What changed in this filing

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Item 9A. Controls and Procedures

2025-02-18 compared with 2024-02-20 · 170 added, 233 removed, 768 unchanged (34% of the section changed)

9 unchanged sentences

Our management assessed the effectiveness of our internal control over financial reporting as of December 31, 2024.

In making this assessment, it used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (2013 Framework) in Internal Control - Integrated Framework .

In making this assessment, it used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway

Commission (2013 Framework) in Internal Control - Integrated Framework .

Based on our assessment, we believe that, as of December 31, 2024, our internal control over financial reporting is effective.

7 unchanged sentences

We intend to satisfy the requirements under Item 5.05 of Form 8-K regarding disclosure of any amendments to, or waivers from, our Code of Conduct that apply to our principal executive officer, principal financial officer, principal accounting officer or controller, or persons performing similar functions, on our website.

We have adopted comprehensive insider trading policies and procedures that apply to trustees, directors, officers and employees, as applicable, of us and RMR.

These policies are designed to prevent trading on the basis of material nonpublic information and to ensure compliance with applicable securities laws.

The policies include provisions for pre-clearance of trades, blackout periods and the establishment of Rule-10b5-1 trading plans.

A copy of our insider trading policy is filed as an exhibit to this Annual Report on Form 10-K.

The remainder of the information required by Item 10 will be included in our 2025 Proxy Statement, and is incorporated herein by reference.

34 unchanged sentences

(Incorporated by reference to Exhibit 3.1 of the Current Report on Form 8-K filed by the Company on December 22, 2021.)

3.2 Amended and Restated Bylaws of the Company, as of September 14, 2023.

(Incorporated by reference to Exhibit 3.2 of the Current Report on Form 8-K filed by the Company on September 15, 2023.)

3.2 Second Amended and Restated Bylaws of the Company, as of May 30, 2024.

(Incorporated by reference to Exhibit 3.2 of the Current Report on Form 8-K filed by the Company on June 3, 2024.)

4.1 Form of Common Share Certificate.

9 unchanged sentences

10.5 Form of Indemnification Agreement.(+) (Incorporated by reference to Exhibit 10.3 of the Company’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2023.)

10.6 Summary of Trustee Compensation.(+) (Incorporated by reference to Exhibit 10.1 of the Current Report on Form 8-K filed by the Company on May 27, 2022.)

10.6 Master Repurchase Agreement, dated February 18, 2021, by and between RMTG Lender LLC and UBS AG.

9 unchanged sentences

(Incorporated by reference to Exhibit 10.13 of the Company’s Annual Report on Form 10-K for the year ended December 31, 2021.)

10.11 First Amendment to Amended and Restated Master Repurchase Agreement, dated September 27, 2024, by and between TRMT CB Lender LLC and Citibank, N.A.

(Filed herewith.)

10.12 Facility Loan Program Agreement and Security Agreement, dated November 9, 2021, by and between Seven Hills BH Lender LLC and BMO Harris Bank N.A.

10 unchanged sentences

(Incorporated by reference to Exhibit 10.2 of the Current Report on Form 8-K filed by the Company on March 16, 2022.)

10.18 First Amendment to Master Repurchase and Securities Contract, dated October 25, 2024, by and between Seven Hills WF Lender LLC and Wells Fargo Bank, National Association.

(Filed herewith.)

10.19 Property Management Agreement, dated as of July 8, 2023, between The RMR Group LLC and Floral Vale LLC, a subsidiary of the Company.

(Incorporated by reference to Exhibit 10.1 of the Company’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2023.)

19.1 Seven Hills Realty Trust Insider Trading Policies and Procedures.

(Filed herewith.)

21.1 Subsidiaries of the Company.

14 unchanged sentences

(Furnished herewith.)

97.1 S even Hills Realty Trust Clawback Policy.

(Furnished herewith.)

97.1 Seven Hills Realty Trust Clawback Policy.

(Incorporated by reference to Exhibit 97.1 of the Company’s Annual Report on Form 10-K for the year ended December 31, 2023.)

101.INS XBRL Instance Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document.

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Opinion on the Financial Statements

We have audited the accompanying consolidated balance sheets of Seven Hills Realty Trust and subsidiaries (the "Company") as of December 31, 2023 and 2022, the related consolidated statements of operations, shareholders' equity, and cash flows, for each of the two years in the period ended December 31, 2023, and the related notes and the schedule listed in the Index at Item 15 (collectively referred to as the "financial statements").

We have audited the accompanying consolidated balance sheets of Seven Hills Realty Trust (the "Company") as of December 31, 2024 and 2023, the related consolidated statements of operations, shareholders' equity, and cash flows, for each of the two years in the period ended December 31, 2024, and the related notes and the schedule listed in the Index at Item 15 (collectively referred to as the "financial statements").

In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2024 and 2023, and the results of its operations and its cash flows for each of the two years in the period ended December 31, 2024, in conformity with accounting principles generally accepted in the United States of America.

16 unchanged sentences

The communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.

Purchase Price Allocation for the Acquisition of Real Estate Owned – Refer to Notes 2 and 4 to the financial statements

Critical Audit Matter Description

The Company assumed legal title to an office property located in Yardley, PA through a deed in lieu of foreclosure in June 2023.

The Company concluded that this was an asset acquisition, and the fair value was allocated to the assets acquired and liabilities assumed based on their relative fair values on acquisition date.

The fair value of the property was determined based on unobservable inputs and industry valuation methods including discounted cash flows, discount rates, capitalization rates, and sales comparables.

We identified the allocation of purchase price as a critical audit matter because of the significant estimates management makes to determine the fair value of assets acquired and liabilities assumed.

This required a high degree of auditor judgment and an increased extent of effort, including the need to involve our fair value specialists, when performing audit procedures to evaluate the reasonableness of management’s assumptions.

Allowance for credit losses – Refer to Notes 2 and 3 to the financial statements

The allowance for credit losses for loans held for investment is a management estimate that is developed using an analytical model.

The allowance is estimated at the individual loan level and utilizes significant inputs in the analytical model that includes loan specific data, as well as macroeconomic forecast assumptions.

