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Item 1. Financial Statements

2022-04-27 compared with 2021-11-02 · 187 added, 558 removed, 211 unchanged (78% of the section changed)

1 unchanged sentence

SEVEN HILLS REALTY TRUST

CONDENSED CONSOLIDATED BALANCE SHEET

CONDENSED CONSOLIDATED BALANCE SHEETS

(dollars in thousands, except per share data)

September 30,

March 31, December 31,

Cash and cash equivalents $ 8,953 $ 26,197

1 unchanged sentence

Loans held for investment, net 622,710 570,780

Accrued interest receivable 1,611

Prepaid expenses and other assets 3,353 2,918

2 unchanged sentences

Accounts payable, accrued liabilities and deposits $ 967 $ 1,561

Master repurchase facilities, net 215,735

Secured financing facilities, net 367,679 339,627

Due to related persons 1,126 1,111

3 unchanged sentences

Common shares of beneficial interest, $ 0.001 par value per share;

unlimited number of shares authorized;

25,000,000 shares authorized;

14,597,079 shares issued and outstanding

4 unchanged sentences

Total liabilities and shareholders' equity $ 635,025 $ 599,993

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

SEVEN HILLS REALTY TRUST

CONSOLIDATED STATEMENT OF ASSETS AND LIABILITIES (Predecessor Basis)

(dollars in thousands, except per share data)

December 31, 2020

Cash and cash equivalents $ 103,314

Loans held for investment (cost $ 91,879 )

Restricted cash 250

Dividends and interest receivable 139

Prepaid expenses 345

Other assets 128

Total assets 196,055

Accrued income taxes 2,386

Accrued expenses and other liabilities 491

Advisory fee payable 141

Deferred revenue 82

Compliance and internal audit costs payable 31

Administrative fee payable 30

Total liabilities 3,161

Net assets attributable to common shares $ 192,894

Composition of net assets attributable to common shares

Common shares, $ 0.001 par value per share;

unlimited number of shares authorized

Additional paid in capital 192,884

Net assets attributable to common shares $ 192,894

Common shares outstanding 10,202

Net asset value per share attributable to common shares $ 18.91

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

See accompanying notes.

SEVEN HILLS REALTY TRUST

1 unchanged sentence

(amounts in thousands, except per share data)

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

Three Months Ended March 31,

INCOME FROM INVESTMENTS:

Interest income from investments $ 9,579 $ 2,001

Purchase discount accretion 5,935 —

interest and related expenses ( 1,737 ) —

4 unchanged sentences

Reimbursement of shared services expenses 560 326

Total expenses 1,513 4,856

Other transaction related costs 37 —

Total other expenses 2,606 1,633

Income before income tax expense 11,171 368

4 unchanged sentences

Net income per common share - basic and diluted $ 0.76 $ 0.03

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

SEVEN HILLS REALTY TRUST

CONSOLIDATED STATEMENTS OF OPERATIONS (Predecessor Basis)

(amounts in thousands)

Three Months Ended September 30, 2020 Nine Months Ended September 30, 2020

INVESTMENT INCOME:

Dividend income $ 2,951 $ 10,468

Interest income 51 74

Other income 18 43

Total investment income 3,020 10,585

Advisory 599 1,851

Compliance and internal audit 34 102

Shareholder reporting 58 93

Custodian 24 72

Administrative 25 73

Preferred share remarketing and auction fees 19 55

Trustees' fees and expenses 14 42

Total expenses before interest expense 955 2,773

Interest expense 215 1,066

Total expenses 1,170 3,839

Net investment income 1,850 6,746

Realized and change in unrealized gain (loss) on investments

Net realized gain on investments 6,887 7,808

Net change in unrealized losses on investments ( 7,244 ) ( 92,204 )

Net realized and change in unrealized losses on investments ( 357 ) ( 84,396 )

Net increase (decrease) in net assets before preferred distributions resulting from operations 1,493 ( 77,650 )

Distributions to preferred shareholders from net investment income ( 84 ) ( 297 )

Net increase (decrease) in net assets attributable to common shares resulting from operations $ 1,409 $ ( 77,947 )

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

See accompanying notes.

SEVEN HILLS REALTY TRUST

4 unchanged sentences

Shares Shares Capital Net Income Distributions Total

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

Net income — — — 350 — 350

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

Balance at December 31, 2021 14,597 $ 15 $ 237,624 $ 24,650 $ ( 4,595 ) $ 257,694

Share grants — — 82 — — 82

1 unchanged sentence

Distributions — — — — ( 3,649 ) ( 3,649 )

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

Issuance of shares 4,285 5 44,170 — — 44,175

Balance at March 31, 2022 14,597 $ 15 $ 237,706 $ 35,776 $ ( 8,244 ) $ 265,253

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

Net income — — — 350 — 350

Distributions — — — — ( 3,065 ) ( 3,065 )

Balance at September 30, 2021 14,502 $ 15 $ 237,235 $ 3,994 $ ( 4,595 ) $ 236,649

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

SEVEN HILLS REALTY TRUST

CONSOLIDATED STATEMENTS OF CHANGES IN NET ASSETS (Predecessor Basis)

(amounts in thousands)

Three Months Ended September 30, 2020 Nine Months Ended September 30, 2020

Increase (decrease) in net assets resulting from operations

Net investment income $ 1,850 $ 6,746

Net realized gain on investments 6,887 7,808

Net change in unrealized losses on investments ( 7,244 ) ( 92,204 )

Distributions to preferred shareholders ( 84 ) ( 297 )

Net increase (decrease) in net assets attributable to common shares resulting from operations 1,409 ( 77,947 )

Distributions to common shareholders from:

Distributable earnings ( 1,020 ) ( 5,407 )

Total distributions to common shareholders ( 1,020 ) ( 5,407 )

Total increase (decrease) in net assets attributable to common shares 389 ( 83,354 )

Net assets attributable to common shares

Beginning of period 171,583 255,326

End of period $ 171,972 $ 171,972

Common shares issued and repurchased

Shares outstanding, beginning of period 10,202 10,202

Shares outstanding, end of period 10,202 10,202

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

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

See accompanying notes.

SEVEN HILLS REALTY TRUST

CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(dollars in thousands)

Nine Months Ended September 30, 2021

Three Months Ended March 31,

CASH FLOWS FROM OPERATING ACTIVITIES:

Net income $ 11,126 $ 350

Adjustments to reconcile net income to net cash provided by operating activities:

Adjustments to reconcile net income to net cash provided by (used in) operating activities:

Accretion of purchase discount ( 5,935 ) —

Share based compensation 82 —

2 unchanged sentences

Changes in operating assets and liabilities:

Accrued interest receivable and interest advances ( 1,137 )

Prepaid expenses and other assets ( 520 ) ( 219 )

1 unchanged sentence

Due to related persons 15 553

Net cash provided by operating activities 1,297

Net cash provided by (used in) operating activities 3,085 ( 1,385 )

CASH FLOWS FROM INVESTING ACTIVITIES:

2 unchanged sentences

Repayment of loans held for investment 48,643 —

Payment of merger related costs ( 6,160 )

Cash assumed in merger 11,070

Net cash used in investing activities ( 44,612 ) ( 55,044 )

CASH FLOWS FROM FINANCING ACTIVITIES:

Proceeds from master repurchase facility 97,715

Repayments under master repurchase facility ( 10,332 )

