rating of BBB from Egan-Jones Ratings Company. An explanation of the significance of ratings may be obtained from the rating agency. Generally, rating agencies base their ratings on such material and information, and such of their own investigations, studies and assumptions, as they deem appropriate.
If the net operating income of the subject property is reduced, the borrower’s ability to repay the loan, or our ability to receive adequate returns on our investment, may be impaired. In the case of non-income producing properties, the expectation is that our loans will be repaid out of sale or refinancing proceeds.
If the net operating income of the subject property is reduced, the borrower’s ability to repay the loan, or our ability to receive adequate returns on our investment, may be impaired. 17 Table of Contents In the case of non-income producing properties, the expectation is that our loans will be repaid out of sale or refinancing proceeds.
We cannot assure you that our business and results of operations will not be negatively impacted by a cyber incident. We face risks from cybersecurity threats that could have a material adverse effect on our business, financial condition, results of operations, cash flows or reputation.
We cannot assure you that our business and results of operations will not be negatively impacted by a cyber incident. 23 Table of Contents We face risks from cybersecurity threats that could have a material adverse effect on our business, financial condition, results of operations, cash flows or reputation.
Moreover, if we have net income from “prohibited transactions,” that income will be subject to a 100% tax. In general, prohibited transactions are sales or other dispositions of property held primarily for sale to 36 Table of Contents customers in the ordinary course of business.
Moreover, if we have net income from “prohibited transactions,” that income will be subject to a 100% tax. In general, prohibited transactions are sales or other dispositions of property held primarily for sale to customers in the ordinary course of business.
We and our subsidiaries have 40 Table of Contents incurred and may in the future incur substantial amounts of debt and other obligations that will rank senior to the Series A Preferred Stock. Certain of our existing or future debt instruments may restrict the authorization, payment or setting apart of dividends on the Series A Preferred Stock.
We and our subsidiaries have incurred and may in the future incur substantial amounts of debt and other obligations that will rank senior to the Series A Preferred Stock. Certain of our existing or future debt instruments may restrict the authorization, payment or setting apart of dividends on the Series A Preferred Stock.
An economic slowdown, a public health crisis (such as COVID-19), delayed recovery or general disruption in the mortgage markets may result in decreased demand for residential and commercial properties, which could adversely impact homeownership rates and force owners of commercial properties to lower rents, thus placing additional pressure on property values.
An economic slowdown, a public health crisis (such as COVID-19), armed conflicts, societal unrest, delayed recovery or general disruption in the mortgage markets may result in decreased demand for residential and commercial properties, which could adversely impact homeownership rates and force owners of commercial properties to lower rents, thus placing additional pressure on property values.
The issuance or incurrence of any indebtedness with incremental protections could affect the market for, trading volume and prices of the Notes. 33 Table of Contents An increase in market interest rates could result in a decrease in the value of the Notes. In general, as market interest rates rise, notes bearing interest at a fixed rate decline in value.
The issuance or incurrence of any indebtedness with incremental protections could affect the market for, trading volume and prices of the Notes. An increase in market interest rates could result in a decrease in the value of the Notes. In general, as market interest rates rise, notes bearing interest at a fixed rate decline in value.
Even if we are recognized as a creditor of one or more of these entities, our 32 Table of Contents claims would still be effectively subordinated to any security interests in the assets of any such entity and to any indebtedness or other liabilities of any such entity senior to our claims.
Even if we are recognized as a creditor of one or more of these entities, our claims would still be effectively subordinated to any security interests in the assets of any such entity and to any indebtedness or other liabilities of any such entity senior to our claims.
If we breach any loan covenants, we may not be able to obtain such a waiver from the lenders in which case we would be in default under the credit arrangement and the lender could exercise its rights as described above, and we may be forced into bankruptcy or 35 Table of Contents liquidation.
If we breach any loan covenants, we may not be able to obtain such a waiver from the lenders in which case we would be in default under the credit arrangement and the lender could exercise its rights as described above, and we may be forced into bankruptcy or liquidation.
In addition, we could also suffer reputational damage as a result of their acts or omissions, which could lead to borrowers and lenders and other counterparties ceasing to do business with us, which could materially adversely affect our business, financial condition and results of operations and ability to make distributions to our shareholders.
In addition, we could also suffer reputational damage because of their acts or omissions, which could lead to borrowers and lenders and other counterparties ceasing to do business with us, which could materially adversely affect our business, financial condition and results of operations and ability to make distributions to our shareholders.
Credit ratings are not a recommendation to buy, sell or hold any security, and may be revised or withdrawn at any time by the issuing organization in its sole discretion. The Notes have received a private rating of BBB+ from Egan-Jones Ratings Company. An explanation of the significance of ratings may be obtained from the rating agency.
Credit ratings are not a recommendation to buy, sell or hold any security, and may be revised or withdrawn at any time by the issuing organization in its sole discretion. Upon issuance, each tranche of Notes received a private rating of BBB+ from Egan-Jones Ratings Company. An explanation of the significance of ratings may be obtained from the rating agency.
Our access to third-party sources of capital depends, in part, on general market conditions, the market’s perception of our growth potential, leverage, current and expected results of operations, liquidity, financial condition and cash distributions to shareholders and the market price of our Common Shares.
Our access to third-party sources of capital depends, in part, on general market conditions, the market’s perception of our growth potential, leverage, current and expected results of operations, liquidity, financial condition and cash distributions to shareholders and the market price of our equity securities.
In addition, we are subject to a 4% nondeductible excise tax on the amount, if any, by which distributions paid by us in any calendar year are less than the sum of 85% of our ordinary income, 95% of our capital gain net income and 100% of our undistributed income from prior years.
We are also subject to a 4% non-deductible excise tax on the amount, if any, by which distributions paid by us in any calendar year are less than the sum of 85% of our ordinary income, 95% of our capital gain net income and 100% of our undistributed income from prior years.
The conditions, and the responses thereto, such as sanctions imposed by the United States and other western democracies, and any expansion thereof is likely to have unpredictable and wide-ranging effects on the domestic and global financial markets, which could have an adverse effect on our business and results of operations.
These conditions, and the responses thereto, such as tariffs and sanctions imposed by the United States, and any expansion thereof is likely to have unpredictable and wide-ranging effects on the domestic and global financial markets, which could have an adverse effect on our business and results of operations.
Accordingly, we may not make a distribution on the Series A Preferred Stock if, after giving effect to the distribution, we would not be able to pay our debts as they become due in the usual course of business or, except in limited circumstances, our total assets would be less than the sum of our 41 Table of Contents total liabilities plus, unless the charter provides otherwise, the amount that would be needed to satisfy the preferential rights upon dissolution of the holders of shares of any class or series of preferred shares then outstanding, if any, with preferences senior to those of the Series A Preferred Stock.
Accordingly, we may not make a distribution on the Series A Preferred Stock if, after giving effect to the distribution, we would not be able to pay our debts as they become due in the usual course of business or, except in limited circumstances, our total assets would be less than the sum of our total liabilities plus, unless the charter provides otherwise, the amount that would be needed to satisfy the preferential rights upon dissolution of the holders of shares of any class or series of preferred shares then outstanding, if any, with preferences senior to those of the Series A Preferred Stock. 31 Table of Contents The 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.
Because the Churchill Facility and the NHB Mortgage have, and any future credit facilities will likely have, customary cross-default provisions, if repayment of any outstanding indebtedness, such as the Notes, the Churchill Facility, the Wells Fargo Loan, the NHB Mortgage, the Needham Credit Facility or any future credit facility, is accelerated, we may be unable to repay or finance the amounts due.
Because the Churchill Credit Facility and the NHB Mortgage have, and any future credit facilities may have, customary cross-default provisions, if repayment of any outstanding indebtedness, such as the Notes, the Churchill Facility, the NHB Mortgage, the Needham Credit Facility or any future credit facility, is accelerated, we may be unable to repay or finance the amounts due.
We 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. We may seek in the future to distribute taxable dividends that are payable in cash and Common Shares, at the election of each shareholder.
We 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. We may seek in the future to distribute taxable dividends that are payable in cash and Common Shares.
Some of the factors that could negatively affect our stock price or result in fluctuations in the price or trading volume of our Common Shares are the following: ● our actual or projected operating results, financial condition, cash flows and liquidity, or changes in business strategy or prospects; ● equity issuances by us, or share resales by our shareholders, or the perception that such issuances or resales may occur; ● publication of research reports about us or the real estate industry; ● changes in market valuations of similar companies; ● adverse market reaction to the level of leverage we employ; ● additions to or departures of our key personnel; ● accounting issues; ● speculation in the press or investment community; ● our failure to meet, or the lowering of, our earnings’ estimates or those of any securities analysts; ● increases in market interest rates, which may lead investors to demand a higher distribution yield for our Common Shares and would result in increased interest expenses on our debt; ● failure to qualify or to remain qualified as a REIT; ● price and volume fluctuations in the stock market generally; and ● general market and economic conditions, including the current state of the credit and capital markets and current level of inflation.
