UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549 
FORM 10-Q
 
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 20222023
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
Commission File Number 001-34383
 
Seven Hills Realty Trust
(Exact Name of Registrant as Specified in Its Charter)
Maryland20-4649929
(State of Organization)(IRS Employer Identification No.)
 
Two Newton Place, 255 Washington Street, Suite 300, Newton, MA 02458-1634
(Address of Principal Executive Offices)                            (Zip Code)
Registrant’s Telephone Number, Including Area Code 617-332-9530
Securities registered pursuant to Section 12(b) of the Act:
Title of Each ClassTrading SymbolName of each exchange on which registered
Common Shares of Beneficial InterestSEVNThe Nasdaq Stock Market LLC
Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.  Yes   No
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).  Yes   No
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer Accelerated filer
Non-accelerated filer Smaller reporting company
Emerging growth company

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided in Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐  No
Number of registrant's common shares of beneficial interest, $0.001 par value per share, outstanding as of April 25, 2022: 14,597,07920, 2023: 14,706,862.



Table of Contents
SEVEN HILLS REALTY TRUST
FORM 10-Q
March 31, 20222023
 
INDEX
  Page
 
 


References in this Quarterly Report on Form 10-Q to SEVN, we, us"SEVN", "we", "us" or our"our" mean Seven Hills Realty Trust and its consolidated subsidiaries unless otherwise expressly stated or the context indicates otherwise.


Table of Contents
PART I. Financial Information
Item 1. Financial Statements
SEVEN HILLS REALTY TRUST
CONDENSED CONSOLIDATED BALANCE SHEETS
(dollars in thousands, except per share data)
(unaudited)

March 31,December 31,March 31,December 31,
2022202120232022
ASSETSASSETSASSETS
Cash and cash equivalentsCash and cash equivalents$8,953 $26,197 Cash and cash equivalents$84,300 $71,057 
Restricted cashRestricted cash98 Restricted cash10 
Loans held for investmentLoans held for investment622,070 669,929 
Allowance for credit lossesAllowance for credit losses(4,135)— 
Loans held for investment, netLoans held for investment, net622,710 570,780 Loans held for investment, net617,935 669,929 
Accrued interest receivableAccrued interest receivable3,346 3,354 
Prepaid expenses and other assetsPrepaid expenses and other assets3,353 2,918 Prepaid expenses and other assets1,176 2,497 
Total assetsTotal assets$635,025 $599,993 Total assets$706,765 $746,847 
LIABILITIES AND SHAREHOLDERS' EQUITYLIABILITIES AND SHAREHOLDERS' EQUITYLIABILITIES AND SHAREHOLDERS' EQUITY
Accounts payable, accrued liabilities and deposits$967 $1,561 
Accounts payable, accrued liabilities and other liabilitiesAccounts payable, accrued liabilities and other liabilities$3,262 $1,903 
Secured financing facilities, netSecured financing facilities, net367,679 339,627 Secured financing facilities, net433,385 471,521 
Due to related personsDue to related persons1,126 1,111 Due to related persons2,371 1,844 
Total liabilitiesTotal liabilities369,772 342,299 Total liabilities439,018 475,268 
Commitments and contingenciesCommitments and contingencies00Commitments and contingencies
Shareholders' equity:Shareholders' equity:Shareholders' equity:
Common shares of beneficial interest, $0.001 par value per share; 25,000,000 shares authorized; 14,597,079 shares issued and outstanding15 15 
Common shares of beneficial interest, $0.001 par value, 25,000,000 shares authorized; 14,706,862 and 14,709,165 shares issued and outstanding, respectivelyCommon shares of beneficial interest, $0.001 par value, 25,000,000 shares authorized; 14,706,862 and 14,709,165 shares issued and outstanding, respectively15 15 
Additional paid in capitalAdditional paid in capital237,706 237,624 Additional paid in capital238,612 238,505 
Cumulative net incomeCumulative net income35,776 24,650 Cumulative net income53,498 52,290 
Cumulative distributionsCumulative distributions(8,244)(4,595)Cumulative distributions(24,378)(19,231)
Total shareholders' equityTotal shareholders' equity265,253 257,694 Total shareholders' equity267,747 271,579 
Total liabilities and shareholders' equityTotal liabilities and shareholders' equity$635,025 $599,993 Total liabilities and shareholders' equity$706,765 $746,847 


See accompanying notes.
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Table of Contents
SEVEN HILLS REALTY TRUST
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(amounts in thousands, except per share data)
(unaudited)

Three Months Ended March 31,Three Months Ended March 31,
2022202120232022
INCOME FROM INVESTMENTS:INCOME FROM INVESTMENTS:INCOME FROM INVESTMENTS:
Interest income from investments$9,579 $2,001 
Interest and related incomeInterest and related income$15,856 $9,579 
Purchase discount accretionPurchase discount accretion5,935 — Purchase discount accretion1,185 5,935 
Less: interest and related expensesLess: interest and related expenses(1,737)— Less: interest and related expenses(7,694)(1,737)
Income from investments, netIncome from investments, net13,777 2,001 Income from investments, net9,347 13,777 
OTHER EXPENSES:OTHER EXPENSES:OTHER EXPENSES:
Base management feesBase management fees1,063 715 Base management fees1,072 1,063 
General and administrative expensesGeneral and administrative expenses946 592 General and administrative expenses796 872 
Reimbursement of shared services expensesReimbursement of shared services expenses560 326 Reimbursement of shared services expenses643 634 
Reversal of credit lossesReversal of credit losses(987)— 
Other transaction related costsOther transaction related costs37 — Other transaction related costs— 37 
Total other expensesTotal other expenses2,606 1,633 Total other expenses1,524 2,606 
Income before income tax expense11,171 368 
Income before income taxesIncome before income taxes7,823 11,171 
Income tax expenseIncome tax expense(45)(18)Income tax expense(20)(45)
Net incomeNet income$11,126 $350 Net income$7,803 $11,126 
Weighted average common shares outstanding - basicWeighted average common shares outstanding - basic14,505 10,202 Weighted average common shares outstanding - basic14,582 14,505 
Weighted average common shares outstanding - dilutedWeighted average common shares outstanding - diluted14,519 10,202 Weighted average common shares outstanding - diluted14,582 14,519 
Net income per common share - basic and dilutedNet income per common share - basic and diluted$0.76 $0.03 Net income per common share - basic and diluted$0.53 $0.76 


See accompanying notes.


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Table of Contents
SEVEN HILLS REALTY TRUST
CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY
(amounts in thousands)
(unaudited)
Number ofAdditional
CommonCommonPaid InCumulativeCumulative
 SharesSharesCapitalNet IncomeDistributionsTotal
Balance at December 31, 202214,709 $15 $238,505 $52,290 $(19,231)$271,579 
Cumulative-effect adjustment upon adoption of ASU No. 2016-13 (Note 2)— — — (6,595)— (6,595)
Share grants— — 121 — — 121 
Share repurchases(1)— (13)— — (13)
Share forfeitures(1)— (1)— — (1)
Net income— — — 7,803 — 7,803 
Distributions— — — — (5,147)(5,147)
Balance at March 31, 202314,707 $15 $238,612 $53,498 $(24,378)$267,747 

Number ofAdditional
CommonCommonPaid InCumulativeCumulative
 SharesSharesCapitalNet IncomeDistributionsTotal
Balance at December 31, 2021Balance at December 31, 202114,597 $15 $237,624 $24,650 $(4,595)$257,694 Balance at December 31, 202114,597 $15 $237,624 $24,650 $(4,595)$257,694 
Share grantsShare grants— — 82 — — 82 Share grants— — 82 — — 82 
Net incomeNet income— — — 11,126 — 11,126 Net income— — — 11,126 — 11,126 
DistributionsDistributions— — — — (3,649)(3,649)Distributions— — — — (3,649)(3,649)
Balance at March 31, 2022Balance at March 31, 202214,597 $15 $237,706 $35,776 $(8,244)$265,253 Balance at March 31, 202214,597 $15 $237,706 $35,776 $(8,244)$265,253 
Net assets at December 31, 202010,202 $10 $192,884 $— $— $192,894 
Net income— — — 350 — 350 
Balance at March 31, 202110,202 $10 $192,884 $350 $— $193,244 


See accompanying notes.

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Table of Contents
SEVEN HILLS REALTY TRUST
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(dollars in thousands)
(unaudited)

Three Months Ended March 31,Three Months Ended March 31,
2022202120232022
CASH FLOWS FROM OPERATING ACTIVITIES:CASH FLOWS FROM OPERATING ACTIVITIES:CASH FLOWS FROM OPERATING ACTIVITIES:
Net incomeNet income$11,126 $350 Net income$7,803 $11,126 
Adjustments to reconcile net income to net cash provided by (used in) operating activities:
Adjustments to reconcile net income to net cash provided by operating activities:Adjustments to reconcile net income to net cash provided by operating activities:
Accretion of purchase discountAccretion of purchase discount(5,935)— Accretion of purchase discount(1,185)(5,935)
Reversal of credit lossesReversal of credit losses(987)— 
Amortization of loan origination and exit feesAmortization of loan origination and exit fees(1,004)(1,298)
Amortization of deferred financing costsAmortization of deferred financing costs307 209 
Share based compensationShare based compensation82 — Share based compensation120 82 
Amortization of deferred financing costs209 — 
Amortization of loan origination and exit fees(1,298)(254)
Changes in operating assets and liabilities:Changes in operating assets and liabilities:Changes in operating assets and liabilities:
Accrued interest receivableAccrued interest receivable(133)
Prepaid expenses and other assetsPrepaid expenses and other assets(520)(219)Prepaid expenses and other assets1,101 (387)
Accounts payable, accrued liabilities and deposits(594)(1,815)
Accounts payable, accrued liabilities and other liabilitiesAccounts payable, accrued liabilities and other liabilities(113)(594)
Due to related personsDue to related persons15 553 Due to related persons527 15 
Net cash provided by (used in) operating activities3,085 (1,385)
Net cash provided by operating activitiesNet cash provided by operating activities6,577 3,085 
CASH FLOWS FROM INVESTING ACTIVITIES:CASH FLOWS FROM INVESTING ACTIVITIES:CASH FLOWS FROM INVESTING ACTIVITIES:
Origination of loans held for investmentOrigination of loans held for investment(90,036)(54,840)Origination of loans held for investment— (90,036)
Additional funding of loans held for investmentAdditional funding of loans held for investment(3,219)(204)Additional funding of loans held for investment(1,651)(3,219)
Repayment of loans held for investmentRepayment of loans held for investment48,643 — Repayment of loans held for investment51,918 48,643 
Net cash used in investing activities(44,612)(55,044)
Net cash provided by (used in) investing activitiesNet cash provided by (used in) investing activities50,267 (44,612)
CASH FLOWS FROM FINANCING ACTIVITIES:CASH FLOWS FROM FINANCING ACTIVITIES:CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from secured financing facilitiesProceeds from secured financing facilities130,160 — Proceeds from secured financing facilities— 130,160 
Repayments under secured financing facilitiesRepayments under secured financing facilities(101,597)— Repayments under secured financing facilities(38,125)(101,597)
Payments of deferred financing costsPayments of deferred financing costs(720)(76)Payments of deferred financing costs(318)(720)
Repurchase of common sharesRepurchase of common shares(13)— 
DistributionsDistributions(5,147)(3,649)
Net cash (used in) provided by financing activitiesNet cash (used in) provided by financing activities(43,603)24,194 
Distributions(3,649)— 
Net cash provided by (used in) financing activities24,194 (76)
Decrease in cash, cash equivalents and restricted cash(17,333)(56,505)
Increase (decrease) in cash, cash equivalents and restricted cashIncrease (decrease) in cash, cash equivalents and restricted cash13,241 (17,333)
Cash, cash equivalents and restricted cash at beginning of periodCash, cash equivalents and restricted cash at beginning of period26,295��103,564 Cash, cash equivalents and restricted cash at beginning of period71,067 26,295 
Cash, cash equivalents and restricted cash at end of periodCash, cash equivalents and restricted cash at end of period$8,962 $47,059 Cash, cash equivalents and restricted cash at end of period$84,308 $8,962 
SUPPLEMENTAL DISCLOSURES:SUPPLEMENTAL DISCLOSURES:SUPPLEMENTAL DISCLOSURES:
Interest paidInterest paid$1,584 $— Interest paid$7,408 $1,584 
Income taxes paidIncome taxes paid$47 $1,830 Income taxes paid$$47 





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Table of Contents


SUPPLEMENTAL DISCLOSURE OF CASH, CASH EQUIVALENTS AND RESTRICTED CASH:
The table below provides a reconciliation of cash, cash equivalents and restricted cash reported within the condensed consolidated balance sheets to the amounts shown in the condensed consolidated statements of cash flows:
As of March 31,As of March 31,
2022202120232022
Cash and cash equivalentsCash and cash equivalents$8,953 $46,839 Cash and cash equivalents$84,300 $8,953 
Restricted cashRestricted cash220 Restricted cash
Total cash, cash equivalents and restricted cash shown in the condensed consolidated statements of cash flowsTotal cash, cash equivalents and restricted cash shown in the condensed consolidated statements of cash flows$8,962 $47,059 Total cash, cash equivalents and restricted cash shown in the condensed consolidated statements of cash flows$84,308 $8,962 

See accompanying notes.
5

Table of Contents
SEVEN HILLS REALTY TRUST
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(dollars in thousands, except per share data)

Note 1. Basis of Presentation
The accompanying condensed consolidated financial statements are unaudited. Certain information and disclosures required by U.S. generally accepted accounting principles, or GAAP, for complete financial statements have been condensed or omitted. We believe the disclosures made are adequate to make the information presented not misleading. However, the accompanying condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and notes contained in our Annual Report on Form 10-K for the year ended December 31, 2021,2022, or our 20212022 Annual Report. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair statement of results for the interim periods have been included. All intercompany transactions and balances with or among our consolidated subsidiaries have been eliminated. Operating results for interim periods are not necessarily indicative of the results that may be expected for the full year.

The preparation of financial statements in conformity with GAAP requires us to make estimates and assumptions that affect reported amounts. Actual results could differ from those estimates. Significant estimates in the accompanying condensed consolidated financial statements include the allowance for credit losses and the fair value of financial instruments.

