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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q


☒			QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2025


☐			TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

Commission File Number 001-34383

Seven Hills Realty Trust

(Exact Name of Registrant as Specified in Its Charter)


Maryland			20-4649929
(State of Organization)			(IRS Employer Identification No.)

Two Newton Place, 255 Washington Street, Suite 300, Newton, MA 02458-1634

(Address of Principal Executive Offices) (Zip Code)

Registrant’s Telephone Number, Including Area Code 617-332-9530

Securities registered pursuant to Section 12(b) of the Act:

Title of Each Class

Trading Symbol

Name of each exchange on which registered

Common Shares of Beneficial Interest

SEVN

The Nasdaq Stock Market LLC

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer

☐

Accelerated filer

☐

Non-accelerated filer

☒

Smaller reporting company

☒

Emerging growth company

☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided in Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

Number of registrant's common shares of beneficial interest, $0.001 par value per share, outstanding as of July 24, 2025: 14,943,728.

Table of Contents

SEVEN HILLS REALTY TRUST

FORM 10-Q

June 30, 2025

INDEX


		Page
PART I	Financial Information
Item 1.	Financial Statements (unaudited)
	Condensed Consolidated Balance Sheets — June 30, 2025 and December 31, 2024	1
	Condensed Consolidated Statements of Operations — Three and Six Months Ended June 30, 2025 and 2024	2
	Condensed Consolidated Statements of Shareholders’ Equity — Three and Six Months Ended June 30, 2025 and 2024	3
	Condensed Consolidated Statements of Cash Flows — Six Months Ended June 30, 2025 and 2024	4
	Notes to Unaudited Condensed Consolidated Financial Statements	5
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	15
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	30
Item 4.	Controls and Procedures	30
	Warning Concerning Forward-Looking Statements	31
PART II	Other Information	34
Item 1A.	Risk Factors	34
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	34

Item 6.	Exhibits	34
	Signatures	35

References in this Quarterly Report on Form 10-Q to "SEVN", "we", "us" or "our" mean Seven Hills Realty Trust and its consolidated subsidiaries unless otherwise expressly stated or the context indicates otherwise.

Table of Contents

PART I. Financial Information

Item 1. Financial Statements

SEVEN HILLS REALTY TRUST

CONDENSED CONSOLIDATED BALANCE SHEETS

(dollars in thousands, except per share data)

(unaudited)


	June 30,		December 31,
	2025		2024
ASSETS
Cash and cash equivalents	$	45,951	$	70,750
Loans held for investment	631,318		609,916
Allowance for credit losses	(9,375)		(8,074)
Loans held for investment, net	621,943		601,842
Real estate owned, net	10,988		11,187
Acquired real estate leases, net	3,052		3,366
Accrued interest receivable	2,827		2,954
Prepaid expenses and other assets, net	2,622		2,709
Total assets	$	687,383	$	692,808

LIABILITIES AND SHAREHOLDERS' EQUITY
Accounts payable, accrued liabilities and other liabilities	$	2,991	$	3,982
Secured financing facilities, net	415,999		417,796
Due to related persons	1,373		1,752
Total liabilities	420,363		423,530

Commitments and contingencies

Shareholders' equity:
Common shares of beneficial interest, $0.001 par value per share; 25,000,000 shares authorized; 14,943,728 and 14,902,773 shares issued and outstanding, respectively	15		15
Additional paid in capital	241,390		240,425
Cumulative net income	96,690		89,480
Cumulative distributions	(71,075)		(60,642)
Total shareholders' equity	267,020		269,278
Total liabilities and shareholders' equity	$	687,383	$	692,808

See accompanying notes.

Table of Contents

SEVEN HILLS REALTY TRUST

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(amounts in thousands, except per share data)

(unaudited)


	Three Months Ended June 30,				Six Months Ended June 30,
	2025		2024		2025		2024
INCOME FROM INVESTMENTS:
Interest and related income	$	14,359	$	16,415	$	28,681	$	32,726
Purchase discount accretion	—		782		—		1,927
Less: interest and related expenses	(7,524)		(8,385)		(14,961)		(17,058)
Income from loan investments, net	6,835		8,812		13,720		17,595
Revenue from real estate owned	558		568		1,267		1,147
Total revenue	7,393		9,380		14,987		18,742
OTHER EXPENSES:
Base management fees	1,076		1,082		2,155		2,162
Incentive fees	229		370		247		420
General and administrative expenses	1,381		1,081		2,344		2,044
Reimbursement of shared services expenses	551		691		1,101		1,382
Provision for credit losses	912		1,315		759		2,012
Expenses from real estate owned	569		599		1,163		1,244
Total other expenses	4,718		5,138		7,769		9,264
Income before income taxes	2,675		4,242		7,218		9,478
Income tax benefit (expense)	3		(13)		(8)		(16)
Net income	$	2,678	$	4,229	$	7,210	$	9,462

Weighted average common shares outstanding - basic and diluted	14,785		14,691		14,771		14,683


Net income per common share - basic and diluted	$	0.18	$	0.28	$	0.48	$	0.64

See accompanying notes.

Table of Contents

SEVEN HILLS REALTY TRUST

CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY

(amounts in thousands)

(unaudited)


	Number of Common Shares	Common Shares		Additional Paid In Capital		Cumulative Net Income		Cumulative Distributions		Total

Balance at December 31, 2024	14,903	$	15	$	240,425	$	89,480	$	(60,642)	$	269,278
Share grants	5	—		356		—		—		356
Share repurchases	(1)	—		(5)		—		—		(5)

Net income	—	—		—		4,532		—		4,532
Distributions	—	—		—		—		(5,216)		(5,216)
Balance at March 31, 2025	14,907	15		240,776		94,012		(65,858)		268,945
Share grants	42	—		677		—		—		677
Share repurchases	(5)	—		(63)		—		—		(63)

Net income	—	—		—		2,678		—		2,678
Distributions	—	—		—		—		(5,217)		(5,217)
Balance at June 30, 2025	14,944	$	15	$	241,390	$	96,690	$	(71,075)	$	267,020





Balance at December 31, 2023	14,811	$	15	$	239,443	$	71,660	$	(39,870)	$	271,248
Share grants	—	—		336		—		—		336
Share repurchases	(6)	—		(75)		—		—		(75)
Net income	—	—		—		5,233		—		5,233
Distributions	—	—		—		—		(5,184)		(5,184)
Balance at March 31, 2024	14,805	15		239,704		76,893		(45,054)		271,558
Share grants	29	—		497		—		—		497
Share repurchases	(1)	—		(13)		—		—		(13)
Net income	—	—		—		4,229		—		4,229
Distributions	—	—		—		—		(5,182)		(5,182)
Balance at June 30, 2024	14,833	$	15	$	240,188	$	81,122	$	(50,236)	$	271,089

See accompanying notes.

Table of Contents

SEVEN HILLS REALTY TRUST

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(dollars in thousands)

(unaudited)


	Six Months Ended June 30,
	2025		2024
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income	$	7,210	$	9,462
Adjustments to reconcile net income to net cash provided by operating activities:
Accretion of purchase discount	—		(1,927)
Provision for credit losses	759		2,012
Amortization of loan origination and exit fees	(1,097)		(1,283)
Amortization of deferred financing costs	749		699
Straight line rental income	(31)		(385)
Depreciation and amortization	559		683
Share based compensation	1,033		833
Changes in operating assets and liabilities:
Accrued interest receivable	127		395
Prepaid expenses and other assets	72		(683)
Accounts payable, accrued liabilities and other liabilities	(339)		(275)
Due to related persons	(379)		(562)
Net cash provided by operating activities	8,663		8,969

CASH FLOWS FROM INVESTING ACTIVITIES:
Origination of loans held for investment	(85,991)		(35,571)
Additional funding of loans held for investment	(5,358)		(1,697)
Repayment of loans held for investment	71,044		57,690
Real estate owned improvements	(116)		(7)
Net cash (used in) provided by investing activities	(20,421)		20,415

CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from secured financing facilities	54,304		10,197
Repayments under secured financing facilities	(56,711)		(47,024)
Payments of deferred financing costs	(133)		(355)
Repurchase of common shares	(68)		(88)
Distributions	(10,433)		(10,366)
Net cash used in financing activities	(13,041)		(47,636)

Decrease in cash and cash equivalents	(24,799)		(18,252)
Cash and cash equivalents at beginning of period	70,750		87,855
Cash and cash equivalents at end of period	$	45,951	$	69,603

SUPPLEMENTAL DISCLOSURES:
Interest paid	$	14,244	$	16,537
Income taxes refunded	$	(5)	$	(28)

Table of Contents

SEVEN HILLS REALTY TRUST

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(dollars in thousands, except per share data)

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, 2024, or our 2024 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 June 30, 2025 and December 31, 2024:


	As of June 30, 2025			As of December 31, 2024
Number of loans	23			21
Total loan commitments	$	665,421		$	641,213
Unfunded loan commitments (1)	$	32,595		$	30,402
Principal balance	$	632,826		$	610,811

Carrying value	$	621,943		$	601,842
Weighted average coupon rate	8.03		%	8.24		%
Weighted average all in yield (2)	8.37		%	8.62		%
Weighted average floor	2.56		%	2.12		%
Weighted average maximum maturity (years) (3)	2.7			2.6
Weighted average risk rating	2.9			3.1

(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.

