Sunrise Realty (SUNS) Earnings Call Transcript

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Date

Thursday, Mar. 12, 2026 at 10 a.m. ET

Call participants

• Executive Chairman — Leonard Mark Tannenbaum
• Chief Executive Officer — Brian Sedrish
• Chief Financial Officer — Brandon Hetzel

Takeaways

• Loan originations -- Sunrise Realty Trust (NASDAQ:SUNS) committed $247 million in loans during 2025 and funded $224 million, with repayments totaling $52 million.
• Distributable earnings -- Generated $0.27 per share in the quarter, reduced by $0.03 per share due to a Thompson Hotel loan placed on nonaccrual status.
• Dividends -- The board declared a $0.30 per share dividend for the following quarter, to be paid Apr. 15, 2026, to shareholders of record as of Mar. 31, 2026.
• Net interest income -- Reported $5.2 million for the quarter and $21.6 million for 2025.
• GAAP net income -- Achieved $1.6 million, or $0.12 per share, for the quarter, and $12.1 million, or $0.93 per share, for 2025.
• Portfolio composition -- As of year-end, held $420.7 million of current commitments with $305.5 million principal outstanding over 16 loans; as of Feb. 27, 2026, $442.1 million in commitments and $337.0 million principal (excluding the Thompson Hotel), also spanning 16 loans.
• Portfolio yield -- Portfolio (excluding Thompson Hotel) had a weighted average yield to maturity of approximately 12% at Feb. 27, 2026.
• Floating rate exposure -- 97% of the loan principal is floating rate, with a weighted average floor of 3.9%.
• Credit facility expansion -- Revolving credit facility increased to $165 million, now expandable up to $200 million, with a rate of 275 basis points over SOFR and a 2.63% floor.
• CECL reserve -- Current expected credit loss reserve was $2.1 million at year-end, representing 68 basis points of loans held at carrying value.
• Book value -- Book value stood at $13.56 per share as of Dec. 31, 2025.
• Recent foreclosure -- Took ownership of the Thompson Hotel in San Antonio on Mar. 3, 2026, following the loan being placed on nonaccrual less than two weeks prior.
• Loan pipeline -- The investment pipeline stood at $652 million, down from $1.7 billion the prior quarter, as less actionable or distracting transactions were removed.
• New loan activity in 2026 -- As of Feb. 27, Sunrise Realty Trust committed $62 million to loans originated by the TCG real estate platform.

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Risks

• "Our availability is a bit lower" due to the nonaccrual status of the Thompson Hotel, which has also come out of the borrowing base, directly impacting leverage and earnings capacity.
• The decline in distributable earnings by $0.03 per share in the quarter resulted from the Thompson Hotel nonaccrual, with board and management explicitly citing the need to resolve this asset to restore momentum and expand the borrowing base.
• Uncertainty in market conditions and volatile rates are creating hesitation for new deal activity and were discussed as contributing to the current smaller investment pipeline.

Summary

Management reported reduced distributable earnings per share due to the nonaccrual and foreclosure of the Thompson Hotel loan, which has also limited credit facility utilization and leverage. The dividend for the next quarter remains above current distributable earnings, with management expressing confidence in covering the payout over the coming year. The overall portfolio remains concentrated in senior secured, floating-rate residential loans and demonstrates a weighted average yield to maturity of approximately 12%. Credit facility access has expanded with an additional bank participant and increased available borrowings, with further expansion contingent on resolution of the foreclosed asset. The loan origination pipeline now consists of $652 million, reflecting a strategic narrowing amid ongoing market volatility and selectivity regarding actionable deals.