Certain prior year amounts have been reclassified to conform to current year presentation.
Note 2. RecentRecently Adopted Accounting Pronouncements
In June 2016, the Financial Accounting Standards Board, or the FASB, issuedOn January 1, 2023, we adopted Accounting Standards Update, or ASU, No. 2016-13, Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments, which requires that entities usereplaces the “incurred loss” model for recognizing credit losses with a new forward-looking “expected loss” model that generally will result in the earlier recognition of allowance for credit losses. The measurement of current expected credit losses, or CECL, is based upon historical experience, current conditions, and reasonable and supportable forecasts incorporating forward-looking information that affect the collectability of the reported amount. AsASU No. 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 smaller reporting company,valuation account that is deducted from the related loans’ amortized cost basis on our condensed consolidated balance sheets. Our loans typically include commitments to fund incremental proceeds to borrowers over the life of the loan; these future funding commitments are also subject to the CECL model. The allowance for credit losses related to unfunded loan commitments is included in accounts payable, accrued liabilities and other liabilities on our condensed consolidated balance sheets.
Given the lack of historical loss data related to our loan portfolio, we expectelected to adoptestimate 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 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. 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. 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 to the amortized cost basis of the loan. For collateral-dependent loans for which foreclosure is probable, the related allowance for credit losses is determined using the fair value of the collateral compared to the loan's amortized cost.

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SEVEN HILLS REALTY TRUST
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(dollars in thousands, except per share data)

Upon adoption of ASU No. 2016-13 using the modified retrospective transition method and, based on our loan portfolio, the then current economic environment and expectations for future conditions, we recorded a cumulative-effect adjustment reducing our cumulative net income on our condensed consolidated balance sheets by $6,595, establishing an allowance for credit losses of $4,893 with respect to our then outstanding loans held for investment and increasing accounts payable, accrued liabilities and other liabilities by $1,702 with respect to our then unfunded loan commitments. No reserve for loan losses or allowance for credit losses was recognized within our consolidated financial statements prior to our adoption of ASU No. 2016-13.
Concurrent with our adoption of ASU No. 2016-13, on January 1, 2023. We are currently assessing the potential impact the adoption of ASU No. 2016-13 will have on our condensed consolidated financial statements. The effect of the adoption of ASU No. 2016-13, if material, will be presented as a cumulative-effect adjustment to equity as of the date of adoption.
In March 2022, the FASB issued2023, 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 have adopted ASU No. 2016-13. Instead, an entity must apply the loan refinancing and restructure guidance in Accounting Standards Codification, or ASC, Topic 310, Receivables (Topic 310), to determine whether a modification results in a new loan or continuation of an existing loan.loan under Accounting Standards Codification, or ASC, 310, Receivables (Topic 310), or ASC 310. If a borrower is experiencing financial difficulty, enhanced disclosures are required. ASU No. 2022-02 also amended the guidance on vintage disclosures to requirerequires disclosure of current period gross write-offs by year of origination. We expect to adopt ASU No. 2022-02 prospectively on January 1, 2023, concurrently with the adoption of ASU No. 2016-13. We are currently assessing the potential impact theThe adoption of ASU No. 2022-02 willusing the prospective transition method did not have a material impact on our condensed consolidated financial statements.
See Note 2 to our Consolidated Financial Statements included in Part IV, Item 15 of our 2022 Annual Report for further information regarding our measurement of reserves for loan losses prior to our adoption of ASU No. 2016-13 and our internal loan risk rating policy.
Note 3. Loans Held for Investment, net
We originate first mortgage loans secured by middle market and transitional commercial real estate, or CRE, which are generally to be held as long term investments. We fundedfund our loan portfolio using cash on hand and advancements under our secured financing facilities. Additionally, we acquired the loan portfolio of Tremont Mortgage Trust, or TRMT,Secured Financing Facilities, as defined in the merger of TRMT with and into us on September 30, 2021, or the Merger, with our common shares.Note 4. See Note 4 for further information regarding our secured financing agreements.


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SEVEN HILLS REALTY TRUST
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(dollars in thousands, except per share data)

The table below provides overall statistics for our loan portfolio as of March 31, 20222023 and December 31, 2021:2022:    
As of March 31, 2022As of December 31, 2021As of March 31, 2023As of December 31, 2022
Number of loansNumber of loans2726Number of loans2527
Total loan commitmentsTotal loan commitments$684,547$648,266Total loan commitments$674,475$727,562
Unfunded loan commitments (1)
Unfunded loan commitments (1)
$47,812$57,772
Unfunded loan commitments (1)
$45,779$49,007
Principal balancePrincipal balance$636,831$590,590Principal balance$628,696$678,555
Carrying valueCarrying value$622,710$570,780Carrying value$617,935$669,929
Weighted average coupon rateWeighted average coupon rate4.57 %4.54 %Weighted average coupon rate8.57 %8.07 %
Weighted average all in yield (2)
Weighted average all in yield (2)
5.10 %5.08 %
Weighted average all in yield (2)
9.06 %8.57 %
Weighted average floorWeighted average floor0.61 %0.68 %Weighted average floor0.65 %0.62 %
Weighted average maximum maturity (years) (3)
Weighted average maximum maturity (years) (3)
3.73.8
Weighted average maximum maturity (years) (3)
3.13.3
Weighted average risk ratingWeighted average risk rating2.82.9Weighted average risk rating2.92.9
(1)Unfunded loan commitments are primarily used to finance property and building improvements and leasing capital and are generally funded over the term of the loan.
(2)All in yield represents the yield on a loan, including amortization of deferred fees over the initial term of the loan and excluding any purchase discount accretion.
(3)    Maximum maturity assumes all borrower loan extension options have been exercised, which options are subject to the borrower meeting certain conditions.

The tables below represent our loan activities during the three months ended March 31, 2022 and 2021:
Principal BalanceDeferred Fees and Other ItemsCarrying Value
Balance at December 31, 2021$590,590 $(19,810)$570,780 
Additional funding3,304 — 3,304 
Originations91,184 (1,148)90,036 
Repayments(48,247)— (48,247)
Net amortization of deferred fees— 902 902 
Net purchase discount accretion— 5,935 5,935 
Balance at March 31, 2022$636,831 $(14,121)$622,710 
Principal BalanceDeferred Fees and Other ItemsCarrying Value
Balance at December 31, 2020$92,863 $(984)$91,879 
Additional funding274 — 274 
Originations55,515 (675)54,840 
Net amortization of deferred fees— 254 254 
Balance at March 31, 2021$148,652 $(1,405)$147,247 

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SEVEN HILLS REALTY TRUST
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(dollars in thousands, except per share data)

The tables below represent our loan activities during the three months ended March 31, 2023 and 2022:
Principal BalanceDeferred Fees and Other ItemsAmortized Cost
Balance at December 31, 2022$678,555 $(8,626)$669,929 
Additional funding1,884 (14)1,870 
Repayments(51,743)(175)(51,918)
Net amortization of deferred fees— 1,004 1,004 
Purchase discount accretion— 1,185 1,185 
Balance at March 31, 2023$628,696 $(6,626)$622,070 
Principal BalanceDeferred Fees and Other ItemsAmortized Cost
Balance at December 31, 2021$590,590 $(19,810)$570,780 
Additional funding3,304 — 3,304 
Originations91,184 (1,148)90,036 
Repayments(48,247)— (48,247)
Net amortization of deferred fees— 902 902 
Purchase discount accretion— 5,935 5,935 
Balance at March 31, 2022$636,831 $(14,121)$622,710 
The tables below detail the property type and geographic location of the properties securing the loans in our portfolio as of March 31, 20222023 and December 31, 2021:2022:
March 31, 2022December 31, 2021March 31, 2023December 31, 2022
Property TypeProperty TypeNumber of LoansCarrying ValuePercentage of ValueNumber of LoansCarrying ValuePercentage of ValueProperty TypeNumber of LoansAmortized CostPercentage of ValueNumber of LoansAmortized CostPercentage of Value
Office (1)
Office (1)
13$276,406 45 %13$269,865 47 %
Office (1)
10$244,302 39 %11$252,796 38 %
MultifamilyMultifamily6142,220 23 %5106,002 19 %Multifamily8198,390 32 %8197,229 29 %
Lab— — %113,398 %
RetailRetail6145,012 23 %488,724 16 %Retail4110,037 18 %4109,248 16 %
Industrial (1)
Industrial (1)
259,072 %392,791 16 %
Industrial (1)
369,341 11 %4110,656 17 %
27$622,710 100 %26$570,780 100 %25$622,070 100 %27$669,929 100 %
(1)    NaNAs of December 31, 2022, one loan investmentsinvestment secured by a mixed use propertiesproperty consisting of office space and an industrial warehouse in Aurora, IL and Colorado Springs, CO arewas classified as office for the purpose of counting the number of loans in our portfolio because the majority of the square footage of the properties consistsproperty consisted of office space. The carrying valueamortized cost of thesethis loan investments isinvestment was reflected in office and industrial based on the fair value of the buildingsbuilding at the time of origination relative to the total fair value of the properties.property. During the three months ended March 31, 2023, our loan investment in Aurora, IL was repaid.
March 31, 2022December 31, 2021March 31, 2023December 31, 2022
Geographic LocationGeographic LocationNumber of LoansCarrying ValuePercentage of ValueNumber of LoansCarrying ValuePercentage of ValueGeographic LocationNumber of LoansAmortized CostPercentage of ValueNumber of LoansAmortized CostPercentage of Value
MidwestMidwest8$235,289 38 %9$251,208 37 %
WestWest8148,085 24 %8146,837 22 %
SouthSouth5133,243 21 %6166,616 25 %
EastEast3$65,481 10 %3$55,132 10 %East4105,453 17 %4105,268 16 %
South8190,383 31 %7153,495 27 %
West8147,126 24 %8145,453 25 %
Midwest8219,720 35 %8216,700 38 %
27$622,710 100 %26$570,780 100 %25$622,070 100 %27$669,929 100 %
Loan
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SEVEN HILLS REALTY TRUST
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(dollars in thousands, except per share data)

Credit Quality Information
We evaluate the credit quality of each of our loans for impairment at least quarterly by assessing a variety of risk factors in relation to each loan and assigning a risk rating to each loan based on those factors. The higher the number, the greater the risk level. See our 20212022 Annual Report for more information regarding our loan risk ratings.

The following table allocatesAs of March 31, 2023 and December 31, 2022, the carrying valueamortized cost of our loan portfolio at March 31, 2022 and December 31, 2021 based on ourwithin each internal risk rating policy:by year of origination was as follows:
March 31, 2022December 31, 2021
March 31, 2023March 31, 2023
Risk RatingRisk RatingNumber of LoansCarrying ValueNumber of LoansCarrying ValueRisk RatingNumber of LoansPercentage of Portfolio202320222021PriorTotal
11$— $— 11%$— $— $— $9,496 $9,496 
228147,472 494,743 2520 %— 41,952 31,483 52,289 125,724 
3317448,922 21463,600 31663 %— 128,678 236,711 29,001 394,390 
44226,316 112,437 4315 %— 36,538 39,970 15,952 92,460 
55— — 5— %— — — — — 
27$622,710 26$570,780 25100 %$— $207,168 $308,164 $106,738 $622,070 
December 31, 2022
Risk RatingNumber of LoansPercentage of Portfolio202220212020PriorTotal
11%$— $— $9,708 $— $9,708 
2620 %— 65,902 68,740 — 134,642 
31765 %169,516 235,602 — 28,998 434,116 
4314 %36,506 39,314 — 15,643 91,463 
5— %— — — — — 
27100 %$206,022 $340,818 $78,448 $44,641 $669,929 
The weighted average risk rating of our loans by carrying value was 2.8 and 2.9 as of March 31, 20222023 and December 31, 2021,2022, respectively. The COVID-19 pandemic has negatively impacted someCertain of our borrowers’borrowers' business operations or tenants, particularly in the cases of ourcertain office and retail and hospitality collateral, some of which are the types of properties, that have been mostwere negatively impacted by the pandemic. We expectCOVID-19 pandemic and continue to be impacted by market conditions that arose or intensified during or in response to the pandemic and which have continued to be impacted. Current inflationary pressures, rising or sustained high interest rates, supply chain issues or a prolonged economic slowdown or recession could amplify those negative impacts may continue and may apply to other borrowers and/or their tenants. Further, although economic activity in the U.S. has improved significantly from the low points during the pandemic to date, certain industries have not recovered to their pre-pandemic positions.impacts. Therefore, certain of our borrowers’ business plans have taken or will likely take longer to execute than initially expected, and as a result, certain of our borrowers may be unable to pay their debt service obligations owed and due to us as currently scheduled or at all. As of
The table below represents the changes to the allowance for credit losses during the three months ended March 31, 2022, we had 2 loans representing approximately 4% of the carrying value of our loan portfolio with a loan risk rating of “4” or “higher risk".2023:
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NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(dollars in thousands, except per share data)


Loans Held For Investment, netUnfunded Loan CommitmentsTotal
Balance at December 31, 2022$— $— $— 
Cumulative-effect adjustment upon adoption of ASU No. 2016-134,893 1,702 6,595 
Reversal of credit losses(758)(229)(987)
Balance At March 31, 2023$4,135 $1,473 $5,608 
We may enter into loan modifications that include, among other changes, extensions of maturity dates, repurposing or required replenishment of reserves, increases or decreases in loan commitments and required pay downs of principal amounts outstanding. Modifications that represent concessionsLoan modifications are evaluated to determine whether a borrower that is experiencing financial difficulties are classified as troubled debt restructurings and considered impaired.

In February 2022, we amended the agreement governing ourmodification results in a new loan secured by an office property located in Yardley, PA. As part of this amendment, the loan commitment was increased by $1,600, or the Additional Advance, and may be used to finance debt service costs and operating costs of the borrower and the initial maturity date was extended by one year to December 19, 2023. For purposes of calculating interest due to us for this loan, the Additional Advance is deemed to be outstanding as of the date of the amendment, regardless of whether such amounts have been advanced, at the London Interbank Offered Rate, or LIBOR, or a replacement base rate determined by us if LIBOR is no longer available, plus 12.0%. Ascontinuation of March 31, 2022, thisan existing loan had a risk rating of 4. The modification of this loan resulting from the amendment was determined not to be a troubled debt restructuring. However, we accounted for this modification as an extinguishment in accordance withunder ASC Topic 310, Receivables, because the changes to the terms were determined to be more than minor. As such, we recognized the related unaccreted purchase discount of $1,748 as interest income from investments in our condensed consolidated statements of income.

310. There were no other materialsuch modifications to our loan portfolio for borrowers experiencing financial difficulties during the three months ended March 31, 2022.2023.
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SEVEN HILLS REALTY TRUST
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(dollars in thousands, except per share data)

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 three months ended March 31, 2023, compared to the January 1, 2023 cumulative-effect adjustment upon adoption of ASU No. 2016-13, is primarily attributable to favorable changes in the macroeconomic outlook, most notably in near-term CRE pricing forecasts, and loan repayments.
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.
We did not have any impairedpast due loans or nonaccrual loans as of March 31, 20222023 or December 31, 2021.2022. As of March 31, 20222023 and April 25, 2022,20, 2023, all of our borrowers had paid all of their debt service obligations owed and due to us and none of the loans included inus. See our investment portfolio were in default.2022 Annual Report for more information regarding our nonaccrual policy.