SEVEN HILLS REALTY TRUST

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(dollars in thousands, except per share data)

The tables below represent our loan activities during the three months ended June 30, 2025 and 2024:


	Principal Balance		Deferred Fees and Other Items		Amortized Cost
Balance at March 31, 2025	$	661,389	$	(1,152)	$	660,237
Additional funding	1,285		—		1,285
Originations	40,800		(544)		40,256
Repayments	(70,648)		(396)		(71,044)

Net amortization of deferred fees	—		584		584

Balance at June 30, 2025	$	632,826	$	(1,508)	$	631,318


	Principal Balance		Deferred Fees and Other Items		Amortized Cost
Balance at March 31, 2024	$	590,632	$	(1,997)	$	588,635
Additional funding	811		—		811
Originations	36,017		(446)		35,571
Repayments	(17,250)		—		(17,250)

Net amortization of deferred fees	—		701		701
Purchase discount accretion	—		782		782
Balance at June 30, 2024	$	610,210	$	(960)	$	609,250

The tables below represent our loan activities during the six months ended June 30, 2025 and 2024:


	Principal Balance		Deferred Fees and Other Items		Amortized Cost
Balance at December 31, 2024	$	610,811	$	(895)	$	609,916
Additional funding	5,358		—		5,358
Originations	87,305		(1,314)		85,991
Repayments	(70,648)		(396)		(71,044)

Net amortization of deferred fees	—		1,097		1,097

Balance at June 30, 2025	$	632,826	$	(1,508)	$	631,318


	Principal Balance		Deferred Fees and Other Items		Amortized Cost
Balance at December 31, 2023	$	629,892	$	(3,430)	$	626,462
Additional funding	1,855		(158)		1,697
Originations	36,017		(446)		35,571
Repayments	(57,554)		(136)		(57,690)

Net amortization of deferred fees	—		1,283		1,283
Purchase discount accretion	—		1,927		1,927
Balance at June 30, 2024	$	610,210	$	(960)	$	609,250

SEVEN HILLS REALTY TRUST

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(dollars in thousands, except per share data)

The tables below detail the property type and geographic location of the properties securing the loans in our portfolio as of June 30, 2025 and December 31, 2024:


	June 30, 2025					December 31, 2024
Property Type	Number of Loans	Amortized Cost		Percentage of Value		Number of Loans	Amortized Cost		Percentage of Value
Multifamily	7	$	205,218	33	%	5	$	163,987	27	%
Office	6	164,800		26	%	6	167,749		28	%
Industrial	6	161,827		26	%	5	136,646		22	%
Hotel	3	84,199		13	%	3	84,028		14	%
Retail	1	15,274		2	%	2	57,506		9	%
	23	$	631,318	100	%	21	$	609,916	100	%


	June 30, 2025					December 31, 2024
Geographic Location	Number of Loans	Amortized Cost		Percentage of Value		Number of Loans	Amortized Cost		Percentage of Value
South	10	$	260,877	41	%	7	$	192,108	32	%
West	6	135,916		22	%	6	142,560		23	%
Midwest	4	134,951		21	%	4	135,349		22	%
East	3	99,574		16	%	4	139,899		23	%
	23	$	631,318	100	%	21	$	609,916	100	%

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 2024 Annual Report for more information regarding our loan risk ratings.

As of June 30, 2025 and December 31, 2024, the amortized cost of our loan portfolio within each internal risk rating by year of origination was as follows:


June 30, 2025
Risk Rating	Number of Loans	Percentage of Portfolio		2025		2024		2023		2022		2021		Prior		Total
1	2	6	%	$	—	$	—	$	24,288	$	—	$	15,274	$	—	$	39,562
2	4	23	%	—		57,501		28,932		—		54,905		—		141,338
3	12	49	%	86,344		76,771		25,128		97,375		23,620		—		309,238
4	5	22	%	—		—		—		—		114,560		26,620		141,180
5	—	—	%	—		—		—		—		—		—		—
	23	100	%	$	86,344	$	134,272	$	78,348	$	97,375	$	208,359	$	26,620	$	631,318

SEVEN HILLS REALTY TRUST

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(dollars in thousands, except per share data)


December 31, 2024
Risk Rating	Number of Loans	Percentage of Portfolio		2024		2023		2022		2021		Prior		Total
1	—	—	%	$	—	$	—	$	—	$	—	$	—	$	—
2	4	18	%	41,570		53,070		—		15,252		—		109,892
3	12	58	%	91,515		25,086		163,228		76,034		—		355,863
4	5	24	%	—		—		—		114,556		29,605		144,161
5	—	—	%	—		—		—		—		—		—
	21	100	%	$	133,085	$	78,156	$	163,228	$	205,842	$	29,605	$	609,916

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 2024 Annual Report for further information regarding our measurement of our allowance for credit losses.

SEVEN HILLS REALTY TRUST

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(dollars in thousands, except per share data)

The tables below represent the changes to the allowance for credit losses during the three months ended June 30, 2025 and 2024.


	Loans Held for Investment, net		Unfunded Loan Commitments		Total
Balance at March 31, 2025	$	7,648	$	1,107	$	8,755
Provision for (reversal of) credit losses	1,727		(815)		912


Balance at June 30, 2025	$	9,375	$	292	$	9,667


	Loans Held for Investment, net		Unfunded Loan Commitments		Total
Balance at March 31, 2024	$	5,149	$	1,376	$	6,525

Provision for credit losses	574		741		1,315


Balance at June 30, 2024	$	5,723	$	2,117	$	7,840

The tables below represent the changes to the allowance for credit losses during the six months ended June 30, 2025 and 2024.


	Loans Held for Investment, net		Unfunded Loan Commitments		Total
Balance at December 31, 2024	$	8,074	$	834	$	8,908
Provision for (reversal of) credit losses	1,301		(542)		759


Balance at June 30, 2025	$	9,375	$	292	$	9,667


	Loans Held for Investment, net		Unfunded Loan Commitments		Total
Balance at December 31, 2023	$	4,376	$	1,452	$	5,828

Provision for credit losses	1,347		665		2,012


Balance at June 30, 2024	$	5,723	$	2,117	$	7,840

The increase in the allowance for credit losses during the three and six months ended June 30, 2025 was primarily attributable to unfavorable CRE pricing forecasts used in our CECL model and extensions for certain of our loans, partially offset by loan repayments.

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 August 2024, we amended the agreement governing our loan secured by an office property in Dallas, TX. As part of this amendment, the loan commitment was reduced by $3,189, the borrower was required to contribute $2,900 to cash reserves and the maturity date was extended by two years to August 25, 2026. As of June 30, 2025, this loan had an amortized cost of $43,511 and a risk rating of 4.

In August 2024, we amended the agreement governing our loan secured by an office property in Plano, TX. As part of this amendment, the coupon rate was reduced from the Secured Overnight Financing Rate, or SOFR, + 4.75% to SOFR + 3.75% and the maturity date was extended by two years to July 1, 2026. As of June 30, 2025, this loan had an amortized cost of $26,636 and a risk rating of 4.

In November 2024, we amended the agreement governing our loan secured by an office property in Carlsbad, CA. As part of this amendment, the borrower was required to contribute $1,100 to cash reserves and the maturity date was extended by two years to October 27, 2026. As of June 30, 2025, this loan had an amortized cost of $24,414 and a risk rating of 4.

