Merger with Tremont Mortgage Trust

12 Months Ended

Dec. 31, 2021

Business Combination and Asset Acquisition [Abstract]

As described in Note 1, on September 30, 2021, we completed the Merger, pursuant to which we acquired TRMT's loans held for investment portfolio consisting of 10 loans with an aggregate principal balance of $204,692. The purchase price, based on the closing price of our common shares on September 30, 2021 of $10.31 per share, was $169,150, including the assumption of $128,962 outstanding under the Citibank Master Repurchase Facility and closing costs of $6,160 and assumed working capital of $10,146.

The following table summarizes the consideration transferred and liabilities assumed as a result of the Merger:


TRMT Common Shares outstanding	8,303,629
Multiplied by the exchange ratio	0.516
	4,284,673
TRMT fractional shares adjustment	(73)
SEVN common shares issued	4,284,600
Closing price of SEVN common shares on September 30, 2021	$	10.31
Value of consideration transferred	$	44,174
Assumed working capital	(10,146)
Assumed Citibank Master Repurchase Facility, principal balance	128,962
Merger related costs	6,160
Consideration transferred and liabilities assumed	$	169,150

After consideration of applicable factors pursuant to ASC Topic 805, Business Combinations, including the application of a screen test to evaluate if substantially all the fair value of TRMT as the acquired entity is concentrated in a single identifiable asset or group of similar identifiable assets, we have concluded that the Merger qualifies as an asset acquisition under GAAP. Accordingly, SEVN accounted for the Merger as an asset acquisition, with Merger related costs capitalized as a component of the cost of the assets acquired and SEVN treated as the acquirer of TRMT.

The assets acquired and liabilities assumed were recorded at their relative fair values and added to our consolidated balance sheet as of September 30, 2021. The fair value of the loans acquired in the Merger exceeded the purchase price of the loans. In accordance with GAAP, a purchase discount of $36,443 was recorded for the difference between the fair value and purchase price of the loans acquired. The purchase discount was allocated to each acquired TRMT loan based on their relative fair value and has been and is being accreted into income over the remaining term of the respective loan. For the year ended December 31, 2021, we recorded purchase discount accretion of $18,932.

The following table summarizes the purchase price allocation for the Merger:


Cash and cash equivalents	$	11,070
Loans held for investment, net	169,150
Accrued interest receivable	603
Prepaid expenses and other assets	31
Total assets	180,854
Accounts payable and other liabilities	(901)
Citibank Master Repurchase Facility	(128,962)
Due to related persons	(657)
Net assets acquired	50,334
Assumed working capital	(10,146)
Assumed Citibank Master Repurchase Facility, principal balance	128,962
Consideration transferred and liabilities assumed	$	169,150