Seven Hills Realty Trust (SEVN) 30 Jul 242024 Q2 Earnings call transcript

Good morning, and welcome to Seven Hills Realty Trust's Second Quarter 2024 Financial Results Conference Call.

[Operator Instructions]

Please note, this event is being recorded. I would now like to turn the conference over to Stephen Colbert, Director of Investor Relations. Please go ahead.

morning. Good

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

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

information SEC, Additional the Commission, could Exchange is differences accessed and Securities filings those or in cause our can the contained SEC's with be from website. factors which concerning that

cautioned undue statements. forward-looking place upon any not are to reliance Investors

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

call for Thank morning, today. everyone. Good Stephen. our you Thanks, joining

investments. over years team leads look to where Vice forward success President. Jared's our contributions our Capital, at team joined at new ongoing worked as Tremont mentioned, to Seven We and responsible he Jared together Realty Jared Realty at have Stephen As has screening structuring underwriting Hills. Hills our Lewis and continued for the XX I for manager, Seven

disciplined of our estimates. consensus momentum share ample evaluation, is earnings the reported new With Investment analyst were stability of teams. we Seven by underwriting, resilient to our and book, highlighted of Hills second that by our above The supported on move we strong reflection on robust under continued distributable loan evening, pipeline portfolio a of per strength Last half we into originations and hand look building asset as and forward management opportunities liquidity XXXX. a

an with received resilient and commitments. what within one the dividend rating to a per loan portfolio distributable We Federal accelerated remained is profile share for in closing loan quarter. the of From $XX.X our our We from risk comfort $X.XX U.S. economic The our level. relatively begun with and credit exceeding across highlights has second with and quarterly recede nonaccrual activity, inflation while economy average the Reserve their payoff earnings no fall X, Turning strong we by million, few of rates have of overall has million a $X.XX per $XX.X X delivered indicated loans. perspective, production, macro loans to X%. stable remains share loan no loan the to

rate expects increased we rates now to that believe bodes An reductions continue the transactions real to market the see interest result, later rate lead year. and this ahead. opportunities environment estate a As easy interest will lower for to months in commercial beginning well traditionally lending

activity. quarter second portfolio our to Turning

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

Scottsdale a earlier and $XX.X repayment received loan hotel During we on this a Portland million, we multifamily totaling received of property. the million month, payoff our quarter, $XX.X a

a capacity capital financing to our business provide of perspective, loans. Angeles. second to and transaction multifamily in the quarter facility partners remain during Los a From loan ample $XX.X in loans self-storage million on continue supportive new as X a activity a very on loan us $XX.X property secured increased, our a and the acquisition originate closed on We of Virginia million new

Turning loan book. to our

June Hills floating XX commitments first which of remained loans loan of rate mortgages Seven with and $XX consisted $XXX As invested XX, size million. in XXX% total of portfolio million of an average

recent remain our X% approximately sequentially, million portfolio or increased only our commitments. With and X% future while consistent total $XX investments, X of about fundings

maximum rated have and rating average when close and of a X. loan credit stable X.X with XX%. portfolio to weighted a investments an X.X% are a value all-in coupon of yield weighted years X.X%. the and has options a In extension average including of risk Our X of of an aggregate, loans of at our None profile average maturity

loan our progress diversifying to continue We book. make

largest while of office our comprised retail, our As multifamily industrial and our was of quarter self-storage at XX%, decreased and to of XX%, the is hospitality, portfolio exposure loans. property type end, we have balance

we outstanding The portfolio providing and terms consists be as million the in Dallas Hills $XX.X to pandemic. be Seven the In plan. of business on We originated of to reminder, that and their be vintage, recently portfolio was to a loan term to to loans August. now of with into complete the entirely subsequent will capital of onset terms our extension in borrower continues mature additional property additional with borrower were the return, will borrower contributing support set asset to invested the agreed

longer current we [ on was for extended finalized with million ] X, while XX%. mature which market documentation term set outpacing This a been occupancy to short-term on basis at July $XX.X plane asset the XX-month is a the extension. Our has loan, Texas

active deal pipeline. Turning to our

deliver self-storage, process, acquisitions deals our diligence retail screening, see over new to requests consisting in potential loan steady of sheets track in on We in of additional in remain X with refinancing several prospective of loans currently continue million our We to properties. $XXX term with XXXX on pipeline of flow one and hospitality our and opportunities goal and stages of multifamily, industrial, outstanding. for lending a diligence various

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

as positioned accelerate are production I'll loan shareholders. potentially with call interest early back to the Fernando. this And for our to rates in cut turn and deliver over attractive year as our returns next half to we we September that, for With in the the their to Federal well of portfolio meeting now Reserve believe expected

Thank payable yesterday's second based stock you, quarterly closing quarter morning. approximately $X.XX equates per of yield XX, or our our to of which $X.XX afternoon, Arizona. In earnings, the covered dividend guidance high or August DE dividend XXX%. Scottsdale, of reported and in share our distributable to due per annualized on regular early of our mid-July, above of XXXX $X.XX second good repayment basis, loan which share quarter, hotel was range, Tom, million we we primarily a $X.X Yesterday price. by end DE our shareholders an to On on approximately XX.X% declared the

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

loans debt no metric service, have and remain increased loans. all current we this slightly, on non-accrual their While

