Seven Hills Realty Trust
For the period ended Jun 30, 2025. Filed Jul 28, 2025.
View on SEC.govAbout this filing
A company's report for each of its first three quarters. The financial statements are not audited. It shows how the business has moved since the last annual report, and what management says changed.
Jun 30, 2025 · Filed Jul 28, 2025
SEVN$6.63-1.9%Stored close · as of Nov 6, 2026
What changed in Management’s Discussion and Analysis?
Read the current filingPrevious report: 10-Q
Period ended 2025-03-31; filed 2025-04-28.
0001452477-25-000025
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of OperationsCurrent report: 10-Q
Period ended 2025-06-30; filed 2025-07-28.
0001452477-25-000044
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of OperationsThe baseline is this issuer’s latest earlier reporting period of the same form that was filed before the current report. A previous 10-Q is a different quarter, not a year-over-year comparison. Amendments are excluded.
Compared 101 previous paragraphs and 110 current paragraphs.
73 unchanged; 19 reworded; 10 added; 8 removed; 1 previous and 8 current paragraphs rearranged.
Tables are not compared: 9 previous and 11 current tables excluded. Dates, whitespace, punctuation and numbering changes are ignored; changes to financial figures remain significant.
A changed paragraph is not evidence that risk increased or decreased. An unchanged paragraph does not establish that risk stayed the same.
Added paragraphs (10)
Current report
Market Conditions. U.S. trade and fiscal policy, coupled with ongoing geopolitical tensions, has caused uncertainty in financial markets. As a result, we believe many CRE investors continue to remain on the sidelines, waiting until they have greater clarity on the outcomes of negotiations with U.S. trade partners, new tariff announcements, domestic fiscal policy initiatives and the path of interest rates to make buy and sell decisions. However, the Federal Open Market Committee, or FOMC, has indicated that the U.S. economy is on solid footing, allowing it to be patient and wait to measure the impact of tariff driven price increases before determining the future path of interest rates.
Current report
Despite the current macroeconomic uncertainty, CRE debt markets continue to function well. The relative risk versus reward in CRE debt investments has led to healthy loan demand from various types of lenders, including banks, securitized lenders, life insurance companies, private debt funds and mortgage REITs. With fewer sale transactions to finance and strong debt capital market liquidity, borrowers with well-performing collateral properties are benefiting from increased competition amongst lenders, which has driven credit spreads and whole loan rates downward.
Current report
In May 2025, we amended the agreement governing our loan secured by an office property in Downers Grove, IL. As part of this amendment, the borrower repaid $3,000 of the outstanding principal balance and the maturity date was extended by one year to May 22, 2026. As of June 30, 2025, this loan had an amortized cost of $26,620 and a risk rating of 4.
Current report
Incentive fees. We recognize management incentive fees payable to Tremont in accordance with our management agreement. The increase in management incentive fees was due to the incentive fee for the 12 month period ended June 30, 2025 exceeding the fee paid for the previous three calendar quarters by a higher margin, as compared to the fee for the 12 month period ended March 31, 2025.
Current report
Six Months Ended June 30, 2025 Compared to Six Months Ended June 30, 2024:
Current report
Purchase discount accretion. The decrease in purchase discount accretion was due to the purchase discount recorded as part of our merger with Tremont Mortgage Trust, or the Merger, becoming fully accreted during 2024.
Current report
Interest and related expenses. The decrease in interest and related expenses was primarily the result of lower weighted average coupon rates under our Secured Financing Facilities, partially offset by higher outstanding principal balances during the six months ended June 30, 2025. The weighted average coupon rate was 6.51% as of June 30, 2025 compared to 7.48% as of June 30, 2024. The weighted average principal balance was approximately $432,000 for the six months ended June 30, 2025 compared to approximately $431,000 for the six months ended June 30, 2024.
Current report
General and administrative expenses. The increase in general and administrative expenses was primarily due to an increase in share based compensation resulting from shares awarded to our trustees during the six months ended June 30, 2025.