Proceeds from secured financing facilities 130,160 —

Repayments under secured financing facilities ( 101,597 ) —

Payments of deferred financing costs ( 720 ) ( 76 )

Distributions ( 3,649 ) —

Net cash provided by financing activities 82,090

Net cash provided by (used in) financing activities 24,194 ( 76 )

Decrease in cash, cash equivalents and restricted cash ( 17,333 ) ( 56,505 )

4 unchanged sentences

Income taxes paid $ 47 $ 1,830

NON-CASH INVESTING ACTIVITIES

Loans held for investment acquired by issuance of common shares $ 169,150

Working capital net liabilities assumed $ 924

NON-CASH FINANCING ACTIVITIES

Assumption of master repurchase facility $ 128,962

Issuance of common shares $ 44,175

SEVEN HILLS REALTY TRUST

CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS (Continued)

(dollars in thousands)

SUPPLEMENTAL DISCLOSURE OF CASH, CASH EQUIVALENTS AND RESTRICTED CASH:

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 September 30, 2021

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

As of March 31,

Cash and cash equivalents $ 8,953 $ 46,839

Restricted cash 9 220

Total cash, cash equivalents and restricted cash shown in the condensed consolidated statement of cash flows $ 19,847

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

SEVEN HILLS REALTY TRUST

CONSOLIDATED STATEMENT OF CASH FLOWS (Predecessor Basis)

(dollars in thousands)

Nine Months Ended September 30, 2020

CASH FLOWS FROM OPERATING ACTIVITIES:

Net decrease in net assets before preferred distributions resulting from operations $ ( 77,650 )

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 ( 36,502 )

Proceeds from sales of long term investments 57,207

Net sales of short term investments 34,612

Origination of loans held for investment ( 29,192 )

Changes in assets and liabilities:

Dividends and interest receivable and other assets ( 3,066 )

Prepaid expenses 81

Interest payable ( 127 )

Payable for securities purchased ( 10 )

Advisory fee payable ( 63 )

Compliance and internal audit costs payable ( 48 )

Administrative fee payable 7,270

Accrued expenses and other liabilities 51

Net change in unrealized losses on investments 92,204

Net realized gain on investments and foreign currency transactions ( 7,808 )

Cash provided by operating activities 36,959

CASH FLOWS FROM FINANCING ACTIVITIES:

Distributions paid to preferred shareholders ( 297 )

Distributions paid to common shareholders ( 5,407 )

Cash used in financing activities ( 5,704 )

Increase in cash and cash equivalents 31,255

Cash and cash equivalents at beginning of period 7

Cash and cash equivalents at end of period $ 31,262

SUPPLEMENTAL DISCLOSURES:

Cash paid for interest and fees on borrowings $ 1,193

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

SEVEN HILLS REALTY TRUST

CONSOLIDATED PORTFOLIO OF INVESTMENTS - DECEMBER 31, 2020 (Predecessor Basis)

(dollars in thousands)

Location Property Type Committed Principal Amount Coupon Rate Origination Date Maturity Date Cost Value

MORTGAGE LOANS HELD FOR INVESTMENT 47.6 % (1)

Downers Grove, IL Office $ 30,000 L + 4.25 %

09/25/2020 11/25/2023 $ 29,232 $ 29,232

Durham, NC Lab $ 21,500 L + 4.35 %

12/17/2020 12/17/2023 13,281 13,281

Los Angeles, CA Retail $ 24,600 L + 4.25 %

12/17/2020 12/17/2022 17,029 17,029

Aurora, IL Office $ 16,500 L + 4.35 %

12/18/2020 12/18/2023 14,540 14,540

Berkeley, CA Lab $ 19,120 L + 4.35 %

12/30/2020 12/30/2023 17,797 17,797

Total Mortgage Loans - 47.6 %

$ 91,879 91,879

Other assets less liabilities - 52.4 % (2)

Net Assets attributable to common shareholders – 100.0 %

(1) The mortgage loans we invest in are not registered under the securities laws.

These mortgage loans are valued using Level III inputs as defined in the fair value hierarchy under U.S.

generally accepted accounting principles, or GAAP.

(2) Please refer to our Consolidated Statement of Assets and Liabilities for further information on these amounts.

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

SEVEN HILLS REALTY TRUST

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(dollars in thousands, except per share data)

Seven Hills Realty Trust (formerly known as 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, 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.

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, or REIT, that focuses primarily on originating and investing in first mortgage loans secured by middle market and transitional commercial real estate, or CRE, or the Business Change.

Merger with Tremont Mortgage Trust

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 agreed to merge with and into us, with us continuing as the surviving entity in the merger, or the Merger.

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

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

Pursuant to the terms set forth in the Merger Agreement and the Letter Agreement, dated as of August 26, 2021, by and between us and TRMT, or the Letter Agreement, at the Effective Time, each one (1) issued and outstanding common share of beneficial interest, $ 0.01 par value per share, of TRMT, or the TRMT Common Shares, was automatically converted into the right to receive 0.516 of one (1) of our common shares of beneficial interest, $ 0.001 par value per share or, 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 awarded 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 immediately prior to the Effective Time.

Effective as of the Effective Time, we changed our name to “Seven Hills Realty Trust.” The combined company continues to be managed by our manager and TRMT's manager (until TRMT ceased to exist), Tremont Realty Capital LLC (formerly known as Tremont Realty Advisors LLC), or TRC, or our Manager, and our common shares continue to trade on The Nasdaq Stock Market LLC, or Nasdaq, under the new ticker symbol “SEVN."

Upon consummation of the Merger, TRMT's separate management agreement with TRC was terminated and TRC waived its right to receive payment of the termination fee that would otherwise have been payable as a result of that termination.

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

The purchase price, based on the closing price of our common shares on September 30, 2021 of $ 10.31 per share, was approximately $ 169,150 , including the assumption of $ 128,962 outstanding under TRMT's master repurchase facility and closing costs of approximately $ 6,160 (excluding closing costs of $ 5,205 of which was paid by TRMT) and assumed working capital of $ 10,146 .

Following the Merger and the other transactions contemplated by the Merger Agreement, we assumed TRMT’s master repurchase facility and the portfolio of 10 loans with an aggregate principal balance of $ 204,692 .

Total cash, cash equivalents and restricted cash shown in the condensed consolidated statements of cash flows $ 8,962 $ 47,059

See accompanying notes.

SEVEN HILLS REALTY TRUST

2 unchanged sentences

Basis of Presentation

Prior to the Business Change, the Trust was accounted for as an investment company in accordance with the Financial Accounting Standards Board, or FASB, Accounting Standards Codification, or ASC, Topic 946, Financial Services - Investment Companies , or the Predecessor Basis.

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 and nine months ended September 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 nine months ended September 30, 2021.

The accompanying condensed consolidated financial statements are unaudited.

Certain information and disclosures required by U.S.

generally accepted accounting principles, or GAAP, for complete financial statements have been condensed or omitted.

We believe the disclosures made are adequate to make the information presented not misleading.

However, the accompanying condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and notes contained in our Annual Report on Form 10-K for the year ended December 31, 2021, or our 2021 Annual Report.

In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair statement of results for the interim periods have been included.

4 unchanged sentences

Significant estimates in the accompanying condensed consolidated financial statements include the fair value of financial instruments.