SEVEN HILLS REALTY TRUST

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(dollars in thousands, except per share data)

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 SOFR + 3.85% to SOFR + 2.85% and the maturity date was extended by three years to April 7, 2028. As of June 30, 2025, this loan had an amortized cost of $19,999 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 by one year to May 22, 2026. As of June 30, 2025, this loan had an amortized cost of $26,620 and a risk rating of 4.

We did not have any outstanding past due loans or nonaccrual loans as of June 30, 2025 or December 31, 2024. As of June 30, 2025 and July 24, 2025, all of our borrowers had paid their debt service obligations owed and due to us. See our 2024 Annual Report for more information regarding our nonaccrual policy.

As of June 30, 2025, we had unfunded loan commitments of $32,595 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 1.3 years as of June 30, 2025.

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. Upon acquisition, we allocate the fair value of the real estate owned in accordance with ASC 805, Business Combinations. Subsequent to acquisition, costs incurred related to improvements to the property are capitalized and depreciated over their estimated useful lives and costs related to the operation of the property are expensed as incurred.

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:


	June 30, 2025		December 31, 2024
Land, building and improvements	$	11,735	$	11,735
Less: accumulated depreciation	(747)		(548)
Real estate owned, net	10,988		11,187
Acquired real estate leases, net	3,052		3,366
Prepaid expenses and other assets, net (1)	1,761		1,826
Total assets	$	15,801	$	16,379

Accounts payable, accrued liabilities and other liabilities	$	511	$	501
Total liabilities	$	511	$	501

(1)Includes $1,125 and $1,094 of straight line rent receivables as of June 30, 2025 and December 31, 2024, 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 $15 and $31 for the three and six months ended June 30, 2025, respectively, and $107 and $385 for the three and six months ended June 30, 2024, 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.

SEVEN HILLS REALTY TRUST

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(dollars in thousands, except per share data)

Note 5. Secured Financing Agreements

As of June 30, 2025, 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 2024 Annual Report for more information regarding our Secured Financing Facilities.

The table below summarizes our Secured Financing Facilities as of June 30, 2025 and December 31, 2024:


	Debt Obligation
							Weighted Average				Collateral
	Maximum Facility Size		Principal Balance		Carrying Value		Coupon Rate (1)		Remaining Maturity (years) (2)	Maturity Date	Principal Balance
June 30, 2025:

UBS Master Repurchase Facility	$	250,000	$	156,929	$	156,663	6.76	%	0.5	2/18/2026	$	241,161
Citibank Master Repurchase Facility	215,000		108,113		107,642		6.46	%	1.2	9/27/2026	164,387
BMO Facility	150,000		72,205		72,065		6.36	%	0.6	Various	105,442

Wells Fargo Master Repurchase Facility	125,000		79,968		79,629		6.22	%	0.5	3/11/2026	103,836
Total/weighted average	$	740,000	$	417,215	$	415,999	6.51	%	0.7		$	614,826


December 31, 2024:

UBS Master Repurchase Facility	$	250,000	$	181,989	$	181,566	6.85	%	0.7	2/18/2026	$	267,084
Citibank Master Repurchase Facility	215,000		93,314		92,700		6.57	%	1.5	9/27/2026	145,520
BMO Facility	150,000		103,855		103,622		6.39	%	0.9	Various	145,234

Wells Fargo Master Repurchase Facility	125,000		40,464		39,908		6.31	%	0.6	3/11/2026	52,973
Total/weighted average	$	740,000	$	419,622	$	417,796	6.62	%	0.9		$	610,811

(1)The weighted average coupon rate is determined using SOFR plus a spread ranging from 1.83% 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.

As of June 30, 2025, we were in compliance with the covenants and other terms of the agreements that govern our Secured Financing Facilities.

As of June 30, 2025, our outstanding borrowings under our Secured Financing Facilities had the following remaining maturities:


Year	Principal Payments on Secured Financing Facilities
2025	$	137,380
2026	263,747
2027	16,088
2028 and thereafter	—
	$	417,215

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 June 30, 2025, 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.

SEVEN HILLS REALTY TRUST

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(dollars in thousands, except per share data)

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 2024 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:


	June 30, 2025				December 31, 2024
	Carrying Value		Fair Value		Carrying Value		Fair Value
Financial assets
Loans held for investment	$	621,943	$	625,151	$	601,842	$	603,558
Financial liabilities
Secured Financing Facilities	$	415,999	$	417,656	$	417,796	$	418,492

There were no transfers of financial assets or liabilities within the fair value hierarchy during the six months ended June 30, 2025.

Note 7. Shareholders' Equity

Common Share Awards

On March 19, 2025, in accordance with our Trustee compensation arrangements, we awarded one of our Trustees 4,709 of our common shares, valued at the closing price of our common shares on The Nasdaq Stock Market LLC, or Nasdaq, on that day. The aggregate value of common shares awarded was $60.

On May 28, 2025, in accordance with our Trustee compensation arrangements, we awarded each of our seven Trustees 5,977 of our common shares, valued at the closing price of our common shares on Nasdaq, on that day. The aggregate value of common shares awarded was $490.

Common Share Purchases

During the six months ended June 30, 2025, we purchased 5,593 of our common shares from certain current and former officers of 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 Nasdaq on the applicable purchase date. The aggregate value of common shares purchased was $68.

Distributions

For the six months ended June 30, 2025, we declared and paid regular quarterly distributions to common shareholders, using cash on hand, as follows:


Record Date	Payment Date	Distribution per Share		Total Distribution
January 27, 2025	February 20, 2025	$	0.35	$	5,216
April 22, 2025	May 15, 2025	0.35		5,217
		$	0.70	$	10,433

On July 10, 2025, we declared a quarterly distribution of $0.28 per common share, or $4,184, to shareholders of record on July 21, 2025. We expect to pay this distribution on or about August 14, 2025 using cash on hand.

Note 8. Management Agreement with Tremont

We have no employees. The personnel and various services we require to operate our business are provided to us, pursuant to a management agreement with Tremont Realty Capital LLC, or Tremont, which provides for the day to day management of our operations, subject to the oversight and direction of our Board of Trustees.

SEVEN HILLS REALTY TRUST

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(dollars in thousands, except per share data)

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 2024 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 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 D. 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 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.

Certain of our Independent Trustees also serve as independent trustees of other public companies to which RMR or its subsidiaries provide management services. Adam D. 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 June 30, 2025, Tremont owned 1,708,058 of our common shares, and Mr. Portnoy beneficially owned (including through Tremont and ABP Trust) 13.6% 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 $16 and $37 for the three and six months ended June 30, 2025, respectively, and $22 and $31 for the three and six months ended June 30, 2024, respectively, related to real estate owned.

For further information about these and other such relationships and certain other related person transactions, refer to our 2024 Annual Report.

SEVEN HILLS REALTY TRUST

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(dollars in thousands, except per share data)

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):


	Three Months Ended June 30,				Six Months Ended June 30,
	2025		2024		2025		2024
Numerators:
Net income	$	2,678	$	4,229	$	7,210	$	9,462
Net income attributable to unvested share awards	(50)		(44)		(101)		(92)
Net income used in calculating net income per common share - basic and diluted	$	2,628	$	4,185	$	7,109	$	9,370

Denominators:
Weighted average common shares outstanding - basic and diluted	14,785		14,691		14,771		14,683

Net income per common share - basic and diluted	$	0.18	$	0.28	$	0.48	$	0.64

Note 12. Segment Reporting

We manage our business on a consolidated basis and therefore have one 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.

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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

The following discussion should be read in conjunction with our condensed consolidated financial statements and accompanying notes included elsewhere in this Quarterly Report on Form 10-Q and in our 2024 Annual Report.

OVERVIEW (dollars in thousands, except share data)

We are a Maryland REIT. Our business strategy is focused on originating and investing in floating rate first mortgage loans that range from $15,000 to $75,000, secured by middle market transitional CRE properties that have values up to $100,000. We define transitional CRE as commercial properties subject to redevelopment or repositioning activities that are expected to increase the value of the properties.

Tremont is registered with the Securities and Exchange Commission, or SEC, as an investment adviser under the Investment Advisers Act of 1940, as amended. We believe that Tremont provides us with significant experience and expertise in investing in middle market transitional CRE.

