Seven Hills Realty Trust
For the period ended Sep 30, 2026. Filed Oct 28, 2026.
View on SEC.govAbout this filing
A company's report for each of its first three quarters. The financial statements are not audited. It shows how the business has moved since the last annual report, and what management says changed.
Sep 30, 2026 · Filed Oct 28, 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-Q
Period ended 2026-06-30; filed 2026-07-28.
0001452477-26-000029
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of OperationsCurrent report: 10-Q
Period ended 2026-09-30; filed 2026-10-28.
0001452477-26-000050
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of OperationsThe baseline is this issuer’s latest earlier reporting period of the same form that was filed before the current report. A previous 10-Q is a different quarter, not a year-over-year comparison. Amendments are excluded.
Compared 114 previous paragraphs and 115 current paragraphs.
72 unchanged; 31 reworded; 10 added; 9 removed; 2 previous and 2 current paragraphs rearranged.
Tables are not compared: 11 previous and 11 current tables excluded. Dates, whitespace, punctuation and numbering changes are ignored; changes to financial figures remain significant.
A changed paragraph is not evidence that risk increased or decreased. An unchanged paragraph does not establish that risk stayed the same.
Added paragraphs (10)
Current report
Market Conditions. During the third quarter of 2026, U.S. CRE markets continued to demonstrate improvements, supported by continued recovery in underlying property fundamentals, strong debt capital availability and the gradual rebalancing of the supply and demand dynamics in the multifamily and industrial sectors. Furthermore, the commercial real estate sector has been the beneficiary of strong third quarter GDP growth, consumer spending and corporate profits and investments. At the same time, CRE capital markets continue to be highly impacted by increasing interest rates caused by persistent inflationary pressures and the cost of oil tied to the continued geopolitical issues in the Middle East, which is beginning to impact transaction activity.
Current report
During the quarter, the Federal Reserve increased the target federal funds rate to a range of 3.75% to 4.00% in response to the resiliency of the labor market, economic growth trends and continued inflationary pressures. Near the end of the third quarter, significant increases in the 5 and 10-year U.S. Treasury yields started to have a meaningful impact on investor sentiment and CRE owners’ buy, sell or refinance decision making. Elevated 5 and 10-year Treasury yields are generally more impactful on property values than shorter term rates, which is beginning to weigh on those market participants who were more dependent on lower interest rates to refinance an asset.
Current report
Despite these concerns, and the challenges that come with the rapid increase in rates, CRE financing markets remained active during the quarter. The amount of debt capital available to borrowers, from a wide array of sources, continues to provide certain property owners with the ability to recapitalize assets in the current interest rate environment. Competition amongst lenders for high-quality debt investments has generally resulted in tighter credit spreads, greater financing flexibility and improved borrower execution over the quarter.
Current report
While competitive lending conditions are likely to support transaction activity, borrowing costs, asset valuations and market liquidity could remain volatile if inflation proves more persistent than expected and interest rates remain elevated for an extended period and possibly increase further. Increasing interest rates will continue to force owners to focus on operational upside as a means of value creation compared to those who may have been waiting for lower interest rates to sell or refinance an asset.
Current report
(4)This loan was repaid in October 2026.
Current report
In August 2026, we entered into a discounted payoff agreement for our loan secured by an office property in Dallas, TX, which had an amortized cost of $44,217 and a risk rating of 4 as of June 30, 2026. In connection with this agreement, the borrower repaid $42,717 of the outstanding principal balance of $44,217, resulting in a realized loss of $1,500. The realized loss is included in (reversal of) provision for credit losses in our condensed consolidated statements of operations during the three and nine months ended September 30, 2026.
Current report
In August 2026, we entered into a discounted payoff agreement for our loan secured by an office property in Carlsbad, CA in connection with the pending sale of the underlying collateral. As a result, we determined that the loan was collateral dependent and wrote the loan down to the fair value of the collateral, less estimated costs to sell, of $22,166. Accordingly, we recorded a reversal of credit losses of $224 during the three months ended September 30, 2026 to reduce the allowance for credit losses for this loan to $2,508. As of September 30, 2026, this loan had a risk rating of 5. In October 2026, the borrower repaid approximately $22,100 of the outstanding principal balance.