Note 4. Secured Financing Agreements
Our secured financing agreements at March 31, 20222023 consisted of agreements that govern: our master repurchase facility with UBS AG,Wells Fargo, National Association, or UBS,Wells Fargo, or the UBSWells Fargo Master Repurchase Facility; our master repurchase facility with Citibank, N.A., or Citibank, or the Citibank Master Repurchase Facility; our facility loan program with BMO Harris Bank N.A., or BMO, or the BMO Facility, and our master repurchase facility with Wells Fargo, National Association,UBS AG, or Wells Fargo,UBS, or the Wells FargoUBS Master Repurchase Facility. We refer to the UBSWells Fargo Master Repurchase Facility, the Citibank Master Repurchase Facility and the Wells FargoUBS Master Repurchase Facility, collectively, as our Master Repurchase Facilities. We refer to the Master Repurchase Facilities and the BMO Facility, collectively, as our Secured Financing Facilities. See our 20212022 Annual Report for more information regarding our Secured Financing Facilities.
Wells Fargo Master Repurchase Facility

On March 11, 2022, one of our wholly owned subsidiaries entered into a master repurchase and securities agreement with Wells Fargo, or the Wells Fargo Master Repurchase Agreement, for the Wells Fargo Master Repurchase Facility. The Wells Fargo Master Repurchase Facility provides up to $125,000 in advances, with an option to increase the maximum facility amount to $250,000, subject to certain terms and conditions. We expect to use the Wells Fargo Master Repurchase Facility to finance the acquisition or origination of floating rate, commercial mortgage loans. We refer to our loan investments that secure advances we receive under any of our Secured Financing Facilities as the purchased assets. The expiration date of the Wells Fargo Master Repurchase Agreement is March 11, 2025, unless extended or earlier terminated in accordance with the terms of the Wells Fargo Master Repurchase Agreement.

Under the Wells Fargo Master Repurchase Facility, the initial purchase price paid by Wells Fargo for each purchased asset is up to 75% or 80%, depending on the property type of the purchased asset’s real estate collateral, of the lesser of the market value of the purchased asset or the unpaid principal balance of such purchased asset, and subject to Wells Fargo’s approval. Upon the repurchase of a purchased asset, we are required to pay Wells Fargo the outstanding purchase price of the purchased asset, accrued interest and all accrued and unpaid expenses of Wells Fargo relating to such purchased asset. Interest on advancements under the Wells Fargo Master Repurchase Facility will be calculated at the Secured Overnight Financing Rate, or SOFR, plus a premium.

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NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(dollars in thousands, except per share data)

In connection with our Wells Fargo Master Repurchase Agreement, we entered into a guaranty, or the Wells Fargo Guaranty, which requires us to guarantee 25% of the aggregate repurchase price, and 100% of losses in the event of certain bad acts as well as any costs and expenses of Wells Fargo related to our Wells Fargo Master Repurchase Agreement. The Wells Fargo Guaranty also contains financial covenants, which require us to maintain a minimum tangible net worth, a minimum liquidity and a minimum interest coverage ratio and to satisfy a total indebtedness to stockholders’ equity ratio.

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

In addition, our Wells Fargo Master Repurchase Agreement provides for acceleration of the date of repurchase of the purchased assets by us and Wells Fargo’s liquidation of the purchased assets upon the occurrence and continuation of certain events of default, including a change of control of us, which includes Tremont Realty Capital LLC, or Tremont, ceasing to act as our sole manager or to be a wholly owned subsidiary of The RMR Group LLC, or RMR.

Citibank Master Repurchase Facility

On March 15, 2022, we amended and restated our master repurchase agreement with Citibank, or the Citibank Master Repurchase Agreement. The amended and restated Citibank Master Repurchase Agreement increased the maximum amount of available advancements under our Citibank Master Repurchase Facility to $215,000, extended the stated maturity date to March 15, 2025, and made certain other changes to the agreement and related fee letter, including replacing LIBOR with SOFR, for interest rate calculations on advancements under the Citibank Master Repurchase Facility and modifying certain pricing terms.

BMO Facility

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

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

As of March 31, 2022,2023, we were in compliance with the covenants and other terms of the agreements that govern our Secured Financing Facilities.

As of March 31, 20222023 and April 25, 2022,20, 2023, we had a $369,432$435,490 and a $378,905,$426,340, respectively, aggregate outstanding principal balance under our Secured Financing Facilities.

AsThe table below summarizes our Secured Financing Facilities as of March 31, 2022, our outstanding2023 and December 31, 2022:
Debt Obligation
Weighted AverageCollateral
Maximum Facility SizePrincipal BalanceCarrying Value
Coupon Rate (1)
Remaining Maturity (years) (2)
Principal Balance
March 31, 2023:
Citibank Master Repurchase Facility$215,000 $150,101 $149,845 6.83 %0.9$205,380 
UBS Master Repurchase Facility192,000 133,108 132,680 6.80 %0.8182,530 
BMO Facility150,000 84,855 84,296 6.73 %2.0113,745 
Wells Fargo Master Repurchase Facility125,000 67,426 66,564 6.57 %1.989,177 
Total/weighted average$682,000 $435,490 $433,385 6.76 %1.3$590,832 
December 31, 2022:
Citibank Master Repurchase Facility$215,000 $150,647 $150,360 6.34 %1.1$205,234 
UBS Master Repurchase Facility192,000 144,437 143,887 6.48 %1.1198,254 
BMO Facility150,000 111,105 110,473 6.22 %2.2148,476 
Wells Fargo Master Repurchase Facility125,000 67,426 66,801 6.23 %2.189,008 
Total/weighted average$682,000 $473,615 $471,521 6.34 %1.5$640,972 
(1)The weighted average coupon rate is determined using the Secured Overnight Financing Rate, or SOFR, plus a spread ranging from 1.83% to 2.51%, as applicable, for the respective borrowings under our Secured Financing Facilities hadas of the followingapplicable date.
(2)The weighted average remaining maturities:
Principal Payments on
Secured Financing Facilities
2022$31,448 
202386,996
2024219,338
202531,650
2026
$369,432 

maturity is determined using the current maturity date of our corresponding loan investments, assuming no borrower loan extension options have been exercised. As of March 31, 2023, our Citibank Master Repurchase Facility, UBS Master Repurchase Facility and Wells Fargo Master Repurchase Facility mature on March 15, 2025, February 18, 2024 and March 11, 2025, respectively. Our BMO Facility matures at various dates based on the respective underlying loans held for investment.
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SEVEN HILLS REALTY TRUST
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(dollars in thousands, except per share data)

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

Debt Obligation
Weighted AverageCollateral
Maximum Facility SizePrincipal BalanceCarrying Value
Coupon Rate (1)
Remaining Maturity (2) (years)
Principal Balance
March 31, 2022:
UBS Master Repurchase Facility$192,000 $127,278 $126,475 2.40 %1.8$192,044 
Citibank Master Repurchase Facility215,000 159,878 159,557 2.32 %1.7223,744 
Wells Fargo Master Repurchase Facility125,000 — — — 2.9— 
BMO Facility100,000 82,276 81,647 2.16 %2.8109,701 
Total/weighted average$632,000 $369,432 $367,679 2.32 %1.9$525,489 
December 31, 2021:
UBS Master Repurchase Facility$192,000 $167,928 $167,024 2.09 %2.0$225,868 
Citibank Master Repurchase Facility213,482 161,825 161,724 2.03 %0.7222,129 
BMO Facility100,000 11,116 10,879 2.01 %2.714,821 
Total/weighted average$505,482 $340,869 $339,627 2.06 %1.4$462,818 
(1)The weighted average coupon rate is determined using LIBOR or SOFR plus a spread ranging from 1.80% to 2.30%, as applicable, for the respective2023, our outstanding borrowings under our Secured Financing Facilities.Facilities had the following remaining maturities:
(2)The weighted average remaining maturity is determined using the current maturity date of the corresponding loans, assuming no borrower loan extension options have been exercised. As of March 31, 2022, our UBS Master Repurchase Facility, Citibank Master Repurchase Facility and Wells Fargo Master Repurchase Facility mature on February 18, 2024, March 15, 2025 and March 11, 2025, respectively. Our BMO Facility matures at various dates based on the respective underlying loans held for investment.

YearPrincipal Payments on
Secured Financing Facilities
2023$87,237 
2024237,996 
2025110,257 
2026 and thereafter— 
$435,490 
Note 5. Fair Value of Financial Instruments
ASC Topic 820, Fair Value Measurement, establishes a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets and liabilities (Level I) and the lowest priority to unobservable inputs (Level III). A financial asset’s or financial liability’s fair value measurement level within the fair value hierarchy is based on the lowest level of any input that is significant to the fair value measurement. Valuation techniques used need to maximize the use of observable inputs and minimize the use of unobservable inputs.
The carrying values of cash and cash equivalents, restricted cash and accounts payable approximate their fair values due to the short term nature of these financial instruments.
We estimate the fair values of our loans held for investment and outstanding principal balances under our Secured Financing Facilities by using Level III inputs, including discounted cash flow analyses and currently prevailing market terms as of the measurement date, determined by significant unobservable market inputs, which include holding periods, discount rates based on loan toreporting date. See our 2022 Annual Report for further information regarding the fair value ratio, or LTV, property types and loan pricing expectations which are corroborated by a comparison with other market participants to determine the appropriate market spread to add to the current base interest.
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NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(dollars in thousands, except per share data)

of financial instruments.
The table below provides information regarding financial assets and liabilities not carried at fair value on a recurring basis in our condensed consolidated balance sheets:
March 31, 2022December 31, 2021
Carrying ValueFair ValueCarrying ValueFair Value
Financial assets
Loans held for investment$622,710 $641,034 $570,780 $597,669 
Financial liabilities
Secured Financing Facilities$367,679 $369,140 $339,627 $341,679 

March 31, 2023December 31, 2022
Carrying ValueFair ValueCarrying ValueFair Value
Financial assets
Loans held for investment$617,935 $626,689 $669,929 $679,911 
Financial liabilities
Secured Financing Facilities$433,385 $430,528 $471,521 $471,362 
There were no transfers of financial assets or liabilities within the fair value hierarchy during the three months ended March 31, 2022.2023.
Note 6. Shareholders' Equity
Common Share Awards
During the three months ended March 31, 2023, we purchased 1,503 of our common shares from a former officer of ours and a former officer and employee of The RMR Group LLC, or RMR, in satisfaction of tax withholding and payment obligations in connection with the vesting of awards of our common shares, valued at the closing price of our common shares on The Nasdaq Stock Market LLC, or Nasdaq, on the applicable purchase date. The aggregate value of common shares purchased was $13.
Distributions

For the three months ended March 31, 2022,2023, we declared and paid a distributionregular quarterly distributions to common shareholders, using cash on hand, as follows:
Record DateRecord DatePayment DateDistribution per ShareTotal DistributionRecord DatePayment DateDistribution per ShareTotal Distribution
January 24, 2022February 17, 2022$0.25 $3,649 
January 23, 2023January 23, 2023February 16, 2023$0.35 $5,147 
On April 14, 2022,13, 2023, we declared a quarterly distribution of $0.25$0.35 per common share, or $3,649,$5,147, to shareholders of record on April 25, 2022.24, 2023. We expect to pay this distribution on or about May 19, 2022,18, 2023, using cash on hand.
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SEVEN HILLS REALTY TRUST
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(dollars in thousands, except per share data)

Note 7. Management Agreement with Tremont
We have no employees. The personnel and various services we require to operate our business are provided to us by Tremont Realty Capital LLC, or Tremont, pursuant to a management agreement, which provides for the day to day management of our operations by Tremont, subject to the oversight and direction of our Board of Trustees.

We pay Tremont an annual base management fee payable quarterly (0.375% per quarter) in arrears equal to 1.5% of our “Equity,” as defined under our management agreement. We recognized base management fees of $1,072 and $1,063 for the three months ended March 31, 2023 and 2022, and base management and advisory fees of $737 for the three months ended March 31, 2021.respectively. Pursuant to the terms of our management agreement, we also pay Tremont management incentive fees, became payable by us beginning with the quarter ended June 30, 2021, subject to Tremont earning those fees in accordance with the management agreement. We did not incur any management incentive fees for either of the three months ended March 31, 2023 or 2022.

Tremont, and not us, is responsible for the costs of its employees who provide services to us, unless any such payment or reimbursement is specifically approved by a majority of our Independent Trustees, is a shared services cost or relates to awards made under any equity compensation plan adopted by us. We are required to pay or to reimburse Tremont and its affiliates for all other costs and expenses of our operations. Some of these overhead, professional and other services are provided by RMR, pursuant to a shared services agreement between Tremont and RMR. These reimbursements include an allocation of the cost of personnel employed by RMR and our share of RMR's costs for providing our internal audit function.RMR. These shared services costs are subject to approval by a majority of our Independent Trustees at least annually. We incurred shared services costs of $634$643 and $352$634 payable to Tremont for the three months ended March 31, 20222023 and March 31, 2021,2022, respectively. We include these amounts in reimbursement of shared services expenses or general and administrative expenses, as applicable, in our condensed consolidated statements of operations.

In connection with the Merger, TRMT terminated its management agreement with Tremont, and Tremont waived its right to receive payment of the termination fees that would have otherwise resulted due to the Merger. In consideration of this waiver, we agreed that, effective upon consummation of the Merger and the termination of TRMT's management agreement with Tremont, certain of the expenses Tremont had paid pursuant to its management agreement with TRMT will be included in the “Termination Fee” under and as defined in our existing management agreement with Tremont. See our 20212022 Annual Report for further information regarding this waiver and change to the "Termination Fee" and the Merger.

12
our management agreement with Tremont.


