What changed in this filing

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Item 2. Management’s Discussion and Analysis

2021-11-02 compared with 2021-08-03 · 170 added, 155 removed, 200 unchanged (62% of the section changed)

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As a result, we changed our SEC registration to a reporting company under the Exchange Act.

The issuance of the deregistration order enabled us to proceed with full implementation of our new business mandate to operate as a real estate investment trust that focuses primarily on originating and investing in first mortgage whole loans secured by middle market and transitional CRE.

The issuance of the deregistration order enabled us to proceed with full implementation of our new business mandate to operate as a real estate investment trust that focuses primarily on originating and investing in first mortgage loans secured by middle market and transitional CRE.

As a result of these changes to our business, we have not provided a comparison of our financial condition, any changes to financial conditions and results of operations to prior periods in which we were operating as a registered investment company because it would not be useful to our shareholders.

The discussion herein is principally limited to our operations during the period following the SEC’s issuance of the deregistration order on January 5, 2021 to June 30, 2021.

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

Under our new business strategy of originating and investing in first mortgage whole loans secured by middle market and transitional CRE, we define middle market CRE as commercial properties that have values up to $100,000 and transitional CRE as commercial properties subject to redevelopment or repositioning activities that are expected to increase the value of the properties.

The discussion herein is principally limited to our operations during the period following the SEC’s issuance of the deregistration order on January 5, 2021 to September 30, 2021.

Under our new business mandate of originating and investing in first mortgage loans secured by middle market and transitional CRE, we define middle market CRE as commercial properties that have values up to $100,000 and transitional CRE as commercial properties subject to redevelopment or repositioning activities that are expected to increase the value of the properties.

These assets are classified as loans held for investment in our condensed consolidated balance sheet.

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We also operate our business in a manner that permits us to maintain our exemption from registration under the 1940 Act.

As noted earlier in this Quarterly Report on Form 10-Q, on April 26, 2021, we entered into the Merger Agreement with TRMT pursuant to which we have agreed, on the terms and subject to the conditions set forth therein, to consummate the Merger and the other Transactions, subject to the satisfaction or waiver of certain conditions.

Pursuant to the terms and subject to the conditions set forth in the Merger Agreement, at the Effective Time, each of TRMT's common shares issued and outstanding immediately prior to the Effective Time will be converted into the right to receive the Exchange Ratio of one newly issued RMRM Common Share, 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 our common shares or the TRMT Common Shares prior to the Effective Time.

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

Pursuant to the Merger Agreement, effective upon consummation of the Merger, our Declaration of Trust will be amended to, among other things, change our name to "Seven Hills Realty Capital Trust” and provide our Board of Trustees authority to effect the conversion of us into a Maryland real estate investment trust without shareholder approval.

Following the consummation of the Merger, our common shares will continue to trade on Nasdaq under the new ticker symbol “SHRC”.

The completion of the Merger is subject to the satisfaction or waiver of various conditions, including, among other things:

(1) approval of the Merger and the other Transactions to which TRMT is a party by at least a majority of all the votes entitled to be cast by holders of its outstanding common shares at the special meeting of its shareholders scheduled to be held

on September 17, 2021 for that purpose;

(2) approval of the Merger Share Issuance by at least a majority of all the votes cast by the holders of our outstanding Common Shares entitled to vote at the special meeting of our shareholders scheduled to be held on September 17, 2021 for that purpose;

(3) the absence of any law or order by any governmental authority prohibiting, making illegal, enjoining or otherwise restricting, preventing or prohibiting the consummation of the Merger and the other Transactions;

(4) the effectiveness of the Form S-4 filed by us with the SEC to register our Common Shares to be issued in the Merger;

(5) Nasdaq’s approval of the listing of our Common Shares to be issued in the Merger, subject to official notice of issuance;

and (6) the receipt of certain tax opinions from each party’s tax counsel.

The Form S-4 was declared effective by the SEC on July 26, 2021.

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

Pending approval by our and TRMT shareholders at the special meetings of shareholders scheduled to be held on September 17, 2021, the Merger is expected to close during the third quarter of 2021.

The Merger Agreement provides that either party may terminate the agreement if the Merger is not consummated by December 31, 2021.

The Merger is intended to qualify as a tax-free reorganization under the IRC and to provide a tax-free exchange for TRMT's shareholders for our Common Share consideration they receive in the Merger, except that TRMT's shareholders generally may recognize gain or loss with respect to cash received in lieu of fractional shares of our Common Shares.

The Merger Agreement contains certain customary representations, warranties and covenants, including, among others, covenants with respect to the conduct of our and TRMT’s respective businesses prior to closing, subject to certain consent rights by us and TRMT, respectively, and covenants prohibiting us and TRMT from soliciting, providing information or entering into discussions concerning TRMT competing proposals (generally defined as proposals for 20% or more of the assets, revenues or earnings or equity of the applicable party), subject to certain exceptions.

The Merger Agreement contains certain termination rights for both us and TRMT, including that under specified circumstances, either party is entitled to terminate the Merger Agreement to accept a superior proposal (generally defined as proposals for 75% or more of the assets, revenues or earnings or equity of such party, which proposal such party’s board of trustees (or an authorized committee thereof) has determined in good faith, after consultation with outside financial advisors and outside legal counsel, (1) would, if consummated, result in a transaction that is more favorable to the shareholders of such party from a financial point of view than the Merger and the other Transactions, (2) for which the third party has demonstrated that the financing for such superior proposal is fully committed or is reasonably likely to be obtained, and (3) which is reasonably likely to receive all required approvals from any governmental authority and otherwise reasonably likely to be consummated on the terms proposed);

provided that TRMT may only terminate the Merger Agreement after it has held the special meeting of its shareholders scheduled to be held on September 17, 2021 for the purpose of approving the Merger.