We operate our business in a manner that is consistent with our qualification for taxation as a REIT under the IRC. As such, we generally are not subject to U.S. federal income tax, provided that we meet certain distribution and other requirements. We also operate our business in a manner that permits us to maintain our exemption from registration under the Investment Company Act of 1940, as amended, or the 1940 Act.

Factors Affecting Operating Results

Our results of operations are impacted by a number of factors and primarily depend on the interest income from our investments and the financing and other costs associated with our business. Our operating results are also impacted by general CRE market conditions and unanticipated defaults by our borrowers. For further information regarding the risks associated with our loan portfolio, see Note 3 to the Unaudited Condensed Consolidated Financial Statements included in Part I, Item 1 and elsewhere in this Management Discussion and Analysis of Financial Condition and Results of Operations of this Quarterly Report on Form 10-Q and Part I, Item 1A, "Risk Factors" of our 2024 Annual Report.

Credit Risk. We are subject to the credit risk of our borrowers in connection with our investments. We seek to mitigate this risk by utilizing a comprehensive underwriting, diligence and investment selection process and by ongoing monitoring of our investments. Nevertheless, unanticipated credit losses could occur that may adversely impact our operating results.

Changes in Fair Value of our Assets. We generally intend to hold our investments for their contractual terms, unless repaid earlier by the borrowers. We evaluate the credit quality of each of our loans at least quarterly. 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 record an 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.

Availability of Leverage and Equity. We use leverage to make additional investments that may increase our returns. We may not be able to obtain the expected amount of leverage we desire or its cost may exceed our expectation and, consequently, the returns generated from our investments may be reduced. Our ability to further grow our loan portfolio over time will depend, to a significant degree, upon our ability to obtain additional capital. However, our access to additional capital depends on many factors including the price at which our common shares trade relative to their book value and market lending conditions. See "—Market Conditions" below.

Market Conditions. U.S. trade and fiscal policy, coupled with ongoing geopolitical tensions, has caused uncertainty in financial markets. As a result, we believe many CRE investors continue to remain on the sidelines, waiting until they have greater clarity on the outcomes of negotiations with U.S. trade partners, new tariff announcements, domestic fiscal policy initiatives and the path of interest rates to make buy and sell decisions. However, the Federal Open Market Committee, or FOMC, has indicated that the U.S. economy is on solid footing, allowing it to be patient and wait to measure the impact of tariff driven price increases before determining the future path of interest rates.

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Despite the current macroeconomic uncertainty, CRE debt markets continue to function well. The relative risk versus reward in CRE debt investments has led to healthy loan demand from various types of lenders, including banks, securitized lenders, life insurance companies, private debt funds and mortgage REITs. With fewer sale transactions to finance and strong debt capital market liquidity, borrowers with well-performing collateral properties are benefiting from increased competition amongst lenders, which has driven credit spreads and whole loan rates downward.

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.

Conversely, decreases in interest rates, in general, may cause: (a) the coupon rates on our variable rate investments to reset, perhaps on a delayed basis, to lower rates; (b) it to become easier and more affordable for our borrowers to refinance, and as a result, repay our loans, but may negatively impact our future returns if any such repayment proceeds were to be reinvested in lower yielding investments; and (c) the interest expense associated with our variable rate borrowings to decrease.

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 5.20%; therefore, changes to income from investments, net, may not move proportionately with the increase or decrease in benchmark rates. As of June 30, 2025, SOFR was 4.32%, and as a result, one of our loan investments had an active interest rate floor.

Size of Portfolio. The size of our loan portfolio, as measured both by the aggregate principal balance and the number of our CRE loans and our other investments, is also an important factor in determining our operating results. Generally, if the size of our loan portfolio grows, the amount of interest income we receive would increase and we may achieve certain economies of scale and diversify risk within our loan portfolio. A larger portfolio, however, may result in increased expenses; for example, we may incur additional interest expense or other costs to finance our investments. Also, if the aggregate principal balance of our loan portfolio grows but the number of our loans or the number of our borrowers does not grow, we could face increased risk by reason of the concentration of our investments.

Prepayment Risk. We are subject to risk that our loan investments will be repaid at an earlier date than anticipated, which may reduce the returns realized on those loans as less interest income may be received over time. Additionally, we may not be able to reinvest the principal repaid timely and/or at a similar or higher yield of the original loan investment. We seek to limit this risk by structuring our loan agreements with fees required to be paid to us upon prepayment of a loan within a specified period of time before the loan’s maturity; however, unanticipated prepayments could negatively impact our operating results.

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Our Loan Portfolio

The table below details overall statistics for our loan portfolio as of June 30, 2025 and December 31, 2024:


	As of June 30, 2025			As of December 31, 2024
Number of loans	23			21
Total loan commitments	$	665,421		$	641,213
Unfunded loan commitments (1)	$	32,595		$	30,402
Principal balance	$	632,826		$	610,811

Carrying value	$	621,943		$	601,842
Weighted average coupon rate	8.03		%	8.24		%
Weighted average all in yield (2)	8.37		%	8.62		%
Weighted average floor	2.56		%	2.12		%
Weighted average maximum maturity (years) (3)	2.7			2.6
Weighted average risk rating	2.9			3.1
Weighted average LTV (4)	68		%	67		%

(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.

(4)LTV represents the initial loan amount divided by the underwritten in-place value of the underlying collateral at closing.

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Loan Portfolio Details

The table below details our loan portfolio as of June 30, 2025:


#	Location	Property Type	Origination Date	Committed Principal Amount		Principal Balance		Coupon Rate	All in Yield (1)	Maximum Maturity (date) (2)	LTV (3)		Risk Rating
	First mortgage loans
1	Olmsted Falls, OH	Multifamily	01/28/2021	$	54,575	$	54,575	S + 4.00%	S + 4.29%	01/28/2026	63	%	2
2	Passaic, NJ	Industrial	09/08/2022	47,000		45,179		S + 3.85%	S + 4.28%	09/08/2027	69	%	3
3	Dallas, TX	Office	08/25/2021	46,811		43,511		S + 3.25%	S + 3.27%	08/25/2026	72	%	4
4	Boston, MA	Hotel	12/16/2024	45,000		39,800		S + 3.95%	S + 4.39%	12/16/2029	49	%	3
5	Oxford, MS	Multifamily	11/26/2024	42,000		42,000		S + 2.95%	S + 3.33%	11/26/2029	75	%	2
6	San Marcos, TX	Multifamily	01/14/2025	31,200		28,005		S + 3.25%	S + 3.69%	01/14/2030	62	%	3
7	Farmington Hills, MI	Multifamily	05/24/2022	30,520		29,501		S + 3.15%	S + 3.56%	05/24/2027	75	%	3
8	Anaheim, CA	Hotel	11/29/2023	29,000		29,000		S + 4.00%	S + 4.56%	11/29/2028	55	%	2
9	San Antonio, TX	Industrial	06/13/2025	28,000		22,800		S + 3.40%	S + 3.88%	06/13/2030	62	%	3
10	Fountain Inn, SC	Industrial	07/13/2023	27,500		24,300		S + 4.25%	S + 4.87%	07/13/2026	76	%	1
11	Plano, TX	Office	07/01/2021	27,385		26,569		S + 3.75%	S + 3.76%	07/01/2026	78	%	4
12	Downers Grove, IL	Office	09/25/2020	27,000		26,500		S + 5.00%	S + 5.15%	05/22/2026	67	%	4
13	Fayetteville, GA	Industrial	10/06/2023	25,250		25,250		S + 3.35%	S + 3.73%	10/06/2028	55	%	3
14	Carlsbad, CA	Office	10/27/2021	24,750		24,417		S + 3.25%	S + 3.26%	10/27/2026	78	%	4
15	Fontana, CA	Industrial	11/18/2022	24,355		22,460		S + 3.75%	S + 4.08%	11/18/2026	72	%	3
16	Los Angeles, CA	Industrial	06/28/2024	23,800		22,517		S + 3.40%	S + 3.83%	06/28/2029	58	%	3
17	Downers Grove, IL	Office	12/09/2021	23,530		23,530		S + 4.25%	S + 4.54%	12/09/2026	72	%	3
18	Bellevue, WA	Office	11/05/2021	21,000		20,000		S + 2.85%	S + 2.85%	04/07/2029	68	%	4
19	Waco, TX	Multifamily	03/06/2025	18,500		18,500		S + 3.35%	S + 3.75%	03/06/2030	73	%	3
20	Boise, ID	Multifamily	06/26/2025	18,000		18,000		S + 3.50%	S + 4.29%	06/26/2030	79	%	3
21	Newport News, VA	Multifamily	04/25/2024	17,757		15,126		S + 3.15%	S + 3.85%	04/25/2029	71	%	3
22	Sandy Springs, GA	Retail	09/23/2021	16,488		15,286		S + 3.75%	S + 4.05%	09/23/2026	72	%	1
23	Lake Mary, FL	Hotel	09/06/2024	16,000		16,000		S + 4.00%	S + 4.41%	09/06/2029	68	%	2

	Total/weighted average			$	665,421	$	632,826	S + 3.64%	S + 3.98%		68	%	2.9

(1)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.