Macroeconomic forecast assumptions include the performance of commercial real estate assets, unemployment rates, interest rates and other factors.

We have identified the macroeconomic factors within the CECL allowance estimate as a critical audit matter because of the subjectivity, complexity and estimate uncertainty in determining the impact of the factors on the Company’s allowance for credit losses.

How the Critical Audit Matter Was Addressed in the Audit

Our audit procedures related to the purchase price allocation for the real estate owned included the following, among others:

• We tested the design and implementation of controls over management’s evaluation of the purchase price allocation, including the assumptions used to value the acquired assets and liabilities assumed.

• We held discussions with the Company’s management and evaluated Company-prepared analyses to assess the reasonableness of the accounting treatment as an asset acquisition as opposed to a business combination.

• We obtained and evaluated the third-party purchase price allocation report along with relevant supporting documentation to corroborate our understanding of the substance of the acquisition obtained through inquiry with the Company’s management, as well as assess the completeness of the assets acquired and the liabilities assumed as part of the acquisition.

• With the assistance of our fair value specialists, we evaluated the reasonableness of the valuation methodology, significant assumptions used, including comparing the key inputs used in the projections to external market sources, and the mathematical accuracy of the valuation model.

• We tested the reasonableness of management’s assumptions through independent analysis and comparison to external sources.

Our audit procedures to assess the macroeconomic factors applied by management to determine the allowance for credit losses included, among others:

• We tested the design and implementation of controls over management’s review of the allowance for credit losses, including management’s judgements involved in determination of the macroeconomic factors applied to determine the allowance for credit losses.

• We evaluated the reasonableness of the methodology and macroeconomic assumptions used by management to develop the allowance for credit losses.

• We tested the accuracy and completeness of quantitative data used by management to develop the adjustments to account for current and future economic conditions.

• We utilized credit specialists to assist in the evaluation of management’s allowance for credit losses methodology and assumptions, including the macroeconomic assumptions.

/s/ Deloitte & Touche LLP

46 unchanged sentences

Reimbursement of shared services expenses 2,647 2,596

Reversal of credit losses ( 799 ) —

Provision for (reversal of) credit losses 3,080 ( 799 )

Expenses from real estate owned 2,489 1,293

Other transaction related costs — 37

Total other expenses 17,421 12,308

Income before income taxes 17,853 25,927

Income tax benefit (expense) 38 ( 113 )

Income tax (expense) benefit ( 33 ) 38

Net income $ 17,820 $ 25,965

8 unchanged sentences

Balance at December 31, 2022 14,709 $ 15 $ 238,505 $ 52,290 $ ( 19,231 ) $ 271,579

Cumulative-effect adjustment upon adoption of credit loss accounting standard — — — ( 6,595 ) — ( 6,595 )

Share grants 122 — 1,124 — — 1,124

4 unchanged sentences

Balance at December 31, 2023 14,811 15 239,443 71,660 ( 39,870 ) 271,248

Cumulative-effect adjustment upon adoption of ASU No.

2016-13 (Note 2) — — — ( 6,595 ) — ( 6,595 )

Share grants 120 — 1,359 — — 1,359

Share repurchases ( 28 ) — ( 377 ) — — ( 377 )

Share forfeitures ( 3 ) — ( 3 ) — — ( 3 )

Net income — — — 17,820 — 17,820

10 unchanged sentences

Accretion of purchase discount ( 2,347 ) ( 4,128 )

Reversal of credit losses ( 799 ) —

Provision for (reversal of) credit losses 3,080 ( 799 )

Amortization of loan origination and exit fees ( 2,697 ) ( 3,333 )

15 unchanged sentences

Real estate owned improvements ( 329 ) ( 1,086 )

Net cash provided by (used in) investing activities 35,844 ( 84,067 )

Net cash provided by investing activities 21,261 35,844

CASH FLOWS FROM FINANCING ACTIVITIES:

4 unchanged sentences

Distributions ( 20,772 ) ( 20,639 )

Net cash (used in) provided by financing activities ( 39,326 ) 116,088

Increase in cash and cash equivalents 16,788 44,772

Net cash used in financing activities ( 58,476 ) ( 39,326 )

(Decrease) increase in cash and cash equivalents ( 17,105 ) 16,788

Cash and cash equivalents at beginning of period 87,855 71,067

2 unchanged sentences

Interest paid $ 30,555 $ 32,079

Income taxes paid $ 135 $ 134

Income taxes (refunded) paid $ ( 35 ) $ 135

NON-CASH INVESTING ACTIVITIES

31 unchanged sentences

2016-13 is applicable to financial assets measured at amortized cost and off-balance sheet credit exposures, such as unfunded loan commitments.

The allowance for credit losses required under ASU No.

2016-13 is a valuation account that is deducted from the related loans’ amortized cost basis in our consolidated balance sheets.

The allowance for credit losses is a valuation account that is deducted from the related loans’ amortized cost basis in our consolidated balance sheets.

Our loans typically include commitments to fund incremental proceeds to borrowers over the life of the loan;

5 unchanged sentences

Given the lack of historical loss data related to our loan portfolio, we estimate our expected losses using an analytical model that considers the likelihood of default and loss given default for each individual loan.

This analytical model incorporates data from a third party database with historical loan loss information for commercial mortgage-backed securities, or CMBS, and commercial real estate, or CRE, loans since 1998.

We estimate the allowance for credit losses for our loan portfolio, including unfunded loan commitments, at the individual loan level.

This analytical model incorporates data from a third party database with historical loan loss information for commercial mortgage-backed securities, or CMBS, and CRE loans since 1998.

We estimate the allowance for credit losses for our portfolio, including unfunded loan commitments, at the individual loan level.

Significant inputs to the model include certain loan specific data, such as loan to value, or LTV, property type, geographic location, occupancy, vintage year, remaining loan term, net operating income, expected timing and amounts of future loan fundings and macroeconomic forecast assumptions, including the performance of CRE assets, unemployment rates, interest rates and other factors.

We utilize the model to estimate credit losses over a reasonable and supportable economic forecast period, followed by a straight-line reversion period to average historical losses.

