Seven Hills Realty Trust
For the period ended Dec 31, 2025. Filed Feb 18, 2026.
View on SEC.govAbout this filing
A company's yearly report to the SEC, with audited financial statements. It is the fullest account a company gives of its business, its finances and the risks it sees.
FY2025 · Filed Feb 18, 2026
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-K
Period ended 2024-12-31; filed 2025-02-18.
0001452477-25-000014
Item 7. Management's Discussion and Analysis of Financial Condition and Results of OperationsCurrent report: 10-K
Period ended 2025-12-31; filed 2026-02-18.
0001452477-26-000010
Item 7. 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 124 previous paragraphs and 120 current paragraphs.
77 unchanged; 30 reworded; 12 added; 15 removed; 2 previous and 1 current paragraphs rearranged.
Tables are not compared: 9 previous and 9 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 (12)
Current report
Market Conditions. Earlier this year, U.S. trade and fiscal policy, coupled with ongoing geopolitical tensions, caused volatility in financial markets and uncertainty for CRE investors. As a result, transaction activity slowed as investors waited on the outcomes of negotiations with U.S. trade partners, new tariff announcements and domestic fiscal policy initiatives as well as the path of interest rates before making buy and sell decisions.
Current report
CRE transaction activity showed signs of recovery in the second half of 2025 as investors and lenders responded to three interest rate cuts by the FOMC in 2025. Additionally, a more stabilized monetary environment, improving property fundamentals and substantial liquidity in debt capital markets may give CRE investors and lenders renewed optimism and confidence in underwriting assumptions. The relative value of CRE debt investments today compared to alternative corporate or private debt investments continues to drive demand from lenders, including banks, securitized lenders, life insurance companies, private debt funds and mortgage REITs. This increased competition amongst lenders has led to a tightening of credit spreads and lower overall borrowing costs for CRE debt investors across all property sectors.
Current report
Barring potential risks associated with persistent inflation, increased geopolitical uncertainty that may negatively impact global economic conditions and a weakening labor market that could moderate economic growth, we believe the CRE sector is relatively well positioned, with expectations for increased transaction volume in 2026.
Current report
(4)In January 2026, the maturity date of this loan was extended to March 31, 2026.
Current report
(5)These loans were acquired in November 2025.
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 December 31, 2025, this loan had an amortized cost of $26,640 and a risk rating of 3.
Current report
Interest and related income. The decrease in interest and related income was primarily the result of lower weighted average coupon rates, which was partially offset by interest rate floors for seven of our loans becoming active, lower interest income earned on cash invested due to decreased index rates and lower purchase discount accretion due to discounts becoming fully accreted during the year ended December 31, 2025. The weighted average coupon rate was 7.60% for the year ended December 31, 2025, inclusive of the seven active floors, compared to 8.77% for the year ended December 31, 2024.
Current report
Adjusted Book Value
Current report
Rights Offering
Current report
In November 2025, we commenced the Rights Offering, pursuant to which we issued transferable rights to our shareholders of record as of November 10, 2025. The record date shareholders received one transferable right for each outstanding common share they owned on the record date, which entitled them to purchase one new common share for every two rights held. The Rights Offering was fully backstopped by Tremont. In December 2025, we completed the Rights Offering, in which 7,532,861 common shares were issued at $8.65 per share, generating net proceeds of $61,530, after offering costs. For further information regarding the Rights Offering, see Note 9 to our Consolidated Financial Statements included in Part IV, Item 15 of this Annual Report on Form 10-K.
Current report
As of December 31, 2025, we had a $64,632 aggregate outstanding principal balance under the BMO Facility.
Current report
Allowance for Credit Losses. We recognize the allowance for credit losses under the current expected credit loss, or CECL, model. The CECL measurement is based upon historical experience, current conditions, and reasonable and supportable forecasts incorporating forward-looking information that affect the collectability of the reported amount. The CECL model is applicable to financial assets measured at amortized cost and off-balance sheet credit exposures, such as unfunded loan commitments.
