Seven Hills Realty Trust (SEVN) 30 Apr 242024 Q1 Earnings call transcript

Good morning, and welcome to the Seven Hills Realty Trust First Quarter 2024 Financial Results Conference Call. [Operator Instructions] After today's presentation, there will be an opportunity to ask questions. Please note, this event is being recorded.

I would now like to turn the call over to Stephen Colbert, Director of Investor Relations. Please go ahead.

morning. Good

today's Fernando Lorenzini, and Diaz, on Investment and Treasurer. are and Officer; Chief call me President Tom Chief Joining Financial Officer

question-and-answer written transcription of Today's followed conference call note presentation a without today's the the session the company. prohibited a prior that and call Please of with retransmission by recording, is analysts. consent includes by management,

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

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 that, I turn the call with Tom. And to over

guidance call for the quarter our above per you Thanks, of that results earnings thank distributable today. night, end Stephen. by share we high Good everyone, morning, strong our highlighted joining Last reported first and range. were

momentum hand, total industry book continuing our loan underwriting, build to a ample returns on on helped Seven and ongoing the Hills' We benchmark liquidity teams. that our our serves disciplined believe to the to strength and throughout exceeded look stability deliver originations we forward portfolio investment The asset of Nareit management of once as and continued XXXX. With testament outperformance quarter. this for our again shareholder to positive strength

the from of quarter. rating exceeding earnings dividend X with our and no share Turning loan per of share nonaccrual of by risk per first with X%. profile no overall distributable an delivered We stable remained average quarterly portfolio to highlights of in loans a $X.XX, The credit our few loans. $X.XX default

our We industry total million equating points, on outperformance delivered of to since received business payoffs, over today's $XX more to loan in of the well-capitalized more outperformed that execute of ability benchmark demonstrating cumulative percentage beginning return X continued plans sponsors And of than the market. XX% than by their we shareholder XXXX. the

macro relatively From strong amid economy Federal U.S. and Reserve's inflation comfort resilient above of has backdrop a a readings remained the data economic perspective, level. the

the now towards As back expectations and cuts of rate for year. a result, are have weighted shifted half this interest

that While pipeline to ultimately attractive result lower opportunities, more estate this will lending production real a of we interest current loan rates we further transactions year. and investment book create in our confident our believe a are flow expand for opportunities favorable steady provide environment increased

activity. portfolio quarter first our to Turning

to continues property experience portfolio repayments underwritten various conservatively Our across places.

loan X not did loan first million. $XX.X loans which during fees. for multifamily close During on when period a quarter, points total basis on new a office, SOFR plus payoffs, million of however, including end, quarter the Post coupon year. we April all-in traditionally with yield received $XX.X we for commitment and a the of including is with total loan X XX, property industrial We of of closed slower an a retail a the any X X X% XXX quarter,

nearly X% million $XXX in only consistent Hills our mortgages portfolio XX future March floating average about $XX with size as XXX% down from and remain remains of X% total book loans first loan while million, Turning at commitments. quarter, commitments an approximately fundings consisted of of to our or rate $XX Seven last total of million invested loan XX. of and

Our aggregate, the average and of of including close has investments maturity weighted an maximum stable average have loan-to-value a a risk a with portfolio weighted In when of all-in credit X.X%. of X.X years a XX%. X.X% and average an profile extension of coupon and options X overall rating yield at

diversifying continue We our to progress make book. loan

end, largest quarter our multifamily XX%. was of property at type As

our compared exposure loans. retail, comprised self-storage of XX% ago. office XX% a to declined of And the hospitality, to and has year portfolio industrial Our balance is

entirely subsequent Hills portfolio of Seven loans terms the the the originated now that of after consists of were vintage, pandemic. onset we portfolio to repayments first quarter, In received during the

perspective, capital at aggregate, million facilities partners $XXX average provide very financing us our our X our a in supportive we a In SOFR nearly points the secured capacity. remain borrowing of And borrowing had basis lending with of quarter. From of plus weighted the XXX rate business. end

Turning to our deal active pipeline.

deals various self-storage, and prospective of under within in million in and the diligence over days. opportunities multifamily, currently and see to process of of retail of diligence to and of continue our stages properties, We application loan XX including requests X million consisting $XXX lending $XX.X steady industrial, for flow and screening next hospitality acquisition expected close a refinancing for

deliver our credit to portfolio and and our remains In overall business results. performance solid continues closing, strong

positioned generate for remain selecting to year, to for While this are we shareholders. longer, continue compelling loan portfolio most believe attractive our well the returns for interest production accelerate and our investment rates to higher are we likely opportunities

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

million per loan and repayments our afternoon, high the during range, end the we primarily due morning. the of was of which timing of $X.XX Thank Yesterday quarter. above you, $X.XX Tom, guidance quarter earnings, to distributable first reported share, XXXX $X.X DE, good or or

basis, last per dividend closing earnings to based XX, annualized an declared rate our covered level. the which dividend dividend approximately stock XXX%. DE on first over exceeded quarterly yield we our approximately yesterday's equates May our mid-April, Our of price. quarters payable to have run few a XX% our on of $X.XX share by shareholders On quarter regular comfortably In

reserve diversifying debt deem have our to loans estate on We service, modest commitments our to XX% XX. further basis and nonaccrual on reduced CECL of we end with attractive to loans. XXX remains Our points quarter current March And loan XX% remain remain exposure have and of we total into at of as more the as focused all compared be real quarter of portfolio office fundamentals XXXX. our sectors in first no

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

Hills reinvestment leverage $XX and the facilities. metrics have million financing to conservative across substantial X secured quarter, and first on liquidity. We Seven maintained cash continues $XXX the ended our of capacity of its hand million In quarter with

