Seven Hills Realty Trust

Note 1. Basis of Presentation

The accompanying condensed consolidated financial statements are unaudited. Certain information and disclosures required by U.S. generally accepted accounting principles, or GAAP, for complete financial statements have been condensed or omitted. We believe the disclosures made are adequate to make the information presented not misleading. However, the accompanying condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and notes contained in our Annual Report on Form 10-K for the year ended December 31, 2025, or our 2025 Annual Report. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair statement of results for the interim periods have been included. All intercompany transactions and balances with or among our consolidated subsidiaries have been eliminated. Operating results for interim periods are not necessarily indicative of the results that may be expected for the full year.

The preparation of financial statements in conformity with GAAP requires us to make estimates and assumptions that affect reported amounts. Actual results could differ from those estimates. Significant estimates in the accompanying condensed consolidated financial statements include the allowance for credit losses, the valuation of real estate owned and the fair value of financial instruments.

Note 2. Recent Accounting Pronouncements

In November 2024, the Financial Accounting Standards Board issued Accounting Standards Update, or ASU, No. 2024-03, Income Statement (Topic 220): Reporting Comprehensive Income - Expense Disaggregation Disclosures, or ASU No. 2024-03, which requires public entities to provide disaggregated disclosure of certain income statement expense captions within the footnotes to the financial statements. ASU No. 2024-03 is effective for fiscal years beginning after December 15, 2026, and interim periods within fiscal years beginning after December 15, 2027. We are currently evaluating the impact ASU No. 2024-03 will have on our consolidated financial statements and disclosures.

Note 3. Loans Held for Investment, net

We originate first mortgage loans secured by middle market transitional commercial real estate, or CRE, which are generally to be held as long term investments. We fund our loan portfolio using cash on hand and advancements under our Secured Financing Facilities, as defined in Note 5. See Note 5 for further information regarding our secured financing agreements.

The table below provides overall statistics for our loan portfolio as of March 31, 2026 and December 31, 2025:

(1)Unfunded loan commitments are primarily used to finance property improvements and leasing capital and are generally funded over the term of the loan.

(2)All in yield represents the yield on a loan, including amortization of deferred fees over the initial term of the loan and excluding any purchase discount accretion.

(3) Maximum maturity assumes all borrower loan extension options have been exercised, which options are subject to the borrower meeting certain conditions.

The tables below represent our loan activities during the three months ended March 31, 2026 and 2025:

The tables below detail the property type and geographic location of the properties securing the loans in our portfolio as of March 31, 2026 and December 31, 2025:

Credit Quality Information and Allowance for Credit Losses

We evaluate the credit quality of each of our loans at least quarterly by assessing a variety of risk factors in relation to each loan and assigning a risk rating to each loan based on those factors. The higher the number, the greater the risk level. See our 2025 Annual Report for more information regarding our loan risk ratings.

As of March 31, 2026 and December 31, 2025, the amortized cost of our loan portfolio within each internal risk rating by year of origination was as follows:

Allowance for credit losses

We measure our allowance for credit losses using the current expected credit loss, or 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.

The allowance for credit losses is a valuation account that is deducted from the related loans’ amortized cost basis in our condensed 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 condensed consolidated balance sheets.

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. We estimate the allowance for credit losses for our portfolio, including unfunded loan commitments, at the individual loan level. Significant inputs to the model include certain loan specific data, such as loan to value, or 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.

We have elected to exclude accrued interest receivable from amortized cost and not to measure an allowance for credit losses on accrued interest receivable. Accrued interest receivables are generally written off when payments are 120 days past due. Such amounts are reversed against interest income and no further interest will be recorded until it is collected.

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 elect to apply a practical expedient to determine the loan's 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.

See Note 2 to our Consolidated Financial Statements included in Part IV, Item 15 of our 2025 Annual Report for further information regarding our measurement of our allowance for credit losses.

The tables below represent the changes to the allowance for credit losses during the three months ended March 31, 2026 and 2025.

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.

We may enter into loan modifications that include, among other changes, extensions of maturity dates, repurposing or required replenishment of reserves, increases or decreases in loan commitments and required pay downs of principal amounts outstanding. Loan modifications are evaluated to determine whether a modification results in a new loan or a continuation of an existing loan under ASC 310.

