Seven Hills Realty Trust Announces Record High Distributable Earnings in Q4 2023 – What’s Next?

Boston, MA – Seven Hills Realty Trust, a commercial mortgage REIT, held its Q4 2023 financial results conference call on February 21, 2024. The call highlighted the company’s highest level of distributable earnings in its three-year history, outperforming its benchmark index. Executives discussed the company’s strong fourth-quarter performance, outlining key highlights and future opportunities.

President and Chief Investment Officer Tom Lorenzini reported that Seven Hills had generated distributable earnings per share of $0.43, representing a 13% increase on a sequential quarter basis, and exceeding the quarterly dividend by 123%. The company had also closed $54 million in new loan commitments and received over $100 million of loan payoffs in the fourth quarter, demonstrating the ability for well-capitalized sponsors to refinance in the current market environment.

The company’s portfolio, with an overall average risk rating of three, continues to perform well with no loans in default and no nonaccrual loans. Amid positive signs in the U.S. economy, including declining inflation, a healthy labor market, and GDP growth, Seven Hills anticipates a more favorable environment for real estate transactions and increased lending opportunities.

Seven Hills’ loan book as of December 31st remained 100% invested in floating rate loans, consisting of 24 first mortgages with a total commitment of $670 million. The company has also continued to diversify its loan book, with multifamily remaining the largest property type, representing 1/3 of the portfolio, while office loans accounted for 29%.

Regarding the company’s financial position, Seven Hills has secured financing facilities providing nearly $700 million in borrowing capacity, with a weighted average borrowing rate of SOFR plus 217 basis points at the end of the quarter. The company also discussed its active deal pipeline, highlighting approximately $750 million of prospective lending opportunities in various stages of the screening process.

In terms of outlook, Seven Hills remains well positioned in the current lending environment, expecting an increase in originations as 2024 progresses. The company anticipates distributable earnings to be within the range of $0.35 to $0.37 per share for the first quarter of 2024, continuing to cover the quarterly dividend.

The call also included a question-and-answer session, with analysts inquiring about the company’s evaluation of specific property types and geographic markets. Executives provided insights into their evaluation process and market preferences, offering valuable information for investors and industry observers.

Overall, Seven Hills Realty Trust’s Q4 2023 financial results conference call provided a comprehensive overview of the company’s performance, strategic initiatives, and outlook for the future. With a strong emphasis on the company’s financial stability, diversified loan portfolio, and growth opportunities, the call offered valuable insights into the commercial mortgage REIT’s position and prospects in the real estate market.