• CEO Brian Sedrish said, "I expect that will continue. You know, we are in the business of finding where there are opportunities to take advantage of dislocation in the market. And I think that is where the opportunity will sit for the foreseeable future."
• Executive Chairman Leonard Mark Tannenbaum highlighted that the Thompson Hotel issue was anticipated, stating, "I think you saw the asset was a 3. It was on our watch list. We sort of knew that this could happen. We were hoping it did not. You know, the resolution was clean, which was nice too, that it was a clean foreclosure. There was no delay to it."
• The board and management emphasized that the Thompson Hotel is currently "the only asset that we are concerned about at this time," addressing concerns that the foreclosure is not indicative of broader credit deterioration within the portfolio.

Industry glossary

• B note: A subordinate debt tranche in a senior loan structure, carrying higher risk and return, often used for larger or more complex real estate financings.
• CECL (Current Expected Credit Loss): An accounting standard requiring recognition of expected credit losses over the life of financial instruments, rather than only incurred losses.
• SOFR (Secured Overnight Financing Rate): A benchmark interest rate for dollar-denominated derivatives and loans, replacing LIBOR.
• Flag: The hotel brand or franchise under which a property operates; "black flag" refers to the highest-tier branding.

Full Conference Call Transcript

Leonard Mark Tannenbaum, our Executive Chairman, Brian Sedrish, Chief Executive Officer, and Brandon Hetzel, our Chief Financial Officer. Before we begin, I would like to note that this call is being recorded. Replay information is included in our 02/10/2026 press release and is posted on the Investor Relations portion of our website at sunriserealtytrust.com, along with our fourth quarter and fiscal year 2025 earnings release and investor presentation. Today’s conference call includes forward-looking statements and projections that reflect the company’s current views with respect to, among other things, market developments, our investment pipeline, anticipated portfolio yield, financial performance, and projections in 2026 and beyond. These statements are subject to inherent uncertainties in predicting future results.

Please refer to Sunrise Realty Trust, Inc.’s most recent periodic filings with the SEC, including our Annual Report on Form 10-K filed earlier this morning, for certain conditions and significant factors that could cause actual results to differ materially from these forward-looking statements and projections. During today’s conference call, management will refer to non-GAAP financial measures, including distributable earnings. Please see our fourth quarter and fiscal year earnings release uploaded to our IR website for reconciliations of the non-GAAP financial measures with the most directly comparable GAAP measures. The format for today’s call is as follows. Len will provide a general business and markets overview.

Next, Brian will cover our view on the state of the commercial real estate lending markets and discuss our existing portfolio. Then Brandon will provide an update on our financial position. After that, we will open the lines for Q&A. I will now turn the call over to our Executive Chairman, Leonard Mark Tannenbaum.

Leonard Mark Tannenbaum: Thank you, Gabe. Good morning, and welcome to our fourth quarter and fiscal year 2025 earnings conference call. As we finished 2025 and turned to 2026, we remain focused on providing loans to sponsors of transitional real estate business plans, primarily in the Southern United States. Our portfolio construction remains similar to how we began the year, with a focus on residential loans, which are mainly senior secured and floating rate. From a broader real estate market perspective, 2025 also seemed to be a transition year. We saw limited transaction volume in early 2025, which gave way to improving conditions in the second half as the Federal Reserve’s rate easing cycle took hold.

As a reminder, Sunrise Realty Trust, Inc. is an important part of the TCG real estate platform. The platform consists of a number of funds focused on sourcing, underwriting, and investing in commercial real estate loans. The affiliation with our platform provides Sunrise Realty Trust, Inc. with a scalable infrastructure, debt and equity capital markets expertise, and the ability to pursue larger transactions than it could currently pursue on its own. During the fiscal year ended 12/31/2025, the TCG real estate platform closed on $368 million of loans, of which Sunrise Realty Trust, Inc. committed $247 million and funded $224 million. Additionally, during the 2025 fiscal year, Sunrise Realty Trust, Inc. received $52 million of repayments.