Some of the factors that could negatively affect our stock price or result in fluctuations in the price or trading volume of our Common Shares are the following: ● our actual or projected operating results, financial condition, cash flows and liquidity, or changes in business strategy or prospects; ● equity issuances by us, or share resales by our shareholders, or the perception that such issuances or resales may occur; ● publication of research reports about us or the real estate industry; ● changes in market valuations of similar companies; ● adverse market reaction to the level of leverage we employ; ● additions to or departures of our key personnel; ● accounting issues; ● speculation in the press or investment community; ● our failure to meet, or the lowering of, our earnings’ estimates or those of any securities analysts; ● increases in market interest rates, which may lead investors to demand a higher distribution yield for our Common Shares and would result in increased interest expenses on our debt; ● failure to qualify or to remain qualified as a REIT; ● price and volume fluctuations in the stock market generally; and ● general market and economic conditions, including the current state of the credit and capital markets and current level of inflation. 34 Table of Contents We 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.
Issuances or sales of substantial amounts of our securities, including sales of the Series A Preferred Stock or the perception that such issuances or sales might occur, could negatively impact the market price of the Series A Preferred Stock and the terms upon which we may obtain additional equity financing in the future. 43 Table of Contents Although the Series A Preferred Stock currently has a private credit rating of BBB from Egan-Jones Ratings Company, 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.
Issuances or sales of substantial amounts of our securities, including sales of shares of the Series A Preferred Stock or the perception that such issuances or sales might occur, could negatively impact the market price of the Series A Preferred Stock and the terms upon which we may obtain additional equity financing in the future. 33 Table of Contents Although 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.
Any default under the agreements governing our existing indebtedness or other indebtedness to which we may be a party that is not waived by the required lenders, and the remedies sought by the holders of such indebtedness could make us unable to pay principal and interest on the Notes and substantially decrease the market value of the Notes.
Any default under the agreements governing our existing indebtedness, or other indebtedness that we may incur in the future that is not waived by the required lenders, and the remedies sought by the holders of such indebtedness could make us unable to pay principal and interest on the Notes and substantially decrease the market value of the Notes.
A significant amount of judgment is involved in determining the presence of 25 Table of Contents an indicator of impairment or credit loss.
A significant amount of judgment is involved in determining the presence of an indicator of impairment or credit loss.
We cannot assure you that the credit rating assigned to us or the Series A Preferred Stock will not be downgraded, suspended or withdrawn in the future. If it is, the liquidity or market value of the Series A Preferred Stock could be adversely affected. ​ Item 1B. Unresolved Staff Comments None. ​
We cannot assure you that the credit rating assigned to us or the Series A Preferred Stock will not be downgraded, suspended or withdrawn in the future. If it is, the liquidity or market value of the Series A Preferred Stock could be adversely affected.
Given the magnitude of the housing crisis of 2008, and in response to the well-publicized failures of many mortgage servicing companies to follow proper foreclosure procedures (such as involving “robo-signing”), lenders, and their agents, are being held to much higher foreclosure-related documentation standards than they previously were. As a result, the mortgage foreclosure process has become lengthier and more expensive.
Given the magnitude of the housing crisis of 2008, and in response to the well-publicized failures of many mortgage servicing companies to follow proper foreclosure procedures (such as involving “robo-signing”), lenders, and their agents, are being held to much higher foreclosure-related documentation standards than they previously were.
The concerns about deficiencies in foreclosure practices of servicers and related delays in the foreclosure process may impact our loss assumptions and affect the values of, and our returns on, our mortgage loans. 27 Table of Contents We 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.
Continuing deficiencies in foreclosure practices of mortgage lenders and related delays in the foreclosure process may impact our loss assumptions and affect the values of, and our returns on, our mortgage loans. We 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.
Residential mortgage loans are subject to increased risks. At December 31, 2023, approximately 67.5% of the loans in our loan portfolio (representing approximately 49.4% of our outstanding mortgage loans receivable) are secured by residential real property. None of these loans are guaranteed by the U.S. government or any government sponsored entity.
Residential mortgage loans are subject to increased risks. At December 31, 2024, 56.2% of the loans in our loan portfolio (representing 49.4% of our outstanding mortgage loans receivable) are secured by residential real property. None of these loans are guaranteed by the U.S. government or any government sponsored entity.
In prior years, concerns about the health of the global economy generally and the residential and commercial real estate markets specifically, as well as inflation, energy costs, perceived or actual changes in interest rates, European sovereign debt, U.S. budget debates, geopolitical issues, international trade issues, public health issues, and the availability and cost of credit have contributed to increased volatility and uncertainty for the economy and the financial and credit markets.
In prior years, concerns about the health of the global economy generally and the residential and commercial real estate markets specifically, as well as inflation, energy costs, perceived or actual changes in interest rates, European sovereign debt, U.S. debt limit and budget deficits, slowing economic growth among developed nations, geopolitical conflicts, international trade issues, public health issues, and the availability and cost of credit have contributed to increased volatility and uncertainty for the economy and the financial and credit markets.
Given the fact that many of the properties securing our loans are not income producing or even cash producing and most of the borrowers are entities with no assets other than the single property that is the subject of the loan, some of our borrowers have considerable difficulty servicing our loans and the risk of a non-payment of default is considerable.
Since many of the properties securing our loans are under construction or renovation and, therefore, are not income producing or even cash producing and most of the borrowers are entities with no assets other than the single property that is the subject of the loan, some of our borrowers could have considerable difficulty servicing our loans and the risk of a non-payment of default is considerable.
As a result, we are subject to the risks associated with a third party’s failure to perform, including failure to perform due to reasons such as fraud, negligence, errors, miscalculations, or insolvency.
As a result, we are subject to the risks associated with a third party’s failure to perform, including failure to perform due to reasons such as fraud, negligence, errors, miscalculations, or insolvency and the corresponding losses or impairments to our investments.
If we fail to qualify as a REIT in any taxable year and we do not qualify for certain statutory relief provisions, all our taxable income would be subject to U.S. federal and state income taxes at the prevailing corporate income tax rates, we would no longer be allowed to deduct the distributions to our shareholders and we generally would be disqualified from treatment as a REIT for the four taxable years following the year in which we lost our REIT status.
If we fail to qualify as a REIT in any taxable year and we do not qualify for certain statutory relief provisions, all our taxable income would be subject to U.S. federal and state income taxes at the prevailing corporate income tax rates, we would no longer be allowed to deduct the distributions to our shareholders and we generally would be disqualified from treatment as a REIT for the four taxable years following the year in which we lost our REIT status. 36 Table of Contents Qualifying as a REIT involves highly technical and complex provisions of the Code and therefore, in certain circumstances, may be subject to uncertainty.
During the year ended December 31, 2023, the price for our Common Shares on the NYSE American has ranged from a high of $3.98 to a low of $2.99. We cannot assure you that the market price of our Common Shares will not fluctuate or decline significantly.
During the year ended December 31, 2024, the price for our Common Shares on the NYSE American has ranged from a high of $4.54 to a low of $1.17. We cannot assure you that the market price of our Common Shares will not fluctuate or decline significantly.
Any impairment or provision could have a material adverse effect on us. We review our loan portfolio for impairments and provisions for credit losses on a quarterly basis and whenever events or changes in circumstances indicate that the carrying amount may not be recoverable.
We review our loan portfolio for impairments and provisions for credit losses on a quarterly basis and whenever events or changes in circumstances indicate that the carrying amount may not be recoverable.
We cannot assure you that our program will be effective in preventing a cyber incident in the future. If it’s not effective it could have a material adverse effect on our business, financial condition, results of operations, or cash flows. The loss of key personnel, such as one of our executive officers, could have a material adverse effect on us.
We cannot assure you that our program will be effective in preventing a cyber incident in the future. If it is not effective, it could have a material adverse effect on our business, financial condition, results of operations, or cash flows.
The trading price of the Series A Preferred Stock could be substantially affected by various factors. During the year ended December 31, 2023, the price for our Series A Preferred Stock on the NYSE American has ranged from a high of $23.00 to a low of $18.73.
The trading price of the Series A Preferred Stock could be substantially affected by various factors. During the year ended December 31, 2024, the price for our Series A Preferred Stock on the NYSE American has ranged from a high of $24.70 to a low of $15.39.
Any deterioration in the mortgage markets, the residential or commercial real estate markets, the financial markets and the economy generally may lower net income, increase losses and a decline in the market value of our assets, all of which may adversely affect our results of operations, the availability and cost of credit and our ability to make distributions to our shareholders.
