10q10k10q10k.net

What changed in Seven Hills Realty Trust's 10-K — 2024 vs 2025

vs

Paragraph-level year-over-year comparison of Seven Hills Realty Trust's 2024 and 2025 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2025 report.

+266 added−270 removedSource: 10-K (2026-02-18) vs 10-K (2025-02-18)

Top changes in Seven Hills Realty Trust's 2025 10-K

266 paragraphs added · 270 removed · 217 edited across 7 sections

Item 1. Business

Business — how the company describes what it does

64 edited+7 added−11 removed304 unchanged
Biggest changeAssuming that each class of our shares will be “widely held” and that no facts and circumstances exist that restrict transferability of these shares, our tax counsel, Sullivan & Worcester LLP, is of the opinion that our shares will not fail to be “freely transferable” for purposes of the regulation due to the restrictions on transfer of our shares in our declaration of trust and that under the regulation each class of our currently outstanding shares is publicly offered and our assets will not be deemed to be “plan assets” of any ERISA Plan or Non-ERISA Plan that acquires our shares in a public offering.
Biggest changeWe believe that the restrictions imposed under our declaration of trust on the transfer of shares do not result in the failure of our shares to be “freely transferable.” In addition, we do not expect or intend to impose in the future, or to permit any person to impose on our behalf, on shares owned by an ERISA Plan or Non-ERISA Plan, any limitations or restrictions on transfer that would not be among the enumerated permissible limitations or restrictions in the regulation and that would otherwise result in the failure of our shares to be “freely transferable”. 30 Table of Contents Assuming that each class of our shares will be “widely held” and that no facts and circumstances exist that prevent shares owned by an ERISA Plan or Non-ERISA Plan from being “freely transferable” for purposes of the regulation, our tax counsel, Sullivan & Worcester LLP, is of the opinion that under the regulation each class of our currently outstanding shares is publicly offered and our assets will not be deemed to be “plan assets” of any ERISA Plan or Non-ERISA Plan that acquires our shares in a public offering.
We also believe that RMR’s broad platform provides us with access to its extensive network of real estate owners, operators, intermediaries, sponsors, financial institutions and other real estate related professionals and businesses with which RMR has historical relationships. We also believe that Tremont provides us with significant experience and expertise in investing in middle market and transitional CRE.
We also believe that RMR’s broad platform provides us with access to its extensive network of real estate owners, operators, intermediaries, sponsors, financial institutions and other real estate related professionals and businesses with which RMR has historical relationships. We also believe that Tremont provides us with significant experience and expertise in investing in middle market transitional CRE.
A taxpayer discloses a reportable transaction by filing IRS Form 8886 with its federal income tax return and, in the first year of filing, a copy of Form 8886 must be sent to the IRS’s Office of Tax Shelter Analysis.
A taxpayer discloses a reportable transaction by filing IRS Form 8886 with its federal income tax return and, in the first year of filing, a copy of IRS Form 8886 must be sent to the IRS’s Office of Tax Shelter Analysis.
Shareholders The rules governing the U.S. federal income taxation of non-U.S. shareholders are complex, and the following discussion is intended only as a summary of material considerations of an investment in our shares relevant to such investors.
Taxation of Non-U.S. Shareholders The rules governing the U.S. federal income taxation of non-U.S. shareholders are complex, and the following discussion is intended only as a summary of material considerations of an investment in our shares relevant to such investors.
In addition, if we so elect by making a timely designation to our shareholders, a shareholder would be taxed on its proportionate share of our undistributed capital gain and would generally be expected to receive a credit or refund for its proportionate share of the federal corporate income tax we paid on our retained net capital gain. • If we have net income from “prohibited transactions”—that is, dispositions at a gain of inventory or property held primarily for sale to customers in the ordinary course of a trade or business other than dispositions of foreclosure property and other than dispositions excepted by statutory safe harbors—we will be subject to tax on this income at a 100% rate. • If we elect to treat property that we acquire in connection with a foreclosure of a mortgage loan or certain property that we dispose of as “foreclosure property,” as described in Section 856(e) of the IRC, we may thereby avoid both (a) the 100% tax on gain from a resale of that property (if the sale would otherwise constitute a prohibited transaction) and (b) the inclusion of any income from such property not qualifying for purposes of the REIT gross income tests discussed below, but in exchange for these benefits we will be subject to tax on the foreclosure property income at the highest regular corporate income tax rate. • If we fail to satisfy the 75% gross income test or the 95% gross income test discussed below, due to reasonable cause and not due to willful neglect, but nonetheless maintain our qualification for taxation as a REIT because of specified cure provisions, we will be subject to tax at a 100% rate on the greater of the amount by which we fail the 75% gross income test or the 95% gross income test, with adjustments, multiplied by a fraction intended to reflect our profitability for the taxable year. • If we fail to satisfy any of the REIT asset tests described below (other than a de minimis failure of the 5% or 10% asset tests) due to reasonable cause and not due to willful neglect, but nonetheless maintain our qualification for taxation as a REIT because of specified cure provisions, we will be subject to a tax equal to the greater of $50,000 or the highest regular corporate income tax rate multiplied by the net income generated by the nonqualifying assets that caused us to fail the test. • If we fail to satisfy any provision of the IRC that would result in our failure to qualify for taxation as a REIT (other than violations of the REIT gross income tests or violations of the REIT asset tests described below) due to reasonable cause and not due to willful neglect, we may retain our qualification for taxation as a REIT but will be subject to a penalty of $50,000 for each failure. • If we fail to distribute for any calendar year at least the sum of 85% of our REIT ordinary income for that year, 95% of our REIT capital gain net income for that year and any undistributed taxable income from prior periods, we will be subject to a 4% nondeductible excise tax on the excess of the required distribution over the amounts actually distributed. • If we acquire a REIT asset where our adjusted tax basis in the asset is determined by reference to the adjusted tax basis of the asset in the hands of a C corporation, under specified circumstances we may be subject to federal income taxation on all or part of the built-in gain (calculated as of the date the property ceased being owned by the C corporation) on such asset.
In addition, if we so elect by making a timely designation to our shareholders, a shareholder would be taxed on its proportionate share of our undistributed capital gain and would generally be expected to receive a credit or refund for its proportionate share of the federal corporate income tax we paid on our retained net capital gain. • If we have net income from “prohibited transactions”—that is, dispositions at a gain of inventory or property held primarily for sale to customers in the ordinary course of a trade or business other than dispositions of foreclosure property and other than dispositions excepted by statutory safe harbors—we will be subject to tax on this income at a 100% rate. • If we elect to treat property that we acquire in connection with a foreclosure of a mortgage loan or certain property that we dispose of as “foreclosure property,” as described in Section 856(e) of the IRC, we may thereby avoid both (a) the 100% tax on gain from a resale of that property (if the sale would otherwise constitute a prohibited transaction) and (b) the inclusion of any income from such property not qualifying for purposes of the REIT gross income tests discussed below, but in exchange for these benefits we will be subject to tax on the foreclosure property income at the highest regular corporate income tax rate. • If we fail to satisfy the 75% gross income test or the 95% gross income test discussed below, due to reasonable cause and not due to willful neglect, but nonetheless maintain our qualification for taxation as a REIT because of specified cure provisions, we will be subject to tax at a 100% rate on the greater of the amount by which we fail the 75% gross income test or the 95% gross income test, with adjustments, multiplied by a fraction intended to reflect our profitability for the taxable year. • If we fail to satisfy any of the REIT asset tests described below (other than a de minimis failure of the 5% or 10% asset tests) due to reasonable cause and not due to willful neglect, but nonetheless maintain our qualification for taxation as a REIT because of specified cure provisions, we will be subject to a tax equal to the greater of $50,000 or the highest regular corporate income tax rate multiplied by the net income generated by the nonqualifying assets that caused us to fail the test. • If we fail to satisfy any provision of the IRC that would result in our failure to qualify for taxation as a REIT (other than violations of the REIT gross income tests or violations of the REIT asset tests described below) due to reasonable cause and not due to willful neglect, we may retain our qualification for taxation as a REIT but will be subject to a penalty of $50,000 for each failure. • If we fail to distribute for any calendar year at least the sum of 85% of our REIT ordinary income for that year, 95% of our REIT capital gain net income for that year and any undistributed taxable income from prior periods, we will be subject to a 4% nondeductible excise tax on the excess of the required distribution over the amounts actually distributed. • If we acquire a REIT asset where our adjusted tax basis in the asset is determined by reference to the adjusted tax basis of the asset in the hands of a C corporation, under specified circumstances we may be subject to federal income taxation on all or part of the built-in gain (calculated as of the date the property ceased being owned by the C 12 Table of Contents corporation) on such asset.
Our tax counsel’s opinions are conditioned upon the assumption that our leases, declaration of trust and all other legal documents to which we have been or are a party have been and will be complied with by all parties to those documents, upon the accuracy and completeness of the factual matters described in this Annual Report on Form 10-K and upon representations made by us to our tax counsel as to certain factual matters relating to our organization and operations and our expected manner of operation.
Our tax counsel’s opinions are conditioned upon the assumption that our leases, loan documents, declaration of trust, and all other legal documents to which we have been or are a party have been and will be complied with by all parties to those documents, upon the accuracy and completeness of the factual matters described in this Annual Report on Form 10-K and upon representations made by us to our tax counsel as to certain factual matters relating to our organization and operations and our expected manner of operation.
Your federal income tax consequences generally will differ depending on whether or not you are a “U.S. shareholder.” For purposes of this summary, a “U.S. shareholder” is a beneficial owner of our shares that is: • an individual who is a citizen or resident of the United States, including an alien individual who is a lawful permanent resident of the United States or meets the substantial presence residency test under the federal income tax laws; • an entity treated as a corporation for federal income tax purposes that is created or organized in or under the laws of the United States, any state thereof or the District of Columbia; 11 Table of Contents • an estate the income of which is subject to federal income taxation regardless of its source; or • a trust if a court within the United States is able to exercise primary supervision over the administration of the trust and one or more U.S. persons have the authority to control all substantial decisions of the trust, or, to the extent provided in Treasury regulations, a trust in existence on August 20, 1996 that has elected to be treated as a domestic trust; whose status as a U.S. shareholder is not overridden by an applicable tax treaty.
Your federal income tax consequences generally will differ depending on whether or not you are a “U.S. shareholder.” For purposes of this summary, a “U.S. shareholder” is a beneficial owner of our shares that is: • an individual who is a citizen or resident of the United States, including an alien individual who is a lawful permanent resident of the United States or meets the substantial presence residency test under the federal income tax laws; 10 Table of Contents • an entity treated as a corporation for federal income tax purposes that is created or organized in or under the laws of the United States, any state thereof or the District of Columbia; • an estate the income of which is subject to federal income taxation regardless of its source; or • a trust if a court within the United States is able to exercise primary supervision over the administration of the trust and one or more U.S. persons have the authority to control all substantial decisions of the trust, or, to the extent provided in Treasury regulations, a trust in existence on August 20, 1996 that has elected to be treated as a domestic trust; whose status as a U.S. shareholder is not overridden by an applicable tax treaty.
The summary does not discuss all of the particular tax considerations that might be relevant to you if you are subject to special rules under U.S. federal income tax law, for example if you are: • a bank, insurance company or other financial institution; 10 Table of Contents • a regulated investment company or REIT; • a subchapter S corporation; • a broker, dealer or trader in securities or foreign currencies; • a person who marks-to-market our shares for U.S. federal income tax purposes; • a U.S. shareholder (as defined below) that has a functional currency other than the U.S. dollar; • a person who acquires or owns our shares in connection with employment or other performance of services; • a person subject to alternative minimum tax; • a person who acquires or owns our shares as part of a straddle, hedging transaction, constructive sale transaction, constructive ownership transaction or conversion transaction, or as part of a “synthetic security” or other integrated financial transaction; • a person who owns 10% or more (by vote or value, directly or constructively under the IRC) of any class of our shares; • a U.S. expatriate; • a non-U.S. shareholder (as defined below) whose investment in our shares is effectively connected with the conduct of a trade or business in the United States; • a nonresident alien individual present in the United States for 183 days or more during an applicable taxable year; • a “qualified shareholder” (as defined in Section 897(k)(3)(A) of the IRC); • a “qualified foreign pension fund” (as defined in Section 897(l)(2) of the IRC) or any entity wholly owned by one or more qualified foreign pension funds; • a non-U.S. shareholder that is a passive foreign investment company or controlled foreign corporation; • a person subject to special tax accounting rules as a result of their use of applicable financial statements (within the meaning of Section 451(b)(3) of the IRC); or • except as specifically described in the following summary, a trust, estate, tax-exempt entity or foreign person.
The summary does not discuss all of the particular tax considerations that might be relevant to you if you are subject to special rules under U.S. federal income tax law, for example if you are: 9 Table of Contents • a bank, insurance company or other financial institution; • a regulated investment company or REIT; • a subchapter S corporation; • a broker, dealer or trader in securities or foreign currencies; • a person who marks-to-market our shares for U.S. federal income tax purposes; • a U.S. shareholder (as defined below) that has a functional currency other than the U.S. dollar; • a person who acquires or owns our shares in connection with employment or other performance of services; • a person subject to alternative minimum tax; • a person who acquires or owns our shares as part of a straddle, hedging transaction, constructive sale transaction, constructive ownership transaction or conversion transaction, or as part of a “synthetic security” or other integrated financial transaction; • a person who owns 10% or more (by vote or value, directly or constructively under the IRC) of any class of our shares; • a U.S. expatriate; • a non-U.S. shareholder (as defined below) whose investment in our shares is effectively connected with the conduct of a trade or business in the United States; • a nonresident alien individual present in the United States for 183 days or more during an applicable taxable year; • a “qualified shareholder” (as defined in Section 897(k)(3)(A) of the IRC); • a “qualified foreign pension fund” (as defined in Section 897(l)(2) of the IRC) or any entity wholly owned by one or more qualified foreign pension funds; • a non-U.S. shareholder that is a passive foreign investment company or controlled foreign corporation; • a person subject to special tax accounting rules as a result of their use of applicable financial statements (within the meaning of Section 451(b)(3) of the IRC); or • except as specifically described in the following summary, a trust, estate, tax-exempt entity, governmental organization or foreign person.
Item 1. Business Our Company. Seven Hills Realty Trust is a Maryland REIT that focuses primarily on originating and investing in floating rate first mortgage loans that range from $15.0 million to $75.0 million, secured by middle market transitional CRE properties that have values of up to $100.0 million.
Item 1. Business Our Company. Seven Hills Realty Trust is a Maryland REIT that focuses primarily on originating and investing in floating rate first mortgage loans that range from $15.0 million to $75.0 million, secured by middle market transitional CRE properties that have values up to $100.0 million.
If the IRS were to disagree with any such determinations made or with the method used by us, the amount of any excess inclusion or similar income required to be taken into account by one or more of our shareholders could be significantly increased. 14 Table of Contents In addition, if we own a residual interest in a REMIC, we will be taxed at the highest corporate income tax rate on the percentage of our excess inclusion income that corresponds to the percentage of our shares of beneficial interest that are held in record name by “disqualified organizations.” Although the law is unsettled, the IRS asserts that similar rules apply to a REIT that generates income similar to excess inclusion income as a result of owning specified non-REMIC collateralized mortgage pools.
If the IRS were to disagree with any such determinations made or with the method used by us, the amount of any excess inclusion or similar income required to be taken into account by one or more of our shareholders could be significantly increased. 13 Table of Contents In addition, if we own a residual interest in a REMIC, we will be taxed at the highest corporate income tax rate on the percentage of our excess inclusion income that corresponds to the percentage of our shares of beneficial interest that are held in record name by “disqualified organizations.” Although the law is unsettled, the IRS asserts that similar rules apply to a REIT that generates income similar to excess inclusion income as a result of owning specified non-REMIC collateralized mortgage pools.
If a dividend is declared in October, November or December to shareholders of record during one of those months and is paid during the following January, then for federal income tax purposes such dividend will be treated as having been both paid and received on December 31 of the prior taxable year to the extent of any undistributed earnings and profits. 23 Table of Contents The 90% distribution requirements may be waived by the IRS if a REIT establishes that it failed to meet them by reason of distributions previously made to meet the requirements of the 4% excise tax discussed below.
If a dividend is declared in October, November or December to shareholders of record during one of those months and is paid during the following January, then for federal income tax purposes such dividend will be treated as having been both paid and received on December 31 of the prior taxable year to the extent of any undistributed earnings and profits. 22 Table of Contents The 90% distribution requirements may be waived by the IRS if a REIT establishes that it failed to meet them by reason of distributions previously made to meet the requirements of the 4% excise tax discussed below.
Foreclosure property is generally any real property, including interests in real property, and any personal property incident to such real property: • that is acquired by a REIT as a result of the REIT having bid on such property at foreclosure, or having otherwise reduced such property to ownership or possession by agreement or process of law, after there was a default or when default was imminent on a lease of such property or on indebtedness that such property secured; • for which any related loan acquired by the REIT was acquired at a time when the default was not imminent or anticipated; and • for which the REIT makes a proper election to treat the property as foreclosure property. 19 Table of Contents For purposes of the 75% and 95% gross income tests, all income from the property will be qualifying income as long as the property qualifies as foreclosure property.
Foreclosure property is generally any real property, including interests in real property, and any personal property incident to such real property: • that is acquired by a REIT as a result of the REIT having bid on such property at foreclosure, or having otherwise reduced such property to ownership or possession by agreement or process of law, after there was a default or when default was imminent on a lease of such property or on indebtedness that such property secured; • for which any related loan acquired by the REIT was acquired at a time when the default was not imminent or anticipated; and • for which the REIT makes a proper election to treat the property as foreclosure property. 18 Table of Contents For purposes of the 75% and 95% gross income tests, all income from the property will be qualifying income as long as the property qualifies as foreclosure property.