SEVEN HILLS REALTY TRUST
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(dollars in thousands, except per share data)

Note 8. Related Person Transactions
We have relationships and historical and continuing transactions with Tremont, RMR, The RMR Group Inc., or RMR Inc., and others related to them, including other companies to which RMR or its subsidiaries provide management services and some of which have trustees, directors or officers who are also our Trustees or officers. Tremont is a subsidiary of RMR, which is a majority owned subsidiary of RMR Inc., and RMR Inc. is the managing member of RMR. RMR provides certain shared services to Tremont that are applicable to us, and we reimburse Tremont or pay RMR for the amounts Tremont or RMR pays for those services. One of our Managing Trustees and Chair of our Board of Trustees, Adam D. Portnoy, is the sole trustee, an officer and the controlling shareholder of ABP Trust, which is the controlling shareholder of RMR Inc., and he is also a director of Tremont, the chair of the board of directors, a managing director, the president and chief executive officer of RMR Inc., and an officer and employee of RMR. OurMatthew P. Jordan, our other Managing Trustee, Matthew P.is a director and the president and chief executive officer of Tremont. Mr. Jordan is also an officer of RMR Inc. and an officer and employee of RMR, and our executive officers are officers of RMR and officers and employees of Tremont and/or RMR.

Some of our Independent Trustees also serve as independent directors or independent trustees of other public companies to which RMR or its subsidiaries provideprovides management services. Adam D. Portnoy serves as the chair of the boardsboard and as a managing director or managing trustee of those companies. Other officers of RMR and Tremont serve as managing trustees managing directors or officers of certain of these companies.

Our Manager, Tremont Realty Capital LLC. We have a management agreement with Tremont to provide management services to us. See Note 7 for further information regarding our management agreement with Tremont. On May 11, 2022, Tremont also provided management services to TRMT untilpurchased 882,407 of our common shares from Diane Portnoy, the Merger.mother of Adam D. Portnoy. Tremont paid an aggregate purchase price of $9,469 for these shares. As of March 31, 2023, Tremont owned 1,708,058 of our common shares, and Mr. Portnoy beneficially owned (including through Tremont and ABP Trust) 13.4% of our outstanding common shares.

Tremont Mortgage Trust.Acceleration of Unvested Shares of Former Officer. TRMT merged with and into us on September 30, 2021. Prior to the Merger, Adam D. Portnoy and Matthew P. Jordan, our Managing Trustees, were also TRMT’s managing trustees. Thomas J. Lorenzini, our President, also served as president of TRMT, and G. Douglas Lanois resigned as our Chief Financial Officer and Treasurer, also served as chief financial officer and treasurereffective September 30, 2022. Our Compensation Committee approved the acceleration of TRMT. Threeall 3,648 of our Independent Trustees, William A. Lamkin, Joseph L. Morea and Jeffrey P. Somers, previously served as independent trustees of TRMT. In addition, our former Independent Trustee, John L. Harrington, also previously served as an independent trustee of TRMT and he resigned both trusteeships effectiveunvested common shares owned by Mr. Lanois as of the effective time of the Merger. See our 2021 Annual Report for further information regarding the Merger and the other Transactions.

his separation date, January 1, 2023.
For further information about these and other such relationships and certain other related person transactions, refer to our definitive Proxy Statement for our 20222023 Annual Meeting of Shareholders and to our 20212022 Annual Report.
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SEVEN HILLS REALTY TRUST
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(dollars in thousands, except per share data)

Note 9. Income Taxes
We have elected to be taxed as a real estate investment trust, or REIT, under the Internal Revenue Code of 1986, as amended, or the IRC. Accordingly, we generally are not, and will not be, subject to U.S. federal income tax, provided that we meet certain distribution and other requirements. We are subject to certain state and local taxes, certain of which amounts are or will be reported as income taxes in our condensed consolidated statements of operations.
Note 10. Weighted Average Common Shares
We calculate net income per common share - basic using the two class method, by dividing net income by the weighted average number of common shares outstanding during the period.method. We calculate net income per common share - diluted using the more dilutive of the two class or treasury stock method. 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.

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NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(dollarsThe calculation of net income per common share - basic and diluted is as follows (amounts in thousands, except per share data):
Three Months Ended March 31,
20232022
Numerators:
Net income$7,803 $11,126 
Net income attributable to unvested share awards(67)(70)
Net income used in calculating net income per common share - basic and diluted$7,736 $11,056 
Denominators
Weighted average common shares outstanding - basic14,582 14,505 
Effect of dilutive securities: unvested share awards— 14 
Weighted average common shares outstanding - diluted14,582 14,519 
Net income per common share - basic and diluted$0.53 $0.76 

The table below provides a reconciliation of the weighted average number of common shares used in the calculations of net income per common share (amounts in thousands):
For the Three Months Ended March 31,
20222021
Weighted average common shares for net income per common share - basic14,505 10,202 
Effect of dilutive securities: unvested share awards14 — 
Weighted average common shares for net income per common share - diluted14,519 10,202 
Note 11. Commitments and Contingencies
As of March 31, 2022,2023, we had unfunded loan commitments of $47,812$45,779 related to our loans held for investment that are not reflected in our condensed consolidated balance sheets. These unfunded loan commitments had a weighted average initial maturity of 2.11.4 years as of March 31, 2022.2023. See Note 3 for further information related to our loans held for investment.

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Table of Contents
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
The following discussion should be read in conjunction with our condensed consolidated financial statements and accompanying notes included elsewhere in this Quarterly Report on Form 10-Q and in our 20212022 Annual Report.
OVERVIEW (dollars in thousands, except share data)
We are a Maryland REIT. Our business strategy is focused on originating and investing in floating rate first mortgage loans in the $15,000 to $75,000 range, secured by middle market and transitional commercial real estate, or CRE. We define middle market CRE as commercial properties that have values up to $100,000 and$100,000. We define transitional CRE as commercial properties subject to redevelopment or repositioning activities that are expected to increase the value of the properties. TheseOur mortgage loans are classified as loans held for investment in our condensed consolidated balance sheets. Loans held for investment are reported at cost, net of any unamortized loan fees, origination costs, premiums or discounts, as applicable, unless the assets are deemed impaired.

Tremont is registered with the Securities and Exchange Commission, or SEC, as an investment adviser under the Investment Advisers Act of 1940, as amended. We believe that Tremont provides us with significant experience and expertise in investing in middle market and transitional CRE.

We operate our business in a manner that is consistent with our qualification for taxation as a REIT under the IRC. As such, we generally are not subject to U.S. federal income tax, provided that we meet certain distribution and other requirements. We also operate our business in a manner that permits us to maintain our exemption from registration under the Investment Company Act of 1940, as amended, or the 1940 Act.

COVID-19 Pandemic
The COVID-19 pandemic and the various governmental and market responses intended to contain and mitigate the spread of the virus and its detrimental public health impact have had a significant impact on the global economy, including the U.S. economy. Many of the restrictions that had been imposed in the U.S. during the pandemic have been lifted and commercial activity in the U.S. has increasingly returned to pre-pandemic practices and operations. To date, the COVID-19 pandemic has not had a significant impact on our business.

There remains uncertainty as to the ultimate duration and severity of the COVID-19 pandemic, including risks that may arise from mutations or related strains of the virus, the ability to successfully administer vaccinations to a sufficient number of persons or attain immunity to the virus by natural or other means to achieve herd immunity or otherwise render the virus reasonably manageable, and the impact on the U.S. economy that may result from the inability of other countries to administer vaccinations to their citizens or their citizens’ ability to otherwise achieve immunity to the virus. As a result, we are unable to determine what the ultimate impact will be on our borrowers’ and other stakeholders’ businesses, operations, financial results and financial position. For further information and risks relating to the COVID-19 pandemic on us and our business, see "Warning Concerning Forward-Looking Statements" elsewhere in this Quarterly Report on Form 10-Q and Part 1, Item 1A, "Risk Factors", of our 2021 Annual Report.

Non-GAAP Financial Measures

We present Distributable Earnings, Distributable Earnings per common share, Adjusted Distributable Earnings, Adjusted Distributable Earnings per common share and Adjusted Book Value per common share, which are considered “non-GAAP financial measures” within the meaning of the applicable SEC rules. These non-GAAP financial measures do not represent net income, net income per common share or cash generated from operating activities and should not be considered as an alternativealternatives to net income or net income per common share determined in accordance with GAAP or as an indication of our cash flows from operations determined in accordance with GAAP, measuresa measure of our liquidity or operating performance or an indication of funds available for our cash needs. In addition, our methodologies for calculating these non-GAAP financial measures may differ from the methodologies employed by other companies to calculate the same or similar supplemental performance measures; therefore, our reported Distributable Earnings, Distributable Earnings per common share Adjusted Distributable Earnings and Adjusted Distributable Earnings per common share may not be comparable to non-GAAP financial measuresdistributable earnings and distributable earnings per common share as reported by other companies.

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We believe that Adjusted Book Value per common share is a meaningful measure of our capital adequacy because it excludes the impact of certain non-cash estimates or adjustments, including the unaccreted purchase discount resulting from the excess of the fair value of the loans Tremont Mortgage Trust, or TRMT, then held for investment and that we acquired as a result of our merger with TRMT on September 30, 2021, or the Merger, over the consideration we paid in the Merger.Merger and our allowance for credit losses for our loan portfolio and unfunded loan commitments. Adjusted Book Value per common share does not represent book value per common share or alternative measures determined in accordance with GAAP. Our methodology for calculating Adjusted Book Value per common share may differ from the methodologies employed by other companies to calculate the same or similar supplemental capital adequacy measures; therefore, our Adjusted Book Value per common share may not be comparable to the adjusted book value per common share reported by other companies.

In order to maintain our qualification for taxation as a REIT, we are generally required to distribute substantially all of our taxable income, subject to certain adjustments, to our shareholders. We believe that one of the factors that investors consider important in deciding whether to buy or sell securities of a REIT is its distribution rate. Over time, Distributable Earnings Distributable Earnings per common share, Adjusted Distributable Earnings and Adjusted Distributable Earnings per common share may be useful indicators of distributions to our shareholders and are measures that are considered by our Board of Trustees when determining the amount of distributions. We believe that Distributable Earnings Distributable Earnings per common share, Adjusted Distributable Earnings and Adjusted Distributable Earnings per common share provide meaningful information to consider in addition to net income, net income per common share and cash flows from operating activities determined in accordance with GAAP. These measures help us to evaluate our performance excluding the effects of certain transactions, the variability of any management incentive fees that may be paid or payable and GAAP adjustments that we believe are not necessarily indicative of our current loan portfolio and operations. In addition, Distributable Earnings is used in determining the amount of base management and management incentive fees payable by us to Tremont under our management agreement.
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Distributable Earnings and Adjusted Distributable Earnings

We calculate Distributable Earnings and Distributable Earnings per common share as net income and net income per common share, respectively, computed in accordance with GAAP, including realized losses not otherwise included in net income determined in accordance with GAAP, and excluding: (a) the management incentive fees earned by Tremont, if any; (b) depreciation and amortization, if any; (c) non-cash equity compensation expense; (d) unrealized gains, losses and other similar non-cash items that are included in net income for the period of the calculation (regardless of whether such items are included in or deducted from net income or in other comprehensive income under GAAP), if any; and (e) one-time events pursuant to changes in GAAP and certain non-cash items, if any. Distributable Earnings are reduced for realized losses on loan investments when amounts are deemed uncollectable.

We define Adjusted This is generally at the time a loan is repaid, or in the case of foreclosure, when the underlying asset is sold, but may also be when, in our determination, it is nearly certain that all amounts due will not be collected. The realized loss amount reflected in Distributable Earnings will equal the difference between the cash received or expected to be received and Adjusted Distributable Earnings per common share as Distributable Earnings and Distributable Earnings per common share, respectively, excluding the effectscarrying value of certain non-recurring transactions.the asset.

Reconciliation of Book Value per Common Share to Adjusted Book Value per Common Share
The table below calculates our book value per common share and demonstrates how we calculate Adjusted Book Value per common share:
March 31, 2022December 31, 2021March 31, 2023December 31, 2022
Shareholders' equityShareholders' equity$265,253 $257,694 Shareholders' equity$267,747 $271,579 
Total outstanding common sharesTotal outstanding common shares14,597 14,597 Total outstanding common shares14,707 14,709 
Book value per common shareBook value per common share18.17 17.65 
Book value per common share
18.21 18.46 
Unaccreted purchase discount per common share(1)Unaccreted purchase discount per common share(1)0.78 1.20 Unaccreted purchase discount per common share(1)0.38 0.46 
Adjusted Book Value per common share (1)
$18.95 $18.85 
Allowance for credit losses per common share (2)
Allowance for credit losses per common share (2)
0.38 — 
Adjusted Book Value per common shareAdjusted Book Value per common share$18.97 $18.92 
(1)Adjusted Book Value per common share is a non-GAAP financial measure that excludesExcludes the impact of the unaccreted purchase discount resulting from the excess of the fair value of the loans TRMT then held for investment and that we acquired as a result of theour Merger over the consideration we paid in the Merger. The purchase discount of $36,443 was allocated to each acquired loan and is being accreted into income over the remaining term of the respective loan. As of March 31, 20222023 and December 31, 2021,2022, the unaccreted purchase discount was $11,458$5,519 and $17,391.$6,703, respectively.
(2)Excludes the impact of our allowance for credit losses. As of March 31, 2023, our allowance for credit losses for our loan portfolio and unfunded loan commitments was $5,608. As of December 31, 2022, we did not have an allowance for credit losses. For further information on our adoption of ASU No. 2016-13, see Notes 2 and 3 to our Unaudited Condensed Consolidated Financial Statements included in Part I, Item 1 of this Quarterly Report on Form 10-Q.

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Our Loan Portfolio
The table below details overall statistics for our loan portfolio as of March 31, 20222023 and December 31, 2021:2022:
As of March 31, 2022As of December 31, 2021As of March 31, 2023As of December 31, 2022
Number of loansNumber of loans2726Number of loans2527
Total loan commitmentsTotal loan commitments$684,547$648,266Total loan commitments$674,475$727,562
Unfunded loan commitments (1)
Unfunded loan commitments (1)
$47,812$57,772
Unfunded loan commitments (1)
$45,779$49,007
Principal balancePrincipal balance$636,831$590,590Principal balance$628,696$678,555
Carrying valueCarrying value$622,710$570,780Carrying value$617,935$669,929
Weighted average coupon rateWeighted average coupon rate4.57 %4.54 %Weighted average coupon rate8.57 %8.07 %
Weighted average all in yield (2)
Weighted average all in yield (2)
5.10 %5.08 %
Weighted average all in yield (2)
9.06 %8.57 %
Weighted average floorWeighted average floor0.61 %0.68 %Weighted average floor0.65 %0.62 %
Weighted average maximum maturity (years) (3)
Weighted average maximum maturity (years) (3)
3.73.8
Weighted average maximum maturity (years) (3)
3.13.3
Weighted average risk ratingWeighted average risk rating2.82.9Weighted average risk rating2.92.9
Weighted average LTV (4)
Weighted average LTV (4)
68 %68 %
Weighted average LTV (4)
67 %68 %
(1)Unfunded loan commitments are primarily used to finance property and building improvements and leasing capital, and are generally funded over the term of the loan.
(2)All in yield represents the yield on a loan, including amortization of deferred fees over the initial term of the loan and excluding any purchase discount accretion.
(3)Maximum maturity assumes all borrower loan extension options have been exercised, which options are subject to the borrower meeting certain conditions.
(4)LTV represents the initial loan amount divided by the underwritten in-place value of the underlying collateral at closing.