Any deterioration in the mortgage markets, the residential or commercial real estate markets, the financial markets and the economy generally may lower net income, increase losses and impair the market value of our assets, all of which may adversely affect our results of operations, the availability and cost of credit and our ability to make distributions to our shareholders. 16 Table of Contents Increases in interest rates could adversely affect our ability to generate income and pay dividends.
As a result, they are effectively subordinated to all our existing and future secured indebtedness, such as the Wells Fargo Loan, approximately $26.8 million at December 31, 2023, the Churchill Facility, approximately $26.5 million as of December 31, 2023, the Needham Facility, $35.0 million as of December 31, 2023, and the NHB Mortgage, approximately $1.1 million at December 31, 2023, as well as any secured indebtedness that we may incur in the future, or any indebtedness that is initially unsecured to which we subsequently grant a security interest, to the extent of the value of the assets securing such indebtedness.
As a result, they are effectively subordinated to all our existing and future secured indebtedness, such as the Churchill Credit Facility ($33.7 million outstanding balance at December 31, 2024), the Needham Credit Facility, ($40.0 million outstanding balance at December 31, 2024), and the NHB Mortgage, ($1.0 million outstanding balance at December 31, 2024) as well as any secured indebtedness that we may incur in the future, or any indebtedness that is initially unsecured to which we subsequently grant a security interest, to the extent of the value of the assets securing such indebtedness.
Risks Related to Regulatory Matters Maintenance of our Investment Company Act exemption imposes limits on our operations. We have conducted and intend to continue to conduct our operations so as not to become regulated as an investment company under the Investment Company Act. We believe that there are several exclusions under the Investment Company Act that are applicable to us.
We have conducted and intend to continue to conduct our operations so as not to become regulated as an investment company under the Investment Company Act. We believe that there are several exclusions under the Investment Company Act that are applicable to us.
The occurrence of any one of these events could have a material adverse effect on our business, financial condition and results of operations and our ability to make distributions to shareholders.
The occurrence of any one of these events could have a material adverse effect on our business, financial condition and results of operations and our ability to make distributions to shareholders. We are leveraged. If we default on our obligations, we may suffer adverse consequences.
If we are forced to liquidate our assets to pay our creditors, we may not have sufficient assets to pay amounts due on any or all of the Series A Preferred Stock then outstanding.
If we are forced to liquidate our assets to pay our creditors, we may not have sufficient assets to pay amounts due with respect to the outstanding shares of the Series A Preferred Stock.
Competition could have a material adverse effect on our business, financial condition and results of operations. We operate in a highly competitive market and we believe these conditions will persist for the foreseeable future as the financial services industry continues to consolidate, producing larger, better capitalized and more geographically diverse companies with broad product and service offerings.
We operate in a highly competitive market, and we believe these conditions will persist for the foreseeable future as the financial services industry continues to consolidate, producing larger, better capitalized and more geographically diverse companies with broad product and service offerings.
Despite our efforts to manage credit risk, there are many aspects of credit risk that we cannot control. Our credit policies and procedures may not be successful in limiting future delinquencies, defaults, and losses, or they may not be cost effective. Our underwriting reviews and due diligence procedures may not be effective.
Despite our efforts to manage credit risk, there are many aspects of credit risk that we cannot control. Our credit policies and procedures may not be successful in limiting future delinquencies, defaults, and losses. Our underwriting reviews and due diligence procedures are designed for completeness and accuracy and are based on pre-funding diligence.
Nevertheless, there is a risk that borrower demand for funding under existing loans could exceed our available working capital and if we fail to meet our funding obligations, we may be subject to legal claims by the borrowers.
Nevertheless, there is a risk that borrower demand for funding under existing loans could exceed our available working capital and if we fail to meet our funding obligations, we may be subject to legal claims by the borrowers. This could have a material and adverse impact on our business reputation, our operations as well as our financial condition.
This could have a material and adverse impact on our business reputation, our operations as well as our financial condition. 30 Table of Contents Risks Related to Debt Financing If 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 .
Any remedy, whether we have to pay damages or repurchase or replace a loan, could have a material adverse impact on our business, operations and financial condition. Risks Related to Debt Financing If 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 .
Therefore, our current common shareholders may experience dilution of their equity investment if we sell additional Common Shares in the future, sell securities that are convertible into Common Shares or issue Common Shares or options exercisable for Common Shares. In addition, we could sell securities at a price less than our then-current book value per share.
Therefore, our current common shareholders may experience dilution of their equity investment if we sell additional Common Shares in the future, sell securities that are convertible into Common Shares or issue Common Shares or options exercisable for Common Shares.
We believe the risks associated with our mortgage loan portfolio will be more acute during periods of economic slowdown, recession or market dislocations, especially if these periods are accompanied by declining real estate values and defaults.
Our business is materially affected by conditions in the residential and commercial mortgage and real estate markets, the financial markets and the economy generally. We believe the risks associated with our mortgage loan portfolio will be more acute during periods of economic slowdown, recession or market dislocation, especially if these periods are accompanied by declining real estate values and defaults.
In addition, claims may be assessed against us on account of our position as a mortgage holder or property owner, including assignee liability, responsibility for tax payments, environmental hazards and other liabilities. In some cases, these liabilities may be “recourse liabilities” or may otherwise lead to losses in excess of the purchase price of the related mortgage or property.
In addition, claims may be assessed against us on account of our position as a mortgage holder or property owner, including assignee liability, responsibility for tax payments, environmental hazards and other liabilities.
In connection with our business of originating and funding mortgage loans, we rely on third-party service providers to perform a variety of services, comply with applicable laws and regulations, and carry out contractual covenants and terms. For example, we may rely on appraisers for a valuation analysis of the property that will be mortgaged to secure the loan.
In connection with our business of originating and funding mortgage loans, we rely on third-party service providers to perform a variety of services, comply with applicable laws and regulations, and carry out contractual covenants and terms.
We must continue to identify, hire, train, and retain qualified professionals, operations employees, and sales and senior 29 Table of Contents management personnel who maintain relationships with our customers and who can provide the technical, strategic and marketing skills that will help us grow.
We must continue to identify, hire, train, and retain qualified professionals, operations employees, and sales and senior management personnel who maintain relationships with our customers and who can provide the technical, strategic and marketing skills that will help us grow. Competitive pressures may require that we enhance our pay and benefits package to compete effectively for such personnel.
Therefore, if actual prepayment rates differ from anticipated prepayment rates, our business, financial condition and results of operations and ability to make distributions to our shareholders could be materially adversely affected. Short-term loans may involve a greater risk of loss than traditional mortgage loans.
Therefore, if actual prepayment rates differ from anticipated prepayment rates, our business, financial condition and results of operations and ability to make distributions to our shareholders could be materially adversely affected.
At December 31, 2023, our total outstanding indebtedness, including the aggregate outstanding principal amount of unsecured, unsubordinated notes (net of deferred financing costs), amounts due under the Churchill Facility, the Wells Fargo Loan, the NHB Mortgage and the Needham Credit Facility, totaled $371.7 million, and total liabilities were $395.5 million.
At December 31, 2024, our total outstanding indebtedness, including the aggregate outstanding principal amount of the Notes (net of deferred financing costs), amounts due under the Churchill Credit Facility, the NHB Mortgage and the Needham Credit Facility, totaled $301.2 million, and total liabilities were $310.3 million.
The 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.
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.
Also, we must make distributions to stockholders aggregating annually at least 90% of our “REIT taxable income” (determined without regard to the dividends paid deduction and excluding net capital gain).
To qualify as a REIT, we must satisfy several requirements, including requirements regarding the composition of our assets, the sources of our income and the diversity of our share ownership. Also, we must make distributions to stockholders aggregating annually at least 90% of our “REIT taxable income” (determined without regard to the dividends paid deduction and excluding net capital gain).
We may be unable to pursue investment opportunities that would be otherwise advantageous to us in order to satisfy the source-of-income or asset-diversification requirements for us to qualify as a REIT. Thus, compliance with the REIT requirements may hinder our ability to make certain attractive investments and, thus, reduce our income and amounts available to service our indebtedness.
We may be unable to pursue investment opportunities that would be otherwise advantageous to us in order to satisfy the source-of-income or asset-diversification requirements for us to qualify as a REIT.
Other than the limited circumstances described in our certificate of incorporation, as amended, holders of shares of Series A Preferred Stock will not have any voting rights.
Other than the limited circumstances described in our certificate of incorporation, as amended, holders of shares of Series A Preferred Stock will not have any voting rights. Future 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.
Moreover, while the Board may periodically review our loan guidelines and our strategies and policies and while it may also approve certain loans, it does not approve every individual mortgage loan that we originate or fund, leaving management with day-to-day discretion over our loan portfolio composition within our broad lending guidelines.