Finally, with the exception of specified rental arrangements with our TRSs (including in respect of lodging facilities or health care facilities), rental income will qualify as “rents from real property” only to the extent that we do not directly or constructively hold a 10% or greater interest, as measured by vote or value, in the lessee’s equity. 20 Table of Contents We expect that all or substantially all the rents and related service charges that we have received or may in the future receive will be “rents from real property” and will to that extent be qualifying income for purposes of both the 75% and 95% gross income tests.
Finally, with the exception of specified rental arrangements with our TRSs (including in respect of lodging facilities or health care facilities), rental income will qualify as “rents from real property” only to the extent that we do not directly or constructively hold a 10% or greater interest, as measured by vote or value, in the lessee’s equity. 19 Table of Contents We expect that all or substantially all the rents and related service charges that we have received or may in the future receive will be “rents from real property” and will to that extent be qualifying income for purposes of both the 75% and 95% gross income tests.
When a failure to satisfy the above asset tests results from an acquisition of securities or other property during a quarter, the failure can be cured by disposition of sufficient nonqualifying assets within 30 days after the close of that quarter. 22 Table of Contents In addition, if we fail the 5% asset test, the 10% vote test or the 10% value test at the close of any quarter and we do not cure such failure within 30 days after the close of that quarter, that failure will nevertheless be excused if (a) the failure is de minimis and (b) within six months after the last day of the quarter in which we identify the failure, we either dispose of the assets causing the failure or otherwise satisfy the 5% asset test, the 10% vote test and the 10% value test.
When a failure to satisfy the above asset tests results from an acquisition of securities or other property during a quarter, the failure can be cured by disposition of sufficient nonqualifying assets within 30 days after the close of that quarter. 21 Table of Contents In addition, if we fail the 5% asset test, the 10% vote test or the 10% value test at the close of any quarter and we do not cure such failure within 30 days after the close of that quarter, that failure will nevertheless be excused if (a) the failure is de minimis and (b) within six months after the last day of the quarter in which we identify the failure, we either dispose of the assets causing the failure or otherwise satisfy the 5% asset test, the 10% vote test and the 10% value test.
Although we cannot be sure, we believe that we have met conditions (1) through (8) during each of the requisite periods ending on or before the close of our most recently completed taxable year, and that we will continue to meet these conditions in our current and future taxable years. 15 Table of Contents To help comply with condition (6), our declaration of trust restricts transfers of our shares that would otherwise result in concentrated ownership positions.
Although we cannot be sure, we believe that we have met conditions (1) through (8) during each of the requisite periods ending on or before the close of our most recently completed taxable year, and that we will continue to meet these conditions in our current and future taxable years. 14 Table of Contents To help comply with condition (6), our declaration of trust restricts transfers of our shares that would otherwise result in concentrated ownership positions.
To the extent that any of our mezzanine loans do not meet all of the requirements for reliance on the IRS safe harbor, however, we cannot be sure that the IRS will not challenge the tax treatment of these loans. 18 Table of Contents There is limited case law or administrative guidance addressing the treatment of mezzanine loans and preferred equity investments as debt or equity for federal income tax purposes.
To the extent that any of our mezzanine loans do not meet all of the requirements for reliance on the IRS safe harbor, however, we cannot be sure that the IRS will not challenge the tax treatment of these loans. 17 Table of Contents There is limited case law or administrative guidance addressing the treatment of mezzanine loans and preferred equity investments as debt or equity for federal income tax purposes.
Our ownership of stock and other securities in our TRSs is exempt from the 5% asset test, the 10% vote test and the 10% value test discussed below. 16 Table of Contents In addition, any corporation (other than a REIT and other than a QRS) in which a TRS directly or indirectly owns more than 35% of the voting power or value of the outstanding securities is automatically a TRS (excluding, for this purpose, certain “straight debt” securities).
Our ownership of stock and other securities in our TRSs is exempt from the 5% asset test, the 10% vote test and the 10% value test discussed below. 15 Table of Contents In addition, any corporation (other than a REIT and other than a QRS) in which a TRS directly or indirectly owns more than 35% of the voting power or value of the outstanding securities is automatically a TRS (excluding, for this purpose, certain “straight debt” securities).
For so long as a class of our shares is listed on a U.S. national securities exchange, capital gain dividends that we declare and pay to a non-U.S. shareholder on those shares, as well as dividends to such a non-U.S. shareholder on those shares attributable to our sale or exchange of “United States real property interests” within the meaning of Section 897 of the IRC, or USRPIs, will not be subject to withholding as though those amounts were effectively connected with a U.S. trade or business, and non-U.S. shareholders will not be required to file U.S. federal income tax returns or pay branch profits tax in respect of these dividends.
For so long as a class of our shares is listed on a U.S. national securities exchange, capital gain dividends that we declare and pay to a non-U.S. shareholder on those shares, as well as dividends to such a non-U.S. shareholder on those shares attributable to our sale or exchange of “United States real property interests” within the meaning of Section 897 of the IRC, or 26 Table of Contents USRPIs, will not be subject to withholding as though those amounts were effectively connected with a U.S. trade or business, and non-U.S. shareholders will not be required to file U.S. federal income tax returns or pay branch profits tax in respect of these dividends.
A U.S. shareholder may be subject to backup withholding when it receives distributions on our shares or proceeds upon the sale, exchange, redemption, retirement or other disposition of our shares, unless the U.S. shareholder properly executes, or has previously properly executed, under penalties of perjury an IRS Form W-9 or substantially similar form that: • provides the U.S. shareholder’s correct taxpayer identification number; 29 Table of Contents • certifies that the U.S. shareholder is exempt from backup withholding because (a) it comes within an enumerated exempt category, (b) it has not been notified by the IRS that it is subject to backup withholding, or (c) it has been notified by the IRS that it is no longer subject to backup withholding; and • certifies that it is a U.S. citizen or other U.S. person.
A U.S. shareholder may be subject to backup withholding when it receives distributions on our shares or proceeds upon the sale, exchange, redemption, retirement or other disposition of our shares, unless the U.S. shareholder properly executes, or has previously properly executed, under penalties of perjury an IRS Form W-9 or substantially similar form that: • provides the U.S. shareholder’s correct taxpayer identification number; • certifies that the U.S. shareholder is exempt from backup withholding because (a) it comes within an enumerated exempt category, (b) it has not been notified by the IRS that it is subject to backup withholding, or (c) it has been notified by the IRS that it is no longer subject to backup withholding; and • certifies that it is a U.S. citizen or other U.S. person.
Our tax counsel, Sullivan & Worcester LLP, is of the opinion that we have been organized and have qualified for taxation as a REIT under the IRC for our 2020 through 2024 taxable years, and that our current and anticipated investments and plan of operation will enable us to continue to meet the requirements for qualification and taxation as a REIT under the IRC.
Our tax counsel, Sullivan & Worcester LLP, is of the opinion that we have been organized and have qualified for taxation as a REIT under the IRC for our 2020 through 2025 taxable years, and that our current and anticipated investments and plan of operation will enable us to continue to meet the requirements for qualification and taxation as a REIT under the IRC.
While we cannot be sure, we believe that TRMT, through RMR, is positioned to leverage its established relationships with tenants and operators across a wide variety of real estate asset sectors, and in particular its established relationships with managers of lodging facilities and health care facilities, to facilitate our goals in this regard.
While we cannot be sure, we believe that Tremont, through RMR, is positioned to leverage its established relationships with tenants and operators across a wide variety of real estate asset sectors, and in particular its established relationships with managers of lodging facilities and health care facilities, to facilitate our goals in this regard.
Taxation of Tax-Exempt U.S. Shareholders The rules governing the federal income taxation of tax-exempt entities are complex, and the following discussion is intended only as a summary of material considerations of an investment in our shares relevant to such investors.
Shareholders The rules governing the federal income taxation of tax-exempt entities are complex, and the following discussion is intended only as a summary of material considerations of an investment in our shares relevant to such investors.
Fiduciaries of any Non-ERISA Plan should consider that the Non-ERISA Plan may only make investments that are authorized by the appropriate governing instrument and applicable law. Fiduciaries considering an investment in our securities should consult their own legal advisors if they have any concern as to whether the investment is consistent with the foregoing criteria or is otherwise appropriate.
Fiduciaries of any Non-ERISA Plan should consider that the Non-ERISA Plan may only make investments that are authorized by the appropriate governing instrument and applicable law. 29 Table of Contents Fiduciaries considering an investment in our securities should consult their own legal advisors if they have any concern as to whether the investment is consistent with the foregoing criteria or is otherwise appropriate.
As long as we qualify for taxation as a REIT, a distribution to our U.S. shareholders that we do not designate as a capital gain dividend generally will be treated as an ordinary income dividend to the extent of our available current or accumulated earnings and profits (subject to the lower effective tax rates applicable to qualified REIT dividends via the deduction-without-outlay mechanism of Section 199A of the IRC, which is generally available to our noncorporate U.S. shareholders that meet specified holding period requirements for taxable years before 2026).
As long as we qualify for taxation as a REIT, a distribution to our U.S. shareholders that we do not designate as a capital gain dividend generally will be treated as an ordinary income dividend to the extent of our available current or accumulated earnings and profits (subject to the lower effective tax rates applicable to qualified REIT dividends via the deduction-without-outlay mechanism of Section 199A of the IRC, which is generally available to our noncorporate U.S. shareholders that meet specified holding period requirements).
We will similarly designate the portion of any dividend that is to be taxed to noncorporate U.S. shareholders at preferential maximum rates (including any qualified dividend income) so that the designations will be proportionate among all outstanding classes of our shares. We may elect to retain and pay income taxes on some or all of our net capital gain.
We will similarly designate the portion of any dividend that is to be taxed to noncorporate U.S. shareholders at preferential maximum rates (including any qualified dividend income) so that the designations will be proportionate among all outstanding classes of our shares. 24 Table of Contents We may elect to retain and pay income taxes on some or all of our net capital gain.
We expect to repay our debts through repayments from our borrowers on loans held for investment. 8 Table of Contents We funded our loan originations to date using cash on hand and advancements under our debt facilities.
We expect to repay our debts through repayments from our borrowers on loans held for investment. 7 Table of Contents We funded our loan originations to date using cash on hand and advancements under our debt facilities.
Because the determination as to whether a shareholder will satisfy any of the tests of Section 302(b) of the IRC depends upon the facts and circumstances at the time that our shares are redeemed, we urge you to consult your own tax advisor to determine the particular tax treatment of any redemption. 25 Table of Contents Taxation of Taxable U.S.
Because the determination as to whether a shareholder will satisfy any of the tests of Section 302(b) of the IRC depends upon the facts and circumstances at the time that our shares are redeemed, we urge you to consult your own tax advisor to determine the particular tax treatment of any redemption. Taxation of Taxable U.S.
Shareholders.” Section 302 of the IRC treats a redemption of our shares for cash only as a distribution under Section 301 of the IRC, and hence taxable as a dividend to the extent of our available current or accumulated earnings and profits, unless the redemption satisfies one of the tests set forth in Section 302(b) of the IRC enabling the redemption to be treated as a sale or exchange of the shares.
Shareholders.” 23 Table of Contents Section 302 of the IRC treats a redemption of our shares for cash only as a distribution under Section 301 of the IRC, and hence taxable as a dividend to the extent of our available current or accumulated earnings and profits, unless the redemption satisfies one of the tests set forth in Section 302(b) of the IRC enabling the redemption to be treated as a sale or exchange of the shares.
Also, the opinions of our tax counsel are not binding on either the IRS or a court, and either could take a position different from that expressed by our tax counsel. 12 Table of Contents Our continued qualification and taxation as a REIT will depend upon our compliance with various qualification tests imposed under the IRC and summarized below.
Also, the opinions of our tax counsel are not binding on either the IRS or a court, and either could take a position different from that expressed by our tax counsel. Our continued qualification and taxation as a REIT will depend upon our compliance with various qualification tests imposed under the IRC and summarized below.
It is also possible that our deductions for U.S. federal income tax purposes may accrue more slowly than, or will not otherwise correspond to, our cash expenditure outlays.
It is also possible that our deductions for U.S. federal income tax purposes may be limited or accrue more slowly than, or will not otherwise correspond to, our cash expenditure outlays.
We invest in floating rate first mortgage loans that provide bridge financing on transitional CRE properties. These investments typically are secured by properties undergoing redevelopment or repositioning activities that are expected to increase the value of the properties. We fund these loans over time as the borrowers’ business plans for the properties are carried out.
We invest in floating rate first mortgage loans that provide bridge financing on transitional CRE properties. These investments typically are secured by properties undergoing redevelopment or repositioning activities that are expected to increase the value of the properties. We fund these loans over time as the borrowers’ business plans for the properties are executed.
In addition, specified foreign currency gains will be excluded from gross income for purposes of one or both of the gross income tests. 17 Table of Contents Interest Income .
In addition, specified foreign currency gains will be excluded from gross income for purposes of one or both of the gross income tests. 16 Table of Contents Interest Income .
We may elect to retain, rather than distribute, some or all of our net capital gain and pay income tax on such gain.
We may elect to retain, rather than distribute, some or all of our net capital gain and pay income tax on such retained amounts.
Fiduciaries considering an investment in our securities should consult their own legal advisors as to whether the ownership of our securities involves a non-exempt prohibited transaction. 31 Table of Contents “Plan Assets” Considerations The U.S.
Fiduciaries considering an investment in our securities should consult their own legal advisors as to whether the ownership of our securities involves a non-exempt prohibited transaction. “Plan Assets” Considerations The U.S.
As of December 31, 2024, all amounts outstanding under our financing agreements pay interest at floating rates that are not subject to floors. We currently expect that our leverage, on a debt to equity basis, will generally be below a ratio of 3:1. As of December 31, 2024, our debt to equity ratio was 1.6:1.
As of December 31, 2025, all amounts outstanding under our financing agreements pay interest at floating rates that are not subject to floors. We currently expect that our leverage, on a debt to equity basis, will generally be below a ratio of 3.5:1. As of December 31, 2025, our debt to equity ratio was 1.5:1.
As a result, our ordinary dividends generally are taxed at the higher federal income tax rates applicable to ordinary income (subject to the lower effective tax rates applicable to qualified REIT dividends via the deduction-without-outlay mechanism of Section 199A of the IRC, which is generally available to our noncorporate U.S. shareholders that meet specified holding period requirements for taxable years before 2026).
As a result, our ordinary dividends generally are taxed at the higher federal income tax rates applicable to ordinary income (subject to the lower effective tax rates applicable to qualified REIT dividends via the deduction-without-outlay mechanism of Section 199A of the IRC, which is generally available to our noncorporate U.S. shareholders that meet specified holding period requirements).
We expect that shareholders that are tax-exempt pension plans, individual retirement accounts or other qualifying tax-exempt entities, and that receive (a) distributions from us, or (b) proceeds from the sale of our shares, will not have such amounts treated as UBTI, provided in each case (x) that the shareholder has not financed its acquisition of our shares with “acquisition indebtedness” within the meaning of the IRC, (y) that the shares are not otherwise used in an unrelated trade or business of the tax-exempt entity, and (z) that, consistent with our present intent, we do not hold a residual interest in a real estate mortgage investment conduit or otherwise hold mortgage assets or conduct mortgage securitization activities that generate “excess inclusion” income. 27 Table of Contents Taxation of Non-U.S.
We expect that shareholders that are tax-exempt pension plans, individual retirement accounts or other qualifying tax-exempt entities, and that receive (a) distributions from us, or (b) proceeds from the sale of our shares, should not have such amounts treated as UBTI, provided in each case (x) that the shareholder has not financed its acquisition of our shares with “acquisition indebtedness” within the meaning of the IRC, (y) that the shares are not otherwise used in an unrelated trade or business of the tax-exempt entity, and (z) that, consistent with our present intent, we do not hold a residual interest in a real estate mortgage investment conduit or otherwise hold mortgage assets or conduct mortgage securitization activities that generate “excess inclusion” income.
The charts below detail the geographic region and property type of the properties securing the loans in our portfolio by amortized cost as of December 31, 2024: For further information regarding our loans held for investment, see Part II, Item 7, "Management’s Discussion and Analysis of Financial Condition and Results of Operations" and Note 3 to our Consolidated Financial Statements included in Part IV, Item 15 of this Annual Report on Form 10-K.
The charts below detail the geographic region and property type of the properties securing the loans in our portfolio by amortized cost as of December 31, 2025: For further information regarding our loans held for investment, see Part II, Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and Note 3 to our Consolidated Financial Statements included in Part IV, Item 15 of this Annual Report on Form 10-K.
Our stock and other securities in a TRS are exempted from these 5% and 10% asset tests. • Not more than 20% of the value of our total assets may be represented by stock or other securities of our TRSs. • Not more than 25% of the value of our total assets may be represented by “nonqualified publicly offered REIT debt instruments” as defined in Section 856(c)(5)(L)(ii) of the IRC. 21 Table of Contents Our tax counsel, Sullivan & Worcester LLP, is of the opinion that, although the matter is not free from doubt, our investments in the equity or debt of a TRS of ours, to the extent that and during the period in which they qualify as temporary investments of new capital, will be treated as real estate assets, and not as securities, for purposes of the above REIT asset tests.
Our stock and other securities in a TRS are exempted from these 5% and 10% asset tests. • Not more than 20% (25% with respect to taxable years beginning after December 31, 2025) of the value of our total assets may be represented by stock or other securities of our TRSs. • Not more than 25% of the value of our total assets may be represented by “nonqualified publicly offered REIT debt instruments” as defined in Section 856(c)(5)(L)(ii) of the IRC. 20 Table of Contents Our tax counsel, Sullivan & Worcester LLP, is of the opinion that, although the matter is not free from doubt, our investments in the equity or debt of a TRS of ours, to the extent that and during the period in which they qualify as temporary investments of new capital, will be treated as real estate assets, and not as securities, for purposes of the above REIT asset tests.
Decreases to our net income during periods of declining interest rates may be mitigated by active interest rate floors that are higher than the applicable benchmark index. As of December 31, 2024, 96.1% of our loan portfolio by principal outstanding had interest rate floors in place with a weighted average floor of 2.12%.
Decreases to our net income during periods of declining interest rates may be mitigated by active interest rate floors that are higher than the applicable benchmark index. As of December 31, 2025, 96.6% of our loan portfolio by principal outstanding had interest rate floors in place with a weighted average floor of 2.81%.