Removed paragraphs (15)
Previous report
Market Conditions. Early in 2024, CRE investors seemed cautiously optimistic that inflation had peaked, the U.S. economy was likely headed for a “soft-landing” and the FOMC was poised to reduce the federal funds rate by 125 to 150 basis points by year end. With the anticipation of lower interest rates in the future, investors delayed sale or refinancing decisions, which resulted in tepid CRE investment and transaction volume during the first half of 2024. In September 2024, citing progress toward its 2% inflation target, the FOMC lowered the targeted federal funds rate by 50 basis points, providing CRE owners initial relief from high borrowing costs and reduced uncertainty regarding the timing and magnitude of future rate cuts. The FOMC then followed with two additional 25 basis point reductions by year end. Although the 100-basis point reduction fell short of expectations, the reduction in overall borrowing costs helped spur CRE refinancing activity through the fourth quarter of 2024, and we believe there is a renewed appetite amongst most lenders to increase CRE loan origination volume in 2025.
Previous report
The CMBS financing market was a key provider of debt liquidity to the CRE industry in 2024. Increasing demand from bond investors has translated into tighter credit spreads, particularly for 5-year loans which have become more popular among borrowers anticipating further interest rate reductions at the longer end of the yield curve. Life insurance companies continue to expand their product offerings, providing low leverage, fixed rate term debt for stabilized assets as well as floating rate capital for more transitional properties, which were once reserved for banks and alternative lenders, like us. The banking sector, particularly smaller regional banks, continues to be impacted by increased regulations and capital charges related to legacy CRE and construction loan portfolios. However, larger banks have continued to work through these challenges and have found ways to begin to increase CRE exposure, including on a direct basis and through warehouse lines of credit to debt funds and mortgage REITs, like us. Agency lenders, such as Fannie-Mae and Freddie-Mac, continue to provide liquidity to the multifamily market. Volatility in long-term interest rates, however, has resulted in increased competition for multifamily loans from CMBS/conduit providers, life-insurance companies and alternative lenders. Despite an increase in delinquencies on loans financed by the CRE-CLO market in 2024, concerns about collateral and loan performance have waned. CLO bond investors continue to demonstrate an appetite for these bonds which has resulted in increased competition for new, quality multifamily loans to package and sell, driving down spreads and borrowers’ interest expense.
Previous report
In addition to lower interest rates and increased liquidity from CRE debt providers, property fundamentals continue to stabilize as supply/demand imbalances across most property sectors continue to normalize.
Previous report
The U.S. office market continues to navigate the impact of the post COVID-19 Pandemic remote workplace dynamics, and corporations are increasingly requiring return-to-office mandates. Additionally, fewer construction starts should improve the supply/demand imbalance in the office market. Retail assets, particularly needs based and grocery anchored retail, have benefited from a strong consumer market and a healthy job market. New supply in the industrial sector resulted in downward pressure on rent growth during 2024, but fewer new construction starts, strong consumer demand and onshoring of manufacturing is expected to bring equilibrium to the sector by the end of 2025. As for the multifamily market, the lack of affordable housing in the United States and the rent versus own dynamic continue to favor the sector. While there has been oversupply in certain markets and a subsequent decline in rents, it is expected that for most markets, the supply/demand imbalance will be short lived, and once equilibrium is reached, rent-growth will return.
Previous report
Interest rate cuts in the latter half of 2024 have resulted in CRE investors again being cautiously optimistic heading into 2025. Over $2 trillion in CRE debt is expected to mature over the next two years. These maturities, coupled with a lower and more stabilized interest rate environment, are likely to provide investors with greater investment opportunities, which we expect will translate into more lending activity. Looking forward, it is unclear how geopolitical uncertainty, and the new presidential administration, may impact the commercial real estate sector, but we believe that the CRE lending market remains well positioned for 2025.
Previous report
(1)Excludes the impact of the unaccreted purchase discount resulting from the excess of the fair value of the loans TRMT then held for investment and that we acquired as a result of the Merger over the consideration we paid in the Merger. The purchase discount of $36,443 was allocated to each acquired loan and was accreted into income over the remaining term of the respective loan. As of December 31, 2024, the purchase discount was fully accreted. As of December 31, 2023, the unaccreted purchase discount was $2,347.