We utilize the model to estimate credit losses over a reasonable and supportable economic forecast period of 12 months, followed by a straight-line reversion period of six months to average historical losses.

Average historical losses are established using a population of third party historical loss data that approximates our portfolio as of the measurement date.

We evaluate the estimated allowance for each of our loans individually and we consider our internal loan risk rating as the primary credit quality indicator underlying our assessment.

If a loan is determined to be collateral dependent (because the repayment of the loan is expected to be provided substantially through the operation or sale of the underlying collateral property) and the borrower is experiencing financial difficulties, but foreclosure is not probable, we may elect to apply a practical expedient to determine the loan's allowance for credit losses by comparing the collateral's fair value, less costs to sell, if applicable, to the amortized cost basis of the loan.

We have elected to exclude accrued interest receivable from amortized cost and not to measure an allowance for credit losses on accrued interest receivable.

Accrued interest receivables are generally written off when payments are 120 days past due.

Such amounts are reversed against interest income and no further interest will be recorded until it is collected.

For collateral-dependent loans for which foreclosure is probable, the related allowance for credit losses is determined using the fair value, less costs to sell, if applicable, of the collateral compared to the loan's amortized cost.

2 unchanged sentences

No reserve for loan losses or allowance for credit losses was recognized within our consolidated financial statements prior to our adoption of ASU No.

Concurrent with our adoption of ASU No.

2016-13, on January 1, 2023, we adopted 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 adopted ASU No.

Instead, an entity must determine whether a modification results in a new loan or continuation of an existing loan under Accounting Standards Codification, or ASC, 310, Receivables (Topic 310).

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

2022-02 also requires disclosure of current period gross write offs by year of origination.

The adoption of ASU No.

2022-02 using the prospective transition method did not have a material impact on our consolidated financial statements.

See Note 3 to our Consolidated Financial Statements included in Part IV, Item 15 of this 2023 Annual Report for further information regarding loan modifications.

We evaluate the credit quality of each of our loans 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.

11 unchanged sentences

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.

SEVEN HILLS REALTY TRUST

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(dollars in thousands, except per share data)

“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;

2 unchanged sentences

and/or the property having a high LTV.

SEVEN HILLS REALTY TRUST

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(dollars in thousands, except per share data)

“5” loss likely—Criteria reflects a very high risk of realizing a principal loss or having incurred a principal loss;

8 unchanged sentences

Upon acquisition, we allocate the fair value of the real estate owned in accordance with ASC 805, Business Combinations.

Upon acquisition, real estate owned is recognized at the lesser of the fair value of the property and the amortized cost of the loan secured by the property at the time of acquisition.

We allocate the purchase price to land, building and improvements, and intangibles based on determinations of the relative fair values of these assets assuming the properties are vacant.

Upon acquisition, real estate owned is recognized at the fair value of the property at the time of acquisition.

We allocate the purchase price to land, building and improvements, and acquired in place leases based on determinations of the relative fair values of these assets assuming the properties are vacant.

The fair value of the property is determined using Level III inputs and standard industry valuation methods, including discounted cash flow analyses that are based on a number of factors, including capitalization rates and discount rates, among others, and sales comparisons.

4 unchanged sentences

We recognize depreciation on a straight line basis over estimated useful lives generally ranging from 7 to 40 years.

The following is a summary of real estate owned presented in our consolidated balance sheets:

December 31, 2023

Building and improvements

Tenant improvements

Total real estate owned

accumulated depreciation

Real estate owned, net

Depreciation expense related to real estate owned for the year ended December 31, 2023 was $ 136 and is included in expenses from real estate owned.

We did not record depreciation expense related to real estate owned during the year ended December 31, 2022.

SEVEN HILLS REALTY TRUST

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(dollars in thousands, except per share data)

We allocate a portion of the purchase price to acquired in place leases and tenant relationships based upon market estimates to lease up the property based on the leases in place at the time of acquisition.

1 unchanged sentence

We amortize the value of acquired in place leases (included in acquired real estate leases, net in our consolidated balance sheets) over the terms of the associated leases.

Such amortization, which is included in expenses from real estate owned in our consolidated income statements, amounted to $ 458 for the year ended December 31, 2023.

We did not record any such amortization during the year ended December 31, 2022.

As of December 31, 2023, our acquired real estate lease obligations were as follows:

December 31, 2023

Acquired real estate leases

accumulated amortization

Acquired real estate leases, net

As of December 31, 2023, the weighted average amortization periods for acquired in place lease values was 7.4 years.

Future amortization of acquired in place lease values is estimated to be $ 771 in 2024, $ 594 in 2025, $ 493 in 2026, $ 493 in 2027, $ 466 in 2028 and $ 1,320 thereafter.

Such amortization is included in expenses from real estate owned in our consolidated statements of operations.

We regularly evaluate real estate owned for indicators of impairment.

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We estimate fair value through an evaluation of recent financial performance and projected discounted cash flows using standard industry valuation methods.

See Note 4 for further information regarding our real estate owned.

Fair Value of Financial Instruments.

4 unchanged sentences

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

SEVEN HILLS REALTY TRUST

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(dollars in thousands, except per share data)

Loan Deferred Fees.

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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.

SEVEN HILLS REALTY TRUST

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(dollars in thousands, except per share data)

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 until it is collected.

6 unchanged sentences

Revenue from real estate owned represents rental income from operating leases with tenants and is recognized on a straight line basis over the lease term.

New Accounting Pronouncements.

On November 27, 2023, the FASB issued ASU No.

Effective for the fiscal year ended December 31, 2024, we adopted ASU No.

2023-07, Segment Reporting (Topic 280):

8 unchanged sentences

2023-07 are incremental to the requirements in ASC 280 and do not change how a public entity identifies its operating segments, aggregates those operating segments, or applies the quantitative thresholds to determine its reportable segments.

2023-07 should be applied retrospectively to all prior periods presented in the financial statements and is effective for fiscal years beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024.

Early adoption is permitted.

As a result, we have included additional information related to the required disclosures within Note 13 to our consolidated financial statements.