Current report
n/m - not meaningful
Current report
Nine Months Ended September 30, 2026 Compared to Nine Months Ended September 30, 2025:
Current report
As of September 30, 2026, we had a $102,232 aggregate outstanding principal balance under the BMO Facility.
Removed paragraphs (9)
Previous report
Market Conditions. The first quarter of 2026 reflected a continuation of the stabilization trends that emerged in the second half of 2025, supported by improving underlying property fundamentals along with relative interest rate stability allowing for greater confidence in underwriting assumptions going forward.
Previous report
During the second quarter of 2026, CRE capital markets continued to improve, however ongoing geopolitical uncertainty and renewed inflationary pressures are causing considerable volatility in U.S. Treasury yields. These conditions are again weighing on market participants’ buy, sell or refinance decision making process.
Previous report
To that end, CRE financing activity remains robust, but market activity is more heavily weighted toward refinancings with lower than usual acquisition financing volume. However, an abundance of upcoming loan maturities coupled with many lenders’ decreased tolerance for loan extensions may lead to higher transaction volume in the second half of 2026.
Previous report
The relative value of CRE debt investments compared to alternative fixed income, corporate credit and private credit investments continues to attract capital from banks, securitized lenders, life insurance companies, private debt funds and mortgage REITs. Increased competition among lenders has contributed to tighter credit spreads, more flexible loan terms and lower all-in borrowing costs for high-quality, well-structured CRE debt investments, although lender appetite remains differentiated by property type, market, sponsorship and leverage profile. Overall, borrowers are the beneficiaries of this competition among lenders.
Previous report
The outlook for U.S. monetary policy remains uncertain. The Federal Open Market Committee held rates steady during the quarter, however, updated projections indicate increased concern regarding persistent inflation and the potential need for policy tightening. As a result, the timing and direction of future interest rate decisions will depend on incoming inflation data, labor market conditions, energy prices and the broader economic impact of geopolitical developments. While CRE capital markets remain relatively well positioned, transaction volume, valuation trends and borrowing costs may remain subject to volatility if inflation proves persistent, geopolitical risks intensify or interest rates remain elevated for longer than currently expected.
Previous report
Six Months Ended June 30, 2026 Compared to Six Months Ended June 30, 2025:
Previous report
Rights Offering
Previous 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 $61,494, after offering costs. For further information regarding the Rights Offering, see Notes 7 and 9 to our Unaudited Condensed Consolidated Financial Statements included in Part I, Item 1 of this Quarterly Report on Form 10-Q
Previous report
As of June 30, 2026, we had a $85,032 aggregate outstanding principal balance under the BMO Facility.
Reworded paragraphs (31)
Previous wording
Changes in Interest Rates. With respect to our business operations, increases in interest rates, in general, may cause: (a) the coupon rates on our variable rate investments to reset, perhaps on a delayed basis, to higher rates; (b) it to become more difficult and costly for our borrowers, which may negatively impact their ability to repay our investments; and (c) the interest expense associated with our variable rate borrowings to increase.
Current wording
Changes in Interest Rates. With respect to our business operations, increases in interest rates, in general, may cause: (a) the coupon rates on our variable rate investments to reset, perhaps on a delayed basis, to higher rates; (b) it to become more difficult and costly for our borrowers to refinance, which may negatively impact their ability to repay our investments; and (c) the interest expense associated with our variable rate borrowings to increase.
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 4.34% with a weighted average floor of 2.96%; therefore, changes to income from investments, net, may not move proportionately with the increase or decrease in benchmark rates. As of June 30, 2026, SOFR was 3.65%, and as a result, six 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 2.82%; therefore, changes to income from investments, net, may not move proportionately with the increase or decrease in benchmark rates. As of September 30, 2026, SOFR was 3.91%, and as a result, four of our loan investments had an active interest rate floor.
Previous wording
As of June 30, 2026, we had $765,343 in aggregate loan commitments, consisting of a diverse portfolio, geographically and by property type, of 27 first mortgage loans. As of June 30, 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”.
Current wording
As of September 30, 2026, we had $744,532 in aggregate loan commitments, consisting of a diverse portfolio, geographically and by property type, of 26 first mortgage loans. As of September 30, 2026, we had five loans representing approximately 19% of the amortized cost of our loan portfolio with a loan risk rating of “4” or “higher risk” and one loan representing approximately 4% of the amortized cost of our loan portfolio with a risk rating of “5” or “loss likely”.