Each party is required to pay the other party a termination fee of $2,156 plus the other party’s reasonable fees and expenses under certain circumstances related to such party’s change in recommendation, breach or termination in connection with a superior proposal.

Except with respect to the foregoing, all fees and expenses incurred in connection with the Merger and the other Transactions will be paid by the party incurring those expenses, except that we and TRMT will share equally any filing fees incurred in connection with the filing of the Form S-4 and the related joint proxy statement/prospectus.

The Merger, the Merger Share Issuance and the other Transactions and the terms thereof were evaluated, negotiated and recommended, as applicable, to each of our and TRMT’s board of trustees by special committees of our and TRMT’s board of trustees, respectively, each comprised solely of our and TRMT’s disinterested, independent trustees, respectively, and were separately unanimously approved and adopted by our and TRMT’s independent trustees and by our and TRMT’s board of trustees, with independent trustees unanimously approving the Merger, the Merger Share Issuance and the other Transactions, as applicable.

UBS Securities LLC acted as financial advisor to the special committee of our Board of Trustees and Citigroup Global Markets Inc.

acted as financial advisor to the special committee of TRMT's board of trustees.

For further information regarding the Merger and the other Transactions, see Notes 1, 9 and 10 to the Notes to Condensed Consolidated Financial Statements included in Part I, Item 1 of this Quarterly Report on Form 10-Q and “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Liquidity and Capital Resources—Our Investment and Financing Liquidity and Resources” of this Quarterly Report on Form 10-Q.

Merger with Tremont Mortgage Trust

As noted earlier in this Quarterly Report on Form 10-Q, on April 26, 2021, we and TRMT entered into the Merger Agreement, pursuant to which, on the terms and subject to the satisfaction or waiver of the conditions thereof, TRMT agreed to merge with and into us, with us continuing as the surviving entity in the merger.

The Merger was consummated and became effective at 4:01 p.m., Eastern Time, on September 30, 2021.

At the Effective Time, the separate existence of TRMT ceased.

Pursuant to the terms set forth in the Merger Agreement and the Letter Agreement, at the Effective Time, each one (1) issued and outstanding TRMT Common Shares was automatically converted into the right to receive 0.516 of one (1) of the SEVN Common Shares.

No fractional shares of SEVN Common Shares were issued in the Merger, and holders of shares of TRMT Common Shares received cash in lieu of any such fractional shares.

Pursuant to the Merger Agreement and the Letter Agreement, at the Effective Time, each outstanding unvested TRMT Common Share award under TRMT's equity compensation plan was converted into an award of SEVN Common Shares determined by multiplying the number of unvested TRMT Common Shares subject to such award by 0.516 (rounded down to the nearest whole number).

Such award will continue to be subject to the same vesting and other terms and conditions as were in effect.

At the Effective Time, we changed our name to "Seven Hills Realty Trust”.

The combined company continues to be managed by TRC, our Manager and TRMT’s manager (until TRMT ceased to exist), and our common shares continue to trade on Nasdaq under the new ticker symbol “SEVN.”

Since the Merger was effective after the close of trading on September 30, 2021, assets acquired and liabilities assumed from TRMT in the Merger are included in our condensed consolidated balance sheet as of September 30, 2021;

however, TRMT's results of operations are excluded from our condensed consolidated statement of operations for all periods presented.

For further information regarding the Merger, see the Notes to Condensed Consolidated Financial Statements included in Part I, Item 1 of this Quarterly Report on Form 10-Q and “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Liquidity and Capital Resources—Our Investment and Financing Liquidity and Resources” of this Quarterly Report on Form 10-Q.

COVID-19 Pandemic

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As a result, we are unable to determine what the ultimate impact will be on our borrowers’ and other stakeholders’ businesses, operations, financial results and financial position.

Book Value per Common Share

The table below calculates our book value per common share:

June 30, 2021

For further information and risks relating to the COVID-19 pandemic on us and our business, and the various actions our Manager has taken in response to the COVID-19 pandemic, see "Risk Factors" in the joint proxy statement/prospectus that is included in the registration statement on Form S-4, as subsequently amended and declared effective on July 26, 2021, and "Summary of Principal Risk Factors" included in our Current Report on Form 8-K filed on March 24, 2021.

Reconciliation of Book Value per Common Share to Adjusted Book Value per Common Share

The table below calculates our book value per common share and demonstrates how we calculate Adjusted Book Value per Common Share:

September 30, 2021

Shareholders' equity $ 236,649

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Book value per common share $ 16.32

Unaccreted purchase discount per common share 2.51

Adjusted Book Value per Common Share (1)

(1) Adjusted Book Value per Common Share is a non-GAAP financial measure that excludes the impact of the unaccreted purchase discount resulting from the excess fair value over the purchase price of the loans held for investment acquired in the Merger.

The purchase discount of $36,443 was allocated to each acquired loan held for investment and will be accreted into income over the remaining term of the respective loan held for investment.

See "Non-GAAP Financial Measures" included in the section captioned "Results of Operations" of this Quarterly Report on Form 10-Q for more information about Adjusted Book Value per Common Share.

Our Loan Portfolio

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

As of June 30, 2021

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

As of September 30, 2021

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

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$ 472,018 $ 92,863

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

Carrying value $ 434,474 $ 91,879

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(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 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.

