sevn-20230630

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, 2023


☐			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 27, 2023: 14,744,827.

Table of Contents

SEVEN HILLS REALTY TRUST

FORM 10-Q

June 30, 2023

INDEX


		Page
PART I	Financial Information
Item 1.	Financial Statements (unaudited)
	Condensed Consolidated Balance Sheets — June 30, 2023 and December 31, 2022	1
	Condensed Consolidated Statements of Operations — Three and Six Months Ended June 30, 2023 and 2022	2
	Condensed Consolidated Statements of Shareholders’ Equity — Three and Six Months Ended June 30, 2023 and 2022	3
	Condensed Consolidated Statements of Cash Flows — Six Months Ended June 30, 2023 and 2022	4
	Notes to Unaudited Condensed Consolidated Financial Statements	6
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	17
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	31
Item 4.	Controls and Procedures	31
	Warning Concerning Forward-Looking Statements	32
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,
	2023		2022
ASSETS
Cash and cash equivalents	$	81,806	$	71,057
Restricted cash	238		10
Loans held for investment	629,525		669,929
Allowance for credit losses	(4,201)		—
Loans held for investment, net	625,324		669,929

Real estate owned	15,592		—
Accrued interest receivable	3,417		3,354
Prepaid expenses and other assets	1,537		2,497
Total assets	$	727,914	$	746,847

LIABILITIES AND SHAREHOLDERS' EQUITY
Accounts payable, accrued liabilities and other liabilities	$	4,287	$	1,903
Secured financing facilities, net	452,690		471,521

Due to related persons	3,139		1,844
Total liabilities	460,116		475,268

Commitments and contingencies

Shareholders' equity:
Common shares of beneficial interest, $0.001 par value, 25,000,000 shares authorized; 14,745,486 and 14,709,165 shares issued and outstanding, respectively	15		15
Additional paid in capital	239,167		238,505
Cumulative net income	58,142		52,290
Cumulative distributions	(29,526)		(19,231)
Total shareholders' equity	267,798		271,579
Total liabilities and shareholders' equity	$	727,914	$	746,847

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,
	2023		2022		2023		2022
INCOME FROM INVESTMENTS:
Interest and related income	$	15,821	$	8,869	$	31,677	$	18,448
Purchase discount accretion	1,047		1,636		2,232		7,571
Less: interest and related expenses	(7,927)		(3,007)		(15,621)		(4,744)
Income from loan investments, net	8,941		7,498		18,288		21,275
Revenue from real estate owned	149		—		149		—
Total revenue	9,090		7,498		18,437		21,275
OTHER EXPENSES:
Base management fees	1,074		1,063		2,146		2,126
Incentive fees	192		—		192		—
General and administrative expenses	1,281		1,304		2,077		2,176
Reimbursement of shared services expenses	628		514		1,271		1,148
Provision for credit losses	1,026		—		39		—
Expenses from real estate owned	218		—		218		—
Other transaction related costs	—		—		—		37
Total other expenses	4,419		2,881		5,943		5,487
Income before income taxes	4,671		4,617		12,494		15,788
Income tax expense	(27)		(39)		(47)		(84)
Net income	$	4,644	$	4,578	$	12,447	$	15,704

Weighted average common shares outstanding - basic and diluted	14,605		14,521		14,594		14,514


Net income per common share - basic and diluted	$	0.32	$	0.31	$	0.85	$	1.08

See accompanying notes.

Table of Contents

SEVEN HILLS REALTY TRUST

CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY

(amounts in thousands)

(unaudited)

Number of

Additional

Common

Paid In

Cumulative

Capital

Net Income

Distributions

Total

Balance at December 31, 2022

14,709

SEC Form 10-Q filed by Seven Hills Realty Trust