Previous wording
In July 2026, we amended the agreement governing our loan secured by an office property in Plano, TX. As part of this amendment, the maturity date was extended by two years to July 1, 2028. As of June 30, 2026, this loan had an amortized cost of $26,637 and a risk rating of 4.
Current wording
In July 2026, we amended the agreement governing our loan secured by an office property in Plano, TX. As part of this amendment, the maturity date was extended by two years to July 1, 2028. As of September 30, 2026, this loan had an amortized cost of $26,576 and a risk rating of 4.
Previous wording
The table below details our Secured Financing Facilities activities during the six months ended June 30, 2026:
Current wording
The table below details our Secured Financing Facilities activities during the nine months ended September 30, 2026:
Previous wording
As of June 30, 2026, outstanding advancements under our Secured Financing Facilities had a weighted average interest rate of 5.78% per annum, excluding associated fees and expenses. As of June 30, 2026 and July 24, 2026, we had a $471,744 and $488,944, respectively, aggregate outstanding principal balance under our Secured Financing Facilities.
Current wording
As of September 30, 2026, outstanding advancements under our Secured Financing Facilities had a weighted average interest rate of 5.89% per annum, excluding associated fees and expenses. As of September 30, 2026 and October 23, 2026, we had a $439,272 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 a lower weighted average principal balance due to loan repayment activity during the three months ended June 30, 2026. The weighted average principal balance of our loan investments was approximately $699,000 for the three months ended June 30, 2026 compared to approximately $712,000 for the three months ended March 31, 2026. The weighted average coupon rate was approximately 7.25% during the three months ended June 30, 2026 compared to approximately 7.33% during the three months ended March 31, 2026.
Current wording
Interest and related income. The decrease in interest and related income was primarily due to a lower weighted average coupon rate for the three months ended September 30, 2026 and the accretion of purchase discount ending during the three months ended June 30, 2026, offset by the accelerated recognition of fee income related to an early loan repayment. The weighted average coupon rate was approximately 7.21% during the three months ended September 30, 2026 compared to approximately 7.25% during the three months ended June 30, 2026.
Previous wording
Interest and related expenses. The decrease in interest and related expenses was primarily the result of lower weighted average coupon rates, partially offset by a higher weighted average principal balance during the three months ended June 30, 2026. The weighted average coupon rate was approximately 5.81% during the three months ended June 30, 2026 compared to approximately 5.86% during the three months ended March 31, 2026. The weighted average principal balance of our repurchase loans was approximately $468,000 for the three months ended June 30, 2026 compared to approximately $462,000 for the three months ended March 31, 2026.
Current wording
Interest and related expenses. The decrease in interest and related expenses was primarily the result of lower weighted average coupon rates and a lower weighted average principal balance during the three months ended September 30, 2026. The weighted average coupon rate was approximately 5.76% during the three months ended September 30, 2026 compared to approximately 5.81% during the three months ended June 30, 2026. The weighted average principal balance of our repurchase loans was approximately $451,000 for the three months ended September 30, 2026 compared to approximately $468,000 for the three months ended June 30, 2026.
Previous wording
Incentive fees. We recognize management incentive fees payable to Tremont in accordance with our management agreement. The increase in management incentive fees was due to the incentive fee for the 12 month period ended June 30, 2026 exceeding the fee paid for the previous three calendar quarters by a higher margin, as compared to the fee for the 12 month period ended March 31, 2026.
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 the lower “core earnings”, as defined in our management agreement, for the three months ended September 30, 2026 as compared to the three months ended June 30, 2026.
Previous wording
General and administrative expenses. The increase in general and administrative expenses was primarily due to an increase in share based compensation resulting from shares awarded to our Trustees during the three months ended June 30, 2026.
Current 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, 2026, partially offset by shares awarded to officers and certain other employees of Tremont and RMR during the three months ended September 30, 2026.
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.
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 increase 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.
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 lower utility expenses during the three months ended June 30, 2026 as compared to the three months ended March 31, 2026.
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 repair and maintenance and utility expenses during the three months ended September 30, 2026 as compared to the three months ended June 30, 2026.