(2) The principal balance at September 30, 2021 includes $96 of capitalized interest that does not reduce the amount of unfunded loan commitments and $204,692 of loans acquired in the Merger.

(3) 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.

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

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Loan Portfolio Details

The table below details our loan portfolio as of June 30, 2021:

The table below details our loan portfolio as of September 30, 2021:

Location Property Type Origination Date Committed Principal Amount Principal

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First mortgage loans

Louis, MO (4)

Office 12/19/2018 $ 29,500 $ 27,763 L + 3.25% L + 3.74% 12/19/2023 72 % 2

Atlanta, GA (4)

Hotel 12/21/2018 24,000 23,904 L + 3.25% L + 3.72% 12/21/2023 62 % 4

Coppell, TX (4)

Retail 02/05/2019 19,865 19,615 L + 3.50% L + 3.72% 02/12/2022 73 % 4

Omaha, NE (4)

Retail 06/14/2019 14,500 13,053 L + 3.65% L + 4.05% 06/14/2024 77 % 3

Yardley, PA (4)

Office 12/19/2019 14,900 14,265 L + 3.75% L + 4.47% 12/19/2024 75 % 4

Allentown, PA (4)

Industrial 01/24/2020 14,000 14,000 L + 3.50% L + 4.02% 01/24/2025 67 % 3

Dublin, OH (4)

Office 02/18/2020 22,820 21,735 L + 3.75% L + 4.82% 02/18/2023 33 % 2

Downers Grove, IL Office 09/25/2020 30,000 29,500 L + 4.25% L + 4.69% 11/25/2024 67 % 3

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Aurora, IL Office / Industrial 12/18/2020 16,500 14,710 L + 4.35% L + 5.04% 12/18/2024 73 % 3

Berkeley, CA Lab 12/30/2020 19,120 17,998 L + 4.35% L + 4.85% 12/30/2025 75 % 2

Miami, FL Office 01/19/2021 10,900 10,900 L + 4.50% L + 5.47% 01/19/2025 68 % 3

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Londonderry, NH Industrial 04/06/2021 39,240 34,323 L + 4.00% L + 4.62% 04/06/2026 73 % 3

Westminster, CO (4)

Office 05/24/2021 15,250 13,506 L + 3.75% L + 4.25% 05/24/2026 66 % 3

Plano, TX Office 07/01/2021 27,384 24,827 L + 4.75% L + 5.18% 07/01/2026 78 % 3

Portland, OR Multifamily 07/09/2021 19,688 19,688 L + 3.57% L + 3.97% 07/09/2026 75 % 3

Portland, OR (4)

Multifamily 07/30/2021 13,400 13,400 L + 3.57% L + 4.01% 07/30/2026 71 % 3

Seattle, WA Multifamily 08/16/2021 12,500 12,200 L + 3.55% L + 3.89% 08/16/2026 70 % 3

Dallas, TX (4)

Office 08/25/2021 50,000 43,450 L + 3.25% L + 3.64% 08/25/2026 72 % 3

Sandy Springs, GA Retail 09/23/2021 16,488 14,821 L + 3.75% L + 4.11% 09/23/2026 72 % 3

Total/weighted average $ 525,885 $ 472,018 L + 3.86% L + 4.41% 68 % 3.0

(1) 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) 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, 2021, we had $250,710 in aggregate loan commitments, consisting of a diverse portfolio, geographically and by property type, of nine first mortgage loans.

(4) These first mortgage loans were acquired in the Merger.

As of September 30, 2021, we had $525,885 in aggregate loan commitments, consisting of a diverse portfolio, geographically and by property type, of 22 first mortgage loans.

The impact from the COVID-19 pandemic has negatively impacted some of our borrowers’ business operations or tenants, particularly in the cases of our retail and hospitality collateral, which are some of the types of properties that have been most negatively impacted by the pandemic.

We expect that those negative impacts may continue and may apply to other borrowers and/or their tenants.

Further, although economic activity in the United States has improved significantly from the low points during the pandemic to date, certain industries have not recovered to their pre-pandemic positions.

Therefore, certain of our borrowers’ business plans will likely take longer to execute than initially expected and certain of our borrowers may be unable to pay their debt service obligation owed and due to us as currently scheduled.

As of September 30, 2021, we had three loans representing approximately 14% of the carrying value of our loan portfolio with a loan risk rating of “4” or “higher risk”.

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 continue to actively engage with our borrowers regarding their execution of the business plans for the underlying collateral, among other things.

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.

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

As of October 29, 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.

In October 2021, we originated a first mortgage loan of $24,750 to refinance a multi-tenant office building located in Carlsbad, CA.

This loan requires the borrower to pay interest at the floating rate of LIBOR plus a premium of 325 basis points per annum.

This floating rate loan includes an initial funding of $23,740 and a future funding allowance of $1,010 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 which was used 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 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.

We did not have any impaired loans, non-accrual loans or loans in default as of June 30, 2021;

We did not have any impaired loans, non-accrual loans or loans in default as of September 30, 2021;

thus, we did not record a reserve for loan loss as of that date.

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As a result, they may become unable to pay their debt service obligations owed and due to us, which may result in the impairment of those loans, and our recording loan loss reserves with respect to those loans and recording of any income with respect to those loans on a nonaccrual basis.

For further information regarding the risks associated with our loan portfolio, see the risk factors identified in our "Summary of Principal Risk Factors" included in our Current Report on Form 8-K filed on March 24, 2021.

For further information regarding the risks associated with our loan portfolio, see the risk factors identified in "Risk Factors" in the joint proxy statement/prospectus that is included in the registration statement on Form S-4, as subsequently amended and declared effective on July 26, 2021, and "Summary of Principal Risk Factors" included in our Current Report on Form 8-K filed on March 24, 2021.