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Loan Portfolio Details
The table below details our loan portfolio as of March 31, 2022:2023:
LocationProperty TypeOrigination DateCommitted Principal AmountPrincipal
Balance
Coupon Rate
All in
Yield (1)
Maximum Maturity (2)
(date)
LTV(3)
Risk Rating
First mortgage loans
St. Louis, MOOffice12/19/2018$29,500 $28,917 L + 3.25%L + 3.74%12/19/202372 %2
Coppell, TXRetail02/05/201919,365 19,365 L + 3.50%L + 4.24%08/12/202273 %3
Yardley, PAOffice12/19/201916,500 14,687 L + 4.58%L + 5.80%12/19/202475 %4
Allentown, PAIndustrial01/24/202010,270 10,270 L + 3.50%L + 4.03%01/24/202567 %2
Dublin, OHOffice02/18/202022,820 22,507 S + 3.75%S + 4.95%02/18/202333 %2
Downers Grove, ILOffice09/25/202030,00029,499L + 4.25%L + 4.69%11/25/202467 %3
Los Angeles, CARetail12/17/202024,600 19,142 L + 4.25%L + 5.05%12/17/202467 %3
Aurora, ILOffice / Industrial12/18/202016,500 14,710 L + 4.35%L + 5.04%12/18/202473 %2
Miami, FLOffice01/19/202110,90010,900L + 4.50%L + 5.47%01/19/202568 %2
Olmstead Falls, OHMultifamily01/28/202154,57546,084L + 4.00%L + 4.64%01/28/202663 %3
Colorado Springs, COOffice / Industrial04/06/202134,27529,642L + 4.50%L + 5.03%04/06/202573 %3
Westminster, COOffice05/25/202115,25013,759L + 3.75%L + 4.20%05/25/202666 %2
Plano, TXOffice07/01/202127,38525,209L + 4.75%L + 5.17%07/01/202678 %3
Portland, ORMultifamily07/09/202119,689 19,688 L + 3.57%L + 3.97%07/09/202675 %3
Portland, ORMultifamily07/30/202113,400 13,400 L + 3.57%L + 3.98%07/30/202671 %4
Seattle, WAMultifamily08/16/202112,50012,259L + 3.55%L + 3.89%08/16/202670 %3
Dallas, TXOffice08/25/202150,000 43,450 L + 3.25%L + 3.61%08/25/202672 %3
Sandy Springs, GARetail09/23/202116,488 14,821 L + 3.75%L + 4.11%09/23/202672 %2
Carlsbad, CAOffice10/27/202124,750 23,740 L + 3.25%L + 3.59%10/27/202678 %3
Bellevue, WAOffice11/05/202121,000 20,000 L + 3.85%L + 4.19%11/05/202668 %3
Ames, IAMultifamily11/15/202118,00017,680L + 3.80%L + 4.13%11/15/202671 %3
Downers Grove, ILOffice12/09/202123,530 23,530 L + 4.25%L + 4.57%12/09/202672 %3
West Bloomfield, MIRetail12/16/202142,500 37,388 L + 3.85%L + 4.66%12/16/202459 %3
Summerville, SCIndustrial12/20/202135,000 35,000 L + 3.50%L + 3.82%12/20/202670 %2
Delray Beach, FLRetail03/18/202216,000 13,034 S + 4.25%S + 5.00%03/18/202656 %3
Starkville, MSMultifamily03/22/202237,250 35,950 S + 4.00%S + 4.33%03/22/202770 %3
Brandywine, MDRetail03/29/202242,500 42,200 S + 3.85%S + 4.25%03/29/202762 %3
Total/weighted average$684,547 $636,831 + 3.87%+ 4.40%68 %2.8
#LocationProperty TypeOrigination DateCommitted Principal AmountPrincipal
Balance
Coupon Rate
All in
Yield (1)
Maximum Maturity
(date) (2)
LTV (3)
Risk Rating
First mortgage loans
1Olmsted Falls, OHMultifamily01/28/2021$54,575 $46,084 L + 4.00%L + 4.64%01/28/202663 %3
2Dallas, TXOffice08/25/202150,000 43,450 L + 3.25%L + 3.61%08/25/202672 %4
3Passaic, NJIndustrial09/08/202247,000 38,440 S + 3.85%S + 4.22%09/08/202769 %3
4Brandywine, MDRetail03/29/202242,500 42,200 S + 3.85%S + 4.25%03/29/202762 %2
5West Bloomfield, MIRetail12/16/202142,500 37,594 L + 3.85%L + 4.66%12/16/202459 %3
6Starkville, MSMultifamily03/22/202237,250 36,787 S + 4.00%S + 4.32%03/22/202770 %4
7Farmington Hills, MIMultifamily05/24/202231,520 28,859 S + 3.15%S + 3.50%05/24/202775 %3
8Downers Grove, ILOffice09/25/202030,000 29,500 L + 4.25%L + 4.69%11/25/202467 %2
9Las Vegas, NVMultifamily06/10/202228,950 24,729 S + 3.30%S + 4.03%06/10/202760 %3
10St. Louis, MOOffice12/19/201828,866 28,866 L + 3.25%L + 3.74%06/20/202372 %3
11Plano, TXOffice07/01/202127,385 26,307 L + 4.75%L + 5.16%07/01/202678 %3
12Carlsbad, CAOffice10/27/202124,750 23,825 L + 3.25%L + 3.58%10/27/202678 %3
13Fontana, CAIndustrial11/18/202224,355 22,000 S + 3.75%S + 4.28%11/18/202672 %3
14Downers Grove, ILOffice12/09/202123,530 23,530 L + 4.25%L + 4.57%12/09/202672 %3
15Dublin, OHOffice02/18/202022,507 22,507 S + 4.25%S + 4.75%08/16/202333 %2
16Bellevue, WAOffice11/05/202121,000 20,000 L + 3.85%L + 4.19%11/05/202668 %3
17Portland, ORMultifamily07/09/202119,687 19,687 L + 3.57%L + 3.97%07/09/202675 %3
18Ames, IAMultifamily11/15/202118,000 17,820 L + 3.80%L + 4.13%11/15/202671 %2
19Yardley, PAOffice12/19/201916,500 15,865 L + 4.58%L + 5.97%12/19/202475 %4
20Sandy Springs, GARetail09/23/202116,489 15,287 L + 3.75%L + 4.10%09/23/202672 %3
21Delray Beach, FLRetail03/18/202216,000 15,362 S + 4.25%S + 4.91%03/18/202656 %3
22Westminster, COOffice05/25/202115,750 14,739 L + 3.75%L + 4.25%05/25/202666 %2
23Portland, ORMultifamily07/30/202113,400 13,400 L + 3.57%L + 3.98%07/30/202671 %3
24Seattle, WAMultifamily08/16/202112,500 12,397 L + 3.55%L + 3.89%08/16/202670 %3
25Allentown, PAIndustrial01/24/20209,461 9,461 S + 3.50%S + 4.03%01/24/202567 %1
Total/weighted average$674,475 $628,696 + 3.80%+ 4.28%67 %2.9
(1)All in yield represents the yield on a loan, including amortization of deferred fees over the initial term of the loan and excluding any purchase discount accretion.
(2)Maximum maturity assumes all borrower loan extension options have been exercised, which options are subject to the borrower meeting certain conditions.
(3)    LTV represents the initial loan amount divided by the underwritten in-place value of the underlying collateral at closing.


As of March 31, 2022,2023, we had $684,547$674,475 in aggregate loan commitments, consisting of a diverse portfolio, geographically and by property type, of 2725 first mortgage loans. The impact from the COVID-19 pandemic has negatively impacted some of our borrowers’ business operations or tenants, particularly in the cases of our retail and hospitality collateral, which are some of the types of properties that have been most negatively impacted by the pandemic. We expect that those negative impacts may continue and may apply to other borrowers and/or their tenants. Further, although economic activity in the U.S. has improved significantly from the low points during the pandemic to date, certain industries have not recovered to their pre-pandemic positions. Therefore, certain of our borrowers’ business plans will likely take longer to execute than initially expected and certain of our borrowers may be unable to pay their debt service obligation owed and due to us as currently scheduled. As of March 31, 2022,2023, we had two loanthree loans representing approximately 4%15% of the carrying valueamortized cost of our loan portfolio with a loan risk rating of “4” or “higher risk”.

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All of the loans in our portfolio are structured with risk mitigation mechanisms, such as cash flow sweeps or interest reserves, to help protect us against investment losses. In addition, we continue to actively engage with our borrowers regarding their execution of the business plans for the underlying collateral, among other things.

As of March 31, 20222023 and April 25, 2022,20, 2023, all of our borrowers had paid all of their debt service obligations owed and due to us and none of the loans included in our investment portfolio were in default.

us.
We did not have any impaired loans, non-accrualpast due loans or nonaccrual loans in default as of March 31, 2022; thus, we did not record a reserve for loan loss as of that date.2023. However, depending on the duration and severity of the COVID-19 pandemic and any resulting economic downturn, our borrowers' businesses, operations and liquidity may be materially adversely impacted.impacted by current inflationary pressures, rising or sustained high interest rates, supply chain issues or a prolonged economic slowdown or recession could amplify those negative impacts. As a result, they may become unable to pay their debt service obligations owed and due to us, which may result in the impairmentan increased allowance for credit losses and/or recognition of those loans, and our recording loan loss reserves with respect to those loans and recording of any income with respect to those loans on a nonaccrual basis. For further information regarding our loan portfolio and the risks associated with it,risk rating policy, see Note 3 to our Unaudited Condensed Consolidated Financial Statements included in Part I, Item 1, of"—Factors Affecting our Operating Results" and "Warning Concerning Forward-Looking Statements" elsewhere in this Quarterly Report on Form 10-Q and the risk factors identified in Part I, Item 1A, “Risk Factors”, of our 20212022 Annual Report.
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Financing Activities
On March 11, 2022, oneThe table below is an overview of our wholly owned subsidiaries entered intoSecured Financing Facilities as of March 31, 2023:
FacilityMaturity DatePrincipal BalanceUnused CapacityMaximum Facility Size
Collateral Principal Balance
Citibank Master Repurchase Facility03/15/2025$150,101 $64,899 $215,000 $205,380 
UBS Master Repurchase Facility02/18/2024133,108 58,892 192,000 182,530 
BMO FacilityVarious84,855 65,145 150,000 113,745 
Wells Fargo Master Repurchase Facility03/11/202567,426 57,574 125,000 89,177 
Total$435,490 $246,510 $682,000 $590,832 
The table below details our Wells Fargo Master Repurchase Agreement forSecured Financing Facilities activities during 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 to $250,000, subject to certain terms and conditions. We expect to use the Wells Fargo Master Repurchase Facility to finance the acquisition or originationthree months ended March 31, 2023:
Carrying Value
Balance at December 31, 2022$471,521 
Repayments(38,125)
Deferred fees(318)
Amortization of deferred fees307 
Balance at March 31, 2023$433,385 
As of floating rate commercial mortgage loans. 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. The Wells Fargo Master Repurchase Facility acts in the manner of31, 2023, outstanding advancements under our Secured Financing Facilities had a revolving credit facility that can be repaid as our loan investments are repaid and re-drawn as we fund new or additional loan investments.

On March 15, 2022, we amended and restated our Citibank Master Repurchase Agreement, which governs the Citibank Master Repurchase Facility. The amended and restated Citibank Master Repurchase Agreement extended the stated maturity date of the Citibank Master Repurchase Facility to March 15, 2025, and made certain other changes to the agreement and related fee letter, including replacing LIBOR with SOFR forweighted average interest rate calculations on advancementsof 6.76% per annum, excluding associated fees and expenses. As of March 31, 2023 and April 20, 2023, we had a $435,490 and $426,340, respectively, aggregate outstanding principal balance under the Citibank Master Repurchase Facilityour Secured Financing Facilities.
As of March 31, 2023, we were in compliance with all covenants and modifying certain pricing terms.

On April 25, 2022, we amended and restatedother terms under our BMO Loan Program Agreement, which increased the maximum facility amount from $100,000 to $150,000.

Secured Financing Facilities.
For further information regarding our Secured Financing Facilities, see Note 4 to our Unaudited Condensed Consolidated Financial Statements included in Part I, Item 1 of this Quarterly Report on Form 10-Q.

