SEVEN HILLS REALTY TRUST Seven Hills Realty Trust
First Quarter 2024
Financial Results
Seven Hills Realty Trust Announces First Quarter 2024 Results
"SEVN reported strong first quarter results highlighted by distributable earnings per share once again exceeding our guidance and more than covering our quarterly dividend. The credit quality of our loan portfolio remains strong and all loans remained current on their debt service, underscoring the strength of our disciplined underwriting. We received more than $40 million in loan repayments during the quarter and further reduced our exposure to the office sector from 40% at Q1 2023 to
28% currently. With ample liquidity and a robust pipeline, we are in a position to increase loan production and continue to deliver attractive risk adjusted returns for our shareholders."
Tom Lorenzini, President and Chief Investment Officer of SEVN
Newton, MA(April 29, 2024). Seven Hills Realty Trust (Nasdaq: SEVN) today announced financial results for the quarter ended March 31, 2024.
Distributions
On April 11, 2024, SEVN declared a quarterly distribution of $0.35 per common share, or approximately $5.2 million, to shareholders of record on April 22, 2024. SEVN expects to pay this distribution on or about May 16, 2024.
Conference Call
A conference call to discuss SEVN's first quarter 2024 results will be held on Tuesday, April 30, 2024 at 11:00 a.m. Eastern Time. The conference call telephone number is (866) 739-7850. Participants calling from outside the United States and Canada should dial (412) 317-6592. No pass code is necessary to access the call from either number. Participants should dial in about 15 minutes prior to the scheduled start of the call. A replay of the conference call will be available through 11:59 p.m. Eastern Time on Tuesday, May 7, 2024. To access the replay, dial (877) 344-7529. The replay pass code is 7619101. A live audio webcast of the conference call will also be available in a listen only mode on SEVN's website, at www.sevnreit.com. The archived webcast will be available for replay on SEVN's website after the call. The transcription, recording and retransmission of SEVN's first quarter conference call in any way are strictly prohibited without the prior written consent of SEVN.
About Seven Hills Realty Trust
Seven Hills Realty Trust (Nasdaq: SEVN), or SEVN, we, our or us, is a real estate investment trust, or REIT, that originates and invests in first mortgage loans secured by middle market and transitional commercial real estate. SEVN is managed by Tremont Realty Capital, an affiliate of The RMR Group (Nasdaq: RMR), a leading U.S. alternative asset management company with over $41 billion in assets under management and more than 35 years of institutional experience in buying, selling, financing and operating commercial real estate. For more information about SEVN, please visit www.sevnreit.com.
Q1 2024 | 2 |
Company Snapshot
(As of March 31, 2024, unless otherwise noted)
Strong Loan Portfolio
$629 million
Floating rate
first mortgage loan commitments
$30 million
Average
loan commitment
68%
Weighted average
LTV
9.6%
Weighted average
All In Yield
100% floating rate first mortgage loan portfolio secured by diverse property types and geographic regions and owned by high quality sponsors.
Conservative Leverage
1.6x
Debt to equity ratio
$695 million
Maximum facility size
$272 million
Unused financing
capacity
$93 million
Cash
on hand
Conservative leverage levels and ample cash on hand provide SEVN with liquidity to continue to originate accretive loans that meet our disciplined underwriting criteria.
Integrated with RMR Real Estate Platform
12%
Ownership of SEVN
~$41 billion
of Gross AUM
~1,100
CRE professionals
~2,100
Properties managed
across the U.S.
SEVN is managed by Tremont Realty Capital, a wholly owned subsidiary of RMR, providing a depth of market knowledge and an extensive network of real estate owners, operators, sponsors and financial institutions.
Q1 2024 | 3 |
First Quarter 2024 Highlights
(As of and for the three months ended March 31, 2024, unless otherwise noted)
Financial
Results
Investment
Activity
Portfolio
Liquidity &
Capitalization
- Generated net income of $5.2 million, or $0.35 per diluted share and Distributable Earnings of $5.6 million, or $0.38 per diluted share.
- Quarterly distribution of $0.35 per common share, declared and paid during the quarter.
