UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q ☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended June 30, 2023 OR ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 Commission File Number 001-34383 Seven Hills Realty Trust (Exact Name of Registrant as Specified in Its Charter) Maryland 20-4649929 (State of Organization) (IRS Employer Identification No.) Two Newton ...

UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q ☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended March 31, 2023 OR ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 Commission File Number 001-34383 Seven Hills Realty Trust (Exact Name of Registrant as Specified in Its Charter) Maryland 20-4649929 (State of Organization) (IRS Employer Identification No.) Two Newto ...

Real Estate Assets and Management - The company has over $37 billion of real estate assets under management as of December 31, 2022[48]. - The combined RMR managed companies generated more than $16 billion in annual revenues[48]. - RMR manages significant capital expenditure budgets for building improvements and property redevelopment[48]. - The company acquired Tremont Mortgage Trust (TRMT) in September 2021, which is expected to qualify as a "reorganization" under Section 368(a) of the IRC, ensuring compliance with REIT asset and income tests[126]. - The acquisition of TRMT's assets is believed to not materially impact the company's qualification for taxation as a REIT, as the assets generally qualify as real estate assets[126]. REIT Qualification and Compliance - The company must distribute at least 90% of its annual REIT taxable income to maintain its REIT status[39]. - The company must comply with various qualification tests to maintain its REIT status, including the requirement to distribute at least 85% of its REIT ordinary income and 95% of its REIT capital gain net income[69]. - If the company fails to qualify as a REIT, it will be subject to federal income taxation as a C corporation, which could significantly reduce cash available for distribution to shareholders[70]. - The company believes it has satisfied the REIT qualification conditions during the requisite periods and will continue to do so in future taxable years[75]. - The company must derive at least 75% of its gross income from real property-related investments to maintain REIT qualification[88]. - At least 95% of the company's gross income must consist of qualifying income for the 75% gross income test[88]. - The company may face a $50,000 penalty for failing to meet certain REIT qualification conditions due to reasonable cause[79]. - The company has restrictions in place to prevent concentrated ownership positions to comply with REIT regulations[77]. - The company is permitted to own securities of a TRS, provided that no more than 20% of the total value of its assets is comprised of investments in TRS securities[82]. - The company believes that all its direct and indirect wholly owned subsidiaries will qualify as REIT subsidiaries[80]. Taxation and Distributions - The company’s distributions include cash and in-kind distributions, which are treated as returns of capital to the extent of a shareholder's basis in shares[64]. - The company is required to make annual distributions equal to at least 90% of its "real estate investment trust taxable income" to maintain REIT status[119]. - If the company fails to meet distribution requirements, it may incur a 4% nondeductible excise tax on undistributed amounts[119]. - The company may rectify insufficient dividend payments by issuing "deficiency dividends" in later years, which would incur an interest charge for the delay[124]. - The company expects to make distributions to shareholders, which may include cash and property distributions, with tax treatment varying based on shareholder status[130]. Shareholder Tax Implications - For noncorporate U.S. shareholders, the maximum federal income tax rate for long-term capital gains and most corporate dividends is generally 15% or 20% depending on income thresholds[131]. - Ordinary dividends are generally taxed at higher federal income tax rates applicable to ordinary income, with some exceptions for qualified REIT dividends[134]. - If capital gain dividends are designated, they will be allocated proportionately among all classes of shares based on total dividends paid[135]. - Non-U.S. shareholders will generally face a 30% withholding tax on distributions not designated as capital gain dividends, unless a lower treaty rate applies[148]. - Distributions in excess of current or accumulated earnings and profits are treated as a nontaxable return of capital, reducing the adjusted basis in shares[148]. - Capital gain dividends paid to non-U.S. shareholders on shares listed on a U.S. national securities exchange will not be subject to withholding as effectively connected with a U.S. trade or business[149]. - The company may elect to retain and pay taxes on some or all of its net capital gain, affecting shareholders' tax basis in shares[136]. - Tax-exempt shareholders receiving distributions will not have such amounts treated as UBTI if certain conditions are met[144]. - Non-U.S. shareholders may be subject to a maximum withholding tax rate of up to 21% on distributions attributable to capital gain dividends[151]. - If a class of shares is listed on a U.S. national securities exchange, non-U.S. shareholders' gains on the sale of those shares will generally not be subject to U.S. federal income taxation[155]. - The company believes it qualifies as a "domestically controlled" REIT, with less than 50% of the value of its shares held by non-U.S. shareholders over the past five years[155]. - Non-U.S. shareholders may claim tax treaty benefits using IRS Form W-8, which could reduce withholding obligations[150]. - Amounts designated as undistributed capital gain for non-U.S. shareholders may be treated similarly to actual capital gain dividends, allowing for potential tax credits[152]. Financial Operations and Strategy - The company funded its loan originations using cash on hand and advancements under debt facilities[41]. - The company expects to repay its debts through repayments from borrowers on loans held for investment[40]. - The company operates in a highly competitive financial services industry, competing with various banks and financial institutions[44]. - The company may change its investment and leverage strategies to capitalize on market opportunities without shareholder approval[38]. - The company expects that interest income from mortgage-related assets will generally qualify for both the 75% and 95% gross income tests[89]. - The company may invest in CMBS and agency securities, which are expected to qualify for the 75% and 95% gross income tests[92]. - Mezzanine loans may be treated as real estate assets for tax purposes if they meet specified safe harbor requirements[93]. - The company expects mezzanine loans to generally be treated as debt for federal income tax purposes, while preferred equity investments are expected to be treated as equity[94]. - The company anticipates that interest from participation interests in mortgage loans and mezzanine loans will generally qualify for both the 75% and 95% gross income tests[95]. - Fee income from loans originated by the company, including prepayment penalties and late payment charges, is expected to qualify for both the 75% and 95% gross income tests[96]. - Income generated from rents received after foreclosure is expected to satisfy the 75% and 95% gross income tests if it meets the requirements for "rents from real property"[98]. - The company believes it will satisfy the 75% and 95% gross income tests on a continuing basis beginning with its first taxable year as a REIT[106]. - At least 75% of the value of the company's total assets must consist of "real estate assets" to qualify for taxation as a REIT[110]. - The company intends to monitor compliance with asset tests on an ongoing basis, although it has not obtained independent appraisals to support asset valuations[109]. - The company may utilize TRSs to conduct transactions that might otherwise recognize dealer gains, avoiding the 100% penalty tax[104]. - The company expects that all or substantially all rents and related service charges will qualify as "rents from real property" for gross income tests[103]. - The company may treat property acquired through foreclosure as "foreclosure property," which can provide tax benefits under certain conditions[99]. - The company maintains records of asset values to document compliance with REIT asset tests and intends to take necessary actions to cure any failures within specified timeframes[116]. Governance and Management - As of December 31, 2022, the Board of Trustees included seven members, with approximately 29% being female[52]. - The company believes its common shares have been and will remain widely held, with expectations for future classes of equity to follow the same trend[170]. - The minimum investment for securities is set at $10,000 or less, with certain restrictions on transfer not affecting their classification as freely transferable[172]. - The company asserts that the restrictions on share transfer do not hinder their shares from being classified as freely transferable[173]. - Legal counsel opines that the company's shares will not fail to be freely transferable due to the existing transfer restrictions, assuming they remain widely held[174]. Risk and Regulatory Environment - The company is subject to potential changes in tax laws that could affect its REIT status and the tax implications for shareholders[162]. - There are no applicable quantitative and qualitative disclosures about market risk for the company[388].