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

million leverage had accretive over $XXX end weighted a plus cash [ conservative debt increased leverage substantial believe to rate of We Hills will the $XXX liquidity. In quarter, previous have $XX of the at of and metrics to loan capacity and X.Xx its average borrowing points a discussed. quarter, the with of XXX strong from that quarter. ended X.Xx to on going borrowing loans consisting Tom the benefit of to end originate continues our that due of forward. company conservative quarter borrowing the provide Total sulfur equity million that We basis maintained hand and the the the opportunity at primarily of to repayment we ] million available liquidity Seven and second capacity,

to quarter. for our outlook Turning the guidance and third

prepayment We And expenses the will expect rates $X.XX reflects be open levels. G&A and flat with second that questions. and saw and That repayment concludes to line prepared remain for excluding that, expected current the guidance consistent earnings that in of quarter. at please our sequentially activity This income we when interest our assumes operator, remarks. the with originations flat distributable $X.XX

[Operator Instructions]

first Jones Our Jason from Trading. today with question Weaver is

how the opportunity of and capital specifically specifically the a backs? any within marketplace, that's If hoping more the is competition I was to the yourself? environment, level amount that you coming buy of bit your about in of little could within address the pertains it level out is origination in crowding set the -- way for

reasons I that Sales would Jason. it's competitive competitive. one market you dearth in certainly -- there's new transactions. the a of because there's is marketplace. the transactions a is Sure, happening of And the tell

they up these may ultimately, more So happens happening, what And right? refinance is we're in transactions seeing end not that a lot of opportunities.

real lender. than their lender. and has a little around a be may don't a to various if ultimately, acquisition And kind can transact that they cash an solid deal with current we to REITs yield liquidity a that we find quality we sidelines even the the mortgage other again. ample and of debt the sponsorship to debt on with be there situation, funds, wise bid see estate Borrowers decent shopping transactions current get with we're stick wise flow the better and they of with competitively start is that of find work, want, simply originations very especially bit because do see -- starting and your is When commercial they

competitively that are work transactions bid. So those very

transactions in the to lenders. against of on. opportunities i.e., there'll We works, Because cause find us, back but transactions would ourselves start different our of when you trade, generally some be to such anticipate or sales or that the lenders more half X X one relief as there'll for bid see and hope find be if rate bigger competing right to XX we a and that then will it's more year, pool now, also more that you

marginally activity in We've line time in your in. year, wonder might monetary this easing half indicate the complement view? And in picking economic some lines, there that of along estimate the you more Has picking last has seen weeks? softer up a be X figures have -- moved -- those I with in of of that that back number if grown

so. I Yes, think

to back off cuts We and and need rate were the to in of off, And also of X Fed the any. at then year X volume You XXXX, in might And of last we're nearly at have that saw or the drop interest back rate kind the beginning not uptick pipeline. to look level so expecting of into back an of coming we market when volume year the not we that in saw our people going have off. end as cuts.

that of to if And optimists. going if financing, are ahead they're start get to want Now up selling about they we're thinking of I thinking because be with where will, -- on they that a to quarters, and about better and again way they seeing rate-cutting you sponsors Fed volume several see pick starting believe they next to is another the go we're starting the can their over capital. path start if lie, cost think

the you'll see, think and I come as you're the real begins again, transactions we'll see in see from So more investors, happen. to optimism Fed to going estate cut, to start

Instructions] Operator

The with Chris next is from Muller JMP. question Citizens

that theme. kind on So that, following last of up

lending. You actively as are the of guys one only mortgage rates commercial

to Some thinking this of starting you pace starts quarters? about fall we how start pick a a reports. But guys guys more? do as that maybe that to see ballpark? a the coming pick other that good of growth little as I up origination, is little up, are will guess, Or everyone And out the portfolio bit to think pipeline you and over are of

closed as anticipating mentioned year. to X, X the in in again, X transactions say, this prepared I we're already Chris, X as would we've XXXX, I we Well, -- remarks,

that's diligence, one have pretty have solid pipeline. we We in and a do

goal we production and to for Most -- QX. of happen at so that's obviously, think Our standpoint, total million think would probably production which going we're achievable. be that, is from in I of $XXX -- looking or a to really of most and XXXX, QX

marketing started now with XXXX concessions office expired, And the property the you possibility? the helpful. rent on then That's sale Yardley I And in that have is yet? a guys guess

started marketing not have that We property.

to I we've hold our that XXXX. through been think planning --

to flow. I think a get, little the I you're That in is performing a until couple building in that more. the cents stabilize you'll attention it'll today, office that market marketplace, to environment you has know quite cash put don't adding the bit get because building right, -- office would on the that an of that DE.

The there. to there. property the They continue have tours for continue They well leased. to vacant is tenants renew space

I so think occupied we're XX% there. or

manages fits is really, So portfolio. that the asset. within RMR our property well. performing It well

at what quo there. moment. probably want it's going to a of determine with the We'll the really, we just make kind status So do XXXX decision Board into that to

with next is Janney. from The Jason question Stewart

missed Fernando, the guidance. I

repeat you appreciate I'd that could just If that. me, for

saw Sure. prepayment quarter hotel Yes. of which so We're the of in income of quarter. $X.XX the second excludes prepayment our one $X.XX we guiding next that $X.XX, loans, for our from

And obviously, that should... includes the obviously, Yardley I rate, contribution

Exactly, correct. $X.XX yes. -- yes. is that get That we from

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

Thanks, forward to us We Financial today. look seeing Conference in September. Gary. at Thanks, everyone, in joining Washington, JM for the D.C. you Services

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

now may You disconnect.