Seven Hills Realty Trust

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. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star then one on your telephone keypad. To withdraw your question, please press star, then two. Please note, this event is being recorded. I would now like to turn the call over to Kevin Barry, Director of Investor Relations. Please go ahead.

Thank you, and good morning, everyone. Thanks for joining us today. With me on the call are President Tom Lorenzini and Chief Financial Officer and Treasurer Doug Winoi. In just a moment they will provide details about our business and our performance for the fourth quarter of 2021. We will then open the call to a question and answer session with sell side analysts. First I would like to note that the recording and retransmission of today's conference call is strictly prohibited without Seven Hills Realty Trust's prior written consent. Also note that today's conference call contains forward looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 and other securities laws. These forward-looking statements are based on Seven Hills' beliefs and expectations as of today, Friday, February 18th, 2022, and actual results may differ materially from those that we project. The company undertakes no obligation to revise or publicly release the results of any revision to the forward-looking statements made in today's conference call. Additional information concerning factors that could cause those differences is contained in our filings with the Securities and Exchange Commission, or SEC, which can be accessed from the SEC's website. Investors are cautioned not to place undue reliance upon any forward-looking statements. In addition, we will be discussing non-GAAP numbers during this call, including distributable earnings, adjusted distributable earnings, and adjusted book value. For a reconciliation of GAAP to non-GAAP financial measures, please see our quarterly earnings release, which is available on our website. With that, I will now turn the call over to Tom.

Mr. Thank you, Kevin. Good morning, everyone, and welcome to the fourth quarter earnings call for Seven Hills Realty Trust. On today's call, I will begin with an update on our fourth quarter investment activity and deal pipeline before turning the call over to Doug to review our financial results and balance sheet. 2021 was a transformative year for our company. After completing our transition to a commercial mortgage REIT at the beginning of the year, we intensified our focus on our new business plan, investing in first mortgage floating rate loans. We reached a key milestone in our company's expansion with the acquisition of Tramont Mortgage Trust, at the end of the third quarter, which provided a tremendous opportunity to quickly achieve scale. We continued to build upon this momentum during the fourth quarter with strong sequential growth in investment income and another record quarter of loan originations at Seven Hills. We ended the year with total loan commitments of nearly $650 million compared to approximately $100 million one year ago. Based on our strong operating performance and our positive outlook for the long-term growth of our business, We were pleased to announce a 67% increase in our quarterly dividend in January to $0.25 per share, or $1 annually. We are excited about the progress we are making at Seven Hills and the opportunity in front of us to continue to grow our business and further increase returns to our shareholders in the year ahead. We have substantial runway to build on our momentum and take advantage of attractive investment opportunities in the middle market commercial real estate debt space. Over the course of 2021, our manager, Tremont Realty Capital, increased their market presence and accelerated loan production, originating 17 loans for approximately $450 million, over 70% of which were originated in the second half of the year. We also recently grew and diversified our borrowing capacity with an additional financing facility, as Doug will discuss in more detail shortly. With ample capital available for investment and a robust and growing pipeline of potential loan opportunities, We remain enthusiastic about our ability to continue to implement our business strategy and further increase profitability as we grow the company in 2022 and beyond. Considering the current share price of Seven Hills and our positive outlook on the long-term growth of our business, we believe that Seven Hills is tremendously undervalued. We are intensely focused on reducing this discount as we continue to execute on our business plan, further ramp up loan production, and demonstrate the strength of our lending platform to the investment community. We believe that our current valuation combined with the attractive market opportunity for Seven Hills to expand and generate higher risk adjusted returns in the year ahead provides a compelling rationale to invest in our stock. Turning now to our fourth quarter investment activity and loan book at year end. It was an active period for us on the originations front. Our manager originated a record 16 loans for approximately $165 million of committed capital representing 18% growth quarter over quarter. The percentage of initial funding to total new loan commitments for the quarter was 95%, or $159 million, allowing us to put more capital to work at the inception of each loan. Our fourth quarter originations were geographically diverse and secured by various property types, including multifamily, industrial, grocery, anchored retail, and office properties. The loans carry attractive return profiles with spreads ranging from 325 basis points to 425 basis points and range in loan size from $21 million to $43 million, consistent with our target investment focus. We also receive loan repayments on our hospitality loan in Atlanta, Georgia and our retail loan in Omaha, Nebraska for a combined outstanding principal balance of approximately $37 million. We ended the fourth quarter with 26 first mortgage loans with an aggregate commitment of $648 million. Our investments are 100% floating rate with a weighted average coupon of 4.5% and an all-in yield of 5.1%. In aggregate, the portfolio has a weighted average loan to value of 68% and a weighted average maximum maturity of 3.8 years when including extension options. By property type, our portfolio was weighted towards multifamily, industrial, and office real estate. The portfolio was also well diversified geographically with investments distributed across the U.S. Our investments continue to perform well with all our loans current on debt service, and from a credit quality perspective, the portfolio weighted average risk rating improved quarter over quarter to 2.9. None of our loans are in default, and we've not recorded any credit losses. Looking ahead to 2022, we believe there will be significant opportunities for Seven Hills to find ample investment opportunities. Our manager has broad relationships across the commercial real estate industry built on decades of real estate lending that enable us to generate strong lending opportunities. Our approach to originating loans through a differentiated client-focused process allows us to be selective and pick the best investments for our portfolio. We customize each financing structure to meet the specific business plans of our borrowers while maintaining disciplined underwriting standards. We spend considerable time and energy ensuring that our loan closing process is efficient for our borrowers and that post-closing our loan servicing and asset management is responsive. As discussed last quarter, we plan to reach nearly $1 billion in assets by mid-year 2022 and we remain on track with our plans. After record originations during the fourth quarter, we do anticipate transaction volume to decelerate in Q1, which is not atypical after the holidays, before re-accelerating during Q2. Our average loan size has increased for the past few quarters, approaching $30 million, and we expect to maintain this level with near-term investment opportunities in our pipeline. We have three loans under application, totaling $97 million, which we expect to close during the first quarter, subject to our final diligence. Overall, our pipeline currently consists of potential transactions totaling more than $500 million. In summary, we continue to see a robust flow of investment opportunities that fit our strategy and investment criteria, and we feel great about our growth going forward. Our increased loan origination volumes, attractive loan pricing, and strong credit profile clearly demonstrate the quality and strength of our platform. As such, we are confident that we will be able to continue to scale our portfolio in a disciplined manner and look forward to updating you on our ongoing growth. With that, I'll now turn the call over to Doug.