As of February 27, the TCG real estate platform has closed on $91 million in loans this year, with Sunrise Realty Trust, Inc. committing $62 million of that total. For the quarter ending 12/31/2025, Sunrise Realty Trust, Inc. generated distributable earnings of $0.27 per basic weighted average share of common stock. Earnings were impacted by the loan to Thompson Hotel in San Antonio, which we foreclosed on less than two weeks ago. In line with our policies, we placed the loan on nonaccrual during the fourth quarter, which reduced distributable earnings by approximately $0.03 per share. Had this loan been on accrual, distributable earnings would have been approximately $0.30 per share.

Looking ahead, the Board of Directors has declared a $0.30 dividend per share for the quarter ended 03/31/2026. We remain focused on paying a dividend that is consistent with the earnings power of the business over the medium term. I am also pleased to announce that subsequent to the quarter end, we increased our revolving credit facility to $165 million with the addition of Customers Bank, who has committed $25 million. As a reminder, our revolving credit facility, originally established in November 2024, remains expandable to $200 million and carries an interest rate at 275 basis points over SOFR with a 2.63% floor.

I will now turn the call over to Brian Sedrish to walk through our portfolio in more detail.

Brian Sedrish: Thank you, Lenny. Good morning, everyone. Before turning to our current portfolio and pipeline, I wanted to take a minute to discuss what we are seeing generally in the commercial real estate market. Over the last year, we have observed a clear bifurcation emerge across the lending market between lenders that have largely worked through their problem loans and can remain on offense and those still constrained by legacy portfolio issues. Many lenders that are currently on offense remain focused on multifamily and industrial assets where spreads are tight and continue to compress. In these more commoditized segments, return targets are largely achieved through leverage and capital markets arbitrage rather than fundamental credit expertise. Our approach is differentiated.

We focus on originating commercial mortgage loans for sponsors executing transitional business plans, situations that demand a more structured, bespoke solution. Our team’s depth of experience in prestabilization strategies and complex deal structures allows us to identify and underwrite opportunities that many lenders choose not to pursue. We believe these core competencies position us to capture the most compelling risk-adjusted opportunities in today’s market. Critically, our focus on structuring complexity and asset-level expertise enables us to generate superior unleveraged returns, reducing our reliance on financial leverage to meet target yields and providing a more durable foundation for performance across more market cycles. Turning to our portfolio.

In 2025, Sunrise Realty Trust, Inc. closed on $56 million of commitments, which include approximately $26 million in a financing package comprised of two senior loans for Collection Suites, a small-bay industrial for-sale development consisting of two projects located in Doral and West Palm Beach, Florida, and a $30 million senior bridge loan for the financing of a seven-story Class A retail property in the Galleria section of Houston, Texas. From year-end through March 1, Sunrise Realty Trust, Inc. committed approximately $62 million to two loans originated by the TCG real estate platform.

One was a $14 million commitment to a senior bridge loan for the acquisition of a premier ranch property in Southern Colorado, which has already been repaid, and the second is a $48 million B note to refinance a 15-property portfolio of Graduate by Hilton hotels. These investments reflect our broader strategy of partnering with top-tier sponsors who share our vision for creating and investing in high-quality real estate projects. Turning to our portfolio management efforts. On March 3, we took ownership of the Thompson Hotel in San Antonio. The 20-story mixed-use hotel and condominium consists of 162 hotel rooms and was delivered and opened in 2021.

The property sits in a premier location in San Antonio along the Riverwalk and is viewed as a Class A hotel situated in one of the nation’s top 10 cities by population. Despite slower-than-expected hotel operations, we believe the hotel’s medium- to long-term prospects are attractive. Of note, the loan carries a personal guarantee from the borrower covering certain shortfalls, which we intend to pursue. Prior to and following the foreclosure event, numerous hospitality companies have reached out to us inquiring about the prospects of acquiring the asset. Over the next week, we intend to hire a premier broker to market the asset.