Changes in our lending and financing strategies and to our operational and management policies, or adoption of new strategies and/or policies, could materially adversely affect our business, financial condition and results of operations and ability to make distributions to our shareholders. 21 Table of Contents Moreover, while the Board may periodically review our loan guidelines and our strategies and policies and while it may also approve certain loans, it does not approve every individual mortgage loan that we originate or fund, leaving management with day-to-day discretion over our loan portfolio composition within our broad lending guidelines.
Due to the relative illiquidity of our loan portfolio, our ability to promptly sell all or a portion of the portfolio in response to changing economic, financial, investment or other conditions is limited.
Despite the loss on the sale, both for GAAP purposes and tax purposes, we consider the transaction to be a success. Due to the relative illiquidity of our loan portfolio, our ability to promptly sell all or a portion of the portfolio in response to changing economic, financial, investment or other conditions is limited.
Given the nature of our business, we may in the future acquire more real estate assets upon a default of mortgage loans.
In some cases, the real estate is classified as “held for sale” and in other cases it is classified as “held for rental”. Given the nature of our business, we may in the future acquire more real estate assets upon a default of mortgage loans.
We believe that our continued success depends on the continued services of John L. Villano, our chairman, chief executive officer and president. Our reputation among and our relationships with our key customers are the direct result of a significant investment of time and effort by him to build our credibility in a highly specialized industry. The loss of Mr.
Our reputation and our relationships with our key customers are the direct result of a significant investment of time and effort by him to build our credibility in a highly specialized industry. The loss of Mr.
Therefore, we may not be able to vary our portfolio in response to economic, financial, investment or other conditions promptly or on favorable terms, which could have a material adverse effect on us. Declining real estate valuations could result in impairment charges or provisions for credit losses, the determination of which involves a significant amount of judgment on our part.
Therefore, we may not be able to vary our portfolio in response to economic, financial, investment or other conditions promptly or on favorable terms, which could have a material adverse effect on us.
To the extent any of the foregoing risks arise in Connecticut, New York and Florida, our business, financial condition and results of operations and ability to make distributions to shareholders could be materially adversely affected. The illiquidity of our loan portfolio could significantly impede our ability to respond to adverse changes in economic, financial, investment and other conditions.
To the extent any of the foregoing risks arise in Connecticut, New York and Florida, our business, financial condition and results of operations and ability to make distributions to shareholders could be materially adversely affected. 20 Table of Contents Competition could have a material adverse effect on our business, financial condition and results of operations.

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Item 1C. Cybersecurity

Cybersecurity — threats and controls disclosure

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Biggest changeOur cybersecurity partners, including consultants, and other third-party service providers are a key part of our cybersecurity risk management strategy and infrastructure. We partner with industry recognized cybersecurity providers leveraging third-party technology and expertise and engage with these partners to maintain the performance and effectiveness of IT assets, data, and services.
Biggest changeOur cybersecurity partners, including a technology consultant and other relevant third-party service providers, are a key part of our cybersecurity risk management strategy and infrastructure. We partner with industry recognized cybersecurity providers leveraging third-party technology and expertise and engage with these partners to maintain the performance and effectiveness of IT assets, data, and services.
We also maintain a disaster recovery plan to help us quickly recover from an incident during a disruption and help mitigate the impact of certain cybersecurity risks. Governance Our management team, including the IT Manager, in conjunction with third-party IT and cybersecurity service providers is responsible for oversight and administration of our cyber risk management program.
We also maintain a disaster recovery plan to help us quickly recover from an incident during a disruption and help mitigate the impact of certain cybersecurity risks. 39 Table of Contents Governance Our management team, including the IT Manager, in conjunction with third-party IT and cybersecurity service providers is responsible for oversight and administration of our cyber risk management program.
This includes a review of vendors during the selection/onboarding process, inclusion of formal service level agreements (SLAs) including requirements for uptime where applicable, and a periodic review of contracts. 44 Table of Contents We are in the process of formalizing the Audit Committee’s responsibilities to oversee our cybersecurity risk exposure and the steps taken by management to monitor and mitigate cybersecurity risks.
This includes a review of vendors during the selection/onboarding process, inclusion of formal service level agreements (SLAs) including requirements for uptime where applicable, and a periodic review of contracts. We are in the process of formalizing the Audit Committee’s responsibilities to oversee our cybersecurity risk exposure and the steps taken by management to monitor and mitigate cybersecurity risks.
In addition, under the program we employ additional key practices including, but not limited to, maintenance of an information technology (“IT”) assets inventory, periodic vulnerability testing, identity access management controls including restricted access of privileged accounts, physical security measures at our offices, maintenance of firewalls and anti-malware tools, ongoing cybersecurity user awareness training, industry-standard encryption protocols, and critical data backups.
Under this program, we employ additional key practices including, but not limited to, maintenance of an information technology (“IT”) assets inventory, quarterly vulnerability testing, identity access management controls including restricted access of privileged accounts, physical security measures at our offices, maintenance of firewalls and anti-malware tools, ongoing cybersecurity user awareness training, industry-standard encryption protocols, and critical data backups.

Item 2. Properties

Properties — owned and leased real estate

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Biggest changeWe also lease additional office space at 470 James Street #003, New Haven, Connecticut for our construction servicing oversight and real estate development team, which oversees our construction finance business. Item 3. Legal Proceedings We are not currently a party to any material legal proceedings not in the ordinary course of business. ​ Item 4.
Biggest changeThis property serves as an investment in rental real estate property. Item 3. Legal Proceedings We are not currently a party to any material legal proceedings not in the ordinary course of business. ​ Item 4. Mine Safety Disclosures Not applicable. 40 Table of Contents PART II
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Item 2. Properties As of March 3, 2023, our principal offices are located at 568 East Main Street, Branford, Connecticut. Prior to that and during the year ended December 31, 2022, our principal offices were located at 698 Main Street Branford, Connecticut.
Added
Item 2. Properties Our principal office is located at 568 East Main Street, Branford, Connecticut. We use this space for all our operations. We believe this facility is adequate to meet our requirements at our current level of business activity and employee headcount. We also own a commercial property located at 1 Glendinning Place, Westport, Connecticut.
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Mine Safety Disclosures Not applicable. ​ PART II

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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Biggest changeTo the extent that it annually distributes less than 100% of its taxable income, the undistributed amount is taxed at regular corporate rates. We intend to pay regular quarterly dividends in an amount necessary to maintain our qualification as a REIT.
Biggest changeDividends and Distribution Policy U.S. federal income tax law generally requires that a REIT distribute annually at least 90% of its taxable income. To the extent that it annually distributes less than 100% of its taxable income, the undistributed amount is taxed at regular corporate rates.
The number of holders does not include individuals or entities who beneficially own shares but whose shares, which are held of record by a broker or clearing agency but does include each such broker or clearing agency as one record holder.
The number of holders does not include individuals or entities who beneficially own shares but whose shares, which are held of record by a broker or clearing agency but does include each such broker or clearing agency as one record holder. Computershare Trust Company, N.A. serves as transfer agent for our Common Shares.
On March 28, 2024, the last reported sale price of our Common Shares on the NYSE American was $4.43 per share. Holders As of March 28, 2024, we had 73 shareholders of record of our Common Shares.
On March 28, 2025, the last reported sale price of our Common Shares on the NYSE American was $1.12 per share. Holders As of March 28, 2025, we had 71 shareholders of record of our Common Shares.
Removed
Computershare Trust Company, N.A. serves as transfer agent for our Common Shares. 45 Table of Contents Dividends and Distribution Policy U.S. federal income tax law generally requires that a REIT distribute annually at least 90% of its taxable income.
Added
We intend to pay regular quarterly dividends in an amount necessary to maintain our qualification as a REIT.
Removed
To comply with certain REIT qualification requirements, we will, before the end of any REIT taxable year in which we have accumulated earnings and profits attributable to a non-REIT year, declare a dividend to our shareholders to distribute such accumulated earnings and profits, referred to as a Purging Distribution.
