Seven Hills Realty Trust Q2 FY2024 earnings call

• Strong second quarter results with distributable earnings per share of $0.38, exceeding the $0.35 per share quarterly dividend by 9%. • Credit profile of loan portfolio remains stable with average risk rating of 3, no loans in default or non-accrual. • Received $17.3 million loan payoff and closed $41.6 million across two loan commitments. • Portfolio is 100% invested in floating rate loans originated post-pandemic. • Ended quarter with over $345 million of liquidity (cash on hand $69M, borrowing capacity $276M). • CECL reserve at 120 basis points of total loan commitments as of June 30. • Declared $0.35 per share quarterly dividend payable on August 15, covered by second quarter distributable earnings approximately 109%.

Seven Hills Realty Trust's second quarter portfolio consisted of 22 first mortgages with an average loan size of $30 million and total commitments of $652 million. The portfolio increased approximately 4% or $23 million sequentially with two recent investments. The weighted average coupon was 9.1% and all-in yield was 9.6%. The portfolio had a weighted average maximum maturity of 2.6 years (including extension options), average risk rating of 3, and loan to value at close of 68%. Multifamily was the largest property type at 37%, office was 27%, and the balance included retail, hospitality, self-storage, and industrial loans.

• Expect distributable earnings to be flat sequentially at $0.35 for the third quarter, excluding $0.03 of prepayment income seen in the second quarter. • Guidance reflects expected originations and repayment activity, assumes flat G&A expenses and consistent interest rates.

Q: Could you address the origination environment and competition?

A: The market is competitive with many lenders bidding on good transactions. Hoping rate relief in the back half of the year will lead to more transactions.

Q: Has activity picking up in the back half moved in line with softer economic figures indicating monetary easing?

A: Sponsors are optimistic; if Fed cuts rates, will see more transactions.

Q: How are you thinking about portfolio growth and origination pace?

A: Anticipating 6-8 transactions in 2024, already closed two, with one in diligence and solid pipeline.

Q: Is sale of Yardley office a possibility in 2024?

A: Not started marketing yet, property is performing well, decision likely with Board in 2025.

Q: Repeat the guidance for the next quarter?

A: Guiding $0.35 excluding $0.03 prepayment income from second quarter