Financing Activities

On February 18, 2021, one of our wholly owned subsidiaries entered into our Master Repurchase Agreement with UBS.

For further information regarding our Master Repurchase Agreement, see Note 6 to the Notes to Unaudited Condensed Consolidated Financial Statements included in Part I, Item 1 of this Quarterly Report on Form 10-Q.

The table below is an overview of our Master Repurchase Facility, which provided financing for our loans held for investment, as of June 30, 2021:

June 30, 2021 Maturity Date Principal Balance Unused Capacity Maximum Facility Size (1)

Collateral Principal Balance

Master Repurchase Facility 02/18/2024 $ 49,172 $ 143,883 $ 193,055 $ — $ 212,515

(1) 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 June 30, 2021 is $193,055.

The table below details our Master Repurchase Facility activities during the three months ended June 30, 2021:

Balance at March 31, 2021 $ —

On February 18, 2021, one of our wholly owned subsidiaries entered into our UBS Master Repurchase Agreement with UBS, and on September 30, 2021, in conjunction with the Merger, we assumed the Citibank Master Repurchase Facility, and the Citibank Master Repurchase Agreement was amended to, among other things, change the guarantor under the Citibank Master Repurchase Facility from TRMT to SEVN.

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

The table below is an overview of our Master Repurchase Facilities as of September 30, 2021:

Agreement Maturity Date Principal Balance Unused Capacity Maximum Facility Size Collateral Principal Balance

Citibank Master Repurchase Facility 11/06/2022 $ 128,962 $ 84,520 $ 213,482 $ 182,957

UBS Master Repurchase Facility 02/18/2024 87,383 104,617 192,000 134,749

$ 216,345 $ 189,137 $ 405,482 $ 317,706

The table below details our Master Repurchase Facilities activities during the three months ended September 30, 2021:

Balance at June 30, 2021 $ 48,775

Borrowings 48,543

Repayments (10,332)

Deferred fees (268)

Amortization of deferred fees 55

Balance at June 30, 2021 $ 48,775

The table below details our Master Repurchase Facility activities during the six months ended June 30, 2021:

Assumed in Merger 128,962

Balance at September 30, 2021 $ 215,735

The table below details our Master Repurchase Facilities activities during the nine months ended September 30, 2021:

Balance at December 31, 2020 $ —

Borrowings 97,715

Repayments (10,332)

Deferred fees (698)

Amortization of deferred fees 88

Balance at June 30, 2021 $ 48,775

As of June 30, 2021, outstanding advancements under our Master Repurchase Facility had a weighted average interest rate of LIBOR plus 205 basis points per annum, excluding associated fees and expenses.

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.

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

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

Assumed in Merger 128,962

Balance at September 30, 2021 $ 215,735

As of September 30, 2021, outstanding advancements under our Master Repurchase Facilities had a weighted average interest rate of LIBOR plus 198 basis points per annum, excluding associated fees and expenses.

As of September 30, 2021 and October 29, 2021, we had a $216,345 and a $223,584, respectively, aggregate outstanding principal balance under our Master Repurchase Facilities.

As of September 30, 2021, we were in compliance with all covenants and other terms under our Master Repurchase Agreements and our Guarantees.

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

As a result of the changes to our business, we have not provided a comparison of our financial statements to prior year periods in which we were operating as a registered investment company because it would not be useful to our shareholders.

We have provided a 2021 sequential quarter comparison which we believe may be useful to investors because we have operated as a mortgage REIT since January 5, 2021.

The discussion herein is principally limited to our operations during the period following the SEC's issuance of the deregistration order on January 5, 2021 to June 30, 2021.

Three Months Ended June 30, 2021 Compared to Three Months Ended March 31, 2021

We have provided a 2021 third and second sequential quarter comparison which we believe may be useful to investors because we have operated as a mortgage REIT since January 5, 2021.

The discussion herein is principally limited to our operations during the period following the SEC's issuance of the deregistration order on January 5, 2021 to September 30, 2021.

Three Months Ended September 30, 2021 Compared to Three Months Ended June 30, 2021

Three Months Ended

June 30, 2021 March 31, 2021 Change % Change

September 30, 2021 June 30, 2021 Change % Change

INCOME FROM INVESTMENTS:

Interest income from investments $ 4,510 $ 3,055 $ 1,455 47.6 %

interest and related expenses (192) — (192) n/m

interest and related expenses (488) (192) (296) 154.2 %

Income from investments, net 4,022 2,863 1,159 40.5 %

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Income before income tax benefit (expense) 2,509 1,153 1,356 117.6 %

Income tax benefit (expense) 7 (18) 25 (138.9 %)

Income tax benefit (expense) (25) 7 (32) n/m

Net income $ 2,484 $ 1,160 $ 1,324 114.1 %

Weighted average common shares outstanding 10,208 10,202 6 0.1 %

Net income per common share $ 0.11 $ 0.03 $ 0.08 266.7 %

Weighted average common shares outstanding - basic 10,263 10,208 55 0.5 %

Weighted average common shares outstanding - diluted 10,264 10,208 56 0.5 %

Net income per common share - basic and diluted $ 0.24 $ 0.11 $ 0.13 118.2 %

n/m - not meaningful

Interest income from investments .

The increase in interest income from investments was primarily the result of a full quarter of interest income from investments on two loan investments that were originated during the three months ended March 31, 2021 and the interest income from the origination of two loan investments during the three months ended June 30, 2021.

