Sunrise Realty (SUNS) Q3 2026 Earnings Call Transcript

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DATE

Nov. 11, 2026

CALL PARTICIPANTS

• Chief Legal Officer - Gabriel Katz
• Executive Chairman - Leonard Tannenbaum
• Chief Executive Officer - Brian Sedrish
• Chief Financial Officer - Brandon Hetzel

TAKEAWAYS

• Distributable Earnings -- $3.2 million, or $0.24 per share, compared to $4.1 million, or $0.31 per share, in the third quarter of 2025, including $0.06 per share of one-time merger-related expenses.
• GAAP Net Income -- $2.9 million, or $0.21 per share, compared to $4.1 million, or $0.31 per share, in the third quarter of 2025.
• Year-to-Date Distributable Earnings -- $11.8 million, or $0.89 per share, for the first nine months of 2026, compared to $11.7 million, or $0.93 per share, for the same period in 2025.
• Pro Forma Combined Commitments -- $478.6 million, representing the total loan commitments of the combined company as of Sept. 30, 2026, if the merger had occurred on that date.
• Pro Forma Combined Principal -- $393.1 million, reflecting the total outstanding principal of the merged entities as of Sept. 30, 2026.
• Merger Exchange Ratio -- 1.45 shares, representing the amount of SUNS common stock issued for each share of Southern Realty Trust in the merger that closed on Nov. 5, 2026.
• Incentive Fee Reduction -- 17.5%, down from 20% under the amended management agreement designed to benefit stockholders following the merger.
• Hurdle Rate Reduction -- 7%, down from 8% annually as part of the restated management agreement.
• Management Fee Waiver -- $1 million, to be realized through $250,000 quarterly reductions in base management fees throughout 2027.
• Annual G&A Savings -- $1.2 million, estimated through the elimination of duplicate personnel, audits, tax returns, and board fees.
• Share Repurchase Program -- $20 million, authorized by the Board of Directors through Dec. 31, 2027, to allow for opportunistic buybacks when the stock trades at a discount to book value.
• Q3 Repayments -- $58.9 million, primarily driven by the July repayment of the Panther National senior term loan and construction revolver.
• Q3 Loan Funding -- $17.1 million, representing disbursements for new and existing loans during the quarter.
• Portfolio Yield to Maturity -- 12%, representing the weighted average estimated yield for the 12 loans in the stand-alone portfolio as of Sept. 30, 2026.
• Floating Rate Exposure -- 95%, of the loan principal as of Sept. 30, 2026, with a weighted average SOFR floor of approximately 3.9%.
• Interest Rate Sensitivity -- $1.9 million, representing the estimated increase in annual interest income from a 100 basis point increase in benchmark rates.
• Debt-to-Equity Ratio -- 0.5x, reflecting $96.8 million in total debt outstanding against $181 million in shareholder equity as of Sept. 30, 2026.
• Book Value Per Share -- $13.39, as of Sept. 30, 2026, on a stand-alone basis before the impact of the merger.
• Investment Pipeline -- $169 million, in signed term sheets for residential projects, including high-end luxury destination homes and residential communities.
• Texas Multifamily Loan -- $93 million, representing a proposed senior construction loan comprising a $62 million A-note with a third-party partner and a $31 million B-note expected to be held by the company.
• Thompson San Antonio Sale -- $41 million, completed through a joint venture on Oct. 9, 2026, which resulted in the company no longer holding any owned real estate.
• Common Stock Dividend -- $0.30 per share, paid on Oct. 15, 2026, to shareholders of record as of Sept. 30, 2026.
• Prorated Merger Dividend -- $0.09 per share, totaling approximately $1.2 million for the stub period from Oct. 1 through Nov. 4, 2026.

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RISKS

• Sedrish stated, "Higher rates and renewed volatility created additional pressure for borrowers during the quarter," noting that the 10-year treasury yield reached its highest level since 2002 in early October.
• Sedrish warned that for sponsors with maturing loans, "refinancing proceeds can fall short of outstanding debt balances," which creates a need for additional equity and structured capital.