Current report
(1)Exit fees collected on loans acquired in the Merger represent fees collected upon repayment of loans for which no income has previously been recognized in Distributable Earnings. In accordance with GAAP, exit fees payable with respect to loans acquired in the Merger were accreted as a component of the purchase discount and were excluded from Distributable Earnings as a non-cash item. Accordingly, these exit fees have been recognized in Distributable Earnings upon collection.
Current report
As of June 30, 2025, we had a $72,205 aggregate outstanding principal balance under the BMO Facility.
Removed paragraphs (8)
Previous report
Market Conditions. CRE investors entered 2025 with cautious optimism. By the end of 2024, citing progress towards attaining its 2% inflation target, the Federal Open Market Committee, or FOMC, lowered the targeted federal funds rate by a combined 100 basis points, providing borrowers relief from a sustained period of elevated borrowing costs. Despite falling short of many borrowers’ expectations, the FOMC’s initial reduction gave borrowers a level of certainty and conviction around buy, sell or refinance decisions, and debt liquidity continued to return to the market.
Previous report
Despite increasing delinquency rates within certain segments of the market, in particular for recent vintage multifamily loans, property fundamentals overall have continued to improve. Supply and demand imbalances, specifically for multifamily and industrial properties, have been showing signs of leveling off with property values trending upwards. Strong investor demand for CMBS and CRE collateralized loan obligations, or CLO, bonds and fresh allocations from life insurance companies and agency lenders such as Fannie-Mae and Freddie-Mac helped to drive credit spreads and borrowing costs downward, increasing financing activity for much of the quarter.
Previous report
The cautious optimism that was common in the markets earlier in the year has now begun to wane as investors direct their attention to the administration’s new trade policies and recent tariff announcements. Although we believe markets had already priced in a baseline level of tariffs, the ultimate scope and magnitude of the announced rates were unexpected, creating new uncertainty and capital markets volatility.
Previous report
The FOMC’s dual mandate to ensure price stability and to maximize employment is again in focus. An increased risk of an economic recession may lead to job losses and the FOMC may need to consider lowering the target federal funds rate, a potentially welcome outcome for leveraged property owners. Alternatively, widespread tariffs, if prolonged, may contribute to greater inflation, which could cause the FOMC to consider maintaining or even increasing rates to slow potential, long-term inflationary pressures.
Previous report
With close to $2 trillion in CRE debt scheduled to mature over the next two years, property owners may face difficult decisions if market volatility persists. At the beginning of the year, borrowers believed they had a clear view on the path of short-term rates while 5 and 10-year U.S. Treasury yields remained somewhat elevated. Today, it is much less clear what the FOMC’s intentions are going forward and what the outlook is for short-term interest rates in the current economic climate. As for longer term interest rates, the 5 and 10-year U.S. Treasury yields continue to be elevated and quite volatile, making it difficult for borrowers that must refinance maturing loans to lock in long-term fixed rates in this environment. Despite the fact that many uncertainties exist today, we continue to believe that the CRE debt markets, property owners and lenders are well positioned to handle these uncertain times and conditions as we move deeper into 2025.
Previous report
(4)In April 2025, the borrower exercised a 30 day extension option which extended the maturity date of the loan to May 23, 2025.
Previous report
In February 2025, we amended the agreement governing our loan secured by an office property in Downers Grove, IL, which extended the term of the loan by 60 days to April 25, 2025 with an option to extend the loan for an additional 30 days. In April 2025, the borrower exercised its option to extend the loan by 30 days to May 23, 2025. As of March 31, 2025, this loan had an amortized cost of $29,642 and a risk rating of 4.
Previous report
As of March 31, 2025, we had a $103,855 aggregate outstanding principal balance under the BMO Facility.
Reworded paragraphs (19)
Previous wording
The interest income on our loans and interest expense on our borrowings float with benchmark rates, such as SOFR. Because we generally intend to leverage approximately 75% of the amount of our investments, as benchmark rates increase above the floors of our loans, our income from investments, net of interest and related expenses, will increase. Decreases in benchmark rates are mitigated by interest rate floor provisions in all but one of our loan agreements with borrowers, ranging from 0.10% to 5.20%; therefore, changes to income from investments, net, may not move proportionately with the increase or decrease in benchmark rates. As of March 31, 2025, SOFR was 4.32%, and as a result, one of our loan investments had an active interest rate floor.