In addition, for taxable years beginning before 2026 and pursuant to the deduction-without-outlay mechanism of Section 199A of the IRC, our noncorporate U.S. shareholders that meet specified holding period requirements are generally eligible for lower effective tax rates on our dividends that are not treated as capital gain dividends or as qualified dividend income.
In addition, pursuant to the deduction-without-outlay mechanism of Section 199A of the IRC, our noncorporate U.S. shareholders that meet specified holding period requirements are generally eligible for lower effective tax rates on our dividends that are not treated as capital gain dividends or as qualified dividend income.
We generally do not expect to sell assets if doing so would result in the imposition of a material built-in gains tax liability; but if and when we do sell assets that may have associated built-in gains tax exposure, then we expect to make appropriate provision for the associated tax liabilities on our financial statements. 13 Table of Contents • Our subsidiaries that are C corporations, including our “taxable REIT subsidiaries”, as defined in Section 856(l) of the IRC, or TRSs, generally will be required to pay federal corporate income tax on their earnings, and a 100% tax may be imposed on any transaction between us and one of our TRSs that does not reflect arm’s length terms. • We acquired Tremont Mortgage Trust, or TRMT, by merger in 2021, or the Merger.
We generally do not expect to sell assets if doing so would result in the imposition of a material built-in gains tax liability; but if and when we do sell assets that may have associated built-in gains tax exposure, then we expect to make appropriate provision for the associated tax liabilities on our financial statements. • Our subsidiaries that are C corporations, including our “taxable REIT subsidiaries”, as defined in Section 856(l) of the IRC, or TRSs, generally will be required to pay federal corporate income tax on their earnings, and a 100% tax may be imposed on any transaction between us and one of our TRSs that does not reflect arm’s length terms.
A U.S. shareholder’s net investment income will include ordinary income dividend distributions received from us and, only if an appropriate election is made by the shareholder, capital gain dividend distributions and qualified dividends received from us; however, distributions treated as a nontaxable return of the shareholder’s basis will not enter into the computation of net investment income.
A U.S. shareholder’s net investment income will include ordinary income dividend distributions received from us and, only if an appropriate election is made by the shareholder, capital gain dividend distributions and qualified dividends received from us; however, distributions treated as a nontaxable return of the shareholder’s basis will not enter into the computation of net investment income. 25 Table of Contents Taxation of Tax-Exempt U.S.
These tax consequences may not be comparable to the U.S. federal income tax consequences discussed above. 30 Table of Contents ERISA PLANS, KEOGH PLANS AND INDIVIDUAL RETIREMENT ACCOUNTS General Fiduciary Obligations The Employee Retirement Income Security Act of 1974, as amended, or ERISA, the IRC and similar provisions to those described below under applicable foreign or state law, individually and collectively, impose certain duties on persons who are fiduciaries of any employee benefit plan subject to Title I of ERISA, or an ERISA Plan, or an individual retirement account or annuity, or an IRA, a Roth IRA, a tax-favored account (such as an Archer MSA, Coverdell education savings account or health savings account), a Keogh plan or other qualified retirement plan not subject to Title I of ERISA, each a Non-ERISA Plan.
ERISA PLANS, KEOGH PLANS AND INDIVIDUAL RETIREMENT ACCOUNTS General Fiduciary Obligations The Employee Retirement Income Security Act of 1974, as amended, or ERISA, the IRC and similar provisions to those described below under applicable foreign or state law, individually and collectively, impose certain duties on persons who are fiduciaries of any employee benefit plan subject to Title I of ERISA, or an ERISA Plan, or an individual retirement account or annuity, or an IRA, a Roth IRA, a tax-favored account (such as an Archer MSA, Coverdell education savings account or health savings account), a Keogh plan or other qualified retirement plan not subject to Title I of ERISA, each a Non-ERISA Plan.
For these purposes, we believe that for all relevant periods the statutory ownership presumptions apply to validate our status as a “domestically controlled” REIT. Accordingly, we believe that we are and will remain a “domestically controlled” REIT.
For these purposes, we believe that for all relevant periods the statutory ownership presumptions apply to validate our status as a “domestically controlled” REIT.
In addition, if we so elect by making a timely designation to our shareholders: (1) each of our U.S. shareholders will be taxed on its designated proportionate share of our retained net capital gains as though that amount were distributed and designated as a capital gain dividend; (2) each of our U.S. shareholders will receive a credit or refund for its designated proportionate share of the tax that we pay; (3) each of our U.S. shareholders will increase its adjusted basis in our shares by the excess of the amount of its proportionate share of these retained net capital gains over the U.S. shareholder’s proportionate share of the tax that we pay; and (4) both we and our corporate shareholders will make commensurate adjustments in our respective earnings and profits for federal income tax purposes. 26 Table of Contents Distributions in excess of our current or accumulated earnings and profits will not be taxable to a U.S. shareholder to the extent that they do not exceed the shareholder’s adjusted tax basis in our shares, but will reduce the shareholder’s basis in such shares.
In addition, if we so elect by making a timely designation to our shareholders: (1) each of our U.S. shareholders will be taxed on its designated proportionate share of our retained net capital gains as though that amount were distributed and designated as a capital gain dividend; (2) each of our U.S. shareholders will receive a credit or refund for its designated proportionate share of the tax that we pay; (3) each of our U.S. shareholders will increase its adjusted basis in our shares by the excess of the amount of its proportionate share of these retained net capital gains over the U.S. shareholder’s proportionate share of the tax that we pay; and (4) both we and our corporate shareholders will make commensurate adjustments in our respective earnings and profits for federal income tax purposes.
All services that would otherwise be provided to us by employees are provided or arranged by Tremont. As of December 31, 2024, RMR had over 1,000 employees, including Tremont’s employees, located at its headquarters and more than 35 offices throughout the United States. Corporate Citizenship.
All services that would otherwise be provided to us by employees are provided or arranged by Tremont. As of December 31, 2025, RMR had nearly 900 employees, including Tremont’s employees, located at its headquarters and more than 30 offices throughout the United States. Corporate Citizenship.
As of December 31, 2024, SOFR was 4.33%, and as a result, one of our loan investments had an active interest rate floor. 7 Table of Contents We generally seek to match the terms of our financing, including benchmark indices and duration, to the loans we originate and pledge as collateral.
As of December 31, 2025, SOFR was 3.69%, and as a result, seven of our loan investments had an active interest rate floor. 6 Table of Contents We generally seek to match the terms of our financing, including benchmark indices and duration, to the loans we originate and pledge as collateral.
As a REIT, we are permitted to own any or all of the securities of a TRS, provided that no more than 20% of the total value of our assets, at the close of each quarter, is comprised of our investments in the stock or other securities of our TRSs.
As a REIT, we are permitted to own any or all of the securities of a TRS, provided that no more than 20% (25% with respect to taxable years beginning after December 31, 2025) of the total value of our assets, at the close of each quarter, is comprised of our investments in the stock or other securities of our TRSs.
For further information about these and other such relationships and related person transactions, see Item 1A, "Risk Factors—Risks Relating to Our Relationships with Tremont and RMR" and Notes 8 and 9 to our Consolidated Financial Statements included in Part IV, Item 15 of this Annual Report on Form 10-K. Sustainability, Environmental and Climate Change Matters.
Lewis, are officers and employees of Tremont and/or RMR. For further information about these and other such relationships and related person transactions, see Item 1A, “Risk Factors—Risks Relating to Our Relationships with Tremont and RMR” and Notes 8 and 9 to our Consolidated Financial Statements included in Part IV, Item 15 of this Annual Report on Form 10-K.
The information on or accessible through RMR Inc.’s website is not incorporated by reference into this Annual Report on Form 10-K and should not be considered part of this report. 9 Table of Contents We are committed to responsibly managing risk and preserving capital.
RMR’s Sustainability Report may be accessed on the RMR Inc. website at www.rmrgroup.com/corporate-sustainability/default.aspx. The information on or accessible through RMR Inc.’s website is not incorporated by reference into this Annual Report on Form 10-K and should not be considered part of this report. 8 Table of Contents We are committed to responsibly managing risk and preserving capital.
Even without having executed an applicable IRS Form W-8 or substantially similar form, however, in some cases information reporting and backup withholding will not apply to proceeds that a non-U.S. shareholder receives upon the sale, exchange, redemption, retirement or other disposition of our shares if the non-U.S. shareholder receives those proceeds through a broker’s foreign office.
Even without having executed an applicable IRS Form W-8 or substantially similar form, however, in some cases information reporting and backup withholding will not apply to proceeds that a non-U.S. shareholder receives upon the sale, exchange, redemption, retirement or other disposition of our shares if the non-U.S. shareholder receives those proceeds through a broker’s foreign office. 28 Table of Contents Non-U.S. financial institutions and other non-U.S. entities are subject to diligence and reporting requirements for purposes of identifying accounts and investments held directly or indirectly by U.S. persons.
As of December 31, 2024, we had a portfolio of 21 floating rate first mortgage loans with aggregate loan commitments of $641.2 million with a weighted average maximum maturity of 2.6 years, a weighted average coupon rate of 8.24% and a weighted average all in yield of 8.62%.
As of December 31, 2025, we had a portfolio of 24 floating rate first mortgage loans with aggregate loan commitments of $724.5 million with a weighted average maximum maturity of 2.6 years, a weighted average coupon rate and a weighted average all in yield of 7.52% and 7.92%, respectively, and a weighted average interest rate floor of 2.81%.
We are managed by Tremont, a subsidiary of RMR. As such, many of the environmental, social and governance, or ESG, initiatives employed by RMR apply to us. RMR periodically publishes its Sustainability Report, which summarizes the ESG initiatives employed by RMR and its clients, including us. RMR’s Sustainability Report may be accessed on the RMR Inc. website at www.rmrgroup.com/corporate-sustainability/default.aspx.
Sustainability, Environmental and Climate Change Matters. We are managed by Tremont, a subsidiary of RMR. As such, many of the environmental, social and governance, or ESG, initiatives employed by RMR apply to us. RMR periodically publishes its Sustainability Report, which summarizes the ESG initiatives employed by RMR and its clients, including us.
We and our shareholders may also be subject to taxation by state, local or other jurisdictions, including those in which we or our shareholders transact business or reside.
We and our shareholders may also be subject to taxation by state, local or other jurisdictions, including those in which we or our shareholders transact business or reside. These tax consequences may not be comparable to the U.S. federal income tax consequences discussed above.
These distributions may include cash distributions, in kind distributions of property, and deemed or constructive distributions resulting from capital market activities. The U.S. federal income tax treatment of our distributions will vary based on the status of the recipient shareholder as more fully described below under the headings “—Taxation of Taxable U.S. Shareholders,” “—Taxation of Tax-Exempt U.S.
The U.S. federal income tax treatment of our distributions will vary based on the status of the recipient shareholder as more fully described below under the headings “—Taxation of Taxable U.S. Shareholders,” “—Taxation of Tax-Exempt U.S. Shareholders,” and “—Taxation of Non-U.S.
As of December 31, 2024, our Board was comprised of seven Trustees, of which five were independent and two, or approximately 29%, were female. RMR is an equal opportunity employer, with all qualified applicants receiving consideration for employment without regard to race, color, religion, sex, sexual orientation, gender identity, national origin, disability or protected veteran status. Government Regulation.
RMR is an equal opportunity employer, with all qualified applicants receiving consideration for employment without regard to race, color, religion, sex, sexual orientation, gender identity, national origin, disability or protected veteran status. Government Regulation.
As of December 31, 2024, we had a portfolio of 21 loans held for investment with a total commitment of $641.2 million, of which $30.4 million remained unfunded.
As of December 31, 2025, we had a portfolio of 24 loans held for investment with a total commitment of $724.5 million, of which $36.9 million remained unfunded.
Treasury regulations also provide special rules to determine whether, for purposes of determining the applicability of a tax treaty, our distributions to a non-U.S. shareholder that is an entity should be treated as paid to the entity or to those owning an interest in that entity, and whether the entity or its owners are entitled to benefits under the tax treaty. 28 Table of Contents If, contrary to our expectation, a class of our shares was not listed on a U.S. national securities exchange and we made a distribution on those shares that was attributable to gain from the sale or exchange of a USRPI, then a non-U.S. shareholder holding those shares would be taxed as if the distribution was gain effectively connected with a trade or business in the United States conducted by the non-U.S. shareholder.
If, contrary to our expectation, a class of our shares was not listed on a U.S. national securities exchange and we made a distribution on those shares that was attributable to gain from the sale or exchange of a USRPI, then a non-U.S. shareholder holding those shares would be taxed as if the distribution was gain effectively connected with a trade or business in the United States conducted by the non-U.S. shareholder.
Any opinion of Sullivan & Worcester LLP as to our qualification or taxation as a REIT will be expressed as of the date issued. Our tax counsel will have no obligation to advise us or our shareholders of any subsequent change in the matters stated, represented or assumed, or of any subsequent change in the applicable law.
Our tax counsel will have no obligation to advise us or our shareholders of any 11 Table of Contents subsequent change in the matters stated, represented or assumed, or of any subsequent change in the applicable law.
As of February 13, 2025, the executive officers of RMR are: Adam D. Portnoy, president and chief executive officer; Christopher J. Bilotto, executive vice president; Jennifer B. Clark, executive vice president, general counsel and secretary; Matthew P. Jordan, executive vice president, chief financial officer and treasurer; Jeffrey C. Leer, executive vice president; and John G. Murray, executive vice president. Messrs.
As of February 13, 2026, the executive officers of RMR are: Adam Portnoy, president and chief executive officer; Christopher J. Bilotto, executive vice president; Matthew C. Brown, executive vice president, chief financial officer and treasurer; Yael Duffy, executive vice president; Lindsey A. Getz, executive vice president, general counsel and secretary; Matthew P.
Information Reporting, Backup Withholding, and Foreign Account Withholding Information reporting, backup withholding, and foreign account withholding may apply to distributions or proceeds paid to our shareholders under the circumstances discussed below.
Accordingly, we believe that we are and will remain a “domestically controlled” REIT. 27 Table of Contents Information Reporting, Backup Withholding, and Foreign Account Withholding Information reporting, backup withholding, and foreign account withholding may apply to distributions or proceeds paid to our shareholders under the circumstances discussed below.
Portnoy and Jordan are our Managing Trustees. Our President and Chief Investment Officer, Thomas J. Lorenzini, our Chief Financial Officer and Treasurer, Fernando Diaz, and our Vice President, Jared R. Lewis are officers and employees of Tremont and/or RMR.
Jordan, executive vice president and chief operating officer; Jeffrey C. Leer, executive vice president; and John G. Murray, executive vice president. Messrs. Portnoy and Jordan are our Managing Trustees. Our President and Chief Investment Officer, Thomas J. Lorenzini, our Chief Financial Officer and Treasurer, Matthew C. Brown, and our Vice President, Jared R.
As of December 31, 2024, RMR Inc. had over $40 billion of real estate assets under management and the combined RMR managed companies had more than $5 billion of annual revenues, approximately 2,000 properties and over 18,000 employees.
As of December 31, 2025, RMR Inc. had over $37 billion of real estate assets under management, approximately 1,800 properties and 40 years of institutional experience in buying, selling, financing and operating CRE.
Removed
If it is determined that TRMT failed to satisfy one or more of the REIT tests described below before its merger into us, the IRS might allow us, as TRMT’s successor, the same opportunity for relief as though we were the remediating REIT.
Added
As of December 31, 2025, our Board was comprised of seven Trustees, of which five were independent trustees. Our Board of Trustees is comprised of approximately 29% women and members of underrepresented communities.
Removed
In such case, TRMT would be deemed to have retained its qualification for taxation as a REIT and the relevant penalties or sanctions for remediation would fall upon us in a manner comparable to the above.
Added
To the extent that such distributions exceed the basis of a U.S. shareholder’s shares, the U.S. shareholder generally must include such distributions in income as long-term capital gain, or short-term capital gain if the shares have been held for one year or less.
Removed
Our Acquisition of Tremont Mortgage Trust In September 2021, we acquired TRMT in a transaction that was intended to qualify as a “reorganization” within the meaning of Section 368(a) of the IRC.
Added
Any opinion of Sullivan & Worcester LLP as to our qualification or taxation as a REIT will be expressed as of the date issued.
Removed
We believe that our acquisition of TRMT’s assets has not and will not materially impact our qualification for taxation as a REIT. 24 Table of Contents As the successor by merger to TRMT, we are generally liable for unpaid taxes, including penalties and interest (if any), of TRMT.
Added
Distributions to our Shareholders As described above, we expect to make distributions to our shareholders from time to time. These distributions may include cash distributions, in kind distributions of property, and deemed or constructive distributions resulting from capital market activities.
Removed
If TRMT failed to qualify for taxation as a REIT for federal income tax purposes in any period prior to the consummation of the Merger, we could lose our qualification for taxation as a REIT should the disqualifying activities continue after the Merger.
Added
Distributions in excess of our current or accumulated earnings and profits will not be taxable to a U.S. shareholder to the extent that they do not exceed the shareholder’s adjusted tax basis in our shares, but will reduce the shareholder’s basis in such shares.
Removed
Even if we retain our qualification for taxation as a REIT, if TRMT did not qualify for taxation as a REIT for a taxable year before the Merger or for its taxable year that included the Merger and if no relief is available, then we would face the following tax consequences: • as the successor by merger to TRMT, we would generally inherit any corporate income tax liabilities of TRMT, including penalties and interest; • we would be subject to tax on the built-in gain on each asset of TRMT existing at the time we acquired TRMT if we were to dispose of such an asset during the five-year period following the date that we acquired TRMT; and • we could be required to pay a special distribution and/or employ applicable deficiency dividend procedures (including interest payments to the IRS) to eliminate any earnings and profits accumulated by TRMT for taxable periods that it did not qualify for taxation as a REIT.
Added
Treasury regulations also provide special rules to determine whether, for purposes of determining the applicability of a tax treaty, our distributions to a non-U.S. shareholder that is an entity should be treated as paid to the entity or to those owning an interest in that entity, and whether the entity or its owners are entitled to benefits under the tax treaty.
Removed
It is unclear whether the IRC provisions that are generally available to remediate REIT compliance failures will be available to us as a successor in respect of any determination that TRMT failed to qualify for taxation as a REIT.
Added
Additionally, limitations or restrictions on the transfer or assignment of a security that are created or imposed by persons other than the issuer of a security or persons acting for or on behalf of the issuer will ordinarily not prevent the security from being considered freely transferable.
Removed
If there is an adjustment to TRMT’s real estate investment trust taxable income or dividends paid deductions, and to the extent that the IRC remedial provisions are available to us to address TRMT’s REIT qualification and taxation, we could elect to use the deficiency dividend procedure in respect of preserving TRMT’s REIT qualification.
Removed
That deficiency dividend procedure could require us to make significant distributions to our shareholders and to pay significant interest to the IRS. Distributions to our Shareholders As described above, we expect to make distributions to our shareholders from time to time.