SUMMARY

Sunrise Realty Trust, Inc. (NASDAQ:SUNS) finalized its merger with Southern Realty Trust, establishing a combined commercial real estate lending platform with expanded equity and scale. Management reported that the integration broadens financing options and reduces duplicative corporate costs through the elimination of redundant administrative functions. The company stated it is prioritizing underwriting standards and sponsor quality over deployment volume during periods of market volatility. Management also initiated a capital allocation strategy that includes opportunistic share repurchases and the funding of existing construction commitments.

• Management estimated that the merger will result in $1.2 million in annual general and administrative savings by combining personnel and eliminating duplicate professional fees.
• Executive Chairman Tannenbaum stated that the company intends to increase its leverage to a 1-to-1 debt-to-equity ratio, noting that the current 0.5x ratio is below the optimal level for achieving target returns on equity.
• CEO Sedrish indicated that the company is focusing on the residential sector and high-end "K-shaped" recovery opportunities where traditional bank competition has decreased.
• The company implemented a management fee waiver that reduces fees by $250,000 per quarter during 2027 to benefit stockholders following the merger.
• Following the $41 million sale of the Thompson San Antonio, management confirmed that the company no longer holds any owned real estate and that all loans in the portfolio are currently performing.
• Executive Chairman Tannenbaum noted that the $20 million share repurchase program will be prioritized if the stock continues to trade at a significant discount to net asset value.

INDUSTRY GLOSSARY

• A-note: The senior portion of a mortgage loan that has priority in repayment over subordinate tranches.
• B-note: A subordinate piece of a mortgage loan that is junior to the A-note and carries higher risk and potential return.
• CECL: Current Expected Credit Losses, an accounting standard that requires companies to estimate and reserve for expected credit losses over the life of a loan.
• Distributable Earnings: A non-GAAP measure used by REITs to assess the performance of the business excluding certain non-cash items and one-time events.
• GAAP: Generally Accepted Accounting Principles, the standard framework of guidelines for financial accounting used in the United States.
• Mezzanine Loan: A form of debt that is subordinate to senior debt but senior to equity, often used to fill a funding gap in a capital stack.
• REIT: Real Estate Investment Trust, a company that owns, operates, or finances income-producing real estate and must distribute most of its taxable income to shareholders.
• SOFR: Secured Overnight Financing Rate, a benchmark interest rate for dollar-denominated derivatives and loans that replaced LIBOR.
• TRS: Taxable REIT Subsidiary, a corporation owned by a REIT that can provide services to tenants and engage in activities that the REIT itself cannot.

Full Conference Call Transcript

Operator: Good morning, and welcome to the Sunrise Realty Trust Third Quarter 2026 Financial Results Conference Call. [Operator Instructions]. I would now like to turn the call over to Gabriel Katz, Chief Legal Officer. Please go ahead.

Gabriel Katz: Good morning, and thank you all for joining Sunrise Realty Trust's Earnings Call for the quarter ended September 30, 2026. I'm joined this morning by Len Tannenbaum, our Executive Chairman; Brian Sedrish, our 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 October 2026 press release and is posted on the Investor Relations portion of our website at sunriserealtytrust.com, along with our third quarter 2026 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, the anticipated benefits of our merger with Sunrise Realty Trust and our share repurchase program. These statements are subject to inherent uncertainties in predicting future results. Please refer to Sunrise Realty Trust's most recent periodic filings with the SEC, including our Form 10-Q for the quarter ended September 30, 2026, 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 third quarter earnings release available on our website for a reconciliation of the non-GAAP financial measures with our most directly comparable GAAP measures. The format for today's call is as follows: Len will discuss our recent merger with SRT and our share repurchase program. Brian will cover the commercial real estate lending market, our portfolio and investment pipeline, and Brandon will review our financial results and position. After that, we'll open the lines for Q&A. With that, I will now turn the call over to our Executive Chairman, Len Tannenbaum.