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 the Secured Overnight Financing Rate, or SOFR, +3.85% to SOFR +2.85% and the maturity date was extended bythree 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.

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 byone 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.

We did not have any outstanding past due loans or nonaccrual loans as of March 31, 2026 or December 31, 2025. As of March 31, 2026 and April 24, 2026, all of our borrowers had paid their debt service obligations owed and due to us. See our 2025 Annual Report for more information regarding our nonaccrual policy.

As of March 31, 2026, we had unfunded loan commitments of $43,955 related to our loans held for investment that are not reflected in our condensed consolidated balance sheets. These unfunded loan commitments had a weighted average initial maturity of 1.2 years as of March 31, 2026.

Note 4. Real Estate Owned

Real estate owned is property acquired in full or partial settlement of loan obligations, generally through foreclosure or by deed in lieu of foreclosure. In June 2023, we assumed legal title to an office property located in Yardley, PA through a deed in lieu of foreclosure. The table below presents the assets and liabilities of real estate owned in our condensed consolidated balance sheets:

(1)Includes $1,225 and $1,211 of straight line rent receivables as of March 31, 2026 and December 31, 2025, respectively.

Revenue from real estate owned represents rental income from operating leases with tenants and is recognized on a straight line basis over the lease term. We increased revenue from real estate owned to record revenue on a straight line basis by $14 and $16 for the three months ended March 31, 2026 and 2025, respectively. Expenses from real estate owned represents costs to operate the property and depreciation and amortization expense.

We regularly evaluate real estate owned for indicators of impairment. Impairment indicators may include declining tenant occupancy, lack of progress leasing vacant space, tenant bankruptcies, low long term prospects for improvement in property performance, weak or declining tenant profitability, cash flow or liquidity, our decision to dispose of an asset before the end of its estimated useful life and legislative, market or industry changes that could permanently reduce the value of a property. If there is an indication that the carrying value of an asset is not recoverable, we estimate the projected undiscounted cash flows to determine if an impairment loss should be recognized. The future net undiscounted cash flows are subjective and are based in part on assumptions regarding hold periods, market rents and terminal capitalization rates. We determine the amount of any impairment loss by comparing the carrying value to estimated fair value. We estimate fair value through an evaluation of recent financial performance and projected discounted cash flows using standard industry valuation methods.

Note 5. Secured Financing Agreements

As of March 31, 2026, we had secured financing facilities governed by master repurchase agreements with Wells Fargo, National Association, or Wells Fargo, Citibank, N.A., or Citibank, and UBS AG, or UBS; and a facility loan program with BMO Harris Bank N.A., or BMO. We refer to the Wells Fargo, Citibank and UBS facilities as our Master Repurchase Facilities and the BMO facility as our BMO Facility. Collectively, we refer to our Master Repurchase Facilities and the BMO Facility as our Secured Financing Facilities. See our 2025 Annual Report for more information regarding our Secured Financing Facilities.

The table below summarizes our Secured Financing Facilities as of March 31, 2026 and December 31, 2025:

(1)The weighted average coupon rate is determined using SOFR plus a spread ranging from 1.50% to 2.95%, as applicable, for the respective borrowings under our Secured Financing Facilities as of the applicable date.

(2)The weighted average remaining maturity of our Master Repurchase Facilities is determined using the earlier of the underlying loan investment maturity date and the respective repurchase agreement maturity date. The weighted average remaining maturity of the BMO Facility is determined using the underlying loan investment maturity date.

In February 2026, we amended our master repurchase agreement with UBS to extend the stated maturity date to February 18, 2028.

In February 2026, we amended our master repurchase agreement with Wells Fargo 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.

As of March 31, 2026, we were in compliance with the covenants and other terms of the agreements that govern our Secured Financing Facilities.

As of March 31, 2026, our outstanding borrowings under our Secured Financing Facilities had the following remaining maturities:

Based upon the performance and payment history of our commercial mortgage loans, along with our ability to obtain financing under repurchase agreements and success in extending certain of our existing Master Repurchase Agreements, we believe it is probable that we will extend our Master Repurchase Facilities prior to their maturities.