Current wording
The interest income on our loans and interest expense on our borrowings float with benchmark rates, such as SOFR. Because we generally intend to leverage up to 80% of the amount of our investments, as benchmark rates increase above the floors of our loans, our income from investments, net of interest and related expenses, will increase. Decreases in benchmark rates are mitigated by interest rate floor provisions in all but one of our loan agreements with borrowers, ranging from 0.25% to 5.20%; therefore, changes to income from investments, net, may not move proportionately with the increase or decrease in benchmark rates. As of June 30, 2025, SOFR was 4.32%, and as a result, one of our loan investments had an active interest rate floor.
Previous wording
As of March 31, 2025, we had $690,913 in aggregate loan commitments, consisting of a diverse portfolio, geographically and by property type, of 23 first mortgage loans. As of March 31, 2025, we had five loans representing approximately 22% of the amortized cost of our loan portfolio with a loan risk rating of “4” or “higher risk”.
Current wording
As of June 30, 2025, we had $665,421 in aggregate loan commitments, consisting of a diverse portfolio, geographically and by property type, of 23 first mortgage loans. As of June 30, 2025, we had five loans representing approximately 22% of the amortized cost of our loan portfolio with a loan risk rating of “4” or “higher risk”. We have no “5” or “loss likely” rated loans.
Previous wording
In August 2024, we amended the agreement governing our loan secured by an office property in Plano, TX. As part of this amendment, the coupon rate was reduced from SOFR + 4.75% to SOFR + 3.75% and the maturity date was extended by two years to July 1, 2026. As of March 31, 2025, this loan had an amortized cost of $26,635 and a risk rating of 4.
Current wording
In August 2024, we amended the agreement governing our loan secured by an office property in Plano, TX. As part of this amendment, the coupon rate was reduced from SOFR + 4.75% to SOFR + 3.75% and the maturity date was extended by two years to July 1, 2026. As of June 30, 2025, this loan had an amortized cost of $26,636 and a risk rating of 4.
Previous wording
In November 2024, we amended the agreement governing our loan secured by an office property in Carlsbad, CA. As part of this amendment, the borrower was required to contribute $1,100 to cash reserves and the maturity date was extended by two years to October 27, 2026. As of March 31, 2025, this loan had an amortized cost of $24,413 and a risk rating of 4.
Current wording
In November 2024, we amended the agreement governing our loan secured by an office property in Carlsbad, CA. As part of this amendment, the borrower was required to contribute $1,100 to cash reserves and the maturity date was extended by two years to October 27, 2026. As of June 30, 2025, this loan had an amortized cost of $24,414 and a risk rating of 4.
Previous wording
As of March 31, 2025, outstanding advancements under our Secured Financing Facilities had a weighted average interest rate of 6.52% per annum, excluding associated fees and expenses. As of March 31, 2025 and April 24, 2025, we had a $442,026 aggregate outstanding principal balance under our Secured Financing Facilities.
Current wording
As of June 30, 2025, outstanding advancements under our Secured Financing Facilities had a weighted average interest rate of 6.51% per annum, excluding associated fees and expenses. As of June 30, 2025 and July 24, 2025, we had a $417,215 and $381,853, respectively, aggregate outstanding principal balance under our Secured Financing Facilities.
Previous wording
Interest and related expenses. The increase in interest and related expenses was primarily the result of greater outstanding principal balances, partially offset by a decrease in the weighted average coupon rates under our Secured Financing Facilities during the three months ended March 31, 2025. The weighted average principal balance was approximately $432,000 for the three months ended March 31, 2025 compared to approximately $411,000 for the three months ended December 31, 2024. The weighted average coupon rate was 6.52% as of March 31, 2025 compared to 6.62% as of December 31, 2024.