New Accounting Pronouncements.

In November 2024, the Financial Accounting Standards Board issued ASU No.

2024-03, Income Statement (Topic 220):

Reporting Comprehensive Income - Expense Disaggregation Disclosures , or ASU No.

2024-03, which requires public entities to provide disaggregated disclosure of certain income statement expense captions within the footnotes to the financial statements.

2024-03 is effective for fiscal years beginning after December 15, 2026, and interim periods within fiscal years beginning after December 15, 2027.

We are currently evaluating the impact ASU No.

5 unchanged sentences

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

The table below provides overall statistics for our loan portfolio as of December 31, 2023 and December 31, 2022:

The table below provides overall statistics for our loan portfolio as of December 31, 2024 and 2023:

As of December 31,

12 unchanged sentences

Weighted average risk rating 3.1 3.0

(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.

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

(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.

7 unchanged sentences

Repayments ( 171,748 ) ( 535 ) ( 172,283 )

Transfer to real estate owned ( 15,865 ) ( 95 ) ( 15,960 )

Net amortization of deferred fees — 3,333 3,333

Purchase discount accretion — 4,128 4,128

— 10,689 10,689

Balance at December 31, 2023

3 unchanged sentences

Repayments ( 165,390 ) ( 594 ) ( 165,984 )

Transfer to real estate owned

( 15,865 ) ( 95 ) ( 15,960 )

Net amortization of deferred fees — 2,697 2,697

6 unchanged sentences

(dollars in thousands, except per share data)

The tables below detail the property type and geographic location of the properties securing the loans in our portfolio as of December 31, 2023 and December 31, 2022:

The tables below detail the property type and geographic location of the properties securing the loans in our portfolio as of December 31, 2024 and 2023:

As of December 31,

4 unchanged sentences

Percentage of Value

Office 6 $ 167,749 28 % 7 $ 181,268 29 %

Multifamily 5 163,987 27 % 7 207,734 33 %

7 181,268 29 % 11 252,796 38 %

Industrial 5 136,646 22 % 5 118,707 19 %

5 118,707 19 % 4 110,656 17 %

Retail 3 72,962 12 % 4 109,248 16 %

Hotel 3 84,028 14 % 2 45,791 7 %

Retail 2 57,506 9 % 3 72,962 12 %

21 $ 609,916 100 % 24 $ 626,462 100 %

(1) As of December 31, 2022, one loan investment secured by a mixed use property consisting of office space and an industrial warehouse in Aurora, IL was classified as office for the purpose of counting the number of loans in our portfolio because the majority of the square footage of the property consisted of office space.

The amortized cost of this loan investment was reflected in office and industrial based on the fair value of the building at the time of origination relative to the total fair value of the property.

During the year ended December 31, 2023, our loan investment in Aurora, IL was repaid.

As of December 31,

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West 6 142,560 23 % 9 185,294 30 %

Midwest 4 128,876 20 % 9 251,208 37 %

East 4 139,899 23 % 3 89,815 14 %

Midwest 4 135,349 22 % 4 128,876 20 %

21 $ 609,916 100 % 24 $ 626,462 100 %

Credit Quality Information

Credit Quality Information and Allowance for Credit Losses

We evaluate the credit quality of each of our loans 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.

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24 100 % $ 132,204 $ 209,580 $ 246,130 $ 38,548 $ 626,462

The borrower of our loan secured by an office property located in Yardley, PA did not pay its debt service obligations due in May 2023, resulting in an event of default.

In June 2023, we assumed legal title to the property through a deed in lieu of foreclosure.

See Note 4 for further information.

The table below present the change to the allowance for credit losses during the year ended December 31, 2023:

The tables below present the changes to the allowance for credit losses during the years ended December 31, 2024 and 2023:

Loans Held for Investment, net Unfunded Loan Commitments Total

Balance at December 31, 2023 $ 4,376 $ 1,452 $ 5,828

Cumulative-effect adjustment upon adoption of ASU No.

2016-13 4,893 1,702 6,595

Provision for credit losses 3,698 ( 618 ) 3,080

Balance at December 31, 2024 $ 8,074 $ 834 $ 8,908

Loans Held for Investment, net Unfunded Loan Commitments Total

Balance at December 31, 2022 $ — $ — $ —

Cumulative-effect adjustment upon adoption of the CECL model 4,893 1,702 6,595

Reversal of credit losses ( 549 ) ( 250 ) ( 799 )

( 549 ) ( 250 ) ( 799 )

Write offs (1)

4 unchanged sentences

We assumed legal title to the property through a deed in lieu of foreclosure in June 2023.

See Note 4 for further information.

We estimate credit losses over a reasonable and supportable forecast period of 12 months, followed by a straight-line reversion period of 12 months back to average historical losses.

The decrease in the allowance for credit losses during the year ended December 31, 2023 compared to the January 1, 2023 cumulative-effect adjustment upon adoption of ASU No.

2016-13, is primarily attributable to a recovery in our previously recorded allowance for credit losses related to the loan transferred to real estate owned in June 2023, partially offset by unfavorable changes in CRE pricing forecasts.

The increase in the allowance for credit losses during the year ended December 31, 2024 is primarily attributable to declining values for CRE and unfavorable CRE pricing forecasts used in our CECL model and increased provisions for our office loans.

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.

Loan modifications are evaluated to determine whether a modification results in a new loan or a continuation of an existing loan under ASC 310.

In June 2023, we amended the agreement governing our loan secured by an office property in St.

As part of this amendment, the borrower repaid $ 5,000 of the outstanding principal amount and the maturity date was extended by six months to December 19, 2023.

We accounted for the amendment as a modification to the existing loan because the changes to the terms were determined to be minor.

In October 2023, the borrower repaid the full outstanding principal amount on this loan.

In August 2023, we amended the agreement governing our loan secured by an office property in Dublin, OH.

As part of this amendment, the borrower repaid $ 2,000 of the outstanding principal amount and the maturity date was extended by one year to August 16, 2024.

We accounted for the amendment as a modification to the existing loan because the changes to the terms were determined to be minor.