Note 6. Fair Value Measurements

We determine the estimated fair value of financial assets and liabilities using the three-tier value hierarchy established by GAAP. As of March 31, 2026, the carrying values of cash and cash equivalents, accrued interest receivable and accounts payable approximate their fair values due to the short term nature of these financial instruments.

We estimate the fair values of our loans held for investment and outstanding principal balances under our Secured Financing Facilities by using Level III inputs, including discounted cash flow analyses and currently prevailing market terms as of the measurement date. See our 2025 Annual Report for further information regarding the fair value of financial instruments.

The table below provides information regarding financial assets and liabilities not carried at fair value in our condensed consolidated balance sheets:

There were no transfers of financial assets or liabilities within the fair value hierarchy during the three months ended March 31, 2026.

Note 7. Shareholders' Equity

Rights Offering

In November 2025, we commenced a transferable rights offering, or 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 $61,494, after offering costs. See Note 9 for further information regarding the Rights Offering.

Common Share Purchases

During the three months ended March 31, 2026, we purchased 814 of our common shares from certain former officers and employees of Tremont Realty Capital, or Tremont, and the RMR Group LLC, or RMR, in satisfaction of tax withholding and payment obligations in connection with the vesting of awards of our common shares, valued at the closing price of our common shares on The Nasdaq Stock Market LLC, or Nasdaq, on the applicable purchase date. The aggregate value of common shares purchased was $7.

Distributions

For the three months ended March 31, 2026, we declared and paid regular quarterly distributions to common shareholders, using cash on hand, as follows:

On April 9, 2026, we declared a 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 on or about May 14, 2026, using cash on hand.

Note 8. Management Agreement with Tremont

We haveno employees. The personnel and various services we require to operate our business are provided to us, pursuant to a management agreement with Tremont which provides for the day to day management of our operations, subject to the oversight and direction of our Board of Trustees.

We pay Tremont an annual base management fee payable quarterly (0.375% per quarter) in arrears equal to 1.5% of our “Equity,” as defined under our management agreement. We include these amounts in base management fees in our condensed consolidated statements of operations. Pursuant to the terms of our management agreement, we also pay Tremont management incentive fees, subject to Tremont earning those fees in accordance with the management agreement. We include these amounts in incentive fees in our condensed consolidated statements of operations.

Tremont, and not us, is responsible for the costs of its employees who provide services to us, unless any such payment or reimbursement is specifically approved by a majority of our Independent Trustees, is a shared services cost or relates to awards made under any equity compensation plan adopted by us. We are required to pay or to reimburse Tremont and its affiliates for all other costs and expenses of our operations. Some of these overhead, professional and other services are provided by RMR, pursuant to a shared services agreement between Tremont and RMR. These reimbursements include an allocation of the cost of personnel employed by RMR. These shared services costs are subject to approval by a majority of our Independent Trustees at least annually. We include these amounts in reimbursement of shared services expenses in our condensed consolidated statements of operations. See our 2025 Annual Report for further information regarding our management agreement with Tremont.

Note 9. Related Person Transactions

We have relationships and historical and continuing transactions with Tremont, RMR, The RMR Group Inc., or RMR Inc., and others related to them, including other companies to which RMR or its subsidiaries provide management services and some of which have trustees, directors or officers who are also our Trustees or officers. Tremont is a subsidiary of RMR, which is a majority owned subsidiary of RMR Inc., and RMR Inc. is the managing member of RMR. RMR provides certain shared services to Tremont that are applicable to us, and we reimburse Tremont or pay RMR for the amounts Tremont or RMR pays for those services. One of our Managing Trustees and Chair of our Board of Trustees, Adam Portnoy, is the sole trustee, an officer and the controlling shareholder of ABP Trust, which is the controlling shareholder of RMR Inc., and he is also a director of Tremont, the chair of the board of directors, a managing director and the president and chief executive officer of RMR Inc., and an officer and employee of RMR. Matthew P. Jordan, our other Managing Trustee, is a director and the president and chief executive officer of Tremont. Mr. Jordan is also a managing director and an officer of RMR Inc. and an officer and employee of RMR, and our other officers are officers and employees of Tremont and/or RMR.

See Note 7 for information relating to common shares we purchased from certain former officers and employees of Tremont and/or RMR in satisfaction of tax withholding and payment obligations in connection with the vesting of awards of our common shares. We include amounts recognized as expense for awards of our common shares in general and administrative expenses in our condensed consolidated statements of operations.