Current wording
Interest and related expenses. The increase in interest and related expenses was primarily the result of a higher average principal balance outstanding under our Secured Financing Facilities and higher deferred fee amortization, partially offset by a decrease in the weighted average coupon rates during the three months ended June 30, 2025. The weighted average principal balance was approximately $433,000 for the three months ended June 30, 2025 compared to approximately $432,000 for the three months ended March 31, 2025. The weighted average coupon rate was 6.51% as of June 30, 2025 compared to 6.52% as of March 31, 2025.
Previous wording
Revenue from real estate owned. Revenue from real estate owned represents revenue from the operations of an office property located in Yardley, PA that was transferred to real estate owned through a deed in lieu of foreclosure in June 2023. The increase in revenue from real estate owned was primarily due to higher operating expense reimbursement during the three months ended March 31, 2025 as compared to the three months ended December 31, 2024.
Current wording
Revenue from real estate owned. Revenue from real estate owned represents revenue from the operations of an office property located in Yardley, PA that was transferred to real estate owned through a deed in lieu of foreclosure in June 2023. The decrease in revenue from real estate owned was primarily due to lower operating expense reimbursements during the three months ended June 30, 2025 as compared to the three months ended March 31, 2025.
Previous wording
General and administrative expenses. The increase in general and administrative expenses was primarily due to trustee stock grants during the three months ended March 31, 2025.
Current wording
General and administrative expenses. The increase in general and administrative expenses was primarily due to an increase in share based compensation resulting from shares awarded to our trustees during the three months ended June 30, 2025.
Previous wording
Expenses from real estate owned. Expenses from real estate owned represent expenses from the operations of an office property located in Yardley, PA that was transferred to real estate owned through a deed in lieu of foreclosure in June 2023. The decrease in expenses from real estate owned was primarily due to decreases in maintenance expenses during the three months ended March 31, 2025 as compared to the three months ended December 31, 2024.
Current wording
Expenses from real estate owned. Expenses from real estate owned represent expenses from the operations of an office property located in Yardley, PA that was transferred to real estate owned through a deed in lieu of foreclosure in June 2023. The decrease in expenses from real estate owned was primarily due to lower utility expenses during the three months ended June 30, 2025 as compared to the three months ended March 31, 2025.
Previous wording
Interest and related income. The increase in interest and related income was primarily the result of greater outstanding principal balances, partially offset by a decrease in the weighted average coupon rates under our loan investment portfolio during the three months ended March 31, 2025. The weighted average principal balance was approximately $641,000 for the three months ended March 31, 2025 compared to approximately $603,000 for the three months ended December 31, 2024. The weighted average coupon rate was 8.07% as of March 31, 2025 compared to 8.24% as of December 31, 2024.
Current wording
Interest and related income. The decrease in interest and related income was primarily the result of lower weighted average coupon rates under our loan investment portfolio, partially offset by higher outstanding principal balances during the six months ended June 30, 2025. The weighted average coupon rate was 8.03% as of June 30, 2025 compared to 9.11% as of June 30, 2024. The weighted average principal balance was approximately $642,000 for the six months ended June 30, 2025 compared to approximately $607,000 for the six months ended June 30, 2024.
Previous wording
Base management and incentive fees. We recognize base management and incentive fees payable to Tremont in accordance with our management agreement. The decrease in base management and incentive fees was due to lower “core earnings”, as defined in our management agreement, during the three months ended March 31, 2025 as compared to the three months ended December 31, 2024.
Current wording
Incentive fees. We recognize management incentive fees payable to Tremont in accordance with our management agreement. The decrease in management incentive fees was due to lower “core earnings”, as defined in our management agreement, during the six months ended June 30, 2025 as compared to the six months ended June 30, 2024.
Previous wording
Reimbursement of shared services expenses. Reimbursement of shared services expenses represents reimbursement of the costs for the services that Tremont arranges on our behalf from RMR. The decrease in reimbursement of shared services expenses was primarily the result of lower usage of shared services from RMR during the three months ended March 31, 2025 as compared to the three months ended December 31, 2024.
