Sunrise Realty Trust Inc Stock

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

Good morning, and thank you all for joining Sunrise Realty Trust's Earnings Call for the quarter ended September 30, 2026. I'm joined this morning by Len Tannenbaum, our Executive Chairman; Brian Sedrish, our Chief Executive Officer; and Brandon Hetzel, our Chief Financial Officer.

Before we begin, I would like to note that this call is being recorded. Replay information is included in our October 2026 press release and is posted on the Investor Relations portion of our website at sunriserealtytrust.com, along with our third quarter 2026 earnings release and investor presentation.

Today's conference call includes forward-looking statements and projections that reflect the company's current views with respect to, among other things, market developments, our investment pipeline, anticipated portfolio yield, financial performance and projections in 2026 and beyond, the anticipated benefits of our merger with Sunrise Realty Trust and our share repurchase program.

These statements are subject to inherent uncertainties in predicting future results. Please refer to Sunrise Realty Trust's most recent periodic filings with the SEC, including our Form 10-Q for the quarter ended September 30, 2026, for certain conditions and significant factors that could cause actual results to differ materially from these forward-looking statements and projections.

During today's conference call, management will refer to non-GAAP financial measures, including distributable earnings. Please see our third quarter earnings release available on our website for a reconciliation of the non-GAAP financial measures with our most directly comparable GAAP measures.

The format for today's call is as follows: Len will discuss our recent merger with SRT and our share repurchase program. Brian will cover the commercial real estate lending market, our portfolio and investment pipeline, and Brandon will review our financial results and position. After that, we'll open the lines for Q&A.

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

Thank you, Gabriel, and good morning. Since our last earnings call, SUNS reached an important milestone. On November 5, we completed our merger with Southern Realty Trust, or SRT, our affiliated private mortgage REIT. At SUNS' October 23 special meeting, approximately 91.6% of votes cast approved the issuance of SUNS common stock in connection with the merger with approximately 60% of the outstanding shares represented.

At SRT's October 23 special meeting, a majority of SRT's outstanding shares approved the merger. We thank stockholders of both companies for their support, and I am pleased to welcome former SRT stockholders as SUNS stockholders. We also welcome Howard Sudnow, a former independent SRT Director to the SUNS Board as an additional independent director. This merger creates a larger, more efficient public CRE lending platform.

On an unaudited pro forma basis as of September 30, 2026, and if the merger had occurred on that date, the combined portfolio would have had approximately $478.6 million of total loan commitments and $393.1 million of outstanding principal. We issued approximately 8.5 million shares at an exchange ratio of 1.45 SUNS shares per SRT share.

The combined company has approximately 22 million shares outstanding with roughly 38.5% held by former SRT stockholders. Our amended and restated management agreement is now in effect. It reduces the incentive fee from 20% to 17.5% and the annual hurdle rate from 8% to 7%. Additionally, beginning in the first quarter of 2027, base management fees will be reduced by $250,000 for each quarter of 2027, totaling $1 million for the benefit of SUNS stockholders.

With the merger complete, our focus is on realizing the benefits of that scale. We believe our larger equity base can, one, broaden financing options, potentially including unsecured debt; two, support greater trading liquidity; and three, reduce duplicative costs. Given our team's experience managing both portfolios, which shared 100% overlap in the same loans, we do not anticipate any integration risk.

We also believe opportunistic share repurchases can be an attractive use of capital. In October, our Board authorized a $20 million share repurchase program through December 31, 2027.

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

Thanks, Len, and good morning. I'll start with the market, then cover new investment activity and the portfolio. Higher rates and renewed volatility created additional pressure for borrowers during the quarter. The Federal Reserve raised its policy rate in September for the first time since 2023. And in early October, the 10-year treasury yield touched its highest level since 2002 before easing. That volatility comes against a substantial maturity backdrop.

According to the Mortgage Bankers Association, approximately $875 billion of commercial and multifamily mortgages are scheduled to mature in 2027, another $652 billion in 2027. For sponsors with loans coming due, refinancing proceeds can fall short of outstanding debt balances, creating demand for additional equity and structured capital, which increases the value of lenders that can commit and execute with certainty. That environment plays to how SUNS is built.

We do not seek to compete primarily on price or stabilized assets where banks and other lenders focus. We earn our returns by underwriting transitional business plans and negotiating structure, which allows us to operate with modest corporate leverage and help limit the financing and liquidity pressures that can affect more heavily levered lenders. Subsequent to the completion of the merger, given our low leverage and expanded capital base, we have ample capacity to deploy across new transactions.

