What changed in this filing

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Item 1. Business

2026-02-18 compared with 2025-02-18 · 40 added, 44 removed, 705 unchanged (11% of the section changed)

Seven Hills Realty Trust is a Maryland REIT that focuses primarily on originating and investing in floating rate first mortgage loans that range from $15.0 million to $75.0 million, secured by middle market transitional CRE properties that have values of up to $100.0 million.

We define transitional CRE as commercial properties subject to redevelopment or repositioning activities that are expected to increase the value of the properties.

As of December 31, 2024, we had a portfolio of 21 floating rate first mortgage loans with aggregate loan commitments of $641.2 million with a weighted average maximum maturity of 2.6 years, a weighted average coupon rate of 8.24% and a weighted average all in yield of 8.62%.

As of December 31, 2025, we had a portfolio of 24 floating rate first mortgage loans with aggregate loan commitments of $724.5 million with a weighted average maximum maturity of 2.6 years, a weighted average coupon rate and a weighted average all in yield of 7.52% and 7.92%, respectively, and a weighted average interest rate floor of 2.81%.

We operate our business in a manner consistent with our qualification for taxation as a REIT under the Internal Revenue Code of 1986, or the IRC.

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These investments typically are secured by properties undergoing redevelopment or repositioning activities that are expected to increase the value of the properties.

We fund these loans over time as the borrowers’ business plans for the properties are carried out.

We fund these loans over time as the borrowers’ business plans for the properties are executed.

Our loans secured by transitional CRE are typically bridge loans that are refinanced with the proceeds from other CRE mortgage loans or property sales.

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As of December 31, 2025, 96.6% of our loan portfolio by principal outstanding had interest rate floors in place with a weighted average floor of 2.81%.

As of December 31, 2024, SOFR was 4.33%, and as a result, one of our loan investments had an active interest rate floor.

As of December 31, 2025, SOFR was 3.69%, and as a result, seven of our loan investments had an active interest rate floor.

We generally seek to match the terms of our financing, including benchmark indices and duration, to the loans we originate and pledge as collateral.

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As of December 31, 2025, RMR Inc.

had over $40 billion of real estate assets under management and the combined RMR managed companies had more than $5 billion of annual revenues, approximately 2,000 properties and over 18,000 employees.

had over $37 billion of real estate assets under management, approximately 1,800 properties and 40 years of institutional experience in buying, selling, financing and operating CRE.

We believe that Tremont’s relationship with RMR provides us with a depth of market knowledge that may allow us to identify high quality investment opportunities and to evaluate them more thoroughly than many of our competitors, including other commercial mortgage REITs.

We also believe that RMR’s broad platform provides us with access to its extensive network of real estate owners, operators, intermediaries, sponsors, financial institutions and other real estate related professionals and businesses with which RMR has historical relationships.

We also believe that Tremont provides us with significant experience and expertise in investing in middle market and transitional CRE.

We also believe that Tremont provides us with significant experience and expertise in investing in middle market transitional CRE.

As of February 13, 2026, the executive officers of RMR are:

Portnoy, president and chief executive officer;

Adam Portnoy, president and chief executive officer;

Christopher J.

Bilotto, executive vice president;

Clark, executive vice president, general counsel and secretary;

Jordan, executive vice president, chief financial officer and treasurer;

Brown, executive vice president, chief financial officer and treasurer;

Yael Duffy, executive vice president;

Getz, executive vice president, general counsel and secretary;

Jordan, executive vice president and chief operating officer;

Leer, executive vice president;

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Our President and Chief Investment Officer, Thomas J.

Lorenzini, our Chief Financial Officer and Treasurer, Fernando Diaz, and our Vice President, Jared R.

Lorenzini, our Chief Financial Officer and Treasurer, Matthew C.

Brown, and our Vice President, Jared R.

Lewis, are officers and employees of Tremont and/or RMR.

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All services that would otherwise be provided to us by employees are provided or arranged by Tremont.

As of December 31, 2024, RMR had over 1,000 employees, including Tremont’s employees, located at its headquarters and more than 35 offices throughout the United States.

As of December 31, 2025, RMR had nearly 900 employees, including Tremont’s employees, located at its headquarters and more than 30 offices throughout the United States.

Corporate Citizenship.

