Seven Hills Realty Trust

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 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 4.00% with a weighted average floor of 2.59%; therefore, changes to income from investments, net, may not move proportionately with the increase or decrease in benchmark rates. As of September 30, 2025, SOFR was 4.13%, and as a result, none 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 2.83%; therefore, changes to income from investments, net, may not move proportionately with the increase or decrease in benchmark rates. As of March 31, 2026, SOFR was 3.66%, and as a result, seven of our loan investments had an active interest rate floor.

Previous wording

As of September 30, 2025, we had $641,901 in aggregate loan commitments, consisting of a diverse portfolio, geographically and by property type, of 22 first mortgage loans. As of September 30, 2025, we had five loans representing approximately 23% 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.

Current wording

As of March 31, 2026, we had $775,958 in aggregate loan commitments, consisting of a diverse portfolio, geographically and by property type, of 26 first mortgage loans. As of March 31, 2026, 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 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 September 30, 2025, this loan had an amortized cost of $19,999 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 March 31, 2026, this loan had an amortized cost of $20,817 and a risk rating of 4.

Previous wording

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 September 30, 2025, this loan had an amortized cost of $26,630 and a risk rating of 4.

Current wording

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 March 31, 2026, this loan had an amortized cost of $26,650 and a risk rating of 3.

Previous wording

All of the loans in our portfolio are structured with risk mitigation mechanisms, such as cash flow sweeps or interest reserves, to help protect us against investment losses. In addition, we actively engage with our borrowers regarding their execution of the business plans for the underlying collateral, among other things.

Current wording

All of the loans in our portfolio are structured with risk mitigation mechanisms, such as cash flow sweeps or interest reserves, to help protect us against investment losses. In addition, we actively engage with our borrowers regarding the execution of their business plans for the underlying collateral, among other things.

Previous wording

As of September 30, 2025, outstanding advancements under our Secured Financing Facilities had a weighted average interest rate of 6.30% per annum, excluding associated fees and expenses. As of September 30, 2025 and October 23, 2025, we had a $430,423 aggregate outstanding principal balance under our Secured Financing Facilities.

Current wording

As of March 31, 2026, outstanding advancements under our Secured Financing Facilities had a weighted average interest rate of 5.84% per annum, excluding associated fees and expenses. As of March 31, 2026 and April 24, 2026, we had a $467,469 and $463,157, respectively, aggregate outstanding principal balance under our Secured Financing Facilities.

Previous wording

Interest and related income. The decrease in interest and related income was primarily due to higher net loan repayment activity and lower weighted average coupon rates during the three months ended September 30, 2025. The weighted average principal balance of our loan investments was approximately $595,000 for the three months ended September 30, 2025 compared to approximately $641,000 for the three months ended June 30, 2025. The weighted average coupon rate was 7.85% as of September 30, 2025 compared to 8.03% as of June 30, 2025.

Current wording

Interest and related income. The increase in interest and related income was primarily due to a higher weighted average principal balance due to loan origination activity during the three months ended March 31, 2026 as compared to the three months ended December 31, 2025, offset by declines in the SOFR index rate. The weighted average principal balance of our loan investments was approximately $712,000 for the three months ended March 31, 2026 compared to approximately $656,000 for the three months ended December 31, 2025. The weighted average coupon rate was approximately 7.33% during the three months ended March 31, 2026 compared to approximately 7.60% during the three months ended December 31, 2025.

Previous 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 nine months ended September 30, 2025 as compared to the nine months ended September 30, 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 higher “equity” and lower “core earnings”, each as defined in our management agreement, for the 12 month period ended March 31, 2026.

Previous wording

General and administrative expenses. The decrease in general and administrative expenses was primarily due to a decrease in share based compensation resulting from shares awarded to our Trustees during the three months ended June 30, 2025.

Current wording

General and administrative expenses. The increase in general and administrative expenses was primarily due to higher legal costs during the three months ended March 31, 2026 as compared to the three months ended December 31, 2025.

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 an adjustment to our estimate of the costs for the usage of shared services from RMR.

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.

Previous 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 increase in the allowance for credit losses during the nine months ended September 30, 2025 was primarily attributable to increased provisions for our office loans, partially offset by loans nearing maturity and loan repayments.