In October 2023, the borrower repaid the full outstanding principal amount on this loan.

There were no other modifications to our loan portfolio for borrowers experiencing financial difficulties during the year ended December 31, 2023.

In August 2024, we amended the agreement governing our loan secured by an office property in Dallas, TX.

As part of this amendment, the loan commitment was reduced by $ 3,189 , the borrower was required to contribute $ 2,900 to cash reserves and the maturity date was extended by two years to August 25, 2026.

As of December 31, 2024, this loan had an amortized cost of $ 43,511 and a risk rating of 4.

In August 2024, we amended the agreement governing our loan secured by an office property in Plano, TX.

As part of this amendment, the coupon rate was reduced from SOFR + 4.75 % to SOFR + 3.75 % and the maturity date was extended by two years to July 1, 2026.

As of December 31, 2024, this loan had an amortized cost of $ 26,635 and a risk rating of 4.

In November 2024, we amended the agreement governing our loan secured by an office property in Carlsbad, CA.

As part of this amendment, the borrower was required to contribute $ 1,100 to cash reserves and the maturity date was extended by two years to October 27, 2026.

As of December 31, 2024, this loan had an amortized cost of $ 24,412 and a risk rating of 4.

SEVEN HILLS REALTY TRUST

1 unchanged sentence

(dollars in thousands, except per share data)

We have elected to exclude accrued interest receivable from amortized cost and not to measure an allowance for credit losses on accrued interest receivable.

Accrued interest receivables are generally written off when payments are 120 days past due.

Such amounts are reversed against interest income and no further interest will be recorded until it is collected.

During the year ended December 31, 2023, we reversed $ 88 of accrued interest related to the loan transferred to real estate owned in June 2023.

In November 2024, we amended the agreement governing our loan secured by an office property in Bellevue, WA.

As part of this amendment, the maturity date was extended by 90 days to February 5, 2025.

Subsequently, in January 2025, the maturity date was extended by 60 days to April 7, 2025.

As of December 31, 2024, this loan had an amortized cost of $ 19,997 and a risk rating of 4.

There were no other modifications to our loan portfolio for borrowers experiencing financial difficulties during the year ended December 31, 2024.

We did not have any outstanding past due loans or nonaccrual loans as of December 31, 2024 or 2023.

2 unchanged sentences

In June 2023, we assumed legal title to an office property located in Yardley, PA through a deed in lieu of foreclosure.

As of June 30, 2023, the property met the held for sale criteria required by ASC 360 and was classified as held for sale.

The amortized cost basis of $ 15,960 of the related loan exceeded the fair value of the property, including cash assumed of $ 1,742 and net liabilities assumed of $ 550 , less estimated costs to sell of $ 740 , by $ 708 .

The previously established allowance for credit losses for the related loan was $ 1,335 , resulting in a decrease to our provision for credit losses of $ 627 recorded in our consolidated statements of operations during the six months ended June 30, 2023.

Upon assumption of legal title of the property, we also assumed $ 2,258 of outstanding commitments for lease related costs pursuant to previously executed tenant leases.

As of September 30, 2023, although there was not a change to the plan of sale, the property did not meet the held for sale criteria required by ASC 360 and was classified as held for investment.

As a result, we recorded a reversal of credit losses of $ 740 for estimated costs to sell in our consolidated statements of operations during the three months ended September 30, 2023.

We accounted for the acquisition as an asset acquisition and allocated the fair value of the assumed assets and liabilities on the acquisition date as follows:

Acquisition Date Fair Value

Land Buildings and Improvements Acquired Real Estate Leases

June 2023 $ 14,800 $ 2,880 $ 7,325 $ 4,595

Other assets related to real estate owned of $ 1,352 , including $ 647 of straight line rent receivables, are included in prepaid expenses and other assets, net, in our consolidated balance sheets at December 31, 2023.

Accrued expenses and other liabilities related to real estate owned of $ 517 are included in accounts payable, accrued liabilities and other liabilities in our consolidated balance sheets at December 31, 2023.

There were no other assets or accrued expenses and other liabilities related to real estate owned at December 31, 2022.

We increased revenue from real estate owned to record revenue on a straight line basis by $ 647 for the year ended December 31, 2023.

The table below presents the assets and liabilities of real estate owned in our consolidated balance sheets:

Land $ 2,880 $ 2,880

Building and improvements 7,354 7,349

Tenant improvements 1,501 1,164

Total real estate owned 11,735 11,393

accumulated depreciation ( 548 ) ( 115 )

Real estate owned, net 11,187 11,278

Acquired real estate leases 4,352 4,595

accumulated amortization ( 986 ) ( 458 )

Acquired real estate leases, net 3,366 4,137

Prepaid expenses and other assets, net (1)

$ 16,379 $ 16,767

Accounts payable, accrued liabilities and other liabilities $ 501 $ 517

Total liabilities

(1) Includes $ 1,094 and $ 647 of straight line rent receivables as of December 31, 2024 and 2023, respectively.

Revenue from real estate owned represents rental income from operating leases with tenants and is recognized on a straight line basis over the lease term.

We increased revenue from real estate owned to record revenue on a straight line basis by $ 447 and $ 647 for the years ended December 31, 2024 and 2023, respectively.

Expenses from real estate owned represents costs related to the acquisition of the property, costs to operate the property and depreciation and amortization expense.

The following operating lease maturity analysis presents the future contractual lease payments to be received by us through 2034 as of December 31, 2023:

We recognized amortization expense related to our acquired real estate leases of $ 771 and $ 458 for the years ended December 31, 2024 and 2023, respectively.

Future amortization of acquired in place lease values is estimated to be $ 594 in 2025, $ 493 in 2026, $ 493 in 2027, $ 466 in 2028, $ 446 in 2029 and $ 874 thereafter.

As of December 31, 2024 and 2023, the weighted average amortization period of acquired real estate leases was 6.9 and 7.4 years, respectively.

