What changed in this filing

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Item 1. Financial Statements

2021-08-03 compared with 2021-05-07 · 201 added, 129 removed, 434 unchanged (43% of the section changed)

11 unchanged sentences

Accounts payable, accrued liabilities and deposits $ 1,638

Master repurchase facility, net 48,775

Due to related persons 1,006

7 unchanged sentences

Cumulative net income 1,510

Cumulative distributions ( 1,530 )

Total shareholders' equity 193,055

29 unchanged sentences

RMR MORTGAGE TRUST

CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(amounts in thousands, except per share data)

Three Months Ended March 31, 2021

Three Months Ended June 30, 2021 Six Months Ended June 30, 2021

INCOME FROM INVESTMENTS:

Interest income from investments $ 3,055 $ 5,056

interest and related expenses ( 192 ) ( 192 )

Income from investments, net 2,863 4,864

OTHER EXPENSES:

3 unchanged sentences

Total expenses 1,710 3,343

Income before income tax expense 368

Income tax expense ( 18 )

Income before income tax benefit (expense) 1,153 1,521

Income tax benefit (expense) 7 ( 11 )

Net income $ 1,160 $ 1,510

3 unchanged sentences

RMR MORTGAGE TRUST

CONSOLIDATED STATEMENT OF OPERATIONS (Predecessor Basis)

CONSOLIDATED STATEMENTS OF OPERATIONS (Predecessor Basis)

(amounts in thousands)

Three Months Ended March 31, 2020

Three Months Ended June 30, 2020 Six Months Ended June 30, 2020

INVESTMENT INCOME:

3 unchanged sentences

Total investment income 3,400 7,565

Advisory 547 1,252

Legal 138 175

Compliance and internal audit 34 68

Shareholder reporting 17 35

Custodian 24 48

Administrative 24 48

7 unchanged sentences

Net realized gain on investments 6 921

Net change in unrealized losses on investments ( 123,346 )

Net realized and change in unrealized losses on investments ( 122,431 )

Net decrease in net assets before preferred distributions resulting from operations ( 119,760 )

Net change in unrealized gains (losses) on investments 38,386 ( 84,960 )

Net realized and change in unrealized gains (losses) on investments 38,392 ( 84,039 )

Net increase (decrease) in net assets before preferred distributions resulting from operations 40,617 ( 79,143 )

Distributions to preferred shareholders from net investment income ( 87 ) ( 213 )

Net decrease in net assets attributable to common shares resulting from operations $ ( 119,886 )

Net increase (decrease) in net assets attributable to common shares resulting from operations $ 40,530 $ ( 79,356 )

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

RMR MORTGAGE TRUST

CONDENSED CONSOLIDATED STATEMENT OF SHAREHOLDERS’ EQUITY

CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY

(amounts in thousands)

Number of Additional

Common Common Paid In Cumulative

Shares Shares Capital Net Income Total

Common Common Paid In Cumulative Cumulative

Shares Shares Capital Net Income Distributions Total

Net assets at December 31, 2020 10,202 $ 10 $ 192,884 $ — $ — $ 192,894

Net income — — — 350 — 350

Shareholders' equity at March 31, 2021 10,202 $ 10 $ 192,884 $ 350 $ 193,244

Balance at March 31, 2021 10,202 10 192,884 350 — 193,244

Share grants 15 — 181 — — 181

Net income — — — 1,160 — 1,160

Distributions — — — — ( 1,530 ) ( 1,530 )

Balance at June 30, 2021 10,217 $ 10 $ 193,065 $ 1,510 $ ( 1,530 ) $ 193,055

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

RMR MORTGAGE TRUST

CONSOLIDATED STATEMENT OF CHANGES IN NET ASSETS (Predecessor Basis)

CONSOLIDATED STATEMENTS OF CHANGES IN NET ASSETS (Predecessor Basis)

(amounts in thousands)

Three Months Ended March 31, 2020

Decrease in net assets resulting from operations

Three Months Ended June 30, 2020 Six Months Ended June 30, 2020

Increase (decrease) in net assets resulting from operations

Net investment income $ 2,225 $ 4,896

Net realized gain on investments 6 921

Net change in unrealized losses on investments ( 123,346 )

Net change in unrealized gains (losses) on investments 38,386 ( 84,960 )

Distributions to preferred shareholders ( 87 ) ( 213 )

Net decrease in net assets attributable to common shares resulting from operations ( 119,886 )

Net increase (decrease) in net assets attributable to common shares resulting from operations 40,530 ( 79,356 )

Distributions to common shareholders from:

1 unchanged sentence

Total distributions to common shareholders ( 1,020 ) ( 4,387 )

Total decrease in net assets attributable to common shares ( 123,253 )

Total increase (decrease) in net assets attributable to common shares 39,510 ( 83,743 )

Net assets attributable to common shares

8 unchanged sentences

(dollars in thousands)

Three Months Ended March 31, 2021

Six Months Ended June 30, 2021

CASH FLOWS FROM OPERATING ACTIVITIES:

1 unchanged sentence

Adjustments to reconcile net income to net cash used in operating activities:

Share based compensation 181

Amortization of deferred financing costs 34

Amortization of loan origination and exit fees ( 641 )

10 unchanged sentences

CASH FLOWS FROM FINANCING ACTIVITIES:

Proceeds from master repurchase facility 49,172

Payments of deferred financing costs ( 431 )

Net cash used in financing activities ( 76 )

Distributions ( 1,530 )

Net cash provided by financing activities 47,211

Decrease in cash, cash equivalents and restricted cash ( 72,957 )

2 unchanged sentences

SUPPLEMENTAL DISCLOSURES:

