Seven Hills Realty Trust (NASDAQ:SEVN) management said first-quarter results benefited from a fully performing senior loan portfolio and what it described as continued discipline in underwriting, while noting that recent market volatility has started to moderate transaction activity in certain segments.
First-quarter performance and portfolio activity
President and Chief Investment Officer Tom Lorenzini said the company delivered “solid first quarter results,” reporting distributable earnings of $5.3 million, or $0.24 per share, which he said came in at the high end of guidance. Lorenzini also highlighted that total outstanding loan commitments reached “a new high water mark” of approximately $776 million after Seven Hills originated three loans totaling $67.5 million during the quarter.
- $30.5 million loan secured by a medical office property in Atlanta
- $19.5 million loan secured by a grocery-anchored retail property in Palmdale, California
- $17.5 million loan secured by a select-service hotel in Scottsdale, Arizona
Lorenzini said the company has three additional loans in process totaling about $78 million that it expects to close “in the near term.” He also reported that originations executed so far in 2026 were completed at a net interest margin of about 195 basis points, which he characterized as the highest level achieved over the past four years, adding that total returns are “incrementally higher” when including exit fees.
As of March 31, Lorenzini said Seven Hills’ portfolio consisted of 26 floating-rate first mortgage loans with a weighted average risk rating of 2.8. He said the company had no realized losses and that all loans were current on debt service. The weighted average all-in yield at quarter-end was 7.8%, and the weighted average loan-to-value at origination was 66%, which management described as conservative.
Loan repayments also featured prominently in management’s update. During the quarter, Seven Hills received full repayment of a $16 million loan secured by a hotel in Lake Mary, Florida. After quarter end, Lorenzini said the company received an additional $54.6 million from repayment of a multifamily loan in Ohio and was expecting the repayment of a $26.5 million loan secured by an office building in suburban Chicago “as early as this week.” Lorenzini said that payoff would reduce overall office exposure to approximately 21% of the current portfolio.
Following the repayments, Lorenzini said Seven Hills had about $110 million of cash on hand and nearly $400 million of available capacity under secured financing facilities. He also noted the company extended the maturities of its UBS and Wells Fargo financing facilities to 2028 and doubled the capacity of the Wells Fargo facility to $250 million.
Market conditions: volatility, rates, and pipeline
Vice President Jared Lewis said capital markets volatility had increased since the prior call, citing the “ongoing conflict in Iran” and its effect on investor sentiment. Lewis also said interest rates had moved higher, with the 10-year Treasury rising from about 3.95% at the end of February to 4.39% on the day of the call. He added that the expectation was for the Federal Open Market Committee to maintain its federal funds target range at 3.5% to 3.75% later that afternoon.
Lewis said the year started with strong transaction activity, continuing momentum from late 2025, but that volatility had begun to influence decision-making. Over the past month, he said acquisition and sales activity moderated as market participants took a more cautious stance amid uncertainty around rates, inflation, monetary policy, and geopolitical developments.
In debt markets, Lewis said the CMBS market “appeared to slow a bit” earlier in the month due to macro uncertainty and interest-rate volatility, though he added that he had not seen “a meaningful pullback” in capital availability. Banks, debt funds, life companies, and government-sponsored enterprises remained active, he said, and Seven Hills’ bank partners continued to support transactions through its secured financing facilities.
Lewis said multifamily refinancing continued to dominate activity as borrowers dealt with maturing bridge and construction loans originated in 2021 and 2022. For new acquisitions and other asset classes, he said owners not under pressure to transact were often waiting for greater clarity before moving forward. Still, he said demand remained for flexible lending solutions.
Lewis said the company had more than $125 million of term sheets outstanding and three loans totaling $78 million in diligence that it expected to close “imminently,” including:
- $39.2 million loan secured by a multifamily property in Georgia
- $22.7 million loan secured by a medical office property in Texas
- $16 million loan secured by a self-storage property in Pennsylvania
Dividend, guidance, and credit metrics
Chief Financial Officer and Treasurer Matt Brown reiterated first-quarter distributable earnings of $0.24 per share and said the figure included $0.08 of dilution related to the company’s December rights offering. Brown said that while the rights offering had weighed on earnings in the near term, deployment of proceeds was “progressing well,” and new loan investments over the last two quarters contributed $0.03 per share to first-quarter distributable earnings.