Added
Issuer Purchases of Equity Securities For an overview of our stock repurchase program and shares repurchased during the years ended December 31, 2024 and 2023, see Note 16 – Equity. ​ I tem 6. [Reserved] ​
Removed
As of January 1, 2017, we had no accumulated earnings and profits. 46 Table of Contents The table below sets forth dividends paid to the holders of our Common Shares since we began operating as a REIT. ​ ​ ​ ​ ​ ​ ​ ​ Amount Payment Date ​ Per Share 2024 ​ ​ ​ ​ January 10≠ ​ ​ $ 0.11 ​ ​ ​ ​ ​ 2023 ​ ​ ​ ​ November 7 ​ ​ $ 0.11 August 11 ​ ​ $ 0.13 April 24 ​ ​ $ 0.13 January 10£ ​ ​ $ 0.13 ​ ​ ​ ​ ​ 2022 ​ ​ ​ ​ November 14 ​ ​ $ 0.13 July 28 ​ ​ $ 0.14 April 18 ​ ​ $ 0.12 January 10Ω ​ ​ $ 0.12 ​ ​ ​ ​ ​ 2021 ​ ​ ​ ​ October 29 ​ ​ $ 0.12 July 30 ​ ​ $ 0.12 April 16 ​ ​ $ 0.12 January 8 ¥ ​ ​ $ 0.12 ​ ​ ​ ​ ​ 2020 ​ ​ ​ ​ November 4 ​ ​ $ 0.12 August 7 ​ ​ $ 0.12 January 27* ​ ​ $ 0.12 ​ ​ ​ ​ ​ 2019 ​ ​ ​ October 22 ​ ​ $ 0.12 July 29 ​ ​ $ 0.12 April 18 ​ ​ $ 0.12 January 10** ​ ​ $ 0.17 ​ ​ ​ ​ ​ 2018 ​ ​ ​ November 6 ​ ​ $ 0.12 July 27 ​ ​ $ 0.11 April 27*** ​ ​ $ 0.105 February 27**** ​ ​ $ 0.105 ​ ​ ​ ​ ​ 2017 ​ ​ ​ November 17 ​ ​ $ 0.105 July 27 ​ ​ $ 0.105 April 27 ​ ​ $ 0.05 ≠ A portion represents a distribution of 2023 income. £ A portion represents a distribution of 2022 income. Ω A portion represents a distribution of 2021 income. ¥ A portion represents a distribution of 2020 income. * A portion represents a distribution of 2019 income. ** Represents a distribution of 2018 income. *** A portion represents a distribution of 2017 income. **** Represents a distribution of 2017 income. 47 Table of Contents Our ability to pay dividends, the amount of the dividend and the frequency at which we will pay dividends is subject to numerous factors, many of which are discussed elsewhere herein including under the caption “Risk Factors.” These factors include the following: ● how quickly we can deploy the net proceeds from the sale of equity and debt securities to make new loans; ● our ability to increase the interest rate on our loans; ● our ability to manage and control our operating and administrative expenses, particularly those relating to our status as a public reporting REIT; ● defaults by our borrowers; ● the rate of prepayments on our outstanding loans and our ability to reinvest those payments in new loans; ● regional and national economic conditions; ● competition from banks and other financing sources; ● our cash flow from operations; ● unanticipated developments, write-offs or liabilities; ● restrictions and limitations imposed by the BCL; and ● restrictions in our existing and future credit facilities.
Removed
For information regarding securities authorized under the equity compensation plan, see Item 12. Stock Repurchase Plan In October 2022, the Board adopted a stock repurchase plan (the “Repurchase Program”), which it then extended in October 2023 so that it now continues through October 9, 2024.
Removed
Under the Repurchase Program, we may repurchase up to an aggregate of $7,500,000 of our Common Shares. Share repurchases will be made from time to time on the open market at prevailing market prices or in negotiated transactions off the market in accordance with applicable federal securities laws, including Rule 10b-18 and 10b5-1 of the Exchange Act.
Removed
Ladenburg Thalmann & Co. Inc. is acting as our exclusive purchasing agent under the Repurchase Program. No repurchases were made under the Repurchase Program during 2023 and through the date of this filing. ​ I tem 6. [Reserved] ​

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

21 edited+34 added−137 removed7 unchanged
Biggest changeAs a REIT, we may also be subject to federal excise taxes and state taxes. 2023 Year in Review; Outlook for 2024 2023 Highlights ● Total revenue increased 25.5%; net income attributable to common shareholders decreased 29.7%; and earnings per common share decreased approximately $0.18 per share. ● We raised an aggregate of approximately $23.0 million of additional capital from the sale of Common Shares and Series A Preferred Stock through our at-the-market offering facility. ● We funded approximately $204.9 million of mortgage loans including loan modifications and construction draws. ● We maintained our leverage ratio, thereby mitigating the risks should economic conditions deteriorate.
Biggest changeIn addition, the Company may make opportunistic real estate purchases apart from its lending activities. 41 Table of Contents 2024 Year in Review Total revenue decreased 11.2%; net (loss) income attributable to common shareholders decreased 462.5%; and earnings per common share decreased $1.20 per share. ● Notwithstanding the decrease in net revenue and the net loss attributable to common shareholders, we reported net positive cash flow from operations of $12.4 million for the year. ● Total dividends declared and paid to common shareholders in 2024 was $11.4 million. ● We raised an aggregate of $7.8 million of additional capital from the sale of Common Shares and Series A Preferred Stock through our at-the-market offering facility. ● We funded $134.3 million of mortgage loans including loan originations, modifications, and construction draws, net of construction holdback. ● We maintained our leverage ratio, thereby mitigating the risks should economic conditions deteriorate.
Our short-term cash requirements primarily include funding of loans, dividend payments, interest and principal payments on our indebtedness, including repayment/refinancing of our notes payable maturing in 2024, and payments for usual and customary operating and administrative expenses, such as employee compensation and sales and marketing expenses.
Our short-term cash requirements primarily include funding of loans, dividend payments, interest and principal payments on our indebtedness, including repayment/refinancing of the Notes maturing in September 2025, and payments for usual and customary operating and administrative expenses, such as employee compensation and sales and marketing expenses.
One such change is to require credit losses to be presented as an allowance rather than as a write-down on available-for-sale debt securities if management does not intend to sell and does not believe that it is more likely than not, they will be required to sell.
Further, CECL requires credit losses to be presented as an allowance rather than as a write-down on available-for-sale debt securities if management does not intend to sell and does not believe that it is more likely than not, they will be required to sell.
Management will base the use of estimates on (a) various assumptions that consider prior reporting results, (b) projections regarding future operations and (c) general financial market and local and general economic conditions. Actual amounts could differ from those estimates.
Management will base the use of estimates on (a) various assumptions that consider prior reporting results, (b) projections regarding future operations and (c) general financial market and local and general economic conditions. Actual amounts could differ from those estimates. See Note 2 – Significant Accounting Policies for further details.
In addition, interest and fees receivable and amounts included in due from borrowers, other than reimbursements, which include origination, modification and other fees receivable are also analyzed for credit losses in accordance with the CECL standard, as they represent a financial asset that is subject to credit risk. Further, CECL made changes to the accounting for available-for-sale debt securities.
This methodology replaces the probable incurred loss impairment methodology. In addition, interest and fees receivable and amounts included in due from borrowers, other than reimbursements, which include origination, modification and other fees receivable are also analyzed for credit losses in accordance with the CECL standard, as they represent a financial asset that is subject to credit risk.
Item 7A. Quantitative and Qualitative Disclosures about Market Risk We are a “smaller reporting company” as defined by Regulation S-K and, as such, are not required to provide the information required by this item. ​
Item 7A. Quantitative and Qualitative Disclosures about Market Risk We are a “smaller reporting company” as defined by Regulation S-K and, as such, are not required to provide the information required by this item. ​ Item 8. Consolidated Financial Statements and Supplementary Data The consolidated financial statements required by this Item are set forth beginning on page F-1. ​
Based on this analysis, we believe that our current cash balances, availability on our debt facilities, and our anticipated cash flows from operations will be sufficient to fund the operations for the next 12 months. Our long-term cash needs will include principal and interest payments on outstanding indebtedness, preferred stock dividends and funding of new mortgage loans.
Based on this analysis, we believe that our current cash balances, availability on our debt facilities, and our anticipated cash flows from operations will be sufficient to fund the operations for the next 12 months.
We also utilize a reasonable and supportable forecast period equal to the contractual term of the loan plus any applicable short-term extensions that are reasonably expected for construction loans. The allowance for the mortgage receivable is presented on the Consolidated Balance Sheets while the allowances on the interest receivable, due from borrowers, and (available-for-sale debt) investment securities are presented net.
We also utilize a reasonable and supportable forecast period equal to the contractual term of the loan plus any applicable short-term extensions that are reasonably expected for construction loans.
Operating costs and expenses Total operating costs and expenses for the year ended December 31, 2023, were approximately $49.7 million compared to approximately $31.4 million for 2022, an increase of approximately $18.3 million, or 58.5%.
Other investment income was $0.4 million for 2024 compared to $1.2 million for 2023, a decrease of $0.8 million, or 67.7%. Operating costs and expenses Total operating costs and expenses for the year ended December 31, 2024, were $75.3 million compared to $49.7 million for 2023, an increase of $25.6 million, or 51.5%.