Leonard Tannenbaum: Thank you, Gabriel, and good morning. Since our last earnings call, SUNS reached an important milestone. On November 5, we completed our merger with Southern Realty Trust, or SRT, our affiliated private mortgage REIT. At SUNS' October 23 special meeting, approximately 91.6% of votes cast approved the issuance of SUNS common stock in connection with the merger with approximately 60% of the outstanding shares represented. At SRT's October 23 special meeting, a majority of SRT's outstanding shares approved the merger. We thank stockholders of both companies for their support, and I am pleased to welcome former SRT stockholders as SUNS stockholders. We also welcome Howard Sudnow, a former independent SRT Director to the SUNS Board as an additional independent director.

This merger creates a larger, more efficient public CRE lending platform. On an unaudited pro forma basis as of September 30, 2026, and if the merger had occurred on that date, the combined portfolio would have had approximately $478.6 million of total loan commitments and $393.1 million of outstanding principal. We issued approximately 8.5 million shares at an exchange ratio of 1.45 SUNS shares per SRT share. The combined company has approximately 22 million shares outstanding with roughly 38.5% held by former SRT stockholders. Our amended and restated management agreement is now in effect. It reduces the incentive fee from 20% to 17.5% and the annual hurdle rate from 8% to 7%.

Additionally, beginning in the first quarter of 2027, base management fees will be reduced by $250,000 for each quarter of 2027, totaling $1 million for the benefit of SUNS stockholders. With the merger complete, our focus is on realizing the benefits of that scale. We believe our larger equity base can, one, broaden financing options, potentially including unsecured debt; two, support greater trading liquidity; and three, reduce duplicative costs. Given our team's experience managing both portfolios, which shared 100% overlap in the same loans, we do not anticipate any integration risk. We also believe opportunistic share repurchases can be an attractive use of capital. In October, our Board authorized a $20 million share repurchase program through December 31, 2027.

With that, I will now turn it over to Brian Sedrish, our Chief Executive Officer.

Brian Sedrish: Thanks, Len, and good morning. I'll start with the market, then cover new investment activity and the portfolio. Higher rates and renewed volatility created additional pressure for borrowers during the quarter. The Federal Reserve raised its policy rate in September for the first time since 2023. And in early October, the 10-year treasury yield touched its highest level since 2002 before easing. That volatility comes against a substantial maturity backdrop. According to the Mortgage Bankers Association, approximately $875 billion of commercial and multifamily mortgages are scheduled to mature in 2027, another $652 billion in 2027.

For sponsors with loans coming due, refinancing proceeds can fall short of outstanding debt balances, creating demand for additional equity and structured capital, which increases the value of lenders that can commit and execute with certainty. That environment plays to how SUNS is built. We do not seek to compete primarily on price or stabilized assets where banks and other lenders focus. We earn our returns by underwriting transitional business plans and negotiating structure, which allows us to operate with modest corporate leverage and help limit the financing and liquidity pressures that can affect more heavily levered lenders.

Subsequent to the completion of the merger, given our low leverage and expanded capital base, we have ample capacity to deploy across new transactions. We were deliberate with new commitments during a volatile third quarter, and we continue to prioritize pricing, structure and sponsor quality over deployment volume. Since quarter end, our activity has picked up. Subsequent to quarter end, SUNS closed on approximately $3 million senior secured loan for buildings A and B of Sommét Blanc, a luxury residential project in Park City, Utah. We were already a lender on the adjacent building, and following the merger, SUNS' commitment across all 3 buildings now total approximately $17 million.

The TCG real estate platform is advancing transaction under signed term sheets. As discussed last quarter, one is a proposed $93 million senior construction loan for a multifamily development in Texas, comprising a $62 million A note with a third-party partner and a $31 million B note expected to be held by SUNS. We expect this transaction to close shortly. The other transactions, which have signed term sheets totaled $169 million. All transactions remain subject to diligence, documentation and customary closing conditions. Turning to our portfolio.