Summary of Significant Accounting Policies

Consolidation.

These condensed consolidated financial statements include the accounts of ours and our subsidiaries, all of which are 100 % owned directly by us.

All intercompany transactions and balances with or among our consolidated subsidiaries have been eliminated.

For each investment we make, we evaluate whether consolidation of the borrower's financial statements is required under GAAP.

GAAP addresses the application of consolidation principles to an investor with a controlling financial interest.

Cash, Cash Equivalents and Restricted Cash.

We consider highly liquid investments with original maturities of three months or less at the date of purchase to be cash equivalents.

Restricted cash primarily consists of deposit proceeds from potential borrowers when originating loans, which may be returned to the applicable borrower upon the closing of the loan, after deducting any transaction costs paid by us for the benefit of such borrower.

Loans Held for Investment.

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, accreted exit fees, unamortized purchase premiums and unaccreted purchase discounts, 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.

Loans that we have a plan to sell or liquidate are held at the lower of cost or fair value less cost to sell.

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.

Factors considered in these evaluations include, but are not limited to, property type, geographic and local market dynamics, physical condition, leasing and tenant profile, projected cash flow, risk of loss, current loan to value ratio, or LTV, debt yield, collateral performance, structure, exit plan and sponsorship.

Loans are rated “1” (lower risk) through “5” (impaired/loss likely) as defined below:

"1" lower risk—Criteria reflects a sponsor having a strong financial condition and low credit risk and our evaluation of management's experience;

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

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.

SEVEN HILLS REALTY TRUST

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(dollars in thousands, except per share data)

"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;

collateral performance expected to meet performance metrics included in the business plan or credit underwriting;

and the property having a moderate LTV.

New loans and loans with a limited history will typically be assigned this rating and will be adjusted to other levels from time to time as appropriate.

"4" higher risk—Criteria reflects a sponsor having a history of unresolved missed or late payments, maturity extensions and difficulty timely fulfilling its credit obligations and our evaluation of management's experience;

collateral performance failing to meet the business plan or credit underwriting;

the existence of a risk of default possibly leading to a loss and/or potential weaknesses that deserve management’s attention;

and/or the property having a high LTV.

"5" impaired/loss likely—Criteria reflects a very high risk of realizing a principal loss or having incurred a principal loss;

a sponsor having a history of default payments, trouble fulfilling its credit obligations, deeds in lieu of foreclosures, and/or bankruptcies;

collateral performance is significantly worse than performance metrics included in the business plan;

loan covenants or performance milestones having been breached or not attained;

timely exit via sale or refinancing being uncertain;

and/or the property having a very high LTV.

See Note 6 for further information regarding our current loan portfolio’s assessment under our internal risk rating policy.

Impairment occurs when it is deemed probable that we will not be able to collect all amounts due under a loan according to its contractual terms.

Impairment will then be measured based on the present value of the expected future cash flows discounted at the loan's contractual effective rate and the fair value of any available collateral, net of any costs we expect to incur to realize that value.

The determination of this estimated fair value involves judgments and assumptions based on objective and subjective factors.

Consideration will be given to various factors, such as business plans, property occupancies, tenant profiles, rental rates, operating expenses and borrowers’ repayment plans, among others, and will require significant judgments regarding certain circumstances, such as guarantees, if any.

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 September 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.

FASB ASC Topic 820-10, Fair Value Measurements and Disclosures , defines fair value, establishes a framework for measuring fair value in accordance with GAAP and expands the required disclosure regarding fair value measurements.

ASC Topic 820-10 defines fair value as the price that would be received for a financial instrument in a current sale, which assumes an orderly transaction between market participants on the measurement date.

We determine the estimated fair value of financial assets and liabilities using the three-tier fair value hierarchy established by GAAP, which prioritizes the inputs used in measuring fair value.

GAAP establishes market based or observable inputs as the preferred source of values followed by valuation models using management assumptions in the absence of market inputs.

The three levels of inputs that may be used to measure fair value are as follows:

Level I—Inputs include quoted prices in active markets for identical assets or liabilities that we have the ability to access.

Level II—Inputs include quoted prices in markets that are less active or inactive or for which all significant inputs are observable, either directly or indirectly.

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

Loan Deferred Fees.

Loan origination and exit fees are reflected in loans held for investment, net, in our condensed consolidated balance sheet and include fees charged to borrowers.

These fees are amortized and accreted, respectively, into interest income over the life of the related loans held for investment.

At September 30, 2021, we had approximately $ 1,101 loan origination and exit fees, net of amortization.

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 statements of

SEVEN HILLS REALTY 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 September 30, 2021, we had approximately $ 610 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 September 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.

Interest income related to our first mortgage loans secured by CRE will generally be accrued based on the coupon rates applied to the outstanding principal balance of such loans.

Fees, premiums and discounts, if any, will be amortized or accreted into interest income over the remaining lives of the loans using the effective interest method, as adjusted for any prepayments.

If a loan's interest or principal payments are not paid when due and there is uncertainty that such payments will be collected, the loan may be categorized as non-accrual and no interest will be recorded unless it is collected.

When all overdue payments are collected and, in our judgment, a loan is likely to remain current, it may be re-categorized as accrual.

For loans purchased at a discount, GAAP limits the yield that may be accreted (accretable yield) to the excess of the investor’s estimate of undiscounted expected principal, interest and other cash flows (cash flows expected at acquisition to be collected) over the investor’s initial investment in the loan.

GAAP also requires that the excess of contractual cash flows over cash flows expected to be collected (non-accretable difference) not be recognized as an adjustment of yield, loss accrual or valuation allowance.

Subsequent increases in cash flows expected to be collected from such loans generally will be recognized prospectively through adjustment of the loan’s yield over its remaining life.

Decreases in cash flows expected to be collected will be recorded as an impairment.

Securities Transactions and Investment Income.

Under the Predecessor Basis, we recorded securities transactions on a trade date basis, dividend income on the ex-dividend date and any non-cash dividends at the fair market value of the securities received.

We use the accrual method for recording interest income, including accretion of original issue discount, where applicable, and accretion of discount on short term investments and identified cost basis for realized gains and losses from securities transactions.

The difference between cost and fair value for investments we continue to hold is reflected as unrealized gain (loss), and any change in that amount from a prior period is reflected in the accompanying consolidated statement of operations.

Recent Accounting Pronouncements

In June 2016, the FASB issued Accounting Standards Update, or ASU, No.

In June 2016, the Financial Accounting Standards Board, or the FASB, issued Accounting Standards Update, or ASU, No.

2016-13, Financial Instruments - Credit Losses (Topic 326) :

7 unchanged sentences

2016-13, if material, will be presented as a cumulative-effect adjustment to equity as of the date of adoption.

Merger with Tremont Mortgage Trust

As described in Note 1, on September 30, 2021, we completed the Merger, pursuant to which we acquired TRMT's loans held for investment portfolio consisting of 10 loans with an aggregate principal balance of $ 204,692 .

The purchase price, based on the closing price of our common shares on September 30, 2021 of $ 10.31 per share, was $ 169,150 , including the assumption of $ 128,962 outstanding under TRMT's master repurchase facility and closing costs of approximately $ 6,160 (excluding closing costs of $ 5,205 of which was paid by TRMT) and assumed working capital of $ 10,146 .