… 2 more changes not shown on this page.

Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

84 edited+23 added−10 removed312 unchanged
Biggest changeIf we fail to satisfy the expectations of investors or if our borrowers or their tenants fail to satisfy expectations of their customers, employees and other stakeholders or if any goals or initiatives we or they announce are not executed as planned, our and their reputations and financial results could be adversely affected, net operating income from operations of our borrowers’ and their tenants’ businesses may decrease, our borrowers’ ability to repay our loans may be impaired, risks of default and foreclosure may increase and our results of operations, financial condition, liquidity and our ability to make or sustain distribution to our shareholders may be materially adversely impacted.
Biggest changeIf we, RMR or Tremont fail to comply with ESG and anti-ESG related regulations and to satisfy the expectations of investors and other stakeholders or our, RMR’s or Tremont’s announced goals and other initiatives are not executed as planned, our, RMR’s and Tremont’s reputation could be adversely affected, and our revenues, results of operations and ability to grow our business may be negatively impacted.
Unless we otherwise consent in writing, the sole and exclusive forum for claims that arise under the Securities Act is the federal district courts of the United States of America, to the fullest extent of the law.
Unless we otherwise consent in writing, to the fullest extent of the law, the sole and exclusive forum for claims that arise under the Securities Act is the federal district courts of the United States of America.
Additionally, provisions contained in our declaration of trust and bylaws or under Maryland law may have a similar impact, including, for example, provisions relating to: • the division of our Trustees into three classes, with the term of one class expiring each year; • limitations on shareholder voting rights with respect to certain actions that are not approved by our Board of Trustees; • the authority of our Board of Trustees, and not our shareholders, to adopt, amend or repeal our bylaws and to fill vacancies on our Board of Trustees; • shareholder voting standards which require a supermajority of shares for approval of certain actions; • the fact that only our Board of Trustees, or, if there are no Trustees, our officers, may call shareholder meetings and that shareholders are not entitled to act without a meeting; • required qualifications for an individual to serve as a Trustee and a requirement that certain of our Trustees be “managing trustees” and other Trustees be “independent trustees,” as defined in our governing documents; • limitations on the ability of our shareholders to propose nominees for election as Trustees and propose other business to be considered at a meeting of our shareholders; • limitations on the ability of our shareholders to remove our Trustees; • the authority of our Board of Trustees to create and issue new classes or series of shares (including shares with voting rights and other rights and privileges that may deter a change of control of us) and issue additional common shares; 51 Table of Contents • restrictions on business combinations between us and an interested shareholder that have not first been approved by our Board of Trustees (including a majority of Trustees not related to the interested shareholder); and • the authority of our Board of Trustees, without shareholder approval, to implement certain takeover defenses.
Additionally, provisions contained in our declaration of trust and bylaws or under Maryland law may have a similar impact, including, for example, provisions relating to: • the division of our Trustees into three classes, with the term of one class expiring each year; • limitations on shareholder voting rights with respect to certain actions that are not approved by our Board of Trustees; • the authority of our Board of Trustees, and not our shareholders, to adopt, amend or repeal our bylaws and to fill vacancies on our Board of Trustees; • shareholder voting standards which require a supermajority of shares for approval of certain actions; • the fact that only our Board of Trustees, or, if there are no Trustees, our officers, may call shareholder meetings and that shareholders are not entitled to act without a meeting; • required qualifications for an individual to serve as a Trustee and a requirement that certain of our Trustees be “managing trustees” and other Trustees be “independent trustees,” as defined in our governing documents; • limitations on the ability of our shareholders to propose nominees for election as Trustees and propose other business to be considered at a meeting of our shareholders; • limitations on the ability of our shareholders to remove our Trustees; • the authority of our Board of Trustees to create and issue new classes or series of shares (including shares with voting rights and other rights and privileges that may deter a change of control of us) and issue additional common shares; 50 Table of Contents • restrictions on business combinations between us and an interested shareholder that have not first been approved by our Board of Trustees (including a majority of Trustees not related to the interested shareholder); and • the authority of our Board of Trustees, without shareholder approval, to implement certain takeover defenses.
In addition to the other risks discussed herein, the CRE loans that we originate or acquire expose us to risks associated with real estate investments, generally, including: • economic and market fluctuations; • political instability or changes; 38 Table of Contents • changes in environmental, zoning and other laws; • casualty or condemnation losses; • cost of remediation and removal of hazardous substances and liabilities associated with environmental conditions; • regulatory limitations on rents; • decreases in property values; • changes in the appeal of properties to tenants; • changes in supply and demand for CRE properties and debt; • changes in valuation of collateral underlying CRE properties and CRE loans, resulting from inherently subjective and uncertain valuations; • energy supply shortages; • various uninsured or uninsurable risks; • adverse weather, natural disasters and adverse impacts from climate change; • acts of God, earthquakes, hurricanes, pandemics or other public health safety events or concerns, and other natural disasters, climate change, or acts of war, sabotage, terrorism, social unrest and civil disturbances, in each case which may result in uninsured or underinsured losses; • changes in government regulations, such as rent control; and • changes in the availability of debt financing and/or mortgage funds, which may render the sale or refinancing of properties difficult or impracticable.
In addition to the other risks discussed herein, the CRE loans that we originate or acquire expose us to risks associated with real estate investments, generally, including: • economic and market fluctuations; • political instability or changes; • changes in environmental, zoning and other laws; • casualty or condemnation losses; • cost of remediation and removal of hazardous substances and liabilities associated with environmental conditions; • regulatory limitations on rents; • decreases in property values; • changes in the appeal of properties to tenants; • changes in supply and demand for CRE properties and debt; • changes in valuation of collateral underlying CRE properties and CRE loans, resulting from inherently subjective and uncertain valuations; • energy supply shortages; • various uninsured or uninsurable risks; • adverse weather, natural disasters and adverse impacts from climate change; 37 Table of Contents • acts of God, earthquakes, hurricanes, pandemics or other public health safety events or concerns, and other natural disasters, climate change, or acts of war, sabotage, terrorism, social unrest and civil disturbances, in each case which may result in uninsured or underinsured losses; • changes in government regulations, such as rent control; and • changes in the availability of debt financing and/or mortgage funds, which may render the sale or refinancing of properties difficult or impracticable.
We intend to continue to make regular quarterly distributions to our shareholders, but we may not be able to increase or maintain such a distribution rate for various reasons, including: • our ability to sustain or increase the rate of distributions may be adversely affected if any of the risks described in our Annual Report on Form 10-K occur; 58 Table of Contents • we may not have enough cash to pay such distributions as a result of changes in our cash requirements, cash flow or financial position; • our payment of distributions is subject to restrictions contained in the agreements governing our debt and may be subject to restrictions in future debt obligations we may incur; during the continuance of any event of default under the agreements governing our debt, we may be limited or in some cases prohibited from paying distributions to our shareholders; and • the timing, amount and form of any distributions will be determined at the discretion of our Board of Trustees and will depend on various factors that our Board of Trustees deems relevant, including, but not limited to our historical and projected income, our Distributable Earnings, Distributable Earnings per common share, Adjusted Distributable Earnings and Adjusted Distributable Earnings per common share, our expectations of future capital requirements and operating performance and our expected needs for cash to pay our obligations and fund our investments, requirements to maintain our qualification for taxation as a REIT and limitations in our Secured Financing Facilities.
We intend to continue to make regular quarterly distributions to our shareholders, but we may not be able to increase or maintain such a distribution rate for various reasons, including: • our ability to sustain or increase the rate of distributions may be adversely affected if any of the risks described in our Annual Report on Form 10-K occur; • we may not have enough cash to pay such distributions as a result of changes in our cash requirements, cash flow or financial position; • our payment of distributions is subject to restrictions contained in the agreements governing our debt and may be subject to restrictions in future debt obligations we may incur; during the continuance of any event of default under the 57 Table of Contents agreements governing our debt, we may be limited or in some cases prohibited from paying distributions to our shareholders; and • the timing, amount and form of any distributions will be determined at the discretion of our Board of Trustees and will depend on various factors that our Board of Trustees deems relevant, including, but not limited to our historical and projected income, our Distributable Earnings, Distributable Earnings per common share, Adjusted Distributable Earnings and Adjusted Distributable Earnings per common share, our expectations of future capital requirements and operating performance and our expected needs for cash to pay our obligations and fund our investments, requirements to maintain our qualification for taxation as a REIT and limitations in our Secured Financing Facilities.
He is also a managing director or managing trustee of all the other public companies to which RMR or its subsidiaries provide management services, including us. Matthew P. Jordan, our other Managing Trustee, is a director and the president and chief executive officer of Tremont and an officer of RMR Inc. and RMR. Thomas J.
He is also a managing director or managing trustee of all the other public companies to which RMR or its subsidiaries provide management services, including us. Matthew P. Jordan, our other Managing Trustee, is a director and the president and chief executive officer of Tremont, and an officer of RMR Inc., and an officer and employee of RMR. Thomas J.
We cannot be sure that our Code of Conduct, governance guidelines, investment allocation policy or other procedural protections we adopt will be sufficient to enable us to identify, adequately address or mitigate actual or alleged conflicts of interest or ensure that our transactions with related persons are made on terms that are at least as favorable to us as those that would have been obtained with an unrelated person. 48 Table of Contents Our management agreement’s fee and expense structure may not create proper incentives for Tremont.
We cannot be sure that our Code of Conduct, governance guidelines, investment allocation policy or other procedural protections we adopt will be sufficient to enable us to identify, adequately address or mitigate actual or alleged conflicts of interest or ensure that our transactions with related persons are made on terms that are at least as favorable to us as those that would have been obtained with an unrelated person. 47 Table of Contents Our management agreement’s fee and expense structure may not create proper incentives for Tremont.
Additionally, in connection with the Merger and the termination of TRMT’s management agreement with Tremont, we agreed that certain of the expenses Tremont had paid pursuant to such management agreement will be included in the “Termination Fee” under and as defined in our existing management agreement with Tremont.
In connection with the Merger and the termination of TRMT’s management agreement with Tremont, we agreed that certain of the expenses Tremont had paid pursuant to such management agreement will be included in the “Termination Fee” under and as defined in our existing management agreement with Tremont.
In order to meet these requirements, it may be necessary for us to sell or forgo attractive investments. 54 Table of Contents If we cease to qualify for taxation as a REIT under the IRC, then our ability to raise capital might be adversely affected, we may be subject to material amounts of federal and state income taxes, our cash available for distribution to our shareholders could be reduced, and the market price of our common shares could decline.
In order to meet these requirements, it may be necessary for us to sell or forgo attractive investments. 53 Table of Contents If we cease to qualify for taxation as a REIT under the IRC, then our ability to raise capital might be adversely affected, we may be subject to material amounts of federal and state income taxes, our cash available for distribution to our shareholders could be reduced, and the market price of our common shares could decline.
The exclusive forum provision of our bylaws may limit a shareholder’s ability to bring a claim in a judicial forum that the shareholder believes is favorable for disputes with us or our Trustees, officers, manager, agents or employees, which may discourage lawsuits against us and our Trustees, officers, manager, agents or employees. 52 Table of Contents We may change our operational, financing and investment policies without shareholder approval and we may become more highly leveraged, which may increase our risk of default under our debt obligations.
The exclusive forum provision of our bylaws may limit a shareholder’s ability to bring a claim in a judicial forum that the shareholder believes is favorable for disputes with us or our Trustees, officers, manager, agents or employees, which may discourage lawsuits against us and our Trustees, officers, manager, agents or employees. 51 Table of Contents We may change our operational, financing and investment policies without shareholder approval and we may become more highly leveraged, which may increase our risk of default under our debt obligations.
In the event we own a mezzanine loan that does not meet the safe harbor requirements and the IRS successfully challenges the loan’s treatment as a real estate asset for purposes of the REIT asset and income tests, then we could fail to remain qualified for taxation as a REIT under the IRC. 56 Table of Contents We may fail to remain qualified for taxation as a REIT under the IRC if the IRS successfully challenges the treatment of our mezzanine loans as debt for federal income tax purposes or successfully challenges the treatment of our preferred equity investments as equity for federal income tax purposes.
In the event we own a mezzanine loan that does not meet the safe harbor requirements and the IRS successfully challenges the loan’s treatment as a real estate asset for purposes of the REIT asset and income tests, then we could fail to remain qualified for taxation as a REIT under the IRC. 55 Table of Contents We may fail to remain qualified for taxation as a REIT under the IRC if the IRS successfully challenges the treatment of our mezzanine loans as debt for federal income tax purposes or successfully challenges the treatment of our preferred equity investments as equity for federal income tax purposes.
In addition, the ability to collect attorneys’ fees or other damages may be limited in the arbitration proceedings, which may discourage attorneys from agreeing to represent parties wishing to bring such litigation. 50 Table of Contents We may be at an increased risk for dissident shareholder activities and shareholder litigation due to perceived conflicts of interest arising from our management structure and relationships.
In addition, the ability to collect attorneys’ fees or other damages may be limited in the arbitration proceedings, which may discourage attorneys from agreeing to represent parties wishing to bring such litigation. 49 Table of Contents We may be at an increased risk for dissident shareholder activities and shareholder litigation due to perceived conflicts of interest arising from our management structure and relationships.
We may enter into one or more alternative or additional repurchase facilities in the future and expect any such facility to contain covenants and conditions that may restrict our operations and ability to make investments and distributions; • third party expectations relating to ESG factors may impose additional costs on us and expose us, our borrowers and their tenants to new risks; • any material failure, inadequacy, interruption or security breach of our, RMR’s or Tremont’s technology systems could materially and adversely affect us; • our management structure and management agreement with Tremont and its relationships with related parties may create conflicts of interest; • ownership limitations and certain provisions in our declaration of trust and bylaws, as well as certain provisions of Maryland law, may deter, delay or prevent a change in control of us or an unsolicited acquisition proposal and could limit shareholders’ ability to obtain a judicial forum they deem favorable for certain disputes; • we may incur adverse tax consequences if we fail to remain qualified for taxation as a REIT for U.S. federal income tax purposes; • we are subject to various risks related to our ownership of certain real property; • REIT distribution requirements could adversely affect us and our shareholders; • distributions to shareholders generally will not qualify for reduced tax rates applicable to “qualified dividends,” and we may also choose to pay distributions in shares, in which case shareholders may be required to pay income taxes in excess of the cash distributions that they receive; • the failure of assets subject to our Master Repurchase Agreements and our BMO Loan Program Agreement to qualify as real estate assets could adversely affect our ability to qualify for taxation as a REIT under the IRC; • REIT requirements may limit our ability to hedge effectively and may cause us to incur tax liabilities; • if we own assets or conduct operations that generate “excess inclusion income” outside a TRS, doing so could adversely affect shareholders’ taxation; and • we may change our operational, financing and investment policies without shareholder approval and may become highly leveraged. 33 Table of Contents Our business is subject to a number of risks and uncertainties.
We may enter into one or more alternative or additional repurchase facilities in the future and expect any such facility to contain covenants and conditions that may restrict our operations and ability to make investments and distributions; • third party expectations relating to sustainability factors may impose additional costs on us and expose us, our borrowers and their tenants to new risks; • any material failure, inadequacy, interruption or security breach of our, RMR’s or Tremont’s technology systems could materially and adversely affect us; • our management structure and management agreement with Tremont and its relationships with related parties may create conflicts of interest; • ownership limitations and certain provisions in our declaration of trust and bylaws, as well as certain provisions of Maryland law, may deter, delay or prevent a change in control of us or an unsolicited acquisition proposal and could limit shareholders’ ability to obtain a judicial forum they deem favorable for certain disputes; • we may incur adverse tax consequences if we fail to remain qualified for taxation as a REIT for U.S. federal income tax purposes; 31 Table of Contents • we are subject to various risks related to our ownership of certain real property; • REIT distribution requirements could adversely affect us and our shareholders; • distributions to shareholders generally will not qualify for reduced tax rates applicable to “qualified dividends,” and we may also choose to pay distributions in shares, in which case shareholders may be required to pay income taxes in excess of the cash distributions that they receive; • the failure of assets subject to our Master Repurchase Agreements and our BMO Loan Program Agreement to qualify as real estate assets could adversely affect our ability to qualify for taxation as a REIT under the IRC; • REIT requirements may limit our ability to hedge effectively and may cause us to incur tax liabilities; • if we own assets or conduct operations that generate “excess inclusion income” outside a TRS, doing so could adversely affect shareholders’ taxation; and • we may change our operational, financing and investment policies without shareholder approval and may become highly leveraged.
If we collect less on the debt instrument than our purchase price plus the market discount we had previously reported as income, we may not be able to benefit from any offsetting loss deductions. 57 Table of Contents Moreover, some of the CMBS that we might acquire may have been issued with original issue discount.
If we collect less on the debt instrument than our purchase price plus the market discount we had previously reported as income, we may not be able to benefit from any offsetting loss deductions. 56 Table of Contents Moreover, some of the CMBS that we might acquire may have been issued with original issue discount.
State licensing statutes vary from state to state and may prescribe or impose, among other things: • various recordkeeping requirements; • restrictions on loan origination and servicing practices, including limits on finance charges and the type, amount and manner of charging fees; • disclosure requirements; • requirements that licensees submit to periodic examination; • surety bond and minimum specified net worth requirements; • periodic financial reporting requirements; • notification requirements for changes in principal officers, share ownership or corporate control; • restrictions on advertising; and 41 Table of Contents • requirements that loan forms be submitted for review.
State licensing statutes vary from state to state and may prescribe or impose, among other things: • various recordkeeping requirements; • restrictions on loan origination and servicing practices, including limits on finance charges and the type, amount and manner of charging fees; • disclosure requirements; • requirements that licensees submit to periodic examination; • surety bond and minimum specified net worth requirements; • periodic financial reporting requirements; • notification requirements for changes in principal officers, share ownership or corporate control; • restrictions on advertising; and • requirements that loan forms be submitted for review.
Consistent with the foregoing, the risks we face include, but are not limited to, the following: • we operate in a highly competitive market for investment opportunities, may not obtain sufficient additional capital, and may be adversely affected by Tremont's diligence processes, any defaults on our loan investments, the rate of prepayments on our loan investments, changes in interest rates or changes in credit spreads due to the size of our loan portfolio; 32 Table of Contents • unfavorable market, economic, CRE and capital market conditions may have a material adverse effect on our investment returns, ability to grow our investment portfolio, results of operations, financial condition and ability to pay distributions to our shareholders; • the lack of liquidity of our loan investments may make it difficult for us to sell our investments if the need or desire arises; • loans secured by properties in transition or requiring significant renovation involve a greater risk of loss than loans secured by stabilized properties; • the CRE loans that we originate or acquire are subject to the ability of the property owner to generate net operating income from the underlying property, as well as the risks of defaults and foreclosure, which may be impacted by current economic conditions, including inflation, uncertainty surrounding interest rates and sustained high interest rates, supply chain challenges, labor availability, geopolitical instability and economic downturn, among other factors; • we are subject to the covenants and conditions contained in our Master Repurchase Agreements and in our facility loan agreement and security agreement with BMO Harris Bank N.A., or BMO, or the BMO Loan Program Agreement, which may restrict our operations and ability to make investments and distributions.
Consistent with the foregoing, the risks we face include, but are not limited to, the following: • we operate in a highly competitive market for investment opportunities, may not obtain sufficient additional capital, and may be adversely affected by Tremont’s diligence processes, any defaults on our loan investments, the rate of prepayments on our loan investments, changes in interest rates or changes in credit spreads due to the size of our loan portfolio; • unfavorable market, economic, CRE and capital market conditions have had and may continue to have a material adverse effect on our investment returns, ability to grow our investment portfolio, results of operations, financial condition and ability to pay distributions to our shareholders; • the lack of liquidity of our loan investments may make it difficult for us to sell our investments if the need or desire arises; • loans secured by properties in transition or requiring significant renovation involve a greater risk of loss than loans secured by stabilized properties; • the CRE loans that we originate or acquire are subject to the ability of the property owner to generate net operating income from the underlying property, as well as the risks of defaults and foreclosure, which may be impacted by current economic conditions, including inflation, uncertainty surrounding interest rates and sustained high interest rates, supply chain challenges, labor availability, and geopolitical instability and tensions, among other factors; • we are subject to the covenants and conditions contained in our Master Repurchase Agreements and in our facility loan agreement and security agreement with BMO Harris Bank N.A., or BMO, or the BMO Loan Program Agreement, which may restrict our operations and ability to make investments and distributions.
Thus, compliance with the REIT distribution requirements may hinder our ability to grow, which could cause the market price of our common shares to decline. 55 Table of Contents We may in the future choose to pay dividends in our common shares, in which case shareholders may be required to pay income taxes in excess of the cash dividends that they receive.
Thus, compliance with the REIT distribution requirements may hinder our ability to grow, which could cause the market price of our common shares to decline. 54 Table of Contents We may in the future choose to pay dividends in our common shares, in which case shareholders may be required to pay income taxes in excess of the cash dividends that they receive.
These terms of our management agreement may discourage a change of control of us, including a change of control which might result in payment of a premium for our common shares. 49 Table of Contents Tremont does not guaranty our performance; moreover, we could experience poor performance or losses for which Tremont would not be liable.
These terms of our management agreement may discourage a change of control of us, including a change of control which might result in payment of a premium for our common shares. 48 Table of Contents Tremont does not guaranty our performance; moreover, we could experience poor performance or losses for which Tremont would not be liable.
Certain of our Independent Trustees also serve as independent directors or independent trustees of other public companies to which RMR or its subsidiaries provide management services. 47 Table of Contents Tremont, RMR, their affiliates and the entities to which they provide management services are generally not prohibited from competing with us.
Certain of our Independent Trustees also serve as independent directors or independent trustees of other public companies to which RMR or its subsidiaries provide management services. 46 Table of Contents Tremont, RMR, their affiliates and the entities to which they provide management services are generally not prohibited from competing with us.
However, the SEC’s guidance is more than 30 years old and was issued in accordance with factual situations that may be different from ours. 53 Table of Contents We cannot be sure that the SEC staff will concur with our classification of our assets.
However, the SEC’s guidance is more than 30 years old and was issued in accordance with factual situations that may be different from ours. 52 Table of Contents We cannot be sure that the SEC staff will concur with our classification of our assets.
The situation related to SVB, Signature and other regional banks could in the future lead to further rules and regulations for public companies, banks, financial institutions and other participants in the U.S. and global capital markets, and complying with the requirements of any such rules or regulations may be burdensome.
The situation related to regional banks could in the future lead to further rules and regulations for public companies, banks, financial institutions and other participants in the U.S. and global capital markets, and complying with the requirements of any such rules or regulations may be burdensome.
Portnoy, Jordan, Lorenzini and Diaz have duties to RMR and to Tremont, as well as to us, and we do not have their undivided attention. They and other RMR personnel may have conflicts in allocating their time and resources between us and RMR and other companies to which RMR or its subsidiaries provide services.
Portnoy, Jordan, Lorenzini and Brown have duties to RMR and to Tremont, as well as to us, and we do not have their undivided attention. They and other RMR personnel may have conflicts in allocating their time and resources between us and RMR and other companies to which RMR or its subsidiaries provide services.
As a result, our ability to adjust our loan portfolio in response to changes in economic and other conditions may be limited, which could adversely affect our financial condition and results of operations. 35 Table of Contents Loans secured by properties in transition or requiring significant renovation involve a greater risk of loss than loans secured by stabilized properties.
As a result, our ability to adjust our loan portfolio in response to changes in economic and other conditions may be limited, which could adversely affect our financial condition and results of operations. Loans secured by properties in transition or requiring significant renovation involve a greater risk of loss than loans secured by stabilized properties.
We cannot be sure that such claims will not arise or that we will not be subject to significant liability and losses if claims of this type arise. Insurance proceeds with respect to a property may not cover all losses, which could result in the corresponding non-performance of or loss on our investment related to such property.
We cannot be sure that such claims will not arise or that we will not be subject to significant liability and losses if claims of this type arise. 41 Table of Contents Insurance proceeds with respect to a property may not cover all losses, which could result in the corresponding non-performance of or loss on our investment related to such property.
As of December 31, 2024, our primary sources of capital were the facilities governed by our Master Repurchase Agreements, including our master repurchase facility with Wells Fargo, or the Wells Fargo Master Repurchase Facility; our master repurchase facility with Citibank, or the Citibank Master Repurchase Facility and our master repurchase facility with UBS, or the UBS Master Repurchase Facility; and our facility loan program with BMO, or the BMO Facility.
As of December 31, 2025, our primary sources of capital were the facilities governed by our Master Repurchase Agreements, including our master repurchase facility with Wells Fargo, or the Wells Fargo Master Repurchase Facility; our master repurchase facility with Citibank, or the Citibank Master Repurchase Facility and our master repurchase facility with UBS, or the UBS Master Repurchase Facility; and our facility loan program with BMO, or the BMO Facility.
As a result, our income may decline as a result of borrower prepayments, which would have a negative impact on our ability to make or sustain distributions to our shareholders. Difficulty or delays in redeploying the proceeds from repayments of our existing loan investments may cause our financial performance and returns to shareholders to decline.
As a result, our income may decline as a result of borrower prepayments, which would have a negative impact on our ability to make or sustain distributions to our shareholders. 35 Table of Contents Difficulty or delays in redeploying the proceeds from repayments of our existing loan investments may cause our financial performance and returns to shareholders to decline.
In addition, losses in our TRS will generally not provide any tax benefit, except for being carried forward against future taxable income in the TRS. We may be required to report taxable income from particular investments in excess of the economic income we ultimately realize from them.
In addition, losses in our TRS will generally not provide any tax benefit, except for being carried forward and deducted against 80% of future taxable income in the TRS. We may be required to report taxable income from particular investments in excess of the economic income we ultimately realize from them.
Furthermore, the management and resolution of CRE increases our costs and requires significant commitments of time from our management and directors, which can be detrimental to the performance of their other responsibilities. 39 Table of Contents REIT distribution requirements may adversely impact our ability to carry out our business plan.
Furthermore, the management and resolution of CRE increases our costs and requires significant commitments of time from our management and directors, which can be detrimental to the performance of their other responsibilities. REIT distribution requirements may adversely impact our ability to carry out our business plan.
Selecting and evaluating material due diligence matters is subjective by nature, and there is no guarantee that the criteria utilized or judgment exercised by Tremont will reflect the beliefs, values, internal policies or preferred practices of any particular investor or align with the beliefs or values or preferred practices of other commercial real estate debt investors or with market trends.
Selecting and evaluating material due diligence matters is subjective by nature, and there is no guarantee that the criteria utilized or judgment exercised by Tremont will reflect the beliefs, values, internal policies or preferred practices of any particular investor or align with the beliefs or values or preferred practices of other CRE debt investors or with market trends.
