SEVN 10-K & 10-Q changes, risk factors and insider trading

•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 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 economic downturn,tensions, among other factors;

•third party expectations relating to ESGsustainability factors may impose additional costs on us and expose us, our borrowers and their tenants to new risks;

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.

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. 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 newcurrent 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. Current and future economic conditions in the United States may affect the demand for real estate and real estate financing, real estate values, CRE transaction and leasing activity, rents, capital market stability and liquidity and capital costs. Current economic conditions, including high interest rates, inflation, reduced availability of financing or financing on favorable terms and increased CRE financing costs, have resulted in a reduction in CRE transaction volume and adversely impacted CRE lending, including alternative CRE lenders like us. If these conditions continue or worsen, or if other adverse market conditions arise, CRE transaction activity, capital market stability, financing availability and financing costs for CRE lending may be further negatively impacted. In addition, these conditions may result in a prolonged economic slowdown or recession, which may negatively impact our borrowers’ ability to pay their debt obligations owed to us. Further, these conditions may reduce the value of the properties relating to our investments, which may increase the likelihood that we incur losses if our borrowers default on our loans. 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.

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. For example, in response2023, tomultiple theregional banks experienced rapidly declining financial conditioncondition, ofwhich regionalresulted banks Silicon Valley Bank (“SVB”) and Signature Bank (“Signature”), the California Department of Financial Protection and Innovation and the New York State Department of Financial Services closed SVB and Signature on March 10, 2023 and March 12, 2023, respectively, andin the Federal Deposit Insurance Corporation (the “FDIC”) wasbeing appointed as receivera forreceiver. SVB and Signature. Although the U.S. Department of the Treasury, the Federal Reserve and the FDIC have taken measures to stabilize the financial system, uncertainty and liquidity concerns in the broader financial services industry remain. Additionally, shouldShould 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 currentlyin being pursued.place. In addition, highly publicized issues related to the U.S. and global capital markets in the past have led to significant and widespread investor concerns over the integrity of the capital markets. 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. Even if not adopted, evaluating and responding to any such proposed rules or regulations could result in increased costs and require significant attention from Tremont.

Prior to our making any investment, Tremont conducts diligence that it considers reasonable based upon the facts and circumstances of the investment. When conducting diligence on our behalf, Tremont may be required to evaluate important and complex business, financial, tax, accounting, environmental and legal issues. Outside consultants, legal advisors, accountants and investment banks may be involved in the diligence process to varying degrees depending on the type of potential investment. 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 estateCRE debt investors or with market trends. Tremont’s diligence may also not reveal all of the risks associated with our investments. We evaluate our potential investments based upon criteria Tremont deems appropriate for the relevant investment. Our underwriting assumptions and loss estimates may not prove accurate, and actual results may vary from estimates. Moreover, investment analyses and decisions by Tremont may frequently be required to be undertaken on an expedited basis to take advantage of investment opportunities. In such cases, the information available to Tremont at the time of making an investment decision may be limited. 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 cannot predict the degree to which economic conditions generally, and the conditions for CRE and CRE debt financing in particular, will improve or decline. Current economic conditions, including inflation, high interest rates, supply chain challenges, labor availability, and geopolitical instability and economictensions, downturn,among other factors, have materially adversely impacted CRE transaction activity and valuations and have caused disruptions in the CRE lending market. If these conditions continue or worsen, or if further declines in the performance of the U.S. or global economies or in real estate debt markets are realized, we may experience a material adverse effect on us and our business, results of operations and financial condition.

Changes in interest rates may be sudden and may significantly reduce our revenues or impede our growth. In efforts to combat rising inflation, the Federal Open Market Committee of the U.S. 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 Septemberin 2024 and three times between September 2025 and December 2024,2025, and it may seek to further reduce interest rates, increase interest rates or maintain current interest rates. Changes in interest rates may materially and negatively affect us in several ways, including:

•Changes in interest rates may affect our ability to make investments as well as borrower default rates. In a period of rising or sustained high interest rates, our interest income on our loan investments will increase; however, defaults on our loan investments may also increase. 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. 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. Additionally, rising or sustained high interest rates may reduce our ability to make investments, as fixed rate financing may be more attractive to potential borrowers or they may forgo or delay obtaining financing. Our operating results depend in large part on differences between the income from our investments, net of credit losses and financing costs. Even when our investments and borrowings are match funded, the income from our investments may respond more slowly to interest rate fluctuations than the cost of our borrowings;