Funding for long-term cash needs will come from unused net proceeds from financing activities, operating cash flows, refinancing existing debt, and proceeds from sales of real estate owned.
Our long-term cash needs will include principal and interest payments on outstanding indebtedness maturing late in 2026 and early 2027, preferred stock dividends and funding of new mortgage loans. Funding for long-term cash needs will come from unused net proceeds from financing activities, operating cash flows, refinancing existing debt, and proceeds from sales of real estate owned.
Comprehensive Income For the year ended December 31, 2023, we reported a reclass of unrealized losses on certain equity securities of approximately $877,000 reflecting the recognition of unrealized losses on securities held for over one year, which were not considered temporary losses.
For the year ended December 31, 2023, we reported a reclassification of unrealized losses to provision for credit losses of $0.8 million reflecting the recognition of unrealized losses on securities held for over one year, which were not considered temporary losses, as well as an unrealized gain on investment securities of $0.1 million.
We continue to look for opportunities in new markets that meet our underwriting and loan criteria. ● We continued implementing our strategy to fund larger loans than we have in the past that are secured by what we believe are higher-quality properties that are being developed by borrowers that we deem to be more stable and successful.
At December 31, 2024, our capital structure was 62.0% debt and 38.0% equity compared to 60.4% debt and 39.6% equity at December 31, 2023. ● We maintained our strategy to fund larger loans than we have in the past that are secured by what we believe are higher-quality properties that are being developed by borrowers that we deem to be more stable and successful.
Even if we qualify for taxation as a REIT, we may be subject to certain U.S. federal, state and local taxes on our income. Critical Accounting Policies and Use of Estimates The accompanying consolidated financial statements have been prepared in accordance with U.S. generally accepted accounting principles (“GAAP”).
Most of the loans sold were categorized as “non-performing”. Critical Accounting Policies and Use of Estimates The accompanying consolidated financial statements have been prepared in accordance with U.S. generally accepted accounting principles (“GAAP”).
The increases were partially offset by a decrease in accrued dividends payable of approximately $0.2 million. Total shareholders’ equity at December 31, 2023 was approximately $230.1 million compared to approximately $217.7 million at December 31, 2022, an increase of approximately $12.4 million, or 5.7%.
Total shareholders’ equity at December 31, 2024 was $181.7 million compared to $230.1 million at December 31, 2023, a decrease of $48.4 million, or 21.0%.
We record an allowance for credit losses (“CECL”) in accordance with the CECL standard on our loan portfolio, including unfunded construction commitments, on a collective basis by assets with similar risk characteristics. This methodology replaces the probable incurred loss impairment methodology.
Revenue Recognition Interest income from commercial loans is recognized, as earned, over the loan period, whereas origination and modification fee revenue on commercial loans are amortized over the term of the respective notes. ​ 42 Table of Contents CECL Allowance We record an allowance for credit losses (“CECL”) in accordance with the CECL standard on our loan portfolio, including unfunded construction commitments, on a collective basis by assets with similar risk characteristics.
Income from partnership investments increased to approximately $3.5 million for 2023 compared to approximately $1.8 million for 2022, an increase of approximately $1.7 million, or 94.6%. Fee and other income was approximately $4.8 million for 2023 compared to approximately $3.0 million for 2022, an increase of approximately $1.8 million, or 62.1%.
Fee income from loans decreased to $8.6 million for 2024 compared to $10.7 million for 2023, a decrease of $2.1 million, or 19.7% due to lower origination volume as compared to 2023. Income from limited liability company investments increased to $5.2 million for 2024 compared to $3.5 million for 2023, an increase of $1.7 million, or 48.8%.
Contractual Obligations As of December 31, 2023, our contractual obligations include unfunded amounts of any outstanding construction loans and unfunded commitments for loans and partnership investments. ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Less than ​ 1 – 3 ​ 3 – 5 ​ More than ​ Total 1 year years years 5 years Unfunded portions of outstanding construction loans ​ $ 97,901,849 ​ $ 50,278,089 ​ $ 47,623,760 ​ $ — ​ $ — Unfunded partnership commitments ​ 3,936,022 ​ 3,936,022 ​ — ​ — ​ — Total contractual obligations ​ $ 101,837,871 ​ $ 54,214,111 ​ $ 47,623,760 ​ $ — ​ $ — ​ Recent Accounting Pronouncements See ‘‘Note 2 — Significant Accounting Policies’’ to the financial statements for explanation of recent accounting pronouncements impacting us.
Off-Balance Sheet Arrangements We are not a party to any off-balance sheet transactions, arrangements or other relationships with unconsolidated entities or other persons that are likely to affect liquidity or the availability of our requirements for capital resources. 46 Table of Contents Contractual Obligations As of December 31, 2024, our contractual obligations include unfunded amounts of any outstanding construction loans and unfunded commitments for loans and limited liability company investments. ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Less than ​ 1 – 3 ​ 3 – 5 ​ More than (in thousands) Total 1 year years years 5 years Unfunded portions of outstanding construction loans ​ $ 49,874 ​ $ 36,223 ​ $ 13,651 ​ $ — ​ $ — Unfunded commitments ​ 4,374 ​ 4,374 ​ — ​ — ​ — Total contractual obligations ​ $ 54,248 ​ $ 40,597 ​ $ 13,651 ​ $ — ​ $ — ​ Recent Accounting Pronouncements See ‘‘Note 2 — Significant Accounting Policies’’ to the financial statements for explanation of recent accounting pronouncements impacting us.
Net income and net income per share Net income for 2023 attributable to common shareholders was approximately $12.1 million compared to approximately $17.2 million for 2022, a decrease of approximately $5.1 million or 29.7%. Our net income per weighted average Common Share outstanding for 2023 was $0.27 compared to $0.46 for 2022.
Net (loss) income attributable to common shareholders and net (loss) income attributable to common shareholders per share Net loss attributable to common shareholders for the year ended December 31, 2024 was $43.9 million compared to net income attributable to common shareholders of $12.1 million for the year ended December 31, 2023.
On March 28, 2024, our Board of Directors approved a dividend of $0.11 per share, payable on April 16, 2024 to common shareholders of record as of the close of the NYSE American on April 9, 2024. Management has evaluated subsequent events through March 28, 2024 the date on which the consolidated financial statements were available to be issued.
Management has evaluated subsequent events through March 31, 2025, the date on which the consolidated financial statements were available to be issued. Based on the evaluation, no adjustments were required in the accompanying consolidated financial statements.
Those units were approved in March of 2024, subject to a 30 day appeal period, which extends into April 2024. On March 19, 2024, our Board of Directors authorized a one time bonus of a restricted grant of 111,857 Common shares to John L. Villano. The fair market value on the date of grant was approximately $500,000.
Villano, which shares had a fair market value on the date of grant of approximately $500,000; and (ii) a one-time bonus grant of 20,000 restricted Common Shares to each of our non-employee directors, Arthur Goldberg, Brian Prinz, Leslie Bernhard and Jeffery Walraven. Each of our non-employee directors, with the exception of Mr.
The change in the balances during the reporting period are recorded in the Consolidated Statements of Comprehensive Income under the Provision for credit losses. 55 Table of Contents Results of Operations Years ended December 31, 2023 and 2022 Total revenue Total revenue for the year ended December 31, 2023, was approximately $65.6 million compared to approximately $52.3 million for the year ended December 31, 2022, an increase of approximately $13.3 million, or 25.5%.
Results of Operations Years ended December 31, 2024 and 2023 Total revenue Total revenue for the year ended December 31, 2024, was $57.5 million compared to $64.7 million for the year ended December 31, 2023, a decrease of $7.2 million, or 11.2%.
Removed
Company Overview We are a Connecticut-based real estate finance company that specializes in originating, underwriting, funding, servicing and managing a portfolio of short-term ( i.e., three years or less) loans secured by first mortgage liens on real property. From our inception in December 2010, through our initial public offering, in February 2017, we operated as a limited liability company.
Added
Company Overview Sachem Capital Corp., a New York corporation, established in 2010 and completing an initial public offering in 2017 is a self-managed REIT that specializes in originating, underwriting, funding, servicing and managing a portfolio of first mortgage loans. The Company operates its business as one segment.
Removed
On February 9, 2017, we completed our initial public offering (the “IPO”), the primary purpose of which was to raise equity capital to fund mortgage loans and expand our mortgage loan portfolio and to diversify our ownership so that we could qualify, for federal income tax purposes, as a real estate investment trust, or REIT.
Added
The Company offers short-term ( i.e ., one to three years), secured, non-bank loans (sometimes referred to as “hard money” loans) to real estate owners and investors to fund their acquisition, renovation, development, rehabilitation or improvement of properties located primarily in the northeastern and southeastern sections of the United States.