We were deliberate with new commitments during a volatile third quarter, and we continue to prioritize pricing, structure and sponsor quality over deployment volume. Since quarter end, our activity has picked up. Subsequent to quarter end, SUNS closed on approximately $3 million senior secured loan for buildings A and B of Sommét Blanc, a luxury residential project in Park City, Utah.

We were already a lender on the adjacent building, and following the merger, SUNS' commitment across all 3 buildings now total approximately $17 million. The TCG real estate platform is advancing transaction under signed term sheets. As discussed last quarter, one is a proposed $93 million senior construction loan for a multifamily development in Texas, comprising a $62 million A note with a third-party partner and a $31 million B note expected to be held by SUNS. We expect this transaction to close shortly.

The other transactions, which have signed term sheets totaled $169 million. All transactions remain subject to diligence, documentation and customary closing conditions.

Turning to our portfolio. On October 9, we completed the $41 million sale of the Thompson San Antonio through our joint venture, consisting of $9 million in purchaser cash and $32 million of senior secured financing, now held entirely by SUNS following the merger. The transaction closed in line with our investments carrying value before closing costs and transaction expenses.

The loan bears interest at a fixed rate, increasing scale from 8% to 10% rates throughout the term. The buyer intends to fund additional cash equity towards capital improvements. Separately, SUNS continues to pursue available remedies under the former sponsor guarantee. Following the sale, SUNS no longer holds any owned real estate. All loans in our portfolio were current and performing at September 30 and remains so today.

Looking ahead, we are primarily focused on deploying SUNS capital into loans that meet our underwriting standards, opportunistically executing the share repurchase program and continuing to fund construction commitments within our existing book. A performing loan portfolio, low leverage and an expanded equity base support the financial flexibility to pursue these priorities selectively.

I will now turn to Brandon Hetzel, our Chief Financial Officer, to review our financial results.

Thank you, Brian. For the quarter ended September 30, 2026, we generated net interest income of $5.8 million and distributable earnings of $3.2 million or $0.24 per basic weighted average common share. GAAP net income was $2.9 million or $0.21 per basic weighted average common share. These results included approximately $900,000 or $0.06 per share of onetime merger-related costs.

For the 9 months ended September 30, 2026, we generated net interest income of $18.9 million and distributable earnings of $11.8 million or $0.89 per basic weighted average common share compared to $0.90 per share of dividends declared for the same period.

GAAP net income for the 9 months was $10.2 million or $0.75 per basic weighted average common share. We believe that providing distributable earnings is helpful to stockholders in assessing the overall performance of SUNS business. Distributable earnings represents net income computed in accordance with GAAP, excluding noncash items such as stock compensation expense, unrealized gains or losses and the provision for current expected credit losses.

In the third quarter, SUNS funded $17.1 million of new and existing loans and received $58.9 million of repayments, primarily reflecting the July repayment of the Panther National senior term loan and construction revolver. We ended September 30 with $313.9 million of loan commitments and $256.9 million of principal outstanding across 12 loans, all current and performing with a weighted average estimated portfolio yield to maturity of approximately 12%.

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

As of September 30, 2026, approximately 95% of our loan principal was floating rate with a weighted average SOFR floor of approximately 3.9%. We estimate that a 100 basis point increase in benchmark rates would increase our annual interest income by approximately $1.9 million, while a 100 basis point decrease would only reduce it by approximately $500,000, which reflecting the protection provided by our rate floors in each case before any change in borrowing costs.

As of September 30, 2026, our total outstanding -- our debt outstanding was approximately $96.8 million, representing a debt-to-equity ratio of approximately 0.5x. On a stand-alone basis, as of September 30, 2026, SUNS had total assets of $285.4 million, and our total shareholder equity was $181 million with a book value of $13.39 per share. For the quarter ended September 30, 2026, the Board of Directors declared a $0.30 common stock dividend per share outstanding, which was paid on October 15, 2026, to shareholders of record as of September 30, 2026.

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

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

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

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

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

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

Sure. Gaurav. So those deals are deals we've been spending a lot of time on. They are -- to answer your question, they are residential plays where in one case, there's an existing very high-end luxury destination home resort where ultimately we would potentially be providing the capital to help improve and build additional homes for sale. So there's that one.

We have another one where, again, a very successful residential community. We'd be helping very similar in the capital to help continue to add value in that site. And then lastly, another play, again, all residential as well. These are both condos and single-family homes where, again, the sponsor needs the requisite capital to help them continue to deliver product to their clients.