We believe that the Sunrise Realty Trust, Inc. portfolio is well positioned from an interest rate perspective, as 97% of our current portfolio’s outstanding principal is floating rate with floors of, on a weighted average, 3.9%. Given these floors in place across our loan book, our credit line with an approximate floor of 2.6% presents a potential opportunity to expand Sunrise Realty Trust, Inc.’s net interest margin. I remain confident in the opportunity set ahead and look forward to capitalizing on the attractive opportunities currently in front of us. I will now turn the call over to Brandon Hetzel, our CFO.

Brandon Hetzel: Thank you, Brian. For the quarter ended 12/31/2025, we generated net interest income of $5.2 million and distributable earnings of $3.5 million, or $0.27 per basic weighted average common share, and had GAAP net income of $1.6 million, or $0.12 per basic weighted average common share. For the full year ended 12/31/2025, we generated net interest income of $21.6 million and distributable earnings of $15.2 million, or $1.19 per basic weighted average common share, and had GAAP net income of $12.1 million, or $0.93 per basic weighted average common share. We believe that providing distributable earnings is helpful to shareholders in assessing the overall performance of Sunrise Realty Trust, Inc.’s business.

Distributable earnings represents net income computed in accordance with GAAP, excluding non-cash items such as stock compensation expense, unrealized gains or losses, and the provision for current expected credit losses, also known as CECL. We ended 2025 with $420.7 million of current commitments and $305.5 million of principal outstanding spread across 16 loans. As of 02/27/2026, our portfolio, excluding the Thompson Hotel, consisted of $442.1 million of current commitments and $337.0 million of principal outstanding across 16 loans, with a weighted average portfolio yield to maturity of approximately 12%. I would also like to note that as of 12/31/2025, our CECL reserve was approximately $2.1 million, or 68 basis points, for our loans held at carrying value.

As of 12/31/2025, we had total assets of $310.2 million and our total shareholders’ equity was $182.0 million, with a book value of $13.56 per share. As Len mentioned earlier, the Board of Directors has declared a $0.30 dividend per share for the quarter ended 03/31/2026. The dividend will be paid on 04/15/2026 to shareholders of record as of 03/31/2026. I will now turn it back over to the operator to start the Q&A.

Operator: Thank you. We will now open for questions. To remove yourself from the queue, you may press 1-1 again. Our first question comes from the line of Timothy D’Agostino of B. Riley Securities. Your line is open, Timothy.

Timothy D’Agostino: Yeah. Hi. Thank you for taking the question this morning. Regarding originations, the $62,000,000 you committed was in February. And given recent market volatility, uncertainty, disruption, however you want to characterize it, could you just talk us through how the investment opportunity and the market for you all looks given we are seeing the 10-year kind of tick back up. It would be great to just kind of understand how the market dynamics have changed throughout the course of 2026 so far. Thank you.

Brian Sedrish: Yeah, sure. Thanks for the question. It is Brian. So, yeah, certainly, certainly the volatility in the market has created some ups and downs. We started the year in 2026 where what we saw, as I mentioned in some of the prepared remarks, a real dichotomy between the spreads on multifamily and industrial, in particular existing assets, continuing to tighten, I think largely led by price tightening in the senior market, the CLO market, the warehouse line market. That is really not an area, as you know, that we have been focused on.

What that did is it created a bit more gap and an opportunity for us to see more of the types of transitional deals that we are focused on. And that definitely seemed to happen. You also seem to see a gap tighten between buyers and sellers, so there is more opportunity on new acquisitions. All that being said, the last couple weeks have definitely created more uncertainty. Rates, as you mentioned, going back up, really are creating a bit of a question mark as to whether or not an active deal makes sense or not. I expect that will continue.

You know, we are in the business of finding where there are opportunities to take advantage of dislocation in the market. And I think that is where the opportunity will sit for the foreseeable future. I think that sort of volatility creates opportunities for us. But it is definitely, like everyone else, a bit of a wait and see to see how things settle out.

