• Distributable Earnings Per Share (Q4 2024): $0.33, meeting the high end of guidance range.
• Total Loan Commitments (Q4 2024): Increased to $641 million from $594 million in Q3.
• Average Loan Commitment: Increased from $30 million to $31 million quarter over quarter.
• Cash on Hand (End of Q4 2024): $70 million.
• Loan Repayments (2024): Eight loan repayments totaling $165 million.
• New Loans Closed (Q4 2024): Two loans totaling $87 million.
• Weighted Average Coupon: 8.2%.
• All-in Yield: 8.6%.
• Dividend Declared (January 2025): $0.35 per share.
• Annualized Dividend Yield: Approximately 10.6% based on the closing price.
• Debt to Equity Ratio (End of Q4 2024): Increased to 1.6 times from 1.4 times in the previous quarter.
• First Quarter 2025 Distributable Earnings Guidance: Expected to be in the range of $0.30 to $0.32 per share.

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Release Date: February 19, 2025

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

• Seven Hills Realty Trust (NASDAQ:SEVN) outperformed the Mare Mortgage commercial financing Index by more than 20% for the second consecutive year.
• The company reported distributable earnings per share of $0.33, meeting the high end of their guidance range.
• Total loan commitments increased to $641 million from $594 million in the previous quarter.
• The loan portfolio has a strong credit profile with no loans in default or non-accrual status.
• Seven Hills Realty Trust (NASDAQ:SEVN) maintains a diversified portfolio with 52% consisting of multi-family and industrial loans.

Negative Points

• The company anticipates no first-quarter repayments, which may impact short-term liquidity.
• A significant portion of the portfolio, approximately 58%, is scheduled to mature in 2025, posing potential refinancing risks.
• The company operates with a conservative leverage ratio, which may limit growth opportunities compared to peers.
• The securitization market remains challenging for Seven Hills Realty Trust (NASDAQ:SEVN) due to the size and composition of their portfolio.
• The dividend yield is subject to quarterly evaluation and may be impacted by market conditions and loan origination pace.

Q & A Highlights

Q: How comfortable is Seven Hills Realty Trust with the current dividend level and portfolio size, considering the targeted $100 million in net originations and $200 million in payoffs? A: Fernando Diaz, CFO, explained that the board evaluates the dividend on a quarterly basis, considering market conditions, loan originations, payoffs, and interest rates. Thomas Lorenzini, President, added that the pace of loan production is crucial for supporting the dividend, with recent transactions and upcoming deals expected to maintain the dividend level.

Q: How much insight does Seven Hills have into loan payoffs, given that 58% of the portfolio is scheduled to mature this year? A: Thomas Lorenzini, President, stated that they maintain regular communication with sponsors and are aware of upcoming maturities. They have identified several loans that will extend, and others are actively pursuing refinancing or sale options. Most loans are scheduled to mature in Q3 or Q4.

Q: What are Seven Hills' thoughts on leverage in 2025, given their current position below typical industry levels? A: Fernando Diaz, CFO, mentioned that they finished the quarter at 1.6 times leverage and expect to reach around 2 times leverage with additional capital deployment. The maximum leverage target is about 2.5 times, but they aim to maintain a conservative approach.

Q: Is a CLO (Collateralized Loan Obligation) something that could fit into Seven Hills' strategy, considering the tightening securitization markets? A: Jared Lewis, Vice President, noted that while the CMBS and CRE loan markets are active, accessing the CRE CLO market is challenging due to the portfolio size and focus on multi-family properties. They continue to find returns through other means.

Q: How does Seven Hills view the current market environment for floating rate loans? A: Jared Lewis, Vice President, highlighted that the stability of short-term rates makes floating rate loans attractive. This environment allows Seven Hills to be selective in credit analysis while strategically expanding their loan portfolio, particularly in sectors like student housing, industrial, hospitality, and retail.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.