Previous report
(2)Excludes the impact of our allowance for credit losses. As of December 31, 2024 and 2023, our allowance for credit losses for our loan portfolio and unfunded loan commitments was $8,908 and $5,828, respectively. For further information on our adoption of our allowance for credit losses, see Note 2 to our Consolidated Financial Statements included in Part IV, Item 15 of this Annual Report on Form 10-K.
Previous report
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 December 31, 2024, this loan had an amortized cost of $26,635 and a risk rating of 4.
Previous report
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 December 31, 2024, this loan had an amortized cost of $24,412 and a risk rating of 4.
Previous report
In November 2024, we amended the agreement governing our loan secured by an office property in Bellevue, WA. As part of this amendment, the maturity date was extended by 90 days to February 5, 2025. Subsequently, in January 2025, the maturity date was extended by 60 days to April 7, 2025. As of December 31, 2024, this loan had an amortized cost of $19,997 and a risk rating of 4.
Previous report
In September 2024, we amended our Citibank Master Repurchase Agreement. The amendment to the Citibank Master Repurchase Agreement made certain changes to the agreement and related fee letter, including extending the stated maturity date to September 27, 2026.
Previous report
Interest and related income. The decrease in interest and related income was primarily the result of lower outstanding principal balances under our loan investment portfolio during the year ended December 31, 2024. The weighted average principal balance was approximately $603,000 for the year ended December 31, 2024 compared to approximately $646,000 for the year ended December 31, 2023.
Previous report
Purchase discount accretion. The decrease in purchase discount accretion was due to the purchase discount recorded as part of the Merger becoming fully accreted during the year ended December 31, 2024.
Previous report
As of December 31, 2024, we had a $103,855 aggregate outstanding principal balance under the BMO Facility.
Previous report
Allowance for Credit Losses. On January 1, 2023, we adopted Accounting Standards Update, or ASU, No. 2016-13, Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments, which replaces the “incurred loss” model for recognizing credit losses with a forward-looking “expected loss” model that generally will result in the earlier recognition of credit losses. We measure our allowance for credit losses using the CECL model, which is based upon historical experience, current conditions, and reasonable and supportable forecasts incorporating forward-looking information that affect the collectability of the reported amount.
Reworded paragraphs (30)
Previous wording
Tremont is registered with the SEC as an investment adviser under the Investment Advisers Act of 1940, as amended. We believe that Tremont provides us with significant experience and expertise in investing in middle market and transitional CRE.
Current wording
Tremont is registered with the SEC as an investment adviser under the Investment Advisers Act of 1940, as amended. We believe that Tremont provides us with significant experience and expertise in investing in middle market transitional CRE.
Previous wording
Changes in Fair Value of our Assets. We generally intend to hold our investments for their contractual terms, unless repaid earlier by the borrowers. We evaluate the credit quality of each of our loans at least quarterly. If a loan is determined to be collateral dependent (because the repayment of the loan is expected to be provided substantially through the operation or sale of the underlying collateral property) and the borrower is experiencing financial difficulties, but foreclosure is not probable, we will record an allowance for credit losses by comparing the collateral's fair value to the amortized cost basis of the loan. For collateral-dependent loans for which foreclosure is probable, the related allowance for credit losses is determined using the fair value of the collateral compared to the loan's amortized cost.
Current wording
Changes in Fair Value of our Assets. We generally intend to hold our investments for their contractual terms, unless repaid earlier by the borrowers. We evaluate the credit quality of each of our loans at least quarterly. If a loan is determined to be collateral dependent (because the repayment of the loan is expected to be provided substantially through the operation or sale of the underlying collateral property) and the borrower is experiencing financial difficulties, but foreclosure is not probable, we may record an allowance for credit losses by comparing the collateral's fair value to the amortized cost basis of the loan. For collateral-dependent loans for which foreclosure is probable, the related allowance for credit losses is determined using the fair value of the collateral compared to the loan's amortized cost.
