Office loan exposure fell to 13% in the third quarter.
Management expects dividend coverage in the first half of 2027.
Third-quarter loan originations reached $122 million across three transactions.
On its third-quarter 2026 earnings call, held on Oct. 28, 2026, Seven Hills Realty Trust (NASDAQ:SEVN) reported loan originations of $122 million while lowering its commercial office concentration. The real estate investment trust is recycling trapped cash into higher-yielding assets to cover its $0.28 quarterly dividend per share.
Three things management said stand out.
Realized losses on legacy office loans stayed well below Current Expected Credit Losses reserves, which are credit loss accounting reserves set aside for bad loans. That's allowing Seven Hills to free up trapped capital and cut its office portfolio share to 13%.
As a result of our origination and repayment activity, office exposure declined from 19% at the end of the second quarter to 13% at the end of the third quarter.
-- Thomas J. Lorenzini, President and Chief Investment Officer
Management expects dividend coverage for its $0.28 quarterly payout during the first half of 2027. Reinvesting repaid principal into new loans boosts earnings as net interest margins, or net spreads between loan yields and borrowing costs, expand.
Based on our current outlook, we now expect to achieve sustainable dividend coverage in the first half of 2027.
-- Thomas J. Lorenzini, President and Chief Investment Officer
A substantial volume of commercial debt originated in 2022 and 2020 is reaching maturity across the industry. That wave creates steady refinancing demand for non-bank lenders that can execute transactions quickly.
Given the significant volume of upcoming loan maturities across the market, we expect refinancing demand to remain a meaningful driver of our pipeline and origination activity.
-- Jared Lewis, Vice President
Borrowers face tighter traditional bank terms, and Seven Hills is positioning itself to capture property owners searching for alternative capital.
In addition to industrial and multifamily, we continue to see opportunities spanning a variety of property types.
-- Jared Lewis, Vice President
The company maintains conservative leverage, or borrowing relative to equity, of 1.4 times, along with $426 million in unused borrowing facility capacity. That balance sheet capacity provides the funding needed to expand portfolio scale and cover the payout.
Closing the gap between our third quarter run rate and our dividend requires approximately $220 million of net portfolio growth and we have the capital in place to fund it.
-- Matt Brown, Chief Financial Officer and Treasurer
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