Interest paid $ 120

Income taxes paid $ 2,477

1 unchanged sentence

The table below provides a reconciliation of cash, cash equivalents and restricted cash reported within the condensed consolidated balance sheet to the amounts shown in the condensed consolidated statement of cash flows:

As of March 31, 2021

As of June 30, 2021

Cash and cash equivalents $ 30,402

5 unchanged sentences

(dollars in thousands)

Three Months Ended March 31, 2020

Six Months Ended June 30, 2020

CASH FLOWS FROM OPERATING ACTIVITIES:

Net decrease in net assets before preferred distributions resulting from operations $ ( 79,143 )

Adjustments to reconcile net decrease in net assets before preferred distributions

resulting from operations to cash provided by operating activities:

Adjustments to reconcile net decrease in net assets before preferred distributions resulting from operations to cash provided by operating activities:

Purchases of long term investments ( 5,789 )

3 unchanged sentences

Dividends and interest receivable and other assets 979

Receivable for securities sold ( 1,849 )

Prepaid expenses 54

45 unchanged sentences

(dollars in thousands, except per share data)

RMR Mortgage Trust (formerly known as RMR Real Estate Income Fund), or we, us, our, or the Trust, is a Maryland statutory trust.

RMR Mortgage Trust, or we, us, our, or the Trust, is a Maryland statutory trust.

We were previously registered under the Investment Company Act of 1940, as amended, or the 1940 Act, as a closed-end management investment company.

Our investment objective while we operated as a registered investment company was investing in equity securities of real estate companies.

On January 5, 2021, the Securities and Exchange Commission, or the SEC, issued an order granting our request to deregister as an investment company under the 1940 Act.

On January 5, 2021, the Securities and Exchange Commission, or the SEC, issued an order granting our request to deregister as an investment company under the 1940 Act, or the Deregistration.

As a result, the Trust changed its SEC registration to a reporting company under the Securities Exchange Act of 1934, as amended, or the Exchange Act.

1 unchanged sentence

On April 26, 2021, we and Tremont Mortgage Trust, or TRMT, entered into an Agreement and Plan of Merger, or the Merger Agreement, pursuant to which, on the terms and subject to the satisfaction or waiver of the conditions thereof, TRMT has agreed to merge with and into us, with us continuing as the surviving entity in the merger, or the Merger.

Pursuant to the terms and subject to the conditions set forth in the Merger Agreement, at the effective time of the Merger, or the Effective Time, each common share of beneficial interest, $ 0.01 par value per share, of TRMT, or TRMT Common Shares, issued and outstanding immediately prior to the Effective Time will be converted into the right to receive 0.52 , or the Exchange Ratio, of one newly issued common share of beneficial interest, $ 0.001 par value per share, of us, or the RMRM Common Shares, subject to adjustment as described in the Merger Agreement, with cash paid in lieu of fractional shares.

Pursuant to the terms and subject to the conditions set forth in the Merger Agreement, at the effective time of the Merger, or the Effective Time, each common share of beneficial interest, $ 0.01 par value per share, of TRMT, or TRMT Common Shares, issued and outstanding immediately prior to the Effective Time will be converted into the right to receive 0.52 , or the Exchange Ratio, of one newly issued common share of beneficial interest, $ 0.001 par value per share, of our common shares, or the RMRM Common Shares, subject to adjustment as described in the Merger Agreement, with cash paid in lieu of fractional shares.

Under the Merger Agreement, the Exchange Ratio is fixed and will not be adjusted to reflect changes in the market price of the RMRM Common Shares or the TRMT Common Shares prior to the Effective Time.

Pursuant to the Merger Agreement, at the Effective Time, any unvested TRMT Common Share awards outstanding under TRMT's equity compensation plan generally will be converted into an unvested RMRM Common Share award under our equity compensation plan, subject to substantially similar vesting requirements and other terms and conditions, determined by multiplying the number of unvested TRMT Common Shares subject to such award by the Exchange Ratio (rounded down to the nearest whole number).

The Merger and the other transactions contemplated by the Merger Agreement are collectively referred to herein as the Transactions.

The Merger and the other transactions contemplated by the Merger Agreement are collectively referred to herein as the other Transactions.

We have incurred $ 2,183 of transaction costs related to the Merger that are included in prepaid expenses and other assets in the condensed consolidated balance sheet.

Following the consummation of the Merger, the combined company will continue to be managed by our and TRMT’s current manager, Tremont Realty Advisors LLC, or TRA or our Manager, pursuant to the terms of our existing management agreement with TRA.

Contemporaneously with the execution of the Merger Agreement, we, TRMT and TRA entered into a letter agreement, or the TRA Letter Agreement, pursuant to which, on the terms and subject to conditions contained therein, we, TRMT and TRA have acknowledged and agreed that, effective upon consummation of the Merger, TRMT shall have terminated its management agreement with TRA, and TRA shall have waived its right to receive payment of the termination fee pursuant to such agreement.

In consideration of this waiver, we have agreed that, effective upon consummation of the Merger and the termination of TRMT's management agreement with TRA, certain of the expenses TRA had paid on behalf of TRMT pursuant to such management agreement will be included in the “Termination Fee” under and as defined in our existing management agreement with TRA.

In consideration of this waiver, we have agreed that, effective upon consummation of the Merger and the termination of TRMT's management agreement with TRA, certain of the expenses TRA had paid pursuant to such management agreement will be included in the “Termination Fee” under and as defined in our existing management agreement with TRA.

The TRA Letter Agreement further provides that such termination by TRMT and waiver by TRA shall apply only in respect of the Merger and will not apply in respect of any competing proposal or superior proposal (as those terms are defined in the Merger Agreement) or to any other transaction or arrangement.