SEVEN HILLS REALTY TRUST

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(dollars in thousands, except per share data)

The following table summarizes the consideration transferred and liabilities assumed as a result of the Merger:

TRMT common shares outstanding 8,303,629

Multiplied by the exchange ratio 0.516

TRMT fractional shares adjustment ( 73 )

SEVN Common Shares issued 4,284,600

Closing price of SEVN Common Shares on September 30, 2021 $ 10.31

Value of consideration transferred $ 44,174

Assumed working capital ( 10,146 )

Assumed master repurchase facility, principal balance 128,962

Merger related costs 6,160

Consideration transferred and liabilities assumed $ 169,150

After consideration of applicable factors pursuant to ASC Topic 805, Business Combinations , including the application of a screen test to evaluate if substantially all the fair value of TRMT as the acquired entity is concentrated in a single identifiable asset or group of similar identifiable assets, we have concluded that the Merger qualifies as an asset acquisition under GAAP.

Accordingly, SEVN accounted for the Merger as an asset acquisition, with Merger related costs capitalized as a component of the cost of the assets acquired and SEVN treated as the acquirer of TRMT.

The assets acquired and liabilities assumed were recorded at their relative fair values and added to our condensed consolidated balance sheet as of September 30, 2021.

The fair value of the loans acquired in the Merger exceeded the purchase price of the loans.

In accordance with GAAP, a purchase discount of $ 36,443 is recorded for the difference between the fair value and purchase price of the loans acquired.

The purchase discount will be allocated to each acquired TRMT loan and accreted into income over the remaining term of the respective loan.

The following table summarizes the purchase price allocation for the Merger:

Cash and cash equivalents $ 11,070

Loans held for investment, net 169,150

Accrued interest receivable 603

Prepaid expenses and other assets 31

Total assets 180,854

Accounts payable and other liabilities ( 901 )

Master repurchase facility, net ( 128,962 )

Due to related persons ( 657 )

Net assets acquired 50,334

Assumed working capital ( 10,146 )

Assumed master repurchase facility, principal balance 128,962

Consideration transferred and liabilities assumed $ 169,150

In March 2022, the FASB issued ASU No.

2022-02, Financial Instruments - Credit Losses (Topic 326):

Troubled Debt Restructurings and Vintage Disclosures , which eliminated the guidance for and recognitions of troubled debt restructurings for all entities that have adopted ASU No.

Instead, an entity must apply the loan refinancing and restructure guidance in Accounting Standards Codification, or ASC, Topic 310, Receivables (Topic 310), to determine whether a modification results in a new loan or continuation of an existing loan.

If a borrower is experiencing financial difficulty, enhanced disclosures are required.

2022-02 also amended the guidance on vintage disclosures to require disclosure of current period gross write-offs by year of origination.

We expect to adopt ASU No.

2022-02 prospectively on January 1, 2023, concurrently with the adoption of ASU No.

We are currently assessing the potential impact the adoption of ASU No.

2022-02 will have on our condensed consolidated financial statements.

Loans Held for Investment

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 loan portfolio prior to the Merger using cash on hand and advancements under our master repurchase facility with UBS AG, or UBS, or our UBS Master Repurchase Facility, and we acquired 10 first mortgage loans in the Merger.

See Note 7 for further information regarding our debt agreements.

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

We funded our loan portfolio using cash on hand and advancements under our secured financing facilities.

Additionally, we acquired the loan portfolio of Tremont Mortgage Trust, or TRMT, in the merger of TRMT with and into us on September 30, 2021, or the Merger, with our common shares.

See Note 4 for further information regarding our secured financing agreements.

SEVEN HILLS REALTY TRUST

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The table below provides 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)

The table below provides overall statistics for our loan portfolio as of March 31, 2022 and December 31, 2021:

As of March 31, 2022 As of December 31, 2021

Number of loans 27 26

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Principal balance $ 636,831 $ 590,590

$ 472,018 $ 92,863

Carrying value $ 622,710 $ 570,780

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5.10 % 5.08 %

Weighted average LIBOR floor 1.01 % 0.78 %

Weighted average floor 0.61 % 0.68 %

Weighted average maximum maturity (years) (3)

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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 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.

(2) All in yield represents the yield on a loan, including amortization of deferred fees over the initial term of the loan and excluding any purchase discount accretion.

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

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

The tables below represent our loan activities during the three months ended March 31, 2022 and 2021:

Principal Balance Deferred Fees and Other Items Carrying Value

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

Balance at December 31, 2021 $ 590,590 $ ( 19,810 ) $ 570,780

Additional funding 3,304 — 3,304

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Net amortization of deferred fees — 902 902

Loans acquired in Merger (1)

204,692 901 205,593

Purchase discount on loans acquired in Merger — ( 36,443 ) ( 36,443 )

Balance at September 30, 2021 (Successor Basis) $ 472,018 $ ( 37,544 ) $ 434,474

(1) Deferred fees and other items for loans acquired in Merger represent exit fees contractually due upon repayment of loans acquired in the Merger.

The table below represents our loan activities during the nine months ended September 30, 2021:

Net purchase discount accretion — 5,935 5,935

Balance at March 31, 2022 $ 636,831 $ ( 14,121 ) $ 622,710

Principal Balance Deferred Fees and Other Items Carrying Value

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

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

Additional funding 274 — 274

Originations 55,515 ( 675 ) 54,840

Repayments ( 18,433 ) — ( 18,433 )

Net amortization of deferred fees — 254 254

Loans acquired in Merger (1)

204,692 901 205,593

Purchase discount on loans acquired in Merger — ( 36,443 ) ( 36,443 )

Balance at September 30, 2021 (Successor Basis) $ 472,018 $ ( 37,544 ) $ 434,474

(1) Deferred fees and other items for loans acquired in Merger represent exit fees contractually due upon repayment of loans acquired in the Merger.

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

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In August 2021, we received $ 19,137 of repayment proceeds from the borrower on our loan that was used to refinance a three-building lab property located in Berkeley, CA, which included outstanding principal of $ 18,433 , a prepayment premium and exit fee of $ 621 , as well as accrued interest and our associated legal expenses of $ 83 .

In October 2021, we received $ 13,130 of repayment proceeds from the borrower on our loan that was used to finance a grocery anchored shopping center in Omaha, NE, which included outstanding principal of $ 13,053 , as well as accrued interest and our associated legal expenses of $ 76 .

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.

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

September 30, 2021

(Successor Basis) December 31, 2020

(Predecessor Basis)

The tables below detail the property type and geographic location of the properties securing the loans in our portfolio as of March 31, 2022 and December 31, 2021:

March 31, 2022 December 31, 2021

Property Type Number of Loans

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2 59,072 9 % 3 92,791 16 %

Hotel 1 19,765 5 % — — — %

27 $ 622,710 100 % 26 $ 570,780 100 %

(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.

September 30, 2021

(Successor Basis) December 31, 2020

(Predecessor Basis)

The carrying value of these loan investments 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 properties.

March 31, 2022 December 31, 2021

Geographic Location Number of Loans

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27 $ 622,710 100 % 26 $ 570,780 100 %

Loan Risk Ratings

Loan Credit Quality

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 higher the number, the greater the risk level.

SEVEN HILLS REALTY TRUST

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(dollars in thousands, except per share data)

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

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

See our 2021 Annual Report for more information regarding our loan risk ratings.