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The table below is an overview of our Secured Financing Facilities as of March 31, 2022:
Maturity DatePrincipal BalanceUnused CapacityMaximum Facility Size
Collateral Principal Balance
UBS Master Repurchase Facility02/18/2024$127,278 $64,722 $192,000 $192,044 
Citibank Master Repurchase Facility03/15/2025159,878 55,122 215,000 223,744 
Wells Fargo Master Repurchase Facility03/11/2025— 125,000 125,000 — 
BMO FacilityVarious82,276 17,724 100,000 109,701 
Total$369,432 $262,568 $632,000 $525,489 
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The table below details our Secured Financing Facilities activities during the three months ended March 31, 2022:
Carrying Value
Balance as of December 31, 2021$339,627 
Borrowings130,160 
Repayments(101,597)
Deferred fees(720)
Amortization of deferred fees209 
Balance as of March 31, 2022$367,679 
As of March 31, 2022, outstanding advancements under our Secured Financing Facilities had a weighted average interest rate of 2.32% per annum, excluding associated fees and expenses. As of March 31, 2022 and April 25, 2022, we had a $369,432 and a $378,905, respectively, aggregate outstanding principal balance under our Secured Financing Facilities.
As of March 31, 2022, we were in compliance with all covenants and other terms under our Secured Financing Facilities.
RESULTS OF OPERATIONS (amounts in thousands, except per share data)
Three Months Ended March 31, 20222023 Compared to Three Months Ended December 31, 2021:2022:

Three Months EndedThree Months Ended
March 31, 2022December 31, 2021Change% ChangeMarch 31, 2023December 31, 2022Change% Change
INCOME FROM INVESTMENTS:INCOME FROM INVESTMENTS:INCOME FROM INVESTMENTS:
Interest income from investments$9,579 $7,209 $2,370 32.9 %
Interest and related incomeInterest and related income$15,856 $15,205 $651 4.3 %
Purchase discount accretionPurchase discount accretion5,935 18,932 (12,997)(68.7 %)Purchase discount accretion1,185 1,522 (337)(22.1 %)
Less: interest and related expensesLess: interest and related expenses(1,737)(1,573)(164)10.4 %Less: interest and related expenses(7,694)(7,439)(255)3.4 %
Income from investments, netIncome from investments, net13,777 24,568 (10,791)(43.9 %)Income from investments, net9,347 9,288 59 0.6 %
OTHER EXPENSES:OTHER EXPENSES:OTHER EXPENSES:
Base management feesBase management fees1,063 1,054 0.9 %Base management fees1,072 1,070 0.2 %
General and administrative expensesGeneral and administrative expenses946 1,352 (406)(30.0 %)General and administrative expenses796 719 77 10.7 %
Reimbursement of shared services expensesReimbursement of shared services expenses560 615 (55)(8.9 %)Reimbursement of shared services expenses643 733 (90)(12.3 %)
Other transaction related costs37 589 (552)(93.7 %)
Total expenses2,606 3,610 (1,004)(27.8 %)
Reversal of credit lossesReversal of credit losses(987)— (987)n/m
Income before income tax expense11,171 20,958 (9,787)(46.7 %)
Total other expensesTotal other expenses1,524 2,522 (998)(39.6 %)
Income before income taxesIncome before income taxes7,823 6,766 1,057 15.6 %
Income tax expenseIncome tax expense(45)(302)257 (85.1 %)Income tax expense(20)(6)(14)n/m
Net incomeNet income$11,126 $20,656 $(9,530)(46.1 %)Net income$7,803 $6,760 $1,043 15.4 %
Weighted average common shares outstanding - basic14,505 14,506 (1)— %
Weighted average common shares outstanding - diluted14,519 14,507 12 0.1 %
Weighted average common shares outstanding - basic and dilutedWeighted average common shares outstanding - basic and diluted14,582 14,579 — %
Net income per common share - basic and dilutedNet income per common share - basic and diluted$0.76 $1.42 $(0.66)(46.5 %)Net income per common share - basic and diluted$0.53 $0.46 $0.07 15.2 %
n/m - not meaningful

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Interest and related income from investments. The increase in interest and related income from investments was primarily the result of prepayment premiums and accelerated amortizationhigher benchmark interest rates, partially offset by loan repayments. The weighted average benchmark interest rate was 4.77% as of March 31, 2023 as compared to 4.29% as of December 31, 2022.
Purchase discount accretion. The decrease in purchase discount accretion was primarily the deferred feesresult of $2,402less amounts outstanding on twoacquired loans repaid during the three months ended March 31, 2022,2023 as well as a full quarter of interest income from investments on six loan investments that were originated duringcompared to the three months ended December 31, 2021 and the interest income from the origination of three loan investments during the three months ended March 31, 2022.

Purchase discount accretion. The fair value of the loans acquired in the Merger exceeded the purchase price of the loans. In accordance with GAAP, a purchase discount was recorded for the difference between the fair value and purchase price of the loans acquired. The purchase discount was allocated to each acquired TRMT loan and is being accreted into income over the remaining term of the respective loan. During the three months ended December 31, 2021, three loans acquired in the Merger were repaid, resulting in the respective allocated purchase discount being fully accreted. No loans acquired in the Merger were repaid during the three months ended March 31, 2022; therefore, purchase discount accretion decreased.

Interest and related expenses. The increase in interest and related expenses was primarily the result of anhigher benchmark interest rates. The weighted average benchmark interest rate was 4.75% as of March 31, 2023 as compared to 4.33% as of December 31, 2022, partially offset by loan repayments.
General and administrative expenses. The increase in advances madegeneral and administrative expenses was primarily due to us under our Secured Financing Facilities and an increaseincreases in interest rates on those advancesprofessional fees during the three months ended March 31, 20222023 as compared to the three months ended December 31, 2021.

General and administrative expenses. The decrease in general and administrative expenses was primarily due to a decrease in share-based compensation and professional fees during the three months ended March 31, 2022 as compared to the three months ended December 31, 2021.2022.
Reimbursement of shared services expenses. Reimbursement of shared services expenses represents reimbursement of the costs for the services that Tremont arranges on our behalf from RMR. The decrease in reimbursement of shared services expenses was primarily the result of an adjustment recognized during the three months ended December 31, 20212022 to increase our estimate of costs for the usage of shared services from RMR for the year ended December 31, 20212022 to reflect actual costs incurred.
Other transaction related costs.Reversal of credit losses. The reversal of credit losses represents the decrease in the allowance for credit losses on our loan portfolio and unfunded commitments. The decrease in other transaction related costs was primarily the result of a decrease in the costs associated with the final settlement of legal complaints filed in connection with the Merger and our conversion from a Maryland statutory trust to a Maryland REITallowance for credit losses during the three months ended DecemberMarch 31, 2021.2023 was primarily attributable to favorable changes in the current macroeconomic outlook, most notably in near-term CRE pricing forecasts, and loan repayments.
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Income tax expense. Income tax expense represents income taxes paid or payable by us in certain jurisdictions where we are subject to state income taxes. The decrease in income tax expense was primarily the result of income tax expense incurred during the three months ended December 31, 2021 on realized gains on the disposition of our securities portfolio upon our conversion from an investment company under the 1940 Act to a mortgage REIT.
Net incomeincome.. The decreaseincrease in net income was due to the changes noted above.
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Reconciliation of Net Income to Distributable Earnings and Adjusted Distributable Earnings
The table below demonstrates how we calculate Distributable Earnings and Distributable Earnings per common share Adjusted Distributable Earnings and Adjusted Distributable Earnings per common share, which are non-GAAP measures, and provides a reconciliation of these non-GAAP measures to net income:
Three Months Ended March 31, 2022Three Months Ended December 31, 2021
Reconciliation of net income to Distributable Earnings and Adjusted Distributable Earnings:
Net income$11,126 $20,656 
Non-cash equity compensation expense82 446 
Non-cash accretion of purchase discount(5,935)(18,932)
Distributable Earnings5,273 2,170 
Other transaction related costs (1)
37 589 
Income tax expense (2)
— 282 
Adjusted Distributable Earnings$5,310 $3,041 
Weighted average common shares outstanding - basic14,505 14,506 
Weighted average common shares outstanding - diluted14,519 14,507 
Distributable Earnings per common share - basic and diluted$0.36 $0.15 
Adjusted Distributable Earnings per common share - basic and diluted$0.37 $0.21 

(1)Other transaction related costs for the three months ended March 31, 2022 include expenses related to the Merger and to our conversion from a Maryland statutory trust to a Maryland REIT. For the three months ended December 31, 2021, other transaction related costs include expenses related to our conversion from a Maryland statutory trust to a Maryland REIT and the final settlement of legal complaints filed in connection with the Merger.
(2)Income tax expense represents the portion of our income tax expense incurred on realized gains on the disposition of our securities portfolio upon our conversion from an investment company under the 1940 Act to a mortgage REIT.
Three Months Ended
March 31, 2023December 31, 2022
Net income$7,803 $6,760 
Non-cash equity compensation expense120 129 
Non-cash accretion of purchase discount(1,185)(1,522)
Reversal of credit losses(987)— 
Distributable Earnings$5,751 $5,367 
Weighted average common shares outstanding - basic and diluted14,582 14,579 
Net income per common share - basic and diluted$0.53 $0.46 
Distributable Earnings per common share - basic and diluted$0.39 $0.37 

Factors Affecting Operating Results

Our results of operations are impacted by a number of factors and primarily depend on the interest income from our investments and the financing and other costs associated with our business. Our operating results are also impacted by general CRE market conditions generally and in the sectors relating to our loans and unanticipated defaults by our borrowers.borrowers, if any. For further information regarding the risks associated with our loan portfolio, see Note 3 to the risk factors identifiedUnaudited Condensed Consolidated Financial Statements included in Part I, Item 1 and elsewhere in this Management Discussion and Analysis of Financial Condition and Results of Operations of this Quarterly Report on Form 10-Q and Part I, Item 1A, “Risk Factors”,"Risk Factors" of our 20212022 Annual Report.

Credit Risk. We are subject to the credit risk of our borrowers in connection with our investments. We seek to mitigate this risk by utilizing a comprehensive underwriting, diligence and investment selection process and by ongoing monitoring of our investments. Nevertheless, unanticipated credit losses could occur that couldmay adversely impact our operating results.

Changes in Fair Value of our Assets. We generally intend to hold our investments for their contractual terms, unless repaid earlier by the borrowers. We evaluate the credit quality of each of our investments for impairmentloans at least quarterly. Impairments occur when it is probable that we will not be able to collect all amounts due according to the applicable contractual terms. If we determine that a loan is impaired,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 will record an allowance for credit losses by comparing the collateral's fair value to reduce the carrying valueamortized cost basis of the loan to an amount that takes into account bothloan. For collateral-dependent loans for which foreclosure is probable, the present value of expected future cash flows discounted at the loan's contractual effective interest rate andrelated allowance for credit losses is determined using the fair value of any availablethe collateral net of any costs we expectcompared to incur to realize that value.

Although we intend to generally hold our investments for their contractual terms or until repaid earlier by the borrowers, we may occasionally classify some of our investments as held for sale. Investments held for sale will be carried at the lower of theirloan's amortized cost or fair value less costs to sell within loans held for sale on our condensed consolidated balance sheets, with changes in fair value recorded through earnings. Fees received from our borrowers on any loans held for sale will be recognized as part of the gain or loss on sale. Currently, we do not expect to hold any of our investments for trading purposes.
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Availability of Leverage and Equity. We use leverage to make additional investments that may increase our returns. We may not be able to obtain the expected amount of leverage we desire or its cost may exceed our expectation and, consequently, the returns generated from our investments may be reduced. Our ability to further grow our loan portfolio over time will depend, to a significant degree, upon our ability to obtain additional capital. However, our access to additional capital depends on many factors including the price at which our common shares trade relative to their book value and market lending conditions. See "—Market Conditions" below.
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Market Conditions. CRE transaction total volume for 2021 exceeded the previous annual high watermark of 2019. Investor demand for CRE assets, historically low interest rates and strong property fundamentals, particularly for multifamily and industrial assets, have caused CRE valuations to continue to grow. These conditions continue to drive significant demand for CRE debt. CRE loan originations, driven by property acquisitions and refinancing activities of borrowers capitalizing on increasing property values, reached a record high in 2021. Investor demand for the relative risk adjusted returns offered by CRE debt investments has also contributed to the growth of the CRE mortgage loan market. This increased demand has allowed alternative lenders, like us, to continue to gain market share, as borrowers seek flexible capital to complete value add business plans to optimize property values or to have the option to sell or refinance in short to medium term time frames.

However, significant inflation experienced in 2022 and Russia's invasion of Ukraine, along with the additional supply chain issues and overall geopolitical risks have caused recent increased uncertainty in the CRE debt markets. The U.S. Federal Reserve's reactionIn response to inflationary pressures has resulted in increased borrowing and transaction costs for both borrowers and lenders alike. Despite the recent increase in borrowing costs, nominal interest rates remain low, and CRE investors continue to see strength in the fundamentalsFederal Open Market Committee of the U.S. CRE markets, especially in the multifamily and industrial sectors. Transaction activity and loan origination opportunities continue to be strong, as CRE investors are seemingly willing to accept higher borrowing costs in the short term as they perceive longer term upside to rent growth resulting from continued demand for affordable rental housing and industrial space.

Recovery from the impact of the COVID-19 pandemic on the hospitality and retail sectors continues to improve. Hotels located in destinations that can be driven to, select service hotels that offer services and amenities in moderation and extended stay hotels continue to see improvements in performance, along with increased investor and lender demand. Retail has performed better than many expected and investors continue to favor grocery anchored, service oriented and neighborhood shopping centers over larger shopping centers anchored by big box retailers, regional malls or lifestyle centers. However, the office sector continues to pose underwriting challenges, especially for older suburban assets, and there continues to be uncertainty surrounding the long term impacts of work-from-home and flexible work schedules on demand for office space.

While the debt capital markets experienced strong performance in 2021 and into the first quarter of 2022, we believe challenges remain. The longer term impact of the COVID-19 pandemic and the risk of future variants of the virus is still uncertain. Supply chain issues remain and inflation has started to impact the broader markets. The U.S. Federal Reserve raised interest rates inhas increased the federal funds rate by 450 basis points since March 2022 and has indicated that it expectsthere may be additional increases. These inflationary pressures and interest rate increases have contributed and continue to raisecontribute to macroeconomic uncertainty and volatility in the United States and in the CRE debt markets. Additionally, increased borrowing costs and concerns of a possible economic recession have resulted in tighter underwriting standards and an overall decline in CRE transactions.
Many CRE debt providers have become less willing, or able, to extend credit to borrowers, and those that are extending credit are doing so at lower leverage levels and often with higher credit spreads. Market volatility and the increase in interest rates severalhas not affected all lenders equally. Banks and life insurance companies have reduced their leverage ratios and increased credit spreads, but continued to originate new loans. However, concerns about the capital adequacy and liquidity of the banking sector caused by recent failures of certain banks in March 2023 may result in decreased lending activity from such traditional sources. Lenders that rely on secondary markets to finance their lending activities have also experienced challenges. Credit spreads in the secondary market for commercial mortgage-backed securities, or CMBS, and CRE collateralized loan obligations, or CLO, bonds have widened substantially due to competing demand for alternative fixed income investments and a corresponding decrease in the demand for CRE CLO bonds. As a result, some lenders who originate and sell loans into the CRE CLO market as a means of financing have chosen to wait to issue bonds until market volatility subsides and credit spreads stabilize.
In addition to tighter underwriting standards and increased overall borrowing costs, lenders may experience certain challenges from increasing interest rates on floating rate loan portfolios. While rising interest rates generally result in increased income on floating rate portfolios, the borrowers of floating rate loans may find it more times during 2022, whichdifficult to service their debt. Floating rate lenders often require borrowers to obtain interest rate caps or swaps to help mitigate this risk. While interest rate caps and swaps on loans protect lenders in periods of rising interest rates, the cost to borrowers to obtain new or replace existing interest rate caps or swaps may be prohibitive. These challenges could cause floating rate portfolio amounts overall to decrease and/or losses to be incurred if borrowers are unable to obtain interest rate caps or swaps or service their debt and, as a result, could offset the increase in interest income generated from higher benchmark rates.
Despite the current market conditions and headwinds experienced in the overall CRE lending market, we believe certain alternative lenders, like us, are uniquely positioned to face these challenges. We believe there will be significant opportunities for alternative lenders that do not finance their lending activities through the use of CMBS or CRE CLOs, and with available liquidity, to capitalize on challenges that traditional lenders may experience. Capital remains available for investment in CRE assets, and certain favored assets, such as multifamily and industrial, continue to transact. Additionally, we believe overall CRE transaction activity will improve once market uncertainty and volatility subside and there are, and will continue to increase borrowing costs for property owners.