SEVEN HILLS REALTY TRUST

1 unchanged sentence

(dollars in thousands, except per share data)

The following operating lease maturity analysis presents the future contractual lease payments to be received by us through 2034 as of December 31, 2024:

Secured Financing Agreements

UBS Master Repurchase Facility

We are a party to a master repurchase agreement with UBS AG, or UBS, or our UBS Master Repurchase Agreement, for a facility, or our UBS Master Repurchase Facility, pursuant to which we may sell to UBS, and later repurchase, commercial mortgage loans, which are referred to as purchased assets.

In July 2023, we amended and restated our master repurchase agreement with UBS, or the UBS Master Repurchase Agreement.

The amended and restated UBS Master Repurchase Agreement made certain changes to the agreement and related fee letter, including extending the stated maturity date to February 18, 2025.

In August 2023, we amended the related fee letter to increase the maximum amount of available advancements under the UBS Master Repurchase Facility to $ 205,000 .

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 was equal to the one month Secured Overnight Financing Rate, or SOFR plus a 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 %.

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 as any costs and expenses of UBS related to our UBS Master Repurchase Agreement.

The UBS Guaranty also contains financial covenants, which require us to maintain a minimum tangible net worth, a minimum liquidity and to satisfy a total indebtedness to stockholders' equity ratio.

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.

Citibank Master Repurchase Facility

We are a party to a master repurchase agreement with Citibank NA, or Citibank, or our Citibank Master Repurchase Agreement, for a facility, or our Citibank Master Repurchase Facility, pursuant to which we may sell to Citibank, and later repurchase, commercial mortgage loans, which are referred to as purchased assets.

The maximum amount of available advancements under our Citibank Master Repurchase Facility is $ 215,000 and the stated maturity date is March 15, 2025, subject to earlier termination as provided for in the Citibank Master Repurchase Agreement.

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

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 was equal to SOFR 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.

SEVEN HILLS REALTY TRUST

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(dollars in thousands, except per share data)

In connection with our Citibank Master Repurchase Agreement, we entered into a guaranty, or 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 contains financial covenants, which require us to maintain a minimum tangible net worth, a minimum liquidity, a minimum interest coverage ratio and to satisfy a total indebtedness to tangible net worth 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.

We are a party to a facility loan program agreement and the security agreement with BMO Harris Bank N.A., or BMO, or our BMO Loan Program Agreement, with BMO as administrative agent for the lenders.

Amounts advanced under an uncommitted credit facility, up to the maximum principal amount of $ 150,000 , or the BMO Facility, may be used to fund new mortgage loan originations and/or fund future funding obligations under existing and new mortgage loans pursuant to separate agreements, or the BMO Facility Loan Agreements.

BMO Facility Loan Agreements issued under the BMO Facility are coterminous with the pledged mortgage loan investments, are not subject to margin calls and allow for up to an 80 % advance rate, subject to certain loan to cost and LTV limits.

Interest on advancements under the BMO Facility are calculated at SOFR plus a premium.

BMO Facility Loan Agreements issued under our BMO Facility are secured by a security interest and collateral assignment of the underlying loans to our borrowers which are secured by real property owned by such borrowers.

In connection with our BMO Loan Program Agreement, we guaranteed certain of the obligations under our BMO Loan Program Agreement and the BMO Facility Loan Agreements pursuant to a limited guaranty from us to and for the benefit of the administrative agent for itself and such other lenders.

Specifically, the BMO Guaranty requires us to guarantee 25 % of the then current outstanding principal balance of the facility loans and 100 % of losses or the entire indebtedness in the event of certain bad acts as well as any costs and expenses of the administrative agent or lenders related to our BMO Loan Program Agreement.

In addition, the BMO Guaranty contains financial covenants that require us to maintain a minimum tangible net worth and a minimum liquidity and to satisfy a total indebtedness to stockholders’ equity ratio.

Wells Fargo Master Repurchase Facility

We are a party to a master repurchase and securities agreement with Wells Fargo, National Association, or 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 may sell to Wells Fargo, and later repurchase, commercial mortgage loans, which are referred to as 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 is calculated at 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.

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.

As of December 31, 2024 and 2023, we had secured financing facilities governed by master repurchase agreements with Wells Fargo, National Association, or Wells Fargo, Citibank N.A., or Citibank, and UBS AG, or UBS;

and a facility loan program with BMO Harris Bank N.A, or BMO.

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

Collectively, we refer to our Master Repurchase Facilities and the BMO Facility as our Secured Financing Facilities.

Pursuant to our Master Repurchase Facilities, we may sell to, and later repurchase from the respective lender, the purchased assets related to the applicable facility.

The initial purchase price paid under our Master Repurchase Facilities is generally between 75 % and 80 % of the market value or the unpaid principal balance of such purchased asset.

Our Master Repurchase Facilities each contain margin maintenance provisions that provide our lenders with the right, in certain circumstances related to a credit event, to redetermine the value of purchased assets.

Where a decline in the value of a purchased asset results in a margin deficit, we may be required to eliminate such a deficit through a combination of purchased asset repurchases and cash transfers.

Pursuant to our BMO Facility, BMO advances amounts to fund new mortgage loan originations and/or fund future obligations under existing loans.

Advances under the BMO Facility are secured by a security interest and collateral assignment of the underlying loan, are coterminous with the pledged mortgage loans, generally up to an 80 % advance rate and are not subject to margin calls.

In connection with each of our Secured Financing Facilities, we entered into guarantees that require us to guarantee 25 % of the aggregate purchase price of the asset and also contain 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.

Interest expense under our Secured Financing Facilities accrues at a rate of SOFR plus a premium.

In September 2024, we amended our Citibank Master Repurchase Agreement.

The amendment to the Citibank Master Repurchase Agreement made certain changes to the agreement and related fee letter, including extending the stated maturity date to September 27, 2026.

In October 2024, we amended our Wells Fargo Master Repurchase Agreement.

The amendment to the Wells Fargo Master Repurchase Agreement made certain changes to the agreement and related fee letter, including extending the stated maturity date to March 11, 2026.

In December 2024, we amended the fee letter to our UBS Master Repurchase Agreement to extend the stated maturity date to February 18, 2026 and increase the maximum facility size to $ 250,000 .