The following table allocates the carrying value of our loan portfolio at March 31, 2022 and December 31, 2021 based on our internal risk rating policy:

March 31, 2022 December 31, 2021

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

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27 $ 622,710 26 $ 570,780

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

The weighted average risk rating of our loans by carrying value was 2.8 and 2.9 as of March 31, 2022 and December 31, 2021, respectively.

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, some of which are 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.

Further, although economic activity in the U.S.

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 obligations owed and due to us as currently scheduled or at all.

As of September 30, 2021, we had three loans representing approximately 11 % of the carrying value of our loan portfolio with a loan risk rating of “4” or “higher risk".

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

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

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.

Debt Agreements

UBS Master Repurchase Facility

On February 18, 2021, one of our wholly owned subsidiaries entered into a master repurchase agreement, or the UBS 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 UBS Master Repurchase Agreement is February 18, 2024, unless extended or earlier terminated in accordance with the terms of the UBS Master Repurchase Agreement.

Pursuant to the UBS 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 UBS Master Repurchase Agreement).

Under our UBS 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.

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.

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

The weighted average interest rate for advancements under our UBS Master Repurchase Facility was 2.1 % and 2.2 % for the three and nine months ended September 30, 2021, respectively.

In connection with our UBS Master Repurchase Agreement, we entered into a guaranty, or the UBS 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 UBS Master Repurchase Agreement.

The UBS 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 March 31, 2022, we had two loans representing approximately 4 % of the carrying value of our loan portfolio with a loan risk rating of “4” or “higher risk".

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Our UBS 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 UBS 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 September 30, 2021, we were in compliance with all covenants and other terms under our UBS Master Repurchase Agreement and the UBS Guaranty.

We may enter into loan modifications that include among other changes, extensions of maturity dates, repurposing or required replenishment of reserves, increases or decreases in loan commitments and required pay downs of principal amounts outstanding.

Modifications that represent concessions to a borrower that is experiencing financial difficulties are classified as troubled debt restructurings and considered impaired.

In February 2022, we amended the agreement governing our loan secured by an office property located in Yardley, PA.

As part of this amendment, the loan commitment was increased by $ 1,600 , or the Additional Advance, and may be used to finance debt service costs and operating costs of the borrower and the initial maturity date was extended by one year to December 19, 2023.

For purposes of calculating interest due to us for this loan, the Additional Advance is deemed to be outstanding as of the date of the amendment, regardless of whether such amounts have been advanced, at the London Interbank Offered Rate, or LIBOR, or a replacement base rate determined by us if LIBOR is no longer available, plus 12.0 %.

As of March 31, 2022, this loan had a risk rating of 4.

The modification of this loan resulting from the amendment was determined not to be a troubled debt restructuring.

However, we accounted for this modification as an extinguishment in accordance with ASC Topic 310, Receivables , because the changes to the terms were determined to be more than minor.

As such, we recognized the related unaccreted purchase discount of $ 1,748 as interest income from investments in our condensed consolidated statements of income.

There were no other material modifications to our loan portfolio during the three months ended March 31, 2022.

We did not have any impaired loans or nonaccrual loans as of March 31, 2022 or December 31, 2021.

As of March 31, 2022 and April 25, 2022, 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.

Secured Financing Agreements

Our secured financing agreements at March 31, 2022 consisted of agreements that govern:

our master repurchase facility with UBS AG, or UBS, or the UBS Master Repurchase Facility;

our master repurchase facility with Citibank, N.A., or Citibank, or the Citibank Master Repurchase Facility;

our facility loan program with BMO Harris Bank N.A., or BMO, or the BMO Facility, and our master repurchase facility with Wells Fargo, National Association, or Wells Fargo, or the Wells Fargo Master Repurchase Facility.

We refer to the UBS Master Repurchase Facility, the Citibank Master Repurchase Facility and the Wells Fargo Master Repurchase Facility, collectively, as our Master Repurchase Facilities.

We refer to the Master Repurchase Facilities and the BMO Facility, collectively, as our Secured Financing Facilities.

See our 2021 Annual Report for more information regarding our Secured Financing Facilities.

Wells Fargo Master Repurchase Facility

On March 11, 2022, one of our wholly owned subsidiaries entered into a master repurchase and securities agreement with Wells Fargo, or the Wells Fargo Master Repurchase Agreement, for the Wells Fargo Master Repurchase Facility.

The Wells Fargo Master Repurchase Facility provides up to $ 125,000 in advances, with an option to increase the maximum facility amount to $ 250,000 , subject to certain terms and conditions.

We expect to use the Wells Fargo Master Repurchase Facility to finance the acquisition or origination of floating rate, commercial mortgage loans.

We refer to our loan investments that secure advances we receive under any of our Secured Financing Facilities as the purchased assets.

The expiration date of the Wells Fargo Master Repurchase Agreement is March 11, 2025, unless extended or earlier terminated in accordance with the terms of the Wells Fargo Master Repurchase Agreement.

Under the Wells Fargo Master Repurchase Facility, the initial purchase price paid by Wells Fargo for each purchased asset is up to 75 % or 80 %, depending on the property type of the purchased asset’s real estate collateral, of the lesser of the market value of the purchased asset or the unpaid principal balance of such purchased asset, and subject to Wells Fargo’s approval.

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

Interest on advancements under the Wells Fargo Master Repurchase Facility will be calculated at the Secured Overnight Financing Rate, or SOFR, plus a premium.

SEVEN HILLS REALTY TRUST

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(dollars in thousands, except per share data)

In connection with our Wells Fargo Master Repurchase Agreement, we entered into a guaranty, or the Wells Fargo 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 as any costs and expenses of Wells Fargo related to our Wells Fargo Master Repurchase Agreement.

The Wells Fargo Guaranty also contains financial covenants, which require us to maintain a minimum tangible net worth, a minimum liquidity and a minimum interest coverage ratio and to satisfy a total indebtedness to stockholders’ equity ratio.

Our Wells Fargo Master Repurchase Facility also contains margin maintenance provisions that provide Wells Fargo with the right, in certain circumstances related to a credit event, as defined in the Wells Fargo 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, Wells Fargo may require us to eliminate any margin deficit through a combination of purchased asset repurchases and cash transfers to Wells Fargo subject to Wells Fargo’s approval.

In addition, our Wells Fargo Master Repurchase Agreement provides for acceleration of the date of repurchase of the purchased assets by us and Wells Fargo’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 Tremont Realty Capital LLC, or Tremont, ceasing to act as our sole manager or to be a wholly owned subsidiary of The RMR Group LLC, or RMR.

Citibank Master Repurchase Facility

As previously mentioned in Note 5, as a result of the Merger, we assumed the master repurchase facility with Citibank N.A., or Citibank, or our Citibank Master Repurchase Facility.

TRMT had a master repurchase facility pursuant to a Master Repurchase Agreement, dated as of February 9, 2018, between TRMT CB Lender and Citibank N.A., or Citibank, or the Citibank Master Repurchase Agreement, as amended by the First Amendment to the Citibank Master Repurchase Agreement, dated as of November 6, 2018, and the Second Amendment to the Citibank Master Repurchase Agreement, dated as of October 30, 2020.

On September 30, 2021, as a result of the Merger, we became party to TRMT's master repurchase facility and entered into a guaranty, or the Citibank Guaranty, in favor of Citibank, pursuant to which, among other things, we replaced TRMT as guarantor of certain obligations of TRMT CB Lender LLC, a wholly owned subsidiary, or TRMT CB Lender, under the Citibank Master Repurchase Agreement.