Despite these challenges, we believe that if and as the U.S. economy continues to grow, there will continue to be, significant opportunities for alternative lenders, like us, to provide creative, flexible debt capital for a wide array of circumstances and business plans.

Changes in Market Interest Rates. With respect to our business operations, increases in interest rates, in general, may cause: (a) the interest expense associated with our variable rate borrowings, to increase; (b) the value of our fixed rate investments, if any, to decline; (c) the coupon rates on our variable rate investments to reset, perhaps on a delayed basis, to higher rates; and (d)(b) it to become more difficult and costly for our borrowers, which may negatively impact their ability to repay our investments.investments; and (c) the interest expense associated with our variable rate borrowings to increase. See "—Market Conditions" above for a discussion of the current market including interest rates.

Conversely, decreases in interest rates, in general, may cause: (a) the interest expense associated with our variable rate borrowings, to decrease; (b) the value of our fixed rate investments, if any, to increase; (c) the coupon rates on our variable rate investments to reset, perhaps on a delayed basis, to lower rates; and (d)(b) it to become easier and more affordable for our borrowers to refinance, and as a result, repay our loans, but may negatively impact our future returns if any such repayment proceeds were to be reinvested in lower yielding investments.
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investments; and (c) the interest expense associated with our variable rate borrowings to decrease.
The interest income on our loans and interest expense on our borrowings float with benchmark rates, such as LIBOR and SOFR. Because we generally intend to leverage approximately 75% of the amount of our investments, as benchmark rates increase above the floors of our loans, our income from investments, net of interest and related expenses, will increase. Decreases in benchmark rates are mitigated by interest rate floor provisions in all but one of our loan agreements with borrowers;borrowers, ranging from 0.10% to 3.87%; therefore, changes to income from investments, net, may not move proportionately with the increase or decrease in benchmark rates. As of March 31, 2022,2023, the London Interbank Offered Rate, or LIBOR, and SOFR were 0.45%4.86% and 0.30%4.80%, respectively, and would have toboth of which exceed the floorfloors established by anyall of our loans, which currently range from 0.10% to 2.32%, for us to realize an increase in interest income.
Interest rates underand as a result none of our loan investments currently have active interest rate floors.
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Certain of our loan agreements with borrowers entered into prior to January 1, 2022 have been or are expectedrequired the borrowers to be amended to replacepay us interest at floating rates based upon LIBOR. LIBOR with SOFR prior to June 30, 2023, the date LIBORwas phased out for new contracts as of December 31, 2021 and is expected to no longer be available. Since January 1, 2022, interest rates underavailable by June 30, 2023. As of April 20, 2023, all of our new loan agreements with borrowers are based on SOFR. Our Citibank Master Repurchase Agreement waspre-existing contracts have been amended and restated in March 2022 to among other things, replace LIBOR with SOFR for interest rate calculations on advances. Interest rates on advances under our BMO Facility and Wells Fargo Master Repurchase Facility have been based on SOFR since we entered into the agreements governing these facilities.

SOFR.
Size of Portfolio. The size of our loan portfolio, as measured both by the aggregate principal balance and the number of our CRE loans and our other investments, is also an important factor in determining our operating results. Generally, if the size of our loan portfolio grows, the amount of interest income we receive would increase and we may achieve certain economies of scale and diversify risk within our loan portfolio. A larger portfolio, however, may result in increased expenses; for example, we may incur additional interest expense or other costs to finance our investments. Also, if the aggregate principal balance of our loan portfolio grows but the number of our loans or the number of our borrowers does not grow, we could face increased risk by reason of the concentration of our investments.

Prepayment Risk.
We are subject to risk that our loan investments will be repaid at an earlier date than anticipated, which may reduce the returns realized on those loans as less interest income may be received over time. Additionally, we may not be able to reinvest the principal repaid at a similar or higher yield of the original loan investment. We seek to limit this risk by structuring our loan agreements with fees required to be paid to us upon prepayment of a loan within a specified period of time before the loan’s maturity; however, unanticipated prepayments could negatively impact our operating results.
LIQUIDITY AND CAPITAL RESOURCES (dollars in thousands, except per share data)
Liquidity is a measure of our ability to meet potential cash requirements, including ongoing commitments to fund our lending commitments, repay or meet margin calls resulting from our borrowings, if any, fund and maintain our assets and operations, make distributions to our shareholders and fund other business operating requirements. Our sources of cash flows include cash on hand, payments of principal, interest and fees we receive on our investments, other cash we may generate from our business and operations and any unused borrowing capacity, including under our Secured Financing Facilities or other repurchase agreements or financing arrangements we may obtain, which may also include bank loans or public or private issuances of debt or equity securities. We believe that these sources of funds will be sufficient to meet our operating and capital expenses, pay our debt service obligations owed and make any distributions to our shareholders for the next 12 months and for the foreseeable future, subject to the duration and severity of the COVID-19 pandemic and its economic impact on our borrowers and their ability to fund their debt service obligations owed to us.future. For further information regarding the risks associated with our loan portfolio, see Note 3 to our Unaudited Condensed Consolidated Financial Statements included in Part I, Item 1 and elsewhere in this Management Discussion and Analysis of Financial Condition and Results of Operations of this Quarterly Report on Form 10-Q and Part I, Item 1A, "Risk Factors" of our 20212022 Annual Report.

Pursuant to the terms of our UBS Master Repurchase Facility, and our Citibank Master Repurchase Facility and Wells Fargo Master Repurchase Facility, we may sell to, and later repurchase from, UBS, Citibank and Citibank,Wells Fargo, the purchased assets related to the applicable facility. The initial purchase price paid by UBS or Citibank of each purchased asset is up to 75% of the lesser of the market value of the purchased asset or the unpaid principal balance of such purchased asset, subject to UBS’s or Citibank's approval. 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 UBS, Citibank or Citibank,Wells Fargo, as applicable, the outstanding purchase price of the purchased asset, accrued interest and all accrued and unpaid expenses of UBS, Citibank or Citibank,Wells Fargo, as applicable, relating to such purchased asset.
The interest rate relating to an existing UBS purchased asset is equal to one month LIBOR plus a premium within a fixed range, determined by the debt yield and property type of the purchased asset’s real estate collateral. The interest raterates related to our Citibank, UBS and Wells Fargo purchased assets was amended March 15, 2022 as part of the amendment to the Citibank Master Repurchase Agreement to replace one month LIBOR with one monthare calculated at 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 and Citibank each has the discretion to make advancements at margins higher than 75% and Wells Fargo has discretion to make advancements higher than 80%.

Loans issued under the BMO Facility are coterminous with the corresponding 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. Loans issued under the BMO Facility are secured by a security interest and collateral assignment of the underlying loans to our borrowers which are secured by real property underlying such loans. We are required to pay an upfront fee equal to a percentage of the aggregate amount of the facility loan, such percentage to be determined at the time of approval of the separate facility loan agreements with BMO, or the BMO Facility Loan Agreements.

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On March 11, 2022, one of our wholly owned subsidiaries entered into the Wells Fargo Master Repurchase Agreement for the Wells Fargo Master Repurchase Facility, pursuant to which we may sell to, and later repurchase from Wells Fargo, the purchased assets related to the 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.

For further information regarding our Secured Financing Facilities, see Note 4 to the Unaudited Condensed Consolidated Financial Statements included in Part I Item 1 of this Quarterly Report on Form 10-Q and "—Overview-Financing Activities" above.

The following is a summary of our sources and uses of cash flows for the periods presented:
Three Months Ended March 31,
20222021
Cash, cash equivalents and restricted cash at beginning of period$26,295 $103,564 
Net cash provided by (used in):
Operating activities3,085 (1,385)
Investing activities(44,612)(55,044)
Financing activities24,194 (76)
Cash, cash equivalents and restricted cash at end of period$8,962 $47,059 

The increase in cash provided by operating activities for the 2022 period compared to the 2021 period was primarily the result of our origination activities since April 1, 2021. Since April 1, 2021, we have increased the size of our loan portfolio from 7 loans to 27 loans as of March 31, 2022. The decrease in cash used in investing activities in the 2022 period compared to the 2021 period is primarily due to the repayment of loans in the 2022 period, partially offset by an increase in origination activity in the 2022 period. The increase in cash used in financing activities in the 2022 period compared to the 2021 period is primarily due to proceeds received from our Secured Financing Facilities, partially offset by repayments on our Secured Financing Facilities for the 2022 period. As of March 31, 2021, we had not yet borrowed any funds under our Secured Financing Facilities.

Distributions
During the three months ended March 31, 2022, we paid distributions to our common shareholders totaling $3,649, or $0.25 per common share, using cash on hand.

On April 14, 2022, we declared a quarterly distribution of $0.25 per common share, or $3,649, to shareholders of record on April 25, 2022. We expect to pay this distribution to our common shareholders on May 19, 2022 using cash on hand.
For further information regarding distributions, see Note 6 to the Unaudited Condensed Consolidated Financial Statements included in Part I, Item 1, of this Quarterly Report on Form 10-Q.

The table below is a summary of our sources and uses of cash flows for the periods presented:
Three Months Ended March 31,
20232022
Cash, cash equivalents and restricted cash at beginning of period$71,067 $26,295 
Net cash provided by (used in):
Operating activities6,577 3,085 
Investing activities50,267 (44,612)
Financing activities(43,603)24,194 
Cash, cash equivalents and restricted cash at end of period$84,308 $8,962 
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TableThe increase in cash provided by operating activities for the 2023 period compared to the 2022 period was primarily the result of Contentshigher benchmark interest rates, partially offset by the impact of loan repayments. The increase in cash provided by investing activities is primarily due to higher loan repayments in the 2023 period. The increase in cash used in financing activities is primarily due to decreased proceeds received from our Secured Financing Facilities during the 2023 period, repayments on our Secured Financing Facilities and an increase in distributions to our common shareholders for the 2023 period.
Distributions
During the three months ended March 31, 2023, we declared and paid regular quarterly distributions to our common shareholders totaling $5,147, or $0.35 per common share, using cash on hand.
On April 13, 2023, we declared a regular quarterly distribution of $0.35 per common share, or $5,147, to shareholders of record on April 24, 2023. We expect to pay this distribution to our common shareholders on or about May 18, 2023 using cash on hand.
For further information regarding distributions, see Note 6 to our Unaudited Condensed Consolidated Financial Statements included in Part I, Item 1 of this Quarterly Report on Form 10-Q.
Contractual Obligations and Commitments

Our contractual obligations and commitments as of March 31, 20222023 were as follows:
Payment Due by PeriodPayment Due by Period
TotalLess than 1 Year1 - 3 Years3 - 5 YearsMore than 5 yearsTotalLess than 1 Year1 - 3 Years3 - 5 YearsMore than 5 years
Unfunded loan commitments (1)
Unfunded loan commitments (1)
$47,812 $6,450 $41,362 $— $— 
Unfunded loan commitments (1)
$45,779 $15,170 $30,609 $— $— 
Principal payments on Secured Financing Facilities (2)
Principal payments on Secured Financing Facilities (2)
369,432 63,687 305,745 — — 
Principal payments on Secured Financing Facilities (2)
435,490 215,442 220,048 — — 
Interest payments (3)
Interest payments (3)
17,495 8,512 8,983 — — 
Interest payments (3)
38,677 26,258 12,419 — — 
$434,739 $78,649 $356,090 $— $— $519,946 $256,870 $263,076 $— $— 
(1)The allocation of our unfunded loan commitments is based on the current loan maturity date to which the individual commitments relate.
(2)The allocation of outstanding advancements under our Secured Financing Facilities is based on the earlier of the current maturity date of each loan investment with respect to which the individual borrowing relates or the maturity date of the respective Secured Financing Facilities.
(3)Projected interest payments are attributable only to our debt service obligations at existing rates as of March 31, 20222023 and are not intended to estimate future interest costs which may result from debt prepayments, additional borrowings, new debt issuances or changes in interest rates.
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Debt Covenants
Our principal debt obligations as of March 31, 20222023 were the outstanding balances under our Secured Financing Facilities. The agreements governing our Master Repurchase Facilities, or our Master Repurchase Agreements, provide for acceleration of the date of repurchase of any then purchased assets and the liquidation of the purchased assets by UBS, Citibank or Wells Fargo, as applicable, upon the occurrence and continuation of certain events of default, including a change of control of us, which includes Tremont ceasing to act as our sole manager or to be a wholly owned subsidiary of RMR. Our Master Repurchase Agreements also provide that upon the repurchase of any then purchased asset, we are required to pay UBS, Citibank or Wells Fargo the outstanding purchase price of such purchased asset and accrued interest and any and all accrued and unpaid expenses of UBS, Citibank or Wells Fargo, as applicable, relating to such purchased asset.
In connection with our Master Repurchase Agreements, we entered into our guarantees, or the Master Repurchase Guarantees, which require us to guarantee 25% of the aggregate repurchase price and 100% of losses in the event of certain bad acts, as well as any costs and expenses of UBS, Citibank and Wells Fargo, as applicable, related to our Master Repurchase Agreements. The Master Repurchase Guarantees 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.
In connection with our facility loan program agreement and the security agreement with BMO Harris Bank N.A., or the BMO Loan Program Agreement, we have agreed to guarantee certain of the obligations under the 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, or the BMO Guaranty. 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 the 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. The BMO Loan Program Agreement and the BMO Guaranty contain representations, warranties, covenants, conditions precedent to funding, events of default and indemnities that are customary for agreements of these types.
As of March 31, 2022,2023, we had a $287,156$350,635 aggregate outstanding principal balance under our Master Repurchase Facilities. Our Master Repurchase Agreements are structured with risk mitigation mechanisms, including a cash flow sweep, which would allow UBS, Citibank and Wells Fargo, as applicable, to control interest payments from our borrowers under our loans that are financed under our respective Master Repurchase Facilities, and the ability to accelerate dates of repurchase and institute margin calls, which may require us to pay down balances associated with one or more of our loans that are financed under our Master Repurchase Facilities.
As of March 31, 2022,2023, we had a $82,276$84,855 aggregate outstanding principal balance under the BMO Facility.
As of March 31, 2022,2023, we were in compliance with all covenants and other terms under our Secured Financing Facilities.

