SEVN - Earnings call transcript Q4 2021 | Seven Hills Realty Trust

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Operator

Good morning, and welcome to the Seven Hills Realty Trust Fourth Quarter 2021 Earnings Conference Call. All participants will be in a listen-only mode. [Operator instructions] After today's presentation, there will be an opportunity to ask questions. [Operator instructions] Please note, this event is being recorded. I'd now like to turn the call over to Kevin Barry, Director of Investor Relations. ahead. go Please

Kevin Barry

just good fourth With and Lorenzini Thanks joining our Illinois. for Chief about provide Thank business of our on morning, XXXX. the today. and In Doug Treasurer, me Officer for Tom moment, call us they'll Financial details the you performance and everyone. a quarter are and President,

We sell side will then analysts. open the call to a question-and-session with

as may Trusts to XX, today's without within and release like any Private would contains company note or in of the written today, statements Realty the conference materially on Seven laws. differ undertakes conference of revise Act forward-looking is I of call. statements are and we based call Friday, actual no of Litigation and the XXXX, Securities note First, expectations retransmission Seven the Also project. results other These publicly prohibited those call results strictly and Hills conference Hills' the that that from securities to The prior today's consent. to recording forward-looking obligation Reform XXXX meaning February revision today's of made statements beliefs forward-looking

upon is Additional forward-looking can the Securities could information that those in any Investors are SEC, cause website. the place SEC's concerning filings reliance our statements. be to with and differences undue or factors Commission, from Exchange contained which accessed not cautioned

including distributable distributable In addition, adjusted call, we value. will earnings, this non-GAAP be and during adjusted discussing earnings numbers book

over now financial our call to With earnings which on release to the For website. a quarterly reconciliation will I is of measures, Tom. please our non-GAAP see GAAP that, available turn

Thomas Lorenzini

turning we will fourth We call, floating rate After to new sheet. rate for over our everyone. focus the call before transformative our Mortgage a results mortgage review financial was mortgage call the Doug And activity XXXX which you, Realty completing in Seven with our update earnings transition new year on commercial achieve business opportunity our year, Thank and the quarter pipeline -- on our company. balance in of at I to milestone beginning business plan an to to Trust. deal first expansion investing loans. quarter for third a of of and investment On at provided Trust fourth Good view welcome to Hills key morning, the today's intensified begin reached scale. our the the with our TRMT end a acquisition quarter, the a tremendous company's on quickly Kevin.

with outlook during this million and positive compared with for increase year our sequential commitments one operating million long on of upon growth we our continued strong Hills. We strong income to $X growth quarterly another our to ago. performance January our nearly of and of in loan total Based and the or $X.XX a quarter at fourth annually. build per business, We XX% loan in to to the investment the share dividend pleased $XXX term were year announce ended quarter momentum originations Seven approximately $XXX record

are to we the in our Hills opportunity ahead. of and grow front in progress continue year making the about at to shareholders us and excited business are We returns increase our Seven further to the

and substantial estate real take attractive in build space. commercial We our debt runway on have opportunities the market momentum to middle advantage investment of

accelerated year. for of Realty which loans the were the originating Tremont Over the loan presence XX approximately their XX% course half of Capital XXXX, and originated second $XXX of million over production, increased in market our manager

to as profitability outlook we a growth implement beyond. available to With increase enthusiastic the Hills we our loan and ability growing our our investment opportunities, the company borrowing of Seven share and long more grow and for We in undervalued. also is we potential of recently diversified remain grew and XXXX Considering and business, positive price robust and the in that with about additional Hills shortly. ample will financing an capacity strategy Seven tremendously term facility Doug current pipeline discuss our business further our believe and as capital and detail continue

adjusted We are investment intensely to lending our further focused strength We discount on and community. up business to continue on execute we plan, of reducing our this ramp the production loan platform as demonstrate the for returns believe Hills that the market generate higher attractive combined invest and year rationale with valuation provides our in expand a to ahead, Seven compelling in opportunity our current the stock. to risk

It Turning originations end. was and at loan an now quarter for book our activity on period investment active year us the to fourth front.

