SEVN - Earnings call transcript Q4 2024 | Seven Hills Realty Trust

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Operator

Good morning, and welcome to Seven Hills Realty Trust Fourth Quarter 2024 Financial Results Conference Call. [Operator Instructions] Please note, this event is being recorded. I would now like to turn the call over to Matt Murphy, Manager of Investor Relations. Please go ahead.

Matt Murphy

Good morning.

call Diaz, Lorenzini, Treasurer; Chief Lewis, President. today's Investment and and on Vice Fernando Officer; Financial me are President Tom Chief Jared Joining Officer and question-and-answer presentation followed Today's by includes analysts. a by call a session with management, transcription note call today's written of is Please prior conference the the of company. retransmission without the recording, consent that and prohibited

differ February laws. are company from XX, note today's today's conference of XXXX, revise results and the actual on obligation Private the the no revision of Reform beliefs that that as call results or The Act within in and may statements Also forward-looking of Securities project. and any call. XXXX These Seven release made the materially Hills' of conference we securities today, other meaning to publicly those based contains forward-looking forward-looking undertakes Litigation expectations to statements statements

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

sevnreit.com. earnings addition, GAAP share. earnings In be financial distributable non-GAAP during A call, which can found presentation, will release our including measures and at earnings reconciliation on discussing this of can financial website to distributable our non-GAAP numbers be we per in found be

will turn to now the I that, over With call Tom.

Thomas Lorenzini

analysts. then it followed as competitive call our an Fernando over On opening turning pipeline. relates I fourth are macro an everyone. call Matt, results start from perspective loan our activities the and discuss on today, financial quarter our to we sell-side opportunities to our questions that to it review Jared the portfolio overview and before by seeing morning, this good performance, Thanks, our update to in environment the will will of before and with

year, that Seven second our the us than quality This into benchmark our XX%. management. a we Hills Commercial highlight allowing index, and index, quarterly is borrowers that well like Mortgage soundly the more as testament full I portfolio results, deliver consecutive to would by shareholder our this NAREIT outperformed the jumping Before for which year index, asset meaningful have is to as the underwriting of returns, outperformed our to Financing

fourth share our and Turning $XXX to met $XXX strengthened million million of of per Last the guidance to at reported end our earnings our commitments by portfolio of quarter we total $X.XX, from quarter our the distributable which results. We high the increasing range. end during loan evening, further diversified QX.

commitment million Our average million. $XX quarter-over-quarter $XX also loan increased from to

well currently has Our continues weighted of and average loan risk to portfolio perform rating a X.X.

grow our XXXX. loans, our $XX cash no We ample receiving our to year, approximately strategically during loans capacity portfolio in positioning million the us no risk-adjusted after through repayments, loan X nonaccrual our portfolio X-rated borrowing to taking We the million to attractive advantage in by capital returns. further Prior future pipeline and have no we would loans. in loan generated opportunities quarter in recycling of grow generate any totaling ended by default expect $XXX repayments and million to $XXX

were Turning the million. active highlights to quarter. closing $XX totaling from fourth X a few We the additional loans during quarter,

we in finance we million on one Texas here Mississippi. at housing student closed in fully loan University Also, another a property, bridge received Mississippi second in the of Starkville, was Then early the housing to to acquisition $XX this University serving repayment, loan hotel million. State loan, loan one Boston. our of student located during acquisition $XX the located totaled the January, million commitment first loan was million a funded And $XX finance quarter, a XXX-room of The the refinance a $XX San which property of Marcos.

X X should we expect position not as approximately any the but markets us to loans well repayments, being the which are forward, continue quarter do first anticipating Looking $XXX totaling improve. half XXXX, in million back to of repaid

Turning commitments, rating fundings to of XX, $XXX weighted of to an loans, X% invested of book X% and portfolio our commitments aggregate, a with or and from December an the of average consisted quarter. a rate loan XX and weighted years a Seven risk and X.X as of overall loan-to-value a mortgages million In XX%. which maximum yield Hills of $XX floating with million $XX average an our approximately of increase total including X.X%. decreased in total average options of modestly million, weighted last XXX% remained coupon Future of have when size close stable first of and credit at of maturity X.X average average investments has portfolio X.X% an extension all-in profile loan

loan our book. We continue thoughtfully diversify to

of today, has But of office and total be to actively outstanding dollars, XX% service reduced at our well-leased are QX. all been XX% of loans of by our secured remain continue from end properties, exposure debt our importantly, on the office to supported As down our by borrowers. more loan current

by across select XX% In and to continue retail the we hospitality and well-diversified country. loans. be portfolio addition, loans, consists today's service of of Geographically, industrial multifamily grocery-anchored followed

amended partners extending while facility XXXX, lending maximum supportive our $XX remain increasing also UBS our date million. capital million February agreement maturity of our the We of size by business. perspective, the repurchase $XXX a master to to From by incredibly

extended February March we Wells date XXXX. repurchase maturity Secondly, of from to our million $XXX of the Fargo master XXXX facility