Current wording
Reimbursement of shared services expenses. Reimbursement of shared services expenses represents reimbursement of the costs for the services that Tremont arranges on our behalf from RMR. The decrease in reimbursement of shared services expenses was primarily the result of lower usage of shared services from RMR during the six months ended June 30, 2025 as compared to the six months ended June 30, 2024.
Previous wording
Reversal of credit losses. The reversal of credit losses represents the decrease in the allowance for credit losses on our loan portfolio and unfunded commitments. The decrease in the allowance for credit losses during the three months ended March 31, 2025 was primarily attributable to certain of our loans nearing maturity and improved performance at certain of the collateral properties underlying our loans, partially offset by higher total loan commitments as of March 31, 2025 as compared to December 31, 2024, including future funding of our unfunded loan commitments.
Current wording
Provision for credit losses. The provision for credit losses represents the change in the allowance for credit losses on our loan portfolio and unfunded commitments. The decrease in the provision for credit losses during the six months ended June 30, 2025 was primarily attributable to improved performance at certain of the collateral properties underlying our loans, partially offset by higher total loan commitments during the six months ended June 30, 2025 as compared to the six months ended June 30, 2024.
Previous wording
We believe that Adjusted Book Value per common share is a meaningful measure of our capital adequacy because it excludes the impact of certain non-cash estimates or adjustments, including our allowance for credit losses for our loan portfolio and unfunded loan commitments. Adjusted Book Value per common share does not represent book value per common share or alternative measures determined in accordance with GAAP. Our methodology for calculating Adjusted Book Value per common share may differ from the methodologies employed by other companies to calculate the same or similar supplemental capital adequacy measures; therefore, our Adjusted Book Value per common share may not be comparable to the adjusted book value per common share reported by other companies.
Current wording
We believe that Adjusted Book Value per common share is a meaningful measure of our capital adequacy because it excludes the impact of certain non-cash estimates or adjustments, including the unaccreted purchase discount resulting from the excess of the fair value of the loans Tremont Mortgage Trust then held for investment and that we acquired as a result of the Merger, over the consideration we paid in the Merger and our allowance for credit losses for our loan portfolio and unfunded loan commitments. Adjusted Book Value per common share does not represent book value per common share or alternative measures determined in accordance with GAAP. Our methodology for calculating Adjusted Book Value per common share may differ from the methodologies employed by other companies to calculate the same or similar supplemental capital adequacy measures; therefore, our Adjusted Book Value per common share may not be comparable to the adjusted book value per common share reported by other companies.
Previous wording
(1)Excludes the impact of our allowance for credit losses. As of March 31, 2025 and December 31, 2024, our allowance for credit losses for our loan portfolio and unfunded loan commitments was $8,755 and $8,908, respectively.
Current wording
(1)Excludes the impact of our allowance for credit losses. As of June 30, 2025 and December 31, 2024, our allowance for credit losses for our loan portfolio and unfunded loan commitments was $9,667 and $8,908, respectively.
Previous wording
The decrease in cash provided by operating activities for the 2025 period compared to the 2024 period was primarily due to lower net interest income resulting from lower weighted average interest rates under our loan investment portfolio. The decrease in cash provided by investing activities was primarily due to increased loan originations and decreased loan repayments in the 2025 period. The increase in cash provided by financing activities was primarily due to decreased repayments on our Secured Financing Facilities and increased proceeds from our Secured Financing Facilities in the 2025 period.
Current wording
The decrease in cash provided by operating activities for the 2025 period compared to the 2024 period was primarily due to lower net interest income resulting from lower weighted average interest rates under our loan investment portfolio. The change from cash provided by to cash used in investing activities was primarily due to increased loan originations in the 2025 period. The decrease in cash used in financing activities was primarily due to increased proceeds from our Secured Financing Facilities in the 2025 period.
Previous wording
During the three months ended March 31, 2025, we declared and paid regular quarterly distributions to our common shareholders totaling $5,216, or $0.35 per common share, using cash on hand.
Current wording
During the six months ended June 30, 2025, we declared and paid regular quarterly distributions to our common shareholders totaling $10,433, or $0.70 per common share, using cash on hand.