Previous wording
Income tax benefit (expense). Income tax benefit (expense) represents income taxes paid or payable by us in certain jurisdictions where we are subject to state income taxes.
Current wording
Income tax (expense) benefit. Income tax (expense) benefit represents income taxes paid or payable by us in certain jurisdictions where we are subject to state income taxes.
Previous wording
Net (loss) income and net (loss) income per common share - basic and diluted. The decrease in net (loss) income during the three months ended June 30, 2026 as compared to the three months ended March 31, 2026 was due to the changes noted above.
Current wording
Net income (loss) and net income (loss) per common share - basic and diluted. The increase in net income (loss) during the three months ended September 30, 2026 as compared to the three months ended June 30, 2026 was due to the changes noted above.
Previous wording
Interest and related income. The increase in interest and related income was primarily due to a higher weighted average principal balance resulting from loan origination activity during the six months ended June 30, 2026, partially offset by declines in the SOFR index rate. The weighted average principal balance of our loan investments was approximately $705,000 for the six months ended June 30, 2026 compared to approximately $642,000 for the six months ended June 30, 2025. The weighted average coupon rate was approximately 7.31% during the six months ended June 30, 2026 compared to approximately 8.03% during the six months ended 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 resulting from loan origination activity during the nine months ended September 30, 2026, partially offset by declines in the SOFR index rate. The weighted average principal balance of our loan investments was approximately $704,000 for the nine months ended September 30, 2026 compared to approximately $626,000 for the nine months ended September 30, 2025. The weighted average coupon rate was approximately 7.28% during the nine months ended September 30, 2026 compared to approximately 7.85% during the nine months ended September 30, 2025.
Previous wording
Interest and related expenses. The decrease in interest and related expenses was primarily the result of declines in the SOFR index rate, offset by a higher weighted average principal balance during the six months ended June 30, 2026 as compared to the six months ended June 30, 2025. The weighted average coupon rate was approximately 5.80% during the six months ended June 30, 2026 compared to approximately 6.51% during the six months ended June 30, 2025. The weighted average principal balance of our repurchase loans was approximately $465,000 for the six months ended June 30, 2026 compared to approximately $432,000 for the six months ended June 30, 2025.
Current wording
Interest and related expenses. The decrease in interest and related expenses was primarily the result of declines in the SOFR index rate, offset by a higher weighted average principal balance during the nine months ended September 30, 2026 as compared to the nine months ended September 30, 2025. The weighted average coupon rate was approximately 5.82% during the nine months ended September 30, 2026 compared to approximately 6.30% during the nine months ended September 30, 2025. The weighted average principal balance of our repurchase loans was approximately $461,000 for the nine months ended September 30, 2026 compared to approximately $421,000 for the nine months ended September 30, 2025.
Previous wording
Revenue from real estate owned. Revenue from real estate owned represents revenue from the operations of an office property located in Yardley, PA that was transferred to real estate owned through a deed in lieu of foreclosure in June 2023. The increase in revenue from real estate owned was primarily due to higher operating expense reimbursements and higher rental rates from lease renewal activity during the six months ended June 30, 2026 as compared to the six months ended June 30, 2025.
Current wording
Revenue from real estate owned. Revenue from real estate owned represents revenue from the operations of an office property located in Yardley, PA that was transferred to real estate owned through a deed in lieu of foreclosure in June 2023. The decrease in revenue from real estate owned was primarily due to lower operating expense reimbursements during the nine months ended September 30, 2026 as compared to the nine months ended September 30, 2025.
Previous wording
General and administrative expenses. The increase in general and administrative expenses was primarily due to an increase in share based compensation to our trustees during the six months ended June 30, 2026 as compared to the six months ended June 30, 2025.
Current wording
General and administrative expenses. The decrease in general and administrative expenses was primarily due to a decrease in legal fees and other public company costs, partially offset by an increase in share based compensation to our employees and Trustees during the nine months ended September 30, 2026 as compared to the nine months ended September 30, 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.
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 increase in reimbursement of shared services expenses was primarily the result of higher usage of shared services from RMR during the nine months ended September 30, 2026, as our loan book has grown.