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 December 31, 2024, SOFR was 4.33%, 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 4.34% with a weighted average floor of 2.81%; therefore, changes to income from investments, net, may not move proportionately with the increase or decrease in benchmark rates. As of December 31, 2025, SOFR was 3.69%, and as a result, seven of our loan investments had an active interest rate floor.
Previous wording
Prepayment Risk. We are subject to risk that our loan investments will be repaid at an earlier date than anticipated, which may reduce the returns realized on those loans as less interest income may be received over time. Additionally, we may not be able to reinvest the principal repaid at a similar or higher yield of the original loan investment. We seek to limit this risk by structuring our loan agreements with fees required to be paid to us upon prepayment of a loan within a specified period of time before the loan’s maturity; however, unanticipated prepayments could negatively impact our operating results.
Current wording
Prepayment Risk. We are subject to risk that our loan investments will be repaid at an earlier date than anticipated, which may reduce the returns realized on those loans as less interest income may be received over time. Additionally, we may not be able to reinvest the principal repaid timely and/or at a similar or higher yield of the original loan investment. We seek to limit this risk by structuring our loan agreements with fees required to be paid to us upon prepayment of a loan within a specified period of time before the loan’s maturity; however, unanticipated prepayments could negatively impact our operating results.
Previous wording
As of December 31, 2024, we had $641,213 in aggregate loan commitments, consisting of a diverse portfolio, geographically and by property type, of 21 first mortgage loans. As of December 31, 2024, we had five loans representing approximately 24% of the amortized cost of our loan portfolio with a loan risk rating of “4” or “higher risk”.
Current wording
As of December 31, 2025, we had $724,458 in aggregate loan commitments, consisting of a diverse portfolio, geographically and by property type, of 24 first mortgage loans. As of December 31, 2025, we had 4 loans representing approximately 17% of the amortized cost of our loan portfolio with a loan risk rating of “4” or “higher risk”. As of December 31, 2025, we had no loans with risk rating of “5” or “impaired/ loss likely”.
Previous wording
In August 2024, we amended the agreement governing our loan secured by an office property in Dallas, TX. As part of this amendment, the loan commitment was reduced by $3,189, the borrower was required to contribute $2,900 to cash reserves and the maturity date was extended by two years to August 25, 2026. As of December 31, 2024, this loan had an amortized cost of $43,511 and a risk rating of 4.
Current wording
In April 2025, we amended the agreement governing our loan secured by an office property in Bellevue, WA. As part of this amendment, the borrower was required to contribute $1,625 to cash reserves, 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. As of December 31, 2025, this loan had an amortized cost of $20,245 and a risk rating of 4.
Previous wording
In October 2024, we amended our Wells Fargo Master Repurchase Agreement. The amendment to the Wells Fargo Master Repurchase Agreement made certain changes to the agreement and related fee letter, including extending the stated maturity date to March 11, 2026.
Current wording
In February 2026, we amended the Wells Fargo Master Repurchase Agreement and made certain changes to the agreement, including extending the stated maturity date to March 13, 2028 and increasing the maximum facility size by $125,000 to $250,000.
Previous wording
In December 2024, we amended the fee letter to our UBS Master Repurchase Agreement to extend the stated maturity date to February 18, 2026 and increase the maximum facility size to $250,000.
Current wording
In February 2026, we amended our UBS Master Repurchase Agreement to extend the stated maturity date to February 18, 2028.
Previous wording
The table below is an overview of our Secured Financing Facilities as of December 31, 2024:
Current wording
The table below is an overview of our Secured Financing Facilities as of December 31, 2025, after giving effect to the above referenced amendments to the UBS and Wells Fargo Master Repurchase Agreements:
Previous wording
As of December 31, 2024, outstanding advancements under our Secured Financing Facilities had a weighted average interest rate of 6.62% per annum, excluding associated fees and expenses. As of December 31, 2024 and February 13, 2025, we had a $419,622 and $442,026, respectively, aggregate outstanding principal balance under our Secured Financing Facilities.