Current wording

Provision for (reversal of) credit losses. The provision for 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 March 31, 2026 reflects an increased loan investment balance as of March 31, 2026 and increased allowances for certain of our office loans, partially offset by 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. The decrease in expenses from real estate owned was primarily due to decreases in maintenance, depreciation and amortization expenses, partially offset by higher utility expenses during the nine months ended September 30, 2025 as compared to the nine months ended September 30, 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 increase in expenses from real estate owned was primarily due to higher utility expenses during the three months ended March 31, 2026 as compared to the three months ended December 31, 2025.

Previous wording

Net income. The increase 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 in December 2025.

Previous wording

We present 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 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 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 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 Adjusted Book Value per common share, Distributable Earnings and Distributable Earnings per common share may not be comparable to adjusted book value per common share, 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 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

Liquidity is a measure of our ability to meet potential cash requirements, including ongoing commitments to fund our lending commitments, repay or meet margin calls resulting from our borrowings, if any, fund and maintain our assets and operations, make distributions to our shareholders and fund other business operating requirements. Our sources of cash flows include cash on hand, payments of principal, interest and fees we receive on our investments, other cash we may generate from our business and operations, any unused borrowing capacity, including under our Secured Financing Facilities or other repurchase agreements or financing arrangements we may obtain, which may also include bank loans or public or private issuances of debt or equity securities, and proceeds from any sale of real estate owned. We believe that these sources of funds will be sufficient to meet our operating and capital expenses, pay our debt service obligations owed and make any distributions to our shareholders for the next 12 months and for the foreseeable future. For further information regarding the risks associated with our loan portfolio, see Note 3 to our Unaudited Condensed Consolidated Financial Statements included in Part I, Item 1 and elsewhere in this Management Discussion and Analysis of Financial Condition and Results of Operations of this Quarterly Report on Form 10-Q and Part I, Item 1A, "Risk Factors" of our 2024 Annual Report.

Current wording

Liquidity is a measure of our ability to meet cash requirements, including ongoing commitments to fund our lending commitments, repay or meet margin calls resulting from our borrowings, if any, fund and maintain our assets and operations, make distributions to our shareholders and fund other business operating requirements. Our sources of cash flows include cash on hand, payments of principal, interest and fees we receive on our investments, other cash we may generate from our business and operations, any unused borrowing capacity, including under our Secured Financing Facilities or other repurchase agreements or financing arrangements we may obtain, which may also include bank loans or public or private issuances of debt or equity securities, and proceeds from any sale of real estate owned. We believe that these sources of funds will be sufficient to meet our operating and capital expenses, pay our debt service obligations owed and make any distributions to our shareholders for the next 12 months and for the foreseeable future. For further information regarding the risks associated with our loan portfolio, see Note 3 to our Unaudited Condensed Consolidated Financial Statements included in Part I, Item 1 and elsewhere in this Management Discussion and Analysis of Financial Condition and Results of Operations of this Quarterly Report on Form 10-Q and Part I, Item 1A, "Risk Factors" of our 2025 Annual Report.

Previous wording

Pursuant to the terms of our Citibank Master Repurchase Facility, our UBS Master Repurchase Facility and our Wells Fargo Master Repurchase Facility, we may sell to, and later repurchase from, Citibank, UBS and Wells Fargo, the purchased assets related to the applicable facility. The initial purchase price paid by Citibank of each purchased asset is up to 75% of the lesser of the market value of the purchased asset or the unpaid principal balance of such purchased asset, subject to Citibank's approval. The initial purchase price paid by UBS of each purchased asset is up to 80% of the lesser of the market value of the purchased asset or the unpaid principal balance of such purchased asset, subject to UBS's approval. The initial purchase price paid by Wells Fargo for each purchased asset is up to 75% or 80%, depending on the property type of the purchased asset’s real estate collateral, of the lesser of the market value of the purchased asset or the unpaid principal balance of such purchased asset, and subject to Wells Fargo’s approval. Upon the repurchase of a purchased asset, we are required to pay Citibank, UBS or Wells Fargo, as applicable, the outstanding purchase price of the purchased asset, accrued interest and all accrued and unpaid expenses of Citibank, UBS or Wells Fargo, as applicable, relating to such purchased asset.