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We value a diversity of backgrounds, experience and perspectives.

As of December 31, 2024, our Board was comprised of seven Trustees, of which five were independent and two, or approximately 29%, were female.

As of December 31, 2025, our Board was comprised of seven Trustees, of which five were independent trustees.

Our Board of Trustees is comprised of approximately 29% women and members of underrepresented communities.

RMR is an equal opportunity employer, with all qualified applicants receiving consideration for employment without regard to race, color, religion, sex, sexual orientation, gender identity, national origin, disability or protected veteran status.

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• a person subject to special tax accounting rules as a result of their use of applicable financial statements (within the meaning of Section 451(b)(3) of the IRC);

• except as specifically described in the following summary, a trust, estate, tax-exempt entity or foreign person.

• except as specifically described in the following summary, a trust, estate, tax-exempt entity, governmental organization or foreign person.

The sections of the IRC that govern the federal income tax qualification and treatment of a REIT and its shareholders are complex.

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Our dividends are not generally entitled to the preferential tax rates on qualified dividend income, but a portion of our dividends may be treated as capital gain dividends or as qualified dividend income, all as explained below.

In addition, for taxable years beginning before 2026 and pursuant to the deduction-without-outlay mechanism of Section 199A of the IRC, our noncorporate U.S.

In addition, pursuant to the deduction-without-outlay mechanism of Section 199A of the IRC, our noncorporate U.S.

shareholders that meet specified holding period requirements are generally eligible for lower effective tax rates on our dividends that are not treated as capital gain dividends or as qualified dividend income.

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Our current or accumulated earnings and profits are generally allocated first to distributions made on our preferred shares, of which there are none outstanding at this time, and thereafter to distributions made on our common shares.

To the extent that such distributions exceed the basis of a U.S.

shareholder’s shares, the U.S.

shareholder generally must include such distributions in income as long-term capital gain, or short-term capital gain if the shares have been held for one year or less.

For all these purposes, our distributions include cash distributions, any in kind distributions of property that we might make, and deemed or constructive distributions resulting from capital market activities (such as some redemptions), as described below.

Our tax counsel, Sullivan & Worcester LLP, is of the opinion that we have been organized and have qualified for taxation as a REIT under the IRC for our 2020 through 2025 taxable years, and that our current and anticipated investments and plan of operation will enable us to continue to meet the requirements for qualification and taxation as a REIT under the IRC.

Our tax counsel’s opinions are conditioned upon the assumption that our leases, declaration of trust and all other legal documents to which we have been or are a party have been and will be complied with by all parties to those documents, upon the accuracy and completeness of the factual matters described in this Annual Report on Form 10-K and upon representations made by us to our tax counsel as to certain factual matters relating to our organization and operations and our expected manner of operation.

Our tax counsel’s opinions are conditioned upon the assumption that our leases, loan documents, declaration of trust, and all other legal documents to which we have been or are a party have been and will be complied with by all parties to those documents, upon the accuracy and completeness of the factual matters described in this Annual Report on Form 10-K and upon representations made by us to our tax counsel as to certain factual matters relating to our organization and operations and our expected manner of operation.

If this assumption or a description or representation is inaccurate or incomplete, our tax counsel’s opinions may be adversely affected and may not be relied upon.

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Any opinion of Sullivan & Worcester LLP as to our qualification or taxation as a REIT will be expressed as of the date issued.

Our tax counsel will have no obligation to advise us or our shareholders of any subsequent change in the matters stated, represented or assumed, or of any subsequent change in the applicable law.

Our tax counsel will have no obligation to advise us or our shareholders of any

subsequent change in the matters stated, represented or assumed, or of any subsequent change in the applicable law.

Also, the opinions of our tax counsel are not binding on either the IRS or a court, and either could take a position different from that expressed by our tax counsel.

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• If we fail to distribute for any calendar year at least the sum of 85% of our REIT ordinary income for that year, 95% of our REIT capital gain net income for that year and any undistributed taxable income from prior periods, we will be subject to a 4% nondeductible excise tax on the excess of the required distribution over the amounts actually distributed.

• If we acquire a REIT asset where our adjusted tax basis in the asset is determined by reference to the adjusted tax basis of the asset in the hands of a C corporation, under specified circumstances we may be subject to federal income taxation on all or part of the built-in gain (calculated as of the date the property ceased being owned by the C corporation) on such asset.

corporation) on such asset.