The increase in interest income from investments was primarily the result of a full quarter of interest income from investments on two loan investments that were originated during the three months ended June 30, 2021 and the interest income from the origination of four loan investments during the three months ended September 30, 2021.

Interest and related expenses.

The increase in interest and related expenses was primarily the result of advances made to us under our Master Repurchase Facility during the three months ended June 30, 2021.

The increase in interest and related expenses was primarily the result of advances made to us under our UBS Master Repurchase Facility during the three months ended September 30, 2021.

General and administrative expenses .

The increase in general and administrative expenses was primarily due to share-based compensation recognized as a result of trustee share grants awarded in May 2021, partially offset by a decrease in professional fees.

The decrease in general and administrative expenses was primarily due to share-based compensation recognized in the three months ended June 30, 2021 as a result of trustee share grants awarded in May and a decrease in professional services.

Reimbursement of shared services expenses.

Reimbursement of shared services expenses represents reimbursement of the costs for the services that our Manager arranges on our behalf from RMR LLC.

The decrease in reimbursement of shared services expenses was primarily the result of decreased usage of shared services from RMR LLC during the three months ended June 30, 2021.

The increase in reimbursement of shared services expenses was primarily the result of an increased usage of shared services from RMR LLC during the three months ended September 30, 2021.

Income tax benefit (expense).

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Non-GAAP Financial Measures

We present Distributable Earnings, which is considered a “non-GAAP financial measure” within the meaning of the applicable SEC rules.

We present Distributable Earnings and Adjusted Book Value per Common Share, which are considered “non-GAAP financial measures” within the meaning of the applicable SEC rules.

Distributable Earnings does not represent net income or cash generated from operating activities and should not be considered as an alternative to net income determined in accordance with GAAP or 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.

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therefore, our reported Distributable Earnings may not be comparable to the distributable earnings as reported by other companies.

We intend to elect to be taxed as a REIT under the IRC, effective for our 2020 taxable year.

In order to qualify 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 Adjusted Book Value per Common Share is a more meaningful measure of our capital adequacy than book value per common share because it excludes the unaccreted purchase discount resulting from the Merger that will be accreted into income over the remaining term of the respective loans acquired in the Merger.

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.

We elected to be taxed as a REIT under the IRC, effective for our 2020 taxable year.

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.

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Distributable Earnings are reduced for realized losses on loan investments when amounts are deemed uncollectable.

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

Three Months Ended September 30, 2021 Nine Months Ended September 30, 2021

Reconciliation of net income to Distributable Earnings:

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Distributable Earnings $ 2,484 $ 4,175

Weighted average common shares outstanding 10,208 10,205

Distributable Earnings per common share $ 0.13 $ 0.17

Weighted average common shares outstanding - basic 10,263 10,225

Weighted average common shares outstanding - diluted 10,264 10,225

Distributable Earnings per common share - basic and diluted $ 0.24 $ 0.41

Factors Affecting Operating Results

Our results of our 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 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 the risk factors identified in "Summary of Principal Risk Factors" included in our Current

Report on Form 8-K filed on March 24, 2021.

Credit Risk .

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Market Conditions.

The outbreak of the COVID-19 pandemic in the first quarter of 2020 led to a sharp decline in economic activity over the first half of 2020.

The closing of non-essential businesses, "shelter-in-place" orders, restrictions on travel, cancellations of events and gatherings and limitations on building occupancies implemented to stop or slow the spread of the virus had a substantial negative impact on the CRE market.

Many property owners granted lease forbearance to tenants unable or, in some cases, unwilling to make rent payments which, in turn, increased the number of loan forbearance requests by property owners.

In addition, volatility in the capital markets resulted in a substantial widening of credit spreads of commercial mortgage-backed securities, or CMBS, contributing to increased overall borrowing costs for banks and alternative lenders.

Further, uncertainty surrounding the depth and duration of the economic downturn resulted in a severe decline in overall CRE transaction volume, and the financial burdens resulting from margin calls imposed on lenders, as a result of increased borrowing costs and declining collateral values, and many lenders’ shift in focus to manage large volumes of forbearance requests from borrowers caused new loan originations to significantly decline.

The CRE debt markets began to rebound in the third quarter of 2020 and are continuing to stabilize.

CMBS credit spreads have declined such that newly issued AAA rated, investment grade bonds for conservatively underwritten loan pools with high quality collateral are trading at credit spreads less than those seen prior to the COVID-19 pandemic.

In addition, issuance of CRE collateralized loan obligations, or CLOs (financial instruments secured by a pool of loans and used by lenders as a source of funding), has increased while CLO credit spreads have declined, providing additional liquidity to alternative lenders, like us.

While CRE transaction volume has improved recently, it has not returned to the average levels experienced prior to the COVID-19 pandemic.

The decline in property transaction volume and increased liquidity available to lenders has caused greater competition among lenders, including banks and alternative lenders, like us, to fund new loans.

We believe that this increased competition amongst lenders, along with significant declines in the LIBOR and U.S.

treasury index rates, has benefited borrowers seeking loans to refinance high quality properties, particularly multifamily, industrial, life science or research and development/laboratory properties, that are either stabilized or near stabilization.

Alternative lenders, like us, can provide flexible, shorter term financing to borrowers that may not be seeking longer term financing options because of economic uncertainty caused by the COVID-19 pandemic.

However, despite the improvement of the securitization markets and the increase in lending activity, we believe challenges remain.

The hospitality and retail sectors are among those that have been most negatively impacted by the economic downturn related to the COVID-19 pandemic.