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Related Person Transactions
We have relationships and historical and continuing transactions with Tremont, RMR, RMR Inc. and others related to them. For further information about these and other such relationships and related person transactions, see Notes 7 and 8 to theour Unaudited Condensed Consolidated Financial Statements included in Part I, Item 1 of this Quarterly Report on Form 10-Q, our 20212022 Annual Report, our definitive Proxy Statement for our 20222023 Annual Meeting of Shareholders and our other filings with the SEC. In addition, see the section captioned “Risk Factors” of our 20212022 Annual Report for a description of risks that may arise as a result of these and other related person transactions and relationships. We may engage in additional transactions with related persons, including businesses to which RMR, Tremont or their respective subsidiaries provide management services.

Critical Accounting Policies

A summary of our critical accounting policies is included in Part II, Item 7 of our 2022 Annual Report. There have been no material changes to our critical accounting policies described in our 2022 Annual Report other than the adoption of ASU No. 2016-13, as described in Note 2 to our Unaudited Condensed Consolidated Financial Statements included in Part I, Item 1 of this Quarterly Report on Form 10-Q.
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Item 3. Quantitative and Qualitative Disclosures About Market Risk
Not applicable.
Item 4. Controls and Procedures
As of the end of the period covered by this Quarterly Report on Form 10-Q, our management carried out an evaluation, under the supervision and with the participation of our Managing Trustees, our President and our Chief Financial Officer and Treasurer, of the effectiveness of our disclosure controls and procedures pursuant to Rules 13a-15 and 15d-15 under the Securities Exchange Act of 1934, as amended. Based upon that evaluation, our Managing Trustees, our President and our Chief Financial Officer and Treasurer concluded that our disclosure controls and procedures are effective.

There have been no changes in our internal control over financial reporting during the quarter ended March 31, 20222023 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
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Warning Concerning Forward-Looking Statements
This Quarterly Report on Form 10-Q contains statements that constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 and other securities laws. Also, whenever we useThese statements include words such as “believe”, “expect”, “anticipate”, “intend”, “plan”, “estimate”, “will”, “may” and negatives or derivatives of these or similar expressions, weexpressions.
Forward-looking statements reflect our current expectations, are makingbased on judgments and assumptions, are inherently uncertain and are subject to risks, uncertainties and other factors, which could cause our actual results, performance or achievements to differ materially from expected future results, performance or achievements expressed or implied in any forward-looking statements. These forward-looking statements are based upon our present intent, beliefs or expectations,Examples of these risks, uncertainties and other factors include, but forward-looking statements are not guaranteedlimited to, occur and may not occur. Forward-looking statements in this Quarterly Report on Form 10-Q relate to various aspects of our business, including:
The duration and severity of the COVID-19 pandemic and its impact on us and our borrowers and their ability and willingness to fund their debt service obligations to us;

following:
Our expectations about our borrowers’ business plans and their abilitiesability to successfully execute them;their business plans;
Our expectations regardingWhether the diversity and other characteristics of our loan portfolio;portfolio will benefit us to the extent we expect;
Our ability to carry out our business strategy and take advantage of opportunities for our business that we believe exist;
Our expectationsThe impact of inflation, geopolitical instability, interest rates and economic recession or downturn on the CRE industry generally and specific CRE sectors applicable to our investments and lending markets, us and our borrowers;
Fluctuations in interest rates and credit spreads may reduce the returns we may receive on our investments and increase our borrowing costs;
Fluctuations in market demand for CRE debt and the volume of transactions and available opportunities that will exist in the CRE debt market, including the middle market;

Dislocations and volatility in the capital markets;
Our ability to utilize our existing available Secured Financing Facilities and to obtain additional capital to enable us to attain our target leverage, to make additional investments and to increase our potential returns;

returns, and the cost of that capital;
Our ability to pay distributions to our shareholders and tosustain or increase and sustain the amount of such distributions;

Our ability to successfully execute, achieve and benefit from our operating and investment targets, investment and financing strategies and leverage policies;
Our expected operating results;
The amount and timing of cash flows we receive from our investments;
The ability of Tremont to make suitable investments for us, to monitor, service and administer our existing investments and to otherwise implement our investment strategy;strategy and successfully manage us;
Our ability to maintain and increase theimprove a favorable net interest spread between the interest we earn on our investments and the interest we pay on our borrowings;

Our belief that we are well positioned to lend to private equity sponsors of middle market and transitional CRE assets;

The extent to which we earn and receive origination, extension, exit, prepayment or other fees we may earn from our investments;
Yields that may be available to us from mortgages on middle market and transitional CRE;
The duration and other terms of our loan agreements with borrowers;
The credit qualities of our borrowers;
Rising inflationary pressures, supply chain issues and geopolitical risks and their effects on demand for CRE debt, our borrowers' businesses and our results of operations and financial conditions;
The ability and willingness of our borrowers to repay our investments in a timely manner or at all;
Our projected leverage;
The cost and availability of additional advancements underextent to which our Secured Financing Facilitiesborrowers' sponsors provide support to our borrowers or other debt financing we may obtain;us regarding our loans;
Our qualification for taxation as a REIT;
Our ability to maintain our exemption from registration under the 1940 Act;
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Events giving rise to increases in our credit loss reserves;
Our understanding of the competitive nature of our industryability to identify and ourexecute loan investments;
Our ability to successfully compete under such circumstances;compete;
Market trends in our industry or with respect to interest rates, real estate values, the debt securities markets or the economy generally; and
Regulatory requirements and the effect they may have on us or our competitors.
Our actual results may differ materially from those contained in or implied by our forward-looking statements. Forward-looking statements involve known and unknown risks, uncertainties and other factors, some of which are beyond our control. Risks, uncertainties and other factors that could have a material adverse effect on our forward-looking statements and upon our business, financial condition, liquidity, results of operations, cash flows, prospects and ability to make distributions include, but are not limited to:
The impact of conditions in the economy, the CRE industry and the capital markets on us and our borrowers;competitors;
Competition within the CRE lending industry;
Changes in the availability, sourcing and structuring of CRE lending;
Defaults by our borrowers;
Compliance with, and changes to, federal, state or local laws or regulations, accounting rules, tax laws or similar matters;
Limitations imposed on our business and our ability to satisfy complex rules in order for us to maintain our qualification for taxation as a REIT for U.S. federal income tax purposes;

Actual and potential conflicts of interest with our related parties, including our Managing Trustees, Tremont, RMR, and others affiliated with them; and
Acts of terrorism, war,God, earthquakes, hurricanes, outbreaks or continuation of pandemics, including the COVID-19 pandemic, or other manmadepublic health safety events or conditions, supply chain disruptions, climate change and other man-made or natural disasters beyond our control.
For example:
We have a limited operating history originating and investing in first mortgage loans secured by middle market and transitional CRE and we may not be able to operate our business successfully or generate sufficient revenue to makeacts of war, terrorism, social unrest or sustain distributions to our shareholders;
To make additional investments and continue to grow our business after we invest our existing available capital, we will need to obtain additional cost-effective capital. We cannot be sure that we will be successful in obtaining any such additional capital. If we are unable to obtain such additional capital, we may not be able to further grow our business by making additional investments;
Our distributions and distribution rate are set from time to time by our Board of Trustees. The timing, amount and form of future distributions will be determined at the discretion of our Board of Trustees and will depend upon various factors that our Board of Trustees deems relevant, including our historical and projected income, our Distributable Earnings, Distributable Earnings per common share, Adjusted Distributable Earnings and Adjusted Distributable Earnings per common share, the then current and expected needs and availability of cash to pay our obligations and fund our investments, distributions which may be required to be paid by us to maintain our qualification for taxation as a REIT, limitations on distributions contained in our financing arrangements and other factors deemed relevant by our Board of Trustees in its discretion. Accordingly, our future distribution rates may be increased or decreased and we can provide no assurances as to the rate at which future distributions will be paid;

Competition may limit our ability to identify and make desirable investments with any additional capital we may obtain or with any proceeds we may receive from repayments of our investments;

Our belief that there will be strong demand for alternative sources of CRE debt capital;
The value of our loans depends upon our borrowers’ ability to generate cash flows from operating the underlying collateral for our loans. Our borrowers may not have sufficient cash flows to repay our loans according to their terms, which may result in delinquency and foreclosure on our loans;
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Our investments contain certain risk mitigation mechanisms that may help protect us against investment losses by mitigating the impact from our borrowers being unable to pay their debt service obligations owed to us as scheduled for a temporary period. However, these mechanisms may not adequately cover the debt service amount and will likely not be able to fully fund the debt service obligations owed to us if the tenants’ businesses fail or they default on their debt service obligations owed to us;
The impact of the COVID-19 pandemic affected all parts of the economy and continues to particularly affect certain aspects of the economy, including certain of our borrowers. In addition, current inflationary pressures, supply chain issues and geopolitical risks may adversely impact the economy and our borrowers' businesses and their ability and willingness to fund their obligations to us. As a result, we may not have sufficient capital to fund our debt obligations or to satisfy any margin calls or other commitments we may have under our Secured Financing Facilities, including as a result of any actions that our lenders under our Master Repurchase Facilities may take if our borrowers default on their loan obligations to us or the value of our collateral that secures those loans declines below required levels;

Prepayment of our loans may adversely affect the value of our loan portfolio and our ability to make or sustain distributions to our shareholders;
Loans secured by properties in transition involve a greater risk of loss than loans secured by stabilized properties;
Tremont and RMR have limited historical experience managing or servicing mortgage REITs;
We may incur significant debt, and our governing documents contain no limit on the amount of debt we may incur;
Although, to date, our Master Repurchase Facility lenders have not instituted cash sweeps on our accounts and we have not received a margin call under our Master Repurchase Agreements, these lenders may do so in the future in accordance with such agreements;
Continued availability of additional advancements under our Secured Financing Facilities is subject to us identifying suitable loans to invest in and our satisfying certain financial covenants and other conditions, as applicable, that we may be unable to satisfy;
Financing for floating rate mortgages and other related assets that we may seek to sell pursuant to our Secured Financing Facilities is subject to approval by those lenders, whose approval we may not obtain;
The phase out of LIBOR could negatively impact our investments and our debt financing arrangements;
Actual costs under our Secured Financing Facilities and our other debt facilities will be higher than the applicable interest index rate plus a premium because of fees and expenses associated with our debt;
We are dependent upon Tremont, its affiliates and their personnel. We may be unable to find suitable replacements if our management agreement is terminated;
We believe that our relationships with our related parties, including our Managing Trustees, Tremont, RMR and others affiliated with them may benefit us and provide us with competitive advantages in operating and growing our business. However, the advantages we believe we may realize from these relationships may not materialize;
Our intention to remain exempt from registration under the 1940 Act imposes limits on our operations, and we may fail to remain exempt from registration under the 1940 Act;civil disturbances; and
Our failure to remain qualified for taxation as a REIT could have significant adverse consequences.Other matters.
Currently unexpected results could occur due to many different circumstances, some of whichThese risks, uncertainties and other factors are beyondnot exhaustive and should be read in conjunction with other cautionary statements that are included in our control, such as acts of terrorism, the COVID-19 pandemic, inflation, war, geopolitical risks, natural disasters, global climate change or changes in capital markets or the economy generally.

periodic filings. The information contained elsewhere in this Quarterly Report on Form 10-Q and our 2021 Annual Report, or in our other filings with the SEC, including under the caption “Risk Factors”, herein or therein, in our periodic reports, or incorporated herein or therein, identifies other important factors that could cause differences from ourthe forward-looking statements.statements in this Quarterly Report on Form 10-Q. Our filings with the SEC are available on the SEC’s website at www.sec.gov.
You should not place undue reliance upon our forward-looking statements.
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Except as required by law, we do not intendundertake no obligation to update or change any forward-looking statements as a result of new information, future events or otherwise.
Statement Concerning Limited Liability
The Declaration of Trust of Seven Hills Realty Trust, a copy of which, together with any amendments or supplements thereto, is duly filed with the State Department of Assessments and Taxation of Maryland, provide that the name Seven Hills Realty Trust refers to the trustees collectively as trustees, but not individually or personally. No trustee, officer, shareholder, employee or agent of Seven Hills Realty Trust shall be held to any personal liability, jointly or severally, for any obligation of, or claim against, Seven Hills Realty Trust. All persons or entities dealing with Seven Hills Realty Trust, in any way, shall look only to the assets of Seven Hills Realty Trust for the payment of any sum or the performance of any obligation.

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Part II. Other Information


Item 1A. Risk Factors
There have been no material changes to the risk factors previously disclosed in our 20212022 Annual Report.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
Issuer purchases of equity securities. The table below provides information about our purchases of our equity securities during the quarter ended March 31, 2023.
Calendar Month
Number of Shares Purchased (1)
Average Price Paid per ShareTotal Number of Shares Purchased as Part of Publicly Announced Plans or ProgramsMaximum Approximate Dollar Value of Shares that May Yet Be Purchased Under the Plans or Programs
January 20231,255 $9.14 — $— 
March 2023248 10.04 — — 
Total/weighted average1,503 $9.59 — $— 
(1)These common share withholdings and purchases were made to satisfy the tax withholding and payment obligations of a former officer of ours and a former officer of RMR in connection with the vesting of awards of our common shares. We withheld and purchased these shares at their fair market value based upon the trading price of our common shares at the close of trading on Nasdaq on the purchase date.
Item 6. Exhibits
Exhibit
Number
 Description
3.1
3.2
4.1
10.1
10.2
10.3
10.4
10.5
31.1
31.2
31.3
31.4
32.1
101.INSXBRL Instance Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document.
101.SCHXBRL Taxonomy Extension Schema Document. (Filed herewith.)
101.CALXBRL Taxonomy Extension Calculation Linkbase Document. (Filed herewith.)
101.DEFXBRL Taxonomy Extension Definition Linkbase Document. (Filed herewith.)
101.LABXBRL Taxonomy Extension Label Linkbase Document. (Filed herewith.)
101.PREXBRL Taxonomy Extension Presentation Linkbase Document. (Filed herewith.)
104Cover Page Interactive Data File. (Formatted as Inline XBRL and contained in Exhibit 101.)

† This document was previously filed as Exhibit 10.2 to our Current Report on Form 8-K, filed with the SEC on November 12, 2021, and has been amended to correct a scrivener’s error.

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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
SEVEN HILLS REALTY TRUST
By:/s/ Thomas J. Lorenzini
Thomas J. Lorenzini
President
Dated: April 27, 202224, 2023
By:/s/ G. Douglas LanoisTiffany R. Sy
G. Douglas LanoisTiffany R. Sy
Chief Financial Officer and Treasurer
(principal financial and accounting officer)
Dated: April 27, 202224, 2023

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