loans Our manager to of quarter committed for $XXX new percentage the loan. each quarter work total was or over and XX% initial allowing to capital of more funding quarter. representing approximately originated growth The million us commitments for $XXX million at record capital to loan a XX% put inception the

and various retail points fourth to loans million properties. our with from target diverse property $XX attractive ranging loan ranging industrial, including points basis basis profiles geographically spreads Our XXX grocery types, from consistent to originations carry size to multifamily, by quarter million and with office XXX investment return and The focus. secured were $XX

in XX We loan Nebraska combined with outstanding loans approximately fourth with also of loan ended received an mortgage balance aggregate hospital of We first million. the Georgia $XX quarter Atlanta, loan and our for $XXX on million. our loan principle commitment in Omaha, payments retail a

across weighted the in real coupon investments was extension Our portfolio multifamily, to weighted portfolio and average was of In XXX% weighted all X.X diversified value options. X.X% industrial our a distributed office years of aggregate floating US. average yield X.X%. and loan an to has are well estate. maximum when geographically with the a of with portfolio also rate investments and a towards The average waited By including XX% property type, maturity

over of not are recorded rating default credit quarter well Our investments from average loans our quarter to perspective and with on X.X. weighted perform service losses. we've current improved and None quality any a loans all portfolio in debt continue to to credit the risk our

Looking opportunities. ahead believe find opportunities we be Hills to significant ample to for there will XXXX, Seven investment

decades the that enable across industry estate of generate real built lending lending on Our broad strong opportunities. commercial estate manager, relationships us to real has

Our while maintaining We for loan a management our to process of for closing approach client each borrowers to meet and the pick considerable customize portfolio. our us and is post ensuring spent differentiated best time business efficient allows servicing process that is selective our standards. loan investments focus borrowers be financing our asset disciplined plans underwriting closing and originating loans We responsive. that through specific and structure the our energy to

to midyear $X in track on assets After anticipate fourth plan we by during to our remain the QX, billion decelerate the in before quarter, XXXX nearly atypical is and not As discussed last transaction we reaccelerating holidays QX. quarter, with plans. which do after originate, reach during we volumes record

for approaching expect loan $XX we million the level size maintain increased in past and average opportunities has few near this to investment pipeline. term quarters Our our

We great opportunities $XX and robust continue investment summary, to totalling criteria expect the we about going million. final have feel $XXX our investment of during to flow a three In which fit close application, strategy growth forward. that first totalling pipeline than of our we subject our million, see and under loans potential diligence. quarter to currently our transactions, we consists Overall, more

credit clearly platform. Our strength and profile demonstrate of the increased our quality loan origination and pricing volumes, strong attractive loan

continue scale and to are portfolio on discipline a able we look confident updating be such, growth. that you our forward As to our the in ongoing to I'll Doug. over that, we'll turn to manner With call

Douglas Lanois

Good Thank everyone. morning, you, Tom.

to X. Tremont acquisition Trust our a on merger Mortgage July occurred compare reminder, third had basis our will if a I XXXX. of forma quarter we results closed fourth pro on As as September results XX, quarter on the our

last TRMT loans a over We accretion acquired net will Additionally, as remaining accrete this purchase discount income of the generated that the in we recognize income. individual into the discussed term loans. quarter,

earnings. non-cash this item of our calculation deduct we in distributable However,

Our further of in on detail quarters. the purchase coming supplemental financial contains discount accretion our package estimate

share. posted Turning for or Adjusted quarter. share, performance per Hills of million in fourth non-cash or net $X.XX $X.XX $X earnings $XX.X distributable million $XX.X to accretion income per per of $X.XX our including at or GAAP share. million came financial Seven the

portfolio and from loans. in six expenses our prior new floors Our financing facilities the compared and due on and to on support loans quarter secured our Interest performance current which million two payments loan XX% related up from earnings during increased to the partial our and embedded repayments to to quarter, into $X.X income to $X.X quarter. reflects our million benefit from portfolio growth. was borrowings borrowings interest strong continued Interest investments money LIBOR grew

our quarterly services spread loan As fees. LIBOR of amortization came approximately $XX.XX investments which points, our stock D&A in the floor professional on run was G&A compensation value adjusted weighted rate range to per points, increased $XXX,XXX yield expense $XXX,XXX a in expense. the after the non-cash of plus all-in XX, XXX book of incremental weighted quarter, excluding XX basis of of basis share. due the sequentially This our average to above Seven was of Hills average end average a X.X%, December consisted weighted fees. our At

