Seven Hills Realty Trust Q4 FY2025 earnings call

• Tom Lorenzini started by providing update on fourth quarter performance and loan portfolio, then Jared discussed current market conditions and pipeline, and Matt discussed financial results and guidance. - Strong fourth quarter results driven by fully performing loan portfolio and ongoing capital deployment. - Successfully completed rights offering in December, raising $61.5 million in net proceeds, increasing investment capacity by over $200 million. - Entered first quarter 2026 with significant available capacity, having closed one loan, with others scheduled to close. - Loan portfolio as of December 31, 2025 had total commitments of $724.5 million, weighted average all-in yield 7.92%, weighted average risk rating 2.8, weighted average loan-to-value at origination 66%. - Market conditions in fourth quarter improved with abundant debt liquidity and greater visibility around interest rates, with increased sales volume across property types, office transaction volume up 25% year-over-year. - Demand for short-term, floating-rate bridge loans remains strong, and borrower and broker engagement with Seven Hills remains strong with over $1 billion of loan opportunities in first quarter 2026.

Fourth quarter distributable earnings were $4.6 million or $0.28 per share. Total commitments across 24 floating rate first mortgage loans as of December 31, 2025 were $724.5 million, with $36.9 million of unfunded commitments. Year-over-year portfolio increased by $83 million or ~13%. Weighted average all-in yield was 7.92%, weighted average risk rating improved to 2.8, and weighted average loan-to-value at origination was 66%. All loans were current on debt service with no past due or nonaccrual loans at year-end. Fourth quarter saw investment in 3 new loans with total commitments of $101.3 million, and first quarter had closed one loan for $30.5 million, 2 loans scheduled to close for $37 million combined, and 2 loans in diligence for ~$39 million.

• Fourth quarter distributable earnings $4.6 million or $0.28 per share, adjusted for rights offering impact would have been $0.31 per share. - Full year 2025 distributable earnings $1.21 per share, run rate annual dividend $1.12 per share, 93% payout ratio. - First quarter distributable earnings expected to be in range of $0.22 to $0.24 per share, temporary impact from rights offering expected to be offset as proceeds are invested and capital from loan repayments in second half is redeployed. - Expect Q1 originations could be about $100 million, Q2-Q4 hopeful about $200 million per quarter of new originations, target portfolio size close to $1 billion by year-end.

Q: Could you talk about finding pockets of inefficiency across the pipeline given heightened competition, moving from strict multifamily to other sectors?

A: Jared Lewis said multifamily is liquid but race to bottom in yield and pricing, they find opportunities in storage, industrial, medical office due to platform breadth with wide range of property level and asset managers.

Q: On $0.22 to $0.24 distributable EPS guidance, does it assume incremental capital from rights offering is fully levered and deployed in first quarter?

A: Matthew Brown said by end of Q1 haven't fully deployed rights offering capital, but it's temporary, expect DE back to fourth quarter levels by end of year.

Q: Any change in bank facilities advance rate?

A: Jared Lewis said no specific changes to advance rates, banking partners supportive.

Q: Investment spreads widened, delayed impact from Fed rate moves?

A: Matthew Brown said no delay, 7 active floors supporting trends, loan investments further supporting total portfolio net spread.

Q: Is current dividend secure through end of 2026?

A: Matthew Brown said yes, remain committed to $0.28 per quarter dividend, temporary drag on earnings from rights offering deployment, but loan repayments in second half will increase investment capacity and get back to current levels.

Q: Expect run rate of originations around $100 million to continue into 2026 and portfolio growth target?

A: Thomas Lorenzini said Q1 could be about $100 million, Q2-Q4 hopeful about $200 million per quarter, target portfolio size close to $1 billion by year-end.

Q: Were the acquired loans in the quarter purchased from another lender or through RMR pipeline?

A: Thomas Lorenzini said loans were underwritten, asset managed by their team, originated by their team, closed by their team, fit into portfolio, and there are no additional such loans expected in coming quarters