Certain of our Independent Trustees also serve as independent trustees of other public companies to which RMR or its subsidiaries provide management services. Adam Portnoy serves as the chair of the board and as a managing trustee of those companies and other officers of RMR, including Mr. Jordan and certain of our other officers and officers of Tremont serve as managing trustees or officers of certain of these companies.

Our Manager, Tremont Realty Capital LLC. Tremont provides management services to us pursuant to our management agreement. See Note 8 for further information regarding our management agreement. As of March 31, 2026, Tremont owned 4,577,835 of our common shares, or 20.3% of our outstanding common shares, and Mr. Portnoy beneficially owned (including through Tremont and ABP Trust)5,085,332 of our common shares, or 22.5% of our outstanding common shares.

Property Management Agreement with RMR. We entered into a property management agreement with RMR in July 2023 with respect to real estate owned in Yardley, PA. Pursuant to this agreement, RMR provides property management services and we pay management fees equal to 3.0% of gross collected rents. Also under the terms of this property management agreement, we pay RMR additional fees for construction supervision services equal to 5.0% of the cost of such construction. Either we or RMR may terminate this agreement upon 30 days' prior notice. No termination fee would be payable as a result of terminating the agreement. We recognized property management and construction supervision fees of $20 and $21 for the three months ended March 31, 2026 and 2025, respectively, related to real estate owned.

Purchase of Mortgage Loans. On November 10, 2025 we purchased from RMRtwo floating rate first mortgage loans that were originated in 2024 and secured by hotel and industrial properties in Revere, MA and Wayne, PA, respectively, for an aggregate purchase price of $61,733, which represented the outstanding principal balance of the loans at the time of acquisition.

Rights Offering. On October 30, 2025, we announced our intent to commence a transferable rights offering, or the Rights Offering, to issue 7,532,861 new common shares and to raise gross proceeds of approximately $65,200. We and Tremont entered into a backstop agreement, pursuant to which Tremont agreed to exercise its pro rata primary subscription right in full and, upon the completion of the Rights Offering, to purchase 100% of all remaining common shares not otherwise subscribed for pursuant to all other rights holders’ primary subscription rights and over-subscription privileges, subject to the terms and conditions of the backstop agreement, or the Backstop Commitment. Tremont did not receive any fees or other consideration in connection with the Backstop Commitment. Through the exercise of their respective primary subscription rights, Tremont purchased 854,029 common shares, Adam Portnoy purchased 109,669 common shares and ABP Trust purchased 58,266 common shares in the Rights Offering. The Rights Offering resulted in subscriptions for approximately 5,517,113 of our common shares, or approximately 73.2% of the 7,532,861 common shares. Accordingly, pursuant to the Backstop Commitment, Tremont purchased 2,015,748 common shares that remained unsubscribed upon expiration of the Rights Offering.

For further information about these and other such relationships and certain other related person transactions, refer to our 2025 Annual Report.

Note 10. Income Taxes

We have elected to be taxed as a real estate investment trust, or REIT, under the Internal Revenue Code of 1986, as amended, or the IRC. Accordingly, we generally are not, and will not be, subject to U.S. federal income tax, provided that we meet certain distribution and other requirements. We are subject to certain state and local taxes, certain of which amounts are or will be reported as income taxes in our condensed consolidated statements of operations.

Note 11. Weighted Average Common Shares

We calculate net income per common share - basic using the two class method. We calculate net income per common share - diluted using the more dilutive of the two class or treasury stock method. Unvested share awards are considered participating securities and the related impact on earnings are considered when calculating net income per common share - basic and net income per common share - diluted.

The calculation of net income per common share - basic and diluted is as follows (amounts in thousands, except per share data):

Note 12. Segment Reporting

We manage our business on a consolidated basis and therefore haveone reportable segment: originating and investing in floating rate first mortgage loans secured by CRE properties. The Chief Operating Decision Maker, or CODM, is our President and Chief Investment Officer. The CODM assesses performance, allocates resources and makes strategic decisions based on net income as shown in our condensed consolidated statements of operations. Our significant expense categories are included in our condensed consolidated statements of operations. The measure of segment assets is reported as total assets in our condensed consolidated balance sheets.