Seven Hills Realty Trust (SEVN) Q4 2022 earnings summary

Executive summary

• FY22 net income increased 12.1% YoY as higher loan interest income more than offset higher financing costs and expenses; diluted EPS declined to $1.89 from $2.18.

• The portfolio grew to 27 first mortgage loans with $727.6m in commitments and an 8.57% weighted average all-in yield at year-end.

Financial highlights

• Interest income was $45.3m, up 170.1% YoY; net investment income after interest expense was $38.4m, up 14.7%.

• Net income was $27.6m, up 12.1% YoY; diluted EPS was $1.89 versus $2.18.

• Adjusted Distributable Earnings were $18.1m, or $1.25/share, versus $7.2m, or $0.64/share, in 2021.

• FY22 interest expense rose to $17.6m from $2.3m as borrowings and benchmark rates increased.

Outlook and guidance

• Available liquidity of $255.8m was expected to support originations, operating costs, debt service and distributions for the next 12 months and foreseeable future.

• Management expected CRE transaction activity to improve once rate volatility subsides and investors and lenders can recalibrate pricing and risk.

• A $0.35/share quarterly distribution was declared for payment on February 16, 2023, using cash on hand.