Our business may be adversely affected by market and economic volatility experienced by the U.S. and global economies, the CRE industry and/or the local economies in the markets in which the properties relating to our investments are located.
Our business has been and may continue to be adversely affected by market and economic volatility experienced by the U.S. and global economies, the CRE industry and/or the local economies in the markets in which the properties relating to our investments are located.
RMR and Tremont rely on information technology and systems, including the Internet and cloud-based infrastructures, commercially available software and their internally developed applications, to process, transmit, store and safeguard information and to manage or support a variety of their business processes, including financial transactions and maintenance of records, which may include personal identifying information of employees and borrower, guarantor, sponsor and investment data.
RMR and Tremont rely on information technology and systems, including the Internet and cloud-based infrastructures and services, commercially available software and their respective internally developed applications, to process, transmit, store and safeguard information and to manage or support a variety of their business processes (including managing our building systems), including financial transactions and maintenance of records, which may include personal identifying information of employees and borrower, guarantor, sponsor and investment data.
In addition, RMR’s or Tremont’s data security, data privacy, investor reporting and business continuity processes could be impacted by a third party’s inability to perform in a remote work environment or by the failure of, or attack on, its information systems and technology.
In addition, RMR’s, Tremont’s or other third parties’ data security, data privacy, investor reporting and business continuity processes could be impacted by a third party’s inability to perform in a remote work environment or by the failure of, or attack on, their information systems and technology.
However, for tax years beginning before 2026, REIT dividends paid to noncorporate shareholders are generally taxed at an effective tax rate lower than applicable ordinary income tax rates due to the availability of a deduction under the IRC for specified forms of income from passthrough entities.
However, REIT dividends paid to noncorporate shareholders are generally taxed at an effective tax rate lower than applicable ordinary income tax rates due to the availability of a deduction under the IRC for specified forms of income from passthrough entities.
In addition, in certain circumstances we may be liable for the actions of our partners or co-venturers. 43 Table of Contents RMR and Tremont rely on information technology and systems in their respective operations, and any material failure, inadequacy, interruption or security breach of that technology or those systems could materially and adversely affect us.
In addition, in certain circumstances we may be liable for the actions of our partners or co-venturers. 42 Table of Contents RMR and Tremont rely on information technology and systems in their respective operations, and any material failure, inadequacy, interruption or security breach of that technology or those systems could materially harm us.
Net operating income of an income producing property can be affected by, among other things: • tenant mix and tenant bankruptcies; • success of tenant businesses; • property management decisions, including with respect to capital improvements, particularly in older building structures; • property location, condition and design; 37 Table of Contents • competition from comparable properties; • changes in market practice, such as those that arose or were intensified in response to the COVID-19 pandemic; • changes in national, regional or local economic conditions and/or specific industry segments, including current and future economic conditions caused by pandemics; • rising inflationary pressures and effects of inflation on borrower and tenant businesses; • supply chain constraints, commodity pricing and other inflation; • borrowers’ and tenants’ ability to attract, retain and motivate sufficient qualified personnel in a challenging labor market and to effectively manage their labor costs; • declines in regional or local real estate values; • declines in regional or local rental or occupancy rates; • changes in interest rates, and in the state of the debt and equity capital markets, including diminished availability or lack of CRE debt financing; • changes in real estate tax rates, tax credits and other operating expenses; • costs of remediation and liabilities associated with environmental conditions; • adverse impacts to properties from short term and long term effects of global climate change; • the potential for uninsured or underinsured property losses; • changes in laws and regulations, including fiscal policies, zoning ordinances and environmental legislation and the related costs of compliance; and • acts of God, earthquakes, hurricanes, health epidemics, pandemics and other public health safety events or concerns, and other natural disasters, or acts of war, sabotage, terrorism, social unrest or civil disturbances, in each case which may result in uninsured or underinsured losses.
Net operating income of an income producing property can be affected by, among other things: • tenant mix and tenant bankruptcies; • success of tenant businesses; • property management decisions, including with respect to capital improvements, particularly in older building structures; • property location, condition and design; • competition from comparable properties; • changes in market practice, such as those that arose or were intensified in response to the COVID-19 pandemic; • changes in national, regional or local economic conditions and/or specific industry segments, including current and future economic conditions caused by pandemics; • rising inflationary pressures and effects of inflation on borrower and tenant businesses; • supply chain constraints, commodity pricing and other inflation; • borrowers’ and tenants’ ability to attract, retain and motivate sufficient qualified personnel in a challenging labor market and to effectively manage their labor costs; • declines in regional or local real estate values; • declines in regional or local rental or occupancy rates; • changes in interest rates, and in the state of the debt and equity capital markets, including diminished availability or lack of CRE debt financing; • changes in real estate tax rates, tax credits and other operating expenses; • costs of remediation and liabilities associated with environmental conditions; • adverse impacts to properties from short term and long term effects of global climate change; • the potential for uninsured or underinsured property losses; • changes in laws and regulations, including fiscal policies, zoning ordinances and environmental legislation and the related costs of compliance; and • acts of God, earthquakes, hurricanes, health epidemics, pandemics and other public health safety events or concerns, and other natural disasters, or acts of war, sabotage, terrorism, social unrest or civil disturbances, in each case which may result in uninsured or underinsured losses. 36 Table of Contents We may suffer from difficulty or delays in deploying capital raised from capital market transactions, which may cause our financial performance to decline and adversely affect our ability to pay distributions to our shareholders and the value of our securities.
Portnoy, is the sole trustee, an officer and the controlling shareholder of ABP Trust, which is the controlling shareholder of RMR Inc., and he is also a director of Tremont, the chair of the board of directors, a managing director and the president and chief executive officer of RMR Inc., and an officer and employee of RMR.
One of our Managing Trustees and Chair of our Board of Trustees, Adam Portnoy, is the sole trustee, an officer and the controlling shareholder of ABP Trust, which is the controlling shareholder of RMR Inc., and he is also a director of Tremont, the chair of the board of directors, a managing director and the president and chief executive officer of RMR Inc., and an officer and employee of RMR.
Although much of RMR’s and Tremont’s staff work from RMR’s offices for the majority of the work week, flexible working arrangements have resulted in increased remote working.
Although most of RMR’s and Tremont’s staff work from RMR’s offices for a majority of the work week, flexible working arrangements have resulted in increased remote working.
This and other possible changing work practices have adversely impacted, and may in the future adversely impact, RMR’s and Tremont’s ability to maintain the security, proper function and availability of RMR’s and Tremont’s information technology and systems since remote working by their employees could strain RMR’s and Tremont’s technology resources and introduce operational risk, including heightened cybersecurity risk.
This and other possible changing work practices have adversely impacted, and may in the future adversely impact, RMR’s, Tremont’s or other third parties’ abilities to maintain the security, proper function and availability of their respective information technology and systems since remote working by their employees could strain their respective technology resources and introduce operational risk, including heightened cybersecurity risk.
If we are unable to meet any such collateral obligations, our financial condition and prospects could deteriorate rapidly. Any default in a repurchase agreement may cause us to experience a loss.
If we are unable to meet any such collateral obligations, our financial condition and prospects could deteriorate rapidly. 45 Table of Contents Any default in a repurchase agreement may cause us to experience a loss.
As of December 31, 2024, we had $370.1 million of available liquidity from cash and amounts available under our Secured Financing Facilities to fund future loan originations and advances. After we invest these sources, we may not be able to obtain additional capital to make investments that we determine are attractive.
As of December 31, 2025, we had $350.8 million of available liquidity from cash and amounts available under our Secured Financing Facilities to fund future loan originations and advances. After we invest these sources, we may not be able to obtain additional capital to make investments that we determine are attractive.
We cannot be sure that our leverage strategies will be successful. The duration of our debt leverage and our investments may not match.
We cannot be sure that our leverage strategies will be successful. 44 Table of Contents The duration of our debt leverage and our investments may not match.
Current economic conditions, including inflation, high interest rates, supply chain challenges, labor availability, geopolitical instability and economic downturn, have materially adversely impacted CRE transaction activity and valuations and have caused disruptions in the CRE lending market.
Current economic conditions, including inflation, high interest rates, supply chain challenges, labor availability, and geopolitical instability and tensions, among other factors, have materially adversely impacted CRE transaction activity and valuations and have caused disruptions in the CRE lending market.
Portnoy holds equity investments in other companies to which RMR or its subsidiaries provide management services and some of these companies have significant cross ownership interests, including, for example: as of December 31, 2024, Mr.
In addition to his investments in RMR Inc. and RMR, Adam Portnoy holds equity investments in other companies to which RMR or its subsidiaries provide management services and some of these companies have significant cross ownership interests, including, for example: as of December 31, 2025, Mr.
We and our borrowers and their tenants may face reputational damage in the event that our or their corporate sustainability procedures or standards do not meet the goals we or they have set or the standards set by various constituencies.
We, RMR and Tremont may face reputational damage in the event that our or their corporate sustainability procedures or standards do not meet the goals that we, RMR or Tremont have set or the standards set by various constituencies.
If interest rates go up, investors may expect a higher distribution rate than we are able to pay, which may increase our cost of capital, or they may sell our common shares and seek alternative investments that offer higher distribution rates.
If interest rates go up, investors may expect a higher distribution rate than we are able to pay, which may increase our cost of capital, or they may sell our common shares and seek alternative investments that offer higher distribution rates. Sales of our common shares may cause a decline in the market price of our common shares.
We are subject to conflicts of interest arising out of our relationship with Tremont, RMR, their affiliates and entities to which they provide management services. Tremont is a subsidiary of RMR, which is the majority owned operating subsidiary of RMR Inc. One of our Managing Trustees and Chair of our Board of Trustees, Adam D.
We are subject to conflicts of interest arising out of our relationship with Tremont, RMR, their affiliates and entities to which they provide management services. Tremont is a subsidiary of RMR, which is the majority owned operating subsidiary of RMR Inc.
Additionally, should there be additional systemic pressure on the financial system and capital markets, there can be no assurances of the response of any government or regulator, and any response may not be as favorable to industry participants as the measures currently being pursued.
Should there be additional systemic pressure on the financial system and capital markets, there can be no assurances of the response of any government or regulator, and any response may not be as favorable to industry participants as the current measures in place.
We typically structure our loan investments with benchmark interest rate floors to mitigate this risk; however, there can be no assurance that such floors will be sufficient to prevent material declines in interest income or that we will continue to structure our loan agreements with such floors; • Changes in credit spreads may negatively impact our net interest income from investments.
We typically structure our loan investments with benchmark interest rate floors to mitigate this risk; however, there can be no assurance that such floors will be sufficient to prevent material declines in interest income or that we will continue to structure our loan agreements with such floors.
The number of loans in which we are invested may be higher or lower depending on the amount of our assets under management at any given time, market conditions and the extent to which we employ leverage, and will likely fluctuate over time.
As of December 31, 2025, our portfolio consisted of 24 first mortgage loans. The number of loans in which we are invested may be higher or lower depending on the amount of our assets under management at any given time, market conditions and the extent to which we employ leverage, and will likely fluctuate over time.
We are subject to various restrictive covenants contained in our Secured Financing Facilities and we may be subject to similar or additional covenants in connection with future financing arrangements.
Our Secured Financing Facilities require us to comply with restrictive covenants and any future financings may require us to comply with similar or more restrictive covenants. We are subject to various restrictive covenants contained in our Secured Financing Facilities and we may be subject to similar or additional covenants in connection with future financing arrangements.
In particular, we may provide financing to entities managed by Tremont, RMR or their subsidiaries, or co-invest with, purchase assets from, sell assets to or arrange financing from any such entities. In addition to his investments in RMR Inc. and RMR, Adam D.
In particular, we may provide financing to entities managed by Tremont, RMR or their subsidiaries, or co-invest with, purchase assets from, sell assets to or arrange financing from any such entities.
We may be unable to find suitable replacements if our management agreement is terminated. We do not have an office separate from Tremont and do not have any employees. Our executive officers also serve as officers of Tremont and of RMR.
Risks Relating to Our Relationships with Tremont and RMR We are dependent upon Tremont and its personnel. We may be unable to find suitable replacements if our management agreement is terminated. We do not have an office separate from Tremont and do not have any employees. Our executive officers also serve as officers of Tremont and of RMR.
Therefore, in order to avoid the prohibited transactions tax, we may choose not to engage in particular sales of loans or we may limit the structures used for dispositions or securitization transactions, even though the sales or structures might otherwise be beneficial to us. We may incur adverse tax consequences as a result of our acquisition of TRMT.
Therefore, in order to avoid the prohibited transactions tax, we may choose not to engage in particular sales of loans or we may limit the structures used for dispositions or securitization transactions, even though the sales or structures might otherwise be beneficial to us.
Unfavorable market, economic and CRE industry conditions may be due to, among other things, uncertainty surrounding interest rates or sustained high interest rates and inflation, labor market challenges, supply chain disruptions, volatility in the capital markets, pandemics or other public health safety concerns, geopolitical instability (such as the war in Ukraine and conflicts in the Middle East), the new presidential administration, and other conditions beyond our control.
Unfavorable market, economic and CRE industry conditions may be due to, among other things, uncertainty surrounding interest rates or sustained high interest rates and inflation, labor market challenges, supply chain disruptions, volatility in the capital markets, pandemics or other public health safety concerns, geopolitical instability and tensions (such as the war in Ukraine and conflicts in the Middle East), the current presidential administration, changing tariffs and trade policies and related uncertainty, catastrophic events such as natural disasters, adverse weather and climate conditions, and other conditions beyond our control.
Some investors may use these factors to guide their investment strategies and, in some cases, may choose not to invest in us and/or potential borrowers may choose not to do business with us if they believe our policies relating to corporate sustainability are inadequate.
Some investors may use ESG factors to guide their investment strategies and, in some cases, may choose not to invest in us, or otherwise do business with us if they believe our, RMR’s or Tremont’s policies relating to corporate sustainability are not aligned with their own policies.
If any counterparty to a repurchase transaction under a repurchase agreement or the counterparty to any other repurchase financing arrangement we may enter defaults on its obligation to resell the underlying asset back to us at the end of the transaction term, or if the value of the underlying asset has declined as of the end of that term, or if we default on our obligations under such repurchase agreement, we may incur a loss on such repurchase transaction. 46 Table of Contents Risks Relating to Our Relationships with Tremont and RMR We are dependent upon Tremont and its personnel.
If any counterparty to a repurchase transaction under a repurchase agreement or the counterparty to any other repurchase financing arrangement we may enter defaults on its obligation to resell the underlying asset back to us at the end of the transaction term, or if the value of the underlying asset has declined as of the end of that term, or if we default on our obligations under such repurchase agreement, we may incur a loss on such repurchase transaction.
Portnoy and other related persons of RMR may precipitate such activities. Shareholder litigation and dissident shareholder activities, if instituted against us, could result in substantial costs, and diversion of our management’s attention and could have a material adverse impact on our reputation and business.
Our relationships with Tremont, RMR, their affiliates and entities to which they provide management services, Adam Portnoy and other related persons of RMR may precipitate such activities. Shareholder litigation and dissident shareholder activities, if instituted against us, could result in substantial costs, and diversion of our management’s attention and could have a material adverse impact on our reputation and business.
Lorenzini, our President and Chief Investment Officer, is an officer of RMR and an officer and employee of Tremont. Fernando Diaz, our Chief Financial Officer and Treasurer, is an officer and employee of RMR and an officer of Tremont. Messrs.
Lorenzini, our President and Chief Investment Officer, is an officer of RMR and an officer and employee of Tremont. Matthew C. Brown, our Chief Financial Officer and Treasurer, is an officer of RMR Inc., an officer and employee of RMR and an officer of Tremont. Messrs.
The risks described below may not be the only risks we face but are risks we believe may be material at this time. Other risks of which we are not yet aware, or that we currently believe are not material, may also materially and adversely impact our business operations or financial results.
Other risks of which we are not yet aware, or that we currently believe are not material, may also materially and adversely impact our business operations or financial results.
Our loan agreements typically require our borrowers to obtain interest rate caps to mitigate the risk of default caused by rising financing costs; however, there can be no assurance that these interest rate caps will prevent us from experiencing losses nor that such mechanisms will continue to be employed.
Our loan agreements typically require our borrowers to obtain interest rate caps to mitigate the risk of default caused by rising financing costs; however, there can be no assurance that these interest rate caps will prevent us from experiencing losses nor that such mechanisms will continue to be employed. 38 Table of Contents Also, as interest rates increase, the cost of interest rate caps could also increase, which may limit borrowers’ ability to afford the loan or increase the risk of default.
Our attempts to mitigate the risk of a mismatch with the duration or index of our investments and leverage will be subject to factors outside of our control, such as the availability to us of favorable financing and hedging options, and we may not be successful. 45 Table of Contents Our Secured Financing Facilities require us to comply with restrictive covenants and any future financings may require us to comply with similar or more restrictive covenants.
Our attempts to mitigate the risk of a mismatch with the duration or index of our investments and leverage will be subject to factors outside of our control, such as the availability to us of favorable financing and hedging options, and we may not be successful.
We cannot be sure that we will be successful in obtaining additional capital to enable us to make additional investments after we invest our existing capital, that any investments we make will achieve our targeted rate of return or other investment objectives, or that we will be able to successfully operate our business, or implement our operating policies and investment strategies.
We cannot be sure that we will be successful in obtaining additional capital to enable us to make additional investments after we invest our existing capital, that any investments we make will achieve our targeted rate of return or other investment objectives, or that we will be able to successfully operate our business, or implement our operating policies and investment strategies. 33 Table of Contents Our loan portfolio consists of a limited number of investments, and losses, repayments or other changes with respect to any of those investments may significantly impact us.
Our access to additional capital depends upon a number of factors, some of which we have little or no control over, including: • general economic, market or industry conditions; • the market’s view of the quality of our assets; • the market’s perception of our growth potential; • our current and potential future earnings and distributions to our shareholders; and • the market value of our securities. 36 Table of Contents If regulatory capital requirements imposed on our lenders change, they may be required to limit, or increase the cost of, financing they provide to us.
Our access to additional capital depends upon a number of factors, some of which we have little or no control over, including: • general economic, market or industry conditions; • the market’s view of the quality of our assets; • the market’s perception of our growth potential; • our current and potential future earnings and distributions to our shareholders; and • the market value of our securities.
Alternatively, if we, our borrowers or their tenants elect not to or are unable to satisfy such new criteria or do not meet the criteria of a specific third party provider, some investors may conclude that our or their policies with respect to corporate sustainability are inadequate.
If we, RMR or Tremont elect not to or are unable to satisfy the criteria by which companies’ corporate responsibility practices are assessed or do not meet the criteria of a specific third party provider, some investors may conclude that our or RMR’s policies with respect to corporate sustainability are inadequate.
Therefore, we cannot be sure that Tremont will have knowledge of all circumstances that may adversely affect such investment. If we underestimate the risks and potential losses associated with an investment we originate or acquire, we may experience losses from the investment. We may be unable to obtain additional capital sufficient to enable us to grow our loan portfolio.
If we underestimate the risks and potential losses associated with an investment we originate or acquire, we may experience losses from the investment. 34 Table of Contents We may be unable to obtain additional capital sufficient to enable us to grow our loan portfolio.
Companies with business dealings with related persons and entities may more often be the target of dissident shareholder trustee nominations, dissident shareholder proposals and shareholder litigation alleging conflicts of interest in their business dealings. Our relationships with Tremont, RMR, their affiliates and entities to which they provide management services, Adam D.
Companies with business dealings with related persons and entities may more often be the target of dissident shareholder trustee nominations, dissident shareholder proposals and shareholder litigation alleging conflicts of interest in their business dealings.
If these risks are realized, they may have a material adverse effect on our investment returns, ability to grow our investment portfolio, results of operations, financial condition and ability to pay distributions to our shareholders. 34 Table of Contents Additionally, events leading to limited liquidity, defaults, non-performance or other adverse developments that affect one industry, such as the financial services industry, or concerns or rumors about any events of these kinds, have in the past and may in the future lead to market-wide liquidity problems, may spread to other industries, and could negatively affect our business.
Additionally, events leading to limited liquidity, defaults, non-performance or other adverse developments that affect one industry, such as the financial services industry, or concerns or rumors about any events of these kinds, have in the past and may in the future lead to market-wide liquidity problems, may spread to other industries, and could negatively affect our business.
Unfavorable market, economic, CRE and capital market conditions may have a material adverse effect on our investment returns, ability to grow our investment portfolio, results of operations, financial condition and ability to pay distributions to our shareholders.
If these risks are realized, they may have a material adverse effect on our investment returns, ability to grow our investment portfolio, results of operations, financial condition and ability to pay distributions to our shareholders.
Federal Reserve, or FOMC, raised interest rates eleven times during 2022 and 2023 and then paused rate increases in the fourth quarter of 2023 following the deceleration of inflationary growth. The FOMC cut interest rates three times between September 2024 and December 2024, and it may seek to further reduce interest rates, increase interest rates or maintain current interest rates.
Federal Reserve, or FOMC, raised interest rates eleven times during 2022 and 2023 and then paused rate increases in the fourth quarter of 2023 following the deceleration of inflationary growth.
In the future, changes in laws or regulations governing our operations, changes in the interpretation thereof or newly enacted laws or regulations and any failure by us to comply with these laws or regulations, could have a materially adverse effect on our business. 42 Table of Contents We may be subject to lender liability claims and, if we are held liable under such claims, we could be subject to losses.
In the future, changes in laws or regulations governing our operations, changes in the interpretation thereof or newly enacted laws or regulations and any failure by us to comply with these laws or regulations, could have a materially adverse effect on our business.
Any failure by RMR, Tremont or other third party vendors to maintain the security, proper function and availability of their information technology and systems could result in financial losses, interrupt our operations, damage our reputation, cause us to be in default of material contracts and subject us to liability claims or regulatory penalties, any of which could materially and adversely affect our business and the market value of our securities. 44 Table of Contents Risks Relating to Our Financing We have debt and expect to incur additional debt, and our governing documents contain no limit on the amount of debt we may incur.
Any failure by RMR, Tremont or other third party vendors to maintain the security, proper function and availability of their respective information technology and systems or to adequately protect personal data, or any failure by RMR, Tremont or other third party vendors to provide the appropriate regulatory and other notifications in a timely manner could result in financial losses, interrupt our operations, damage our reputation, cause us to be in default of material contracts and subject us to liability claims or regulatory penalties, any of which could materially and adversely affect our business and the value of our securities.
A number of judicial decisions have recognized the rights of borrowers to sue lending institutions on the basis of various evolving legal theories, collectively termed “lender liability”.
We may be subject to lender liability claims and, if we are held liable under such claims, we could be subject to losses. A number of judicial decisions have recognized the rights of borrowers to sue lending institutions on the basis of various evolving legal theories, collectively termed “lender liability”.
These conditions have negatively impacted REIT share prices and, if they continue or worsen, may have further adverse impacts on the market value of our securities. Item 1B. Unresolved Staff Comments None.
In addition, the U.S. and global economies have continued to experience inflation above historic levels, constrained labor availability, supply chain challenges, global instability and economic uncertainty. These conditions have negatively impacted REIT share prices and, if they continue or worsen, may have further adverse impacts on the market value of our securities. Item 1B. Unresolved Staff Comments None.
Our executive officers may also own equity investments in other companies to which Tremont, RMR or their subsidiaries provide management services.
Portnoy beneficially owned, in aggregate, 22.5% of our outstanding common shares (including through Tremont and ABP Trust). Our executive officers may also own equity investments in other companies to which Tremont, RMR or their subsidiaries provide management services.
We, our borrowers and their tenants are subject to risks from adverse weather, natural disasters and climate events, and costs associated with future legislation designed to address climate change could increase our, our borrowers’ and their tenants’ costs.
In addition, we may incur significant costs in attempting to comply with regulatory requirements, ESG and anti-ESG policies or third party expectations or demands. 39 Table of Contents We, our borrowers and their tenants are subject to risks from adverse weather, natural disasters and climate events, and costs associated with future legislation designed to address climate change could increase our, our borrowers’ and their tenants’ costs.
Changes in these laws or regulations or their interpretation, or newly enacted laws or regulations, could require us to change our business practices or introduce us to new or increased competition, which may impose additional costs on us or otherwise adversely affect our business.
Changes in these laws or regulations or their interpretation, or newly enacted laws or regulations, could require us to change our business practices or introduce us to new or increased competition, which may impose additional costs on us or otherwise adversely affect our business. 40 Table of Contents For example, various laws and regulations currently exist that restrict the investment activities of banks and certain other financial institutions but do not apply to us.
This could potentially increase our financing costs and reduce our liquidity or require us to sell assets at an inopportune time or price. There can be no assurance that we will be able to obtain additional bank credit facilities or repurchase agreements on favorable terms, or at all.
There can be no assurance that we will be able to obtain additional bank credit facilities or repurchase agreements on favorable terms, or at all.
There can be no assurance that any current relationships with such parties will continue (whether on currently applicable terms or otherwise) or that we will be able to establish relationships with other such persons in the future if desired and on terms favorable to us.
There can be no assurance that any current relationships with such parties will continue (whether on currently applicable terms or otherwise) or that we will be able to establish relationships with other such persons in the future if desired and on terms favorable to us. 32 Table of Contents Unfavorable market, economic, CRE and capital market conditions have had and may continue to have a material adverse effect on our investment returns, ability to grow our investment portfolio, results of operations, financial condition and ability to pay distributions to our shareholders.
The FOMC cut interest rates three times between September 2024 and December 2024, and it may seek to further reduce interest rates, increase interest rates or maintain current interest rates. In addition, the U.S. and global economies have continued to experience inflation above historic levels, constrained labor availability, supply chain challenges, global instability and economic downturn.
The FOMC cut interest rates three times in 2024 and three times between September 2025 and December 2025, and it may seek to further reduce interest rates, increase interest rates or maintain current interest rates.
In July 2023, the SEC adopted rules requiring public companies to disclose material cybersecurity incidents on Form 8-K and periodic disclosure of a registrant’s cybersecurity risk management, strategy, and governance in Annual Reports on Form 10-K.
Public companies are required to disclose material cybersecurity incidents on Form 8-K and periodic disclosure of a registrant’s cybersecurity risk management, strategy, and governance in annual reports. With the SEC’s continued focus on cybersecurity, we expect increased scrutiny of our policies and systems designed to manage our cybersecurity risks and our related disclosures.

