Sachem Capital Corp. 8.00% Note (SCCG) Cash Flow Statement

The REIT's ability to fund its dividend from core operations is critically impaired. In Q4 2025, the dividend of $3.5 million was covered by AFFO of $2.6 million, yielding a ratio of 0.89, but this was followed by a period of negative FFO and missing AFFO data, suggesting the payout is likely being funded from external sources or reserves. The pattern of paying dividends while generating negative FFO and cash flow from operations indicates a distribution policy that is decoupled from underlying economic performance, warranting close monitoring for potential cuts or the need for continuous capital raises.

The severe and persistent negative FFO trend indicates the core mortgage REIT business is not generating positive earnings from its operations before depreciation. The divergence between GAAP operating cash flow (OCF) and FFO—for example, OCF was negative $3.6 million in Q2 2026 while FFO was negative $6.0 million—suggests significant non-cash adjustments are impacting FFO. This poor conversion from earnings to cash is not a quality issue but a reflection of fundamental operational losses that are now also draining operating cash, as confirmed by the negative OCF in the two most recent periods.

For a mortgage REIT, depreciation is typically a small component, but the near-identity of Net Income and FFO losses in Q4 2024 suggests that large, non-depreciation charges dominated the GAAP results. This episode masks the true operational cash flow picture; while FFO is designed to remove real estate depreciation, it cannot adjust for the severe credit losses that appear to have materialized. In subsequent quarters, the wider gap between Net Income and FFO (e.g., FFO of -$6.0M vs. Net Income of -$6.5M in Q2 2026) may indicate a return to more typical, albeit negative, operational patterns where depreciation is a minor factor.

The persistent gap between dividends paid and negative FFO, particularly in 2024, suggests a reliance on external capital markets to sustain distributions. For instance, in Q2 2024, dividends were $6.3 million while FFO was negative $3.0 million. This creates a dependency cycle where the REIT must continuously raise capital to cover losses and pay dividends, potentially diluting shareholders or increasing leverage. Investors should monitor the share count and debt levels for evidence of this financing activity, as it is an unsustainable long-term practice without operational turnaround.