I think generally, broadly, what I'll say is we found a lot of interest in those types of transactions, and we think we're leaning into those really take advantage of our expertise. So we've been spending a lot of time in those. And then the other thing I might add is there's just much less competition in that type of market. So I think we find that we can deliver pretty interesting attractive returns to our shareholders through those types of deals.

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

The answer to that question is if we do extend out it would be for a relatively short period of time. And that deal is a deal that we put on nearly 3 years ago. The sponsor has done exactly what they said they were going to do in terms of delivering on time, actually ahead of time and on budget. They presold of those for-sale condos, a little over 50% of those.

The units look great in the inventories there. So the logical takeout is an inventory loan. The question just is, because the loan is maturing in December, whether the sponsor needs a couple more months, they're going to have a signed term sheet shortly. So we may end up extending out for a couple of months. If we do, we look at that as extremely positive.

Alternatively, the sponsor may just decide to just pay us out. It's just a question of timing as to how quickly they can bring it all together. Ideally, we'd like to have the opportunity to keep it out a little bit longer. It's been a great performing loan for us, and we really like the sponsorship.

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

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

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

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

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

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

I think the tough part of where we are today is, and I think you could see it in the numbers is we're underlevered. And we have a lot of capacity. It's the good news. We have a lot of capacity to do deals. The bad news is a lot of these deals that Brian was talking about earlier, I would have expected to close already and everything takes longer.

And so what's going to drive earnings is getting us back to appropriate leverage and driving the right ROE for our stockholders. And so I think that's the main indicator that I'd be looking for over the next 3 to 4 months as we announce deals as they close and we close them, that's going to be driving -- that should be driving our stock and future ROE.

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

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

I mean actual draws...

$393 million.

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

I'm not going to ROE targets.

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

Okay. Switching gears. When you think of the turmoil that's playing out in the commercial real estate landscape, so we saw sort of Phase 1 play out from 2022 through late 2024, driven by the Fed rate hikes, as you all well know, plus office uncertainty. Some of that has diminished and the office sector has begun a recovery.

Industrial is also doing quite well as our retail and hotel, which leaves multifamily. Multifamily has been facing plenty of supply challenges across the Sunbelt, including in Florida, but we could be perhaps close to a trough there, although everyone's been thinking that for the last year. Nevertheless, at the same time, rates are going higher.

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

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

And as I said to you over the past year, look, it's terrible to get the lofty REO that we had. We were fortunate that we sold the hotel. And currently, we really just don't have any other stress assets at all. So that's the good news.

And then I think -- so that's part one, right? And two is how do we take advantage of stuff. We actually agree with you. There are pockets of real distress out there and distressed REITs. And I think we should be looking at their assets and them also for potential opportunities for our shareholders. So we'll be out there and looking at opportunities. We're opportunistic lenders, and we'll be opportunistic also with trying to find distressed assets or distressed managers and help them get through this cycle.

Yes. Obviously, Jade, it's Brian. I obviously agree with Len. I think clearly, what's happening in the markets right now just from our competitor perspective, you know better than us. You're seeing a lot of groups opting to either exit the business and/or dealing with asset management issues.

I think that you're definitely seeing consolidation in the type of REITs that are focused much more on the flow type business, which, as you know, is not what we focus on. It's much more value-add type opportunities. And what we've seen is a significant pullback in the groups doing those types of deals, which I think largely is what's opened it up for us.

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

On the multi side, I mean, as you know, I mean, I think there's going to continue to be a lot of issues. Rates going up is exactly the wrong move for groups that are sitting on transactions that they originated in '21, '22, that vintage multifamily is now definitely the epicenter of the problem. And so that is -- fortunately, we don't have those types of assets. So I think we're feeling pretty good there.

On a go-forward basis, as you know, that cliff of development has dropped off precipitously. And that will, in markets like Len mentioned, Palm Beach and other growth markets, that will certainly allow groups to start building again because there's growth behind it. So I think there's a lot of pockets of opportunity we'll keep going after, and it's a combination of all those. And I think the biggest thing for us is just staying patient and going after the pockets that we think are really interesting returns for our investors.

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

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

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

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

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

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

Yes, sure, Tim, it's Brian. So largely, the type of deals we're going after is exactly the type we've historically gone after. So big focus on the Southern U.S., right? That's not changing. But as we've always said, strategically and opportunistically, we may follow a borrower or a preexisting relationship into another market. And we are certainly willing to do that. But the core has always been -- will continue to be focusing on where those paths of growth are.