•Amounts outstanding under our Secured Financing Facilities will require interest to be paid by us at floating interest rates. When interest rates increase, our interest costs will increase. In a period of decreasing interest rates, our interest income on our loan investments may decrease. 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. Additionally, our Secured Financing Facilities do not have such floors;

ThirdSustainability partyinitiatives, requirements and market expectations relating to ESG factors may impose additional costs and expose us to new risks.

There remains a continued focus from regulators, investors, borrowers, tenants,tenants and their customers, employees, other stakeholders and regulators concerning corporate sustainability,sustainability. specificallyWe relatedare, and expect to ESGcontinue factors.to be, subject to various proposed, new and evolving sustainability laws and requirements adopted by certain states and regulators, including both voluntary and mandatory disclosure requirements that may impact how we conduct business, and we may incur significant costs in compliance with such rules if and when such regulations become effective. Some investors may use theseESG factors to guide their investment strategies and, in some cases, may choose not to invest in usus, and/or potential borrowers may choose not tootherwise do business with us if they believe ourour, RMR’s or Tremont’s policies relating to corporate sustainability are inadequate.not aligned with their own policies. Third party providers of corporate sustainability ratings and reports on companies have increased in number, resulting in varied and in some cases inconsistent standards. In addition, the criteria by which companies’ corporate sustainability practices are assessed are evolving, which could result in greater expectations of us, our borrowers and their tenants and cause us, our borrowers and their tenants to undertake costly initiatives to satisfy such new criteria. Alternatively, ifIf we, our borrowersRMR or their tenantsTremont elect not to or are unable to satisfy such newthe 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 theirRMR’s policies with respect to corporate sustainability are inadequate. WePursuant to RMR’s zero emissions goal, RMR has pledged to reduce its Scope 1 and our2 borrowersemissions to net zero by 2050 with a 50% reduction commitment by 2029 from a 2019 baseline. We, RMR and their tenantsTremont may face reputational damage in the event that our or their corporate sustainability procedures or standards do not meet the goals wethat we, RMR or theyTremont have set or the standards set by various constituencies. If 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.

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 affectharm us.

RMR and Tremont rely on information technology and systems, including the Internet and cloud-based infrastructures,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,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. If we, RMR, Tremont or our or their third party vendors experience material security or other failures, inadequacies or interruptions in our or their information technology systems, we could incur material costs and losses and our operations could be disrupted. RMR takes various actions, and incurs significant costs, to maintain and protect the operation and security of its information technology and systems, including the data maintained in those systems. However, these measures may not prevent the systems’ improper functioning or a compromise in security, such as in the event of a cyberattack or the improper disclosure of personally identifiable information.

Security breaches, computer viruses, attacks by hackers, online fraud schemes and similar breaches have created and can create significant system disruptions, shutdowns, fraudulent transfer of assets or unauthorized disclosure of confidential information. The risk of a security breach or disruption, particularly through cyberattack or cyber intrusion, including by computer hackers, foreign governments and cyber terrorists, has generally increased as the intensity and sophistication of attempted attacks and intrusions from around the world have increased. The cybersecurity risks to us, RMR, Tremont and third party vendors are heightened by, among other things, the evolving nature of the threats faced, advances in computer capabilities, new discoveries in the field of cryptography and new and increasingly sophisticated methods used to perpetrate illegal or fraudulent activities, including cyberattacks, email or wire fraud and other attacks exploiting security vulnerabilities in RMR’s, Tremont’s or other third parties’ information technology networks and systems or operations. Although muchmost of RMR’s and Tremont’s staff work from RMR’s offices for thea 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 andRMR’s, Tremont’s abilityor other third parties’ abilities to maintain the security, proper function and availability of RMR’stheir and Tremont’srespective information technology and systems since remote working by their employees could strain RMR’stheir and Tremont’srespective technology resources and introduce operational risk, including heightened cybersecurity risk. Remote working environments may be less secure and more susceptible to hacking attacks, including phishing and social engineering attempts that have sought, and may seek, to exploit remote working environments. In addition, RMR’sRMR’s, Tremont’s or Tremont’sother 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, itstheir information systems and technology.