Timothy D’Agostino: Thanks for taking the question this morning.

Operator: Thank you. Our next question comes from the line of Gaurav Mehta of Alliance Global Partners. Your line is open, Gaurav.

Gaurav Mehta: Yeah. Thanks. Good morning. Wanted to ask on the loan pipeline. I think in your deck, you show $652,000,000, which is lower than $1.7 billion in the last quarter. So does that reflect, I guess, comments about market volatility? And, I guess, what kind of dropped off that loan pipeline in the last, I guess, couple of months?

Brian Sedrish: Sure. Thanks for the question. It is Brian again. Yeah. It does trail off the last question and answer. Definitely, there has been a differentiation in terms of pricing on the multifamily and industrial side, and we just have been more discerning. I mean, we have a focus on going after transactions that we think have long-term durability. Six-fifty is still, in our mind, a really strong pipeline, particularly in light of the amount of capital available for us to invest. And everyone has sort of just taken the view of let us focus on very highly actionable deals and remove those that create more noise and distraction for us.

And, you know, I expect, as I am sure you have seen at a lot of the companies, you know, those things will come up and down in terms of the pipeline. But we thought we wanted to cull and reflect what we felt was a more focused area for us in the next couple months.

Gaurav Mehta: Alright. That is helpful. Second question on the hospitality asset in San Antonio. Can you maybe provide some more color on why that asset foreclosed? Anything specific about that asset?

Brian Sedrish: Yeah. Sure. So the Thompson in San Antonio, a really high-quality asset. Obviously, Thompson black flag, which is the highest flag. One hundred sixty-two keys. The asset — look, San Antonio has had a bunch of deliveries recently. There is a lot in that market, but there has been a bunch of deliveries. The asset was, from a pricing perspective, high, our loan interest rate. The asset has taken longer to ramp up. There have been some specific things as it relates to the management of that hotel. And ultimately, just taking longer, and the sponsor’s ability to continue to put dollars in became harder and harder.

As we mentioned in the prepared remarks, we do have a series of personal guarantees, which we intend to pursue. But, ultimately, that was just the decision where until cash flow came back to be able to support the asset’s operations, which we do believe in the medium term is achievable, the sponsor just did not have the capability to continue to service the loan. I mean, just to add to that, it is a very high-quality asset. As I said, it was built very recently in 2021. I think from everyone that stays there, everyone you speak to, it is a high-quality asset.

It is just, unfortunately, an issue with cost of capital right now and the fact that there have been some deliveries that are currently constraining cash flows.

Gaurav Mehta: Alright. Thanks for that color. And then maybe lastly on the dividend, $0.30. It seems like it is higher than $0.27 earnings in 4Q. How should we expect, I guess, your target dividend coverage in respect to where the earnings are?

Leonard Mark Tannenbaum: Look. Our goal — it is Len speaking — the goal is not to overpay our dividend. So I think the Board, looking forward, felt comfortable that we would get this covered over the course of the next six to twelve months in aggregate.

Gaurav Mehta: Alright. Thank you. That is all I had.

Brian Sedrish: Thank you very much.

Operator: Thank you. Our next question comes from the line of Tyler Anton Batory of Oppenheimer. Please go ahead, Tyler.

Tyler Anton Batory: Good morning. Thanks for taking my questions here. Just wanted to clean up a few items and to double click on the San Antonio asset — just help us think about the ideal resolution there, perhaps the timeline as well. And I just want to be clear. It sounds like this is a very asset-specific sort of issue and not reflective of anything that is going on broader in the portfolio, but just wanted to be sure that is the case in your view.

Leonard Mark Tannenbaum: Yeah. I think you saw this — this is Len speaking. I think you saw the asset was a 3. It was on our watch list. We sort of knew that this could happen. We were hoping it did not. You know, the resolution was clean, which was nice too, that it was a clean foreclosure. There was no delay to it. It was necessary, as there is additional value that could be gained depending on whether the flag is renewed or not. And so we are — our intention, I think Brian said that, is to hire a premier broker as soon as we could. That sounds like about a week from now. And market again, market the product.