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

(3)LTV represents the initial loan amount divided by the underwritten in-place value of the underlying collateral at closing.

As of June 30, 2025, we had $665,421 in aggregate loan commitments, consisting of a diverse portfolio, geographically and by property type, of 23 first mortgage loans. As of June 30, 2025, 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”. We have no “5” or “loss likely” rated loans.

In August 2024, we amended the agreement governing our loan secured by an office property in Plano, TX. As part of this amendment, the coupon rate was reduced from SOFR + 4.75% to SOFR + 3.75% and the maturity date was extended by two years to July 1, 2026. As of June 30, 2025, this loan had an amortized cost of $26,636 and a risk rating of 4.

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All of the loans in our portfolio are structured with risk mitigation mechanisms, such as cash flow sweeps or interest reserves, to help protect us against investment losses. In addition, we actively engage with our borrowers regarding their execution of the business plans for the underlying collateral, among other things.

As of June 30, 2025 and July 24, 2025, all of our borrowers had paid their debt service obligations owed and due to us.

We did not have any outstanding past due loans or nonaccrual loans as of June 30, 2025. However, our borrowers' businesses, operations and liquidity may be materially adversely impacted by current inflationary pressures, interest rate fluctuations, supply chain issues or a prolonged economic slowdown or recession could amplify those negative impacts. As a result, they may become unable to pay their debt service obligations owed and due to us, which may result in an increased allowance for credit losses and/or recognition of income on a nonaccrual basis. For further information regarding our loan portfolio and risk rating policy, see Note 3 to our Unaudited Condensed Consolidated Financial Statements included in Part I, Item 1, "—Factors Affecting our Operating Results" and "Warning Concerning Forward-Looking Statements" elsewhere in this Quarterly Report on Form 10-Q and the risk factors identified in Part I, Item 1A, “Risk Factors”, of our 2024 Annual Report.

Financing Activities

The table below is an overview of our Secured Financing Facilities as of June 30, 2025:


Facility	Maturity Date	Principal Balance		Carrying Value		Unused Capacity		Maximum Facility Size		Collateral Principal Balance

UBS Master Repurchase Facility	02/18/2026	$	156,929	$	156,663	$	93,071	$	250,000	$	241,161
Citibank Master Repurchase Facility	09/27/2026	108,113		107,642		106,887		215,000		164,387

BMO Facility	Various	72,205		72,065		77,795		150,000		105,442
Wells Fargo Master Repurchase Facility	03/11/2026	79,968		79,629		45,032		125,000		103,836
Total		$	417,215	$	415,999	$	322,785	$	740,000	$	614,826

The table below details our Secured Financing Facilities activities during the three months ended June 30, 2025:


	Carrying Value
Balance at March 31, 2025	$	440,474
Borrowings	31,900
Repayments	(56,711)
Deferred fees	(47)
Amortization of deferred fees	383
Balance at June 30, 2025	$	415,999

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The table below details our Secured Financing Facilities activities during the six months ended June 30, 2025:


	Carrying Value
Balance at December 31, 2024	$	417,796
Borrowings	54,304
Repayments	(56,711)
Deferred fees	(139)
Amortization of deferred fees	749
Balance at June 30, 2025	$	415,999

As of June 30, 2025, outstanding advancements under our Secured Financing Facilities had a weighted average interest rate of 6.51% per annum, excluding associated fees and expenses. As of June 30, 2025 and July 24, 2025, we had a $417,215 and $381,853, respectively, aggregate outstanding principal balance under our Secured Financing Facilities.

As of June 30, 2025, we were in compliance with all covenants and other terms under our Secured Financing Facilities.

For further information regarding our Secured Financing Facilities, see Note 5 to our Unaudited Condensed Consolidated Financial Statements included in Part I, Item 1 of this Quarterly Report on Form 10-Q.

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RESULTS OF OPERATIONS (amounts in thousands, except per share data)

Three Months Ended June 30, 2025 Compared to Three Months Ended March 31, 2025:


	Three Months Ended
	June 30, 2025		March 31, 2025		Change		% Change
INCOME FROM INVESTMENTS:
Interest and related income	$	14,359	$	14,322	$	37	0.3	%
Less: interest and related expenses	(7,524)		(7,437)		(87)		1.2	%
Income from loan investments, net	6,835		6,885		(50)		(0.7	%)
Revenue from real estate owned	558		709		(151)		(21.3	%)
Total revenue	7,393		7,594		(201)		(2.6	%)
OTHER EXPENSES:
Base management fees	1,076		1,079		(3)		(0.3	%)
Incentive fees	229		18		211		n/m
General and administrative expenses	1,381		963		418		43.4	%
Reimbursement of shared services expenses	551		550		1		0.2	%
Provision for (reversal of) credit losses	912		(153)		1,065		696.1	%
Expenses from real estate owned	569		594		(25)		(4.2	%)
Total other expenses	4,718		3,051		1,667		54.6	%
Income before income taxes	2,675		4,543		(1,868)		(41.1	%)
Income tax benefit (expense)	3		(11)		14		127.3	%
Net income	$	2,678	$	4,532	$	(1,854)	(40.9	%)

Weighted average common shares outstanding - basic and diluted	14,785		14,757		28		0.2	%


Net income per common share - basic and diluted	$	0.18	$	0.30	$	(0.12)	(40.0	%)

Interest and related income. The increase in interest and related income was primarily due to higher deferred fee amortization, partially offset by a decrease in the weighted average coupon rates during the three months ended June 30, 2025. The weighted average coupon rate was 8.03% as of June 30, 2025 compared to 8.07% as of March 31, 2025.

Interest and related expenses. The increase in interest and related expenses was primarily the result of a higher average principal balance outstanding under our Secured Financing Facilities and higher deferred fee amortization, partially offset by a decrease in the weighted average coupon rates during the three months ended June 30, 2025. The weighted average principal balance was approximately $433,000 for the three months ended June 30, 2025 compared to approximately $432,000 for the three months ended March 31, 2025. The weighted average coupon rate was 6.51% as of June 30, 2025 compared to 6.52% as of March 31, 2025.

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 three months ended June 30, 2025 as compared to the three months ended March 31, 2025.

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, 2025 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, 2025.

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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, 2025.

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.

Provision for (reversal of) credit losses. The provision for (reversal of) 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, 2025 was primarily attributable to unfavorable CRE pricing forecasts used in our CECL model and extensions for certain of our loans, partially offset by loan repayments.

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, 2025 as compared to the three months ended March 31, 2025.

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.

Net income. The decrease in net income was due to the changes noted above.

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Six Months Ended June 30, 2025 Compared to Six Months Ended June 30, 2024:


	Six Months Ended June 30,
	2025		2024		Change		% Change
INCOME FROM INVESTMENTS:
Interest and related income	$	28,681	$	32,726	$	(4,045)	(12.4	%)
Purchase discount accretion	—		1,927		(1,927)		(100.0	%)
Less: interest and related expenses	(14,961)		(17,058)		2,097		(12.3	%)
Income from loan investments, net	13,720		17,595		(3,875)		(22.0	%)
Revenue from real estate owned	1,267		1,147		120		10.5	%
Total revenue	14,987		18,742		(3,755)		(20.0	%)
OTHER EXPENSES:
Base management fees	2,155		2,162		(7)		(0.3	%)
Incentive fees	247		420		(173)		(41.2	%)
General and administrative expenses	2,344		2,044		300		14.7	%
Reimbursement of shared services expenses	1,101		1,382		(281)		(20.3	%)
Provision for credit losses	759		2,012		(1,253)		(62.3	%)
Expenses from real estate owned	1,163		1,244		(81)		(6.5	%)
Total other expenses	7,769		9,264		(1,495)		(16.1	%)
Income before income taxes	7,218		9,478		(2,260)		(23.8	%)
Income tax expense	(8)		(16)		8		50.0	%
Net income	$	7,210	$	9,462	$	(2,252)	(23.8	%)

Weighted average common shares outstanding - basic and diluted	14,771		14,683		88		0.6	%


Net income per common share - basic and diluted	$	0.48	$	0.64	$	(0.16)	(25.0	%)

Interest and related income. The decrease in interest and related income was primarily the result of lower weighted average coupon rates under our loan investment portfolio, partially offset by higher outstanding principal balances during the six months ended June 30, 2025. The weighted average coupon rate was 8.03% as of June 30, 2025 compared to 9.11% as of June 30, 2024. The weighted average principal balance was approximately $642,000 for the six months ended June 30, 2025 compared to approximately $607,000 for the six months ended June 30, 2024.