- Received $40.4 million of repayment proceeds:
- $15.6 million on a loan secured by a retail property in Delray Beach, FL.
- $15.8 million on a loan secured by an office property in Westminster, CO.
- $9.0 million on a loan secured by an industrial property in Allentown, PA.
- In April 2024, SEVN closed one new loan secured by a multifamily property in Newport News, VA with a total commitment of $17.8 million, a coupon of S + 3.15% and an All In Yield of S + 3.86%.
- Weighted average coupon of S + 3.77% and All In Yield of S + 4.21%.
- Weighted average risk rating of 3.0 and an allowance for credit losses representing 1.0% of total loan commitments.
- Available liquidity of $365.7 million, including unused capacity of $272.4 million available under our Secured Financing Facilities and $93.3 million of cash on hand.
- Weighted average coupon of S + 2.18%.
Please refer to Non-GAAP Financial Measures and Other Measures and Definitions within the Appendix for terms used throughout this document. All amounts in this presentation are unaudited.
Q1 2024 | 4 |
First Quarter 2024 Financial Summary
(amounts in thousands, except per share data)
Income Statement
Three Months Ended | ||
March 31, 2024 | ||
Income from loan investments, net | $ | 8,783 |
Revenue from real estate owned | 579 | |
Other expenses | (3,432) | |
Provision for credit losses | (697) | |
Net income | $ | 5,233 |
Weighted average common shares outstanding - basic | ||
and diluted | 14,675 | |
Net income per common share - basic and diluted | $ | 0.35 |
Distributable Earnings (1) | $ | 5,568 |
Distributable Earnings per common share - basic and | ||
diluted (1) | $ | 0.38 |
Quarterly Distribution per Share | $ | 0.35 |
(1) See appendix for definitions and reconciliations of non-GAAP measures.
Balance Sheet
March 31, 2024 | ||
Loans held for investment, net | $ | 583,486 |
Real estate owned, net | 11,130 | |
Cash and cash equivalents | 93,298 | |
Other | 9,796 | |
Total assets | $ | 697,710 |
Secured financing facilities, net | $ | 421,171 |
Other | 4,981 | |
Total liabilities | $ | 426,152 |
Total shareholders' equity | $ | 271,558 |
Total outstanding common shares | 14,805 | |
Book value per common share | $ | 18.34 |
Adjusted book value per common share (1) | $ | 18.86 |
Q1 2024 | 5 |
Loan Portfolio Summary
As of | |
(dollars in thousands) | March 31, 2024 |
Number of loans | 21 |
Average loan commitment | $29,947 |
Total loan commitments | $628,891 |
Unfunded loan commitments | $38,259 |
Principal balance | $590,632 |
Weighted average coupon rate | 9.14% |
Weighted average All In Yield | 9.58% |
Weighted average Maximum Maturity | 2.8 |
Weighted average LTV | 68% |
Weighted average floor | 1.41% |
Weighted average risk rating | 3.0 |
First Quarter 2024 Loan Portfolio Activity
(dollars in millions)
$670.3
$628.9 | Total Loan Commitments | ||||
$40.4 | $40.4 | ||||
$1.1 | $38.3 | Unfunded Commitments |
$629.9 | $629.9 | $631.0 | $590.6 | Principal Balance |
Q4 2023 Loan Portfolio | Fundings | Repayments | Q1 2024 Loan Portfolio |
FINANCIAL RESULTS | Q1 2024 | 6 |
Loan Portfolio Originations and Diversity
Loan Originations by Quarter
Geographic Region (1)
(dollars in millions)
$95.8 $4.6
$60.5 | $54.3 | Total Loan Commitments | ||
$8.9 | $- | Unfunded Commitments | ||
$47.0 | $37.5 | $44.8 | ||
$91.2 | ||||
$3.2 | ||||
East 14%
South 35%
Midwest 22%
West 29%
Property Type (1)
Retail
Hotel 8%
$8.6 | $- | ||||||||
$51.6 | $24.4 | $54.3 | Principal Balance | ||||||
$2.4 | |||||||||
$38.4 | $37.5 | $41.6 | |||||||
$22.0 | |||||||||
$- | $- | ||||||||
Q1 2022 | Q2 2022 | Q3 2022 | Q4 2022 | Q1 2023 | Q2 2023 | Q3 2023 | Q4 2023 | Q1 2024 |
Retail 10%
Industrial 19%
Multifamily 35%
Loan Count | 3 | 2 | 1 | 1 | 0 | 1 | 2 | 2 | 0 |
Office 28%
(1) Based on principal balance of loans held for investment as of March 31, 2024.