… 37 more changes not shown on this page.

Item 1C. Cybersecurity

Cybersecurity — threats and controls disclosure

1 edited+2 added−0 removed3 unchanged
Biggest changeIn the event of a cybersecurity incident, RMR has a detailed incident response plan in place for contacting authorities and informing key stakeholders, including our management. We have not been materially affected and do not believe we are reasonably likely to be materially affected by any risks from cybersecurity threats, including as a result of previous incidents.
Biggest changeIn the event of a cybersecurity incident, RMR has a detailed incident response plan in place for contacting authorities and informing key stakeholders, including our management.
Added
To date, we are not aware of risks from cybersecurity threats, including as a result of any previous cybersecurity incidents, that have materially affected or are reasonably likely to materially affect us, including our business strategy, results of operations or financial condition. For additional information on cybersecurity risks and potential related impacts on us, see Part I, Item 1A.
Added
Risk Factors, “RMR and Tremont rely on information technology and systems in their respective operations, and any material failure, inadequacy, interruption or security breach of that technology or those systems could materially harm us.”

Item 2. Properties

Properties — owned and leased real estate

1 edited+0 added−0 removed0 unchanged
Biggest changeItem 2. Properties Our principal executive and administrative offices are located in leased space at Two Newton Place, 255 Washington Street, Newton, MA 02458-1634. In June 2023, we assumed legal title to an office property located in Yardley, PA through a deed in lieu of foreclosure. 59 Table of Contents
Biggest changeItem 2. Properties Our principal executive and administrative offices are located in leased space at Two Newton Place, 255 Washington Street, Newton, MA 02458-1634. In June 2023, we assumed legal title to an office property located in Yardley, PA through a deed in lieu of foreclosure.

Item 3. Legal Proceedings

Legal Proceedings — active lawsuits and investigations

1 edited+1 added−1 removed0 unchanged
Biggest changeItem 3. Legal Proceedings From time to time, we may become involved in litigation matters incidental to the ordinary course of our business. Although we are unable to predict with certainty the eventual outcome of any litigation, we are currently not a party to any litigation that we expect to have a material adverse effect on our business. Item 4.
Biggest changeAlthough we are unable to predict with certainty the eventual outcome of any litigation, we are currently not a party to any litigation that we expect to have a material adverse effect on our business. 58 Table of Contents Item 4. Mine Safety Disclosures Not applicable. PART II
Removed
Mine Safety Disclosures Not applicable. 60 Table of Contents PART II
Added
Item 3. Legal Proceedings From time to time, we may become involved in litigation matters incidental to the ordinary course of our business.

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

3 edited+0 added−0 removed1 unchanged
Biggest changeCalendar Month Number of Shares Purchased (1) Average Price Paid per Share Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs Maximum Approximate Dollar Value of Shares that May Yet Be Purchased Under the Plans or Programs October 2024 3,602 $ 13.61 — $ — December 2024 78 13.35 — — Total/weighted average 3,680 $ 13.60 — — (1) These common share withholdings and purchases were made to satisfy tax withholding and payment obligations of certain of our officers and certain officers and employees of Tremont and/or RMR in connection with the vesting of awards of our common shares.
Biggest changeCalendar Month Number of Shares Purchased (1) Average Price Paid per Share Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs Maximum Approximate Dollar Value of Shares that May Yet Be Purchased Under the Plans or Programs October 2025 3,394 $ 10.41 — $ — November 2025 — — — — December 2025 972 8.82 — — Total/weighted average 4,366 $ 10.06 — $ — (1) These common share withholdings and purchases were made to satisfy tax withholding and payment obligations of certain of our officers and certain officers and employees of Tremont and/or RMR in connection with the vesting of awards of our common shares.
The table below provides information about our purchases of our equity securities during the quarter ended December 31, 2024.
The table below provides information about our purchases of our equity securities during the quarter ended December 31, 2025.
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities Our common shares are traded on Nasdaq (symbol: SEVN). As of February 13, 2025, there were 84 shareholders of record of our common shares. Issuer purchases of equity securities.
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities Our common shares are traded on Nasdaq (symbol: SEVN). As of February 13, 2026, there were 82 shareholders of record of our common shares. Issuer purchases of equity securities.