And so that's what comprises the current pipeline for the substantial majority of the deals we're going after. Like I said earlier, I think you should think about residential will continue to remain a key focus of ours. I think particularly for us, where we're seeing the pockets of opportunities both from a rate of return because as I mentioned earlier, some of our competitors are pulling back in that area.

And then just also from a division of where the opportunity set is, is those higher-end sort of K-shaped type recovery opportunities where we're still seeing a lot of demand for residential product. And so we want to keep leaning into that. We obviously had our Panther deal. We have several others we're working on. So those are some big focuses. And then outside of that, where we do really well in some mixed-use properties where there's more complication and we can lean in and hopefully bring our expertise. Those what I would say are the really big areas of focus for us.

From a deal size perspective, look, we have to be cognizant of concentration. And so we often are playing in the bigger deal sizes. And so what that typically means is if they get too large and chunky, we will bring in co-investors to help us with those deals while still maintaining certainly a big important control position in those deals. So I think that's sort of what we're mindful of.

And as we obviously can expand and grow, we can continue to hold and eat more of that cooking ourselves. But I think the pipeline is pretty strong. The other one I'll say is one that you've heard many times, and we're certainly seeing this is now clearly, with rates expected to go up, let alone stay in their elevated state, that is absolutely reducing the amount of sales that are happening.

And that is resulting in additional calls that we're getting on providing those GAAP equity or I should say, those GAAP capital needs where we would come in and either take out the senior and expand out or alternatively to provide a sub debt tranche. And so we're seeing a lot of those types of rate change. I definitely expect that those will continue, particularly as we move towards year-end.

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

I mean the problem with the unsecured markets, in my opinion, as we talk to our partners is it's too expensive. There's too many REITs borrowing in the low double digits. And somehow you get broad brushed with that, even though we have lower leverage, we don't have the non-accruals that everybody else has. We have a really good solid portfolio. It doesn't matter. And I think the combination, at least we get a little bit bigger and we get more scale, which is going to be part of what we need. But the other thing is we're going to need the markets to allow us to get a cost of capital that makes sense. As you know, we currently lend at 9% all-in cost to SUNS from a mezzanine perspective, right.

Are unsecured.

Unsecured.

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

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

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

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

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

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

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

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

Yes, definitely the latter. It wasn't the merger that was holding us up. I think it's -- back to the commentary before, I think that we have a big focus on patients and picking our spots to get involved in.

I think that the biggest risk right now that anyone has is an eagerness to get capital out. We think the opportunity set ahead of us, and we're -- like I said, we're starting to see that is really strong. I think you pick your spots and be patient about that.

On top of that, as Len mentioned, there are several deals that we are in heavy diligence on. And these types of deals are just not flow type deals. So they just take longer to actually execute. So sometimes you just end up with a chunky quarter, sometimes you don't. So I think it's a combination of those 2 things that are the reason why I think what you're really asking is, was transaction volumes slower in the quarter.

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

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

Good day, and thank you for standing by. Welcome to the Sunrise Realty Trust Q2 2026 Earnings Call. [Operator Instructions] Please be advised that today's conference is being recorded. I would now like to hand the conference over to our first speaker today, Robyn Tannenbaum, President of Sunrise Realty Trust.

Good morning, and thank you all for joining Sunrise Realty Trust's earnings call for the quarter ended June 30, 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 in our July 17, 2026, press release and is posted on the Investor Relations portion of our website at sunriserealtytrust.com, along with our second 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 yields, financial performance and projections in 2026 and beyond, and the proposed SUNS-SRT merger. 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 available on 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: Leon will provide an update on today's proposed merger announcement. Next, Brian will cover our view on the state of the CRE lending market, 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, Leon Tannenbaum.

Thank you, Robyn. Good morning, and welcome to our second quarter 2026 earnings conference call. Before turning to the proposed merger that we announced earlier today, for the quarter ended June 30, 2026, SUNS generated distributable earnings of $0.29 per basic weighted average share of common stock. For the first 6 months of 2026, distributable earnings of $0.65 per share exceeded the $0.60 per share of dividends that we declared over the same period. This reflected the continued earnings power of our portfolio.