Contemporaneously with the execution of the Merger Agreement, we entered into a voting agreement with TRA, or the Voting Agreement, pursuant to which TRA has agreed to vote all of the TRMT Common Shares which it is entitled to vote in favor of approval of the Merger and the other Transactions to which TRMT is a party at the special meeting of TRMT's shareholders held for that purpose and against any competing acquisition proposal.

Contemporaneously with the execution of the Merger Agreement, we entered into a voting agreement with TRA, or the Voting Agreement, pursuant to which TRA has agreed to vote all of the TRMT Common Shares which it is entitled to vote in favor of approval of the Merger and the other Transactions to which TRMT is a party at the special meeting of TRMT's shareholders scheduled to be held on September 17, 2021 for that purpose and against any competing acquisition proposal.

Also contemporaneously with the execution of the Merger Agreement, TRMT entered into a voting agreement with Diane Portnoy, pursuant to which Ms.

Portnoy has agreed to vote all of our common shares which she is entitled to vote in favor of approval of the Merger Share Issuance at the special meeting of our shareholders held for that purpose and against any competing acquisition proposal.

Portnoy has agreed to vote all of our common shares which she is entitled to vote in favor of approval of the issuance of the RMRM Common Shares in the Merger, or the Merger Share Issuance, at the special meeting of our shareholders held for that purpose and against any competing acquisition proposal.

RMR MORTGAGE TRUST

1 unchanged sentence

(dollars in thousands, except per share data)

The record date for determining the shareholders entitled to receive notice of, and to vote at, our and TRMT's special meetings is July 14, 2021.

Pending requisite approval by us and TRMT shareholders, the Merger is expected to close during the third quarter of 2021.

Basis of Presentation .

1 unchanged sentence

Upon the Business Change, we discontinued the application of guidance in ASC Topic 946 and prospectively applied the guidance required under GAAP, applicable to companies that are not investment companies, or the Successor Basis.

As a result of these changes, our condensed consolidated financial statements as of and for the three months ended March 31, 2021 are presented separately from our financial statements on the Predecessor Basis, as of and for the periods prior to the Business Change.

The results of operations from January 1, 2021 through January 4, 2021 were not material to the Trust's condensed consolidated financial statements and have not been presented separately, but they are included in our statement of operations for the three months ended March 31, 2021.

As a result of these changes, our condensed consolidated financial statements as of and for the three and six months ended June 30, 2021 are presented separately from our financial statements on the Predecessor Basis, as of and for the periods prior to December 31, 2020.

The results of operations from January 1, 2021 through January 4, 2021 were not material to the Trust's condensed consolidated financial statements and have not been presented separately, but they are included in our condensed consolidated statement of operations for the six months ended June 30, 2021.

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.

14 unchanged sentences

Loans Held for Investment.

Generally, our loans are classified as held for investment based upon our intent and ability to hold them until maturity, if earlier, repayment.

Generally, our loans are classified as held for investment based upon our intent and ability to hold them until maturity, or if earlier, repayment.

Loans that are held for investment are carried at cost, net of unamortized loan origination and accreted exit fees that are required to be recognized in the carrying value of the loans in accordance with GAAP, unless the loans are deemed to be impaired.

6 unchanged sentences

and the property demonstrating stabilized occupancy and/or market rates, resulting in strong current cash flow and net operating income and/or having a very low LTV.

"2" average risk—Criteria reflects a sponsor having a stable financial condition and our evaluation of management's experience;

collateral performance meeting or exceeding substantially all performance metrics included in the business plan or credit underwriting;

and the property demonstrating improved occupancy at market rents, resulting in sufficient current cash flow and/or having a low LTV.

RMR MORTGAGE TRUST

1 unchanged sentence

(dollars in thousands, except per share data)

"2" average risk—Criteria reflects a sponsor having a stable financial condition and our evaluation of management's experience;

collateral performance meeting or exceeding substantially all performance metrics included in the business plan or credit underwriting;

and the property demonstrating improved occupancy at market rents, resulting in sufficient current cash flow and/or having a low LTV.

"3" acceptable risk—Criteria reflects a sponsor having a history of repaying loans at maturity and meeting its credit obligations and our evaluation of management's experience;

18 unchanged sentences

Upon measurement of an impairment, we will record an allowance to reduce the carrying value of the loan accordingly, and record a corresponding charge to net income in our condensed consolidated statements of operations.

As of March 31, 2021, we have not recorded any allowances for losses as we believe it is probable that we will collect all amounts due pursuant to the contractual terms of our loan agreements with borrowers.

As of June 30, 2021, we have not recorded any allowances for losses as we believe it is probable that we will collect all amounts due pursuant to the contractual terms of our loan agreements with borrowers.

Fair Value of Financial Instruments.

7 unchanged sentences

Level III—Inputs include unobservable prices and are supported by little or no market activity and are significant to the overall fair value measurement.

RMR MORTGAGE TRUST

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(dollars in thousands, except per share data)

Loan Deferred Fees.

2 unchanged sentences

Deferred Financing Costs.

Costs incurred in connection with financings are capitalized and recorded as an offset to the related liability and amortized over the respective financing terms and are recorded in our condensed consolidated statement of

RMR MORTGAGE TRUST

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(dollars in thousands, except per share data)

operations as a component of interest and related expenses.

At March 31, 2021, we had approximately $ 76 of capitalized financing costs.

At June 30, 2021, we had approximately $ 397 of capitalized financing costs, net of amortization.

Net Income Per Common Share.

We calculate net income per common share, or EPS, by dividing net income by the weighted average number of common shares outstanding during the period.

At March 31, 2021 and December 31, 2020, no warrants, options or other types or classes of securities existed that could be potentially dilutive to our common shares outstanding.