In connection with the closing of the Merger, TRMT CB Lender also entered into a Third Amendment to the Citibank Master Repurchase Agreement and Fifth Amendment to Fee Agreement with Citibank.

Pursuant to the Citibank Master Repurchase Agreement, as amended, we may sell to Citibank and later repurchase, floating rate mortgage loans and other related assets.

The maximum amount of available advancements under the Citibank Master Repurchase Agreement, as amended, is $ 213,482 , and the expiration date thereof is November 6, 2022, unless extended or earlier terminated in accordance with the terms of the Citibank Master Repurchase Agreement.

Under our Citibank Master Repurchase Agreement, the initial purchase price paid by 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 Citibank’s approval.

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

The price differential (or interest rate) relating to a purchased asset is equal to LIBOR plus a premium of 200 to 250 basis points, determined by the yield of the purchased asset and the property type of the purchased asset’s real estate collateral.

Citibank has the discretion under our Citibank Master Repurchase Agreement to make advancements at margins higher than 75 % and at premiums of less than 200 basis points.

The Citibank Guaranty, which requires us to guarantee 25 % of our subsidiary's prompt and complete payment of the purchase price, purchase price differential and any costs and expenses of Citibank related to our Citibank Master Repurchase Agreement.

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

These maintenance provisions provide Citibank with the right, in certain circumstances related to a credit event, as defined in our Citibank Master Repurchase Agreement, to re-determine the value of purchased assets.

Where a decline in the value of such purchased assets has resulted in a margin deficit, Citibank may require us to eliminate any margin deficit through a combination of purchased asset repurchases and cash transfers to Citibank, subject to Citibank's approval.

As of September 30, 2021, we have not received a margin call under our Citibank Master Repurchase Agreement.

Our Citibank Master Repurchase Agreement also provides for acceleration of the date of repurchase of the purchased assets by us and 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 The RMR Group LLC, or RMR LLC.

As of September 30, 2021 , we were in compliance with all of the covenants and ot her terms under our Citibank Master Repurchase Agreement and the Citibank Guaranty.

We refer to the Citibank Master Repurchase Agreement and UBS Master Repurchase Agreement collectively as our Master Repurchase Agreements and the Citibank Guaranty and UBS Guaranty collectively as our Guarantees.

On March 15, 2022, we amended and restated our master repurchase agreement with Citibank, or the Citibank Master Repurchase Agreement.

The amended and restated Citibank Master Repurchase Agreement increased the maximum amount of available advancements under our Citibank Master Repurchase Facility to $ 215,000 , extended the stated maturity date to March 15, 2025, and made certain other changes to the agreement and related fee letter, including replacing LIBOR with SOFR, for interest rate calculations on advancements under the Citibank Master Repurchase Facility and modifying certain pricing terms.

On April 25, 2022, we amended our facility loan program agreement and the security agreement with BMO, or the BMO Loan Program Agreement, to increase the maximum principal amount available under our BMO Facility, from $ 100,000 to $ 150,000 .

The weighted average interest rate for advancements under our Citibank Master Repurchase Facility, BMO Facility and UBS Master Repurchase Facility were 2.1 %, 2.0 % and 2.1 %, respectively, for the quarter ended March 31, 2022.

As of March 31, 2022, we were in compliance with the covenants and other terms of the agreements that govern our Secured Financing Facilities.

As of March 31, 2022 and April 25, 2022, we had a $ 369,432 and a $ 378,905 , respectively, aggregate outstanding principal balance under our Secured Financing Facilities.

As of March 31, 2022, our outstanding borrowings under our Secured Financing Facilities had the following remaining maturities:

Principal Payments on

Secured Financing Facilities

2022 $ 31,448

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(dollars in thousands, except per share data)

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.

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

The table below summarizes our Secured Financing Facilities as of March 31, 2022 and December 31, 2021:

Debt Obligation

Weighted Average Collateral

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

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

Remaining Maturity (2) (years)

Principal Balance

UBS Master Repurchase Facility $ 192,000 $ 87,383 $ 86,773 L + 2.03 %

2.2 $ 134,749

Citibank Master Repurchase Facility 213,482 128,962 128,962 L + 1.94 %

$ 405,482 $ 216,345 $ 215,735 $ 317,706

March 31, 2022:

UBS Master Repurchase Facility $ 192,000 $ 127,278 $ 126,475 2.40 % 1.8 $ 192,044

Citibank Master Repurchase Facility 215,000 159,878 159,557 2.32 % 1.7 223,744

Wells Fargo Master Repurchase Facility 125,000 — — — 2.9 —

BMO Facility 100,000 82,276 81,647 2.16 % 2.8 109,701

Total/weighted average $ 632,000 $ 369,432 $ 367,679 2.32 % 1.9 $ 525,489

December 31, 2021:

UBS Master Repurchase Facility $ 192,000 $ 167,928 $ 167,024 2.09 % 2.0 $ 225,868

Citibank Master Repurchase Facility 213,482 161,825 161,724 2.03 % 0.7 222,129

BMO Facility 100,000 11,116 10,879 2.01 % 2.7 14,821

Total/weighted average $ 505,482 $ 340,869 $ 339,627 2.06 % 1.4 $ 462,818

(1) The weighted average coupon rate is determined using LIBOR or SOFR plus a spread ranging from 1.80 % to 2.30 %, as applicable, for the respective borrowings under our Secured Financing Facilities.

(2) 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 UBS Master Repurchase Facility and Citibank Master Repurchase Facility mature on February 18, 2024 and November 6, 2022, respectively.

For the three and nine months ended September 30, 2021, we recorded interest expense of $ 488 and $ 680 , respectively, related to our UBS Master Repurchase Facility and recorded $ 0 interest expense related to our Citibank Master Repurchase Facility.

For the three and nine months ended September 30, 2020, we recorded interest expense of $ 215 and $ 1,066 , 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.

As of March 31, 2022, our UBS Master Repurchase Facility, Citibank Master Repurchase Facility and Wells Fargo Master Repurchase Facility mature on February 18, 2024, March 15, 2025 and March 11, 2025, respectively.

Our BMO Facility matures at various dates based on the respective underlying loans held for investment.

Fair Value of Financial Instruments

ASC Topic 820, Fair Value Measurements , establishes a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value.

ASC Topic 820, Fair Value Measurement , establishes a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value.

The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets and liabilities (Level I) and the lowest priority to unobservable inputs (Level III).

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

As of September 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 September 30, 2021, the outstanding principal balance under our Master Repurchase Facilities approximated the fair value, as interest was based on floating rates of 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 Facilities 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 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 and outstanding principal balances under our Secured Financing Facilities by using Level III inputs, including discounted cash flow analyses and currently prevailing market terms as of the measurement date, determined by significant unobservable market inputs, which include holding periods, discount rates based on loan to value ratio, or 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 current base interest.

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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:

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

March 31, 2022 December 31, 2021

Carrying Value Fair Value Carrying Value Fair Value

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Financial liabilities

Master Repurchase Facilities $ 215,735 $ 216,552 — —

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

Secured Financing Facilities $ 367,679 $ 369,140 $ 339,627 $ 341,679

There were no transfers of financial assets or liabilities within the fair value hierarchy during the three months ended March 31, 2022.

