Logo of jester cap with thought bubble.

Image source: The Motley Fool.

DATE

Thursday, May 14, 2026 at 10 a.m. ET

CALL PARTICIPANTS

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

TAKEAWAYS

  • Distributable earnings -- $0.35 per share, exceeding the dividend of $0.30 per share, reflecting portfolio earnings power.
  • GAAP net income -- $4.3 million, or $0.32 per basic weighted average common share.
  • Net interest income -- $7.3 million for the quarter, driven by onetime fees and new deal activity.
  • Dividend declared -- $0.30 per share, paid on April 15, 2026, to shareholders of record as of March 31, 2026.
  • Portfolio commitments -- $397 million as of March 31, 2026, across 15 loans, with $299 million outstanding principal.
  • Weighted average portfolio yield -- 12.4% to maturity for the portfolio as of May 8, 2026.
  • Capital markets facility -- Senior secured revolving facility expanded to $165 million in March 2026, with a $25 million addition from Customers Bank.
  • Loan activity -- $91 million originated in the quarter by the TCG real estate platform, with SUNS committing $62 million across two loans: $14 million to Silver Mountain Ranch (fully repaid in the quarter) and $48 million B-note on the Graduate by Hilton Hotels refinancing.
  • Repayments and fundings -- $90 million funded in new and existing loans; $70 million of repayments received, including full repayment on Silver Mountain Ranch and Bohem.
  • Current loan performance -- All loans reported current and performing as of May 8, 2026.
  • Book value -- $13.00 per share as of March 31, 2026, based on total shareholder equity of $182.5 million and total assets of $330 million.
  • CECL reserve -- $550,000, or 19 basis points of loans at carrying value as of March 31, 2026.
  • REO asset marketing -- The Thompson San Antonio hotel is still being marketed by Eastdil, with Sunrise Realty Trust evaluating "a number of opportunities" and "have not accepted an offer."
  • Portfolio mix -- Approximately 75% of the portfolio is invested in senior loans, with management expecting the majority of new originations to remain senior.

Need a quote from a Motley Fool analyst? Email [email protected]

RISKS

  • Executive Chairman Tannenbaum said, "on the negative side, even though I think we did have a very good quarter, is we did not get any income from the hotel," and does not anticipate income from that asset until it is sold or a note is issued.
  • Recent distributable earnings were positively impacted by onetime $400,000 and $1.2 million fees; management cautioned against relying on such items for dividend sustainability.

SUMMARY

Sunrise Realty Trust (SUNS +8.84%) reported portfolio-wide loan performance as current and performing, with no assets on the watch list beyond the Thompson San Antonio hotel, which remains unresolved but is actively marketed for sale. Management confirmed the company is focused on southern U.S. markets, citing ongoing investor demand and migration as primary drivers for maintaining regional deployment concentration. The company reiterated a disciplined approach to selecting transitional, complex lending opportunities, avoiding wide-market competition on stabilized, lower-spread loans.

  • Management highlighted the absence of early repayment trends affecting earnings, clarifying the quarter's $70 million in repayments stemmed mainly from scheduled activity.
  • Portfolio selectivity remained at approximately 1.5% of sourced deals, with leadership indicating future volume could rise if acquisition activity accelerates and market discounts appear.
  • Regional banks are described as avoiding smaller, stabilized loans, leaving transitional assets and complex deals as Sunrise Realty Trust's core strategic focus.
  • Tannenbaum stated there is "nothing else on watch list" in the loan book, outside of the San Antonio REO, adding "everything is right within the within the tolerances of our plan."
  • Management is not providing distributable earnings guidance for future quarters, emphasizing a focus on sustainable medium-term portfolio income rather than onetime events.

INDUSTRY GLOSSARY

  • REO (Real Estate Owned): Property acquired by the lender, typically through foreclosure, and held on the balance sheet prior to disposition.
  • B-note: A subordinated tranche of a commercial mortgage loan, often carrying higher risk and yield relative to the senior (A-note) tranche.
  • CECL (Current Expected Credit Loss): A reserve methodology reflecting estimated lifetime credit losses for financial assets, as required under accounting standards.

Full Conference Call Transcript

Gabriel A. Katz: Good morning, and thank you all for joining Sunrise Realty Trust earnings call for the quarter ended 03/31/2026. I am joined this morning by Leonard Mark 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 04/15/2026 press release, 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 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 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 will open the lines for Q&A. With that, I will now turn the call over to our Executive Chairman, Leonard Mark Tannenbaum.

Leonard Mark Tannenbaum: Thank you, Gabe. Good morning, and welcome to our first quarter 2026 earnings conference call. For the quarter ended 03/31/2026, 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 loans secured by Thompson San Antonio. 162 key class a hotel in Texas. We believe we are now better positioned to evaluate value maximum 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 Eastdil 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 leveraged 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 will turn it over to Brian to discuss the market environment and walk through our portfolio in more detail.

Brian Sedrish: 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 this 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 reassessed 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 Sun Belt 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 are going to continue to sit back on smaller, simpler, stabilized deals, and the larger debt funds in commercial mortgage REITs 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 traffic business plans that require operational and development and a sound understanding of local market dynamics. The other dynamic worth highlighting is the growing wave of stress in 2021 and 2022, 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 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 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 thousand-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 Bohem. As of 03/31/2026, the SUNS portfolio had $397 million of commitments, with $299 million funded across 15 loans. Subsequent to quarter end, Bovi 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.

Brandon Hetzel: Thank you, Brian. For the quarter ended 03/31/2026, we generated net interest income of $7.3 million and distributable earnings of $4.7 million or 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 thousand fee on the short term Silver Mountain Ranch Bridge loan, and a $1.2 million prepayment fee on the Bohem loan. We believe that providing distributable 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. We ended the 2026 with $397.1 million of current commitments, and $299.3 million of principal outstanding spread across 15 loans. As of 05/08/2026, our portfolio consists 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 03/31/2026, our CECL reserve was $550 thousand or 19 basis points of for our loans at carrying value.

As of 03/31/2026, we had total assets of $330 million, and our total shareholder equity was $182.5 million with a book value of $13.00 per share. For the quarter ended 03/31/2026, the board of directors declared a $0.30 dividend per share outstanding. The dividend was paid on 04/15/2026 to shareholders of record as of 03/31/2026. With that, I will now turn it back over to the operator to start the Q and A.

Operator: Thank you. And wait for your name to be announced. To withdraw your question, please press 11 again. Please stand by while we are compiling the Q&A roster. 1 moment for your first question. Our first question will come from the line of Gaurav Mehta from Alliance Global Partners. Your line is open.

Analyst (Gaurav Mehta): Thank you. Good morning. I wanted to go back to your comments around the pipeline and to get some more color on what you guys were seeing for acquisition financing versus refinancing And within the current pipeline, what is the sort of mix between different kind of property types?

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

Certainly, in this and the bifurcation between acquisition and refinancings. On the refinancing side, we are seeing opportunities where the sponsors need to inject existing incremental equity to see them through to the stabilization period. So that is there is a series of deals that we are 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 have been focusing on. that is what really makes up the majority of our pipeline.

Analyst (Gaurav Mehta): Okay, thanks for that color. As a follow-up, on regions in the prepared remarks, you talked about Florida and some Southeast markets in demand and then you highlighted some markets still seeing supply. So I guess in terms of capital deployment, should we expect that you would more you would be more focused on Florida and other markets where you are seeing demand, or you could be open to other opportunities in some of the markets where there is still supply and maybe sort of reset opportunities that you talked about?

Brian Sedrish: I would expect the majority of our deals will continue to be in those Southern states that we are focused on. that is really been our focus. that is where we think we have a bit of a competitive advantage. And that is the path of growth. And that continues to be the case. We are seeing that now more pronounced, than we have seen in a while. Now, as we mentioned on the West Coast, there is been, certainly in some of the Sunbelt states, there is been some, supply overhang. We are seeing that absorb in the markets that we are focusing on. that is the majority of our pipeline majority of what we are doing.

You know, as always, opportunistically, we will find interesting deals away from that, but I would expect a huge majority in our core markets.

Analyst (Gaurav Mehta): Okay. Thanks. Last question on the REO. Is that asset currently being marketed for sale? I know earlier you said that you guys received few offers. And it could be all cash sales or you could do some lower leverage financing. But it have you accepted offer or it still in the market?

Leonard Mark Tannenbaum: Good question. it is still in the market with Eastdil. We have we have not accepted an offer. We are evaluating a number of opportunities, and we will tell you as soon as we accept an offer.

Analyst (Gaurav Mehta): Okay. And maybe lastly on the balance sheet, the investment in real estate JV, that is the REO asset that you talked about?

Leonard Mark Tannenbaum: Yes. Correct.

Analyst (Gaurav Mehta): Okay. Thank you. that is all I had.

Leonard Mark Tannenbaum: Thank you. Thank you.

Operator: Our next question will come from the line of Jade Rahmani from KBW. Your line is open.

Analyst (Jason Sabshon): Hi. it is Jason on for James. Thanks for taking the question. 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 1 that you see is most likely? And what would the timeline to exit be? Thanks.

Leonard Mark Tannenbaum: So 1 of the things that I have given back to the quarter is on the negative side, even though I think we did have a very good quarter, is we did not 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 will have to say because it is I think it does get resolved, in a reasonable time line, but I think it is over the next couple of quarters. So we do not anticipate any income from a hotel until it gets sold, or gets sold and we issue-- we have a, note attached to it.

Analyst (Jason Sabshon): Got it. Thanks. Separately, you 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 thousand fee in a short term loan and $1.2 million prepay fee, but and there is also the new hospitality loan. But was there anything else It was up $3.1 million quarter over quarter. So just curious.

Brandon Hetzel: Yeah. And you just touched on the majority of the increase. As you mentioned, $1.2 million prepayment fee related to the Bohem 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 thousand to the 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. A lot as well as additional construction fundings of our construction loans. On the normal, cadence.

Analyst (Jason Sabshon): Got it. Thanks. And then on the short term loan, just curious, how large was that loan?

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

Analyst (Jason Sabshon): Got it. Thanks. And then lastly, just on forward originations, what would be the target mix of senior and subordinate going forward? Currently, you are around 75% senior. So I am just curious.

Brian Sedrish: Yeah. I would think it would be somewhere in that range. Majority of what we are doing is on the senior side. We will 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 are doing more and more of that now, as we create more relationships with seniors, but we will continue to have the majority, supermajority be on the senior side.

Analyst (Jason Sabshon): Thanks.

Brian Sedrish: Sure.

Operator: Thank you. And our next question will come from the line of Timothy D'Agostino from B. Riley Securities. Your line is open.

Analyst (Timothy D'Agostino): Yeah. Hi. Good morning. Thanks for taking the question. Congrats on the quarter. Looking at Slide 11 in the deck, looking through the deal sourced all the way down to Sun's loan funded, You know, over the past couple quarters, deal selectivity has kind of hovered around this 1.5%. And I guess, you know, you have heard a lot of commentary on call, but I guess what do you what would you need or want to see in the market for your selectivity to go up? You know?

So I know you talked about balancing growth versus risk, but just kind of understanding at what point like, what would you need to see to start selecting more deals and growing the portfolio? Thank you.

Brian Sedrish: Yeah. I think I think it is 2 things. 1, none of us in the market being optimistic have thought about or were, have been as happy with the sort of collapse in the market in terms of, you know, really interesting opportunistic loans at big at big discounts. Right? So that has not presented itself to any great size much to everyone's chagrin. I mean, if that sort of 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, is generally just more acquisition volume.

What happened in the last quarter that we saw is acquisition volume increased pretty significantly. I think if that is sustained, right, and rates stabilize and start coming down, which is obviously it is 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 are again, just to repeat myself, we are 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.

Analyst (Timothy D'Agostino): Okay. Great. that is super helpful. And I guess just across the markets you are 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 are looking at and, you know, what is interesting and what is out there.

Brian Sedrish: Thank you. Sure. Well, I hate to be boring, but the reality is that the deals that have been or most interesting have been in those Southern markets that we have that continued to collectively all talk about. it is 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. You know, you had that massive in migration that was that was more getting back to equilibrium. But recently, I have 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 talked to those group that group significantly or frequently. And we have seen just a tremendous increase in volume of homeowners wanting to migrate here. So it seems like that is picked up a bit, and that has knock-on effects for retail, demand and for rental demand. So I those are the markets that we still see are interesting, and they are boring in the sense that we continue to do them, but those are the ones that are fun.

And then, selectively, it is out, as I mentioned earlier, it is opportunistically, there are deals we are seeing in other markets. That are interesting out West. But for the most part, we are just we are sticking to what we what we are seeing is the real interesting opportunities.

Analyst (Timothy D'Agostino): Okay. that is great commentary. Thank you so much, and congrats on the quarter again.

Brian Sedrish: Thank you.

Operator: Once again, star 1 for questions. Our next question will come from the line of Tyler Anton Batory from Oppenheimer. Your line is open.

Analyst (Tyler Batory): Good morning. Thanks for taking my questions here. Just first 1 for me on the outlook this year. There were some onetime items, obviously, positively impacting Q1 contributing to that $0.35 in distributable EPS. what is a good run rate to think about in terms of distributable earnings this year? Do you still think in line with the dividend? Or covering the dividend? Is that a good way to think about things?

Leonard Mark Tannenbaum: What? You want to answer that, Brandon?

Brandon Hetzel: Sure. So we will not give specific guidance on projections for distributable earnings throughout the year, but we will say that from time to time, we will have various fees that can positively impact our income, and that is normal course of business for these types of loans. But, you know, you mentioned, the Q1 to show our earnings benefited from those 2 short term items. But we do not-- the board does not underwrite the dividend based on 1-off items. They look at the medium term earnings power of the portfolio you know, including expected fundings and existing commitments, repayments, leverage, plus any forward origination.

So we will not give specific guidance going forward, but we did wanna point out the short term items so you could back into the run rate.

Analyst (Tyler Batory): Okay. Appreciate that. And in terms of repayments, $70 million this quarter. A couple of those were well before maturity, too. Just trying to understand why that is 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.

Brandon Hetzel: Yeah. Sure. So it is actually only 1 that was repaid early, the Bohem loan. Of the $70 million, 1, 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 is a revolving loan where they will draw and repay, and that gets, grossed up into those repayment numbers.

Analyst (Tyler Batory): Okay.

Brandon Hetzel: In other words, we are not seeing anything abnormal.

Analyst (Tyler Batory): Okay. that is that is what was trying to get at. Thank you. And then just the last 1 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 is nothing that is concerning, nothing that is, you know, that you are watching closely in terms of a potential negative outcome similar to what to what happened in San Antonio?

Leonard Mark Tannenbaum: Yeah. And I and I get that it 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 do not think there is. Right now, there is nothing else on watch list. Not 1 other thing on watch list. So you know, things are obviously doing a little bit better, a little bit worse. But everything is right within the within the tolerances of our plan.

Analyst (Tyler Batory): Okay. Very helpful. I will leave it there. Thank you.

Operator: Thank you. I am not showing any further questions in the queue. I would now like to turn it back over to Brian Sedrish for closing remarks.

Brian Sedrish: 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.

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