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

63 edited+16 added−31 removed76 unchanged
Biggest change(4) LTV represents the initial loan amount divided by the underwritten in-place value of the underlying collateral at closing. 65 Table of Contents Loan Portfolio Details The table below details our loan portfolio as of December 31, 2024: # Location Property Type Origination Date Committed Principal Amount Principal Balance Coupon Rate All in Yield (1) Maximum Maturity (2) (date) LTV (3) Risk Rating 1 Olmsted Falls, OH Multifamily 01/28/2021 $ 54,575 $ 52,050 S + 4.00% S + 4.30% 01/28/2026 63 % 3 2 Passaic, NJ Industrial 09/08/2022 47,000 43,808 S + 3.85% S + 4.22% 09/08/2027 69 % 3 3 Dallas, TX Office 08/25/2021 46,811 43,511 S + 3.25% S + 3.27% 08/25/2026 72 % 4 4 Boston, MA Hotel 12/16/2024 45,000 39,800 S + 3.95% S + 4.39% 12/16/2029 49 % 3 5 Brandywine, MD Retail 03/29/2022 42,500 42,200 S + 3.85% S + 4.27% 03/29/2027 62 % 3 6 Oxford, MS Multifamily 11/26/2024 42,000 42,000 S + 2.95% S + 3.35% 11/26/2029 75 % 2 7 Farmington Hills, MI Multifamily 05/24/2022 30,520 29,443 S + 3.15% S + 3.52% 05/24/2027 75 % 3 8 Downers Grove, IL Office 09/25/2020 30,000 29,500 S + 5.00% S + 5.91% 02/24/2025 67 % 4 9 Anaheim, CA Hotel 11/29/2023 29,000 29,000 S + 4.00% S + 4.56% 11/29/2028 55 % 2 10 Fountain Inn, SC Industrial 07/13/2023 27,500 24,300 S + 4.25% S + 4.85% 07/13/2026 76 % 2 11 Plano, TX Office 07/01/2021 27,385 26,569 S + 3.75% S + 3.76% 07/01/2026 78 % 4 12 Las Vegas, NV Multifamily 06/10/2022 25,992 25,448 S + 3.30% S + 4.07% 06/10/2027 60 % 3 13 Fayetteville, GA Industrial 10/06/2023 25,250 25,250 S + 3.35% S + 3.73% 10/06/2028 55 % 3 14 Carlsbad, CA Office 10/27/2021 24,750 24,417 S + 3.25% S + 3.26% 10/27/2026 78 % 4 15 Fontana, CA Industrial 11/18/2022 24,355 22,000 S + 3.75% S + 4.09% 11/18/2026 72 % 3 16 Los Angeles, CA Industrial 06/28/2024 23,800 21,940 S + 3.40% S + 3.83% 06/28/2029 58 % 3 17 Downers Grove, IL Office 12/09/2021 23,530 23,530 S + 4.25% S + 4.54% 12/09/2026 72 % 3 18 Bellevue, WA Office 11/05/2021 21,000 20,000 S + 3.85% S + 4.01% 11/05/2026 68 % 4 19 Newport News, VA Multifamily 04/25/2024 17,757 14,759 S + 3.15% S + 3.87% 04/25/2029 71 % 3 20 Sandy Springs, GA Retail 09/23/2021 16,488 15,286 S + 3.75% S + 4.05% 09/23/2026 72 % 2 21 Lake Mary, FL Hotel 09/06/2024 16,000 16,000 S + 4.00% S + 4.41% 09/06/2029 68 % 3 Total/weighted average $ 641,213 $ 610,811 S + 3.72% S + 4.10% 67 % 3.1 (1) All in yield represents the yield on a loan, including amortization of deferred fees over the initial term of the loan and excluding any purchase discount accretion.
Biggest change(4) LTV represents the initial loan amount divided by the underwritten in-place value of the underlying collateral at closing. 61 Table of Contents Loan Portfolio Details The table below details our loan portfolio as of December 31, 2025: # Location Property Type Origination Date Committed Principal Amount Principal Balance Coupon Rate All in Yield (1) Maximum Maturity (2) (date) LTV (3) Risk Rating 1 Olmsted Falls, OH (4) Multifamily 01/28/2021 $ 54,575 $ 54,575 S + 4.00% S + 4.29% 01/28/2026 63 % 1 2 Passaic, NJ Industrial 09/08/2022 47,000 45,260 S + 3.85% S + 4.42% 09/08/2027 69 % 3 3 Dallas, TX Office 08/25/2021 46,811 44,217 S + 3.25% S + 3.27% 08/25/2026 72 % 4 4 Boston, MA Hotel 12/16/2024 45,000 39,800 S + 3.95% S + 4.39% 12/16/2029 49 % 3 5 Oxford, MS Multifamily 11/26/2024 42,000 42,000 S + 2.95% S + 3.35% 11/26/2029 75 % 1 6 College Park, MD Multifamily 11/12/2025 37,320 27,911 S + 2.95% S + 3.46% 11/12/2030 43 % 3 7 Revere, MA (5) Hotel 07/01/2024 37,000 37,000 S + 3.95% S + 5.14% 07/01/2029 73 % 3 8 New York, NY Mixed Use 09/05/2025 34,500 34,500 S + 3.20% S + 4.03% 09/05/2030 70 % 3 9 San Marcos, TX Multifamily 01/14/2025 31,200 28,228 S + 3.25% S + 3.68% 01/14/2030 62 % 2 10 Anaheim, CA Hotel 11/29/2023 29,000 29,000 S + 4.00% S + 4.05% 11/29/2028 55 % 2 11 San Antonio, TX Industrial 06/13/2025 28,000 22,800 S + 3.40% S + 3.88% 06/13/2030 62 % 3 12 Plano, TX Office 07/01/2021 27,385 26,569 S + 3.75% S + 3.76% 07/01/2026 78 % 4 13 Downers Grove, IL Office 09/25/2020 27,000 26,500 S + 5.00% S + 5.15% 05/22/2026 67 % 3 14 Wayne, PA (5) Industrial 07/18/2024 27,000 24,733 S + 4.25% S + 4.73% 07/18/2029 62 % 3 15 Fayetteville, GA Industrial 10/06/2023 25,250 25,250 S + 3.35% S + 3.73% 10/06/2028 55 % 3 16 Carlsbad, CA Office 10/27/2021 24,750 24,417 S + 3.25% S + 3.26% 10/27/2026 78 % 4 17 Los Angeles, CA Industrial 06/28/2024 23,800 22,954 S + 3.40% S + 3.82% 06/28/2029 58 % 3 18 Downers Grove, IL Office 12/09/2021 23,530 23,530 S + 4.25% S + 4.51% 12/09/2026 72 % 3 19 Fontana, CA Industrial 11/18/2022 22,080 20,470 S + 3.75% S + 4.03% 11/18/2026 72 % 3 20 Bellevue, WA Office 11/05/2021 21,000 20,245 S + 2.85% S + 2.85% 04/07/2029 68 % 4 21 Waco, TX Multifamily 03/06/2025 18,500 18,500 S + 3.35% S + 3.75% 03/06/2030 73 % 3 22 Boise, ID Multifamily 06/26/2025 18,000 18,000 S + 3.50% S + 4.29% 06/26/2030 79 % 3 23 Newport News, VA Multifamily 04/25/2024 17,757 15,126 S + 3.15% S + 3.85% 04/25/2029 71 % 3 24 Lake Mary, FL Hotel 09/06/2024 16,000 16,000 S + 4.00% S + 4.41% 09/06/2029 68 % 1 Total/weighted average $ 724,458 $ 687,585 S + 3.62% S + 4.02% 66 % 2.8 (1) All in yield represents the yield on a loan, including amortization of deferred fees over the initial term of the loan and excluding any purchase discount accretion.
Our mortgage loans are classified as loans held for investment in our consolidated balance sheets. Tremont is registered with the SEC as an investment adviser under the Investment Advisers Act of 1940, as amended. We believe that Tremont provides us with significant experience and expertise in investing in middle market and transitional CRE.
Our mortgage loans are classified as loans held for investment in our consolidated balance sheets. Tremont is registered with the SEC as an investment adviser under the Investment Advisers Act of 1940, as amended. We believe that Tremont provides us with significant experience and expertise in investing in middle market transitional CRE.
Distributable Earnings We calculate Distributable Earnings and Distributable Earnings per common share as net income and net income per common share, respectively, computed in accordance with GAAP, including realized losses not otherwise included in net income determined in accordance with GAAP, and excluding: (a) depreciation and amortization of real estate owned and related intangible assets, if any; (b) non-cash equity compensation expense; (c) unrealized gains, losses and other similar non-cash items that are included in net income for the period of the calculation (regardless of whether such items are included in or deducted from net income or in other comprehensive income under GAAP), if any; and (d) one-time events pursuant to changes in GAAP and certain non-cash items, if any.
We calculate Distributable Earnings and Distributable Earnings per common share as net income and net income per common share, respectively, computed in accordance with GAAP, including realized losses not otherwise included in net income determined in accordance with GAAP, and excluding: (a) depreciation and amortization of real estate owned and related intangible assets, if any; (b) non-cash equity compensation expense; (c) unrealized gains, losses and other similar non-cash items that are included in net income for the period of the calculation (regardless of whether such items are included in or deducted from net income or in other comprehensive income under GAAP), if any; and (d) one-time events pursuant to changes in GAAP and certain non-cash items, if any.
Upon acquisition, real estate owned is recognized at the fair value of the property at the time of acquisition. We allocate the purchase price to land, building and improvements and intangibles based on determinations of the relative fair values of these assets assuming the properties are vacant.
Real Estate Owned. Upon acquisition, real estate owned is recognized at the fair value of the property at the time of acquisition. We allocate the purchase price to land, building and improvements and intangibles based on determinations of the relative fair values of these assets assuming the properties are vacant.
We utilize the model to estimate credit losses over a reasonable and supportable economic forecast period of 12 months, followed by a straight-line reversion period of six months to average historical losses. Average historical losses are established using a population of third party historical loss data that approximates our portfolio as of the measurement date.
We utilize the model to estimate credit losses over a reasonable and supportable economic forecast period of 12 months, followed by a straight-line reversion period of 12 months to average historical losses. Average historical losses are established using a population of third party historical loss data that approximates our portfolio as of the measurement date.
For further information about these and other such relationships and related person transactions, see Notes 8 and 9 to our Consolidated Financial Statements included in Part IV, Item 15 of this Annual Report on Form 10-K and our other filings with the SEC, which are incorporated herein by reference, including our definitive Proxy Statement for our 2025 Annual Meeting of Shareholders, or our 2025 Proxy Statement, to be filed with the SEC within 120 days after the fiscal year ended December 31, 2024.
For further information about these and other such relationships and related person transactions, see Notes 8 and 9 to our Consolidated Financial Statements included in Part IV, Item 15 of this Annual Report on Form 10-K and our other filings with the SEC, which are incorporated herein by reference, including our definitive Proxy Statement for our 2026 Annual Meeting of Shareholders, or our 2026 Proxy Statement, to be filed with the SEC within 120 days after the fiscal year ended December 31, 2025.
We are subject to risk that our loan investments will be repaid at an earlier date than anticipated, which may reduce the returns realized on those loans as less interest income may be received over time. Additionally, we may not be able to reinvest the principal repaid at a similar or higher yield of the original loan investment.
We are subject to risk that our loan investments will be repaid at an earlier date than anticipated, which may reduce the returns realized on those loans as less interest income may be received over time. Additionally, we may not be able to reinvest the principal repaid timely and/or at a similar or higher yield of the original loan investment.
We did not have any outstanding past due loans or nonaccrual loans as of December 31, 2024. However, our borrowers' businesses, operations and liquidity may be materially adversely impacted by current inflationary pressures, interest rate fluctuations, supply chain issues or a prolonged economic slowdown or recession could amplify those negative impacts.
We did not have any outstanding past due loans or nonaccrual loans as of December 31, 2025. However, our borrowers' businesses, operations and liquidity may be materially adversely impacted by current inflationary pressures, interest rate fluctuations, supply chain issues or a prolonged economic slowdown or recession could amplify those negative impacts.
If a loan is determined to be collateral dependent (because the repayment of the loan is expected to be provided substantially through the operation or sale of the underlying collateral property) and the borrower is experiencing financial difficulties, but foreclosure is not probable, we will record an allowance for credit losses by comparing the collateral's fair value to the amortized cost basis of the loan.
If a loan is determined to be collateral dependent (because the repayment of the loan is expected to be provided substantially through the operation or sale of the underlying collateral property) and the borrower is experiencing financial difficulties, but foreclosure is not probable, we may record an allowance for credit losses by comparing the collateral's fair value to the amortized cost basis of the loan.
Nevertheless, unanticipated credit losses could occur that may adversely impact our operating results. 61 Table of Contents Changes in Fair Value of our Assets. We generally intend to hold our investments for their contractual terms, unless repaid earlier by the borrowers. We evaluate the credit quality of each of our loans at least quarterly.
Nevertheless, unanticipated credit losses could occur that may adversely impact our operating results. 59 Table of Contents Changes in Fair Value of our Assets. We generally intend to hold our investments for their contractual terms, unless repaid earlier by the borrowers. We evaluate the credit quality of each of our loans at least quarterly.
(3) Projected interest payments are attributable only to our debt service obligations at existing rates as of December 31, 2024 and are not intended to estimate future interest costs which may result from debt prepayments, additional borrowings, new debt issuances or changes in interest rates.
(3) Projected interest payments are attributable only to our debt service obligations at existing rates as of December 31, 2025 and are not intended to estimate future interest costs which may result from debt prepayments, additional borrowings, new debt issuances or changes in interest rates.
Significant judgements are required in our estimation of our allowance for credit losses, including but not limited to the amount and timing of future fundings, repayments and macroeconomic forecast assumptions. Therefore, actual results over time could differ materially from our estimates.
Significant judgments are required in our estimation of our allowance for credit losses, including but not limited to the amount and timing of future fundings, repayments and macroeconomic forecast assumptions. Therefore, actual results over time could differ materially from our estimates.
“4” higher risk—Criteria reflects a sponsor having a history of unresolved missed or late payments, maturity extensions and difficulty timely fulfilling its credit obligations and our evaluation of management's experience; collateral performance failing to meet the business plan or credit underwriting; the existence of a risk of default possibly leading to a loss and/or potential weaknesses that deserve management’s attention; and/or the property having a high LTV.
“4” higher risk—Criteria reflects a sponsor having a history of unresolved missed or late payments, maturity extensions and difficulty timely fulfilling its credit obligations and our evaluation of management's experience; collateral performance 71 Table of Contents failing to meet the business plan or credit underwriting; the existence of a risk of default possibly leading to a loss and/or potential weaknesses that deserve management’s attention; and/or the property having a high LTV.
The allowance for credit losses related to unfunded loan commitments is included in accounts payable, accrued liabilities and other liabilities in our consolidated balance sheets. 73 Table of Contents Given the lack of historical loss data related to our loan portfolio, we estimate our expected losses using an analytical model that considers the likelihood of default and loss given default for each individual loan.
The allowance for credit losses related to unfunded loan commitments is included in accounts payable, accrued liabilities and other liabilities in our consolidated balance sheets. Given the lack of historical loss data related to our loan portfolio, we estimate our expected losses using an analytical model that considers the likelihood of default and loss given default for each individual loan.
These non-GAAP financial measures do not represent net income, net income per common share or cash generated from operating activities and should not be considered as alternatives to net income or net income per common share determined in accordance with GAAP or as an indication of our cash flows from operations determined in accordance with U.S. generally accepted accounting principles, or GAAP, a measure of our liquidity or operating performance or an indication of funds available for our cash needs.
These non-GAAP financial measures do not represent book value, book value per common share, net income, net income per common share or cash generated from operating activities and should not be considered as alternatives to book value, book value per common share, net income or net income per common share determined in accordance with GAAP or as an indication of our cash flows from operations determined in accordance with U.S. generally accepted accounting principles, or GAAP, a measure of our capital adequacy, liquidity or operating performance or an indication of funds available for our cash needs.
Also, if the aggregate principal balance of our loan portfolio grows but the number of our loans or the number of our borrowers does not grow, we could face increased risk by reason of the concentration of our investments. Prepayment Risk.
Also, if the aggregate principal balance of our loan portfolio grows but the number of our loans or the number of our borrowers does not grow, we could face increased risk by reason of the concentration of our investments. 60 Table of Contents Prepayment Risk.
“5” loss likely—Criteria reflects a very high risk of realizing a principal loss or having incurred a principal loss; a sponsor having a history of default payments, trouble fulfilling its credit obligations, deeds in lieu of foreclosures, and/or bankruptcies; collateral performance is significantly worse than performance metrics included in the business plan; loan covenants or performance milestones having been breached or not attained; timely exit via sale or refinancing being uncertain; and/or the property having a very high LTV. 74 Table of Contents Real Estate Owned.
“5” loss likely—Criteria reflects a very high risk of realizing a principal loss or having incurred a principal loss; a sponsor having a history of default payments, trouble fulfilling its credit obligations, deeds in lieu of foreclosures, and/or bankruptcies; collateral performance is significantly worse than performance metrics included in the business plan; loan covenants or performance milestones having been breached or not attained; timely exit via sale or refinancing being uncertain; and/or the property having a very high LTV.
The interest income on our loans and interest expense on our borrowings float with benchmark rates, such as SOFR. Because we generally intend to leverage approximately 75% of the amount of our investments, as benchmark rates increase above the floors of our loans, our income from investments, net of interest and related expenses, will increase.
The interest income on our loans and interest expense on our borrowings float with benchmark rates, such as SOFR. Because we generally intend to leverage up to 80% of the amount of our investments, as benchmark rates increase above the floors of our loans, our income from investments, net of interest and related expenses, will increase.
In addition, we actively engage with our borrowers regarding their execution of the business plans for the underlying collateral, among other things. As of December 31, 2024 and February 13, 2025, all of our borrowers with outstanding loans had paid their debt service obligations owed and due to us.
In addition, we actively engage with our borrowers regarding their execution of the business plans for the underlying collateral, among other things. 62 Table of Contents As of December 31, 2025 and February 13, 2026, all of our borrowers with outstanding loans had paid their debt service obligations owed and due to us.
Expenses from real estate owned represent expenses from the operations of an office property located in Yardley, PA that was transferred to real estate owned through a deed in lieu of foreclosure in June 2023. Income tax (expense) benefit.
Expenses from real estate owned represent expenses from the operations of an office property located in Yardley, PA that was transferred to real estate owned through a deed in lieu of foreclosure in June 2023.
The weighted average principal balance was approximately $411,000 for the year ended December 31, 2024 compared to approximately $447,000 for the year ended December 31, 2023. Revenue from real estate owned.
The weighted average principal balance was approximately $425,000 for the year ended December 31, 2025, compared to $411,000 for the year ended December 31, 2024. Revenue from real estate owned.
(4) Lease related costs include capital expenditures used to improve tenants' spaces pursuant to lease agreements or leasing related costs, such as brokerage commissions, related to the Yardley, PA property. Debt Covenants Our principal debt obligations as of December 31, 2024 were the outstanding balances under our Secured Financing Facilities.
(4) Lease related costs include capital expenditures used to improve tenants' spaces pursuant to lease agreements or leasing related costs, such as brokerage commissions, related to real estate owned. Debt Covenants Our principal debt obligations as of December 31, 2025 were the outstanding balances under our Secured Financing Facilities.
Income tax expense for the year ended December 31, 2024 is a result of income taxes paid or payable by us in certain jurisdictions where we are subject to state income taxes. Net income. The decrease in net income was due to the changes noted above.
Income tax expense for the year ended December 31, 2025 is a result of income taxes paid or payable by us in certain jurisdictions where we are subject to state income taxes. Net income and net income per common share - basic and diluted. The decrease in net income was due to the changes noted above.
(2) Maximum maturity assumes all borrower loan extension options have been exercised, which options are subject to the borrower meeting certain conditions. (3) LTV represents the initial loan amount divided by the underwritten in-place value of the underlying collateral at closing.
(2) Maximum maturity assumes all borrower loan extension options have been exercised, which options are subject to the borrower meeting certain conditions. (3) LTV represents the initial loan amount divided by the underwritten in-place value of the underlying collateral at closing. (4) In January 2026, the maturity date of this loan was extended to March 31, 2026.
Loans issued under the BMO Facility are secured by a security interest and collateral assignment of the underlying loans to our borrowers which are secured by real property underlying such loans.
Interest on advancements under the BMO Facility are calculated at SOFR plus a premium. Loans issued under the BMO Facility are secured by a security interest and collateral assignment of the underlying loans to our borrowers which are secured by real property underlying such loans.
Loans that we have a plan to sell or liquidate are held at the lower of cost or fair value less cost to sell. Allowance for Credit Losses.
Loans that we have a plan to sell or liquidate are held at the lower of cost or fair value less cost to sell. Allowance for Credit Losses. We recognize the allowance for credit losses under the current expected credit loss, or CECL, model.
Decreases in benchmark rates are mitigated by interest rate floor provisions in all but one of our loan agreements with borrowers, ranging from 0.10% to 5.20%; therefore, changes to income from investments, net, may not move proportionately with the increase or decrease in benchmark rates.
Decreases in benchmark rates are mitigated by interest rate floor provisions in all but one of our loan agreements with borrowers, ranging from 0.25% to 4.34% with a weighted average floor of 2.81%; therefore, changes to income from investments, net, may not move proportionately with the increase or decrease in benchmark rates.
Financing Activities Our secured financing agreements at December 31, 2024 consisted of agreements that govern our Wells Fargo Master Repurchase Facility, our Citibank Master Repurchase Facility, our BMO Facility and our UBS Master Repurchase Facility. In September 2024, we amended our Citibank Master Repurchase Agreement.
Financing Activities Our secured financing agreements at December 31, 2025 consisted of agreements that govern our Wells Fargo Master Repurchase Facility, our Citibank Master Repurchase Facility, our BMO Facility and our UBS Master Repurchase Facility.
We expect to pay this distribution on February 20, 2025 using cash on hand.
We expect to pay this distribution on February 19, 2026 using cash on hand.
Our BMO Loan Program Agreement provides for acceleration of all payment obligations due under the BMO Facility Loan Agreements upon the occurrence and continuation of certain events of default, including a change of control of us, which includes Tremont ceasing to act as our sole manager or to be a wholly owned subsidiary of RMR.
Our BMO Loan Program Agreement provides for acceleration of all payment obligations due under the BMO Facility Loan Agreements upon the occurrence and continuation of certain events of default, including a change of control of us, which includes Tremont ceasing to act as our sole manager or to be a wholly owned subsidiary of RMR. 69 Table of Contents As of December 31, 2025, we had a $423,643 aggregate outstanding principal balance under our Master Repurchase Facilities.
As of December 31, 2024, SOFR was 4.33%, and as a result, one of our loan investments had an active interest rate floor. Size of Portfolio .
As of December 31, 2025, SOFR was 3.69%, and as a result, seven of our loan investments had an active interest rate floor. Size of Portfolio .
The increase in base management and incentive fees was due to higher “core earnings”, as defined in our management agreement, during the year ended December 31, 2024. General and administrative expenses .
The decrease in incentive fees was due to lower “core earnings”, as defined in our management agreement, during the year ended December 31, 2025 as compared to the year ended December 31, 2024. 64 Table of Contents General and administrative expenses .
As of December 31, 2024 and February 13, 2025, we had a $419,622 and $442,026, respectively, aggregate outstanding principal balance under our Secured Financing Facilities.
As of December 31, 2025 and February 13, 2026, we had a $488,275 and $447,344, respectively, aggregate outstanding principal balance under our Secured Financing Facilities.
As of December 31, 2024, this loan had an amortized cost of $43,511 and a risk rating of 4. In August 2024, we amended the agreement governing our loan secured by an office property in Plano, TX.
As of December 31, 2025, this loan had an amortized cost of $20,245 and a risk rating of 4. In May 2025, we amended the agreement governing our loan secured by an office property in Downers Grove, IL.
As of December 31, 2024, we were in compliance with all covenants and other terms under our Secured Financing Facilities. 72 Table of Contents Related Person Transactions We have relationships and historical and continuing transactions with Tremont, RMR, RMR Inc. and others related to them.
As of December 31, 2025, we had a $64,632 aggregate outstanding principal balance under the BMO Facility. As of December 31, 2025, we were in compliance with all covenants and other terms under our Secured Financing Facilities. Related Person Transactions We have relationships and historical and continuing transactions with Tremont, RMR, RMR Inc. and others related to them.
Distributions During the year ended December 31, 2024, we declared and paid distributions totaling $20,772, or $1.40 per common share, using cash on hand. On January 16, 2025, we declared a regular quarterly distribution of $0.35 per common share, or $5,216, to shareholders of record on January 27, 2025.
Distributions During the year ended December 31, 2025, we declared and paid regular quarterly distributions totaling $18,835, or $1.26 per common share, using cash on hand. On January 15, 2026, we declared a regular quarterly distribution of $0.28 per common share, or $6,327, to shareholders of record on January 26, 2026.
Non-GAAP Financial Measures We present Distributable Earnings, Distributable Earnings per common share and Adjusted Book Value per common share, which are considered “non-GAAP financial measures” within the meaning of the applicable SEC rules.
Additionally, net income per common share - basic and diluted includes the effect of the issuance of 7,532,861 common shares through the Rights Offering. Non-GAAP Financial Measures We present Adjusted Book Value, Adjusted Book Value per common share, Distributable Earnings and Distributable Earnings per common share, which are considered “non-GAAP financial measures” within the meaning of the applicable SEC rules.
For further information regarding the risks associated with our loan portfolio, see Note 3 to our Consolidated Financial Statements included in Part IV, Item 15 and Part I, Item 1A, "Risk Factors" of this Annual Report on Form 10-K. 70 Table of Contents Pursuant to the terms of our Citibank Master Repurchase Facility, our UBS Master Repurchase Facility and our Wells Fargo Master Repurchase Facility, we may sell to, and later repurchase from, Citibank, UBS and Wells Fargo, the purchased assets related to the applicable facility.
For further information regarding the risks associated with our loan portfolio, see Note 3 to our Consolidated Financial Statements included in Part IV, Item 15 and Part I, Item 1A, "Risk Factors" of this Annual Report on Form 10-K.