At June 30, 2021 and December 31, 2020, no warrants, options or other types or classes of securities existed that could be potentially dilutive to our common shares outstanding.

Revenue Recognition.

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2016-13 will have on our condensed consolidated financial statements.

In March 2020, the FASB issued ASU No.

2020-04, Reference Rate Reform (Topic 848):

Facilitation of the Effects of Reference Rate Reform on Financial Reporting , which provides temporary optional expedients and exceptions on contract modifications meeting certain criteria to ease the financial reporting burdens of the expected market transition from LIBOR and other interbank offered rates to the alternative reference rates.

For a contract that meets the criteria, this ASU generally allows an entity to account for and present modifications as an event that does not require remeasurement at the modification date or reassessment of a previous accounting determination.

This ASU was effective upon issuance and can be applied through December 31, 2022.

The adoption of ASU No.

2020-04 did not have a material impact on our condensed consolidated financial statements.

Loans Held for Investment

We originate first mortgage whole loans secured by middle market and transitional CRE, which are generally to be held as long term investments.

We funded our existing loan portfolio using cash on hand.

We originate first mortgage loans secured by middle market and transitional CRE, which are generally to be held as long term investments.

We funded our existing loan portfolio using cash on hand and advancements under our master repurchase facility with UBS AG, or UBS, or our Master Repurchase Facility.

See Note 6 for further information regarding our Master Repurchase Facility.

RMR MORTGAGE TRUST

1 unchanged sentence

(dollars in thousands, except per share data)

The table below provides overall statistics for our loan portfolio as of March 31, 2021 and December 31, 2020:

As of March 31, 2021 (Successor Basis) As of December 31, 2020 (Predecessor Basis)

The table below provides overall statistics for our loan portfolio as of June 30, 2021 and December 31, 2020:

As of June 30, 2021

(Successor Basis) As of December 31, 2020 (Predecessor Basis)

Number of loans 9 5

4 unchanged sentences

$ 212,515 $ 92,863

Unamortized net deferred origination fees $ ( 1,405 ) $ ( 984 )

Unamortized net deferred origination and exit fees $ ( 1,773 ) $ ( 984 )

Carrying value $ 210,742 $ 91,879

2 unchanged sentences

5.62 % 5.71 %

Weighted average LIBOR floor 0.76 % 0.78 %

Weighted average maximum maturity (years) (4)

2 unchanged sentences

(1) Unfunded loan commitments are primarily used to finance property and building improvements and leasing capital and are generally funded over the term of the loan.

(2) The principal balance at March 31, 2021 includes $ 69 of capitalized interest that does not reduce the amount of unfunded loan commitments.

(2) The principal balance at June 30, 2021 includes $ 96 of capitalized interest that does not reduce the amount of unfunded loan commitments.

(3) All in yield represents the yield on a loan, excluding any repurchase debt funding applicable to the loan and including amortization of deferred fees over the initial term of the loan.

1 unchanged sentence

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

The table below represents our loan activities during the three months ended March 31, 2021:

The table below represents our loan activities during the three months ended June 30, 2021:

Principal Balance Deferred Fees Carrying Value

Balance at March 31, 2021 (Successor Basis) $ 148,652 $ ( 1,405 ) $ 147,247

Additional funding 693 — 693

Originations 63,170 ( 755 ) 62,415

Net amortization of deferred fees — 387 387

Balance at June 30, 2021 (Successor Basis) $ 212,515 $ ( 1,773 ) $ 210,742

The table below represents our loan activities during the six months ended June 30, 2021:

Principal Balance Deferred Fees Carrying Value

Balance at December 31, 2020 (Predecessor Basis) $ 92,863 $ ( 984 ) $ 91,879

2 unchanged sentences

Net amortization of deferred fees — 641 641

Balance at March 31, 2021 (Successor Basis) $ 148,652 $ ( 1,405 ) $ 147,247

In April 2021, we originated a first mortgage whole loan of $ 34,275 to refinance an office/industrial property with 288,275 square feet located in Colorado Springs, Colorado.

This loan requires the borrower to pay interest at the floating rate of LIBOR plus a premium of 450 basis points per annum.

This floating rate loan includes an initial funding of $ 28,970 and a future funding allowance of $ 5,305 for tenant improvements, leasing commissions and capital expenditures and has a three year initial term with one one-year extension option, subject to the borrower meeting certain conditions.

Also in April 2021, we originated a first mortgage whole loan of $ 39,240 to finance the acquisition of two cold storage industrial buildings located in Londonderry, New Hampshire.

Balance at June 30, 2021 (Successor Basis) $ 212,515 $ ( 1,773 ) $ 210,742

In July 2021, we originated a first mortgage loan of $ 27,385 to refinance a multi-tenant office building located in Plano, TX.

This loan requires the borrower to pay interest at the floating rate of LIBOR plus a premium of 475 basis points per annum.

This floating rate loan includes an initial funding of $ 24,635 and a future funding allowance of $ 2,750 for tenant improvements, leasing commissions and capital expenditures and has a three-year initial term with two , one-year extension options, subject to the borrower meeting certain conditions.

Also in July 2021, we originated a first mortgage loan of $ 19,688 to finance the acquisition of a 100 -unit apartment building located in Portland, OR.

This loan requires the borrower to pay interest at the floating rate of LIBOR

RMR MORTGAGE TRUST

1 unchanged sentence

(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 March 31, 2021 and December 31, 2020:

March 31, 2021

plus a premium of 357 basis points per annum.

This floating rate loan was fully funded at closing and has a three-year initial term with two , one-year extension options, subject to the borrower meeting certain conditions.