However, with reduced restrictions and increased vaccination rates in the United States, retail sales and leisure travel have experienced improvement during the second quarter of 2021, while business travel remains at levels significantly lower than prior to the COVID-19 pandemic.

It is unclear how consumer and travel habits will be impacted

over the long term during and after the COVID-19 pandemic;

if consumer and travel activity does not substantially rebound, we believe that this uncertainty will continue to burden these sectors and lenders with significant exposure to these property types will continue to face challenges.

It is still unclear how the shift to flexible work-from-home schedules will impact the office sector and demand for office space going forward.

As such, lenders will continue to face underwriting challenges with respect to assumptions related to new leasing, tenant renewal probabilities and occupancy rates for office properties, especially assets located in downtown or central business district markets.

As vaccination rates increase and companies re-evaluate their work-from-home policies, there should be increased clarity on the demand for office properties.

Multifamily properties are expected to continue to be a preferred asset class by most lenders and investors for the near term due to the stability of cash flows and the liquidity available from government sponsored enterprises, such as Fannie Mae or Freddie Mac;

however, it is unclear what the impact of the U.S.

Centers for Disease Control and Prevention moratorium on tenant evictions that expired on July 31, 2021 will have on the sector and how rent collections will be impacted.

Industrial properties continue to perform well and benefit from the shift in consumers’ behavior to increased levels of e-commerce, which accelerated during the COVID-19 pandemic.

Lastly, competition among lenders has caused alternative lenders, like us, to expand their loan portfolios to include certain asset types within these asset classes, such as data centers, manufactured housing, cold storage and self-storage, to achieve favorable yields on high quality properties that have been and may continue to be less susceptible to the impact of the COVID-19 pandemic.

The longer-term impact of the COVID-19 pandemic is still uncertain.

However, we believe that as the U.S.

economy continues to improve and returns to a more stable state, there will be significant opportunities for alternative lenders, like us, to provide creative, flexible debt capital for a wide array of circumstances and business plans.

After the initial market disruption resulting from the COVID-19 pandemic, the CRE debt markets began to rebound in the third quarter of 2020 and have since stabilized.

Increased vaccination rates, strong consumer demand, significant increases in dedicated capital to alternative lenders, along with accommodating fiscal and monetary policies, have resulted in strong economic growth through the first half of 2021, supporting the growth in overall CRE transaction volume.

Through the third quarter of 2021,CRE transaction volume is up over 50% compared to the same period in 2020 and is already on pace to exceed total 2019 volume.

CRE values have also risen considerably, not only compared to 2020, but also in relation to values from the third quarter of 2019.

This increase in CRE transaction activity and property values, combined with historically low interest rates have resulted in significant demand for CRE debt.

CRE debt securities issuance of both fixed rate

commercial mortgage backed securities, or CMBS, and floating rate CRE collateralized loan obligations, or CLOs, is on pace to exceed the record 2019 volumes.

Although debt and equity transaction volume has increased across all property types, the multifamily and industrial sectors remain the most coveted asset types amongst both lenders and investors.

Multifamily is expected to continue to be a preferred asset class due to the stability of cash flows and the abundance of debt capital available from government sponsored enterprises, such as Fannie Mae and Freddie Mac.

Multifamily properties comprise the majority of collateral for floating rate CRE CLO bond offerings and as a result, the competition among alternative lenders, like us, for loans secured by multifamily properties remains strong.

Furthermore, this competition translates into low borrowing costs for buyers and owners of multifamily properties seeking to acquire or implement value added business plans.

Investors’ interest in industrial properties, and in particular warehouse and distribution centers, continues to be strong as a result of the shift in consumers’ behavior to using increased levels of e-commerce, which has accelerated during the COVID-19 pandemic.

The hospitality, office and retail sectors are among those that have been most negatively impacted by the economic downturn related to the COVID-19 pandemic.

However, with the easing of government mandated restrictions and increased vaccination rates in the U.S., retail sales and leisure travel have experienced continued improvement during the third quarter of 2021, while business travel remains at levels significantly lower than prior to the onset of the pandemic.

It is unclear how consumer and travel habits will be impacted over the long term due to the pandemic.

These uncertainties may continue to burden these sectors, which would likely result in lenders with significant exposure to these property types continuing to face challenges.

As it relates to the office sector, it is not yet known how the shift to flexible work-from-home schedules will impact the demand for office space going forward.

As such, lenders will continue to face underwriting challenges with respect to assumptions related to new leasing, tenant renewal probabilities and occupancy rates for office properties, especially those assets located in urban core or central business district markets.

Increased competition among lenders for multifamily and industrial properties has caused alternative lenders, like us, to expand their loan portfolios to include real estate sectors, such as data centers, manufactured housing communities, cold storage and self storage, in order to achieve favorable yields on high quality properties that have been less susceptible to the impact of the COVID-19 pandemic.

Despite the strong performance of the debt capital markets in 2021, we believe challenges remain heading into 2022.

The longer-term impact of the COVID-19 pandemic and potential for future variants of the virus is still uncertain.

It is also unclear if recent signs of inflationary pressure are transitory in nature or not.

Furthermore, it is unclear how the transition away from LIBOR as the preferred index for pricing floating rate debt will affect liquidity and performance of the floating rate debt markets.

Despite these challenges, we believe that as the U.S.

economy continues to grow, there will continue to be significant opportunities for alternative lenders like us to provide creative, flexible debt capital for a wide array of circumstances and business plans.

Changes in Market Interest Rates .

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therefore, changes to income from investments, net, may not move proportionately with the increase or decrease in LIBOR.