In July 2023, the SEC adopted rules requiring publicPublic 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 Annualannual Reports on Form 10-K.reports. With the SECSEC’s particularlycontinued focusedfocus on cybersecurity, we expect increased scrutiny of our policies and systems designed to manage our cybersecurity risks and our related disclosures. We also expect to face increased costs to comply with these SEC rules, including increased costs for cybersecurity training and management. Many jurisdictions in which we operate have laws and regulations relating to data privacy, cybersecurity and protection of personal information, including, the California Consumer Privacy Act and the New York SHIELD Act. In addition, the SEC has indicated that one of its examination priorities for the Office of Compliance Inspections and Examinations is to continue to examine cybersecurity procedures and controls, including testing the implementation of these procedures and controls.

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 market value of our securities.

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. 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. 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 TremontTremont, and an officer of RMR Inc.Inc., and an officer and employee of RMR. Thomas J. Lorenzini, our President and Chief Investment Officer, is an officer of RMR and an officer and employee of Tremont. FernandoMatthew Diaz,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. Portnoy, Jordan, Lorenzini and DiazBrown 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. 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.

In addition, we may in the future enter into additional transactions with Tremont, RMR, their affiliates or entities managed by them or their subsidiaries. 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. 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, 2024,2025, Mr. Portnoy beneficially owned, in aggregate, 13.5%22.5% of our outstanding common shares (including through Tremont and ABP Trust), 9.8% of Diversified Healthcare Trust’s outstanding common shares, 1.3% of Industrial Logistics Properties Trust’s outstanding common shares, 1.2% of Service Properties Trust’s outstanding common shares and 1.1% of Office Properties Income Trust’s outstanding common shares.. Our executive officers may also own equity investments in other companies to which Tremont, RMR or their subsidiaries provide management services. These multiple responsibilities, relationships and cross ownerships may give rise to conflicts of interest or the perception of such conflicts of interest with respect to matters involving us, RMR Inc., RMR, our Managing Trustees, the other companies to which RMR or its subsidiaries provide management services and their related parties. Conflicts of interest or the perception of conflicts of interest could have a material adverse impact on our reputation, business and the market price of our common shares and other securities and we may be subject to increased risk of litigation as a result.

Additionally, in the event our management agreement is terminated by us without a cause event or by Tremont for a material breach, we will be required to pay Tremont a termination fee equal to (i) three times the sum of (a) the average annual base management fee and (b) the average annual incentive fee, in each case paid or payable to Tremont during the twenty-four (24) month period immediately preceding the most recently completed calendar quarter prior to the date of termination, plus (ii) $1.6 million. Additionally,We acquired Tremont Mortgage Trust, or TRMT, by merger in 2021, or the Merger. 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. These provisions increase the cost to us of terminating our management agreement and adversely affect our ability to terminate Tremont or not renew our management agreement without a cause event. 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.

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. 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 bylaws currently provide that, other than any action arising under the Securities Act of 1933, as amended, or the Securities Act, the Circuit Court for Baltimore City, Maryland will be the sole and exclusive forum for: (1) any Internal Corporate Claim, as such term is defined under the Maryland General Corporation Law; (2) any derivative action or proceeding brought on our behalf; (3) any action asserting a claim for breach of a fiduciary duty owed by any of our Trustees, officers, manager or other agents to us or our shareholders; (4) any action asserting a claim against us or any of our Trustees, officers, manager or other agents arising pursuant to Maryland law, our declaration of trust or bylaws, including any disputes, claims or controversies brought by or on behalf of a shareholder, either on his, her or its own behalf, on our behalf or on behalf of any series or class of our shareholders or shareholders against us or any of our Trustees, officers, manager or other agents, including any claims relating to the meaning, interpretation, effect, validity, performance or enforcement of our declaration of trust or bylaws; or (5) any action asserting a claim against us or any of our Trustees, officers, manager or other agents that is governed by the internal affairs doctrine of the State of Maryland. The exclusive forum provision of our bylaws does not apply to any action for which the Circuit Court for Baltimore City, Maryland does not have jurisdiction. 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, to the fullest extent of the law.America. Any person or entity purchasing or otherwise acquiring or holding any interest in our common shares shall be deemed to have notice of and to have consented to these provisions of our bylaws, as they may be amended from time to time. 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.