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 three months ended June 30, 2026 is primarily due to increased allowances for certain of our “4” rated office loans with near-term maturities, and primarily reflects lower estimated collateral values for these loans within the office sector.
Current wording
Provision for credit losses. The provision for credit losses represents the change in the allowance for credit losses on our loan portfolio and unfunded commitments. The increase in the allowance for credit losses during the nine months ended September 30, 2026 is primarily due to increased allowances for certain of our “4” rated and “5” rated office loans with near-term maturities, and primarily reflects lower estimated collateral values for these loans within the office sector and allowances for new loan originations during the nine months ended September 30, 2026.
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 lease related assets becoming fully amortized resulting in lower amortization expense during the six months ended June 30, 2026 as compared to the six months ended June 30, 2025.
Current wording
Expenses from real estate owned. Expenses from real estate owned represent expenses from the operations of an office property located in Yardley, PA that was transferred to real estate owned through a deed in lieu of foreclosure in June 2023. The decrease in expenses from real estate owned was primarily due to lease related assets becoming fully amortized resulting in lower amortization expense during the nine months ended September 30, 2026 as compared to the nine months ended September 30, 2025.
Previous wording
Income tax benefit (expense). Income tax expense represents income taxes paid or payable by us in certain jurisdictions where we are subject to state income taxes.
Current wording
Income tax expense. Income tax expense represents income taxes paid or payable by us in certain jurisdictions where we are subject to state income taxes.
Previous 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.
Current wording
Net income and net income per common share - basic and diluted. The increase in net income was due to the changes noted above. The decrease in net income per common share - basic and diluted reflects the effect of the issuance of 7,532,861 common shares through the transferrable rights offering completed in December 2025.
Previous 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 (loss) income, net (loss) 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 (loss) income or net (loss) 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 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.
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 (loss), net income (loss) 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 (loss) or net income (loss) 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 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
In order to maintain our qualification for taxation as a REIT, we are generally required to distribute substantially all of our taxable income, subject to certain adjustments, to our shareholders. We believe that one of the factors that investors consider important in deciding whether to buy or sell securities of a REIT is its distribution rate. Over time, Distributable Earnings and Distributable Earnings per common share may be useful indicators of distributions to our shareholders and are measures that are considered by our Board of Trustees when determining the amount of distributions. We believe that Distributable Earnings and Distributable Earnings per common share provide meaningful information to consider in addition to net (loss) income, net (loss) income per common share and cash flows from operating activities determined in accordance with GAAP. These measures help us to evaluate our performance excluding the effects of certain transactions and GAAP adjustments that we believe are not necessarily indicative of our current loan portfolio and operations. In addition, Distributable Earnings, excluding incentive fees, is used in determining the amount of base management and management incentive fees payable by us to Tremont under our management agreement.
Current wording
In order to maintain our qualification for taxation as a REIT, we are generally required to distribute substantially all of our taxable income, subject to certain adjustments, to our shareholders. We believe that one of the factors that investors consider important in deciding whether to buy or sell securities of a REIT is its distribution rate. Over time, Distributable Earnings and Distributable Earnings per common share may be useful indicators of distributions to our shareholders and are measures that are considered by our Board of Trustees when determining the amount of distributions. We believe that Distributable Earnings and Distributable Earnings per common share provide meaningful information to consider in addition to net income (loss), net income (loss) per common share and cash flows from operating activities determined in accordance with GAAP. In periods where Distributable Earnings is impacted by a realized loss associated with a specific loan resolution event, we also present Distributable Earnings excluding realized loss and Distributable Earnings excluding realized loss per common share. We believe this supplemental perspective may be useful because realized losses associated with specific loan resolution events are generally not indicative of the ongoing operating performance and earnings capacity of our stabilized loan portfolio. These measures help us to evaluate our performance excluding the effects of certain transactions and GAAP adjustments that we believe are not necessarily indicative of our current loan portfolio and operations. In addition, Distributable Earnings, excluding incentive fees, is used in determining the amount of base management and management incentive fees payable by us to Tremont under our management agreement.