Based on our loan portfolio at June 30, 2021, LIBOR was 0.08% and would have to exceed the floor established by any of our loans, which currently range from 0.50% to 1.00%, for us to realize an increase in interest income.

Based on our loan portfolio at September 30, 2021, LIBOR was 0.08% and would have to exceed the floor established by any of our loans, which currently range from 0.25% to 2.50%, for us to realize an increase in interest income.

LIBOR is currently expected to be phased out for new contracts by December 31, 2021 and for pre-existing contracts by June 30, 2023.

Our Master Repurchase Agreement, with UBS states that at such time as LIBOR shall no longer be made available or used for determining the interest rate of loans, the replacement base rate shall be an alternative benchmark rate (including any mathematical or other adjustments to the benchmark rate (if any) incorporated therein so that the resulting rate approximates LIBOR as close as reasonably possible) as determined by UBS under similar facilities for the financing of similar assets and is consistent with the pricing index of similarly situated counterparties.

Our Master Repurchase Facilities provide that at such time as LIBOR shall no longer be made available or used for determining the interest rate of loans, the replacement base rate shall be an alternative benchmark rate (including any mathematical or other adjustments to the benchmark rate (if any) incorporated therein so that the resulting rate approximates LIBOR as close as reasonably possible) as determined by UBS and Citibank under similar facilities for the financing of similar assets and is consistent with the pricing index of similarly situated counterparties.

We also currently expect that, as a result of any phase out of LIBOR, the interest rates under our loan agreements with borrowers would be amended to replace LIBOR for an alternative benchmark rate (which may include the secured overnight financing rate, or SOFR or another rate based on SOFR) that will approximate the existing interest rate as calculated in accordance with LIBOR.

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A larger portfolio, however, may result in increased expenses;

we may incur additional interest expense or other costs to finance our investments.

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.

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

Under the Merger Agreement, we have agreed to conduct our business in all material respects in the ordinary course of business consistent with past practice.

The Merger Agreement contains certain operating covenants that could affect our liquidity and capital resources, but we do not expect any material changes to our liquidity and capital resources prior to consummation of the Merger or, if applicable, the termination of the Merger Agreement, other than those which may occur in the ordinary course of our business.

See Note 1 to the Notes to Unaudited Condensed Consolidated Financial Statements included in Part I, Item 1 of this Quarterly Report on Form 10-Q for further information regarding the Merger Agreement.

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.

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To the extent that impact is significant, negative and sustained for an extended period, we expect that we may be challenged in accessing capital.

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 and any unused borrowing capacity, including under our Master Repurchase Facility or other repurchase agreements or financing arrangements, and may also include bank loans or public or private issuances of debt or equity securities.

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 and any unused borrowing capacity, including under our Master Repurchase Facilities or other repurchase agreements or financing arrangements, and may also include bank loans or public or private issuances of debt or equity securities.

We believe that these sources of funds will be sufficient to meet our operating and capital expenses and pay our debt service obligations owed and make any distributions to our shareholders for the next 12 months and for the foreseeable future, subject to the duration and severity of the COVID-19 pandemic and economic impact on our borrowers and their ability to fund their debt service obligations owed to us.

For further information regarding the risks associated with our loan portfolio, see the risk factors identified in "Summary of Principal Risk Factors" included in our Current Report on Form 8-K filed on March 24, 2021.

Pursuant to our Master Repurchase Facility, we may sell to, and later repurchase from, UBS the Purchased Assets.

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 or 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 asset.

Pursuant to our Master Repurchase Facilities, we may sell to, and later repurchase from, UBS and Citibank the purchased assets.

The initial purchase price paid by UBS or Citibank for 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 UBS’s and Citibank's approval.

Upon the repurchase of a purchased asset, we are required to pay UBS or Citibank the outstanding purchase price of the purchased asset, accrued interest and all accrued and unpaid expenses of UBS or Citibank relating to such purchased asset.

The pricing rate (or interest rate) relating to a purchased asset is equal to one month LIBOR plus a customary premium within a fixed range, determined by the debt yield and property type of the purchased asset’s real estate collateral.

For further information regarding our Master Repurchase Facility, see Note 6 to the Notes to Unaudited Condensed Consolidated Financial Statements included in Part I Item 1 of this Quarterly Report on Form 10-Q and "—Overview-Financing Activities" above.

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

For further information regarding our Master Repurchase Facilities, see Note 7 to the Notes to Unaudited Condensed Consolidated Financial Statements included in Part I Item 1 of this Quarterly Report on Form 10-Q and "—Overview-Financing Activities" above.

The following is a summary of our sources and uses of cash flows for the period presented:

Six Months Ended June 30, 2021

Nine Months Ended September 30, 2021

Cash, cash equivalents and restricted cash at beginning of period $ 103,564

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Cash, cash equivalents and restricted cash at end of period $ 19,847

During the six months ended June 30, 2021, our cash used in operating activities consisted of unfavorable changes in working capital, including the payment of transaction costs related to the Merger of $2,270.

During the six months ended June 30, 2021, our cash used in investing activities consisted of loan originations and additional fundings on our loans held for investment.

During the six months ended June 30, 2021, our cash provided by financing activities consisted of proceeds from our Master Repurchase Facility, partially offset by deferred financing cost payments related to our Master Repurchase Facility and distributions to our common shareholders.

During the nine months ended September 30, 2021, our cash provided by operating activities consisted of our net income, partially offset by unfavorable changes in working capital.

During the nine months ended September 30, 2021, our cash used in investing activities consisted of loan originations and additional fundings on our loans held for investment and payment of transaction costs related to the Merger, partially offset a loan repayment and cash assumed in the Merger during the third quarter of 2021.