Dividends payable by U.S. corporations to noncorporate shareholders, such as individuals, trusts and estates, are generally eligible for reduced U.S. federal income tax rates applicable to “qualified dividends.” Distributions paid by REITs generally are not treated as “qualified dividends” under the IRC and the reduced rates applicable to such dividends do not generally apply. 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. More favorable rates will nevertheless continue to apply to regular corporate “qualified” dividends, which may cause some investors to perceive that an investment in a REIT is less attractive than an investment in a non-REIT entity that pays dividends, thereby reducing the demand and market price of our common shares.

The REIT provisions of the IRC substantially limit our ability to hedge our assets and liabilities. Any income from a qualifying hedging transaction that we enter into to manage risk of interest rate changes with respect to borrowings made or to be made to acquire or carry real estate assets does not constitute “gross income” for purposes of the 75% or 95% gross income tests that we must satisfy in order to maintain our qualification for taxation as a REIT under the IRC. As a result, a qualifying hedge transaction will neither assist nor hinder our compliance with the 75% and 95% gross income tests. To the extent that we enter into other types of hedging transactions, the income from those transactions is likely to be treated as nonqualifying income for purposes of both of these gross income tests. As a result of these rules, we may limit our use of advantageous hedging techniques or implement some hedges through a TRS. This could increase the cost of our hedging activities because our TRS would be subject to tax on gains or expose us to greater risks associated with changes in the hedged items than we might otherwise want to bear. 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.

As with other publicly traded equity securities and REIT securities, the market price of our common shares and other securities depends on various market conditions that are subject to change from time to time. We believe that one of the factors that investors consider important in deciding whether to buy or sell equity securities of a REIT is the distribution rate, considered as a percentage of the market price of the equity securities, relative to interest rates. There is a general market perception that REIT shares outperform in low interest rate environments and underperform in rising interest rate environments when compared to the broader market. In efforts to combat rising inflation, the 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 Septemberin 2024 and three times between September 2025 and December 2024,2025, 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.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.

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.

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. 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 willmay record an allowance for credit losses by comparing the collateral's fair value to the amortized cost basis of the loan. For collateral-dependent loans for which foreclosure is probable, the related allowance for credit losses is determined using the fair value of the collateral compared to the loan's amortized cost.

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 approximatelyup 75%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. 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%0.25% to 5.20%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. As of December 31, 2024,2025, SOFR was 4.33%,3.69%, and as a result, oneseven of our loan investments had an active interest rate floor.

Prepayment Risk. 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 seek to limit this risk by structuring our loan agreements with fees required to be paid to us upon prepayment of a loan within a specified period of time before the loan’s maturity; however, unanticipated prepayments could negatively impact our operating results.

As of December 31, 2024,2025, we had $641,213$724,458 in aggregate loan commitments, consisting of a diverse portfolio, geographically and by property type, of 2124 first mortgage loans. As of December 31, 2024,2025, we had five4 loans representing approximately 24%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”.

In AugustApril 2024,2025, we amended the agreement governing our loan secured by an office property in Plano,Bellevue, TX.WA. As part of this amendment, the borrower was required to contribute $1,625 to cash reserves, the coupon rate was reduced from SOFR + 4.75%3.85% to SOFR + 3.75%2.85% and the maturity date was extended by twothree years to JulyApril 1,7, 2026.2028. As of December 31, 2024,2025, this loan had an amortized cost of $26,635$20,245 and a risk rating of 4.

In NovemberMay 2024,2025, we amended the agreement governing our loan secured by an office property in Carlsbad,Downers CA.Grove, IL. As part of this amendment, the borrower wasrepaid required$3,000 toof contributethe $1,100outstanding toprincipal cash reservesbalance and the maturity date was extended by twoone yearsyear to OctoberMay 27,22, 2026. As of December 31, 2024,2025, this loan had an amortized cost of $24,412$26,640 and a risk rating of 4.3.

