Good morning, and welcome to the Seven Hills Realty Trust Fourth Quarter 2021 Earnings Conference Call. All participants will be in a listen-only mode. [Operator instructions] After today's presentation, there will be an opportunity to ask questions. [Operator instructions] Please note, this event is being recorded. I'd now like to turn the call over to Kevin Barry, Director of Investor Relations. Please go ahead.

Thank you and good morning, everyone. Thanks for joining us today. With me on the call are President, Tom Lorenzini and Chief Financial Officer and Treasurer, Doug Illinois. In just a moment, they'll provide details about our business and our performance for the fourth quarter of 2021. We will then open the call to a question-and-session with sell side analysts. First, I would like to note the recording and retransmission of today's conference call is strictly prohibited without Seven Hills Realty Trusts prior written consent. Also note that today's conference call contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 and other securities laws. These forward-looking statements are based on Seven Hills' beliefs and expectations as of today, Friday, February 18, 2022, and actual results may differ materially from those that we project. The company undertakes no obligation to revise or publicly release the results of any revision to the forward-looking statements made in today's conference call. Additional information concerning factors that could cause those differences is contained in our filings with the Securities and Exchange Commission, or SEC, which can be accessed from the SEC's website. Investors are cautioned not to place undue reliance upon any forward-looking statements. In addition, we will be discussing non-GAAP numbers during this call, including distributable earnings, adjusted distributable earnings and adjusted book value. For a reconciliation of GAAP to non-GAAP financial measures, please see our quarterly earnings release which is available on our website. With that, I will now turn the call over to Tom.

Thank you, Kevin. Good morning, everyone. And welcome to the fourth quarter earnings call for Seven Hills Realty Trust. On today's call, I will begin with an update on our fourth quarter investment activity and deal pipeline before turning the call over to Doug to review our financial results and balance sheet. 2021 was a transformative view year for our company. After completing our transition to a commercial mortgage rate at the beginning of the year, we intensified our focus on new business -- on our new business plan investing in first mortgage floating rate loans. We reached a key milestone in our company's expansion with the acquisition of TRMT Mortgage Trust at the end of the third quarter, which provided a tremendous opportunity to quickly achieve scale. We continued to build upon this momentum during the fourth quarter with strong sequential growth and investment income and another record quarter of loan originations at Seven Hills. We ended the year with total loan commitments of nearly $650 million compared to approximately $100 million one year ago. Based on our strong operating performance and our positive outlook for the long term growth of our business, we were pleased to announce a 67% increase in our quarterly dividend in January to $0.25 per share or $1 annually. We are excited about the progress we are making at Seven Hills and the opportunity in front of us to continue to grow our business and further increase returns to our shareholders in the year ahead. We have substantial runway to build on our momentum and take advantage of attractive investment opportunities in the middle market commercial real estate debt space. Over the course of 2021, our manager Tremont Realty Capital increased their market presence and accelerated loan production, originating 17 loans for approximately $450…

Thank you, Tom. Good morning, everyone. As a reminder, we closed our acquisition of Tremont Mortgage Trust on September 30, 2021. I will compare our fourth quarter results to our third quarter results on a pro forma basis as if the merger had occurred on July 1. Additionally, as we discussed last quarter, the TRMT loans acquired generated a purchase discount that will accrete into income over the remaining term of the individual loans. We recognize this accretion in net income. However, we deduct this non-cash item in our calculation of distributable earnings. Our supplemental financial package contains further detail on our estimate of purchase discount accretion in the coming quarters. Turning to our financial performance for the fourth quarter. Seven Hills posted GAAP net income of $20.7 million or $1.42 per share, including non-cash accretion of $18.9 million or $1.31 per share. Adjusted distributable earnings came in at $3 million or $0.21 per share. Our earnings continued to benefit from strong portfolio performance and into money LIBOR floors embedded in our loans. Interest income from investments was $7.2 million up 12% compared to the prior quarter, which reflects partial quarter interest payments on six new loans and two loan repayments during the quarter. Interest and related expenses and current from our borrowings on our secured financing facilities grew to $1.6 million due to increased borrowings to support our portfolio growth. As of December 31, our weighted average all-in yield on our investments was 5.1%, which consisted of a weighted average LIBOR floor of 68 basis points, a weighted average spread of 386 basis points, plus the amortization of our loan fees. D&A expense was approximately $906,000 after excluding non-cash stock compensation expense. This came in above our quarterly G&A run rate in the $700,000 range due to incremental professional…

[Operator instructions] And the first question will come from Chris Muller with JMP Securities. Please go ahead.

Hey guys, thanks for taking the questions and congrats on closing out the year and starting off 2022 with some more scale. So it's nice to see the dividend increase. And I guess my question is with distributable EPS running below that and you guys talking about being able to possibly raise that dividend in the back half of the year, I guess it's fair to assume that in the first quarter and second quarter, you should be covering that dividend. How much of that is coming from fees from the repayments versus just interest income. Thanks.

Hey Chris, it's Doug Lanois. Thanks for joining us today. We substantially cover that with regular interest income. The fees -- our expectation that in Q1 the fees will obviously be a spike in income. But when we exclude those fees, we expect to substantially cover that dividend. So it doesn't -- and then further into the year as we deploy additional capital it will more than cover that dividend.

Got it. Thank you. That's helpful. And then the other one I have is on the creation of the purchase discount, do you guys have visibility into how long you expect that to flow through the earning statement? Is that something by the end of 2022, or is that something that could hit the bulk in the first quarter? Just some expectations on timing of that.

Yeah, Chris it's Doug again. The big hit was this quarter fourth quarter at almost $19 million. It ramps down to -- and I'm looking at Page 34 of the supplements. So it's all laid out there for you. In Q1 '22, it's going to be about $4.5 million and then it runs out -- it actually runs out to 2024, but in much smaller amounts and it's really dependent on when those loans the TRMT loans repay right, because it's very specific to those loans only, and it's not any reflection of a concern about the value of those loans. It's strictly an accounting purchase price requirement.

Got it. That's helpful. Thanks a lot, guys.

Thank you.

[Operator instructions] Ladies and gentlemen, this concludes our question-and-answer session. I would like to turn the conference back over to Thomas Lorenzini for any close remarks.

Thank you, Chad, and thank you all for joining us today and for your interest in Seven Hills Realty Trust. We look forward to speaking with you all again soon.

And thank you, sir. The conference has now concluded. Thank you for attending today's presentation. You may not disconnect.