Removed
We believe that, since consummation of the IPO, we meet all the requirements to 48 Table of Contents qualify as a REIT for federal income tax purposes and elected to be taxed as a REIT beginning with our 2017 tax year.
Added
The properties securing the Company’s loans are generally classified as residential or commercial real estate and, typically, are held for resale or investment.
Removed
As a REIT, we are entitled to claim deductions for distributions of taxable income to our shareholders thereby eliminating any corporate tax on such taxable income.
Added
Each loan is secured by a first mortgage lien on real estate and may also be secured with additional collateral, such as other real estate owned by the borrower or its principals, a pledge of the ownership interests in the borrower by the principals thereof, and/or personal guarantees by the principals of the borrower.
Removed
Any taxable income not distributed to shareholders is subject to tax at the regular corporate tax rates and may also be subject to a 4% excise tax to the extent it exceeds 10% of our total taxable income. To maintain our qualification as a REIT, we are required to distribute each year at least 90% of our taxable income.
Added
The Company does not lend to owner occupants of residential real estate. The Company’s primary underwriting criteria is a conservative loan to value ratio.
Removed
At December 31, 2023, our capital structure was 60.4% debt and 39.6% equity compared to 59.3% debt and 40.7% equity at December 31, 2022. ● We adjusted and refined our business strategy to address changes in the marketplace and our growth to-date.
Added
We believe migration to larger borrowers and better capitalized sponsors will decrease future problem loans. ● We continued the enhancement of our underwriting guidelines to strengthen our documentation and collateral position on our loans. ​ ● We sold 32 loans, having an aggregate unpaid principal balance of principal balance of $55.8 million, which generated approximately $36.1 million of net proceeds.
Removed
Specifically, we continue to strengthen our geographic footprint beyond Connecticut and the rest of New England with particular emphasis on Florida and New York. In addition, our current mortgage loan portfolio includes loans secured by properties in California, Georgia, Maine, Maryland, Massachusetts, New Jersey, North Carolina, Pennsylvania, Rhode Island, South Carolina, Tennessee, Texas and Washington D.C.
Added
Loans, interest receivable, due from borrowers, unfunded commitments, and (available-for-sale debt) investment securities are all presented net on the Consolidated Balance Sheets with expanded disclosures in the notes to the consolidated financial statements. The change in the balances during the reporting period are recorded in the Consolidated Statements of Operations under the provision for credit losses.
Removed
We believe migration to larger borrowers and better capitalized sponsors will decrease future problem loans. ● To leverage our expertise in real estate finance and our capital resources, on the one hand, and to capitalize on lending opportunities in specific markets, on the other, we have implemented our strategy to partner and invest with local “hard money” real estate lenders creating satellite offices under the “Sachem” influence. ● We continued the enhancement of our underwriting guidelines to strengthen our documentation and collateral position on our loans. ● On June 23, 2023, the Company entered into a purchase and sale contract (the “Westport Purchase Agreement”) for $10,600,000 to acquire a commercial office building in Westport, CT (the “Westport Asset”).
Added
The decrease in revenue was primarily due to a reduction in the number of loan originations and a decline in net loans held for investment over the year. For 2024, interest income was $43.2 million compared to $49.3 million for 2023, representing a decrease of $6.1 million or 12.4%.
Removed
The transaction was completed on August 31, 2023. In connection with this transaction, which was accounted for as an asset acquisition, the Company allocated the purchase price and acquisition - related costs to the tangible and intangible assets acquired based on the fair market value of the individual components.
Added
This net increase was attributable to (i) a $21.3 million increase in provision for credit losses related to loans and (ii) a $1.9 million increase in general and administrative expenses as a result of increased legal and professional fees during the second and third quarters of the year related to matters outside of our ordinary course of business; all of which was offset by a $1.4 million decrease in interest and amortization expense.
Removed
In addition, the Company recorded a lease liability stemming from below - market rental rates.
Added
Other (loss) income Total other loss for the year ended December 31, 2024 was $21.8 million compared to other income of $0.9 million the year ended December 31, 2023, a decrease of $22.7 million. This decrease was driven by the $22.0 million loss on the sale of loans, and a decrease in gain on equity securities of $0.7 million.
Removed
Total consideration, including capitalized acquisition - related costs, was $10,725,237. 2024 Outlook Our primary business objective for 2024 remains to grow our loan portfolio while protecting and preserving capital in a manner that provides for attractive risk-adjusted returns to our shareholders over the long term principally through dividends.
Added
Accordingly, net loss per weighted average Common Share outstanding for the year ended December 31, 2024 was $0.93 compared to net income per weighted average Common Share outstanding for the year ended December 31, 2023 of $0.27. 43 Table of Contents Comprehensive (loss) income For the year ended December 31, 2024, we reported a reclass of realized losses on certain equity securities of $0.3 million reflecting the recognition of unrealized losses on securities sold, as well as a reversal of losses on debt securities from unrealized to realized following the sale of such securities.
Removed
We intend to achieve this objective by accelerating profitable growth and driving operational excellence. To accelerate profitable growth, we will continue to focus on selectively originating, managing, and servicing a portfolio of first mortgage real estate loans designed to generate attractive risk-adjusted returns across a variety of market conditions and economic cycles.
Added
Book value per common share The following table sets forth the calculation of our book value per common share (in thousands, except share and per share data): ​ ​ ​ ​ ​ ​ ​ ​ At December 31, ​ 2024 2023 Total shareholders’ equity ​ $ 181,651 ​ $ 230,076 Series A Preferred Stock ($25 aggregate liquidation preference) ​ (57,669) ​ (50,748) Total shareholders’ equity, net of preferred stock ​ 123,982 ​ 179,328 Number of Common Shares outstanding at period end ​ 46,965,306 ​ 46,765,483 Book value per common share ​ $ 2.64 ​ $ 3.83 ​ Book value per common share as of December 31, 2024, was $2.64, a decrease of $1.19 from our book value per common share as of December 31, 2023 of $3.83.
Removed
We are also targeting larger-value commercial loans with strong, experienced sponsors. To drive additional operational excellence, we continuously review, assess, and 49 Table of Contents upgrade our existing operational processes, from workflows and employee roles/responsibilities to decision trees and data collection forms.
Added
Such decrease is primarily due to the net effect of the sum of the following: ● Non-cash allowances and losses of (i) provision for credit losses related to loans totaling $26.9 million; (ii) valuation allowance related to loans held for sale totaling $4.9 million; (iii) loss on sale of loans totaling $22.0 million during the year ended December 31, 2024, all of which total $53.8 million, or $1.15 per share decrease in book value; ● Net loss available to common shareholders for the year ended December 31, 2024 adjusted for excluding the non-cash allowances and losses above of $9.8 million, or $0.20 per share increase in book value: and ● Cash dividends declared and paid for year ended December 31, 2024 on Common Shares totaling $11.4 million, or $0.24 per share decrease in book value. ​ Liquidity and Capital Resources Total assets at December 31, 2024 were $492.0 million compared to $620.9 million at December 31, 2023, a decrease of $128.9 million, or 20.8%.
Removed
Additionally, we continue to focus on developing relationships with larger scale wholesale brokers, furthering our efforts to attract larger borrowers with better credit quality.
Added
The decrease was due primarily to note sale that closed during December 2024, lower originations during the year as a result of utilizing principal repayments and cash received for the redemption of the unsubordinated unsecured note payable that was due in December 2024, and sale of $36.2 million of investments in securities.
Removed
We believe that our ability to react quickly to the needs of borrowers, our flexibility in terms of structuring loans to meet the needs of borrowers, our knowledge of the primary real estate markets we lend in, our expertise in “hard money” lending and our focus on newly originated first mortgage loans, should enable us to achieve our primary objective.
Added
Total liabilities at December 31, 2024 were $310.3 million compared to $390.8 million at December 31, 2023, a decrease of $80.5 million, or 20.6%. This decrease was principally due to repaying in full two tranches of our unsecured unsubordinated five-year notes that matured in June and December of 2024. The total amount repaid was $58.2 million.
Removed
Nevertheless, we remain flexible to take advantage of other real estate opportunities that may arise from time to time, whether they relate to the mortgage market or to direct or indirect investments in real estate.
Added
In addition, we closed our Wells Fargo line of credit, which had an outstanding balance of $27.3 million. Finally, there was a decrease in advances from borrowers of $7.0 million. These decreases were partaially offset by our outstanding balance on the Churchill Credit Facility which increased by $7.2 million.