We generally do not expect to sell assets if doing so would result in the imposition of a material built-in gains tax liability;

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• Our subsidiaries that are C corporations, including our “taxable REIT subsidiaries”, as defined in Section 856(l) of the IRC, or TRSs, generally will be required to pay federal corporate income tax on their earnings, and a 100% tax may be imposed on any transaction between us and one of our TRSs that does not reflect arm’s length terms.

• We acquired Tremont Mortgage Trust, or TRMT, by merger in 2021, or the Merger.

If it is determined that TRMT failed to satisfy one or more of the REIT tests described below before its merger into us, the IRS might allow us, as TRMT’s successor, the same opportunity for relief as though we were the remediating REIT.

In such case, TRMT would be deemed to have retained its qualification for taxation as a REIT and the relevant penalties or sanctions for remediation would fall upon us in a manner comparable to the above.

If we fail to qualify for taxation as a REIT in any year, then we will be subject to federal income tax in the same manner as a regular C corporation.

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Taxable REIT Subsidiaries .

As a REIT, we are permitted to own any or all of the securities of a TRS, provided that no more than 20% of the total value of our assets, at the close of each quarter, is comprised of our investments in the stock or other securities of our TRSs.

As a REIT, we are permitted to own any or all of the securities of a TRS, provided that no more than 20% (25% with respect to taxable years beginning after December 31, 2025) of the total value of our assets, at the close of each quarter, is comprised of our investments in the stock or other securities of our TRSs.

Very generally, a TRS is a subsidiary corporation other than a REIT in which a REIT directly or indirectly holds stock and that has made a joint election with such REIT to be treated as a TRS.

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We have deployed and in the future expect to deploy one or more of these tax efficient solutions in respect of property that we acquire through foreclosure.

While we cannot be sure, we believe that TRMT, through RMR, is positioned to leverage its established relationships with tenants and operators across a wide variety of real estate asset sectors, and in particular its established relationships with managers of lodging facilities and health care facilities, to facilitate our goals in this regard.

While we cannot be sure, we believe that Tremont, through RMR, is positioned to leverage its established relationships with tenants and operators across a wide variety of real estate asset sectors, and in particular its established relationships with managers of lodging facilities and health care facilities, to facilitate our goals in this regard.

In other circumstances where real property is reduced to possession after a foreclosure action, we may choose to treat such property as “foreclosure property” pursuant to Section 856(e) of the IRC.

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Our stock and other securities in a TRS are exempted from these 5% and 10% asset tests.

• Not more than 20% of the value of our total assets may be represented by stock or other securities of our TRSs.

• Not more than 20% (25% with respect to taxable years beginning after December 31, 2025) of the value of our total assets may be represented by stock or other securities of our TRSs.

• Not more than 25% of the value of our total assets may be represented by “nonqualified publicly offered REIT debt instruments” as defined in Section 856(c)(5)(L)(ii) of the IRC.

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It is also possible that our deductions for U.S.

federal income tax purposes may accrue more slowly than, or will not otherwise correspond to, our cash expenditure outlays.

federal income tax purposes may be limited or accrue more slowly than, or will not otherwise correspond to, our cash expenditure outlays.

As a result of all these potential timing differences between income recognition or expense deduction and cash receipts or disbursements, we may have substantial taxable income in excess of cash available for distribution.

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While the payment of a deficiency dividend will apply to a prior year for purposes of our REIT distribution requirements and our dividends paid deduction, it will be treated as an additional distribution to the shareholders receiving it in the year such dividend is paid.

We may elect to retain, rather than distribute, some or all of our net capital gain and pay income tax on such gain.

We may elect to retain, rather than distribute, some or all of our net capital gain and pay income tax on such retained amounts.

In addition, if we so elect by making a timely designation to our shareholders, our shareholders would include their proportionate share of such undistributed capital gain in their taxable income, and they would receive a corresponding credit for their share of the federal corporate income tax that we pay thereon.

Our shareholders would then increase the adjusted tax basis of their shares by the difference between (a) the amount of capital gain dividends that we designated and that they included in their taxable income, and (b) the tax that we paid on their behalf with respect to that capital gain.