Purchase discount accretion. The decrease in purchase discount accretion was due to the purchase discount recorded as part of our merger with Tremont Mortgage Trust, or the Merger, becoming fully accreted during 2024.

Interest and related expenses. The decrease in interest and related expenses was primarily the result of lower weighted average coupon rates under our Secured Financing Facilities, partially offset by higher outstanding principal balances during the six months ended June 30, 2025. The weighted average coupon rate was 6.51% as of June 30, 2025 compared to 7.48% as of June 30, 2024. The weighted average principal balance was approximately $432,000 for the six months ended June 30, 2025 compared to approximately $431,000 for the six months ended June 30, 2024.

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 during the six months ended June 30, 2025 as compared to the six months ended June 30, 2024.

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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 lower “core earnings”, as defined in our management agreement, during the six months ended June 30, 2025 as compared to the six months ended June 30, 2024.

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 decrease in reimbursement of shared services expenses was primarily the result of lower usage of shared services from RMR during the six months ended June 30, 2025 as compared to the six months ended June 30, 2024.

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 decrease in the provision for credit losses during the six months ended June 30, 2025 was primarily attributable to improved performance at certain of the collateral properties underlying our loans, partially offset by higher total loan commitments during the six months ended June 30, 2025 as compared to the six months ended June 30, 2024.

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 decreases in maintenance expenses, partially offset by higher utility expenses during the six months ended June 30, 2025 as compared to the six months ended June 30, 2024.

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.

Net income. The decrease in net income was due to the changes noted above.

Non-GAAP Financial Measures

We present 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 per common share, net income, net income per common share or cash generated from operating activities and should not be considered as alternatives to book value per common share, net income or net 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 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 performance measures; therefore, our reported Adjusted Book Value per common share, Distributable Earnings and Distributable Earnings per common share may not be comparable to adjusted book value per common share, distributable earnings and distributable earnings per common share as reported by other companies.

Adjusted Book Value per Common Share

We believe that Adjusted Book Value per common share is a meaningful measure of our capital adequacy because it excludes the impact of certain non-cash estimates or adjustments, including the unaccreted purchase discount resulting from the excess of the fair value of the loans Tremont Mortgage Trust then held for investment and that we acquired as a result of the Merger, over the consideration we paid in the Merger and our allowance for credit losses for our loan portfolio and unfunded loan commitments. Adjusted Book Value per common share does not represent book value per common share or alternative measures determined in accordance with GAAP. Our methodology for calculating Adjusted Book Value per common share may differ from the methodologies employed by other companies to calculate the same or similar supplemental capital adequacy measures; therefore, our Adjusted Book Value per common share may not be comparable to the adjusted book value per common share reported by other companies.

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The table below calculates our book value per common share and Adjusted Book Value per common share, which is a non-GAAP financial measure:


	June 30, 2025		December 31, 2024
Shareholders' equity	$	267,020	$	269,278
Total outstanding common shares	14,944		14,903
Book value per common share	17.87		18.07
Allowance for credit losses per common share (1)	0.64		0.60
Adjusted Book Value per common share	$	18.51	$	18.67

(1)Excludes the impact of our allowance for credit losses. As of June 30, 2025 and December 31, 2024, our allowance for credit losses for our loan portfolio and unfunded loan commitments was $9,667 and $8,908, respectively.

Distributable Earnings

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, net 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.

We calculate Distributable Earnings and Distributable Earnings per common share as net income and net income per common share, respectively, computed in accordance with GAAP, including realized losses not otherwise included in net 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 income for the period of the calculation (regardless of whether such items are included in or deducted from net 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.

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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:


	Three Months Ended				Six Months Ended
	June 30, 2025		March 31, 2025		June 30, 2025		June 30, 2024
Net income	$	2,678	$	4,532	$	7,210	$	9,462
Non-cash equity compensation expense	677		356		1,033		833
Non-cash accretion of purchase discount	—		—		—		(1,927)
Provision for (reversal of) credit losses	912		(153)		759		2,012
Depreciation and amortization of real estate owned	269		269		538		662
Exit fees collected on loans acquired in Merger (1)	—		—		—		90
Distributable Earnings	$	4,536	$	5,004	$	9,540	$	11,132

Weighted average common shares outstanding - basic and diluted	14,785		14,757		14,771		14,683


Net income per common share - basic and diluted	$	0.18	$	0.30	$	0.48	$	0.64
Distributable Earnings per common share - basic and diluted	$	0.31	$	0.34	$	0.65	$	0.76

(1)Exit fees collected on loans acquired in the Merger represent fees collected upon repayment of loans for which no income has previously been recognized in Distributable Earnings. In accordance with GAAP, exit fees payable with respect to loans acquired in the Merger were accreted as a component of the purchase discount and were excluded from Distributable Earnings as a non-cash item. Accordingly, these exit fees have been recognized in Distributable Earnings upon collection.

LIQUIDITY AND CAPITAL RESOURCES (dollars in thousands, except per share data)

Liquidity is a measure of our ability to meet potential cash requirements, including ongoing commitments to fund our lending commitments, repay or meet margin calls resulting from our borrowings, if any, fund and maintain our assets and operations, make distributions to our shareholders and fund other business operating requirements. Our sources of cash flows include cash on hand, payments of principal, interest and fees we receive on our investments, other cash we may generate from our business and operations, any unused borrowing capacity, including under our Secured Financing Facilities or other repurchase agreements or financing arrangements we may obtain, which may also include bank loans or public or private issuances of debt or equity securities, and proceeds from any sale of real estate owned. We believe that these sources of funds will be sufficient to meet our operating and capital expenses, pay our debt service obligations owed and make any distributions to our shareholders for the next 12 months and for the foreseeable future. For further information regarding the risks associated with our loan portfolio, see Note 3 to our Unaudited Condensed Consolidated Financial Statements included in Part I, Item 1 and elsewhere in this Management Discussion and Analysis of Financial Condition and Results of Operations of this Quarterly Report on Form 10-Q and Part I, Item 1A, "Risk Factors" of our 2024 Annual Report.

Pursuant to the terms of our Citibank Master Repurchase Facility, our UBS Master Repurchase Facility and our Wells Fargo Master Repurchase Facility, we may sell to, and later repurchase from, Citibank, UBS and Wells Fargo, the purchased assets related to the applicable facility. The initial purchase price paid by Citibank of each purchased asset is up to 75% of the lesser of the market value of the purchased asset or the unpaid principal balance of such purchased asset, subject to Citibank's approval. The initial purchase price paid by UBS of each purchased asset is up to 80% of the lesser of the market value of the purchased asset or the unpaid principal balance of such purchased asset, subject to UBS's approval. The initial purchase price paid by Wells Fargo for each purchased asset is up to 75% or 80%, depending on the property type of the purchased asset’s real estate collateral, of the lesser of the market value of the purchased asset or the unpaid principal balance of such purchased asset, and subject to Wells Fargo’s approval. Upon the repurchase of a purchased asset, we are required to pay Citibank, UBS or Wells Fargo, as applicable, the outstanding purchase price of the purchased asset, accrued interest and all accrued and unpaid expenses of Citibank, UBS or Wells Fargo, as applicable, relating to such purchased asset.

The interest rates related to our Citibank, UBS and Wells Fargo purchased assets are calculated at SOFR plus a premium within a fixed range, determined by the debt yield and property type of the purchased asset’s real estate collateral. Citibank has the discretion to make advancements at margins higher than 75%, and UBS and Wells Fargo each has the discretion to make advancements at margins higher than 80%.