The increase in the allowance for credit losses during the year ended December 31, 2024 was primarily attributable to declining values for CRE and unfavorable CRE pricing forecasts used in our current expected credit loss, or CECL, model and increased provisions for certain of our office loans. Expenses from real estate owned.
The increase in the allowance for credit losses during the year ended December 31, 2025 was primarily attributable to increased provisions for our office loans and a larger loan portfolio as of December 31, 2025, offset by increasing values for CRE and favorable CRE pricing forecasts used in our CECL model and loans nearing maturity. Expenses from real estate owned.
Reconciliation of Net Income to Distributable Earnings The table below demonstrates how we calculate Distributable Earnings and Distributable Earnings per common share, which are non-GAAP measures, and provides a reconciliation of these non-GAAP measures to net income: Year Ended December 31, 2024 2023 Net income $ 17,820 $ 25,965 Non-cash equity compensation expense 1,359 1,121 Non-cash accretion of purchase discount (2,347) (4,128) Provision for (reversal of) credit losses 3,080 (799) Depreciation and amortization of real estate owned 1,248 594 Exit fees collected on loans acquired in Merger (1) 124 148 Distributable Earnings $ 21,284 $ 22,901 Weighted average common shares outstanding - basic and diluted 14,712 14,625 Net income per common share - basic and diluted $ 1.20 $ 1.76 Distributable Earnings per common share - basic and diluted $ 1.45 $ 1.57 (1) Exit fees collected on loans acquired in the Merger represent fees collected upon repayment of loans for which no income has previously been recognized in Distributable Earnings.
The realized loss amount reflected in Distributable Earnings will equal the difference between the cash received or expected to be received and the carrying value of the loan. 66 Table of Contents Reconciliation of Net Income to Distributable Earnings The table below demonstrates our calculation of Distributable Earnings and Distributable Earnings per common share, which are non-GAAP measures, and provides a reconciliation of these non-GAAP measures to net income: Year Ended December 31, 2025 2024 Net income $ 15,434 $ 17,820 Non-cash equity compensation expense 1,736 1,359 Non-cash accretion of purchase discount (37) (2,347) Provision for credit losses 203 3,080 Depreciation and amortization of real estate owned 1,063 1,248 Exit fees collected on loans acquired in Merger — 124 Distributable Earnings $ 18,399 $ 21,284 Weighted average common shares outstanding - basic and diluted 15,240 14,712 Net income per common share - basic and diluted $ 1.00 $ 1.20 Distributable Earnings per common share - basic and diluted $ 1.21 $ 1.45 (1) Exit fees collected on loans acquired in the Merger represent fees collected upon repayment of loans for which no income has previously been recognized in Distributable Earnings.
The following is a summary of our sources and uses of cash flows for the period presented: Year Ended December 31, 2024 2023 Cash and cash equivalents at beginning of period $ 87,855 $ 71,067 Net cash provided by (used in): Operating activities 20,110 20,270 Investing activities 21,261 35,844 Financing activities (58,476) (39,326) Cash and cash equivalents at end of period $ 70,750 $ 87,855 The decrease in cash provided by operating activities for 2024 compared to 2023 was primarily the result of lower net interest income earned on loan investments due to lower amounts invested, partially offset by favorable changes in working capital, higher interest income earned on cash balances invested and increased cash earned from our real estate owned.
The following is a summary of our sources and uses of cash flows for the period presented: Year Ended December 31, 2025 2024 Cash and cash equivalents at beginning of period $ 70,750 $ 87,855 Net cash provided by (used in): Operating activities 15,038 20,110 Investing activities (72,957) 21,261 Financing activities 110,640 (58,476) Cash and cash equivalents at end of period $ 123,471 $ 70,750 The decrease in cash provided by operating activities for 2025 compared to 2024 was primarily the result of lower net interest income earned on loan investments due to lower SOFR index rates.
As of December 31, 2024, this loan had an amortized cost of $19,997 and a risk rating of 4. 66 Table of Contents All of the loans in our portfolio are structured with risk mitigation mechanisms, such as cash flow sweeps or interest reserves, to help protect us against investment losses.
All of the loans in our portfolio are structured with risk mitigation mechanisms, such as cash flow sweeps or interest reserves, to help protect us against investment losses.
Loans issued under the BMO Facility are coterminous with the corresponding pledged mortgage loan investments, are not subject to margin calls and allow for up to an 80% advance rate, subject to certain loan to cost and LTV limits. Interest on advancements under the BMO Facility are calculated at SOFR plus a premium.
Citibank has the discretion to make advancements at margins higher than 75%, and UBS and Wells Fargo each has the discretion to make advancements at margins higher than 80%. 67 Table of Contents Loans issued under the BMO Facility are coterminous with the corresponding pledged mortgage loan investments, are not subject to margin calls and allow for up to an 80% advance rate, subject to certain loan to cost and LTV limits.
For further information on our adoption of our allowance for credit losses, see Note 2 to our Consolidated Financial Statements included in Part IV, Item 15 of this Annual Report on Form 10-K. 64 Table of Contents Our Loan Portfolio The table below details overall statistics for our loan portfolio as of December 31, 2024 and 2023: As of December 31, 2024 2023 Number of loans 21 24 Total loan commitments $ 641,213 $ 670,293 Unfunded loan commitments (1) $ 30,402 $ 40,401 Principal balance $ 610,811 $ 629,892 Carrying value $ 601,842 $ 622,086 Weighted average coupon rate 8.24 % 9.19 % Weighted average all in yield (2) 8.62 % 9.64 % Weighted average floor 2.12 % 1.36 % Weighted average maximum maturity (years) (3) 2.6 3.0 Weighted average risk rating 3.1 3.0 Weighted average LTV (4) 67 % 68 % (1) Unfunded loan commitments are primarily used to finance property improvements and leasing capital and are generally funded over the term of the loan.
Our Loan Portfolio The table below details overall statistics for our loan portfolio as of December 31, 2025 and 2024: As of December 31, 2025 2024 Number of loans 24 21 Total loan commitments $ 724,458 $ 641,213 Unfunded loan commitments (1) $ 36,873 $ 30,402 Principal balance $ 687,585 $ 610,811 Carrying value $ 676,908 $ 601,842 Weighted average coupon rate 7.52 % 8.24 % Weighted average all in yield (2) 7.92 % 8.62 % Weighted average floor 2.81 % 2.12 % Weighted average maximum maturity (years) (3) 2.6 2.6 Weighted average risk rating 2.8 3.1 Weighted average LTV (4) 66 % 67 % (1) Unfunded loan commitments are primarily used to finance property improvements and leasing capital and are generally funded over the term of the loan.
In August 2024, we amended the agreement governing our loan secured by an office property in Dallas, TX. As part of this amendment, the loan commitment was reduced by $3,189, the borrower was required to contribute $2,900 to cash reserves and the maturity date was extended by two years to August 25, 2026.
In April 2025, we amended the agreement governing our loan secured by an office property in Bellevue, WA. As part of this amendment, the borrower was required to contribute $1,625 to cash reserves, the coupon rate was reduced from SOFR + 3.85% to SOFR + 2.85% and the maturity date was extended by three years to April 7, 2028.
However, our access to additional capital depends on many factors including the price at which our common shares trade relative to their book value and market lending conditions. See "—Market Conditions" below. Market Conditions.
However, our access to additional capital depends on many factors including the price at which our common shares trade relative to their book value and market lending conditions. See "—Market Conditions" below. Market Conditions. Earlier this year, U.S. trade and fiscal policy, coupled with ongoing geopolitical tensions, caused volatility in financial markets and uncertainty for CRE investors.
In December 2024, we amended the fee letter to our UBS Master Repurchase Agreement to extend the stated maturity date to February 18, 2026 and increase the maximum facility size to $250,000.
In February 2026, we amended the Wells Fargo Master Repurchase Agreement and made certain changes to the agreement, including extending the stated maturity date to March 13, 2028 and increasing the maximum facility size by $125,000 to $250,000. In February 2026, we amended our UBS Master Repurchase Agreement to extend the stated maturity date to February 18, 2028.
The increase in reimbursement of shared services expenses was primarily the result of higher usage of shared services from RMR during the year ended December 31, 2024. Provision for (reversal of) credit losses. The provision for (reversal of) credit losses represents the increase in the allowance for credit losses on our loan portfolio and unfunded commitments.
The decrease in reimbursement of shared services expenses was primarily the result of lower usage of shared services from RMR during the year ended December 31, 2025 as compared to the year ended December 31, 2024. Provision for credit losses.
As of December 31, 2024, we were in compliance with all covenants and other terms under our Secured Financing Facilities. 68 Table of Contents RESULTS OF OPERATIONS (amounts in thousands, except per share data) Year Ended December 31, 2024 Compared to Year Ended December 31, 2023: Year Ended December 31, 2024 2023 Change % Change INCOME FROM INVESTMENTS: Interest and related income $ 62,415 $ 66,337 $ (3,922) (5.9) % Purchase discount accretion 2,347 4,128 (1,781) (43.1) % Less: interest and related expenses (31,769) (33,518) 1,749 (5.2) % Income from loan investments, net 32,993 36,947 (3,954) (10.7) % Revenue from real estate owned 2,281 1,288 993 77.1 % Total revenue 35,274 38,235 (2,961) (7.7) % OTHER EXPENSES: Base management fees 4,329 4,303 26 0.6 % Incentive fees 974 968 6 0.6 % General and administrative expenses 3,902 3,947 (45) (1.1 %) Reimbursement of shared services expenses 2,647 2,596 51 2.0 % Provision for (reversal of) credit losses 3,080 (799) 3,879 485.5 % Expenses from real estate owned 2,489 1,293 1,196 92.5 % Total other expenses 17,421 12,308 5,113 41.5 % Income before income taxes 17,853 25,927 (8,074) (31.1 %) Income tax (expense) benefit (33) 38 (71) (186.8 %) Net income 17,820 25,965 (8,145) (31.4 %) Weighted average common shares outstanding - basic and diluted 14,712 14,625 87 0.6 % Net income per common share - basic and diluted $ 1.20 $ 1.76 $ (0.56) (31.8 %) Interest and related income .
As of December 31, 2025, we were in compliance with all covenants and other terms under our Secured Financing Facilities. 63 Table of Contents RESULTS OF OPERATIONS (amounts in thousands, except per share data) Year Ended December 31, 2025 Compared to Year Ended December 31, 2024: Year Ended December 31, 2025 2024 Change % Change INCOME FROM INVESTMENTS: Interest and related income $ 56,340 $ 64,762 $ (8,422) (13.0 %) Less: interest and related expenses (29,485) (31,769) 2,284 7.2 % Income from loan investments, net 26,855 32,993 (6,138) (18.6 %) Revenue from real estate owned 2,528 2,281 247 10.8 % Total revenue 29,383 35,274 (5,891) (16.7 %) OTHER EXPENSES: Base management fees 4,360 4,329 31 0.7 % Incentive fees 625 974 (349) (35.8 %) General and administrative expenses 4,438 3,902 536 13.7 % Reimbursement of shared services expenses 2,040 2,647 (607) (22.9 %) Provision for credit losses 203 3,080 (2,877) (93.4 %) Expenses from real estate owned 2,269 2,489 (220) (8.8 %) Total other expenses 13,935 17,421 (3,486) (20.0 %) Income before income taxes 15,448 17,853 (2,405) (13.5 %) Income tax expense (14) (33) 19 57.6 % Net income $ 15,434 $ 17,820 $ (2,386) (13.4 %) Weighted average common shares outstanding - basic and diluted 15,240 14,712 528 3.6 % Net income per common share - basic and diluted $ 1.00 $ 1.20 $ (0.20) (16.7 %) Interest and related income .
In addition, our methodologies for calculating these non-GAAP financial measures may differ from the methodologies employed by other companies to calculate the same or similar supplemental performance measures; therefore, our reported Distributable Earnings and Distributable Earnings per common share may not be comparable to distributable earnings and distributable earnings per common share as reported by other companies.
In addition, our methodologies for calculating these non-GAAP financial measures may differ from the methodologies employed by other companies to calculate the same or similar supplemental capital adequacy or performance measures; therefore, our reported Adjusted Book Value, Adjusted Book Value per common share, Distributable Earnings, and Distributable Earnings per common share may not be comparable to adjusted book value, adjusted book value per common share, distributable earnings and distributable earnings per common share as reported by other companies. 65 Table of Contents Adjusted Book Value We believe that Adjusted Book Value and Adjusted Book Value per common share is a meaningful measure of our capital adequacy because it excludes the impact of certain non-cash estimates or adjustments, including our allowance for credit losses for our loan portfolio and unfunded loan commitments.
As part of this amendment, the coupon rate was reduced from SOFR + 4.75% to SOFR + 3.75% and the maturity date was extended by two years to July 1, 2026. As of December 31, 2024, this loan had an amortized cost of $26,635 and a risk rating of 4.
As part of this amendment, the borrower repaid $3,000 of the outstanding principal balance and the maturity date was extended by one year to May 22, 2026. As of December 31, 2025, this loan had an amortized cost of $26,640 and a risk rating of 3.
The decrease in purchase discount accretion was due to the purchase discount recorded as part of the Merger becoming fully accreted during the year ended December 31, 2024. Interest and related expenses. The decrease in interest and related expenses was primarily the result of lower outstanding principal balances under our Secured Financing Facilities during the year ended December 31, 2024.
The decrease in interest and related expenses was primarily the result of lower weighted average coupon rates offset by higher outstanding principal balances under our Secured Financing Facilities during the year ended December 31, 2025. The weighted average coupon rate was 6.25% for the year ended December 31, 2025, compared to 7.24% for the year ended December 31, 2024.
Revenue from real estate owned represents revenue from the operations of an office property located in Yardley, PA that was transferred to real estate owned through a deed in lieu of foreclosure in June 2023. Base management and incentive fees. We recognize base management and incentive fees payable to Tremont in accordance with our management agreement.
Revenue from real estate owned represents revenue from the operations of an office property located in Yardley, PA that was transferred to real estate owned through a deed in lieu of foreclosure in June 2023. The increase in revenue from real estate owned was primarily the result of higher operating expense reimbursements during the year ended December 31, 2025.
As of December 31, 2024, we had $641,213 in aggregate loan commitments, consisting of a diverse portfolio, geographically and by property type, of 21 first mortgage loans. As of December 31, 2024, we had five loans representing approximately 24% of the amortized cost of our loan portfolio with a loan risk rating of “4” or “higher risk”.
(5) These loans were acquired in November 2025. As of December 31, 2025, we had $724,458 in aggregate loan commitments, consisting of a diverse portfolio, geographically and by property type, of 24 first mortgage loans.
The decrease in cash provided by investing activities was primarily due to increased fundings for our existing loan portfolio as borrowers carry out their business plans and decreased loan repayments in 2024 compared to 2023. The increase in cash used in financing activities was primarily due to lower proceeds from our Secured Financing Facilities in 2024 compared to 2023.
The change from cash provided by to cash used in investing activities was primarily due to increased loan originations and acquisitions, as well as lower loan repayments in 2025 compared to 2024.
The decrease in general and administrative expenses was primarily due to a decrease in professional fees during the year ended December 31, 2024. 69 Table of Contents Reimbursement of shared services expenses. Reimbursement of shared services expenses represents reimbursement of the costs for the services that Tremont arranges on our behalf from RMR.
Reimbursement of shared services expenses. Reimbursement of shared services expenses represents reimbursement of the costs for the services that Tremont arranges on our behalf from RMR.
The table below is an overview of our Secured Financing Facilities as of December 31, 2024: Facility Maturity Date Principal Balance Unused Capacity Maximum Facility Size Collateral Principal Balance UBS Master Repurchase Facility 02/18/2026 $ 181,989 $ 68,011 $ 250,000 $ 267,084 Citibank Master Repurchase Facility 09/27/2026 93,314 121,686 215,000 145,520 BMO Facility Various 103,855 46,145 150,000 145,234 Wells Fargo Master Repurchase Facility 03/11/2026 40,464 84,536 125,000 52,973 Total $ 419,622 $ 320,378 $ 740,000 $ 610,811 The table below details our Secured Financing Facilities activities during the year ended December 31, 2024: Carrying Value Balance at December 31, 2023 $ 454,422 Borrowings 101,335 Repayments (137,529) Deferred fees (1,855) Amortization of deferred fees 1,423 Balance at December 31, 2024 $ 417,796 67 Table of Contents As of December 31, 2024, outstanding advancements under our Secured Financing Facilities had a weighted average interest rate of 6.62% per annum, excluding associated fees and expenses.
The table below is an overview of our Secured Financing Facilities as of December 31, 2025, after giving effect to the above referenced amendments to the UBS and Wells Fargo Master Repurchase Agreements: Facility Maturity Date Principal Balance Carrying Value Unused Capacity Maximum Facility Size Collateral Principal Balance UBS Master Repurchase Facility 02/18/2028 $ 194,948 $ 194,887 $ 55,052 $ 250,000 $ 278,594 Wells Fargo Master Repurchase Facility 03/13/2028 92,980 92,902 157,020 250,000 120,469 Citibank Master Repurchase Facility 09/27/2026 135,715 135,426 79,285 215,000 199,838 BMO Facility Various 64,632 64,442 85,368 150,000 88,684 Total $ 488,275 $ 487,657 $ 376,725 $ 865,000 $ 687,585 The table below details our Secured Financing Facilities activities during the year ended December 31, 2025: Carrying Value Balance at December 31, 2024 $ 417,796 Borrowings 178,405 Repayments (109,752) Deferred fees (325) Amortization of deferred fees 1,533 Balance at December 31, 2025 $ 487,657 As of December 31, 2025, outstanding advancements under our Secured Financing Facilities had a weighted average interest rate of 5.92% per annum, excluding associated fees and expenses.
We measure our allowance for credit losses using the CECL model, which is based upon historical experience, current conditions, and reasonable and supportable forecasts incorporating forward-looking information that affect the collectability of the reported amount. The allowance for credit losses is a valuation account that is deducted from the related loans’ amortized cost basis in our consolidated balance sheets.
The CECL measurement is based upon historical experience, current conditions, and reasonable and supportable 70 Table of Contents forecasts incorporating forward-looking information that affect the collectability of the reported amount. The CECL model is applicable to financial assets measured at amortized cost and off-balance sheet credit exposures, such as unfunded loan commitments.
For further information regarding distributions, see Note 7 to our Consolidated Financial Statements included in Part IV, Item 15 of this Annual Report on Form 10-K. 71 Table of Contents Contractual Obligations and Commitments Our contractual obligations and commitments as of December 31, 2024 were as follows: Payment Due by Period Total Less than 1 Year 1 - 3 Years 3 - 5 Years More than 5 Years Unfunded loan commitments (1) $ 30,402 $ 15,896 $ 14,506 $ — $ — Principal payments on Secured Financing Facilities (2) 419,622 255,765 163,857 — — Interest payments on Secured Financing Facilities (3) 25,324 19,191 6,133 — — Lease related costs (4) 138 138 — — — $ 475,486 $ 290,990 $ 184,496 $ — $ — (1) The allocation of our unfunded loan commitments is based on the current loan maturity date to which the individual commitments relate.
Contractual Obligations and Commitments Our contractual obligations and commitments as of December 31, 2025 were as follows: Payment Due by Period Total Less than 1 Year 1 - 3 Years 3 - 5 Years More than 5 Years Unfunded loan commitments (1) $ 36,873 $ 7,594 $ 29,279 $ — $ — Principal payments on Secured Financing Facilities (2) 488,275 472,187 16,088 — — Interest payments on Secured Financing Facilities (3) 12,733 12,208 525 — — Lease related costs (4) 222 222 — — — $ 538,103 $ 492,211 $ 45,892 $ — $ — (1) The allocation of our unfunded loan commitments is based on the current loan maturity date to which the individual commitments relate.
The decrease in interest and related income was primarily the result of lower outstanding principal balances under our loan investment portfolio during the year ended December 31, 2024. The weighted average principal balance was approximately $603,000 for the year ended December 31, 2024 compared to approximately $646,000 for the year ended December 31, 2023. Purchase discount accretion.
The decrease in interest and related income was primarily the result of lower weighted average coupon rates, which was partially offset by interest rate floors for seven of our loans becoming active, lower interest income earned on cash invested due to decreased index rates and lower purchase discount accretion due to discounts becoming fully accreted during the year ended December 31, 2025.
Adjusted Book Value per Common Share The table below calculates our book value per common share: As of December 31, 2024 2023 Shareholders' equity $ 269,278 $ 271,248 Total outstanding common shares 14,903 14,811 Book value per common share 18.07 18.31 Unaccreted purchase discount per common share (1) — 0.16 Allowance for credit losses per common share (2) 0.60 0.40 Adjusted Book Value per common share $ 18.67 $ 18.87 (1) Excludes the impact of the unaccreted purchase discount resulting from the excess of the fair value of the loans TRMT then held for investment and that we acquired as a result of the Merger over the consideration we paid in the Merger.
The table below calculates our book value, Adjusted Book Value and Adjusted Book Value per common share: As of December 31, 2025 2024 Shareholders' equity $ 328,651 $ 269,278 Allowance for credit losses (1) 9,111 8,908 Adjusted Book Value $ 337,762 $ 278,186 Total outstanding common shares 22,584 14,903 Book value per common share $ 14.55 $ 18.07 Adjusted Book Value per common share $ 14.96 $ 18.67 (1) Amounts include our allowance for credit losses for our loan portfolio and our unfunded commitments.
Our methodology for calculating Adjusted Book Value per common share may differ from the methodologies employed by other companies to calculate the same or similar supplemental capital adequacy measures; therefore, our Adjusted Book Value per common share may not be comparable to the adjusted book value per common share reported by other companies. 63 Table of Contents In order to maintain our qualification for taxation as a REIT, we are generally required to distribute substantially all of our taxable income, subject to certain adjustments, to our shareholders.
The allowance for credit losses for our unfunded commitments is included in accounts payable, accrued liabilities and other liabilities in our consolidated balance sheets. Distributable Earnings In order to maintain our qualification for taxation as a REIT, we are generally required to distribute substantially all of our taxable income, subject to certain adjustments, to our shareholders.
As of December 31, 2024 and 2023, our allowance for credit losses for our loan portfolio and unfunded loan commitments was $8,908 and $5,828, respectively.
The provision for credit losses represents the increase in the allowance for credit losses on our loan portfolio and unfunded commitments.
Removed
Early in 2024, CRE investors seemed cautiously optimistic that inflation had peaked, the U.S. economy was likely headed for a “soft-landing” and the FOMC was poised to reduce the federal funds rate by 125 to 150 basis points by year end.
Added
As a result, transaction activity slowed as investors waited on the outcomes of negotiations with U.S. trade partners, new tariff announcements and domestic fiscal policy initiatives as well as the path of interest rates before making buy and sell decisions.
Removed
With the anticipation of lower interest rates in the future, investors delayed sale or refinancing decisions, which resulted in tepid CRE investment and transaction volume during the first half of 2024.
Added
CRE transaction activity showed signs of recovery in the second half of 2025 as investors and lenders responded to three interest rate cuts by the FOMC in 2025. Additionally, a more stabilized monetary environment, improving property fundamentals and substantial liquidity in debt capital markets may give CRE investors and lenders renewed optimism and confidence in underwriting assumptions.
Removed
In September 2024, citing progress toward its 2% inflation target, the FOMC lowered the targeted federal funds rate by 50 basis points, providing CRE owners initial relief from high borrowing costs and reduced uncertainty regarding the timing and magnitude of future rate cuts. The FOMC then followed with two additional 25 basis point reductions by year end.
Added
The relative value of CRE debt investments today compared to alternative corporate or private debt investments continues to drive demand from lenders, including banks, securitized lenders, life insurance companies, private debt funds and mortgage REITs.
Removed
Although the 100-basis point reduction fell short of expectations, the reduction in overall borrowing costs helped spur CRE refinancing activity through the fourth quarter of 2024, and we believe there is a renewed appetite amongst most lenders to increase CRE loan origination volume in 2025.
Added
This increased competition amongst lenders has led to a tightening of credit spreads and lower overall borrowing costs for CRE debt investors across all property sectors.
Removed
The CMBS financing market was a key provider of debt liquidity to the CRE industry in 2024. Increasing demand from bond investors has translated into tighter credit spreads, particularly for 5-year loans which have become more popular among borrowers anticipating further interest rate reductions at the longer end of the yield curve.
Added
Barring potential risks associated with persistent inflation, increased geopolitical uncertainty that may negatively impact global economic conditions and a weakening labor market that could moderate economic growth, we believe the CRE sector is relatively well positioned, with expectations for increased transaction volume in 2026. Changes in Interest Rates.
Removed
Life insurance companies continue to expand their product offerings, providing low leverage, fixed rate term debt for stabilized assets as well as floating rate capital for more transitional properties, which were once reserved for banks and alternative lenders, like us.
Added
As of December 31, 2025, we had 4 loans representing approximately 17% of the amortized cost of our loan portfolio with a loan risk rating of “4” or “higher risk”. As of December 31, 2025, we had no loans with risk rating of “5” or “impaired/ loss likely”.
Removed
The banking sector, particularly smaller regional banks, continues to be impacted by increased regulations and capital charges related to legacy CRE and construction loan portfolios.
Added
The weighted average coupon rate was 7.60% for the year ended December 31, 2025, inclusive of the seven active floors, compared to 8.77% for the year ended December 31, 2024. Interest and related expenses.
Removed
However, larger banks have continued to work through these challenges and have found ways to begin to increase CRE exposure, including on a direct basis and through warehouse lines of credit to debt funds and mortgage REITs, like us. Agency lenders, such as Fannie-Mae and Freddie-Mac, continue to provide liquidity to the multifamily market.
Added
Base management and incentive fees. We recognize base management and incentive fees payable to Tremont in accordance with our management agreement. The increase in base management fees was due to higher “equity” as defined in our management agreement.
Removed
Volatility in long-term interest rates, however, has resulted in increased competition for multifamily loans from CMBS/conduit providers, life-insurance companies and alternative lenders. Despite an increase in delinquencies on loans financed by the CRE-CLO market in 2024, concerns about collateral and loan performance have waned.

… 30 more changes not shown on this page.

Other SEVN 10-K year-over-year comparisons