I mention experience more elected estate would as Trustee. Independent and Hills operations development, and to be Danner to Hills an investment that to Ann Before a than significant like Ann asset background to I our will in multifamily Seven over December, of years going strong forward. brings Board and Jared, real the her residential in XX Seven turn call industry

call now Jared. the turn will I over that, to With

Jared Lewis

quick Thanks, update. Tom. provide a will I macro perspective

quarter, the third see optimism the at rates. to Federal the real our Reserve As interest we of reducing as end in market began last the began mentioned on call,

in request saw $X.X registrations we billion we underwriting the our over the a last period significant however, activity saw credit As the during loan loan criteria, evidenced in quality over notably, in increase term a fit increase an same quarter, quarter. to that monthly increase stringent issued by of transactions compared and, in substantial More averaged a fourth particular, and result, sheets when year.

and recent more for at real spreads liquidity the transaction a competition The confluence and sell markets return particularly drive Beginning in and in downward, to and interest CMBS to year so XXXX, are property early of we gives as market. fuel and deal loans decisions. the active liquidity should continues sector. seen borrowers we progress the the CRE-CLO rate of of refinance or help bottoming great With The values multifamily buy, combination end upcoming far increased have the make last new into owners among conviction lenders XXXX. significant loan activity reductions, this of increased maturities, estate to

time in Many are plans amount the to to a facilitate qualify do likely these rate Furthermore, not to to additional loan business XXXX investment these bridge properties additional XXXX of debt for property completion financing stabilize. of permanent in significant upcoming readily new and loans NOIs allow today. of and their maturities for floating originated require and rate for floating are

pipeline while earlier, near-term are options, are robust. our open mentioned As and floating both evaluating to borrowers seeing many financing fixed we of opportunities they loans are offer. And signing floating flexibility the remains that rate rate more I for

increase in an see to continue we properties. opportunities lenders, many Like finance multifamily to

have and where we thoughtful our success of there's However, sectors multifamily about like to continue we capital the be competition student found housing. deploy targeting less how market

industrial, to continue investments. RMR retail expertise where risk-adjusted leverage on platform of the also help stronger better transactions opportunities hospitality sectors, that can the in we returns We see our to us and generate interesting evaluate the broader

for Generally make outstanding lenders a being analysis sheets like properties speaking, $XX to selective industrial rate while still good strategically rate process end, of allows portfolio. stability useful our recent floating circumstances. able million. loans a X our to of and To the hospitality expand environment This be relative have totaling treasury volatility us compared term XX-year loan the us. that The we rate currently very credit on wide short-term during this rates in to for is array floating

the addition, one Barring next $XX days. have of This University. we close a for in loan Bayley housing property issues loan X-year any should serving certain In XX with initial the refinance requirements. options, student meeting million property a borrower diligence, term extension in X-year with subject to a within two is this repeat diligence loan

would like over call I to Fernando. turn the to Now

Fernando Diaz

$X.X and per Jared, you, distributable we XXXX share. million good morning. of quarter reported $X.XX Thank fourth earnings or Yesterday,

January, of million per $XX.X dividend dividend of price. regular the $X.XX to year, closing is declared on we basis, of we per share. February per on annualized XX.X% approximately earnings an $X.XX yesterday's to distributable reported yield based share tomorrow, For $X.XX dividend quarterly our In the compared to paid XX. shareholders On our be full stock a share or

basis XX. remains total XXX our December as of of CECL as basis reserve Our XXX modest points of commitments XX September at to loan points compared

primarily our decreased third fourth and in used improved the loans CECL forecast improvement at the certain to CECL for during quarter, the Our our of due macro $XXX,XXX performance an model provision quarter. in

cash our loans us protect loans risk structure loans reminder, with requirements. of mechanisms against mitigation or dependent as reserves. reserves collateral we to help flow any sweeps, we not have interest a do As losses, rebalancing and investment specific And such with all

Seven from Total the strong continues originations $XX equity average that cash with X.Xx conservative leverage borrowing due believe leverage from We capacity points. ended primarily As Hills provide accretive originate the to liquidity. the million SOFR benefit debt XXX at loans on loan plus of year-end, company. quarter will in quarter quarter, borrowing have capacity basis of the rate maintained opportunity weighted to this X and a metrics and customer previous and to conservative X.Xx ample that ample increased hand, our the a available borrowing earlier. of We its to the end of

guidance. and outlook our to Turning

to We expect first to originations of share the be quarter and of the range closing result per in the payoff $X.XX fourth in pipeline. timing our quarter currently as distributable a the of $X.XX earnings new of

have Jared As with we robust of a stages negotiation. advanced loans Tom pipeline in discussed, and several

the in later these or second until quarter quarter. However, this will not loans close

That questions. that, prepared remarks. And for with operator, please the open concludes our lines

Operator

JonesTrading. The from question Matthew [Operator Instructions] will Erdner come first with