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Loans issued under the BMO Facility are coterminous with the corresponding pledged mortgage loan investments, are not subject to margin calls and allow for up to an 80% advance rate, subject to certain loan to cost and LTV limits. Interest on advancements under the BMO Facility are calculated at SOFR plus a premium. Loans issued under the BMO Facility are secured by a security interest and collateral assignment of the underlying loans to our borrowers which are secured by real property underlying such loans. We are required to pay an upfront fee equal to a percentage of the aggregate amount of the facility loan, such percentage to be determined at the time of approval of the separate facility loan agreements with BMO, or the BMO Facility Loan Agreements.

For further information regarding our Secured Financing Facilities, see Note 5 to our Unaudited Condensed Consolidated Financial Statements included in Part I, Item 1, of this Quarterly Report on Form 10-Q.

The table below is a summary of our sources and uses of cash flows for the periods presented:


	Six Months Ended June 30,
	2025		2024
Cash and cash equivalents at beginning of period	$	70,750	$	87,855
Net cash provided by (used in):
Operating activities	8,663		8,969
Investing activities	(20,421)		20,415
Financing activities	(13,041)		(47,636)
Cash and cash equivalents at end of period	$	45,951	$	69,603

The decrease in cash provided by operating activities for the 2025 period compared to the 2024 period was primarily due to lower net interest income resulting from lower weighted average interest rates under our loan investment portfolio. The change from cash provided by to cash used in investing activities was primarily due to increased loan originations in the 2025 period. The decrease in cash used in financing activities was primarily due to increased proceeds from our Secured Financing Facilities in the 2025 period.

Distributions

During the six months ended June 30, 2025, we declared and paid regular quarterly distributions to our common shareholders totaling $10,433, or $0.70 per common share, using cash on hand.

On July 10, 2025, we declared a reduced regular quarterly distribution of $0.28 per common share, or $4,184, to shareholders of record on July 21, 2025. The reduced quarterly distribution reflects a sustainable rate with expectations that loan repayment proceeds will be redeployed at lower net interest margins and a declining SOFR index rate curve. We expect to pay this distribution to our common shareholders on or about August 14, 2025 using cash on hand.

For further information regarding distributions, see Note 7 to our Unaudited Condensed Consolidated Financial Statements included in Part I, Item 1 of this Quarterly Report on Form 10-Q.

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Contractual Obligations and Commitments

Our contractual obligations and commitments as of June 30, 2025 were as follows:


	Payment Due by Period
	Total		Less than 1 Year		1 - 3 Years		3 - 5 Years		More than 5 years
Unfunded loan commitments (1)	$	32,595	$	9,638	$	22,957	$	—	$	—
Principal payments on Secured Financing Facilities (2)	417,215		293,013		124,202		—		—
Interest payments on Secured Financing Facilities (3)	19,105		16,562		2,543		—		—
Lease related costs (4)	142		142		—		—		—
	$	469,057	$	319,355	$	149,702	$	—	$	—

(1)The allocation of our unfunded loan commitments is based on the current loan maturity date to which the individual commitments relate.

(2)The allocation of outstanding advancements under our Secured Financing Facilities is based on the earlier of the current maturity date of each loan investment with respect to which the individual borrowing relates or the maturity date of the respective Secured Financing Facilities.

(3)Projected interest payments are attributable only to our debt service obligations at existing rates as of June 30, 2025 and are not intended to estimate future interest costs which may result from debt prepayments, additional borrowings, new debt issuances or changes in interest rates.

(4)Lease related costs include capital expenditures used to improve tenants' spaces pursuant to lease agreements or leasing related costs, such as brokerage commissions, related to real estate owned.

Debt Covenants

Our principal debt obligations as of June 30, 2025 were the outstanding balances under our Secured Financing Facilities. The agreements governing our Master Repurchase Facilities, or our Master Repurchase Agreements, provide for acceleration of the date of repurchase of any then purchased assets and the liquidation of the purchased assets by UBS, Citibank or Wells Fargo, as applicable, upon the occurrence and continuation of certain events of default, including a change of control of us, which includes Tremont ceasing to act as our sole manager or to be a wholly owned subsidiary of RMR. Our Master Repurchase Agreements also provide that upon the repurchase of any then purchased asset, we are required to pay UBS, Citibank or Wells Fargo the outstanding purchase price of such purchased asset and accrued interest and any and all accrued and unpaid expenses of UBS, Citibank or Wells Fargo, as applicable, relating to such purchased asset.

In connection with our Master Repurchase Agreements, we entered into our guarantees, or the Master Repurchase Guarantees, which require us to guarantee 25% of the aggregate repurchase price and 100% of losses in the event of certain bad acts, as well as any costs and expenses of UBS, Citibank and Wells Fargo, as applicable, related to our Master Repurchase Agreements. The Master Repurchase Guarantees contain financial covenants, which require us to maintain a minimum tangible net worth, a minimum liquidity and a minimum interest coverage ratio and to satisfy a total indebtedness to stockholders' equity ratio.

In connection with our facility loan program agreement and the security agreement with BMO, or the BMO Loan Program Agreement, we have agreed to guarantee certain of the obligations under the BMO Loan Program Agreement and the BMO Facility Loan Agreements pursuant to a limited guaranty from us to and for the benefit of the administrative agent for itself and such other lenders, or the BMO Guaranty. Specifically, the BMO Guaranty requires us to guarantee 25% of the then current outstanding principal balance of the facility loans and 100% of losses or the entire indebtedness in the event of certain bad acts as well as any costs and expenses of the administrative agent or lenders related to the BMO Loan Program Agreement. In addition, the BMO Guaranty contains financial covenants that require us to maintain a minimum tangible net worth and a minimum liquidity and to satisfy a total indebtedness to stockholders’ equity ratio. Our BMO Loan Program Agreement provides for acceleration of all payment obligations due under the BMO Facility Loan Agreements upon the occurrence and continuation of certain events of default, including a change of control of us, which includes Tremont ceasing to act as our sole manager or to be a wholly owned subsidiary of RMR.

As of June 30, 2025, we had a $345,010 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.

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As of June 30, 2025, we had a $72,205 aggregate outstanding principal balance under the BMO Facility.

As of June 30, 2025, we were in compliance with all covenants and other terms under our Secured Financing Facilities.

Related Person Transactions

We have relationships and historical and continuing transactions with Tremont, RMR, RMR Inc. and others related to them. For further information about these and other such relationships and related person transactions, see Notes 8 and 9 to the Unaudited Condensed Consolidated Financial Statements included in Part I, Item 1 of this Quarterly Report on Form 10-Q, our 2024 Annual Report, our definitive Proxy Statement for our 2025 Annual Meeting of Shareholders and our other filings with the SEC. In addition, see the section captioned “Risk Factors” of our 2024 Annual Report for a description of risks that may arise as a result of these and other related person transactions and relationships. We may engage in additional transactions with related persons, including businesses to which RMR, Tremont or their respective subsidiaries provide management services.

Critical Accounting Estimates

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.

A discussion of our critical accounting estimates is included in our 2024 Annual Report. There have been no significant changes in our critical accounting estimates since the year ended December 31, 2024.

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Item 3. Quantitative and Qualitative Disclosures About Market Risk

Not applicable.

Item 4. Controls and Procedures

As of the end of the period covered by this Quarterly Report on Form 10-Q, our management carried out an evaluation, under the supervision and with the participation of our Managing Trustees, our President and Chief Investment Officer and our Chief Financial Officer and Treasurer, of the effectiveness of our disclosure controls and procedures pursuant to Rules 13a-15 and 15d-15 under the Securities Exchange Act of 1934, as amended. Based upon that evaluation, our Managing Trustees, our President and our Chief Financial Officer and Treasurer concluded that our disclosure controls and procedures are effective.

There have been no changes in our internal control over financial reporting during the quarter ended June 30, 2025 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

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Warning Concerning Forward-Looking Statements

This Quarterly Report on Form 10-Q contains statements that constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 and other securities laws. These statements include words such as “believe”, “could”, “expect”, “anticipate”, “intend”, “plan”, “estimate”, “will”, “would”, “should”, “may” and negatives or derivatives of these or similar expressions. These forward-looking statements include, among others, statements about: the disposition of our real estate owned; economic, market and industry conditions; geopolitical uncertainty; interest rate fluctuations; new trade and fiscal policies and tariffs; demand for CRE debt and opportunities that may exist for alternative lenders like us; the diversity of our loan investment portfolio; our future lending activity and opportunities; the ability of our borrowers to achieve their business plans; our leverage levels and possible future financings; our liquidity needs and sources; and the amount and timing of future distributions.