The tables below detail the property type and geographic location of the properties securing the loans in our portfolio as of June 30, 2021 and December 31, 2020:

June 30, 2021

(Successor Basis) December 31, 2020

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9 $ 210,742 100 % 5 $ 91,879 100 %

(1) Our loan investment secured by a mixed use property consisting of office space and an industrial warehouse in Aurora, IL is classified as office for the purpose of counting the number of loans in our portfolio.

The carrying value of this loan investment is reflected in office and industrial based on the fair value of the buildings at the time of origination relative to the total fair value of the property.

March 31, 2021

(1) Two loan investments secured by mixed use properties consisting of office space and an industrial warehouse in Aurora, IL and Colorado Springs, CO are classified as office for the purpose of counting the number of loans in our portfolio because the majority of the square footage of the properties consists of office space.

The carrying value of these loan investments are reflected in office and industrial based on the fair value of the buildings at the time of origination relative to the total fair value of the properties.

June 30, 2021

(Successor Basis) December 31, 2020

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Percentage of Value Number of Loans Carrying Value Percentage of Value

Midwest 3 $ 87,960 60 % 2 $ 43,772 48 %

West 2 35,167 24 % 2 34,826 38 %

East 1 $ 33,908 16 % — $ — — %

South 2 24,184 11 % 1 13,281 14 %

West 3 64,537 31 % 2 34,826 38 %

Midwest 3 88,113 42 % 2 43,772 48 %

9 $ 210,742 100 % 5 $ 91,879 100 %

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We evaluate each of our loans for impairment 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 following table allocates the carrying value of our loan portfolio at March 31, 2021 and December 31, 2020 based on our internal risk rating policy:

March 31, 2021 (Successor Basis) December 31, 2020 (Predecessor Basis)

The higher the number, the greater the risk level.

The following table allocates the carrying value of our loan portfolio at June 30, 2021 and December 31, 2020 based on our internal risk rating policy:

June 30, 2021 (Successor Basis) December 31, 2020 (Predecessor Basis)

Risk Rating Number of Loans Carrying Value Number of Loans Carrying Value

2 unchanged sentences

3 8 192,892 5 91,879

The weighted average risk rating of our loans by carrying value was 3.0 as of March 31, 2021 and December 31, 2020.

We did not have any impaired loans or nonaccrual loans as of March 31, 2021 or December 31, 2020.

9 $ 210,742 5 $ 91,879

The weighted average risk rating of our loans by carrying value was 2.9 and 3.0 as of June 30, 2021 and December 31, 2020, respectively.

We did not have any impaired loans or nonaccrual loans as of June 30, 2021 or December 31, 2020.

See Note 3 for further information regarding our loan risk ratings.

As of April 30, 2021, all of our borrowers had paid all of their debt service obligations owed and due to us and none of the loans included in our investment portfolio were in default.

Debt Agreements

On February 18, 2021, one of our wholly owned subsidiaries entered into a master repurchase agreement, or the Master Repurchase Agreement, with UBS AG, or UBS, for a master repurchase facility, or the Master Repurchase Facility, pursuant to which we may sell to UBS, and later repurchase, commercial mortgage loans, or the Purchased Assets.

The expiration date of the Master Repurchase Agreement is February 18, 2024, unless extended or earlier terminated in accordance

As of July 30, 2021, all of our borrowers had paid all of their debt service obligations owed and due to us and none of the loans included in our investment portfolio were in default.

RMR MORTGAGE TRUST

1 unchanged sentence

(dollars in thousands, except per share data)

with the terms of the Master Repurchase Agreement.

Debt Agreements

The table below summarizes our debt agreements as of June 30, 2021:

Debt Obligation

Weighted Average Collateral

Maximum Facility Size Principal Balance Carrying Value Coupon Rate Remaining Maturity (1) (years)

Principal Balance Fair Value (2)

June 30, 2021:

Master Repurchase Facility $ 193,055 $ 49,172 $ 48,775 L + 2.05 %

2.5 $ 212,515 $ 208,678

(1) The weighted average remaining maturity is determined using the current maturity date of the corresponding loans, assuming no borrower loan extension options have been exercised.

Our Master Repurchase Facility matures on February 18, 2024.

(2) See Note 7 for further discussion of our financial assets and liabilities not carried at fair value.

On February 18, 2021, one of our wholly owned subsidiaries entered into a master repurchase agreement, or the Master Repurchase Agreement, with UBS for our Master Repurchase Facility, pursuant to which we may sell to UBS, and later repurchase, commercial mortgage loans, or the Purchased Assets.

The expiration date of the Master Repurchase Agreement is February 18, 2024, unless extended or earlier terminated in accordance with the terms of the Master Repurchase Agreement.

Pursuant to the Master Repurchase Agreement, we will pay UBS a non-refundable upfront fee that is equal to 0.50 % of the applicable tranche amount on each Purchase Date (as each term is defined in the Master Repurchase Agreement).

While the Master Repurchase Facility has no maximum facility amount, we expect the advancements under the Master Repurchase Facility to not exceed our equity, which is as of March 31, 2021 is $ 193,244 .

While the Master Repurchase Facility has no maximum facility amount, we expect the advancements under the Master Repurchase Facility to not exceed our equity, which, as of June 30, 2021, is $ 193,055 .

Our equity will change from time-to-time and may increase or decrease.

We expect that the size of our Master Repurchase Facility may similarly change as our equity changes.

Under the Master Repurchase Facility, the initial purchase price paid by UBS for each Purchased Asset is up to 75 % of the lesser of the market value of the Purchased Asset and the unpaid principal balance of such Purchased Asset, subject to UBS’s approval.

Under our Master Repurchase Facility, the initial purchase price paid by UBS for each Purchased Asset is up to 75 % of the lesser of the market value of the Purchased Asset and the unpaid principal balance of such Purchased Asset, subject to UBS’s approval.