Our Acquisition of Tremont Mortgage Trust

In September 2021, we acquired TRMT in a transaction that was intended to qualify as a “reorganization” within the meaning of Section 368(a) of the IRC.

We believe that our acquisition of TRMT’s assets has not and will not materially impact our qualification for taxation as a REIT.

As the successor by merger to TRMT, we are generally liable for unpaid taxes, including penalties and interest (if any), of TRMT.

If TRMT failed to qualify for taxation as a REIT for federal income tax purposes in any period prior to the consummation of the Merger, we could lose our qualification for taxation as a REIT should the disqualifying activities continue after the Merger.

Even if we retain our qualification for taxation as a REIT, if TRMT did not qualify for taxation as a REIT for a taxable year before the Merger or for its taxable year that included the Merger and if no relief is available, then we would face the following tax consequences:

• as the successor by merger to TRMT, we would generally inherit any corporate income tax liabilities of TRMT, including penalties and interest;

• we would be subject to tax on the built-in gain on each asset of TRMT existing at the time we acquired TRMT if we were to dispose of such an asset during the five-year period following the date that we acquired TRMT;

• we could be required to pay a special distribution and/or employ applicable deficiency dividend procedures (including interest payments to the IRS) to eliminate any earnings and profits accumulated by TRMT for taxable periods that it did not qualify for taxation as a REIT.

It is unclear whether the IRC provisions that are generally available to remediate REIT compliance failures will be available to us as a successor in respect of any determination that TRMT failed to qualify for taxation as a REIT.

If there is an adjustment to TRMT’s real estate investment trust taxable income or dividends paid deductions, and to the extent that the IRC remedial provisions are available to us to address TRMT’s REIT qualification and taxation, we could elect to use the deficiency dividend procedure in respect of preserving TRMT’s REIT qualification.

That deficiency dividend procedure could require us to make significant distributions to our shareholders and to pay significant interest to the IRS.

Distributions to our Shareholders

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As a result, our ordinary dividends generally are taxed at the higher federal income tax rates applicable to ordinary income (subject to the lower effective tax rates applicable to qualified REIT dividends via the deduction-without-outlay mechanism of Section 199A of the IRC, which is generally available to our noncorporate U.S.

shareholders that meet specified holding period requirements for taxable years before 2026).

shareholders that meet specified holding period requirements).

To summarize, the preferential federal income tax rates for long-term capital gains and for qualified dividends generally apply to:

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shareholders that we do not designate as a capital gain dividend generally will be treated as an ordinary income dividend to the extent of our available current or accumulated earnings and profits (subject to the lower effective tax rates applicable to qualified REIT dividends via the deduction-without-outlay mechanism of Section 199A of the IRC, which is generally available to our noncorporate U.S.

shareholders that meet specified holding period requirements for taxable years before 2026).

shareholders that meet specified holding period requirements).

Distributions made out of our current or accumulated earnings and profits that we properly designate as capital gain dividends generally will be taxed as long-term capital gains, as discussed below, to the extent they do not exceed our actual net capital gain for the taxable year.

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A reportable transaction currently includes, among other things, a sale or exchange of our shares resulting in a tax loss in excess of (a) $10.0 million in any single year or $20.0 million in a prescribed combination of taxable years in the case of our shares held by a C corporation or by a partnership with only C corporation partners or (b) $2.0 million in any single year or $4.0 million in a prescribed combination of taxable years in the case of our shares held by any other partnership or an S corporation, trust or individual, including losses that flow through pass through entities to individuals.

A taxpayer discloses a reportable transaction by filing IRS Form 8886 with its federal income tax return and, in the first year of filing, a copy of Form 8886 must be sent to the IRS’s Office of Tax Shelter Analysis.

A taxpayer discloses a reportable transaction by filing IRS Form 8886 with its federal income tax return and, in the first year of filing, a copy of IRS Form 8886 must be sent to the IRS’s Office of Tax Shelter Analysis.

The annual maximum penalty for failing to disclose a reportable transaction is generally $10,000 in the case of a natural person and $50,000 in any other case.

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If you are a tax-exempt shareholder, we urge you to consult your own tax advisor to determine the impact of federal, state, local and foreign tax laws, including any tax return filing and other reporting requirements, with respect to your acquisition of or investment in our shares.