Current wording
As of December 31, 2025, outstanding advancements under our Secured Financing Facilities had a weighted average interest rate of 5.92% per annum, excluding associated fees and expenses. As of December 31, 2025 and February 13, 2026, we had a $488,275 and $447,344, respectively, aggregate outstanding principal balance under our Secured Financing Facilities.
Previous wording
Interest and related expenses. The decrease in interest and related expenses was primarily the result of lower outstanding principal balances under our Secured Financing Facilities during the year ended December 31, 2024. The weighted average principal balance was approximately $411,000 for the year ended December 31, 2024 compared to approximately $447,000 for the year ended December 31, 2023.
Current wording
Interest and related expenses. The decrease in interest and related expenses was primarily the result of lower weighted average coupon rates offset by higher outstanding principal balances under our Secured Financing Facilities during the year ended December 31, 2025. The weighted average coupon rate was 6.25% for the year ended December 31, 2025, compared to 7.24% for the year ended December 31, 2024. The weighted average principal balance was approximately $425,000 for the year ended December 31, 2025, compared to $411,000 for the year ended December 31, 2024.
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.
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 increase in revenue from real estate owned was primarily the result of higher operating expense reimbursements during the year ended December 31, 2025.
Previous wording
Base management and incentive fees. We recognize base management and incentive fees payable to Tremont in accordance with our management agreement. The increase in base management and incentive fees was due to higher “core earnings”, as defined in our management agreement, during the year ended December 31, 2024.
Current wording
Base management and incentive fees. We recognize base management and incentive fees payable to Tremont in accordance with our management agreement. The increase in base management fees was due to higher “equity” as defined in our management agreement. The decrease in incentive fees was due to lower “core earnings”, as defined in our management agreement, during the year ended December 31, 2025 as compared to the year ended December 31, 2024.
Previous wording
General and administrative expenses. The decrease in general and administrative expenses was primarily due to a decrease in professional fees during the year ended December 31, 2024.
Current wording
General and administrative expenses. The increase in general and administrative expenses was primarily due to an increase in share based and cash compensation awarded to our Trustees, each resulting from the increase in the size of our Board of Trustees, higher share based compensation for employees of RMR and Tremont and higher legal expenses during the year ended December 31, 2025 as compared to the year ended December 31, 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 increase in reimbursement of shared services expenses was primarily the result of higher usage of shared services from RMR during the year 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 year ended December 31, 2025 as compared to the year ended December 31, 2024.
Previous wording
Provision for (reversal of) credit losses. The provision for (reversal of) credit losses represents the increase in the allowance for credit losses on our loan portfolio and unfunded commitments. The increase in the allowance for credit losses during the year ended December 31, 2024 was primarily attributable to declining values for CRE and unfavorable CRE pricing forecasts used in our current expected credit loss, or CECL, model and increased provisions for certain of our office loans.
Current wording
Provision for credit losses. The provision for credit losses represents the increase in the allowance for credit losses on our loan portfolio and unfunded commitments. The increase in the allowance for credit losses during the year ended December 31, 2025 was primarily attributable to increased provisions for our office loans and a larger loan portfolio as of December 31, 2025, offset by increasing values for CRE and favorable CRE pricing forecasts used in our CECL model and loans nearing maturity.
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.
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 the result of lower amortization expense related to acquired real estate leases during the year ended December 31, 2025.
Previous wording
Income tax (expense) benefit. Income tax expense for the year ended December 31, 2024 is a result of income taxes paid or payable by us in certain jurisdictions where we are subject to state income taxes.
Current wording
Income tax expense. Income tax expense for the year ended December 31, 2025 is a result of income taxes paid or payable by us in certain jurisdictions where we are subject to state income taxes.
Previous wording
Net income. The decrease in net income was due to the changes noted above.
Current wording
Net income and net income per common share - basic and diluted. The decrease in net income was due to the changes noted above. Additionally, net income per common share - basic and diluted includes the effect of the issuance of 7,532,861 common shares through the Rights Offering.