Upon the repurchase of a Purchased Asset, we are required to pay UBS the outstanding purchase price of the Purchased Asset, accrued interest and all accrued and unpaid expenses of UBS relating to such Purchased Assets.

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UBS has the discretion under our Master Repurchase Agreement to make advancements at margins higher than 75 %.

The weighted average interest rate for advancements under our Master Repurchase Facility was 2.39 % for both the three and six months ended June 30, 2021, respectively.

In connection with our Master Repurchase Agreement, we entered into a guaranty, or the Guaranty, which requires us to guarantee 25 % of the aggregate repurchase price, and 100 % of losses in the event of certain bad acts as well any costs and expenses of UBS related to our Master Repurchase Agreement.

The Guaranty also requires us to comply with customary financial covenants, which include the maintenance of a minimum tangible net worth, minimum cash liquidity and a total indebtedness to stockholders' equity ratio.

The Master Repurchase Facility also contains margin maintenance provisions that provide UBS with the right, in certain circumstances related to a Credit Event (as defined in the Master Repurchase Agreement) to redetermine the value of Purchased Assets.

Our Master Repurchase Facility also contains margin maintenance provisions that provide UBS with the right, in certain circumstances related to a Credit Event (as defined in the Master Repurchase Agreement) to redetermine the value of Purchased Assets.

Where a decline in the value of such Purchased Assets has resulted in a margin deficit, UBS may require us to eliminate any margin deficit through a combination of Purchased Asset repurchases and cash transfers to UBS subject to UBS’s approval.

As of March 31, 2021 we had no outstanding balance under our Master Repurchase Facility and as of April 30, 2021 we had a $ 23,172 aggregate outstanding principal balance under our Master Repurchase Facility.

For the three months ended March 31, 2020, we recorded interest expense of $ 554 related to our revolving credit facility, or the Facility, with BNP Paribas Prime Brokerage International Ltd, or PBL.

In November 2020, we repaid all outstanding amounts and terminated the Facility with PBL.

As of June 30, 2021, we were in compliance with all covenants and other terms under our Master Repurchase Agreement and the Guaranty.

As of June 30, 2021 and July 30, 2021, we had a $ 49,172 and a $ 69,172 , respectively, aggregate outstanding principal balance under our Master Repurchase Facility.

For the three and six months ended June 30, 2020, we recorded interest expense of $ 297 and $ 851 , respectively, related to our former revolving credit facility with BNP Paribas Prime Brokerage International Ltd.

In November 2020, we repaid all outstanding amounts and terminated that facility.

RMR MORTGAGE TRUST

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(dollars in thousands, except per share data)

Fair Value of Financial Instruments

3 unchanged sentences

Valuation techniques used need to maximize the use of observable inputs and minimize the use of unobservable inputs.

The carrying values of cash and cash equivalents, restricted cash and accounts payable approximate their fair values due to the short term nature of these financial instruments.

We estimate the fair values of our loans held for investment using Level III inputs, including discounted cash flow analyses and currently prevailing market terms as of the measurement date, determined by significant unobservable market inputs, which include holding periods, discount rates based on LTV, property types and loan pricing expectations which are corroborated by a comparison with other market participants to determine the appropriate market spread to add to the one month LIBOR (Level III inputs as defined in the fair value hierarchy under GAAP).

RMR MORTGAGE TRUST

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(dollars in thousands, except per share data)

The table below provides information regarding our financial assets:

March 31, 2021 (Successor Basis) December 31, 2020 (Predecessor Basis)

As of June 30, 2021 and December 31, 2020, the carrying values of cash and cash equivalents, restricted cash and accounts payable approximate their fair values due to the short term nature of these financial instruments.

At June 30, 2021, the outstanding principal balance under our Master Repurchase Facility approximated the fair value, as interest was based on floating rates based on LIBOR plus a spread, and the spread was consistent with those demanded by the market.

We estimate the fair values of our loans held for investment and outstanding principal balances under our Master Repurchase Facility by using Level III inputs, including discounted cash flow analyses and currently prevailing market terms as of the measurement date, determined by significant unobservable market inputs, which include holding periods, discount rates based on LTV, property types and loan pricing expectations which are corroborated by a comparison with other market participants to determine the appropriate market spread to add to the one month LIBOR (Level III inputs as defined in the fair value hierarchy under GAAP).

The table below provides information regarding financial assets and liabilities not carried at fair value on a recurring basis in our condensed consolidated balance sheets:

June 30, 2021 (Successor Basis) December 31, 2020 (Predecessor Basis)

Carrying Value Fair Value Carrying Value Fair Value

1 unchanged sentence

Loans held for investment $ 210,742 $ 209,034 $ 91,879 $ 91,879

There were no transfers of financial assets or liabilities within the fair value hierarchy during the three months ended March 31, 2021.

Financial liabilities

Master Repurchase Facility $ 48,775 $ 48,238 — —

There were no transfers of financial assets or liabilities within the fair value hierarchy during the three or six months ended June 30, 2021.

Shareholders' Equity

On April 15, 2021, we declared a quarterly distribution of $ 0.15 per common share for the first quarter of 2021, or approximately $ 1,530 , to shareholders of record on April 26, 2021.

We expect to pay this distribution on or about May 20, 2021.

Common Share Awards

We have common shares available for issuance under the terms of our 2021 Equity Compensation Plan, or the 2021 Plan.

The values of the share awards are based upon the closing price of our common shares on The Nasdaq Stock Market LLC, or Nasdaq, on the date of award.

The common shares that we have awarded to our Trustees vested immediately.

We have not made any awards of common shares to date under the 2021 Plan to our officers and other employees of our Manager and of RMR LLC.