Matthew Erdner

loans interest million was said that in on I Fernando, that net payoffs. turning you thanks believe for to portfolio, $XXX income But I that the guess the do And timing with guys targeting $X.XX there fully level of dividend and question expect dividend? and the about forward, $XXX originations, because actually portfolio first comfortable had. and you that thinking the that kind clarification How million later in current going I of the be those XQ, close the run of at are earnings to of you kind size? kind half once rate QX, early just supportive

Fernando Diaz

start that can in can the loan and terms Yes, perhaps I with color add Tom of production. some

market evaluates on As and and you rates. know, quarterly a of Matt, conditions, on forward based Board loan the path interest originations the basis, dividend the payoffs

So I of it's basis. think on with to we terms continue the in the And quarterly that something Board along looks a the dividend. that Board evaluate

Thomas Lorenzini

I certainly of to important pace is production. be to that Matt, And going think our question

for For $XX the closing. in that year, million $XX closed year that's this one earlier another mentioned got million. we've We've we already transaction

in quarter. we second So this we and another getting close we'll at got then point, more can And deals recycling X we've that million probably million, in some quarter have that and start cash. $XX repayments then the X out $XX put those

to out the dollars going get really as as So depend support far can the to just it's how the supporting we plan. initial quickly continue on to dividend,

Matthew Erdner

then guys the mentioned XX% when look with take, a looks that about portfolio, do or follow-up see can it year. how date, good original of And a back this looking into into guys And payoffs, you kind much that? how have? there's the scheduled give mature that of to the was you of half, but maturity to at you insight Because that, as like

Thomas Lorenzini

sponsorship. our their sponsors monthly at But upcoming on package performance Well, maturities, certainly acutely aware working we're speak look, a and properties. the we provide we're of the as they with with minimum the

I those are of to loans there's what you tell look Several through that XXXX. that -- in the is there's will extend. here, know handful So we when a going we XX can mature schedule

have extensions Some right. by the

outside on one of well at refinance work then got there. QX are maturities There's center. a property short-term we And at another rest basis now. And coming end X as until with agreed on extend scheduled while actively really some that continue early up do retail pursuing is We've Chicago be Grove look we've of maturing a got they're if refinance. quickly schedule, paths us. either the may a to in on their sell there and Maryland here bank There extension short-term loans, They the or February. We've they of you the and to QX. to then not a Downers the

Operator

Chris next question from with Our will Citizens come JMP. Muller

Christopher Muller

to nice XXXX. a close on Congrats

I flexibility just lot XXXX? put type you well below a of which thinking in And leverage today, So typically about are a in in forward. a that to guess, are you how The guys guys used REIT that little you but X:X operate context. CM leverage scenario, going to gives

have leverage guys going So thoughts forward. just on curious on any you

Fernando Diaz

happy take that. Yes, to

you the As we know, at X.Xx. finished quarter

where but around be million at work, little north or this alluded we capital probably the little a leverage. will Xx bit can to to that which work. that putting is around $XXX X the about to probably under point, probably comfortably of bit we another leverage currently of amount put money But probably to With maximum the a be. earlier, want us X X.Xx, get Tom as

Thomas Lorenzini

think that in And mind, were of is loans office that X have keep of the X that we I part pretty equation, underlevered.

factors that into low. that number So keeping

Christopher Muller

would And attractive. on hearing that more securitization little a dramatically. remarks tightening up and something your We're you that becoming touched impact and guys then prepared are markets this maybe a little that in more leverage

are that vehicle? you just thinking we could Seven sit today? CLO Hills into And So the the about how is as a guys market something CLO fit

Jared Lewis

catalyst that. Chris, markets, Yes. the and driving downward. spreads address respect huge this can to They're Jared. CRE-CLO With is CMBS definitely very active, back. I they're to they're and a

As we well. a as gain of that, result the repo that benefit our facilities of with

borrowing where costs happen, kind well. into CLO translates our prints So of as

benefit that's to us. So a

CRE-CLO is however, portfolio. challenging little to access given a ability, into that Our or bit today the the market of tap size

those structures those know, multifamily the And billion you of properties. to majority billion As deals. generally, $X from with they're anywhere of are each collateralized $X.XX for

really for world probably So in that to of all and us again. start from originate we over access to all multifamily our scratch have loans that market,

performing think, we portfolio, well. Our is

continue to we to so And elsewhere. ways find returns generate

Christopher Muller

kind would next cycle. be chapter we this current CLO So through a once get of

story comments out So the to play I seeing I appreciate in and today, the look forward 'XX.

Operator

Lorenzini, conference Chief to closing question-and-answer I and any over our Investment back would Officer, concludes this questions, further no With remarks. session. for like turn the Tom to President

Thomas Lorenzini

Thank you for today. call joining has ended. very much our The call now

Operator

The conference has now concluded. Thank you for attending today's presentation.

You may now disconnect.

Seven Hills Realty Trust (SEVN) 19 Feb 252024 Q4 Earnings call transcript