Previous wording
On April 10, 2025, we declared a regular quarterly distribution of $0.35 per common share, or $5,217, to shareholders of record on April 22, 2025. We expect to pay this distribution to our common shareholders on or about May 15, 2025 using cash on hand.
Current wording
On July 10, 2025, we declared a reduced regular quarterly distribution of $0.28 per common share, or $4,184, to shareholders of record on July 21, 2025. The reduced quarterly distribution reflects a sustainable rate with expectations that loan repayment proceeds will be redeployed at lower net interest margins and a declining SOFR index rate curve. We expect to pay this distribution to our common shareholders on or about August 14, 2025 using cash on hand.
Previous wording
As of March 31, 2025, we had a $338,171 aggregate outstanding principal balance under our Master Repurchase Facilities. Our Master Repurchase Agreements are structured with risk mitigation mechanisms, including a cash flow sweep, which would allow UBS, Citibank and Wells Fargo, as applicable, to control interest payments from our borrowers under our loans that are financed under our respective Master Repurchase Facilities, and the ability to accelerate dates of repurchase and institute margin calls, which may require us to pay down balances associated with one or more of our loans that are financed under our Master Repurchase Facilities.
Current wording
As of June 30, 2025, we had a $345,010 aggregate outstanding principal balance under our Master Repurchase Facilities. Our Master Repurchase Agreements are structured with risk mitigation mechanisms, including a cash flow sweep, which would allow UBS, Citibank and Wells Fargo, as applicable, to control interest payments from our borrowers under our loans that are financed under our respective Master Repurchase Facilities, and the ability to accelerate dates of repurchase and institute margin calls, which may require us to pay down balances associated with one or more of our loans that are financed under our Master Repurchase Facilities.
Rearranged current paragraphs (8)
Current report — wording carried from elsewhere
The table below details our Secured Financing Facilities activities during the six months ended June 30, 2025:
Current report — wording carried from elsewhere
Interest and related income. The increase in interest and related income was primarily due to higher deferred fee amortization, partially offset by a decrease in the weighted average coupon rates during the three months ended June 30, 2025. The weighted average coupon rate was 8.03% as of June 30, 2025 compared to 8.07% as of March 31, 2025.
Current report — wording carried from elsewhere
Reimbursement of shared services expenses. Reimbursement of shared services expenses represents reimbursement of the costs for the services that Tremont arranges on our behalf from RMR.
Current report — wording carried from elsewhere
Provision for (reversal of) credit losses. The provision for (reversal of) credit losses represents the change in the allowance for credit losses on our loan portfolio and unfunded commitments. The increase in the allowance for credit losses during the three months ended June 30, 2025 was primarily attributable to unfavorable CRE pricing forecasts used in our CECL model and extensions for certain of our loans, partially offset by loan repayments.
Current report — wording carried from elsewhere
Income tax benefit (expense). Income tax expense represents income taxes paid or payable by us in certain jurisdictions where we are subject to state income taxes.
Current report — wording carried from elsewhere
Revenue from real estate owned. Revenue from real estate owned represents revenue from the operations of an office property located in Yardley, PA that was transferred to real estate owned through a deed in lieu of foreclosure in June 2023. The increase in revenue from real estate owned was primarily due to higher operating expense reimbursements during the six months ended June 30, 2025 as compared to the six months ended June 30, 2024.
Current report — wording carried from elsewhere
Expenses from real estate owned. Expenses from real estate owned represent expenses from the operations of an office property located in Yardley, PA that was transferred to real estate owned through a deed in lieu of foreclosure in June 2023. The decrease in expenses from real estate owned was primarily due to decreases in maintenance expenses, partially offset by higher utility expenses during the six months ended June 30, 2025 as compared to the six months ended June 30, 2024.
Current report — wording carried from elsewhere
Net income. The decrease in net income was due to the changes noted above.
Rearranged previous paragraphs (1)
Previous report — wording carried elsewhere
(5)In April 2025, the coupon rate was reduced from SOFR + 3.85% to SOFR + 2.85% and the maturity date was extended by three years to April 7, 2028.