We expect that the awards of common shares that we award to these persons will vest in five equal annual installments beginning on the date of award.

We will recognize the value of awarded shares in general and administrative expenses ratably over the vesting period.

We will recognize any share forfeitures as they occur.

On May 27, 2021, in accordance with our Trustee compensation arrangements, we awarded to each of our five Trustees 3,000 of our common shares, valued at $ 12.10 per common share, the closing price of our common shares on the Nasdaq that day.

RMR MORTGAGE TRUST

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(dollars in thousands, except per share data)

Distributions

For the six months ended June 30, 2021, we declared and paid a distribution to common shareholders as follows:

Record Date Payment Date Distribution per Share Total Distribution

April 26, 2021 May 20, 2021 $ 0.15 $ 1,530

On July 15, 2021, we declared a quarterly distribution of $ 0.15 per common share, or approximately $ 1,533 in aggregate, to shareholders of record as of July 26, 2021.

We expect to pay this distribution on or about August 19, 2021.

Management Agreement with our Manager

8 unchanged sentences

Each of those agreements was terminated, effective March 16, 2021.

We incurred administration service fees of $ 24 for the three months ended March 31, 2020, all of which related to the subadministration service fees payable by RMR Advisors to State Street and reimbursable by us;

we did not incur any additional administration service fees beyond those reimbursable amounts for that period.

We incurred administration service fees of $ 24 and $ 48 for the three and six months ended June 30, 2020, respectively, and $ 15 for the period from January 1, 2021 to March 16, 2021, all of which related to the subadministration service fees payable by RMR Advisors to State Street and reimbursable by us;

we did not incur any additional administration service fees beyond those reimbursable amounts for those periods.

Investment Advisory Agreement.

2 unchanged sentences

Pursuant to the investment advisory agreement, RMR Advisors was compensated at an annual rate of 0.85 % of our average daily managed assets.

We incurred advisory fees of $ 705 for the three months ended March 31, 2020 and for the period from January 1, 2021 to January 5, 2021, we incurred advisory fees of $ 22 which is included in base management fees in our condensed consolidated statement of operations.

For the three months ended March 31, 2020, we incurred internal audit and compliance costs reimbursable to RMR Advisors of $ 34 .

We incurred advisory fees of $ 547 and $ 1,252 for the three and six months ended June 30, 2020, respectively, and for the period from January 1, 2021 to January 5, 2021, we incurred advisory fees of $ 22 which is included in base management fees in our condensed consolidated statements of operations.

We incurred internal audit and compliance costs reimbursable to RMR Advisors of $ 34 and $ 68 for the three and six months ended June 30, 2020, respectively.

Current Management Agreement with our Manager

Effective January 5, 2021, our Manager provides services to us pursuant to a new management agreement.

We recognized base management fees of $ 715 for the three months ended March 31, 2021.

Pursuant to the terms of our management agreement, no management incentive fees are payable until the first full quarter following the effective date of the management agreement and, thereafter, any management incentive fees would be subject to our Manager earning those fees in accordance with the management agreement.

Our Manager, and not us, is responsible for the costs of its employees who provide services to us, including the cost of our Manager’s personnel who originate our loans, 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

RMR MORTGAGE TRUST

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(dollars in thousands, except per share data)

adopted by us.

We recognized base management fees of $ 721 and $ 1,414 for the three and six months ended June 30, 2021, respectively.

We did not incur any management incentive fees for the three and six months ended June 30, 2021.

We are required to pay or to reimburse our Manager and its affiliates for all other costs and expenses of our operations.

3 unchanged sentences

These shared services costs are subject to approval by a majority of our Independent Trustees at least annually.

We incurred shared services costs of $ 352 payable to our Manager for the three months ended March 31, 2021.

We include these amounts in reimbursement of shared services expenses or general and administrative expenses, as applicable, in our condensed consolidated statements of operations.

We incurred shared services costs of $ 312 and $ 664 and payable to our Manager for the three and six months ended June 30, 2021, respectively.

We include these amounts in reimbursement of shared

RMR MORTGAGE TRUST

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(dollars in thousands, except per share data)

services expenses or general and administrative expenses, as applicable, in our condensed consolidated statements of operations.

Contemporaneously with the execution of the Merger Agreement, we, TRMT and TRA entered into the TRA Letter Agreement, pursuant to which, on the terms and subject to conditions contained therein, we, TRMT and TRA have acknowledged and agreed that, effective upon consummation of the Merger, TRMT shall have terminated its management agreement with TRA, and TRA shall have waived its right to receive payment of the termination fee pursuant to such agreement.

In consideration of this waiver, we have agreed that, effective upon consummation of the Merger and the termination of TRMT’s management agreement with TRA, certain of the expenses TRA had paid on behalf of TRMT pursuant to such management agreement will be included in the “Termination Fee” under and as defined in our existing management agreement with TRA.

In consideration of this waiver, we have agreed that, effective upon consummation of the Merger and the termination of TRMT’s management agreement with TRA, certain of the expenses TRA had paid pursuant to such management agreement will be included in the “Termination Fee” under and as defined in our existing management agreement with TRA.

6 unchanged sentences

One of our Managing Trustees, Adam 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 our Manager, a managing director and the president and chief executive officer of RMR Inc., and an officer and employee of RMR LLC.

In connection with the Business Change, our Board appointed Thomas J.

In connection with the Business Change, our Board of Trustees appointed Thomas J.

Lorenzini as our President and G.

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In addition, on January 5, 2021, Jennifer B.

Clark resigned as our Managing Trustee, and our Board elected Matthew P.

Clark resigned as our Managing Trustee, and our Board of Trustees elected Matthew P.