In DecemberFebruary 2024,2026, we amended the feeWells letter to our UBSFargo Master Repurchase Agreement and made certain changes to extendthe agreement, including extending the stated maturity date to FebruaryMarch 18,13, 20262028 and increaseincreasing the maximum facility size by $125,000 to $250,000.

The table below is an overview of our Secured Financing Facilities as of December 31, 20242025, after giving effect to the above referenced amendments to the UBS and Wells Fargo Master Repurchase Agreements:

Interest and related income. The decrease in interest and related income was primarily the result of lower outstandingweighted principalaverage balancescoupon underrates, which was partially offset by interest rate floors for seven of our loanloans investmentbecoming portfolioactive, 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, 2024.2025. The weighted average principalcoupon balancerate was approximately $603,0007.60% for the year ended December 31, 20242025, inclusive of the seven active floors, compared to approximately $646,0008.77% for the year ended December 31, 2023.2024.

Interest and related expenses. 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. 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 compared to approximately $447,000 for the year ended December 31, 2023.2024.

Revenue from real estate owned. 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.

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 andfees was due to higher “equity” as defined in our management agreement. The decrease in incentive fees was due to higherlower “core earnings”, as defined in our management agreement, during the year ended December 31, 2025 as compared to the year ended December 31, 2024.

General and administrative expenses. The decreaseincrease in general and administrative expenses was primarily due to aan decreaseincrease in professionalshare feesbased and cash compensation awarded to our Trustees, each resulting from the increase in the size of our Board of Trustees, higher share based compensation for employees of RMR and Tremont and higher legal expenses during the year ended December 31, 2025 as compared to the year ended December 31, 2024.

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 increasedecrease in reimbursement of shared services expenses was primarily the result of higherlower usage of shared services from RMR during the year ended December 31, 2025 as compared to 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 increase in the allowance for credit losses during the year ended December 31, 20242025 was primarily attributable to decliningincreased provisions for our office loans and a larger loan portfolio as of December 31, 2025, offset by increasing values for CRE and unfavorablefavorable CRE pricing forecasts used in our current expected credit loss, or CECL,CECL model and increasedloans provisionsnearing for certain of our office loans.maturity.

Expenses from real estate owned. 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 decrease in expenses from real estate owned was primarily the result of lower amortization expense related to acquired real estate leases during the year ended December 31, 2025.

Income tax (expense) benefit.expense. Income tax expense for the year ended December 31, 20242025 is a result of income taxes paid or payable by us in certain jurisdictions where we are subject to state income taxes.

The table below demonstrates howour wecalculation calculateof 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:

The decrease in cash provided by operating activities for 20242025 compared to 20232024 was primarily the result of lower net interest income earned on loan investments due to lower amountsSOFR invested,index 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.rates. The decreasechange infrom cash provided by to cash used in investing activities was primarily due to increased fundings for our existing loan portfoliooriginations and acquisitions, as borrowerswell carryas out their business plans and decreasedlower loan repayments in 20242025 compared to 2023.2024. The increasechange infrom cash used in to cash provided by financing activities was primarily due to lower proceeds received from the Rights Offering and increased borrowing under our Secured Financing Facilities in 20242025 compared to 2023.net repayment activity under our Secured Financing Facilities in 2024.

During the year ended December 31, 2024,2025, we declared and paid regular quarterly distributions totaling $20,772,$18,835, or $1.40$1.26 per common share, using cash on hand.

(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 thereal Yardley,estate PA property.owned.

The allowance for credit losses is a valuation account that is deducted from the related loans’ amortized cost basis in our consolidated balance sheets. Our loans typically include commitments to fund incremental proceeds to borrowers over the life of the loan; these future funding commitments are also subject to the CECL model.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. This analytical model incorporates data from a third party database with historical loan loss information for commercial mortgage-backed securities, or CMBS, and CRE loans since 1998. Significant inputs to the model include certain loan specific data, such as LTV, property type, geographic location, occupancy, vintage year, remaining loan term, net operating income, expected timing and amounts of future loan fundings, and macroeconomic forecast assumptions, including the performance of CRE assets, unemployment rates, interest rates and other factors. 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 six12 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 evaluate the estimated allowance for each of our loans individually and we consider our internal loan risk rating as the primary credit quality indicator underlying our assessment.

Significant judgementsjudgments 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.