We expect that shareholders that are tax-exempt pension plans, individual retirement accounts or other qualifying tax-exempt entities, and that receive (a) distributions from us, or (b) proceeds from the sale of our shares, will not have such amounts treated as UBTI, provided in each case (x) that the shareholder has not financed its acquisition of our shares with “acquisition indebtedness” within the meaning of the IRC, (y) that the shares are not otherwise used in an unrelated trade or business of the tax-exempt entity, and (z) that, consistent with our present intent, we do not hold a residual interest in a real estate mortgage investment conduit or otherwise hold mortgage assets or conduct mortgage securitization activities that generate “excess inclusion” income.

We expect that shareholders that are tax-exempt pension plans, individual retirement accounts or other qualifying tax-exempt entities, and that receive (a) distributions from us, or (b) proceeds from the sale of our shares, should not have such amounts treated as UBTI, provided in each case (x) that the shareholder has not financed its acquisition of our shares with “acquisition indebtedness” within the meaning of the IRC, (y) that the shares are not otherwise used in an unrelated trade or business of the tax-exempt entity, and (z) that, consistent with our present intent, we do not hold a residual interest in a real estate mortgage investment conduit or otherwise hold mortgage assets or conduct mortgage securitization activities that generate “excess inclusion” income.

Taxation of Non-U.S.

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shareholder on those shares, as well as dividends to such a non-U.S.

shareholder on those shares attributable to our sale or exchange of “United States real property interests” within the meaning of Section 897 of the IRC, or USRPIs, will not be subject to withholding as though those amounts were effectively connected with a U.S.

shareholder on those shares attributable to our sale or exchange of “United States real property interests” within the meaning of Section 897 of the IRC, or

USRPIs, will not be subject to withholding as though those amounts were effectively connected with a U.S.

trade or business, and non-U.S.

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The restrictions on transfer enumerated in the regulation as not affecting that finding include any restriction on or prohibition against any transfer or assignment that would result in a termination or reclassification for federal or state tax purposes, or would otherwise violate any state or federal law or court order.

We believe that the restrictions imposed under our declaration of trust on the transfer of shares do not result in the failure of our shares to be “freely transferable.” In addition, we do not expect or intend to impose in the future, or to permit any person to impose on our behalf, any limitations or restrictions on transfer that would not be among the enumerated permissible limitations or restrictions in the regulation.

Assuming that each class of our shares will be “widely held” and that no facts and circumstances exist that restrict transferability of these shares, our tax counsel, Sullivan & Worcester LLP, is of the opinion that our shares will not fail to be “freely transferable” for purposes of the regulation due to the restrictions on transfer of our shares in our declaration of trust and that under the regulation each class of our currently outstanding shares is publicly offered and our assets will not be deemed to be “plan assets” of any ERISA Plan or Non-ERISA Plan that acquires our shares in a public offering.

Additionally, limitations or restrictions on the transfer or assignment of a security that are created or imposed by persons other than the issuer of a security or persons acting for or on behalf of the issuer will ordinarily not prevent the security from being considered freely transferable.

We believe that the restrictions imposed under our declaration of trust on the transfer of shares do not result in the failure of our shares to be “freely transferable.” In addition, we do not expect or intend to impose in the future, or to permit any person to impose on our behalf, on shares owned by an ERISA Plan or Non-ERISA Plan, any limitations or restrictions on transfer that would not be among the enumerated permissible limitations or restrictions in the regulation and that would otherwise result in the failure of our shares to be “freely transferable”.

Assuming that each class of our shares will be “widely held” and that no facts and circumstances exist that prevent shares owned by an ERISA Plan or Non-ERISA Plan from being “freely transferable” for purposes of the regulation, our tax counsel, Sullivan & Worcester LLP, is of the opinion that under the regulation each class of our currently outstanding shares is publicly offered and our assets will not be deemed to be “plan assets” of any ERISA Plan or Non-ERISA Plan that acquires our shares in a public offering.

This opinion is conditioned upon certain assumptions and representations, as discussed above under the heading “Material United States Federal Income Tax Considerations—Taxation as a REIT.” Also, the opinion of our tax counsel is not binding on either the Department of Labor or a court, and either could take a position different from that expressed by our tax counsel.

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 1. Business