Previous wording
We present Distributable Earnings, Distributable Earnings per common share and Adjusted Book Value per common share, which are considered “non-GAAP financial measures” within the meaning of the applicable SEC rules. These non-GAAP financial measures do not represent net income, net income per common share or cash generated from operating activities and should not be considered as alternatives to net income or net income per common share determined in accordance with GAAP or as an indication of our cash flows from operations determined in accordance with U.S. generally accepted accounting principles, or GAAP, a measure of our liquidity or operating performance or an indication of funds available for our cash needs. In addition, our methodologies for calculating these non-GAAP financial measures may differ from the methodologies employed by other companies to calculate the same or similar supplemental performance measures; therefore, our reported Distributable Earnings and Distributable Earnings per common share may not be comparable to distributable earnings and distributable earnings per common share as reported by other companies.
Current wording
We present Adjusted Book Value, Adjusted Book Value per common share, Distributable Earnings and Distributable Earnings per common share, which are considered “non-GAAP financial measures” within the meaning of the applicable SEC rules. These non-GAAP financial measures do not represent book value, book value per common share, net income, net income per common share or cash generated from operating activities and should not be considered as alternatives to book value, book value per common share, net income or net income per common share determined in accordance with GAAP or as an indication of our cash flows from operations determined in accordance with U.S. generally accepted accounting principles, or GAAP, a measure of our capital adequacy, liquidity or operating performance or an indication of funds available for our cash needs. In addition, our methodologies for calculating these non-GAAP financial measures may differ from the methodologies employed by other companies to calculate the same or similar supplemental capital adequacy or performance measures; therefore, our reported Adjusted Book Value, Adjusted Book Value per common share, Distributable Earnings, and Distributable Earnings per common share may not be comparable to adjusted book value, adjusted book value per common share, distributable earnings and distributable earnings per common share as reported by other companies.
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 the unaccreted purchase discount resulting from the excess of the fair value of the loans TRMT 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.
Current wording
We believe that Adjusted Book Value and 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. The table below calculates our book value, Adjusted Book Value and Adjusted Book Value per common share:
Previous wording
The table below demonstrates how we calculate Distributable Earnings and Distributable Earnings per common share, which are non-GAAP measures, and provides a reconciliation of these non-GAAP measures to net income:
Current wording
The table below demonstrates our calculation of Distributable Earnings and Distributable Earnings per common share, which are non-GAAP measures, and provides a reconciliation of these non-GAAP measures to net income:
Previous wording
The decrease in cash provided by operating activities for 2024 compared to 2023 was primarily the result of lower net interest income earned on loan investments due to lower amounts invested, partially offset by favorable changes in working capital, higher interest income earned on cash balances invested and increased cash earned from our real estate owned. The decrease in cash provided by investing activities was primarily due to increased fundings for our existing loan portfolio as borrowers carry out their business plans and decreased loan repayments in 2024 compared to 2023. The increase in cash used in financing activities was primarily due to lower proceeds from our Secured Financing Facilities in 2024 compared to 2023.
Current wording
The decrease in cash provided by operating activities for 2025 compared to 2024 was primarily the result of lower net interest income earned on loan investments due to lower SOFR index rates. The change from cash provided by to cash used in investing activities was primarily due to increased loan originations and acquisitions, as well as lower loan repayments in 2025 compared to 2024. The change from cash used in to cash provided by financing activities was primarily due to proceeds received from the Rights Offering and increased borrowing under our Secured Financing Facilities in 2025 compared to net repayment activity under our Secured Financing Facilities in 2024.
Previous wording
During the year ended December 31, 2024, we declared and paid distributions totaling $20,772, or $1.40 per common share, using cash on hand.
Current wording
During the year ended December 31, 2025, we declared and paid regular quarterly distributions totaling $18,835, or $1.26 per common share, using cash on hand.
Previous wording
On January 16, 2025, we declared a regular quarterly distribution of $0.35 per common share, or $5,216, to shareholders of record on January 27, 2025. We expect to pay this distribution on February 20, 2025 using cash on hand.
Current wording
On January 15, 2026, we declared a regular quarterly distribution of $0.28 per common share, or $6,327, to shareholders of record on January 26, 2026. We expect to pay this distribution on February 19, 2026 using cash on hand.