Brown also pointed to interest rate floors as an earnings buffer, saying floors remained active for seven loans during the quarter and contributed $0.01 per share of earnings protection based on SOFR as of March 31. He said all but one of the company’s loans contain floors ranging from 25 basis points to 4.34%.
Earlier in the month, Brown said the board declared a regular quarterly dividend of $0.28 per share, which he said equated to an annualized yield of about 14% based on the prior day’s closing price. Brown acknowledged distributable earnings did not cover the dividend in the past quarter, but said management remained committed to the dividend level “through 2026 at a minimum” and expected distributable earnings to “trend back to our quarterly dividend level by the end of this year.” The company’s second-quarter distributable earnings guidance was $0.23 to $0.25 per share.
On credit, Brown said the CECL reserve was 130 basis points of total loan commitments, flat quarter over quarter, and supported by the portfolio’s 2.8 risk rating. He said the company had no 5-rated loans, no collateral-dependent loans, and no loans with specific reserves.
Q&A: spreads, deployment plans, and asset strategy
During the question-and-answer portion, Lorenzini attributed the quarter’s roughly 195-basis-point origination net interest margin to product mix, noting first-quarter originations were in medical office, retail, and hospitality—without multifamily, which he said tends to have the tightest pricing. He also said Seven Hills takes a “rifle shot approach” and tries to avoid “auction-type situations” where lenders compress spreads to win deals.
Looking ahead, Lorenzini said the three loans anticipated to close in the near term were expected to have a net interest margin “closer to about 180,” driven in part by the inclusion of a “fairly sizable” multifamily loan among the three.
Asked about liquidity and the deployment timeline, Lewis said the company’s pipeline “averages about $1 billion” and turns over frequently, though he noted much of the activity is refinancing rather than acquisition, which he said can be more challenging to underwrite. Lewis said Seven Hills was negotiating three term sheets totaling about $125 million and that the company generally targets deals in the $25 million to $40 million range. He added that, over the next two quarters, Seven Hills should be able to meet origination targets “in that 100 to 300” range.
On asset type exposure, Lorenzini said the company would “certainly like to increase exposure further to multifamily,” citing liquidity in that market, but emphasized it would pursue transactions only where it can achieve appropriate returns. He also said self-storage, student housing, medical office, and industrial remain attractive, and that Seven Hills is not actively pursuing new office loans and healthcare-related assets.
Regarding portfolio growth expectations, Lorenzini said management anticipated closing roughly $200 million of loans in the current quarter and expected net portfolio growth of about $50 million to $75 million, with another $200 million of net growth in the second half of the year. He later added that the company’s goal was to end 2026 “close to $950 or so” in total portfolio size.
Lorenzini also provided an update on the Yardley REO property, saying occupancy remained about 81% to 82% and that the company renewed a large tenant. He said the weighted average lease term was “almost six years” and that the company’s goal would be to lease additional space and then “consider chatting with the board” about disposing of the asset late in the year.
In closing remarks, Lorenzini said the company expects to attend the Nareit Conference in New York City in June and invited interested parties to reach out to investor relations to schedule meetings.
About Seven Hills Realty Trust (NASDAQ:SEVN)
Seven Hills Realty Trust is a real estate investment trust that focuses on the ownership and operation of grocery-anchored neighborhood and community shopping centers. Established in October 2018 and trading on the NASDAQ under the symbol SEVN, the company targets retail properties that are anchored by essential retailers, including leading grocery chains and national discount operators. Its strategy centers on acquiring assets with strong tenant credit profiles and stable, long-term lease agreements.
The company’s portfolio spans multiple Sun Belt and Southeastern markets, with properties located in states such as Florida, Texas, North Carolina and Georgia.