During the nine months ended September 30, 2021, our cash provided by financing activities consisted of proceeds from our UBS Master Repurchase Facility, partially offset by deferred financing cost payments related to our Master Repurchase Facility and distributions to our common shareholders.

Distributions

During the six months ended June 30, 2021, we paid distributions to our common shareholders aggregating $1,530, or $0.15 per common share, using cash on hand.

For further information regarding distributions we paid during the six months ended June 30, 2021, see Note 6 to the Notes to Condensed Consolidated Financial Statements included in Part I, Item 1 of this Quarterly Report on Form 10-Q.

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 on July 26, 2021.

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

During the nine months ended September 30, 2021, we paid distributions to our common shareholders totaling $4,595 using cash on hand.

We declared a cash distribution of $0.15 in lieu of our regular quarterly distribution to our common shareholders for the quarter ending September 30, 2021, and in anticipation of the closing of the Merger.

No further dividends are expected to be declared in 2021 unless pursuant to applicable tax requirements.

For further information regarding distributions we paid during the nine months ended September 30, 2021, see Note 8 to the Notes to Condensed Consolidated Financial Statements included in Part I, Item 1 of this Quarterly Report on Form 10-Q.

Contractual Obligations and Commitments

Our contractual obligations and commitments as of June 30, 2021 were as follows:

Our contractual obligations and commitments as of September 30, 2021 were as follows:

Payment Due by Period

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$ 53,963 $ 4,613 $ 49,350 $ — $ —

Principal payments on Master Repurchase Facility (2)

Principal payments on Master Repurchase Facilities (2)

216,345 55,189 161,156 — —

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

(2) The allocation of outstanding advancements under our Master Repurchase Facility is based on the current maturity date of each loan investment with respect to which the individual borrowing relates.

(3) Projected interest payments are attributable only to our debt service obligations at existing rates as of June 30, 2021 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.

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

(3) Projected interest payments are attributable only to our debt service obligations at existing rates as of September 30, 2021 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.

Off-Balance Sheet Arrangements

As of June 30, 2021, we had no off-balance sheet arrangements that have had or that we expect would be reasonably likely to have a material effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources.

As of September 30, 2021, we had no off-balance sheet arrangements that have had or that we expect would be reasonably likely to have a material effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources.

Debt Covenants

Our principal debt obligations at June 30, 2021 were the outstanding balances under our Master Repurchase Facility.

Our Master Repurchase Agreement provides for acceleration of the date of repurchase of any then Purchased Assets and UBS’s liquidation of the Purchased Assets upon the occurrence and continuation of certain events of default, including a change of control of us, which includes our Manager ceasing to act as our sole manager or to be a wholly owned subsidiary of RMR LLC.

Our Master Repurchase Agreement also provides that upon the repurchase of any then Purchased Asset, we are required to pay UBS the outstanding purchase price of such Purchased Asset and accrued interest and any and all accrued and unpaid expenses of UBS relating to such Purchased Asset.

In connection with our Master Repurchase Agreement, we entered into 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.

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

Our Master Repurchase Agreement is structured with risk mitigation mechanisms, including a cash flow sweep, which would

allow UBS to control interest payments from our borrowers under our loans that are financed under our Master Repurchase Facility, 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 Facility.

As of June 30, 2021, we believe we were in compliance with all covenants and other terms under our Master Repurchase Agreement and, to date, UBS has not utilized any such risk mitigation mechanisms under our Master Repurchase Agreement.

Our principal debt obligations at September 30, 2021 were the outstanding balances under our Master Repurchase Facilities.

Our Master Repurchase Agreements provide for acceleration of the date of repurchase of any then purchased assets

and UBS’s or Citibank's liquidation of the purchased assets upon the occurrence and continuation of certain events of default, including a change of control of us, which includes our Manager ceasing to act as our sole manager or to be a wholly owned subsidiary of RMR LLC.

Our Master Repurchase Agreements also provide that upon the repurchase of any then purchased asset, we are required to pay UBS or Citibank the outstanding purchase price of such purchased asset and accrued interest and any and all accrued and unpaid expenses of UBS or Citibank relating to such purchased asset.

In connection with our Master Repurchase Agreements, we entered into our 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 and Citibank related to our Master Repurchase Agreements.

The Guarantees also require 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 and a minimum interest coverage ratio.

As of September 30, 2021, we had a $216,345 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 or Citibank, 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.

As of September 30, 2021, we were in compliance with all covenants and other terms under our Master Repurchase Agreements and, to date, UBS or Citibank has not utilized any such risk mitigation mechanisms under our Master Repurchase Agreements.

Related Person Transactions

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and others related to them.

For example, as noted earlier in this Quarterly Report on Form 10-Q, we entered into the Merger Agreement with TRMT pursuant to which we have agreed, on the terms and subject to the conditions set forth therein, to consummate the Merger and the other Transactions, subject to the satisfaction or waiver of certain conditions.

For example, as noted earlier in this Quarterly Report on Form 10-Q, TRMT merged with and into us effective September 30, 2021.

For further information about these and other such relationships and related person transactions, see Notes 1, 10 and 11 to the Notes to Unaudited Condensed Consolidated Financial Statements included in Part I, Item 1 of this Quarterly Report on Form 10-Q, our Current Report on Form 8-K dated April 26, 2021, Proxy Statement for our 2021 Annual Meeting of Shareholders, Form S-4 and our other filings with the SEC.

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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 2. Management’s Discussion and Analysis