Market Conditions. During theThe first quarter of 2026, CRE market conditions2026 reflected a continuation of the stabilization trends that emerged in the second half of 2025. CRE transaction activity continued to show signs of recovery early this quarter,2025, supported by improving underlying property‑level fundamentals,fundamentals substantialalong liquiditywith inrelative debtinterest capitalrate marketsstability andallowing increasedfor greater confidence in underwriting assumptions.assumptions going forward.

The relative value of CRE debt investments today compared to alternative fixed income, corporate orcredit and private debtcredit investments continues to driveattract demandcapital from lenders, including banks, securitized lenders, life insurance companies, private debt funds and mortgage REITs. This increasedIncreased competition amongstamong lenders has ledcontributed to a tightening oftighter credit spreadsspreads, more flexible loan terms and lower overallall-in borrowing costs for high-quality, well-structured CRE debt investorsinvestments, acrossalthough alllender appetite remains differentiated by property sectors.type, market, sponsorship and leverage profile. Overall, borrowers are the beneficiaries of this competition among lenders.

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. 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 2.83%2.96%; therefore, changes to income from investments, net, may not move proportionately with the increase or decrease in benchmark rates. As of MarchJune 31,30, 2026, SOFR was 3.66%,3.65%, and as a result, sevensix of our loan investments had an active interest rate floor.

The table below details overall statistics for our loan portfolio as of MarchJune 31,30, 2026 and December 31, 2025:

The table below details our loan portfolio as of MarchJune 31,30, 2026:

As of MarchJune 31,30, 2026, we had $775,958$765,343 in aggregate loan commitments, consisting of a diverse portfolio, geographically and by property type, of 2627 first mortgage loans. As of MarchJune 31,30, 2026, we had five loans representing approximately 22% of the amortized cost of our loan portfolio with a loan risk rating of “4” or “higher risk”. We have no “5” or “loss likely” rated loans.

In MayJuly 2025,2026, we amended the agreement governing our loan secured by an office property in DownersPlano, Grove, IL.TX. As part of this amendment, the borrower repaid $3,000 of the outstanding principal balance and the maturity date was extended by onetwo yearyears to MayJuly 22,1, 2026.2028. As of MarchJune 31,30, 2026, this loan had an amortized cost of $26,650$26,637 and a risk rating of 3.4.

As of MarchJune 31,30, 2026 and AprilJuly 24, 2026, all of our borrowers had paid their debt service obligations owed and due to us.

We did not have any outstanding past due loans or nonaccrual loans as of MarchJune 31,30, 2026. 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 recessionrecession, any of which could amplify those negative impacts. As a result, they may become unable to pay their debt service obligations owed and due to us, which may result in an increased allowance for credit losses and/or recognition of income on a nonaccrual basis. For further information regarding our loan portfolio and risk rating policy, see Note 3 to our Unaudited Condensed Consolidated Financial Statements included in Part I, Item 1, "—Factors Affecting our Operating Results" and "Warning Concerning Forward-Looking Statements" elsewhere in this Quarterly Report on Form 10-Q and the risk factors identified in Part I, Item 1A, “Risk Factors”, of our 2025 Annual Report.

The table below is an overview of our Secured Financing Facilities as of MarchJune 31,30, 2026:

The table below details our Secured Financing Facilities activities during the three months ended MarchJune 31,30, 2026:

As of MarchJune 31,30, 2026, outstanding advancements under our Secured Financing Facilities had a weighted average interest rate of 5.84%5.78% per annum, excluding associated fees and expenses. As of MarchJune 31,30, 2026 and AprilJuly 24, 2026, we had a $467,469$471,744 and $463,157,$488,944, respectively, aggregate outstanding principal balance under our Secured Financing Facilities.

As of MarchJune 31,30, 2026, we were in compliance with all covenants and other terms under our Secured Financing Facilities.