Tom Total X debt due that equity loan loans primarily to the repayments provide quarter, that leverage to strong decreased benefit We that to capacity our X.Xx the of will forward. company a from to the borrowing accretive and conservative originate previous believe at X.Xx the discussed. opportunity end available going

the to Turning second outlook for our and quarter. guidance

G&A that origination within continue levels. will and share, dividend. We to guidance a our quarterly flat and of recent activity cover repayment expect will interest assumes to to $X.XX consistent range rates remain expenses This and distributable our which with $X.XX reflects per earnings be current

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

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

can and specific the you how little are accelerate you guys bit that growth, to be do think And whether the to talk optimal you looking about that guess, Could you types, geographic for a portfolio pipeline quickly scale an regions? what size? loan really it property I up

here. Tom the Thanks It's for call.

multifamily a region, going certainly, right? to that as I from standpoint, active not and tell product lend aware. really sector. in to that There's any we've particular redlined that you're the into. focus, From we're continues very you still would lend geographic So we're -- nationwide we markets be a So the

multifamily I loan. noted, closed a we As just

We now application looking and in a right diligence that self-storage at West property we're currently the under Coast. in have

the hospitality And a makes And certain We right at we're or still opportunities sense days very we're Industrial well now. next so. close well. in that few as expect looking perform seeing in XX there locations. hospitality, to

What production the for of about we've for $XXX million modeled loans is year.

our a million the on -- million the velocity end 'XX. back $XX from projected comes we of increase depending the have. there's about another of target we're maybe we the repayments that we hit could year loans see think then yet, that $XX there, in We of I the But million before that we $XX X why repayments so year $XX now of the loans to for at of right can't do million we And that reinvest. piece. couple do no reason can X to a expect to

particularly your the XX% properties just quarter-over-quarter. in talk you're market there. a color good about couple occupancies ticked of on office, you noticed guys' up then from Awesome. overall I That's in the the there? seeing Dallas And XX% leasing in Could what and to one

Yes.

Dallas well, and as generated tours in the property. some which were foot -- has actually team modest there there. they they the additional So uptick -- leasing have a their did changed transaction, leasing additional traffic They of

the Floral occupancy what a We've one modest that tours of space. as the momentum own, as at positive new some you're that's for Vale looking far with a there. in Pennsylvania, moving As aware currently seeing we're asset Yardley, leasing for transaction seen we're for under tenant that there we've leasing brokers we in the And into well. our LOI had numerous in an increase there leasing

difficult, is aware. as office you're overall, So

it have to leasing commission team tenants. necessary you willing to sponsors attract new really I those have right, if and are TI depends spend the on there the think and that you the contribute cash to spend, the that capitalized

are would TIs, current we needed service. on case, say, and so... aid is So I for that's -- leasing optimistic, [ as debt Everybody office and are for care our available ] All on portfolio. if loans the cautiously cash

from with Instructions] The Chris comes next question Citizens JMP. [Operator Muller

little to So the on I as hit pipeline well. a bit want

there guys pipeline opportunistic or now? are finish So like of out are falling was playing out the call, the last loans on I or like kind you there the said that there? Or about you maybe talk some dynamics before pipeline million there. guys Are seeing the of even in just you the defensive $XXX Can think not you reaching loans right just building line? capital

-- the existing my now going I going mentioned. an things place." months, curve the been a a to lower down I put better time maybe ride rates. Chris, of a the Fed the back and "Hey, few you think market refinance some if the entertain off right, was, little bit just I is optimism is I'm borrower get think of loan, and it's in those can Maybe There's all that financing in current

period said, just right, transactions coming of look, higher to good in quite is a you time." those few a for number sails, messaging didn't we're the to it bit So economy think have going So Fed of just will, of refinance. at looking might rate a longer a little people the for from interest happen, been "Hey, be that if wind because I out and the a general the took

seeing, that market, still, that maybe there's that some coming to require in in written multifamily The we're where going in. cash thing especially be the are XXXX the overleveraged were have in trying other active, due, which to transactions you sector, we're are

and from So willing go that that. after. transactions cash do to may required out, balance not that to sponsorship we underwrite to the be And want we'll often some there they're

So happen. that transaction doesn't

sidelines powder, I on dry that there's lot a think, have lot with dynamic is of going you other just The the lenders. of on a

we've you spread find transaction when competitive. And works, seen that So it's very compression. a

it almost than find just may business, best want certainly if speaking the somebody we the might a or CLO you buys kind because of putting we're securitized and in really cheaper where we execution. to they're they we do appropriate. willing comes So foot some forward feel other and in situations And be to ourselves will, transaction, much

So there. line just a the flow difficult across is get there little right to out goal It's now. it more

It added accretion looks so quarter in Got run about looks maybe in it. X. like the That's revenues quarter next to discount purchase out first very it helpful. the bit here, little gears that like And the should a then here. changing $X.XX or

term guess, and GAAP earnings I question result you below value see of So to the as is dividend some a run that? my book level the near do we'll decline expect in

I'll Fernando, that. is this Chris, take

run the this expecting off third accretion to quarter. by are We

it So be progressive. will

down, will Second quarter I quarter be third said. and like

Obviously, believe terms don't that as alluded, we that be ramp our going Tom much production, as impacting going in up well. the that's that's earnings. So help to as of us to balance we

for conference This concludes I Tom our to over remarks. like Lorenzini to question-and-answer turn session. any would the closing back

forward look this in June. We today. for Operator, City concludes seeing the Thanks, us York call our joining everyone, Conference at to Nareit many today. of in you New

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

now disconnect. may You