As of December 31, 2024, we were in compliance with the covenants and other terms of the agreements that govern our Secured Financing Facilities.

SEVEN HILLS REALTY TRUST

1 unchanged sentence

(dollars in thousands, except per share data)

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

We refer to the UBS Master Repurchase Agreement, Citibank Master Repurchase Agreement and Wells Fargo Master Repurchase Agreement, collectively, as our Master Repurchase Agreements, and to our Master Repurchase Agreements, the BMO Loan Program Agreement and the BMO Facility Loan Agreements, collectively, as our Secured Financing Agreements.

As of December 31, 2023, we were in compliance with the covenants and other terms of the agreements that govern our Secured Financing Facilities.

The table below summarizes our Secured Financing Facilities as of December 31, 2024 and 2023:

3 unchanged sentences

Remaining Maturity (years) (2)

Principal Balance

Maturity Date Principal Balance

December 31, 2024:

Citibank Master Repurchase Facility $ 215,000 $ 91,115 $ 90,811 7.47 % 0.7 $ 142,465

UBS Master Repurchase Facility $ 250,000 $ 181,989 $ 181,566 6.85 % 0.7 2/18/2026 $ 267,084

BMO Facility 150,000 87,767 87,451 7.29 % 1.3 118,471

Citibank Master Repurchase Facility 215,000 93,314 92,700 6.57 % 1.5 9/27/2026 145,520

BMO Facility 150,000 103,855 103,622 6.39 % 0.9 Various 145,234

Wells Fargo Master Repurchase Facility 125,000 40,464 39,908 6.31 % 0.6 3/11/2026 52,973

3 unchanged sentences

UBS Master Repurchase Facility 205,000 181,381 181,162 7.72 % 0.8 2/18/2025 241,887

BMO Facility 150,000 111,105 110,473 6.22 % 2.2 148,476

BMO Facility 150,000 87,767 87,451 7.29 % 1.3 Various 118,471

Wells Fargo Master Repurchase Facility 125,000 95,551 94,998 7.44 % 1.1 3/11/2025 127,069

2 unchanged sentences

(2) The weighted average remaining maturity of our Master Repurchase Facilities is determined using the earlier of the underlying loan investment maturity date and the respective repurchase agreement maturity date.

As of December 31, 2023, our Citibank Master Repurchase Facility, UBS Master Repurchase Facility and Wells Fargo Master Repurchase Facility mature on March 15, 2025, February 18, 2025 and March 11, 2025, respectively.

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

The weighted average remaining maturity of the BMO Facility is determined using the underlying loan investment maturity date.

As of December 31, 2024, our outstanding borrowings under our Secured Financing Facilities had the following remaining maturities:

Maturity Year Principal Payments

Due Upon Maturity

on Secured Financing Facilities

2025 $ 255,765

2028 and thereafter —

Based upon the performance and payment history of our commercial mortgage loans, along with our ability to obtain financing under repurchase agreements and success in extending certain of our existing Master Repurchase Agreements, we believe it is probable that we will extend our Master Repurchase Facilities prior to their maturities.

Fair Value Measurements

16 unchanged sentences

During the years ended December 31, 2024 and 2023, we awarded to our officers and certain other employees of Tremont and of RMR annual share awards of 91,118 and 80,000 of our common shares, respectively, valued at $ 1,236 and $ 876 , in aggregate, respectively.

In accordance with our Trustee compensation arrangements, during the years ended December 31, 2023 and 2022, we awarded each of our then Trustees 6,000 of our common shares valued at $ 387 and $ 448 , respectively, as part of their annual compensation.

In accordance with our Trustee compensation arrangements, during the years ended December 31, 2024 and 2023, we awarded each of our then Trustees 4,735 and 6,000 of our common shares, respectively, valued at $ 360 and $ 387 , respectively, as part of their annual compensation.

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 dates of awards.

31 unchanged sentences

2023 $ 1.40 $ 20,639 — % 100 % — %

On January 11, 2024, we declared a quarterly distribution of $ 0.35 per common share, or $ 5,184 , to shareholders of record on January 22, 2024, and we paid this distribution on February 15, 2024 using cash on hand.

On January 16, 2025, we declared a quarterly distribution of $ 0.35 per common share, or $ 5,216 , to shareholders of record on January 27, 2025, and we expect to pay this distribution on February 20, 2025 using cash on hand.

Management Agreement with Tremont

26 unchanged sentences

Equity and Core Earnings as defined in our management agreement are non-GAAP financial measures and may be different from our shareholders’ equity and our net income calculated according to GAAP.

The initial term of our management agreement ended on December 31, 2023, and the agreement automatically renewed for a successive one year term on January 1, 2024, and will renew for successive one year terms each January 1 thereafter, unless it is sooner terminated as detailed below.

The term of our management agreement ended on December 31 , 2024 , and the agreement automatically renewed for a successive one year term on January 1, 2025, and will renew for successive one year terms each January 1 thereafter, unless it is sooner terminated as detailed below.

Termination Rights.

50 unchanged sentences

See Note 8 for further information regarding our management agreement.

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.

As of December 31, 2024, Tremont owned 1,708,058 of our common shares, or approximately 11.5 % of our outstanding common shares, and Mr.

2 unchanged sentences

See Note 8 for further information regarding this shared services arrangement.

Share Awards to our Officers and Employees of Tremont and RMR .

As described further in Note 7, we award shares to our officers and other employees of Tremont and/or RMR annually.

Generally, one fifth of these awards vests on the award date and one fifth vests on each of the next four anniversaries of the award dates.

These awards to employees of Tremont and RMR are in addition to the share awards to our Managing Trustees, as Trustee compensation, and the fees we paid to Tremont.

We purchased common shares awarded to certain of our officers and employees of Tremont and/or RMR in satisfaction of tax withholding obligations in connection with the vesting of awards of our common shares.

See Note 7 for further information regarding these purchases.

Acceleration of Unvested Shares of a Former Officer.

Douglas Lanois resigned as our Chief Financial Officer and Treasurer, effective September 30, 2022.

Our Compensation Committee approved the acceleration of all 3,648 of the unvested shares owned by Mr.