Jordan as successor Managing Trustee to fill the vacancy created by Ms.

2 unchanged sentences

Jordan was appointed as a director and the president and chief executive officer of our Manager.

Jordan is an officer of RMR Inc., he and Messrs.

Lorenzini and Lanois are both officers of RMR LLC and Messrs.

Lorenzini and Lanois are also officers of our Manager.

In addition, each of our other officers is also an officer and/or employee of our Manager or RMR LLC.

Jordan is an officer of RMR Inc.

and an officer and employee of RMR LLC, and Messrs.

Lorenzini and Lanois are officers of RMR LLC and officers and employees of our Manager and/or RMR LLC.

Our Independent Trustees also serve as independent directors or independent trustees of other public companies to which RMR LLC or its subsidiaries provide management services.

Adam Portnoy serves as the chair of the boards of trustees and boards of directors of several of these public companies and as a managing director or managing trustee of all of these companies and other officers of RMR LLC, including Mr.

Adam Portnoy serves as the chair of the boards of trustees and boards of directors of several of these public companies and as a managing director or managing trustee of all of these companies.

Other officers of RMR LLC, including Mr.

Jordan and certain of our other officers and officers of our Manager, serve as managing trustees, managing directors or officers of certain of these companies.

2 unchanged sentences

See Note 9 for further information regarding our management agreement with our Manager.

Our Manager also provides management services to Tremont Mortgage Trust, or TRMT, a mortgage REIT that focuses primarily on originating and investing in first mortgage whole loans secured by middle market and transitional CRE.

Our Manager also provides management services to TRMT.

Tremont Mortgage Trust .

5 unchanged sentences

Harrington serves as one of our Independent Trustees and is also an independent trustee of TRMT, and Joseph L.

Morea, one of our independent trustees, previously served as an

Morea, one of our Independent Trustees, previously served as an independent trustee of TRMT;

Somers, one of our Independent Trustees, previously served as an independent trustee of TRMT.

See Note 1 for further information regarding the Merger and the other Transactions.

For further information about these and other such relationships and certain other related person transactions, refer to our definitive Proxy Statement for our 2021 Annual Meeting of Shareholders, to our Current Report on Form 8-K dated April 26, 2021 and to our joint proxy statement/prospectus that is included in our registration statement on Form S-4 filed with the SEC on June 9, 2021, as subsequently amended and declared effective on July 26, 2021, or the Form S-4.

RMR MORTGAGE TRUST

1 unchanged sentence

(dollars in thousands, except per share data)

independent trustee of TRMT;

Somers, one of our independent trustees, previously served as an independent trustee of TRMT.

See Note 1 for further information regarding the Merger Agreement.

We intend to elect to be taxed as a REIT under the Internal Revenue Code of 1986, as amended, or the IRC, effective for our 2020 taxable year.

3 unchanged sentences

Commitments and Contingencies

Unfunded Loan Commitments

As of March 31, 2021, we had unfunded commitments of $ 28,613 related to our loans held for investment that are not reflected in our condensed consolidated balance sheet.

These unfunded commitments had a weighted average initial maturity of 2.6 years as of March 31, 2021.

As of June 30, 2021, we had unfunded commitments of $ 38,291 related to our loans held for investment that are not reflected in our condensed consolidated balance sheet.

These unfunded commitments had a weighted average initial maturity of 2.5 years as of June 30, 2021.

See Note 5 for further information related to our loans held for investment.

Legal Proceedings and Claims

As of July 30, 2021, four lawsuits have been filed by purported shareholders of ours and TRMT in connection with the proposed Merger between us and TRMT.

The lawsuits were brought by the plaintiffs individually and are captioned Bishins v.

Tremont Mortgage Trust, et al.

1:21-cv-05435 (S.D.N.Y., filed June 21, 2021), Lee v.

Tremont Mortgage Trust, et al ., Case No.

1:21-cv-05618 (S.D.N.Y., filed June 29, 2021), Merewether v.

Tremont Mortgage Trust, et al ., Case No.

1:21-cv-13116 (D.N.J., filed June 29, 2021) and Parthenakis v.

RMR Mortgage Trust, et al ., Case No.

1:21-cv-05694 (S.D.N.Y, filed July 1, 2021), each, a complaint, and collectively, the complaints.

The Bishins , Lee and Merewether complaints name as defendants TRMT and the TRMT board of trustees.

The Bishins and Lee complaints also name RMRM as a defendant.

The Parthenakis complaint names as defendants us and our Board of Trustees.

The plaintiffs generally assert claims under Section 14(a) and Section 20(a) of the Exchange Act, contending that the registration statement on Form S-4 filed with the SEC on June 9, 2021, and serving as the preliminary joint proxy statement/prospectus, omitted or misrepresented material information regarding the proposed merger between us and TRMT.

The complaints generally seek injunctive relief preventing us and TRMT from consummating the Merger, rescission or rescissory damages, an award of plaintiffs’ costs, including attorneys’ fees and expenses, and such other relief the court may deem just and proper.

The Bishins complaint also seeks a declaration that the Merger Agreement was entered into in breach of the Bishins individual defendants’ fiduciary duties and is therefore unlawful and unenforceable.

The Lee and Merewether complaints additionally seek a declaration that the defendants violated Sections 14(a) and 20(a) of the Exchange Act and an order directing the defendants to disseminate a registration statement that does not contain any untrue or misleading statements of material fact.

The Parthenakis complaint also seeks an order requiring the Parthenakis defendants to account to plaintiffs for all damages suffered as a result of their wrongdoing.

We and our Board of Trustees deny that we have violated any laws or breached any duties to our shareholders and believe the claims asserted in the complaints are without merit.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 1. Financial Statements