Three Months Ended MarchJune 31,30, 2026 Compared to Three Months Ended DecemberMarch 31, 20252026:

Interest and related income. The increasedecrease in interest and related income was primarily due to a higherlower weighted average principal balance due to loan originationrepayment activity during the three months ended MarchJune 31,30, 2026 as compared to the three months ended December 31, 2025, offset by declines in the SOFR index rate.2026. The weighted average principal balance of our loan investments was approximately $699,000 for the three months ended June 30, 2026 compared to approximately $712,000 for the three months ended March 31, 2026 compared to approximately $656,000 for the three months ended December 31, 2025.2026. The weighted average coupon rate was approximately 7.25% during the three months ended June 30, 2026 compared to approximately 7.33% during the three months ended March 31, 2026 compared to approximately 7.60% during the three months ended December 31, 2025.2026.

Interest and related expenses. The decrease in interest and related expenses was primarily the result of a lower weighted average SOFRcoupon indexrates, ratepartially offset by a higher weighted average principal balance during the three months ended MarchJune 31,30, 2026 as compared to the three months ended December 31, 2025 and the repayment of $40,931 under our Secured Financing Facilities related to our investment loan secured by a multifamily property in Olmsted Falls, OH in January 2026, partially offset by increased borrowings under our Secured Financing Facilities related to loan origination activity.2026. The weighted average coupon rate was approximately 5.81% during the three months ended June 30, 2026 compared to approximately 5.86% during the three months ended March 31, 20262026. comparedThe toweighted average principal balance of our repurchase loans was approximately 6.08%$468,000 duringfor the three months ended DecemberJune 30, 2026 compared to approximately $462,000 for the three months ended March 31, 2025.2026.

Revenue from real estate owned. 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 increasedecrease in revenue from real estate owned was primarily due to higherlower operating expense reimbursements during the three months ended MarchJune 31,30, 2026 as compared to the three months ended DecemberMarch 31, 2025.2026.

Incentive fees. We recognize management incentive fees payable to Tremont in accordance with our management agreement. The decrease in management incentive fees was due to higher “equity” and lower “core earnings”, each as defined in our management agreement, for the 12 month period ended MarchJune 31,30, 2026.

General and administrative expenses. The increase in general and administrative expenses was primarily due to higheran legalincrease costsin share based compensation to our trustees during the threesix months ended MarchJune 31,30, 2026 as compared to the threesix months ended DecemberJune 31,30, 2025.

Provision for (reversal of) credit losses. The provision for credit losses represents the change in the allowance for credit losses on our loan portfolio and unfunded commitments. The increase in the allowance for credit losses during the threesix months ended MarchJune 31,30, 2026 reflectsis anprimarily increaseddue loan investment balance as of March 31, 2026 andto increased allowances for certain of our “4” rated office loans, partially offset by loans nearingwith maturity.near-term maturities, and primarily reflects lower estimated collateral values for these loans within the office sector.

Expenses from real estate owned. 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 increasedecrease in expenses from real estate owned was primarily due to higherlease utilityrelated expensesassets becoming fully amortized resulting in lower amortization expense during the threesix months ended MarchJune 31,30, 2026 as compared to the threesix months ended DecemberJune 31,30, 2025.

Income tax expense.benefit (expense). Income tax expense represents income taxes paid or payable by us in certain jurisdictions where we are subject to state income taxes.

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. These non-GAAP financial measures do not represent book value, book value per common share, net (loss) income, net (loss) 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 (loss) income or net (loss) 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. 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.

We believe that Adjusted Book Value and Adjusted Book Value per common share is aare meaningful measuremeasures of our capital adequacy because itthey excludesexclude the impact of certain non-cash estimates or adjustments, including our allowance for credit losses for our loan portfolio and unfunded loan commitments. The table below calculates our book value, Adjusted Book Value and Adjusted Book Value per common share:

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. We believe that one of the factors that investors consider important in deciding whether to buy or sell securities of a REIT is its distribution rate. Over time, Distributable Earnings and Distributable Earnings per common share may be useful indicators of distributions to our shareholders and are measures that are considered by our Board of Trustees when determining the amount of distributions. We believe that Distributable Earnings and Distributable Earnings per common share provide meaningful information to consider in addition to net (loss) income, net (loss) income per common share and cash flows from operating activities determined in accordance with GAAP. These measures help us to evaluate our performance excluding the effects of certain transactions and GAAP adjustments that we believe are not necessarily indicative of our current loan portfolio and operations. In addition, Distributable Earnings, excluding incentive fees, is used in determining the amount of base management and management incentive fees payable by us to Tremont under our management agreement.

