Sunrise Realty Trust Inc Aktie

Good day, and thank you for standing by. Welcome to the Sunrise Realty Trust's First Quarter 202 Earnings Call. [Operator Instructions] Please be advised that today's call is being recorded. I would now like to hand it over to our first speaker, Gabriel Katz, Chief Legal Officer. Please go ahead.

Good morning, and thank you all for joining Sunrise Realty Trust's earnings call for the quarter ended March 31, 2026. I'm joined this morning by Leonard 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 on our April 15, 2026 press release and is posted on the Investor Relations portion of our website at sunriserealtytrust.com, along with our first 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 and 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's most recent periodic filings with the SEC, including our quarterly report on Form 10-Q 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 first quarter earnings release uploaded to our 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 capital markets overview. Next, Brian will cover our view on the state of the commercial real estate lending markets, discuss our existing portfolio and provide an outlook for our investment pipeline. Then Brandon will provide an update on our financial position. After that, we'll open the lines for Q&A.

With that, I will now turn the call over to our Executive Chairman, Leonard Tannenbaum.

Thank you, Gabe. Good morning, and welcome to our first quarter 2026 earnings conference call. For the quarter ended March 31, 2026, SUNS generated distributable earnings of $0.35 per share of common stock, which covered our dividend of $0.30 per share. The quarter was positively impacted by a short-term loan on a Colorado property, new deal closings and the payoff of a loan to a multifamily property in Dallas.

We were pleased with our first quarter results, which reflected the continued earnings power of our portfolio, the benefit of construction and other existing commitments funding during the quarter and our ability to recycle capital through repayments and new originations at an attractive risk-adjusted return. During the quarter, we completed the foreclosure of our loan secured by Thompson San Antonio, a 162-key Class A hotel in Texas.

We believe we are now better positioned to evaluate value maximizing alternatives since the asset is not subject to the former sponsor's hotel management agreement and brand affiliation. Shortly after taking title, we engaged Easthill to market the asset and the first round of bidding recently concluded. We received multiple attractive offers and expect the process to continue over the upcoming quarters.

The ultimate transaction could take the form of an all-cash sale or a sale that includes lower leverage seller financing from SUNS and its affiliates, combined with a meaningful equity contribution from the buyer. Based on the interest to date, we remain positive about our ability to resolve the investment in a timely manner. On the capital markets front, in March, we completed the expansion of our senior secured revolving facility to $165 million with the addition of Customers Bank, which committed an additional $25 million to our facility.

With that, I'll turn it over to Brian to discuss the market environment and walk through our portfolio in more detail.

Thank you, Len, and good morning. Before turning to the portfolio, I wanted to briefly discuss what we are seeing in the commercial real estate lending market and why we believe SUNS is well positioned.

Over the last 2 years, we have worked to construct a loan book that capitalizes on our team's expertise in providing capital to sponsors of transitional real estate business plans with projects situated in growing southern markets backed by competent owners. Our team seeks to primarily invest in transactions that require a lender which can underwrite complex business plans and create the necessary structure to ensure downside protection. These types of deals are where our team believes it can create alpha.

Within the broader transaction market, we continue to see a meaningful divide between acquisitions and refinancings. Acquisitions where the cost basis has been reset to today's market are generally where the underwriting works most cleanly and where we have been most active. Pricing on refinancings is harder to establish because relatively few comparable assets actually trade, which creates a wide range of outcomes. We find a subset of refinancings interesting, specifically situations where an incumbent senior lender is forcing the sponsor's hand to be taken out.

Capital markets' activity in the quarter was more volatile than recent quarters, driven primarily by geopolitical developments. Treasury yields moved meaningfully higher and securitization spreads widened before partially retracing. From our seat, sponsor inquiry activity remained healthy throughout the period, but several transactions in our pipeline paused for several weeks while sponsors and their counterparties reassess cost of capital.

By quarter end, activity had largely normalized. Importantly, because we underwrite to unlevered returns rather than relying on capital markets execution to manufacture our yield, this kind of episodic volatility has limited impact on the deals we have already closed and modest impact on our forward pipeline. Across the markets we lend into, the picture in the Southern United States is not uniform, and we think this nuance matters in how we deploy capital.

Florida and the Southeast more broadly remain constructive across most asset classes, supported by sustained in-migration and continued employment growth. The major Texas markets are showing signs of tightening on the residential side with concession burn off underway in select submarkets. Some of the more recently overbuilt Western Sunbelt markets are still working through excess supply and many have not yet reached an equilibrium. We remain disciplined about where we deploy and have leaned into reset basis opportunities in the markets that have begun to stabilize.

On the competitive landscape, regional banks have continued to step back into smaller, simpler stabilized deals and the larger debt funds and commercial mortgage REITs have continued to compete aggressively for stabilized multifamily and industrial loans, where spreads have tightened back to the mid-200s over SOFR in many instances. That is not where we play. Our focus remains on transitional business plans where the deal requires structuring, sponsor selection and asset level conviction, not just an attractive cost of funds. Said differently, in a market where many lenders are competing on price, we continue to focus on the less trafficked business plans that require operational and development expertise and a sound understanding of local market dynamics.

The other dynamic worth highlighting is the growing wave of stress in '21 and '22 vintage bridge and construction loans coming due. The market is going to need to clear billions of dollars of this paper through sales, modifications and recapitalizations over the next 2 years. That is not a headwind for SUNS. We did not originate that vintage at scale. Our book is overwhelmingly post rate hike paper at a reset basis and the disgorgement cycle is precisely what creates the acquisition opportunities for the sponsors that we lend to.

Turning to the portfolio. In the first quarter of 2026, the TCG Real Estate platform originated $91 million of loans, of which SUNS committed $62 million across 2 loans. These included $14 million of a $22 million senior bridge loan to finance the acquisition of an 11,000-acre portion of Silver Mountain Ranch in Colorado, which was originated, closed and exited during the quarter and $48 million of a $69 million B note as part of the $406 million refinancing of a 15-property portfolio of Graduate by Hilton Hotels for AJ Capital Partners.

Over the period, SUNS funded $90 million of new and existing loans and received $70 million of repayments, including full repayment on 2 loans, Silver Mountain Ranch and Boheme. As of March 31, 2026, the SUNS portfolio had $397 million of commitments with $299 million funded across 15 loans. Subsequent to quarter end, Jovie Belterra, was fully repaid. Looking ahead, we remain focused on disciplined origination, active portfolio management and prudent capital allocation. We believe the current market favors lenders with flexible capital, structuring expertise and selectivity around basis, sponsorship and downside protection. SUNS is well positioned to capitalize on this environment, balancing growth with risk management and long-term shareholder value.

With that, I will now turn the call over to Brandon Hetzel, our Chief Financial Officer.

Thank you, Brian. For the quarter ended March 31, 2026, we generated net interest income of $7.3 million and distributable earnings of $4.7 million or $0.35 per basic weighted average common share and had GAAP net income of $4.3 million or $0.32 per basic weighted average common share. The quarter included onetime fees from 2 investments, a $400,000 fee on the short-term Silver Mountain Ranch bridge loan and a $1.2 million prepayment fee on the Boheme loan. We believe that providing distributable earnings is helpful to shareholders 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. We ended the first quarter of 2026 with $397.1 million of current commitments and $299.3 million of principal outstanding spread across 15 loans. As of May 8, 2026, our portfolio consisted of $380.2 million of current commitments and $292.1 million of principal outstanding across 14 loans. All loans are current and performing with a weighted average portfolio yield to maturity of approximately 12.4%.

As of March 31, 2026, our CECL reserve was approximately $550,000 or 19 basis points for our loans at carrying value. As of March 31, 2026, we had total assets of $330 million, and our total shareholder equity was $182.5 million with a book value of $13.50 per share. For the quarter ended March 31, 2026, the Board of Directors declared a $0.30 dividend per share outstanding. The dividend was paid on April 15, 2026, to shareholders of record as of March 31, 2026.

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

[Operator Instructions]

Our first question will come from the line of Gaurav Mehta from Alliance Global Partners.

I wanted to go back to your comments around the pipeline and I wanted to get some more color on what you guys were seeing for acquisition financing versus refinancing. And within the current pipeline, what's the sort of mix between different kind of property types?

Sure. It's Brian. Thanks for the question. The pipeline, as mentioned in the prepared remarks, there has definitely been -- it's clear that the banks have returned on more of the most stabilized of assets, multifamily, industrial, existing assets, standing assets. Spreads have come in, as you know. That has not been our focus. What we're seeing a lot of is the opportunity and a big void as a result of these lenders focusing and some of our competitors focusing on industrial and multistabilized, a big opportunity and void in the markets for more transitional product.

So that could include multifamily. It does include multifamily. We're seeing more transitional assets, certainly some in the bifurcation between acquisition and refinancings. On the refinancing side, we're seeing opportunities where the sponsors need to inject existing incremental equity to see them through to the stabilization period. So that's -- there's a series of deals that we've been focusing on there. And then across asset classes, anything with any degree of complexity is really creating a separation from our side and others. Those have really been the big areas that we've been focusing on. That's what really makes up the majority of our pipeline.

Okay. As a follow-up on regions in the prepared remarks, you talked about Florida and some Southeast markets seeing demand and then you highlighted some markets still seeing supply. So I guess in terms of capital deployment, should we expect that you would be more focused on Florida and other markets where you're seeing demand or you could be open to other opportunities in some other markets where there's still supply and maybe sort of reset opportunities that you talked about?

I would expect the majority of our deals will continue to be in those southern states that we are focused on. That's really been our focus. That's where we think we have a bit of a competitive advantage. And that's the path of growth, and that continues to be the case. We're seeing that now more pronounced than we've seen in a while now.

As we mentioned on the West Coast, there's been -- certainly in some of the Sunbelt states, there's been some supply overhang. We're seeing that absorb in the markets that we're focusing on. That's the majority of our pipeline, majority of what we're doing. As always, opportunistically, we will find interesting deals away from that, but I would expect a huge majority in our core markets.

Okay. Last question on the REO. Is that asset currently being marketed for sale? I know earlier you said that you guys received a few offers and it could be all cash sales or you could do some lower leverage financing. But have you accepted the offer? Or is it still in the market?

Good question. It's still in the market with Easthill. We haven't accepted an offer. We're evaluating a number of opportunities, and we will tell you as soon as we accept an offer.

Okay. And maybe lastly, on the balance sheet, the investment in real estate JV, that's the REO asset that you talked about?

Yes, correct.

Our next question will come from the line of Jade Rahmani from KBW.

It's Jason Sabshon, on for Jade. So to start, do you expect to generate any near-term income from the San Antonio JV? You mentioned a few possible outcomes, but is there one that you see as most likely? And what would the time line to exit be?

So one of the things that impacted the quarter is on the negative side, even though I think we had a very good quarter is we didn't get any income from the hotel, probably not getting income from the hotel this quarter, in the current quarter. And in the next quarter, we'll have to see because I think it does get resolved in a reasonable time line, but I think it's over the next couple of quarters. So we don't anticipate any income from a hotel until it gets sold or gets sold and we issue -- we have a note attached to it.

Got it. Separately, it would just -- you touched on it, but can we just have some more color on what drove up interest income during the quarter? I know you mentioned $400,000 fee in a short-term loan and $1.2 million prepay fee, but -- and there was also the new hospitality loan, but was there anything else? It was up $3.1 million quarter-over-quarter. So just curious.

Yes. And you just touched on the majority of the increase, as mentioned, $1.2 million prepayment fee related to the Boheme loan. That also included accretion of unaccreted OID related to that loan. Second was the short-term bridge loan we did to Silver Mountain Ranch, which contributed about $400,000 to the interest income. And then on top of that is the new investment, which was about $48 million into the Graduate Hotel investment. So those 3 drivers were the main increase as well as additional construction fundings of our construction loans on the normal cadence.

Got it. And then on the short-term loan, just curious, how large was that loan?

The entire loan was approximately $21 million. SUNS portion was about $14 million, and that loan was outstanding for about 1 week.

Got it. And then lastly, just on forward originations, what would be the target mix of senior and subordinate going forward? Currently, you're around 75% senior. So just curious.

Yes. I would think it would be somewhere in that range. The majority of what we're doing is on the senior side. We'll selectively find interesting relatively low levered sub debt tranches, which we have in the past. Sometimes those are senior lenders approaching us and asking us if we want to team with them. We're doing more and more of that now as we create more relationships with seniors, but we'll continue to have the majority -- super majority be on the senior side.

And our next question will come from the line of Timothy D'Agostino from B. Riley Securities.

Congrats on the quarter. Looking at Slide 11 in the deck, looking through the deals sourced all the way down to SUNS loan funded, over the past couple of quarters, deal selectivity has kind of hovered around this 1.5%. And I guess you provide a lot of commentary on the call, but I guess, what do you -- what would you need or want to see in the market for your selectivity to go up? I know you talked about balancing growth versus risk, but just kind of understanding at what point -- like what would you need to see for you to start selecting more deals and growing the portfolio?

Yes. I think it's 2 things. One, none of us in the market being optimistic have thought about or were -- or been as happy of the sort of collapse in the market in terms of really interesting opportunistic loans at big discounts, right? So that hasn't presented itself to any great size much to everyone's chagrin. I mean if that start happens more when we have seen banks more willing to enter into DPOs with existing borrowers where we then can team up with those borrowers, that certainly would create it.

The other big thing is just generally more acquisition volume. What happened in the last quarter that we saw is acquisition volume increased pretty significantly. I think if that's sustained, right, and rates stabilize and start coming down, which is obviously it's unclear right now, but that will eventually happen, that will bring about more investment activity. That will create more of an opportunity for us and particularly in those transitional type loans where we -- again, just to repeat myself, we're seeing a big divergence in the majority of the competitors who are focusing on more stabilized assets. Those transitional type deals, which will happen more and more as rates come down, will create many more opportunities for us, and that, I think, will increase our volume for sure.

Okay. Great. That's super helpful. And I guess just across the markets you're in, I know you also speak to making opportunistic investments. I guess, have there been any new markets that stand out to you all? Just trying to get a better sense of what you're looking at and what's interesting and what's out there.

Sure. Well, I hate to be boring, but the reality is that the deals that have been -- are most interesting have been in those southern markets what we've continued to collectively all talked about. It's interesting, data -- I recently saw is I thought there was going to be a lull in pick your markets, Florida, parts of Texas or let's just focus on Florida for a second, where you had that massive in-migration that was more getting back to equilibrium.

But recently, I've seen a big uptick in the continued migration into Florida. I mean we have a big development in -- as you guys know, in Florida, Panther National home sales. We talk to those group -- that group significantly -- or frequently. And we've seen just a tremendous increase in volume of homeowners wanting to migrate here. So it seems like that's picked up a bit. And that is a knock-on effects for retail demand and for rental demand.

So those are the markets that we still see are interesting, and they're boring in the sense that we continue to do them, but those are the ones that are fun. And then selectively, it's out -- as I mentioned earlier, it's opportunistically, there are deals we're seeing in other markets that are interesting out West. But for the most part, we're just -- we're sticking to what we're seeing is the real interesting opportunities.

[Operator Instructions]

Our next question will come from the line of Tyler Batory from Oppenheimer.

Just first one for me on the outlook this year. There were some onetime items, obviously positively impacting Q1, contributing to that $0.35 distributable EPS. What's a good run rate to think about in terms of distributable earnings this year? Are you still thinking in line with the dividend or covering the dividend? Is that a good way to think about things?

Do you want to answer that, Brandon?

Sure. So we won't give specific guidance on projections for distributable earnings throughout the year. But we will say that from time to time, we'll have various fees that can positively impact our income, and that's normal course of business for these types of loans. But as you mentioned, the Q1 distributable earnings benefited from those 2 short-term items.

But we don't -- the Board doesn't underwrite the dividend based on one quarter at a time. They look at the medium-term earnings power of the portfolio, including expected fundings and existing commitments, repayments, leverage capacity and forward originations. So we won't give specific guidance going forward, but we did want to point out the short-term items so you could back into the run rate.

Okay. Appreciate that. And then in terms of repayments, $70 million odd this quarter. A couple of those were well before maturity, too. Just trying to understand why if that's maybe a bigger trend that might be going on or playing out in the portfolio in terms of some loans being repaid earlier than expected?

Yes, sure. So it's actually only one that was repaid early, the Boheme loan. The rest of the $70 million was one, the short-term loan that was in and out during the period as well as repayments and draws around the Panther National loan. So that's a revolving loan where they'll draw and repay and that gets grossed up into those repayment numbers.

In other words, we're not seeing anything abnormal.

Okay. Okay. That's what I was trying to get at. And then just the last one for me. So the San Antonio issue, I think it stuck up on us. So I just wanted to be sure when you look across the rest of the portfolio that there's nothing that is concerning, nothing that you're watching closely in terms of a potential negative outcome similar to what happened in San Antonio?

Yes. And I get that. I did sneak up on some people. It did happen relatively quickly as well. And we do expect a resolution in the coming quarters and not too bad a resolution. So I don't think there is -- right now, there's nothing else on watch list, not one other thing on watch list. So things are obviously doing a little bit better, a little bit worse, but everything is right within the tolerances of our plan.

I'm not showing any further questions in the queue. I would now like to turn it back over to Brian Sedrish for closing remarks.

Thank you all for joining our Q1 call today. We are excited about the opportunity set ahead of us and look forward to sharing our progress with you over the coming quarters. Have a good rest of your week.

Thank you for your participation in today's conference. This does conclude the program. You may now disconnect. Everyone, have a great day.

Good morning, and welcome to Sunrise Realty Trust Fourth Quarter and Fiscal Year 2025 Earnings Call. At this time, all participants are in a listen-only mode. [Operator Instructions] Later, we will conduct the question-and-answer session and instructions will be given at that time. As a reminder, this call is being recorded.

I would now like to turn the call over to Gabriel Katz, Chief Legal Officer. Please go ahead.

Good morning, and thank you all for joining Sunrise Realty Trust Earnings Call for the quarter and fiscal year ended December 31, 2025, and I'm joined this morning by Leonard 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 February 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.

During 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 and 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'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 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 capital 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'll open the lines for Q&A. With that, I will now turn the call over to our Executive Chairman, Leonard Tannenbaum.

Thank you, Gabe. Good morning, and welcome to our fourth quarter and fiscal year 2025 earnings conference call. As we finished 2025 and turn 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 seem to be a transition year, -- we saw limited transaction volume in early '25, which gave way to improving conditions in the second half as the Federal Reserve's rate easing cycle took hold.

As a reminder, SUNS and CNS 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 SUNS with a scalable infrastructure, debt and equity capital markets expertise and the ability to pursue larger transactions than they could currently pursue on its own. During the fiscal year ended December 31, 2025, the TCG real estate platform closed on $368 million of loans, of which SUNS committed $247 million and funded $224 million.

Additionally, during the 2025 fiscal year, SUNS received $52 million of repayments -- as of February '27, the TCG real estate platform has closed on $91 million of loans this year, with SUNS committing $62 million of that total. For the quarter ending December 31, 2025, SUNS generated distributable earnings of $0.27 per share per basic weighted average share of common stock. Earnings were impacted by the long to Thompson Hotel in San Antonio, which we foreclosed on less than 2 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 a 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 March 31, 2026. The -- 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 of 2024 remains expandable to $200 million and carries an interest rate at $2.75 over SOFR with a 2.63% floor. With that, I'll turn it over to Brian to walk through our portfolio in more detail.

Thank you, Lenny, and 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 and 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 more durable foundation for performance across market cycles.

Turning to our portfolio. In the fourth quarter of 2025, [ SUNS ] closed on $56 million of commitments, which include approximately $26 million in a financing package comprised of 2 senior loans for collection suites. A small bay industrial for-sale development consisting of 2 projects located in Doral and West Palm Beach, Florida; and a $30 million loan in a senior bridge for the financing of a 7-story Class A retail property in the Galleria section of Houston, Texas.

From year-end through March 1, SUNS committed approximately $62 million to 2 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 river walk and is viewed as a Class A hotel situated in 1 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 bar 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 SUNS 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% and presents a potential opportunity to expand SUNS' 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. With that, I will now turn the call over to Brandon Hetzel, our CFO.

Thank you, Brian. For the quarter ended December 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 December 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 industrial earnings is helpful to shareholders in assessing the overall performance of SUN's 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, also known as CECL. We ended the fourth quarter of 2025 with $420.7 million of current commitments and $305.5 million of principal outstanding spread across 16 loans.

As of February 27, 2026, our portfolio, excluding the Thompson Hotel consisted of $442.1 million of current commitments and $337 million of principal outstanding across 16 loans with a weighted average portfolio yield to maturity of approximately 12%. I'd also like to note that as of December 31, 2025, our CECL reserve was approximately $2.1 million or 68 basis points for our loans held at carrying value.

As of December 31, 2025, we had total assets of $310.2 million, and our total shareholder equity was $182 million, with a book value of $13.56 per share. As Lynn mentioned earlier, the Board of Directors has declared a $0.30 dividend per share for the quarter ended March 31, 2026, the dividend will be paid on April 15, 2026, to shareholders of record as of March 31, 2026.

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

[Operator Instructions] Our first question comes from the line of Timothy D'Agostino of B. Riley Securities.

Regarding originations, the $62 million 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're seeing a 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.

Yes, sure. Thanks for the question. It's Brian. So yes, certainly, the volatility in the market has created some ups and downs, 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 market, CLO market, the warehouse line market.

That's really not an area, as you know, that we've been focused on. And 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're focused on. And that definitely seems to happen. You also seem to see a gap tightening between buyers and sellers. So there is more opportunity on new acquisitions. All that being said, the last couple of weeks -- it's 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 a deal makes sense or not.

I expect that will continue. We're in the business of finding where there's opportunities for -- to take advantage of dislocation in the market. And I think that is where -- is where the opportunity will sit for the next foreseeable future. I think that sort of volatility creates opportunities for us. But it's definitely like everyone else, a bit of a wait and see to see how things settle out.

Our next question comes from the line of Gaurav Mehta of Alliance Global Partners.

I wanted to ask on the loan pipeline. I think in your deck, you showed $65 million, which is lower than $1.7 million. in the last quarter. So does that reflect your -- I guess, your comments about market volatility and I guess, what kind of dropped off that loan pipeline in the last, I guess, couple of months?

Sure. Thanks for the question. It's Brian again. Yes, it does trail off the last question and answer. Definitely, there has been a differentiation in terms of pricing on the multifamily 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, 650 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's focus on very highly actionable deals and remove those that create more noise and distraction for us. And I expect as I'm sure you've seen a lot of the companies, those things will come up and down in terms of the pipeline. But we thought we wanted to call and reflect what we felt was a more focused area for us in the next couple of months.

All right. That's helpful. Second question on the hospitality asset in San Antonio. Can you maybe provide some more color on why that asset foreclose anything specific about that asset?

Yes, sure. So the Thompson in San Antonio, a really high-quality asset. Obviously, Thompson flag, which is the Hyatt flag, 162 keys -- the asset -- look, San Antonio has had a bunch of deliveries recently. There's a lot of positivity in that market, but there's 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's 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 operations, which we do believe in the medium term is achievable. The sponsor just didn't have the capability to continue to service the loan.

I mean just to add to -- I mean, it's a very high-quality asset. Like I said, it was built very recently in 2021. I think from everyone that stays there, everyone you speak to, it's a high-quality asset. It's just unfortunately an issue with cost of capital right now and the fact that there's been some deliveries that are currently constraining cash flows.

All right. And then maybe lastly on the dividend, $0.30. It seems like it's higher than $0.27 earnings in 4Q. How should we expect, I guess, your target dividend coverage in respect to where the earnings are?

Look, our goal -- is Len speaking. The goal is not to overpay our dividend. So by I think the board, looking forward felt comfortable that we would get this covered over the course of the next 6 to 12 months in aggregate.

Our next question comes from the line of Tyler Batory of Oppenheimer.

Tyler. Just wanted to clean up a few items and the double click on the San Antonio asset. Just help us think about the ideal resolution there, perhaps the time line as well. And I just want to be clear, I mean, it sounds like this is a very asset specific sort of issue and not reflective of anything that's going on broader in the portfolio, but just want to be sure that that's the case in your view.

Yes. I think you saw this -- this is Len speaking. I think you saw the asset was a 3. So it was on our watch list. We sort of knew that this could happen. We were hoping it didn't the resolution was clean, which was nice, too. Was it clean foreclosure, it was no delay to it. It was necessary as there's additional value that could be in depending on whether the flag is renewed or not. And so our intention, I think Brian said that is to hire premier broker as soon as we can. it sounds like about a week from now.

And market -- again, market the product -- and we believe we're going to find a buyer for it. So this is around next quarter, we should ask a lot of questions about why?

Great. And in terms of bumping up the East West Bank facility, $1.40 to $1.55, know there's potential to get that since you 100. Was that something you're expecting in the next couple of quarters? And just kind of talk us through sources of capital here as we move through 2026.

So 1 thing that's been frustrating to me about the nonaccrual or the properties it comes out of our borrowing base, and we proactively sold our banks and when we dealt with us. So we're not able to relever the asset. And -- and that's 1 reason why earnings are a bit lower and our availability is a bit lower. So as soon as we resolve what you're going to look for to sort of see momentum or additional momentum towards positive earnings and all that good stuff. Is this asset getting resolved.

And because as I think maybe pointed out or maybe I skirt last question, this really is the only asset that we're concerned about at this time. And you can see that we'll move assets into category 3, 4 and 5 as we find more concern over assets. So this is really only -- our only concerned asset. It's definitely an issue. We know we have to resolve it quickly and that's going to do 2 things: one, put more money in to do more good deals, but also to expand our borrowing base.

Okay. And the last 1 for me. hopefully tie a lot of this commentary together. When you brief on 2025, you look at 2026 so far, just kind of frame for us how capital deployment is really trending versus your plans a year, 1.5 years ago when you came public. I was just trying to get a reference point in terms of how things have gone in the past couple of quarters versus what you were hoping or versus what you were expecting?

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 -- was the whole premise of really starting the business back in through 2023, 2024.

There were 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 market's tightened up, the opportunity set, rates didn't drop as quickly, the opportunity set was a bit thinner than expected. We were able to get out some capital and what we thought was interesting deals.

I think the most important thing is making sure we're not going after deals just to stretch. '20 -- the end of '25, really things started to break a bit there seems to be definitely a tighter gap between buyer and sellers bids, which meant more acquisitions. And as certainly, as you know, that is highly correlated to the opportunity set for us is just more acquisitions.

Refinancing certainly happened. There seems to be more of a capitulation on the refinancing side in terms of incumbent lenders wanting -- are forcing their borrowers. And then I would say, though, that things have been a bit more demoltrous 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'll be a bunch of volatility for the time being.

I mean largely in our type of business, as I mentioned in the prepared remarks, I mean, we really are in more of the -- more of the off-the-run interesting transactions. And I think those always create opportunities in times of uncertainty, and there are several we're looking at now. And so I'm hopeful look, we're going to get through generally the macro issues, at least I hope so, in the near future. And that will create more opportunities. In the meantime, as I said, this volatility does create pretty interesting opportunities for guys like us.

Let's turn back over to Brian Sedrish for closing remarks. Sir?

Well, thank you very much for all for us for joining. We look forward to talking to you on the next quarterly conference call. Thank you.

This concludes today's conference call. Thank you for participating. You may now disconnect.

Ladies and gentlemen, thank you for standing by. Welcome to Sunrise Realty Trust Third Quarter 2025 Earnings Call. [Operator Instructions] Please be advised that today's conference is being recorded.

I would like now to turn the conference over to Gabriel Katz Chief Legal Officer. Please go ahead.

Good morning, and thank you all for joining Sunrise Realty Trust's Earnings Call for the quarter ended September 30, 2025. I'm joined this morning by Leonard 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 7, 2025 press release and is posted on the Investor Relations portion of our website at sunriserealtytrust.com. Along with our third quarter 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 and financial performance and projections in 2025 and beyond. 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 quarterly report on Form 10-Q 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 third quarter earnings release uploaded to our 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 capital markets overview. Next, Brian will cover our view on the state of the commercial real estate lending markets discuss our existing portfolio and provide an outlook for our investment pipeline, then Brandon will provide an update on our financial position. After that, we'll open the lines for Q&A.

With that, I will now turn the call over to our Executive Chairman, Leonard Tannenbaum.

Thank you, Gabe. Good morning, and welcome to our third quarter 2025 earnings conference call. For the quarter ended September 30, 2025, SUNS generated distributable earnings of $0.31 per share of common stock, which covered our dividend of $0.30. Before Brian walks through our pipeline and portfolio, I want to take a moment to highlight what really sets SUNS apart from other commercial mortgage REITs. At SUNS, our investment focus is clear. We originate transitional loans to properties primarily in the Southern United States. This is a region we know well and that local expertise allows us to generate attractive risk-adjusted returns through disciplined underwriting, and thoughtful structuring.

As of September 30, 2025, our leverage was approximately 0.4x. That should increase as our existing loan commitments continue to fund. This is substantially below our targeted leverage of 1 to 1.5x. The peer average, however, is substantially higher than our target. As our long-term goal is to achieve an investment-grade rating from the top agencies in the next 3 to 5 years.

Now turning to the portfolio. Our weighted average loan to cost to closing is only 56%. This conservative positioning has led to our strong credit performance. Additionally, our new vintage portfolio with no loans made before January 2024, has also contributed to our strong portfolio performance. About 95% of our loans are floating rate. With an average [ SOFR ] floor across the portfolio of about 4%. SOFR has now dropped below 4% and is anticipated to go lower. Given the SOFR floors in place across our loan book and our credit lines much lower floor at approximately 2.6%, we have the potential to earn additional income through the expansion in SUNS net interest margin.

As the company's largest shareholder, I believe SUNS presents a terrific risk-adjusted return at a lower effective tax rate. My confidence in our company is why I've continued to make frequent share purchases since our first day of trading. In my view, SUNS today offers a compelling entry point at a meaningful discount to book value with stable dividend coverage and clear earnings and dividend growth potential. We've also built a team that's built for success. Our 8-person dedicated real estate team within the larger Tanenbound Capital Group platform gives us this disciplined underwriting deep local market knowledge and a differentiated focus on transitional commercial real estate projects across the Southern U.S.

With that, I'll turn it over to Brian to discuss the market environment and walk through our portfolio in more detail.

Thank you, Len, and 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 real estate market. We have seen a notable pickup in activity over the past quarter as financing requests have increased meaningfully relative to the first half of the year. We believe this is the result of borrowers gaining greater confidence that short-term interest rates are on a path of gradual decline. This renewed sense of interest rate stability is encouraging more sponsors to come off the sidelines and actively engage in capital planning, whether it be refinancings or new projects. The increase in activity is not limited to refinancing opportunities as we are also seeing a rise in financing requests tied to new acquisitions.

The bid-ask spread between buyers and sellers continues to narrow, and that is helping to increase transaction volume. We are well positioned to finance new acquisition business plans where the basis has effectively been reset to levels that better align with current rent growth and for-sale housing assumptions. We are also seeing traditional commercial banks gradually reenter the market, primarily focusing on lower leverage lending. While their activity remains selective, they are playing an important role as back leverage providers for many of the transactions that we have been targeting.

We view that as a healthy development indicative of improving liquidity in the broader CRE financing ecosystem. That said, the depth of the commercial real estate market remains out of balance. There remains a meaningful gap between primary and secondary markets. Across property types and at different stages of an asset life cycle, from construction through to stabilization. Most of the new financing activity is concentrated in the bridge lending space primarily within multifamily and industrial properties. These are assets that have largely completed their improvement plans and are moving towards stabilization.

As a reminder, at SUNS, we primarily focus on transitional real estate projects that have yet to reach stabilization or near stabilization. Our focus remains on this segment as we believe this part of the market still provides the strongest risk-adjusted returns. PCG's real estate pipeline primarily comprises loans to transitional assets backed by highly qualified sponsors that require a more structured solution. Whereby our team can capitalize on its expertise in pre-stabilization business plans and complex deal structures.

We believe that these unique core competencies allow us to capture the most attractive opportunities emerging in this current market environment. Turning to our active pipeline. We have continued to see improvements in both the quantity and quality of deals sourced. As of today, the TCG real estate platform has 2 signed nonbinding term sheets in documentation totaling approximately $170 million. We expect SUNS to be allocated a portion of these investments. Turning to the portfolio. Our originations for the quarter ended September 30, 2025, partly reflected the slower market dynamics, which has picked up since quarter end. Specifically, in Q3, the TCG real estate platform originated a $60 million senior secured loan for a 2-tower condominium development in the Brickell neighborhood of Miami, Florida, of which SUNS committed $35 million.

Over the period, SUNS funded $33 million of new and existing loans. As of September 30, 2025, the SUNS portfolio at $367 million of commitments with $253 million funded. Subsequent to quarter end, SUNS successfully closed on $56 million of loan commitments, which include approximately $26 million in a financing package comprised of 2 senior loans for collection suites and industrial for-sale development including 2 projects located in Doral and West Palm Beach, Florida. And a $30 million loan in a senior bridge loan for the refinancing of a 7-story Class A retail property in the Galleria section of Houston, Texas.

I remain highly confident in the opportunity set ahead, and I look forward to capitalizing on the many attractive opportunities currently in front of us.

With that, I will now turn the call over to Brandon Hetzel, our Chief Financial Officer.

Thank you, Brian. For the quarter ended September 30, 2025, we generated net interest income of $6.1 million and distributable earnings of $4.12 million or $0.31 per basic weighted average common share and had GAAP net income of $4.05 million or $0.30 per basic weighted average common share. We believe that providing distributable earnings is helpful to shareholders 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, also known as CECL, for the quarter ended September 30, 2025, the Board of Directors declared a $0.30 dividend per share outstanding.

The dividend was paid on October 15, 2025, to shareholders of record as of September 30, 2025. We ended the third quarter of 2025 with $367 million of current commitments and $253 million of principal outstanding spread across 13 loans. As of November 3, 2025, our portfolio consisted of $421.1 million of current commitments and $295.2 million of principal outstanding across 16 loans with a weighted average portfolio yield to maturity of approximately 11.8%. I'd also like to note that as of September 30, 2025, our CECL reserve was approximately $400,000 or 17 basis points for our loans at carrying value. As of September 30, 2025, we had total assets of $258.8 million, and our total shareholder equity was $184.6 million, with a book value of $13.76 per share.

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

[Operator Instructions] And our first question will come from Timothy [indiscernible] with B. Riley Securities.

Congrats on the quarter. Just getting into the pipeline a little bit. In the investor deck, you had mentioned the pipeline assets are broadening your presence across the Southern United States. I was just wondering what new geographies within the Southern U.S. you're seeing in that pipeline?

Sure. Thanks for the question. It's Brian. I mean, we are staying true to our focus of primarily the Southern U.S. I mean, that has not changed Florida, Texas, of course, we are currently looking at -- we have one signed in the Carolinas, in this case, specifically North Carolina, Georgia, Tennessee, those really remain the primary markets that we're seeing a preponderance of our deals. And then sporadically, as we've always said, if there are interesting deals that we believe represent good risk-adjusted returns, we'll look at those as well.

Okay. Great. And then I guess within the geographies you just mentioned, are there any that stand out as the most attractive in terms of investment?

Not particularly different than what we have historically been looking at. We still are seeing really interesting pockets in the state of Texas. There are certainly some interesting deals still within Florida. It's obviously asset class dependent. You have to worry about oversaturation. So just like anything, you have to be cognizant of particular on-the-ground dynamics. The Carolinas still remain interesting. Tennessee. We're looking at a bunch of deals right now. those are continuing to be the areas that we're focusing on, and we're seeing enough deal flow to really enable us to continue to stay focused on those areas.

[Operator Instructions] And our next question comes from Jade Rahmani with KBW.

How are things going on the debt side of the business strategy? I know you have been focused on further syndication bank participation in the repo line as well as plans for bond issuance?

Okay. We'll start with the easy one. We're not going for a repo line for sure. We're not -- we really are differentiated from the other mortgage REITs and that we don't want to do this 4 time leverage deals and repost. We think that's how you get in trouble. We're set going more after the latter financial model of getting an investment grade rating over time, not levering, overlevering it 1 to 1.5x. From a bank perspective, it's really great. I mean, there's a lot of interest in banks. I think Jeff Bacus, who leads our DCM desk is doing a good job educating these banks as they come in one by one, and there -- they have very positive experiences. But because our portfolio is really strong. So I think so far, so good with expanding our bank lines at that $275 over SOFR level.

So I think that's the way we're going to continue to finance I did say in the last call that I was going to look to do a , I don't know, either preferred or unsecured offering. We're still working on it. We're watching the tape today as read after REIT has started to print perpetual preferreds and they're actually being absorbed by the market. So we are watching that market. We do intend to be there this quarter or next quarter, but you do have to have the market open. So I think that is going to be good -- good enhancer.

Where do you think the cost of the preferred would be?

I mean you're seeing them at 8, right? You see [ 778 ] today from one REIT, cut done, Pine got one done at 8. So it seems like that's the number. I really don't want to price much higher than that. Because I want to make sure we get a good net interest margin over time. So we'll wait for the right price if we have to.

Okay. And you prefer to do that then to take up leverage through a warehouse line?

Absolutely. I really have no desire to do repo , no desire to do warehouse in this product. This product, I own 25% of the product. We want to protect our investors downside by not overlevering it. So we, by the way, may not be preferred it could be unsecured debt. I'd really like to unsecured that too, 5- and 6- and 7-year unsecured, it could be a baby bond. It could be a preferred. There's a lot of variety of things that we could do. That we could lever appropriately and not get to trouble in the downturn.

It's been an interesting cycle. We have not really seen I would say, high volatility and sort of violent pressure on the repo side as what we saw in the financial crisis. We've seen managed deleveraging from several of the mortgage REITs that have major credit issues, but it's been a lot more stable on credit lines or bank warehouse lines are an area that banks definitely seem to be looking to be more active -- could you please comment on the portfolio underlying performance? And any trend in the underlying deals that you're seeing thus far? I know these are construction deals. So completion is probably the biggest hurdle, but if you could give a comment on -- as to how the largest deals are trending?

Sure. Yes, Jade, I'll take it. It's Brian. Our portfolio now is performing as -- really as expected. I mean, a portion of any of these deals. There are always things that pop up that need to be addressed. Bar calls us and says, they'd like to do something because they think it's more value-add or maybe there's a 2-week delay here or there. but that's just ordinary course. The underlying construction activity and progression has been going well on all the loans that we have -- and then on the top line, in terms of if it's presales, on condos or whether it's leased up, they've all been moving along as expected. There's nothing particularly exciting about the progress, which is what we love, slow, steady expected. And that's what we're continuing to see. There's actually been a bit of a pickup recently on a couple of our for-sale projects just resulting from, I think, just a view of more migration down in this particular case to South Florida.

I expect that will continue in light of some of the political environment. But other than that, everything is pretty normal course.

I am showing no further questions in the queue at this time. I would now like to turn the call back over to Brian for closing remarks.

Great. Well, thank you, everybody, for joining. We are excited about the upcoming quarters and the prospects and the pickup in momentum, and we look forward to talking to you again in the coming quarters.

This concludes today's conference call. Thank you for participating, and you may now disconnect.

Good day, and thank you for standing by. Welcome to the Sunrise Realty Trust Second Quarter 2025 Earnings Call. [Operator Instructions] Please be advised today's conference is being recorded. I would now like to turn the conference over to your speaker today, Gabriel Katz, Chief Legal Officer. Please go ahead.

Good morning, and thank you all for joining Sunrise Realty Trust's earnings call for the quarter ended June 30, 2025. I'm joined this morning by Leonard 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 June 24, 2025 press release and is posted on the Investor Relations portion of our website at sunriserealtytrust.com, along with our second quarter 2025 earnings release and investor presentation.

Today's conference call includes forward-looking statements and projections that reflect the company's current view with respect to, among other things, market developments, our investment pipeline, anticipated portfolio yield and financial performance and projections in 2025 and beyond. 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 quarterly report on Form 10-Q 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 second quarter earnings release uploaded to our 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 capital markets overview. Next, Brian will cover our view on the state of the commercial real estate lending markets, discuss our existing portfolio and provide an outlook for our investment pipeline. Then Brandon will provide an update on our financial results. After that, we'll open the lines for Q&A.

With that, I will now turn the call over to our Executive Chairman, Leonard Tannenbaum.

Thank you, Gabe. Good morning, and welcome to our second quarter 2025 earnings conference call. I am pleased with all the progress that SUNS has made over the course of the year. For the quarter ended June 30, 2025, SUNS generated distributable earnings of $0.31 per share of common stock, which covered our dividend of $0.30 per share.

Turning to our senior secured revolving credit facility. I am pleased to announce that during the second quarter, we added $90 million of additional commitments from City National Bank of Florida and EverBank. We now have $140 million of commitments under our senior secured credit facility, which can expand to $200 million.

I believe that having 3 institutional banks in our credit facility highlights the strength of SUNS' lending platform and the trust that we have built with our financing partners. As a reminder, this facility carries a very attractive interest rate at 2.75% over SOFR with a 2.63% floor. This facility provides us the financial flexibility to pursue attractive opportunities and drive continued growth in our target markets. As we look ahead in our capital structure, we believe the next avenue for debt capital will be in the unsecured markets.

I will now turn it over to Brian to discuss the market and our portfolio.

Thank you, Len, and good morning. Before turning to our current portfolio and pipeline, I wanted to take a minute to discuss what we're seeing generally in the real estate market. Beginning in Q1 2025, we saw a noticeable pickup in the U.S. commercial real estate market, which somewhat slowed in Q2 due to tariffs and macroeconomic conditions. Recently, this investment activity has picked up again, leading to an increased demand for capital with many borrowers seeking debt for refinancings or acquisitions.

We believe that this increase in activity is attributable to 2 main factors: one, supply clearing the market as previously construction activity was somewhat muted; and two, an expectation that short-term interest rates will begin a slow path downward. As interest rates eventually begin to creep downward, we believe that this will continue to act as a catalyst for new deal activity.

As noted, during the second quarter, we saw a decrease in transaction activity, which we attribute in part to global uncertainty around tariffs as lenders and borrowers analyze how this may impact construction projects and business activity in general. As we have moved into the third quarter, along with the increase in transaction volume, we have also seen an increase in competitors reentering the market. Many of these competitors are focused on financing complete or near complete business plans where the underlying real estate is already producing cash flow.

At SUNS, we primarily focused on transitional real estate projects that have yet to reach stabilization or near stabilization. In this segment of the market, we are still seeing robust deal flow, and we continue to see less competition. Our focus remains on this segment as we believe this part of the market still provides the strongest risk-adjusted returns. SUNS originations for the quarter ended June 30, 2025, partly reflected the market dynamics observed over the period. Specifically in Q2, SUNS committed $9 million to a senior secured loan for the construction of a residential property in Park City, Utah.

Turning to our pipeline. Just as market activity rebounded coming out of Q2 and into Q3, our active pipeline saw significant increases in both the quantity and quality of deals sourced. As of August 1, the TCG Real Estate platform has 5 signed nonbinding term sheets in documentation, totaling approximately $275 million, which includes one deal from last quarter, which is yet to close. All 5 of these term sheets are for first mortgage loans. We expect SUNS to be allocated a portion of these investments.

TCG's real estate active pipeline primarily comprised of loans to transitional assets backed by highly qualified sponsors that require a more structured solution, whereby our team can capitalize on its expertise in pre-stabilization business plans and complex deal structures. We believe that these unique core competencies allow us to capture the most attractive opportunities emerging in this current market.

Turning to our portfolio. As of June 30, 2025, the SUNS portfolio had $360 million of commitments with $251 million funded. We believe that the SUNS portfolio is well positioned from an interest rate perspective as 86% of our current portfolio's outstanding principal is floating rate with a weighted average SOFR floor of 4.1%. Given the floors in place across our loan book, our credit line with an approximate floor of 2.6% presents a potential opportunity to expand SUNS' net interest margin.

We expect in the near to medium term, our portfolio composition will remain relatively unchanged, with an emphasis on well-located residential and mixed-use assets backed by experienced and well-capitalized sponsors. I continue to remain bullish on the opportunity set in front of us and look forward to capitalizing on many of the current opportunities that we are seeing today.

With that, I will now turn the call over to Brandon Hetzel, our Chief Financial Officer.

Thank you, Brian. For the quarter ended June 30, 2025, we generated net interest income of $5.7 million and distributable earnings of $4.1 million or $0.31 per basic weighted average common share and had GAAP net income of $3.4 million or $0.25 per basic weighted average common share.

We believe that providing distributable earnings is helpful to shareholders 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.

For the quarter ended June 30, 2025, the Board of Directors declared a $0.30 dividend per share. The dividend was paid on July 15, 2025, to shareholders of record as of June 30, 2025. We anticipate that the Board of Directors will declare the third quarter dividend on or about September 15, 2025.

We ended the second quarter of 2025 with $360.2 million of current commitments and $251 million of principal outstanding spread across 13 loans. As of August 1, 2025, our portfolio consisted of $360.2 million of current commitments and $253.2 million of principal outstanding across 13 loans with a weighted average portfolio yield to maturity of approximately 12.2%.

I'd also like to note that as of June 30, 2025, our CECL reserve was approximately $626,000 or 25 basis points for our loans at carrying value. As of June 30, 2025, we had total assets of $256.5 million, and our total shareholder equity was $184.3 million with a book value of $13.73 per share.

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

[Operator Instructions] First question comes from Randy Binner with B. Riley Securities.

Okay. So a quick question, and I'm probably going to look at Slide 13 on the deck with the portfolio detail. But related to the 5 term sheets for $275 million that's in the pipeline, can you kind of size where that kind of interest rate profile is on that?

Sure. Thanks for the question. Yes, so the 5 that we're talking about are, firstly, all first mortgages. And then as it relates to the spread, and we've seen spreads stay relatively strong, they are currently above the current blended portfolio rate of our existing loans.

Okay. Awesome. And then on the -- so the Park City loan is smaller. But it was interesting in that maybe that has a spread that's higher. And it's also in a new geography. So could you speak to if there was something interesting about that one from a return perspective? And then if you're kind of broadening the aperture on geographies you're looking at?

I think -- it's Len speaking. I think the Park City loan is a much bigger loan. We took part of it. So we did not lead or agent that one, but we found an attractive value, and we were brought in as a syndicate partner.

Okay. Is it -- should we think of the West or the Intermountain West as being an attractive area in general? Or was that just more opportunistic?

I would say that as we sort of think about the southern half of the U.S., right, there are certain pockets where it matches up with our growth expectations. And those are the areas that we'll go to. I think expect that we'll continue to see a substantial percentage of our portfolio in the current states that we're operating in, sprinkle in Georgia, sprinkle in the Carolinas, a couple of Tennessee, but that will be the majority of what we're doing.

But we will see opportunistically deals that still fit those -- the profile of the opportunity set that we think is interesting, and we'll take advantage of that. And this one was one of those we're really good about -- we felt really good about the risk in this deal given coverage, and we felt great about the rate of return. And so we opportunistically went for it.

Our next question comes from Jason Sabshon with KBW.

Yes, it would be great to get more color on your origination targets for the second half of 2025 and 2026. And within that, what's the split of senior and subordinate loans?

Yes. Jason -- do you want to go ahead, Len?

Look, we try not to forecast, as you can see from the loans slipping from the second -- the last quarter to this one. These loans can take a long time to close. It's kind of -- can be kind of frustrating at times. You can think a loan closing can be anywhere from a month or 2 to one of them is 8 months. And so you've seen one loan slip from quarter-to-quarter. What I'm really pleased about is the 5 loans that we've signed and in documentation, which means they're in active underwriting.

I can't tell you whether they close in the third quarter or the fourth quarter or all of them close, but we certainly -- most of them will close. And we'll have those closings going on this year. Beyond that, I'm pretty excited, too. I think we've got a number of other ones in the wings that we're contemplating, but they're not signed. So much higher chance of a loan closing after it's signed and we have to deposit and documentation.

Yes. And I would just say generally, we're seeing real interesting activity. But as Len said, it's just unclear, right, from a transaction closing perspective as to when they actually close. But I do feel really encouraged by our pipeline and what we're seeing out in the marketplace.

Got it. That makes sense. And then on the loans that are currently on your books, the Florida condo loans, in your view, how is that market performing overall? And specifically, how are those projects progressing?

Sure. Yes. Right now, the projects that you're talking about are performing as expected. There hasn't been any noticeable decrease in activity. I mean the nice thing certainly about a couple of our loans in the Florida area that you're talking about is the price points are on the more "affordable" side of the space which is obviously opening up the aperture to a lot more buyers. So to date, we're seeing that activity relatively stay the same. There's been some moderation, but the business plan for the most part is on track there.

Great. And then separately, you talked about your leverage target at scale being 1.5x with part of that coming from a credit facility and another portion from unsecured debt. So I guess what's like the target time line for scaling leverage and any potentially unsecured issuance?

As you know, we have a $75 million line that's not drawn, right, Brandon?

It's not.

Yes, that's not drawn. So we want that line drawn to make it more cost efficient of capital. We're monitoring the unsecured market. As I said in my remarks, that's where we're going to go next or that's where we plan to go next, assuming the market cooperates. You also have to do deal timing. We have these deals that are closing in the ones and the wings. And to the extent that we have funded deals that need additional firepower, we're going to have to go to the unsecured market and raise it. So that's the project for the fourth quarter.

And just to clarify, the $75 million line is an unsecured line on top of our $140 million East West Bank-led credit facility.

Our next question comes from Tyler Batory with Oppenheimer.

I got disconnected earlier, so I apologize if these were already addressed. But my first question is on the macro and the market backdrop in terms of more competitors in the market. It sounds like that's not something that's impacting you right now, but it's also something that you've called out. So I'm curious if you can just talk a little bit more about what you're seeing from the competition. I'm not sure if there's perhaps a dynamic where that gets even more intense as the year goes on, just given there's more opportunities out there, perhaps drawing some additional interest in where you're operating here.

Tyler, it's Brian. Thanks for the question. Yes. So the heaviest competition that we have seen has been in the near stabilized, stabilized part of the financing markets and a large part of that has been on the multi side. That's trading much tighter right now. I think largely based upon the fact that the back leverage CLO securitization markets have come back, and that has really enabled guys to compress yields competitors.

That has been a smaller component of our business. We certainly like using with it across our portfolio, having the ability to do deals like that, but it's been a smaller component. And really more of the stuff that we're playing in is more transitional where we can use our expertise in structuring.

There's definitely been more competitors come into that space, but we still have seen, for the most part, a good chunk of opportunities there. I expect that, that will continue. Sure, I think there'll be more competitors coming in. But in terms of the opportunity set and as the market more normalizes, I think the opportunity set is going to increase.

So I think overall, I feel really good about us continuing to be able to lean into the opportunities in that place. And then, look, as loans are looking to be refinanced from a bridge financing perspective, right, prior to a more securitized, stabilized takeout financing, I think that's really where also there'll be some opportunities to do some stuff.

Okay. I also wanted to double-click on the interest rate topic, and this is something that's come up in some conversations with the clients. I want to be sure that it gets picked up. This is also something that you briefly mentioned in the prepared remarks. But just thinking about this environment where potentially, hopefully, interest rates are going to be gliding lower -- what does that mean in terms of your business? What does that mean potentially in terms of your financials? How do you think about net interest margin expanding if that does play out the rest of this year in the back half?

So that's the really good way -- good thing about how we're positioned is these construction loans take a long time to fund. I think we've said that in previous quarters, and they're locked in on really good floors. I think our average floor is about 4.1%. And if you think about floors, maybe in the new deals, they've come down a little bit because you're right, there people are anticipating interest rate cuts. I think maybe the average floor in the newer deals, I'm not saying any of them close, I'm not saying we're able to complete any of them, are around 3.75%.

So they're coming down a little bit, but that leaves a lot of room against our credit line at 2.6% floor to capture some really nice net interest margin. Of course, you have to get drawn first as you don't get the margin. The other thing, I think a drop in interest rates really helps us with as we continue to commit the portfolio to really good lien loans. I think Brian said, these are first mortgage loans really that are in the pipeline today is we'll be able to do better in the unsecured markets.

So look, the fourth quarter, we're keeping our eyes open and we watch Ladder Financial. Congratulations to them getting their first investment-grade rating that I've seen in the mortgage REIT market. I think they're going to set a great benchmark for the industry. Remember, I come out of the business development companies, the BDCs, and we were one of the top 5 investment-grade rated BDCs. And that industry compressed.

So I think the good mortgage REITs are going to start moving towards Ladder's type of cost of capital, obviously not Ladder's, but towards Ladder's cost of capital. And that's really going to benefit all of the good mortgage REITs that are going for the lower leverage like we are. Remember, we don't have any repos. We're going through a traditional leverage model. The basic leverage model, which we said over and over again, is about 1/3 equity, 1/3 sub debt, 1/3 senior with the senior half drawn for a target leverage of 1.5x. And so we're right on track with performing on that.

And I'm not showing any further questions at this time. I'd like to turn the call back over to Brian for any further remarks.

Well, thank you all for joining the call today. We are encouraged by this increased deal activity in our pipeline in the areas that we're seeing, and we look forward to sharing our progress with all of you on the next quarter call. Goodbye.

Thank you. Ladies and gentlemen, this does concludes today's presentation. You may now disconnect, and have a wonderful day.