Shareholders' Equity

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 Nasdaq on the date of award.

The common shares awarded to our Trustees vest immediately.

The common shares awarded to our officers and other employees of our Manager and of RMR LLC vest in five equal annual installments beginning on the date of award.

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

We recognize any share forfeitures as they occur.

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

On October 1, 2021, we awarded to each of our then six Trustees 3,000 of our common shares, valued at $ 10.41 per common share, the closing price of our common shares on Nasdaq that day.

Also on October 1, 2021, we awarded under our equity compensation plan an aggregate of 83,000 of our common shares, valued at $ 10.41 per share, the closing price of our common shares on Nasdaq that day, to our officers and certain other employees of our Manager and of RMR LLC.

On October 5, 2021, we purchased 5,349 of our common shares from certain of our officers and certain former and current officers and employees of our Manager and of RMR LLC in satisfaction of tax withholding and payment obligations in connection with the vesting of awards of our common shares, valued at $ 10.32 per share, the closing price of our common shares on Nasdaq that day.

The aggregate value of common shares purchased was $ 55 .

Distributions

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

For the three months ended March 31, 2022, we declared and paid a distribution to common shareholders, using cash on hand, as follows:

Record Date Payment Date Distribution per Share Total Distribution

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

July 26, 2021 August 19, 2021 0.15 1,532

September 7, 2021 (1)

September 29, 2021 0.15 1,533

$ 0.45 $ 4,595

(1) 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.

SEVEN HILLS REALTY TRUST

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(dollars in thousands, except per share data)

Management Agreement with our Manager

January 24, 2022 February 17, 2022 $ 0.25 $ 3,649

On April 14, 2022, we declared a quarterly distribution of $ 0.25 per common share, or $ 3,649 , to shareholders of record on April 25, 2022.

We expect to pay this distribution on May 19, 2022, using cash on hand.

Management Agreement with Tremont

We have no employees.

The personnel and various services we require to operate our business are provided to us by our Manager, pursuant to a management agreement, which provides for the day to day management of our operations by our Manager, subject to the oversight and direction of our Board of Trustees.

Prior Agreements with RMR Advisors

Administration Agreement.

Prior to its merger with our Manager on January 6, 2021, RMR Advisors LLC, or RMR Advisors, performed administrative functions for us pursuant to an administration agreement with us.

RMR Advisors was also a party to a subadministration agreement with State Street Bank and Trust Company, or State Street, to perform substantially all fund accounting and other administrative services for us.

Under the administration agreement, RMR Advisors was entitled to reimbursement of the cost of providing administrative services.

On January 6, 2021, RMR Advisors merged with and into our Manager, with our Manager being the surviving entity, and our Manager assumed the administration agreement with us and the subadministration agreement with State Street.

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

We incurred administration service fees of $ 25 and $ 73 for the three and nine months ended September 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.

Prior to January 5, 2021, RMR Advisors provided us with a continuous investment program, made day to day investment decisions and generally managed our business affairs in accordance with our investment objectives and policies as a registered investment company pursuant to an investment advisory agreement.

The investment advisory agreement was terminated on January 5, 2021 with our deregistration as an investment company.

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 $ 599 and $ 1,851 for the three and nine months ended September 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 $ 102 for the three and nine months ended September 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.

The annual base management fee payable quarterly ( 0.375 % per quarter) in arrears to TRC by us is equal to 1.5 % of our “Equity,” as defined under our management agreement.

For purposes of calculating the base management fee for September 30, 2021, we included the net book value of TRMT as acquired by us in the Merger when calculating “Equity.” We recognized base management fees of $ 731 and $ 2,145 for the three and nine months ended September 30, 2021, respectively.

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 adopted by us.

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

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

Some of these overhead, professional and other services are provided by RMR LLC, pursuant to a shared services agreement between our Manager and RMR LLC.

These reimbursements include an allocation of the cost of personnel employed by RMR LLC and our share of RMR LLC’s costs for providing our internal audit function.

The personnel and various services we require to operate our business are provided to us by Tremont, pursuant to a management agreement, which provides for the day to day management of our operations by Tremont, subject to the oversight and direction of our Board of Trustees.

We pay Tremont an annual base management fee payable quarterly ( 0.375 % per quarter) in arrears equal to 1.5 % of our “Equity,” as defined under our management agreement.

We recognized base management fees of $ 1,063 for the three months ended March 31, 2022 and base management and advisory fees of $ 737 for the three months ended March 31, 2021.

Pursuant to the terms of our management agreement, management incentive fees became payable by us beginning with the quarter ended June 30, 2021, subject to Tremont earning those fees in accordance with the management agreement.

We did no t incur any management incentive fees for the three months ended March 31, 2022.

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

Some of these overhead, professional and other services are provided by RMR, pursuant to a shared services agreement between Tremont and RMR.

These reimbursements include an allocation of the cost of personnel employed by RMR and our share of RMR's costs for providing our internal audit function.

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

We incurred shared services costs of $ 385 and $ 1,049 and payable to our Manager for the three and nine months ended September 30, 2021, respectively.

We incurred shared services costs of $ 634 and $ 352 payable to Tremont for the three months ended March 31, 2022 and March 31, 2021, respectively.

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

In connection with the Merger, TRMT terminated its management agreement with TRC, and TRC waived its right to receive payment of the termination fees that would have otherwise resulted due to the Merger.

In consideration of this waiver, we agreed that, effective upon consummation of the Merger and the termination of TRMT's management agreement with TRC, certain of the expenses TRC had paid pursuant to its management agreement with TRMT will be included in the “Termination

In connection with the Merger, TRMT terminated its management agreement with Tremont, and Tremont waived its right to receive payment of the termination fees that would have otherwise resulted due to the Merger.

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

See our 2021 Annual Report for further information regarding this waiver and change to the "Termination Fee" and the Merger.

SEVEN HILLS REALTY TRUST

1 unchanged sentence

(dollars in thousands, except per share data)

Fee” under and as defined in our existing management agreement with TRC.

See Note 1 for further information regarding this waiver and change to the "Termination Fee" and the Merger.

Related Person Transactions

We have relationships and historical and continuing transactions with our Manager, RMR LLC, The RMR Group Inc., or RMR Inc., and others related to them, including other companies to which RMR LLC or its subsidiaries provide management services and some of which have trustees, directors or officers who are also our Trustees or officers.

Our Manager is a subsidiary of RMR LLC, which is a majority owned subsidiary of RMR Inc., and RMR Inc.

is the managing member of RMR LLC.

RMR LLC provides certain shared services to our Manager that are applicable to us, and we reimburse our Manager or pay RMR LLC for the amounts our Manager or RMR LLC pays for those services.

We have relationships and historical and continuing transactions with Tremont, RMR, The RMR Group Inc., or RMR Inc., and others related to them, including other companies to which RMR or its subsidiaries provide management services and some of which have trustees, directors or officers who are also our Trustees or officers.

Tremont is a subsidiary of RMR, which is a majority owned subsidiary of RMR Inc., and RMR Inc.

is the managing member of RMR.

RMR provides certain shared services to Tremont that are applicable to us, and we reimburse Tremont or pay RMR for the amounts Tremont or RMR pays for those services.

One of our Managing Trustees and Chair of our Board of Trustees, Adam D.

Portnoy, is the sole trustee, an officer and the controlling shareholder of ABP Trust, which is the controlling shareholder of RMR Inc., and he is also a director of 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 of Trustees appointed Thomas J.

Lorenzini as our President and G.

Douglas Lanois as our Chief Financial Officer and Treasurer.

Lorenzini and Mr.

Lanois succeeded Fernando Diaz and Brian E.

Donley, respectively, who each resigned from our Company, effective January 5, 2021.

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

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.

Clark’s resignation.

Also effective January 1, 2021, Mr.

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

Portnoy, is the sole trustee, an officer and the controlling shareholder of ABP Trust, which is the controlling shareholder of RMR Inc., and he is also a director of Tremont, the chair of the board of directors, a managing director, the president and chief executive officer of RMR Inc., and an officer and employee of RMR.

Our other Managing Trustee, Matthew P.

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.

Portnoy serves as the chair of the boards of trustees and boards of directors and as a managing director or managing trustee of those 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.

and an officer and employee of RMR, and our executive officers are officers of RMR and officers and employees of Tremont and/or RMR.

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

Portnoy serves as the chair of the boards and as a managing director or managing trustee of those companies.

Other officers of RMR and Tremont, serve as managing trustees, managing directors or officers of certain of these companies.

Our Manager, Tremont Realty Capital LLC.

We have a management agreement with our Manager to provide management services to us.

See Note 10 for further information regarding our management agreement with our Manager.

Our Manager also provided management services to TRMT until the Merger.

We have a management agreement with Tremont to provide management services to us.

See Note 7 for further information regarding our management agreement with Tremont.

Tremont also provided management services to TRMT until the Merger.

Tremont Mortgage Trust.

As described further in Note 1, TRMT merged with and into us as of the Effective Time.

TRMT merged with and into us on September 30, 2021.

Prior to the Merger, Adam D.

3 unchanged sentences

Douglas Lanois, our Chief Financial Officer and Treasurer, also served as chief financial officer and treasurer of TRMT.

Morea, one of our Independent Trustees, previously served as an independent trustee of TRMT, and Jeffrey P.

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

Effective as of the Effective Time, John L.

Harrington resigned from our Board of Trustees served as one of our Independent Trustees;

he 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, 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, and to our Current Report on Form 8-K dated October 4, 2021.

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

Three of our Independent Trustees, William A.

Lamkin, Joseph L.

Morea and Jeffrey P.

Somers, previously served as independent trustees of TRMT.

In addition, our former Independent Trustee, John L.

Harrington, also previously served as an independent trustee of TRMT and he resigned both trusteeships effective as of the effective time of the Merger.

See our 2021 Annual Report 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 2022 Annual Meeting of Shareholders and to our 2021 Annual Report.

We have elected to be taxed as a real estate investment trust, or REIT, under the Internal Revenue Code of 1986, as amended, or the IRC.

Accordingly, we generally are not, and will not be, subject to U.S.

2 unchanged sentences

Weighted Average Common Shares

We calculate basic EPS by dividing net income by the weighted average number of common shares outstanding during the relevant period.

We calculate diluted EPS using the more dilutive of the two class method or the treasury stock method.

We calculate net income per common share - basic, using the two class method, by dividing net income by the weighted average number of common shares outstanding during the period.

We calculate net income per common share - diluted using the more dilutive of the two class or treasury stock method.

Unvested share awards and the related impact on earnings are considered when calculating net income per common share - basic and net income per common share - diluted.

SEVEN HILLS REALTY TRUST

1 unchanged sentence

(dollars in thousands, except per share data)

Unvested share awards and other potentially dilutive common share issuances, and the related impact on earnings, are considered when calculating diluted net income per share.

The table below provides a reconciliation of the weighted average number of common shares used in the calculation of basic and diluted net income per share (amounts in thousands):

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

Weighted average common shares for basic net income per share 10,263 10,225

The table below provides a reconciliation of the weighted average number of common shares used in the calculations of net income per common share (amounts in thousands):

For the Three Months Ended March 31,

Weighted average common shares for net income per common share - basic 14,505 10,202

Effect of dilutive securities:

unvested share awards 14 —

Weighted average common shares for diluted net income per share 10,264 10,225

Weighted average common shares for net income per common share - diluted 14,519 10,202

Commitments and Contingencies

Unfunded Loan Commitments

As of September 30, 2021, we had unfunded loan commitments of $ 53,963 related to our loans held for investment that are not reflected in our condensed consolidated balance sheet.

These unfunded loan commitments had a weighted average initial maturity of 1.9 years as of September 30, 2021.

As of March 31, 2022, we had unfunded loan commitments of $ 47,812 related to our loans held for investment that are not reflected in our condensed consolidated balance sheets.

These unfunded loan commitments had a weighted average initial maturity of 2.1 years as of March 31, 2022.

See Note 3 for further information related to our loans held for investment.

Secured Borrowings

As of September 30, 2021, we had an aggregate of $ 216,345 in principal amount outstanding under our Master Repurchase Facilities with a weighted average life to maturity of 1.3 years.

See Note 7 for further information regarding our secured debt agreements.

Legal Proceedings and Claims

As of September 30, 2021, eight lawsuits had been filed by purported shareholders of ours (then, RMR Mortgage Trust, or RMRM) 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) Parthenakis v.

RMR Mortgage Trust, et al ., Case No.

1:21-cv-05694 (S.D.N.Y, filed July 1, 2021);

Tremont Mortgage Trust, et al ., Case No.

1:21-cv-0748 (S.D.N.Y., filed September 3, 2021), Finger v.

Tremont Mortgage Trust, et al.

1:21-cv-07421 (S.D.N.Y., filed September 3, 2021);

Tremont Mortgage Trust, et al.

2:21-cv-03970 (S.D.N.Y., filed September 3, 2021);

and Wilson v.

Tremont Mortgage Trust, et al.

1:21-cv-07446 (S.D.N.Y., filed September 6, 2021), each, a complaint, and collectively, the complaints.

The Bishins , Lee, Merewether, Carlisle , Finger , Whitfield and Wilson complaints named as defendants TRMT and the TRMT board of trustees.

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

The Parthenakis complaint named as defendants RMRM and RMRM's Board of Trustees.

The plaintiffs generally asserted claims under Section 14(a) and Section 20(a) of the Exchange Act, contending that the registration statement on Form S-4, 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 sought 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 sought 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, Merewether, Wilson , Finger and Whitfield complaints additionally sought a declaration that the defendants violated Sections 14(a) and 20(a) of the Exchange Act.

The Lee, Merewether , Wilson and Whitfield complaints sought 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 sought an order requiring the Parthenakis defendants to account to plaintiffs for all damages suffered as a result of their wrongdoing.

On September 27, 2021, plaintiff in the Merewether action filed a notice of voluntary dismissal.

On October 12, 2021, plaintiffs in the Lee , Finger , Carlisle , and Wilson actions each filed a notice of voluntary dismissal.

On October 12, 2021, plaintiff in the Whitfield action filed a notice of voluntary dismissal and the court entered an order dismissing the case.

On October 14, 2021,

SEVEN HILLS REALTY TRUST

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(dollars in thousands, except per share data)

the plaintiff in the Bishins action filed a notice of voluntary dismissal.

On October 15, 2021, plaintiff in the Parthenakis action filed a notice of voluntary dismissal.

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