Yahoo Finance Seven Hills Realty Trust (SEVN) Q1 2024 Earnings Call Transcript Highlights: Strong Performance ...
Distributable Earnings Per Share: $0.38, exceeding guidance.
Quarterly Dividend: $0.35 per share, covered by earnings by 109%.
Total Shareholder Return: Outperformed industry benchmark by over 7 percentage points.
Loan Portfolio: Stable with no defaults or nonaccrual loans, average risk rating of three.
Loan Payoffs: Over $40 million, demonstrating sponsor capability.
Portfolio Size: Total commitments nearly $630 million, down 6% from last quarter.
Weighted Average Coupon: 9.1% with an all-in yield of 9.6%.
Loan to Value: At close of 68%.
Portfolio Composition: 35% multifamily, 28% office, balance in retail, hospitality, self-storage, and industrial.
Liquidity: $93 million cash on hand, $272 million reinvestment capacity.
Total Debt to Equity: Decreased to 1.6 times.
Q2 Earnings Guidance: Expected to be $0.35 to $0.37 per share.
Release Date: April 30, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Q & A Highlights
Q: Could you talk a little bit about the pipeline and what you guys are really looking for to accelerate that loan growth, whether it be specific property types, geographic regions? And how quickly do you think that you can scale up the portfolio to an optimal size? A: Tom Lorenzini, President & Chief Investment Officer of Seven Hills Realty Trust, explained that the focus remains nationwide without redlining any particular markets. The company is very active in the multifamily sector and is also looking at self-storage properties on the West Coast and hospitality opportunities. They project about $175 million of loans for the year, aiming for six loans averaging $28 million to $30 million each. Depending on the velocity of repayments, an additional $50 million to $80 million could be reinvested.
Q: I noticed a couple of the occupancies on the office, particularly the one in Dallas ticked up to 73% from 67% quarter over quarter. Could you talk about what you're seeing in leasing in your guys' US properties and the overall market? A: Tom Lorenzini noted a modest uptick in leasing for the Dallas property, attributed to a change in the leasing team which generated more foot traffic. For the Yardley, Pennsylvania property, there has been positive leasing momentum with potential for a modest increase in occupancy. He emphasized the importance of having capitalized sponsors for tenant attraction and remains cautiously optimistic about the leasing across the portfolio.
Q: Can you talk about the dynamics in the pipeline? Are loans falling out before reaching the finish line, or are you not seeing loans you like? Are you building some defensive or opportunistic capital right now? A: Tom Lorenzini mentioned that the optimism for lower rates had initially increased refinancing interest, but the prolonged high-rate environment dampened this. Some transactions require additional cash from sponsors, which sometimes isn't forthcoming, affecting deal closure. Additionally, the competitive lending environment and spread compression have made securing transactions more challenging despite a good flow of opportunities.
Q: It looks like the purchase accretion discount should run out in the next quarter or two. Do you expect GAAP earnings to run below the dividend level in the near term, and will there be some book value decline as a result? A: Fernando Diaz, CFO and Treasurer, responded that the accretion is expected to run off by the third quarter. He anticipates that ramping up production will help balance the earnings impact from the accretion run-off, suggesting a manageable transition without significant impact on the company's financial health.
Q: Thanks for taking the question. And could you talk a little bit about the pipeline and what you guys are really looking for to accelerate that loan growth, whether it be specific property types, geographic regions? And I guess how quickly do you think that you can scale up the portfolio to an optimal size? A: Tom Lorenzini, President & Chief Investment Officer of Seven Hills Realty Trust, explained that the focus remains nationwide without redlining any particular markets. The company is very active in the multifamily sector and is also looking at self-storage properties on the West Coast and hospitality opportunities. They project about $175 million of loans for the year, aiming for six loans averaging $28 million to $30 million each. Depending on the velocity of repayments, an additional $50 million to $80 million could be reinvested.
Q: I noticed a couple of the occupancies on the office, particularly the one in Dallas ticked up to 73% from 67% quarter over quarter. Could you talk about what you're seeing in leasing in your guys' US properties and the overall market? A: Tom Lorenzini noted a modest uptick in leasing for the Dallas property, attributed to a change in the leasing team which generated more foot traffic. For the Yardley, Pennsylvania property, there has been positive leasing momentum with potential for a modest increase in occupancy. He emphasized the importance of having capitalized sponsors for tenant attraction and remains cautiously optimistic about the leasing across the portfolio.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
This article first appeared on GuruFocus.