sheet, ratio their million. end, the requirements. outstanding $XXX obligations with our which to drawn We debt but early further capital. strong in fund Since times. was North investing end, $XXX Please cash approximately London a meet respect during to secured financing turning approximately of these one and Now to in area, of approximately share, New our total or ended our with loan ahead available leverage had Carolina $X.X At $X.XX the our principle $XXX prepayment at stabilize of our three With capital Hampshire we Durham, and of to capacity million equity Loans QX. unused million. year initial available was for maturity our liquidity end, quarter and year payoffs income to facilities of generated combined held from loans a balance quarter we X.X we position recognize net fourth investment million in $XX range per anticipate million our for prepayments we note received after available million. to balance borrowings, on our will $XX

are earlier, to mentioned that equity. diversify of return on Tom growth the and our enhance our sources on and continued we support increase our plans our capital will As executing business

priced on we match BMO provides that market us us term with quarter, facility million Harris to of $XXX During subject attractively non-mark a to will and the not added capital the the note mark-to-market facility funded fourth Bank. loans underlying matches This note provisions. with

we with to in that also discussions $X additional banking of financing partners giving runway an another master repurchase our ample nearly add expand are to portfolio to facility anticipate will billion. us provide We million $XXX

have we diversify our and our capital With cost XXXX rates, XXX% rates to we of aim funding is of considerably originate in liabilities rates to of raise interest our will to for in business. further and new and our risen that since funding As call, given floating reserve continue and federal interest typically deploy XXX% the excess are loans our favorable our optimize last rate portfolio sources. expectations our liquidity, that respect increase

have benefited floors. rate However, interest to have our on recent while from our not earnings been subject loans our floors borrowings

an a index until may increase impact average As point net basis exceeds our XX weighted result, initially, in rate income our floor the on the interest rates portfolio.

our dividend of per and increased earnings open basis, concludes dividend prepared the lines attractive questions. our approximately during $X.XX Finally, please quarterly Based to for expectations increase an back well yield portfolio are an X% the share. dividend on half our strong annualized we price. On further our in performance on translates our we up positioned current Operator, this remarks. stock $X.XX of year. January, continued the to to for by That growth,

Operator

with And Muller Chris question [Operator come Securities. the will JMP go from instructions] ahead. Please first

Chris Muller

out some and closing the on taking XXXX Hey off with for guys, scale. and questions the thanks starting congrats year more

about the just fair interest it's year, much you dividend from to in is EPS should covering nice and possibly the is running able of to distributable quarter I from How be that back coming the in quarter, second to income. I that my repayments Thanks. guess raise the talking And below assume dividend. guess and fees of being So you see half that with that question it's that dividend increase. versus the first guys

Douglas Lanois

income. income. Doug Hey QX Thanks fees, obviously when The cover dividend. our be interest regular that expectation Chris, a those for in we spike substantially We Lanois. fees substantially us fees in joining will that today. cover But we to the -- it's exclude expect that with

year the more doesn't it -- additional further it that deploy than So and into cover capital then dividend. as we will

Chris Muller

of flow expect could the have Got that that you it. to XXXX, long guys the is helpful. of bulk of something quarter? on Thank then visibility timing I through one other do discount, by the That's the you. earning some statement? hit Is And the that purchase expectations the the how first Just have is in that into you creation end something or that. on

Douglas Lanois

big Page XX Yeah, ramps Chris this $XX quarter down it's Doug -- and hit at quarter to looking again. at The almost million. fourth of was I'm the supplements. It

only, when repay reflection strictly concern loans of it's those out loans. runs runs XXXX, those loans not laid $X.X all actually smaller right, out QX you. to it's dependent really it be it's there very those it's accounting on So specific any value It's much going and of to purchase the loans In TRMT about requirement. and it's price then about because out amounts million an but a and it 'XX, to in the -- for

Chris Muller

guys. Got lot, it. Thanks a That's helpful.

Douglas Lanois

you. Thank

Operator

and like any Ladies the close over Thomas Lorenzini conference gentlemen, our back turn this concludes I question-and-answer remarks. to session. would for instructions] to [Operator

Thomas Lorenzini

and Chad, Realty you, us forward speaking you joining today your thank with soon. Seven and for to We again Trust. in Thank interest look all you for all Hills

Operator

And thank now Thank for conference concluded. sir. you has attending you, presentation. today's The

You disconnect. may not

Seven Hills Realty Trust (SEVN) 18 Feb 222021 Q4 Earnings call transcript