We calculate Distributable Earnings and Distributable Earnings per common share as net (loss) income and net (loss) income per common share, respectively, computed in accordance with GAAP, including realized losses not otherwise included in net (loss) 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 (loss) income for the period of the calculation (regardless of whether such items are included in or deducted from net (loss) 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. Distributable Earnings are reduced for realized losses on loan investments when amounts are deemed uncollectable. This is generally at the time a loan is repaid, or in the case of foreclosure, when the underlying asset is sold, but may also be when, in our determination, it is nearly certain that all amounts due will not be collected. 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.

The table below demonstrates how we calculate Distributable Earnings and Distributable Earnings per common share, which are non-GAAP financial measures, and provides a reconciliation of these non-GAAP financial measures to net (loss) income:

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 areis 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. We are required to pay an upfront fee equal to a percentage of the aggregate amount of the facility loan, such percentage to be determined at the time of approval of the separate facility loan agreements with BMO, or the BMO Facility Loan Agreements.

The increase in cash provided by operating activities for the 2026 period compared to the 2025 period was primarily due to higher net interest income resulting from an increased loan portfolio size and favorable changes in working capital. The decreaseincrease in cash used in investing activities was primarily due to higher loan repaymentorigination activity, partially offset by higher loan originationrepayment activity during the 2026 period. The changeincrease in cash provided by financing activities to cash used in financing activities was primarily due to higher repayments on our Secured Financing Facilities in the 2026 period.

During the threesix months ended MarchJune 31,30, 2026, we declared and paid regular quarterly distributions to our common shareholders totaling $6,327,$12,654, or $0.28$0.56 per common share, using cash on hand.

On AprilJuly 9, 2026, we declared a regular quarterly distribution of $0.28 per common share, or $6,327,$6,346, to shareholders of record on AprilJuly 21,20, 2026. We expect to pay this distribution to our common shareholders on or about MayAugust 14,13, 2026 using cash on hand.

In November 2025, we commenced the Rights Offering, pursuant to which we issued transferable rights to our shareholders of record as of November 10, 2025. The record date shareholders received one transferable right for each outstanding common share they owned on the record date, which entitled them to purchase one new common share for every two rights held. The Rights Offering was fully backstopped by Tremont. In December 2025, we completed the Rights Offering, in which 7,532,861 common shares were issued at $8.65 per share, generating net proceeds of $61,494, after offering costs. For further information regarding distributions,the Rights Offering, see NoteNotes 7 and 9 to our Unaudited Condensed Consolidated Financial Statements included in Part I, Item 1 of this Quarterly Report on Form 10-Q

Our contractual obligations and commitments as of MarchJune 31,30, 2026 were as follows:

(3)Projected interest payments are attributable only to our debt service obligations at existing rates as of MarchJune 31,30, 2026 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.

Our principal debt obligations as of MarchJune 31,30, 2026 were the outstanding balances under our Secured Financing Facilities. Our Master Repurchase Agreements provide for acceleration of the date of repurchase of any then purchased assets and the liquidation of the purchased assets by UBS, Citibank or Wells Fargo, as applicable, 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 Master Repurchase Agreements also provide that upon the repurchase of any then purchased asset, we are required to pay UBS, Citibank or Wells Fargo the outstanding purchase price of such purchased asset and accrued interest and any and all accrued and unpaid expenses of UBS, Citibank or Wells Fargo, as applicable, relating to such purchased asset.

As of MarchJune 31,30, 2026, we had a $382,437$386,712 aggregate outstanding principal balance under our Master Repurchase Facilities. Our Master Repurchase Agreements are structured with risk mitigation mechanisms, including a cash flow sweep, which would allow UBS, Citibank and Wells Fargo, as applicable, to control interest payments from our borrowers under our loans that are financed under our respective Master Repurchase Facilities, and the ability to accelerate dates of repurchase and institute margin calls, which may require us to pay down balances associated with one or more of our loans that are financed under our Master Repurchase Facilities.

As of MarchJune 31,30, 2026, we had a $85,032 aggregate outstanding principal balance under the BMO Facility.

As of MarchJune 31,30, 2026, we were in compliance with all covenants and other terms under our Secured Financing Facilities.