Removed
Our overall business strategy is as follows: ● capitalize on opportunities created by the long-term structural changes in the real estate lending market and the continuing lack of liquidity in the commercial and investment real estate markets; ● take advantage of the prevailing economic environment and current economic, political and social trends that may impact real estate lending, as well as the outlook for real estate in general and particular asset classes; ● remain flexible to capitalize on changing sets of investment opportunities that may be present in the various points of an economic cycle; ● continue to improve operational efficiencies and reduce general and administrative expenses as a percentage of revenue; ● maintain our status as a publicly-held company, subject to the reporting requirements of the Exchange Act, which gives us immediate access to the public markets for much-needed capital; and ● operate to qualify as a REIT and for an exemption from registration under the Investment Company Act of 1940, as amended, or the Investment Company Act.
Added
This decrease was attributable to the $22.0 million loss on the sale of loans that occurred in December 2024, the $26.9 million provisions related to loans mandated by CECL, and the $4.9 million valuation allowance on loans held for sale, all of which contributed to the result of a $39.6 million net loss for the year ended December 31, 2024. 44 Table of Contents Sources and Uses of Funds Our primary sources of cash include principal and interest payments on mortgage loans and various fees associated with such loans, proceeds from the sales of real property, net proceeds from offerings of equity securities and borrowings from our credit facilities.
Removed
We expect 2024 to be a challenging year due to the following factors: Rising interest rates and interest rate compression. The rates on our existing credit facilities, including the Churchill Facility, the Wells Fargo Loan and the NHB Mortgage (refinanced in February 2023) (as defined below), have all increased.
Added
Our primary uses of cash include debt service payments (both principal and interest), new originations of loans held for investment, new investments in real estate, dividend distributions to our shareholders, and operating expenses.
Removed
The effective rate of Needham Bank Credit Facility was 8.25%, and Churchill Facility was 9.40% as of March 28, 2024. In addition, the interest rate on the September 2027 Notes, our last note offering in 2022, was 8%, the highest it has ever been.
Added
These sources and uses of cash are reflected in our Consolidated Statements of Cash Flows as summarized below: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Year Ended ​ ​ ​ One Year Change ​ ​ Amount 2024 2023 Amount Percentage ​ ​ ​ ​ ​ ​ ​ (in thousands) ​ ​ ​ Cash and cash equivalents, January 1 ​ $ 12,598 ​ $ 23,713 ​ $ (11,115) (88.2) % Net cash provided by operating activities ​ ​ 12,890 ​ ​ 21,851 ​ (8,961) (69.5) % Net cash provided by (used in) investing activities ​ ​ 79,910 ​ ​ (72,488) ​ 152,398 190.7 % Net cash (used in) provided by financing activities ​ ​ (87,332) ​ ​ 39,522 ​ (126,854) (145.3) % Cash and cash equivalents, December 31 ​ $ 18,066 ​ $ 12,598 ​ $ 5,468 30.3 % ​ For a detailed breakdown of our cash flows during the years ended December 31, 2024 and 2023, see the statement of cash flows included in our audited financial statements. ​ We project anticipated cash requirements for our operating needs as well as cash flows generated from operating activities available to meet these needs.
Removed
Overall, our weighted average cost of debt capital, excluding amortization of deferred financing costs, as of December 31, 2023 was 7.22% compared to 7.07% as of December 31, 2022. For the year ended December 31, 2023, and 2022, the yield on our mortgage loan portfolio, inclusive of default interest, was 12.6% and 11.5%, respectively.
Added
On March 20, 2025, we terminated our existing Needham Credit Facility and replaced it with a new Needham Credit Facility.
Removed
(For this purpose, the yield only takes into account the stated interest rate on the mortgage note adjusted to the default rate, if applicable.) Nevertheless, we believe the interest rate compression will continue to be a factor during the first half of 2024 until the Fed begins to cut interest rates.
Added
Except as described below, the new Needham Credit Facility is identical to the old Needham Credit Facility in all material respects: ● First, the borrower under the new Needham Credit Facility is SN Holdings LLC, a Connecticut limited liability company formed and wholly owned by Sachem for the sole purpose of acting as the borrower under the new agreement.
Removed
Geopolitical concerns. 2023 was marked with various geopolitical concerns, including the ongoing conflict between Ukraine and Russia and Israel and Hamas, heightened tensions between the U.S. and China regarding Taiwan and global trade, and Iran’s continued pursuit of nuclear weapons and its ongoing attempts to destabilize the Middle East, to name a few.
Added
Sachem is the guarantor of all SN Holdings’ obligations under the new Needham Credit Facility. ● Second, SN Holdings, in its capacity as borrower, granted Needham a lien on all its assets. SN Holdings is required to maintain assets equal to two times the outstanding balance on the new Needham Credit Facility.
Removed
These conflicts have led to market volatility, spikes in commodity prices, supply chain interruptions, heightened cybersecurity concerns and general concerns that it might lead to unconventional warfare. The true ramifications of these conflicts and their impact on the markets and our business operations, specifically our borrowers and real estate prices, are not fully known at this time.
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In addition, SN Holdings is required to collaterally assign to Needham mortgage loans having an outstanding principal balance in an amount no less than the greater of (i) $30 million and (ii) the aggregate principal outstanding principal balance on the new Needham Credit Facility. ● Third, Sachem, in its capacity as guarantor, agreed to grant Needham a blanket lien on all its assets.
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Our business is purely domestic, but we are impacted by market volatility and cybersecurity is a concern for all businesses. Increased competition. In the past, our primary competitors were other non-bank real estate finance companies and banks and other financial institutions.
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However, Needham is required to release its lien at Sachem’s request to facilitate other financing by Sachem and subsidiaries level. ● Fourth, the new Needham Credit Facility is a committed facility of up $50 million, subject to borrowing base limitations and facility covenant compliance. ● Fifth, the new Needham Credit Facility retained the same maturity of March 2, 2026 as original term with the option to extend one year provided we are in compliance with all the covenants and other terms and conditions of the new Needham Credit Facility. 45 Table of Contents Simultaneously with the execution and delivery of the Credit, Security and Guaranty Agreement, dated as of March 20, 2025, among SN Holdings, Sachem and Needham, which governs the new Needham Credit Facility, Sachem repaid the entire outstanding balance on the old credit facility, $39.6 million, and SN Holdings drew $36.1 million on the new credit facility, reducing our outstanding indebtedness by $3.5 million.
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More recently, we are encountering competition from private equity funds, hedge funds and other specialty finance entities funded by investment banks, asset managers, private equity funds and hedge funds. The primary driver for these new market participants, we believe, is their need to find higher yielding investments.
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As of March 20, 2025, the Company was no longer in violation of any Needham Credit Facility covenants. On April 1, 2025, SN Holdings is required to make a principal payment of $9.9 million, further reducing the outstanding indebtedness to $26.2 million.
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Given that residential transition loan gross yields are in the 12-15% range, many institutions are deploying capital into credit products where the returns are nearing equity investments. These entities, in general, are well-funded, have relatively easy access to capital and are aggressive in terms of pricing.
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A copy of the Credit, Security and Guaranty Agreement, dated as of March 20, 2025, among SN Holdings, Sachem and Needham, is filed as Exhibit 10.8 to this Report.
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In addition, competition is becoming more of a factor as we implement our strategy to focus on larger loans and more sophisticated borrowers. 50 Table of Contents Given recent developments regarding mid-size regional banks, we believe competition from traditional banks will continue to abate in 2024 rather than increase.
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Subsequent Events On February 24, 2025, the Board authorized and the Company declared a dividend of $0.484375 per share on the Company’s 7.75% Series A Preferred Stock payable on March 31, 2025 to Series A Preferred Stock shareholders of record on March 15, 2025.
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However, as traditional banks exit the lending market, non-traditional lenders, such as non-bank real estate companies, hedge funds, private equity funds and insurance companies, are likely to step into the void. Our principal competitive advantages include our experience, our reputation, our size and our ability to address the needs of borrowers in terms of timing and structuring loan transactions.
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The payment represents the full amount of the dividend accruing from December 30, 2024 through and including March 29, 2025. On March, 5, 2025, the Board authorized and declared a quarterly dividend of $0.05 per Common Share to be paid to shareholders of record as of the close of trading on the NYSE American on March 17, 2025.
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Borrower expectations. As stated above the increased yield environment has resulted in an inflow of private capital into the transitional lending sector. As a result, some of the negotiating leverage has shifted in favor of borrowers who have multiple term sheets. As borrowers have more choices they are demanding better terms, relative to the current interest rate environment.
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The dividend is payable on March 31, 2025. On March 10, 2025, our Compensation Committee authorized (i) a grant of 420,168 restricted Common Shares to John L.
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While we are able to pass along most of the increased cost of capital to the borrowers, increased competition has the potential to hinder spreads. This is particularly true as we focus more on larger loans and borrowers with better credit histories. Property value fluctuations. Property value market cycles could have an adverse impact on our operations and financial condition.

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