Forward-looking statements reflect our current expectations, are based on judgments and assumptions, are inherently uncertain and are subject to risks, uncertainties and other factors, which could cause our actual results, performance or achievements to differ materially from expected future results, performance or achievements expressed or implied in any forward-looking statements. Some of the risks, uncertainties and other factors that may cause our actual results, performance or achievements to differ materially from those expressed or implied by forward-looking statements include, but are not limited to, the following:

•Our borrowers’ ability to successfully execute their business plans, including our borrowers' ability to manage and stabilize properties;

•Whether the diversity and other characteristics of our loan portfolio will benefit us to the extent we expect;

•Our ability to carry out our business strategy and take advantage of opportunities for our business that we believe exist;

•The impact of inflation, geopolitical instability, interest rate fluctuations, new trade policies, tariffs and economic recession or downturn on the CRE industry generally and specific CRE sectors applicable to our investments and lending markets, us and our borrowers;

•Fluctuations in interest rates and credit spreads may reduce the returns we may receive on our investments and increase our borrowing costs;

•Fluctuations in market demand for CRE debt and the volume of transactions and available opportunities in the CRE debt market, including the middle market;

•Dislocations and volatility in the capital markets;

•Our ability to utilize our Secured Financing Facilities and to obtain additional capital to enable us to attain our target leverage, to make additional investments and to increase our potential returns, and the cost of that capital;

•Our ability to pay distributions to our shareholders and sustain or increase the amount of such distributions;

•Our ability to successfully execute, achieve and benefit from our operating and investment targets, investment and financing strategies and leverage policies;

•The amount and timing of cash flows we receive from our investments;

•The ability of Tremont to make suitable investments for us, to monitor, service and administer our existing investments and to otherwise implement our investment strategy and successfully manage us;

•Our ability to maintain and improve a favorable net interest spread between the interest we earn on our investments and the interest we pay on our borrowings;

•The extent to which we earn and receive origination, extension, exit, prepayment or other fees we may earn from our investments;

•Yields that may be available to us from mortgages on middle market transitional CRE;

•The duration and other terms of our loan agreements with borrowers and our ability to match our loan investments with our repurchase lending arrangements;

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•The credit qualities of our borrowers;

•The ability and willingness of our borrowers to repay our investments in a timely manner or at all;

•The extent to which our borrowers' sponsors provide support to our borrowers or us regarding our loans;

•Our ability to maintain our exemption from registration under the 1940 Act;

•Events giving rise to increases in our credit loss reserves;

•Our ability to diversify our investment portfolio based on industry and market conditions;

•The ability of our manager to arrange for the successful management of real estate owned and our ability to sell those properties at prices that allow us to recover amounts we invested;

•Our ability to successfully compete;

•Market trends in our industry or with respect to interest rates, real estate values, the debt securities markets or the economy generally;

•Reduced demand for office or retail space;

•Regulatory requirements and the effect they may have on us or our competitors;

•Competition within the CRE lending industry;

•Changes in the availability, sourcing and structuring of CRE lending;

•Defaults by our borrowers;

•Compliance with, and changes to, federal, state or local laws or regulations, accounting rules, tax laws or similar matters;

•Limitations imposed on our business and our ability to satisfy complex rules in order for us to maintain our qualification for taxation as a REIT for U.S. federal income tax purposes;

•Actual and potential conflicts of interest with our related parties, including our Managing Trustees, Tremont, RMR, and others affiliated with them;

•Acts of God, earthquakes, hurricanes, outbreaks or continuation of pandemics, or other public health safety events or conditions, supply chain disruptions, climate change and other man-made or natural disasters or war, terrorism, social unrest or civil disturbances; and

•Other matters.

These risks, uncertainties and other factors are not exhaustive and should be read in conjunction with other cautionary statements that are included in our periodic filings. The information contained in our filings with the SEC, including under the caption “Risk Factors” in our periodic reports, or incorporated therein, identifies other important factors that could cause differences from our forward-looking statements in this Quarterly Report on Form 10-Q. Our filings with the SEC are available on the SEC’s website at www.sec.gov.

You should not place undue reliance upon our forward-looking statements.

Except as required by law, we do not intend to update or change any forward-looking statements as a result of new information, future events or otherwise.

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Statement Concerning Limited Liability

The Declaration of Trust of Seven Hills Realty Trust, a copy of which, together with any amendments or supplements thereto, is duly filed with the State Department of Assessments and Taxation of Maryland, provide that the name Seven Hills Realty Trust refers to the trustees collectively as trustees, but not individually or personally. No trustee, officer, shareholder, employee or agent of Seven Hills Realty Trust shall be held to any personal liability, jointly or severally, for any obligation of, or claim against, Seven Hills Realty Trust. All persons or entities dealing with Seven Hills Realty Trust, in any way, shall look only to the assets of Seven Hills Realty Trust for the payment of any sum or the performance of any obligation.

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Part II. Other Information

Item 1A. Risk Factors

There have been no material changes to the risk factors previously disclosed in our 2024 Annual Report.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

Issuer purchases of equity securities. The table below provides information about our purchases of our equity securities during the quarter ended June 30, 2025.


Calendar Month	Number of Shares Purchased (1)	Average Price Paid per Share		Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs	Maximum Approximate Dollar Value of Shares that May Yet Be Purchased Under the Plans or Programs
April 2025	1,376	$	13.00	—	$	—
May 2025	3,858	11.73		—		—
Total/weighted average	5,234	$	12.06	—	$	—

(1)These common share withholdings and purchases were made to satisfy the tax withholding and payment obligations of certain current and former officers and employees of Tremont and/or RMR in connection with the vesting of awards of our common shares. We withheld and purchased these shares at their fair market value based upon the trading price of our common shares at the close of trading on Nasdaq on the purchase date.

Item 6. Exhibits


Exhibit Number						Description
3.1						Declaration of Trust of the Company, dated December 21, 2021. (Incorporated by reference to Exhibit 3.1 of the Company's Current Report on Form 8-K filed on December 22, 2021.)
3.2						Second Amended and Restated Bylaws of the Company, as of May 30, 2024. (Incorporated by reference to Exhibit 3.2 of the Company's Current Report on Form 8-K filed on June 3, 2024.)
4.1						Form of Common Share Certificate. (Incorporated by reference to Exhibit 4.1 of the Company's Quarterly Report on Form 10-Q for the quarter ended June 30, 2023.)
10.1						Second Amended and Restated Seven Hills Realty Trust 2021 Equity Compensation Plan. (Incorporated by reference to Exhibit 10.1 of the Company's Current Report on Form 8-K filed on May 29, 2025.)





31.1						Rule 13a-14(a) Certification. (Filed herewith.)
31.2						Rule 13a-14(a) Certification. (Filed herewith.)
31.3						Rule 13a-14(a) Certification. (Filed herewith.)
31.4						Rule 13a-14(a) Certification. (Filed herewith.)
32.1						Section 1350 Certification. (Furnished herewith.)
101.INS						XBRL Instance Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document.
101.SCH						XBRL Taxonomy Extension Schema Document. (Filed herewith.)
101.CAL						XBRL Taxonomy Extension Calculation Linkbase Document. (Filed herewith.)
101.DEF						XBRL Taxonomy Extension Definition Linkbase Document. (Filed herewith.)
101.LAB						XBRL Taxonomy Extension Label Linkbase Document. (Filed herewith.)
101.PRE						XBRL Taxonomy Extension Presentation Linkbase Document. (Filed herewith.)
104						Cover Page Interactive Data File. (Formatted as Inline XBRL and contained in Exhibit 101.)

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.


			SEVEN HILLS REALTY TRUST


			By:			/s/ Thomas J. Lorenzini
						Thomas J. Lorenzini President and Chief Investment Officer
						Dated: July 28, 2025

			By:			/s/ Matthew C. Brown
						Matthew C. Brown Chief Financial Officer and Treasurer (principal financial and accounting officer)
						Dated: July 28, 2025

Seven Hills Realty Trust 10-Q