Previous wording
We calculate Distributable Earnings and Distributable Earnings per common share as net (loss) income and net (loss) income per common share, respectively, computed in accordance with GAAP, including realized losses not otherwise included in net (loss) income determined in accordance with GAAP, and excluding: (a) depreciation and amortization of real estate owned and related intangible assets, if any; (b) non-cash equity compensation expense; (c) unrealized gains, losses and other similar non-cash items that are included in net (loss) income for the period of the calculation (regardless of whether such items are included in or deducted from net (loss) income or in other comprehensive income under GAAP), if any; and (d) one-time events pursuant to changes in GAAP and certain non-cash items, if any. Distributable Earnings are reduced for realized losses on loan investments when amounts are deemed uncollectable. This is generally at the time a loan is repaid, or in the case of foreclosure, when the underlying asset is sold, but may also be when, in our determination, it is nearly certain that all amounts due will not be collected. The realized loss amount reflected in Distributable Earnings will equal the difference between the cash received or expected to be received and the carrying value of the loan.
Current wording
We calculate Distributable Earnings and Distributable Earnings per common share as net income (loss) and net income (loss) per common share, respectively, computed in accordance with GAAP, including realized losses not otherwise included in net income (loss) determined in accordance with GAAP, and excluding: (a) depreciation and amortization of real estate owned and related intangible assets, if any; (b) non-cash equity compensation expense; (c) unrealized gains, losses and other similar non-cash items that are included in net income (loss) for the period of the calculation (regardless of whether such items are included in or deducted from net income (loss) or in other comprehensive income under GAAP), if any; and (d) one-time events pursuant to changes in GAAP and certain non-cash items, if any. Distributable Earnings are reduced for realized losses on loan investments when amounts are deemed uncollectable. This is generally at the time a loan is repaid, or in the case of foreclosure, when the underlying asset is sold. The realized loss amount reflected in Distributable Earnings will equal the difference between the cash received or expected to be received and the carrying value of the loan.
Previous wording
The table below demonstrates how we calculate Distributable Earnings and Distributable Earnings per common share, which are non-GAAP financial measures, and provides a reconciliation of these non-GAAP financial measures to net (loss) income:
Current wording
The table below demonstrates how we calculate Distributable Earnings and Distributable Earnings per common share which are non-GAAP financial measures, and provides a reconciliation of these non-GAAP financial measures to net income (loss):
Previous wording
During the six months ended June 30, 2026, we declared and paid regular quarterly distributions to our common shareholders totaling $12,654, or $0.56 per common share, using cash on hand.
Current wording
During the nine months ended September 30, 2026, we declared and paid regular quarterly distributions to our common shareholders totaling $19,000, or $0.84 per common share, using cash on hand.
Previous wording
On July 9, 2026, we declared a regular quarterly distribution of $0.28 per common share, or $6,346, to shareholders of record on July 20, 2026. We expect to pay this distribution to our common shareholders on or about August 13, 2026 using cash on hand.
Current wording
On October 8, 2026, we declared a regular quarterly distribution of $0.28 per common share, or $6,393, to shareholders of record on October 19, 2026. We expect to pay this distribution to our common shareholders on or about November 12, 2026 using cash on hand.
Previous wording
As of June 30, 2026, we had a $386,712 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 September 30, 2026, we had a $337,040 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 preparation of financial statements in conformity with GAAP requires us to make estimates and assumptions that affect reporting amounts. Actual results could differ from those estimates. Significant estimates in our condensed consolidated financial statements include revenue recognition, loans held for investment, allowance for credit losses and real estate owned.
Current wording
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 our condensed consolidated financial statements include revenue recognition, loans held for investment, allowance for credit losses and real estate owned.
Rearranged current paragraphs (2)
Current report — wording carried from elsewhere
In September 2026, we amended our master repurchase agreement with Citibank to extend the stated maturity date to September 16, 2028.
Current report — wording carried from elsewhere
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. For further information regarding our allowance for credit losses, see Note 3 to our Unaudited Condensed Consolidated Financial Statements included in Part I, Item 1 of this Quarterly Report on Form 10-Q.
Rearranged previous paragraphs (2)
Previous report — wording carried elsewhere
(4)In July 2026, the maturity date of this loan was extended by two years to July 1, 2028.
Previous report — wording carried elsewhere
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 six months ended June 30, 2026 is primarily due to increased allowances for certain of our “4” rated office loans with near-term maturities, and primarily reflects lower estimated collateral values for these loans within the office sector.