Image Source: PixabayFirst mortgage real-estate lender Sachem Capital (SACH) has seen its shares annihilated as of late, having declined almost 80% from their 2022 high. This puts it at a 73% discount to book value, making it a very enticing investment from a value standpoint.The company’s CEO bought some shares about two months ago, and stated on the company’s most recent conference call that he believes the shares to be undervalued. The company has also dramatically slowed its lending, so it is bringing in more cash than it is leaving, which should shore up the balance sheet.However, there are a few items which seem to reduce the potential value of this investment.First, common shares are not the only claim on the company’s book value. There is a significant number of preference shares, which take a big bite out of that headline discount.Second, the company is in the process of selling some of its mortgages for 70% of their remaining unpaid principal. That is a massive discount, and this suggests the company made some big mistakes when it issued these loans during the good times.Not only can you go ahead and knock some more millions off the discount for this particular deal (albeit less some reserves for these loans that have already been made), but there are other non-performing loans on the books that should probably be given big discounts as well.If it were just these two issues, I could probably pinch my nose, make some conservative write-downs, and still be willing to take a poke at this. But there is another red flag that is keeping me away: what the company is doing with its excess cash. Rather than buy back shares at what is still a large discount, management is instead investing good money into non-controlling stakes in some investment partnership.Maybe that partnership turns into the next NVIDIA, who am I to judge? But this behavior is not that of an owner. It’s that of someone more interested in rent-seeking off of shareholders rather than shareholder return. They’ve invested $51 million in this partnership, which is almost Sachem’s entire market cap. If management believes in their loan book, this amount of money would have done wonders for shareholder returns in the form of repurchases.Sure enough, insiders are not big owners of this company. Despite the aforementioned insider purchase from two months ago, the CEO’s ownership to annual salary ratio is roughly one, which means he’s much better off growing the company than growing returns. He’s doing exactly what his incentives are telling him to.This company may be ripe for an activist takeover, however. Interestingly, the preference shares are an intriguing opportunity for fixed-income investors. These trade publicly, are at a discount to face value, and derive an almost double-digit yield at the recent price.More By This Author:Little 5 Sporting GoodsVOXX International Corporation: Unpopular But Profitable?Book Review: The Inside Scoop