And we believe, you know, we are going to find a buyer for it. So this — you know, if this is around next quarter, we should ask a lot of questions about why.

Tyler Anton Batory: Great. Thank you for that. And in terms of bumping up the East West Bank facility, $140 million to $165 million. I know there is potential to get that to $200 million. You know, is that something you are expecting in the next couple of quarters? And just kind of talk us through sources of capital here as we move through 2026?

Leonard Mark Tannenbaum: So one thing that has been frustrating to me about the nonaccrual or the property is it comes out of our borrowing base. We proactively told our banks when we dealt with this, so we are not able to relever the asset, and that is one reason why earnings are a bit lower. Our availability is a bit lower. So as soon as we have resolved — what you are going to look for to sort of see, you know, re-momentum or additional momentum towards positive earnings and all that good stuff is this asset getting resolved.

And because, as I think we pointed out — or maybe I skipped your last question — this really is the only asset that we are concerned about at this time, and you could see that we will move assets into category 3, 4, and 5 as we find more concern over assets. So this is really our only concerned asset. It is definitely an issue. We know we have to resolve it quickly. And that is going to do two things: one, put more money in to do more great deals; but also, two, expand our borrowing base.

Tyler Anton Batory: Okay. I think the last one for me — hopefully tie a lot of this commentary together. When you reflect on 2025, when you look at 2026 so far, just kind of frame for us how capital deployment is really trending versus your plans, you know, a year, year and a half ago? You know, when you came public. I was just trying to get a reference point in terms of how things have gone the past couple of quarters versus what you were hoping or versus what you were expecting?

Brian Sedrish: Sure. And those often diverge in terms of hope and expect. Look. I think largely I will say without question that the view and projections that we all make is really dependent in large part on the opportunity set and the evolving opportunity set. And it was clear there was significant opportunity from a spread basis to put out really interesting deals, which is really the whole premise of really starting the business back in 2023, 2024. There was a really good opportunity set. Then we saw spreads tighten, which was fine because our capital base, as you know, is not that significant, so we can be highly selective.

Last year really reflected the fact that the markets tightened up, the opportunity set — rates did not drop as quickly, the opportunity set was a bit thinner than expected. We were able to get out some capital on what we thought was interesting deals. I think the most important thing is making sure we are not going after deals just to stretch. The end of ’25, really, things started to break a bit. There seemed to be definitely a tighter gap between buyer and seller’s bids, which meant more acquisitions, and certainly, as you know, that is highly correlated to the opportunity set for us — is just more acquisitions. Refinancing certainly happened.

There seemed to be more of a capitulation on the refinancing side in terms of incumbent lenders wanting or forcing their borrowers. And then I would say, though, that things have been a bit more tumultuous right now, just given, back to an earlier question, the uncertainty in the markets, treasuries being where they are, which is — you know, cap rates are often correlated there. So I think there will be a bunch of volatility for the time being. I mean, largely in our type of business, as I mentioned in prepared remarks, we really are in more of the, you know, off-the-run interesting transactions. And I think those always create opportunities in times of uncertainty.

There are several we are looking at now. And so I am hopeful that we are going to get through generally the macro issues — at least I hope so — in the near future. And, you know, that will create more opportunities. In the meantime, as I said, this volatility does create pretty interesting opportunities for guys like us.

Tyler Anton Batory: A lot of good detail there, so appreciate the perspective. Thank you.

Operator: Thank you. I will now turn the call back over to Brian Sedrish for closing remarks.

Brian Sedrish: Well, thank you very much, all, for joining. We look forward to talking to you on our next quarterly conference call. Thank you.

Operator: This concludes today’s conference call. Thank you for participating. You may now disconnect.

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