Current wording

Pursuant to the terms of the agreements governing our Master Repurchase Facilities, or our Master Repurchase Agreements, with Citibank, UBS and Wells Fargo, we may sell to, and later repurchase from, Citibank, UBS and Wells Fargo, the purchased assets related to the applicable facility. The initial purchase price paid by Citibank of each purchased asset is up to 75% of the lesser of the market value of the purchased asset or the unpaid principal balance of such purchased asset, subject to Citibank's approval. The initial purchase price paid by UBS of each purchased asset is up to 80% of the lesser of the market value of the purchased asset or the unpaid principal balance of such purchased asset, subject to UBS's approval. The initial purchase price paid by Wells Fargo for each purchased asset is up to 75% or 80%, depending on the property type of the purchased asset’s real estate collateral, of the lesser of the market value of the purchased asset or the unpaid principal balance of such purchased asset, and subject to Wells Fargo’s approval. Upon the repurchase of a purchased asset, we are required to pay Citibank, UBS or Wells Fargo, as applicable, the outstanding purchase price of the purchased asset, accrued interest and all accrued and unpaid expenses of Citibank, UBS or Wells Fargo, as applicable, relating to such purchased asset.

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, loan portfolio size and unfavorable changes in working capital. The change from cash provided by investing activities 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.

Current wording

The increase in cash provided by operating activities for the 2026 period compared to the 2025 period was primarily due to higher net interest income resulting from an increased loan portfolio size and favorable changes in working capital. The decrease in cash used in investing activities was primarily due to higher loan repayment activity, partially offset by higher loan origination activity during the 2026 period. The change in cash provided by financing activities to cash used in financing activities was primarily due to higher repayments on our Secured Financing Facilities in the 2026 period.

Previous wording

During the nine months ended September 30, 2025, we declared and paid regular quarterly distributions to our common shareholders totaling $14,617, or $0.98 per common share, using cash on hand.

Current wording

During the three months ended March 31, 2026, we declared and paid regular quarterly distributions to our common shareholders totaling $6,327, or $0.28 per common share, using cash on hand.

Previous wording

On October 9, 2025, we declared a regular quarterly distribution of $0.28 per common share, or $4,218, to shareholders of record on October 27, 2025. We expect to pay this distribution to our common shareholders on or about November 13, 2025 using cash on hand.

Current wording

On April 9, 2026, we declared a regular quarterly distribution of $0.28 per common share, or $6,327, to shareholders of record on April 21, 2026. We expect to pay this distribution to our common shareholders on or about May 14, 2026 using cash on hand.

Previous wording

Our principal debt obligations as of September 30, 2025 were the outstanding balances under our Secured Financing Facilities. The agreements governing our Master Repurchase Facilities, or our Master Repurchase Agreements, provide for acceleration of the date of repurchase of any then purchased assets and the liquidation of the purchased assets by UBS, Citibank or Wells Fargo, as applicable, upon the occurrence and continuation of certain events of default, including a change of control of us, which includes Tremont ceasing to act as our sole manager or to be a wholly owned subsidiary of RMR. Our Master Repurchase Agreements also provide that upon the repurchase of any then purchased asset, we are required to pay UBS, Citibank or Wells Fargo the outstanding purchase price of such purchased asset and accrued interest and any and all accrued and unpaid expenses of UBS, Citibank or Wells Fargo, as applicable, relating to such purchased asset.

Current wording

Our principal debt obligations as of March 31, 2026 were the outstanding balances under our Secured Financing Facilities. Our Master Repurchase Agreements provide for acceleration of the date of repurchase of any then purchased assets and the liquidation of the purchased assets by UBS, Citibank or Wells Fargo, as applicable, upon the occurrence and continuation of certain events of default, including a change of control of us, which includes Tremont ceasing to act as our sole manager or to be a wholly owned subsidiary of RMR. Our Master Repurchase Agreements also provide that upon the repurchase of any then purchased asset, we are required to pay UBS, Citibank or Wells Fargo the outstanding purchase price of such purchased asset and accrued interest and any and all accrued and unpaid expenses of UBS, Citibank or Wells Fargo, as applicable, relating to such purchased asset.

Previous wording

As of September 30, 2025, we had a $353,165 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 March 31, 2026, we had a $382,437 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.