Lanois of us as of his separation date, January 1, 2023.

Property Management Agreement with RMR .

4 unchanged sentences

No termination fee would be payable as a result of terminating the agreement.

We recognized property management and construction supervision fees of $ 17 during the year ended December 31, 2023, related to real estate owned.

We recognized property management and construction supervision fees of $ 71 and $ 17 during the years ended December 31, 2024 and 2023, respectively, related to real estate owned.

We have elected to be taxed as a REIT under the Internal Revenue Code of 1986, as amended.

2 unchanged sentences

We are subject to certain state and local taxes, certain of which amounts are or will be reported as income taxes in our consolidated statements of operations.

SEVEN HILLS REALTY TRUST

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(dollars in thousands, except per share data)

Weighted Average Common Shares

2 unchanged sentences

Unvested share awards are considered participating securities 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

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(dollars in thousands, except per share data)

The calculation of net income per common share - basic and diluted is as follows (amounts in thousands, except per share data):

12 unchanged sentences

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

As of December 31, 2023, we had estimated unspent lease related costs of $ 361 .

Segment Reporting

We manage our business on a consolidated basis and therefore have one reportable segment:

originating and investing in floating rate first mortgage loans secured by CRE properties.

The Chief Operating Decision Maker, or CODM, is our President and Chief Investment Officer.

The CODM assesses performance, allocates resources and makes strategic decisions based on net income as shown in our Consolidated Statements of Operations.

Our significant expense categories are included in our Consolidated Statements of Operations.

The accounting policies of our reportable segment are the same as the ones described in Note 2.

The measure of segment assets is reported as total assets in our Consolidated Balance Sheets.

SEVEN HILLS REALTY TRUST

7 unchanged sentences

First Mortgage Loans (4)

1 Multifamily, Olmsted Falls, OH S + 4.00 %

1 Multifamily, Olmsted Falls, OH (5)

01/28/2025 01/28/2026 I/O — $ 52,050 $ 52,446

2 Industrial, Passaic, NJ S + 3.85 %

09/08/2025 09/08/2027 I/O — 43,808 43,689

3 Office, Dallas, TX S + 3.25 %

08/25/2026 08/25/2026 I/O — 43,511 43,511

3 Industrial, Passaic, NJ S + 3.85 %

4 Hotel, Boston, MA S + 3.95 %

12/16/2027 12/16/2029 I/O — 39,800 39,335

1 unchanged sentence

03/29/2025 03/29/2027 I/O — 42,200 42,254

5 Multifamily, Auburn, AL S + 3.25 %

11/11/2025 11/11/2026 I/O — 37,500 37,323

6 Multifamily, Starkville, MS S + 4.00 %

6 Multifamily, Oxford, MS S + 2.95 %

11/26/2027 11/26/2029 I/O — 42,000 41,570

5 unchanged sentences

11/29/2025 11/29/2028 I/O — 29,000 28,855

10 Multifamily, Las Vegas, NV S + 3.30 %

06/10/2025 06/10/2027 I/O — 25,185 25,196

10 Industrial, Fountain Inn, SC S + 4.25 %

2 unchanged sentences

07/01/2026 07/01/2026 I/O — 26,569 26,635

12 Multifamily, Las Vegas, NV S + 3.30 %

06/10/2025 06/10/2027 I/O — 25,448 25,641

13 Industrial, Fayetteville, GA S + 3.35 %

4 unchanged sentences

11/18/2025 11/18/2026 I/O — 22,000 21,934

16 Office, Downers Grove, IL S + 4.25 %

12/09/2024 12/09/2026 I/O — 23,530 23,574

17 Office, Bellevue, WA S + 3.85 %

16 Industrial, Los Angeles, CA S + 3.40 %

06/28/2027 06/28/2029 I/O — 21,940 21,721

18 Multifamily, Portland, OR S + 3.57 %

17 Office, Downers Grove, IL S + 4.25 %

12/09/2025 12/09/2026 I/O — 23,530 23,588

19 Hotel, Scottsdale, AZ S + 4.25 %

18 Office, Bellevue, WA (6)

02/05/2025 11/05/2026 I/O — 20,000 19,997

20 Retail, Delray Beach, FL S + 4.25 %

19 Multifamily, Newport News, VA S + 3.15 %

04/25/2027 04/25/2029 I/O — 14,759 14,620

1 unchanged sentence

09/23/2025 09/23/2026 I/O — 15,286 15,252

22 Office, Westminster, CO S + 3.75 %

05/25/2024 05/25/2026 I/O — 15,750 15,435

23 Multifamily, Portland, OR S + 3.57 %

07/30/2024 07/30/2026 I/O — 13,400 12,995

24 Industrial, Allentown, PA S + 3.50 %

21 Hotel, Lake Mary, FL S + 4.00 %

09/06/2027 09/06/2029 I/O — 16,000 15,839

6 unchanged sentences

(4) As of December 31 , 2024 , none of our borrowers were delinquent in payment.

(5) In January 2025, the maturity date of this loan was extended to January 28, 2026.

(6) In January 2025, the maturity date of this loan was extended to April 7, 2025.

(7) For further information regarding our allowance for credit losses, see Note 3 to our Consolidated Financial Statements.

11 unchanged sentences

Net amortization of deferred fees 3,333

Decrease in allowance for credit losses

Deductions during the year:

Transfer to real estate owned

Deferred fees ( 1,621 )

Cumulative effect adjustment upon adoption of the CECL model ( 4,893 )

Balance as of December 31, 2023 622,086

4 unchanged sentences

Net amortization of deferred fees 2,697

Decrease in allowance for credit losses

Deductions during the year:

Repayments ( 165,390 )

Transfer to real estate owned

Deferred fees ( 2,509 )

Cumulative effect adjustment upon adoption of ASU No.

Increase in allowance for credit losses ( 3,698 )

Balance as of December 31, 2024 $ 601,842

13 unchanged sentences

(principal financial and accounting officer)

Danner Independent Trustee February 18, 2025

/s/ Barbara D.

10 unchanged sentences

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-K

Item 9A. Controls and Procedures