FINANCIAL RESULTS | Q1 2024 | 7 |
Loan Portfolio Credit Quality
Loan to Value (1)
% of Portfolio
28% | 28% | ||||||||||
16% | 15% | 13% | |||||||||
30% - 60% | 61% - 65% | 66% - 70% | 71% - 75% | 76% - 80% | |||||||
Loan Count | 4 | 2 | 5 | 7 | 3 | ||||||
Weighted Average
LTV: 68%
Risk Rating Distribution (1)
- of Portfolio
71%
Weighted Average
Risk Rating: 3.0
14% | 15% | ||||||||||||||
-% | -% | ||||||||||||||
Lower Risk (1) | Average Risk (2) | Acceptable Risk (3) | Higher Risk (4) | Impaired/Loss Likely (5) | |||||||||||
Loan Count | 0 | 3 | 15 | 3 | 0 | ||||||||||
(1) Percentage of portfolio based on principal balance of loans | |||||||||||||||
held for investment as of March 31, 2024. | |||||||||||||||
FINANCIAL RESULTS | Q1 2024 | 8 |
Reducing Office Loan Exposure
Since the beginning of 2023, SEVN's office loan exposure has declined to 28% through diversified loan originations and repayments.
Portfolio Composition (1)
2% | 7% | 8% | ||
11% | 11% | |||
14% | ||||
18% | 18% | 19% | 19% | |
17% | ||||
12% | 10% | |||
31% | 35% | |||
33% | ||||
33% | 35% |
40% | 36% | 34% | ||
29% | 28% | |||
3/31/2023 | 6/30/2023 | 9/30/2023 | 12/31/2023 | 3/31/2024 | ||
Office Loan Count | 10 | 9 | 9 | 7 | 6 | |
FINANCIAL RESULTS
Hotel
Industrial
Retail
Multifamily
Office
- Percentage of portfolio based on principal balance of loans held for investment.
Q1 2024 | 9 |
Office Loans (1)
- No office loans in urban or CBD markets in our portfolio.
- In March 2024, we received the repayment of one office loan for $15.8 million.
- Six office loans with a weighted average risk rating of 3.5 make up 28% of our portfolio as of March 31, 2024 compared to 40% as of March 31, 2023.
- As of March 31, 2024, all of our borrowers had paid their debt service obligations owed and due to us.
Total Loan Portfolio
Office Risk Rating Distribution
Office
Risk Rating 2-3 13%
Office
Risk Rating 4 15%
Other Property Types 72%
Risk Rating
2 - 3
48% of office
Risk Rating
4
52% of office
$79.6 million principal balance / three loans
- Leased occupancy of 89%.
- Weighted average lease term of 4.9 years.
$43.5 million principal balance / Class B / suburban Dallas, TX
- Leased occupancy of 73%.
- Weighted average lease term of 4.6 years.
- Demonstrated commitment from sponsor, with $4.1 million of equity contributions to fund reserves since 2022.
$24.4 million principal balance / Class A / Carlsbad, CA
- Leased occupancy of 93%.
- Weighted average lease term of 3.4 years.
$20.0 million principal balance / Class A / Bellevue, WA
- Leased occupancy of 74%.
- Weighted average lease term of 4.0 years.
FINANCIAL RESULTS
- Percentage of portfolio and office risk rating distribution based on principal balance of loans held for investment as of March 31, 2024.
Q1 2024 | 10 |
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Disclaimer
Seven Hills Realty Trust published this content on 29 April 2024 and is solely responsible for the information contained therein. Distributed by Public, unedited and unaltered, on 29 April 2024 20:18:17 UTC.