On October 9, we completed the $41 million sale of the Thompson San Antonio through our joint venture, consisting of $9 million in purchaser cash and $32 million of senior secured financing, now held entirely by SUNS following the merger. The transaction closed in line with our investments carrying value before closing costs and transaction expenses. The loan bears interest at a fixed rate, increasing scale from 8% to 10% rates throughout the term. The buyer intends to fund additional cash equity towards capital improvements. Separately, SUNS continues to pursue available remedies under the former sponsor guarantee. Following the sale, SUNS no longer holds any owned real estate.

All loans in our portfolio were current and performing at September 30 and remains so today. Looking ahead, we are primarily focused on deploying SUNS capital into loans that meet our underwriting standards, opportunistically executing the share repurchase program and continuing to fund construction commitments within our existing book. A performing loan portfolio, low leverage and an expanded equity base support the financial flexibility to pursue these priorities selectively. I will now turn to Brandon Hetzel, our Chief Financial Officer, to review our financial results.

Brandon Hetzel: Thank you, Brian. For the quarter ended September 30, 2026, we generated net interest income of $5.8 million and distributable earnings of $3.2 million or $0.24 per basic weighted average common share. GAAP net income was $2.9 million or $0.21 per basic weighted average common share. These results included approximately $900,000 or $0.06 per share of onetime merger-related costs. For the 9 months ended September 30, 2026, we generated net interest income of $18.9 million and distributable earnings of $11.8 million or $0.89 per basic weighted average common share compared to $0.90 per share of dividends declared for the same period. GAAP net income for the 9 months was $10.2 million or $0.75 per basic weighted average common share.

We believe that providing distributable earnings is helpful to stockholders in assessing the overall performance of SUNS business. Distributable earnings represents net income computed in accordance with GAAP, excluding noncash items such as stock compensation expense, unrealized gains or losses and the provision for current expected credit losses. In the third quarter, SUNS funded $17.1 million of new and existing loans and received $58.9 million of repayments, primarily reflecting the July repayment of the Panther National senior term loan and construction revolver. We ended September 30 with $313.9 million of loan commitments and $256.9 million of principal outstanding across 12 loans, all current and performing with a weighted average estimated portfolio yield to maturity of approximately 12%.

Following the Thompson San Antonio sale and the Sommét Blanc loan, as of October 30, 2026, SUNS stand-alone portfolio consisted of $336.3 million of current commitments and $283.6 million of principal outstanding across 14 loans. As of September 30, 2026, our CECL reserve was approximately $900,000 or 36 basis points of loans held at carrying value, and all 12 loans in our stand-alone portfolio were risk rated 2. As of September 30, 2026, approximately 95% of our loan principal was floating rate with a weighted average SOFR floor of approximately 3.9%.

We estimate that a 100 basis point increase in benchmark rates would increase our annual interest income by approximately $1.9 million, while a 100 basis point decrease would only reduce it by approximately $500,000, which reflecting the protection provided by our rate floors in each case before any change in borrowing costs. As of September 30, 2026, our total outstanding -- our debt outstanding was approximately $96.8 million, representing a debt-to-equity ratio of approximately 0.5x. On a stand-alone basis, as of September 30, 2026, SUNS had total assets of $285.4 million, and our total shareholder equity was $181 million with a book value of $13.39 per share.

For the quarter ended September 30, 2026, the Board of Directors declared a $0.30 common stock dividend per share outstanding, which was paid on October 15, 2026, to shareholders of record as of September 30, 2026. In connection with the merger, the Board declared a prorated stub period dividend of $0.09 per share or approximately $1.2 million covering the period from October 1 through November 4, 2026, which was paid on November 5 to stockholders of record as of November 2, 2026. We expect the Board to declare a dividend for the remainder of the fourth quarter covering November 5 through December 31, 2026, with the amount and record date to be announced in the ordinary course.

With that, I will now turn it back over to the operator to start the Q&A.

Operator: [Operator Instructions]. Our first question will be coming from the line of Gaurav Mehta of Alliance Global Partners.

Gaurav Mehta: I wanted to ask you if you could discuss your balance sheet targets post-merger for the combined company.

Brandon Hetzel: Sure. We haven't disclosed the balance sheet numbers as we're still working on the purchase price accounting and due to the timing of the deal closing that has not been complete. But we did put into the investor presentation what the current commitments on a combined basis as of 9/30 would have been, which is about commitments of $478.6 million with principal outstanding of about $393.1 million.

Gaurav Mehta: Okay. Second question, I think in the prepared remarks, you talked about $169 million in signed term sheets. Can you -- are you able to provide some more color on that? Are those loans mostly residential? And any color on that would be helpful.

Brian Sedrish: Sure. Gaurav. So those deals are deals we've been spending a lot of time on. They are -- to answer your question, they are residential plays where in one case, there's an existing very high-end luxury destination home resort where ultimately we would potentially be providing the capital to help improve and build additional homes for sale. So there's that one. We have another one where, again, a very successful residential community. We'd be helping very similar in the capital to help continue to add value in that site. And then lastly, another play, again, all residential as well.

These are both condos and single-family homes where, again, the sponsor needs the requisite capital to help them continue to deliver product to their clients. I think generally, broadly, what I'll say is we found a lot of interest in those types of transactions, and we think we're leaning into those really take advantage of our expertise. So we've been spending a lot of time in those. And then the other thing I might add is there's just much less competition in that type of market. So I think we find that we can deliver pretty interesting attractive returns to our shareholders through those types of deals.

Gaurav Mehta: Okay. And then lastly, you have one loan maturing in December '26 in Fort Lauderdale. Are you guys expecting that loan to be repaid? Or do you guys expect that to extend it?

Brian Sedrish: The answer to that question is if we do extend out it would be for a relatively short period of time. And that deal is a deal that we put on nearly 3 years ago. The sponsor has done exactly what they said they were going to do in terms of delivering on time, actually ahead of time and on budget. They presold of those for-sale condos, a little over 50% of those. The units look great in the inventories there. So the logical takeout is an inventory loan. The question just is, because the loan is maturing in December, whether the sponsor needs a couple more months, they're going to have a signed term sheet shortly.

So we may end up extending out for a couple of months. If we do, we look at that as extremely positive. Alternatively, the sponsor may just decide to just pay us out. It's just a question of timing as to how quickly they can bring it all together. Ideally, we'd like to have the opportunity to keep it out a little bit longer. It's been a great performing loan for us, and we really like the sponsorship.

Operator: Our next question will be coming from the line of Jade Rahmani of KBW.

Jade Rahmani: Could you provide a book value estimate pro forma for the merger close?

Brandon Hetzel: We have not disclosed the pro forma book value due to not having the final purchase price accounting finished due to the timing of the recent close of the merger. But we did believe in the proxy we did have an estimate as of 6/30.

Jade Rahmani: Okay. Just thinking about the dividend beyond the next declaration, which would be for a partial period, what's a reasonable range to assume?

Leonard Tannenbaum: I think that we're going to pay a dividend. The Board still hasn't determined it. The intention is to pay out close to our income for the year. So I think that's going to be the balance this year. And then we'll look at the pro forma results for next year and make a determination next year.

Jade Rahmani: Is there a target ROE we could apply to what we think pro forma book value is to make an estimate?

Leonard Tannenbaum: I think the tough part of where we are today is, and I think you could see it in the numbers is we're underlevered. And we have a lot of capacity. It's the good news. We have a lot of capacity to do deals. The bad news is a lot of these deals that Brian was talking about earlier, I would have expected to close already and everything takes longer. And so what's going to drive earnings is getting us back to appropriate leverage and driving the right ROE for our stockholders.

And so I think that's the main indicator that I'd be looking for over the next 3 to 4 months as we announce deals as they close and we close them, that's going to be driving -- that should be driving our stock and future ROE.

Jade Rahmani: What's a reasonable target for annual originations and debt-to-equity ratio?

Leonard Tannenbaum: Target debt-to-equity ratio is at least 1:1, right? And so we're not anywhere close to that, unfortunately. But we should -- we -- it's still very low for mortgage REITs to have a 1:1 debt-to-equity ratio. And we have approximately -- I'm now rounding numbers, $300 million-ish of equity and drawn will be $400-something million. I mean actual draws...

Brandon Hetzel: $393 million.

Leonard Tannenbaum: So, we should be $200 more million dollars outstanding drawn for us to achieve the ROE targets that we really are looking for.

Jade Rahmani: I'm not going to ROE targets.

Leonard Tannenbaum: I don't have specific targets. I just wanted to say like we are definitely too low today, given we're only $100 million of leverage on a $300 million-ish equity base. So we need another $200 million of deals, not with closed, but closed and fund, or fund existing commitments, for us to achieve a much better ROE.

Jade Rahmani: Okay. Switching gears. When you think of the turmoil that's playing out in the commercial real estate landscape, so we saw sort of Phase 1 play out from 2022 through late 2024, driven by the Fed rate hikes, as you all well know, plus office uncertainty. Some of that has diminished and the office sector has begun a recovery. Industrial is also doing quite well as our retail and hotel, which leaves multifamily. Multifamily has been facing plenty of supply challenges across the Sunbelt, including in Florida, but we could be perhaps close to a trough there, although everyone's been thinking that for the last year. Nevertheless, at the same time, rates are going higher.

So multifamily could be sort of the next wave of stress. And then you look at where commercial mortgage REITs are trading at 50% of book value. So I guess what are your high-level thoughts on the landscape we're facing and where SUNS can really move the needle if it's going to just be on direct originations or if you see that there could be potential consolidation opportunities?

Leonard Tannenbaum: So the good news is our headquarters is in a place called Palm Beach, Florida. And Palm Beach, Florida is an A-plus market according to many different indicators. So -- but we are definitely experienced in Southern Florida, certain -- on the treasure coast, some absorption issues in multifamily. We're not really seeing it right where we are. And that's -- so you really have to have pockets of one and the other. Brian and his team did an excellent job understanding the submarkets, the markets, and that's a lot of our analysis is over absorption and absorption trends. So we're definitely on top of it.

And as I said to you over the past year, look, it's terrible to get the lofty REO that we had. We were fortunate that we sold the hotel. And currently, we really just don't have any other stress assets at all. So that's the good news. And then I think -- so that's part one, right? And two is how do we take advantage of stuff. We actually agree with you. There are pockets of real distress out there and distressed REITs. And I think we should be looking at their assets and them also for potential opportunities for our shareholders. So we'll be out there and looking at opportunities.

We're opportunistic lenders, and we'll be opportunistic also with trying to find distressed assets or distressed managers and help them get through this cycle.

Brian Sedrish: Yes. Obviously, Jade, it's Brian. I obviously agree with Len. I think clearly, what's happening in the markets right now just from our competitor perspective, you know better than us. You're seeing a lot of groups opting to either exit the business and/or dealing with asset management issues. I think that you're definitely seeing consolidation in the type of REITs that are focused much more on the flow type business, which, as you know, is not what we focus on. It's much more value-add type opportunities. And what we've seen is a significant pullback in the groups doing those types of deals, which I think largely is what's opened it up for us.

I think the biggest thing for us is being patient. I think deals are coming to us. I think the biggest risk is acting too expeditiously on a transaction. I mean, as Len sort of hit on, we are seeing some of these groups who have been competitors of ours currently struggling and therefore, are looking to offload some of their portfolio. So I think we are in offensive mode based upon everything we said in terms of our availability of capital, and we're just being super strategic in what we're going after. On the multi side, I mean, as you know, I mean, I think there's going to continue to be a lot of issues.

Rates going up is exactly the wrong move for groups that are sitting on transactions that they originated in '21, '22, that vintage multifamily is now definitely the epicenter of the problem. And so that is -- fortunately, we don't have those types of assets. So I think we're feeling pretty good there. On a go-forward basis, as you know, that cliff of development has dropped off precipitously. And that will, in markets like Len mentioned, Palm Beach and other growth markets, that will certainly allow groups to start building again because there's growth behind it. So I think there's a lot of pockets of opportunity we'll keep going after, and it's a combination of all those.

And I think the biggest thing for us is just staying patient and going after the pockets that we think are really interesting returns for our investors.

Operator: Our next question is coming from the line of Tim D'Agostino of B. Riley.

Timothy D'Agostino: Congrats on the merger. I guess with the combined portfolio now and just looking forward, could you maybe talk to or quantify the potential annual G&A savings and when those might show up, if there are any?

Brandon Hetzel: Sure. And you can find this in the proxy as well. So we estimated that the annual G&A savings would be about $1.2 million, and that relates to combined personnel, less audit, no duplicate audits or tax returns, less board fees. So that's what's really driving the G&A is the duplicate items of having similar funds.

Timothy D'Agostino: And should we expect to see that in -- will they fully show up in 4Q or is that more like a 1Q event?

Brandon Hetzel: I mean since the merger just happened, it's going to be more of a forward-looking 2027 event. And then also wanted to point out that in 2027, we also do have the management fee waiver of $250,000 per quarter.

Timothy D'Agostino: Okay. That's helpful. I guess just in regards to the pipeline, I was wondering if you could just provide maybe any color on what that looks like, I guess, maybe in terms of location, property type as well as investment size. It might be hard to comment on, but just looking at the one deal that closed in the third quarter, I believe it was the Park City, Utah residential for -- and I think the current commitment is about $2.1 million. So it'd just be good to kind of hear a little bit more about what's in the pipeline.

Brian Sedrish: Yes, sure, Tim, it's Brian. So largely, the type of deals we're going after is exactly the type we've historically gone after. So big focus on the Southern U.S., right? That's not changing. But as we've always said, strategically and opportunistically, we may follow a borrower or a preexisting relationship into another market. And we are certainly willing to do that. But the core has always been -- will continue to be focusing on where those paths of growth are. And so that's what comprises the current pipeline for the substantial majority of the deals we're going after. Like I said earlier, I think you should think about residential will continue to remain a key focus of ours.

I think particularly for us, where we're seeing the pockets of opportunities both from a rate of return because as I mentioned earlier, some of our competitors are pulling back in that area. And then just also from a division of where the opportunity set is, is those higher-end sort of K-shaped type recovery opportunities where we're still seeing a lot of demand for residential product. And so we want to keep leaning into that. We obviously had our Panther deal. We have several others we're working on. So those are some big focuses.

And then outside of that, where we do really well in some mixed-use properties where there's more complication and we can lean in and hopefully bring our expertise. Those what I would say are the really big areas of focus for us. From a deal size perspective, look, we have to be cognizant of concentration. And so we often are playing in the bigger deal sizes. And so what that typically means is if they get too large and chunky, we will bring in co-investors to help us with those deals while still maintaining certainly a big important control position in those deals. So I think that's sort of what we're mindful of.

And as we obviously can expand and grow, we can continue to hold and eat more of that cooking ourselves. But I think the pipeline is pretty strong. The other one I'll say is one that you've heard many times, and we're certainly seeing this is now clearly, with rates expected to go up, let alone stay in their elevated state, that is absolutely reducing the amount of sales that are happening. And that is resulting in additional calls that we're getting on providing those GAAP equity or I should say, those GAAP capital needs where we would come in and either take out the senior and expand out or alternatively to provide a sub debt tranche.

And so we're seeing a lot of those types of rate change. I definitely expect that those will continue, particularly as we move towards year-end.

Timothy D'Agostino: Okay. Great. And if I could just ask one more. I know I believe Len talked a little bit about in the prepared remarks, but with the deal now behind you and you have more scale at the platform, I guess when we think about unsecured financing, it seems like that's probably the next step here. Could you just provide a time line on that? Has anything changed around when you're thinking about a potential unsecured deal?

Leonard Tannenbaum: I mean the problem with the unsecured markets, in my opinion, as we talk to our partners is it's too expensive. There's too many REITs borrowing in the low double digits. And somehow you get broad brushed with that, even though we have lower leverage, we don't have the non-accruals that everybody else has. We have a really good solid portfolio. It doesn't matter. And I think the combination, at least we get a little bit bigger and we get more scale, which is going to be part of what we need. But the other thing is we're going to need the markets to allow us to get a cost of capital that makes sense.

As you know, we currently lend at 9% all-in cost to SUNS from a mezzanine perspective, right.

Brandon Hetzel: Are unsecured.

Leonard Tannenbaum: Unsecured.

Brandon Hetzel: It's an 8% fixed with a 1% annual fee.

Leonard Tannenbaum: So to get an all-in cost there, right, with OID, broker fees, and everything else, we have to be able to beat that in my view, to want to access the unsecured market. And so hopefully, as we grow and we continue to perform, and we get a good rating, maybe eventually, that can lead to a sub-9% all-in cost of capital, which I think that's sort of my bogey for being willing to access that market.

Operator: Our next question is coming from the line of Tyler Batory of Oppenheimer.

Tyler Batory: First one for me, the share repurchase program. Just help us think about how you're balancing that with originating new loans. It sounded like in the prepared comments, you'd like to execute on that before year-end. So I just wanted to be sure that I heard that correctly, too.

Leonard Tannenbaum: I think we said we want to -- we definitely will start it before year-end. I'm not sure we're going to execute on the whole share buyback.

Brandon Hetzel: Yes. I think maybe you heard that the share buyback is currently through December 31, 2027, so through all of next year as well.

Leonard Tannenbaum: Right. But I think it's an important component. Look, the stock is trading at a level that the Board determines that it could be a very good use of capital to buy back shares. And as long as the stock continues to trade in this area, I think share buybacks have to be considered more than using that equity to do something different. So I think we're excited to be able to buy back shares at a significant discount to our NAV.

Tyler Batory: Okay. I appreciate the clarification there. And then a number of questions here just on originations and whatnot. I'm curious, was the merger a hang up at all in terms of what you could execute on? I don't know if there was any sort of pause in terms of your process while you were working on that deal or maybe just the broader environment is just a bigger hurdle in terms of getting stuff across the finish line.

Brian Sedrish: Yes, definitely the latter. It wasn't the merger that was holding us up. I think it's -- back to the commentary before, I think that we have a big focus on patients and picking our spots to get involved in. I think that the biggest risk right now that anyone has is an eagerness to get capital out. We think the opportunity set ahead of us, and we're -- like I said, we're starting to see that is really strong. I think you pick your spots and be patient about that. On top of that, as Len mentioned, there are several deals that we are in heavy diligence on. And these types of deals are just not flow type deals.

So they just take longer to actually execute. So sometimes you just end up with a chunky quarter, sometimes you don't. So I think it's a combination of those 2 things that are the reason why I think what you're really asking is, was transaction volumes slower in the quarter.

Operator: Thank you. And that does conclude today's Q&A session. I would like to turn the call back over to Brian Sedrish, CEO, for closing remarks.

Brian Sedrish: Well, thank you all for joining us today. We look forward to updating you on the progress next quarter. Have a good day.

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