Previous wording
(4)Lease related costs include capital expenditures used to improve tenants' spaces pursuant to lease agreements or leasing related costs, such as brokerage commissions, related to the Yardley, PA property.
Current wording
(4)Lease related costs include capital expenditures used to improve tenants' spaces pursuant to lease agreements or leasing related costs, such as brokerage commissions, related to real estate owned.
Previous wording
As of December 31, 2024, we had a $315,767 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 December 31, 2025, we had a $423,643 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.
Previous wording
The allowance for credit losses is a valuation account that is deducted from the related loans’ amortized cost basis in our consolidated balance sheets. Our loans typically include commitments to fund incremental proceeds to borrowers over the life of the loan; these future funding commitments are also subject to the CECL model. The allowance for credit losses related to unfunded loan commitments is included in accounts payable, accrued liabilities and other liabilities in our consolidated balance sheets.
Current wording
The allowance for credit losses is a valuation account that is deducted from the related loans’ amortized cost basis in our consolidated balance sheets. Our loans typically include commitments to fund incremental proceeds to borrowers over the life of the loan. The allowance for credit losses related to unfunded loan commitments is included in accounts payable, accrued liabilities and other liabilities in our consolidated balance sheets.
Previous wording
Given the lack of historical loss data related to our loan portfolio, we estimate our expected losses using an analytical model that considers the likelihood of default and loss given default for each individual loan. This analytical model incorporates data from a third party database with historical loan loss information for commercial mortgage-backed securities, or CMBS, and CRE loans since 1998. Significant inputs to the model include certain loan specific data, such as LTV, property type, geographic location, occupancy, vintage year, remaining loan term, net operating income, expected timing and amounts of future loan fundings, and macroeconomic forecast assumptions, including the performance of CRE assets, unemployment rates, interest rates and other factors. We utilize the model to estimate credit losses over a reasonable and supportable economic forecast period of 12 months, followed by a straight-line reversion period of six months to average historical losses. Average historical losses are established using a population of third party historical loss data that approximates our portfolio as of the measurement date. We evaluate the estimated allowance for each of our loans individually and we consider our internal loan risk rating as the primary credit quality indicator underlying our assessment.
Current wording
Given the lack of historical loss data related to our loan portfolio, we estimate our expected losses using an analytical model that considers the likelihood of default and loss given default for each individual loan. This analytical model incorporates data from a third party database with historical loan loss information for commercial mortgage-backed securities, or CMBS, and CRE loans since 1998. Significant inputs to the model include certain loan specific data, such as LTV, property type, geographic location, occupancy, vintage year, remaining loan term, net operating income, expected timing and amounts of future loan fundings, and macroeconomic forecast assumptions, including the performance of CRE assets, unemployment rates, interest rates and other factors. We utilize the model to estimate credit losses over a reasonable and supportable economic forecast period of 12 months, followed by a straight-line reversion period of 12 months to average historical losses. Average historical losses are established using a population of third party historical loss data that approximates our portfolio as of the measurement date. We evaluate the estimated allowance for each of our loans individually and we consider our internal loan risk rating as the primary credit quality indicator underlying our assessment.
Previous wording
Significant judgements are required in our estimation of our allowance for credit losses, including but not limited to the amount and timing of future fundings, repayments and macroeconomic forecast assumptions. Therefore, actual results over time could differ materially from our estimates.
Current wording
Significant judgments are required in our estimation of our allowance for credit losses, including but not limited to the amount and timing of future fundings, repayments and macroeconomic forecast assumptions. Therefore, actual results over time could differ materially from our estimates.
Rearranged current paragraphs (1)
Current report — wording carried from elsewhere
(1)Amounts include our allowance for credit losses for our loan portfolio and our unfunded commitments. The allowance for credit losses for our unfunded commitments is included in accounts payable, accrued liabilities and other liabilities in our consolidated balance sheets.
Rearranged previous paragraphs (2)
Previous report — wording carried elsewhere
Adjusted Book Value per Common Share
Previous report — wording carried elsewhere
The table below calculates our book value per common share: