What changed in this filing

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Item 1. Financial Statements

2022-10-26 compared with 2022-07-27 · 127 added, 77 removed, 359 unchanged (36% of the section changed)

3 unchanged sentences

(dollars in thousands, except per share data)

June 30, December 31,

September 30, December 31,

Cash and cash equivalents $ 76,371 $ 26,197

21 unchanged sentences

(amounts in thousands, except per share data)

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

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

2022 2021 2022 2021

11 unchanged sentences

Income before income taxes 5,199 2,509 20,987 4,030

Income tax (expense) benefit ( 39 ) 7 ( 84 ) ( 11 )

Income tax expense ( 23 ) ( 25 ) ( 107 ) ( 36 )

Net income $ 5,176 $ 2,484 $ 20,880 $ 3,994

Weighted average common shares outstanding - basic and diluted 14,521 10,208 14,514 10,205

Weighted average common shares outstanding - basic 14,551 10,263 14,526 10,225

Weighted average common shares outstanding - diluted 14,551 10,264 14,526 10,225

Net income per common share - basic and diluted $ 0.35 $ 0.24 $ 1.43 $ 0.39

16 unchanged sentences

Balance at June 30, 2022 14,638 15 238,254 40,354 ( 11,893 ) 266,730

Share grants 85 — 259 — — 259

Share repurchases ( 9 ) — ( 96 ) — — ( 96 )

Net income — — — 5,176 — 5,176

Distributions — — — — ( 3,660 ) ( 3,660 )

Balance at September 30, 2022 14,714 $ 15 $ 238,417 $ 45,530 $ ( 15,553 ) $ 268,409

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

5 unchanged sentences

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

Net income — — — 2,484 — 2,484

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

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

See accompanying notes.

2 unchanged sentences

(dollars in thousands)

Six Months Ended June 30,

Nine Months Ended September 30,

CASH FLOWS FROM OPERATING ACTIVITIES:

Net income $ 20,880 $ 3,994

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

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

Accretion of purchase discount ( 9,167 ) —

6 unchanged sentences

Due to related persons 657 916

Net cash provided by (used in) operating activities 6,307 ( 2,093 )

Net cash provided by operating activities 9,963 1,297

CASH FLOWS FROM INVESTING ACTIVITIES:

2 unchanged sentences

Repayment of loans held for investment 79,490 18,433

Payment of merger related costs — ( 6,160 )

Cash assumed in merger — 11,070

Net cash used in investing activities ( 111,870 ) ( 167,104 )

3 unchanged sentences

Payments of deferred financing costs ( 1,859 ) ( 698 )

Repurchase of common shares ( 96 ) —

Distributions ( 10,958 ) ( 4,595 )

3 unchanged sentences

Cash, cash equivalents and restricted cash at end of period $ 76,437 $ 19,847

SEVEN HILLS REALTY TRUST

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)

(dollars in thousands)

Nine Months Ended September 30,

SUPPLEMENTAL DISCLOSURES:

1 unchanged sentence

Income taxes paid $ 92 $ 2,477

NON-CASH INVESTING ACTIVITIES

Loans held for investment acquired by issuance of common shares $ — $ 162,990

Working capital net liabilities assumed $ — $ 924

NON-CASH FINANCING ACTIVITIES

Assumption of master repurchase facility $ — $ 128,962

Issuance of common shares $ — $ 44,175

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 sheets to the amounts shown in the condensed consolidated statements of cash flows:

As of June 30,

As of September 30,

Cash and cash equivalents $ 76,371 $ 19,298

25 unchanged sentences

The amount of the allowance for credit losses established as a result of the adoption will be presented as a cumulative-effect adjustment to reduce equity as of the date of adoption.

We are currently assessing the amount of the allowance for credit losses that will be established as a result of the adoption of ASU No.

While we are currently evaluating the impact ASU No.

2016-13 will have on our condensed consolidated financial statements, we expect that the adoption will result in an increased amount of provisions for potential loan losses and for such provisions to be recognized earlier in the credit cycle.

We currently do not have any provisions for loan losses recorded in our condensed consolidated financial statements.

In March 2022, the FASB issued ASU No.

6 unchanged sentences

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

As of June 30, 2022, we have not recognized any troubled debt restructurings and do not expect the adoption of ASU No.

As of September 30, 2022, we have not recognized any troubled debt restructurings and do not expect the adoption of ASU No.

2022-02 to have a material impact on our condensed consolidated financial statements.

7 unchanged sentences

(dollars in thousands, except per share data)

The table below provides overall statistics for our loan portfolio as of June 30, 2022 and December 31, 2021:

As of June 30, 2022 As of December 31, 2021

The table below provides overall statistics for our loan portfolio as of September 30, 2022 and December 31, 2021:

As of September 30, 2022 As of December 31, 2021

Number of loans 28 26

13 unchanged sentences

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

The tables below represent our loan activities during the three months ended June 30, 2022 and 2021:

The tables below represent our loan activities during the three months ended September 30, 2022 and 2021:

Principal Balance Deferred Fees and Other Items Carrying Value

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

Balance at June 30, 2022 $ 682,285 $ ( 12,100 ) $ 670,185

Additional funding 4,267 — 4,267

3 unchanged sentences

Net purchase discount accretion — 1,596 1,596

Balance at June 30, 2022 $ 682,285 $ ( 12,100 ) $ 670,185

Balance at September 30, 2022 $ 705,460 $ ( 10,306 ) $ 695,154

Principal Balance Deferred Fees and Other Items Carrying Value

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

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

Additional funding 1,710 — 1,710

Originations 71,534 ( 800 ) 70,734

Repayments ( 18,433 ) — ( 18,433 )

Net amortization of deferred fees — 571 571

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

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 $ 472,018 $ ( 37,544 ) $ 434,474

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

SEVEN HILLS REALTY TRUST

1 unchanged sentence

(dollars in thousands, except per share data)

The tables below represent our loan activities during the six months ended June 30, 2022 and 2021:

The tables below represent our loan activities during the nine months ended September 30, 2022 and 2021:

Principal Balance Deferred Fees and Other Items Carrying Value

5 unchanged sentences

Net purchase discount accretion — 9,167 9,167

Balance at June 30, 2022 $ 682,285 $ ( 12,100 ) $ 670,185

Balance at September 30, 2022 $ 705,460 $ ( 10,306 ) $ 695,154

Principal Balance Deferred Fees and Other Items Carrying Value

2 unchanged sentences

Originations 190,219 ( 2,230 ) 187,989

Repayments ( 18,433 ) — ( 18,433 )

Net amortization of deferred fees — 1,212 1,212

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

The tables below detail the property type and geographic location of the properties securing the loans in our portfolio as of June 30, 2022 and December 31, 2021:

June 30, 2022 December 31, 2021

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 $ 472,018 $ ( 37,544 ) $ 434,474

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

The tables below detail the property type and geographic location of the properties securing the loans in our portfolio as of September 30, 2022 and December 31, 2021:

September 30, 2022 December 31, 2021

Property Type Number of Loans

12 unchanged sentences

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.

June 30, 2022 December 31, 2021

September 30, 2022 December 31, 2021

Geographic Location Number of Loans

13 unchanged sentences

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 June 30, 2022 and December 31, 2021 based on our internal risk rating policy:

June 30, 2022 December 31, 2021

The table below allocates the carrying value of our loan portfolio at September 30, 2022 and December 31, 2021 based on our internal risk rating policy:

September 30, 2022 December 31, 2021

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

4 unchanged sentences

28 $ 695,154 26 $ 570,780

The weighted average risk rating of our loans by carrying value was 2.7 and 2.9 as of June 30, 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 certain of our office and retail 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 U.S.

has improved significantly from the low points during the pandemic to date, certain industries have not recovered to their pre-pandemic positions, and current inflationary pressures and the possibility that the U.S.

economy may now be in, or will soon enter into, a recession or downturn may amplify those, or introduce additional, negative impacts.

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 June 30, 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".

The weighted average risk rating of our loans by carrying value was 2.9 as of September 30, 2022 and December 31, 2021, respectively.

Certain of our borrowers' business operations or tenants, particularly certain office and retail properties, were negatively impacted by the COVID-19 pandemic and continue to be impacted by market conditions that arose or intensified during or in response to the pandemic and have continued.

Current inflationary pressures, rising interest rates, supply chain issues and the possibility that the U.S.

economy is now in, or may soon enter, a recession could amplify those negative impacts.

Therefore, certain of our borrowers’ business plans will likely take longer to execute than initially expected, and as a result, 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, 2022, we had four loans representing approximately 15 % of the carrying value of our loan portfolio with a loan risk rating of “4” or “higher risk".

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.

3 unchanged sentences

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 June 30, 2022, this loan had a risk rating of 4 and an outstanding principal balance of $ 14,972 .

As of September 30, 2022, this loan had a risk rating of 4 and an outstanding principal balance of $ 15,251 .

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

1 unchanged sentence

As such, we recognized the related unaccreted purchase discount of $ 1,748 as interest income from investments in our condensed consolidated statements of income during the first quarter of 2022.

There were no other material modifications to our loan portfolio during the six months ended June 30, 2022.

We did not have any impaired loans or nonaccrual loans as of June 30, 2022 or December 31, 2021.

As of June 30, 2022 and July 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.

There were no other material modifications to our loan portfolio during the nine months ended September 30, 2022.

We did not have any impaired loans or nonaccrual loans as of September 30, 2022 or December 31, 2021.

As of September 30, 2022 and October 24, 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.

In October 2022, we received $ 22,483 of loan repayment proceeds for an unlevered loan investment secured by a retail property located in Los Angeles, CA.

SEVEN HILLS REALTY TRUST

2 unchanged sentences

Secured Financing Agreements

Our secured financing agreements at June 30, 2022 consisted of agreements that govern:

Our secured financing agreements at September 30, 2022 consisted of agreements that govern:

our master repurchase facility with Wells Fargo, National Association, or Wells Fargo, or the Wells Fargo Master Repurchase Facility;

12 unchanged sentences

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.

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

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.

13 unchanged sentences

The amended and restated UBS Master Repurchase Agreement, which was effective March 9, 2022, made certain changes to the agreement and related fee letter, including replacing LIBOR with SOFR for interest rate calculations on advancements under the UBS Master Repurchase Facility and modifying certain pricing terms.

As of June 30, 2022, we were in compliance with the covenants and other terms of the agreements that govern our Secured Financing Facilities.

As of June 30, 2022 and July 25, 2022, we had a $ 455,044 and a $ 469,810 , respectively, aggregate outstanding principal balance under our Secured Financing Facilities.

As of June 30, 2022, our outstanding borrowings under our Secured Financing Facilities had the following remaining maturities:

Principal Payments on

As of September 30, 2022, we were in compliance with the covenants and other terms of the agreements that govern our Secured Financing Facilities.

As of September 30, 2022 and October 24, 2022, we had a $ 505,831 aggregate outstanding principal balance under our Secured Financing Facilities.

As of September 30, 2022, our outstanding borrowings under our Secured Financing Facilities had the following remaining maturities:

Year Principal Payments on

Secured Financing Facilities

1 unchanged sentence

2026 and thereafter —

SEVEN HILLS REALTY TRUST

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(dollars in thousands, except per share data)

The table below summarizes our Secured Financing Facilities as of June 30, 2022 and December 31, 2021:

The table below summarizes our Secured Financing Facilities as of September 30, 2022 and December 31, 2021:

Debt Obligation

3 unchanged sentences

Principal Balance

June 30, 2022:

September 30, 2022:

Citibank Master Repurchase Facility $ 215,000 $ 160,206 $ 159,935 4.86 % 1.3 $ 220,192

UBS Master Repurchase Facility 192,000 167,094 166,423 5.06 % 1.5 226,082

Wells Fargo Master Repurchase Facility 125,000 67,427 66,694 3.34 % 2.7 88,446

BMO Facility 150,000 111,105 110,399 4.73 % 2.5 148,476

Wells Fargo Master Repurchase Facility 125,000 67,426 66,757 4.83 % 2.4 88,649

Total/Weighted Average $ 682,000 $ 505,831 $ 503,514 4.89 % 1.7 $ 683,399

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

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

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

1 unchanged sentence

(1) The weighted average coupon rate is determined using LIBOR or SOFR plus a spread ranging from 1.80 % to 2.51 %, as applicable, for the respective borrowings under our Secured Financing Facilities as of the applicable date.

(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.

As of June 30, 2022, our Citibank Master Repurchase Facility, UBS Master Repurchase Facility and Wells Fargo Master Repurchase Facility mature on March 15, 2025, February 18, 2024 and March 11, 2025, respectively.

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

As of September 30, 2022, our Citibank Master Repurchase Facility, UBS Master Repurchase Facility and Wells Fargo Master Repurchase Facility mature on March 15, 2025, February 18, 2024 and March 11, 2025, respectively.

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

SEVEN HILLS REALTY TRUST

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(dollars in thousands, except per share data)

Fair Value of Financial Instruments

5 unchanged sentences

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.

SEVEN HILLS REALTY TRUST

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(dollars in thousands, except per share data)

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

June 30, 2022 December 31, 2021

September 30, 2022 December 31, 2021

Carrying Value Fair Value Carrying Value Fair Value

3 unchanged sentences

Secured Financing Facilities $ 503,514 $ 503,402 $ 339,627 $ 341,679

There were no transfers of financial assets or liabilities within the fair value hierarchy during the six months ended June 30, 2022.

There were no transfers of financial assets or liabilities within the fair value hierarchy during the nine months ended September 30, 2022.

Shareholders' Equity

2 unchanged sentences

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

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

The common shares that we award to our Trustees as trustee compensation vest immediately.

The awards of common shares that we award to our officers and other employees of Tremont and of RMR vest in five equal annual installments beginning on the date of award.

2 unchanged sentences

On May 26, 2022, in accordance with our Trustee compensation arrangements, we awarded to each of our seven Trustees 6,000 of our common shares, valued at $ 10.66 per common share, the closing price of our common shares on the Nasdaq that day.

On September 14, 2022, we awarded an aggregate of 85,000 of our common shares, valued at $ 10.10 per share, the closing price of our common shares on Nasdaq that day, to our officers and certain other employees of Tremont and of RMR.

On September 19, 2022, we purchased 9,440 of our common shares from certain of our current and former officers and employees of Tremont and/or RMR in satisfaction of tax withholding and payment obligations in connection with the vesting of awards of our common shares, valued at $ 10.15 per share, the closing price of our common shares on Nasdaq that day.

The aggregate value of common shares purchased was $ 96 .

SEVEN HILLS REALTY TRUST

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(dollars in thousands, except per share data)

Distributions

For the six months ended June 30, 2022, we declared and paid a distribution to common shareholders, using cash on hand, as follows:

For the nine months ended September 30, 2022, we declared and paid regular quarterly distributions to common shareholders, using cash on hand, as follows:

Record Date Payment Date Distribution per Share Total Distribution

1 unchanged sentence

April 25, 2022 May 19, 2022 0.25 3,649

July 25, 2022 August 18, 2022 0.25 3,660

$ 0.75 $ 10,958

On July 14, 2022, we declared a quarterly distribution of $ 0.25 per common share, or $ 3,660 , to shareholders of record on July 25, 2022.

We expect to pay this distribution on August 18, 2022, using cash on hand.

On October 13, 2022, we declared a quarterly distribution of $ 0.25 per common share, or $ 3,677 , to shareholders of record on October 24, 2022.

We expect to pay this distribution on or about November 17, 2022, using cash on hand.

Management Agreement with Tremont

2 unchanged sentences

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 and $ 721 for the three months ended June 30, 2022 and 2021, respectively, and $ 2,126 and $ 1,414 for the six months ended June 30, 2022 and 2021, respectively.

We recognized base management fees of $ 1,064 and $ 731 for the three months ended September 30, 2022 and 2021, respectively, and $ 3,190 and $ 2,145 for the nine months ended September 30, 2022 and 2021, respectively.

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 and six months ended June 30, 2022 and 2021.

SEVEN HILLS REALTY TRUST

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(dollars in thousands, except per share data)

We did no t incur any management incentive fees for the three and nine months ended September 30, 2022 and 2021.

Tremont, and not us, is responsible for the costs of its employees who provide services to us, unless any such payment or reimbursement is specifically approved by a majority of our Independent Trustees, is a shared services cost or relates to awards made under any equity compensation plan adopted by us.

3 unchanged sentences

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

We incurred shared services costs of $ 514 and $ 312 payable to Tremont for the three months ended June 30, 2022 and 2021, respectively, and $ 1,148 and $ 664 for the six months ended June 30, 2022 and 2021, respectively.

We incurred shared services costs of $ 594 and $ 385 payable to Tremont for the three months ended September 30, 2022 and 2021, respectively, and $ 1,742 and $ 1,049 for the nine months ended September 30, 2022 and 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.

2 unchanged sentences

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

SEVEN HILLS REALTY TRUST

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(dollars in thousands, except per share data)

Related Person Transactions

4 unchanged sentences

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 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.

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 and the president and chief executive officer of RMR Inc., and an officer and employee of RMR.

Our other Managing Trustee, Matthew P.

1 unchanged sentence

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

See Note 6 for information relating to the awards of our common shares we made in September 2022 to our officers and certain other employees of Tremont and/or RMR and common shares we purchased from certain of our current and former officers and employees of Tremont and/or RMR in satisfaction of tax withholding and payment obligations in connection with the vesting of awards of our common shares.

We include amounts recognized as expense for awards of our common shares to our officers and employees of Tremont and/or RMR in general and administrative expenses in our condensed consolidated statements of operations.

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.

6 unchanged sentences

On May 11, 2022, Tremont purchased 882,407 of our common shares from Diane Portnoy, the mother of Adam D.

Tremont paid an aggregate purchase price of $ 9,469 for these shares, which represents a per share price based upon the average of the 90 day volume weighted average closing price per share and the 90 day straight average closing price per share of our common shares.

As of June 30, 2022, Tremont owned 1,708,058 of our common shares, and Mr.

Tremont paid an aggregate purchase price of $ 9,469 for these shares.

As of September 30, 2022, Tremont owned 1,708,058 of our common shares, and Mr.

Portnoy beneficially owned (including through Tremont) 13.4 % of our outstanding common shares.

5 unchanged sentences

Lorenzini, our President, also served as president of TRMT, and G.

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

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

Three of our Independent Trustees, William A.

6 unchanged sentences

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.

SEVEN HILLS REALTY TRUST

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(dollars in thousands, except per share data)

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.

6 unchanged sentences

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.

For both the three and six months ended June 30, 2022 and 2021, the weighted averages shares - diluted was equal to the weighted average shares - basic.

SEVEN HILLS REALTY TRUST

NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(dollars in thousands, except per share data)

The calculation of basic and diluted earnings per shares is as follows (amounts in thousands, except per share data):

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

2022 2021 2022 2021

Net income $ 5,176 $ 2,484 $ 20,880 $ 3,994

Income attributable to unvested participating securities ( 33 ) — ( 133 ) —

Net income used in calculating net income per common share $ 5,143 $ 2,484 $ 20,747 $ 3,994

Weighted average common shares outstanding - basic 14,551 10,263 14,526 10,225

Effect of dilutive securities:

unvested share awards — 1 — —

Weighted average common shares outstanding - diluted 14,551 10,264 14,526 10,225

Net income per common share - basic and diluted $ 0.35 $ 0.24 $ 1.43 $ 0.39

Commitments and Contingencies

As of June 30, 2022, we had unfunded loan commitments of $ 52,694 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 1.9 years as of June 30, 2022.

As of September 30, 2022, we had unfunded loan commitments of $ 57,712 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 1.8 years as of September 30, 2022.

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

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