Turning to the proposed merger. Earlier today, we announced and filed with the SEC a signed definitive merger agreement, under which SUNS will acquire Southern Realty Trust, or SRT, a private mortgage REIT on the TCG Real Estate Platform. We believe the transaction represents an attractive opportunity for our stockholders. Under the terms of the proposed transaction, SRT, which has $107 million of equity, will merge into the SUNS platform and create a combined company with approximately $290 million of total equity value on a pro forma basis as of June 30, 2026. Upon closing the merger, SRT shareholders will receive newly issued SUNS common stock based on an exchange ratio that applies a 6% premium to SRT's book value per share relative to SUNS' book value per share as of the measurement date.

Before turning to the strategic rationale, I want to note that this was an arm's-length negotiated process. SUNS and SRT each formed an independent special committee comprised entirely of independent directors. Each of the special committees retained outside legal counsel and independent financial advisers, with Oppenheimer & Co. representing SUNS and KBW Keefe, Bruyette & Woods representing SRT. Each of the SUNS and SRT special committees and both companies' Boards unanimously approved the transaction.

In connection with the closing, SUNS' management agreement will be amended and restated. Among other changes, #1, the incentive fee rate will be reduced from 20% to 17.5%. #2, the hurdle rate will move from 8% to 7%. And #3, SUNS' manager will provide a management fee waiver of $1 million in the aggregate over the 4 quarters following the closing to the benefit of all SUNS stockholders.

Strategically, we believe the combination will benefit SUNS stockholders in several ways. We expect this transaction to immediately increase our equity base by approximately 60%, which should provide benefits to our cost of capital. A larger platform should provide improved and increased trading liquidity, broader index inclusion eligibility, and enhanced access to the unsecured markets. We believe the increased float and market cap may attract a wider universe of investors who have a minimum market cap threshold for deployment.

Additionally, from an operating standpoint, we anticipate G&A savings on a combined basis, which will potentially increase our margins post-transaction as we begin eliminating duplicative accounting, legal, audit, board, and regulatory compliance costs inherent in maintaining 2 separate REIT platforms. Because management already oversees both portfolios, which contain pieces of the same underlying loans, we believe there is no material integration risk.

We currently expect the transaction to close in the fourth quarter of 2026, subject to approval by SUNS and SRT stockholders and the satisfaction of other customary closing conditions. SUNS expects to file a proxy statement with the SEC containing additional information. Until the proxy statement is effective, we will limit our comments to the Form 8-K. With that, I'll turn it over to Brian to discuss the market environment and walk through our portfolio in more detail. Brian?

Thank you, Leon. Before reviewing the portfolio, I want to discuss how the current lending environment is translating into opportunities for SUNS. Looking at the broader market, industry estimates put roughly [ $900 billion ] of commercial real estate loans maturing in 2026 with a comparable wave in 2027. Much of it originated between 2019 and 2022 when rates were at historic lows.

With rates still elevated, many of those loans now face a refinancing gap, and what matters is the cause of that gap. In most of the situations we target, the issue is not a shortfall in asset value. It's that leverage sized in a lower rate environment no longer fits today's senior debt capacity. That gap between yesterday's leverage and today's debt capacity is exactly the space our structured capital fills.

Last quarter, we noted that several pipeline transactions were paused as sponsors reassessed their cost of capital amid rate volatility. That volatility continued through the second quarter, and transaction activity stayed uneven with borrowers delaying discretionary acquisitions and refinancings. The most durable demand is need-driven, sponsors facing near-term maturities where the incumbent lender will extend only against a principal paydown or fresh equity rather than a simple extension. Borrowers with real equity to protect are the ones most willing to engage in pricing and the structural protections that appropriately compensate us.

Liquidity is available, and commercial banks have meaningfully reentered the market, particularly for stabilized and near-stabilized multifamily, industrial, and data center assets. We view that as confirmation of our positioning. That competition is compressing spreads in conventional first mortgage lending, which are the commodity lanes we deliberately do not compete in, and banks are the natural low-cost home for that stabilized product. What has stayed scarce in this cycle is not senior debt. It's equity. More bank liquidity does not fill a sponsor's equity gap. And in many cases, a bank's willingness to extend is conditioned on the borrower funding a paydown it cannot cover alone.

Our model differs from many commercial mortgage REITs. Many concentrate on stabilized assets and lean on balance sheet leverage to reach a targeted return. We generate return the other way, through the complexity of transitional business plans, asset-level and sponsor underwriting, and negotiated structural protections. Because the unlevered return on that work is higher, we can carry it with comparatively modest corporate leverage, which also leaves us less exposed to the mark-to-market and margin pressure that a more heavily levered model carries. Where competition is concentrated, we step back; where capital is scarce, we lean in.

Patience is not inactivity. During the quarter, our team reviewed a significant volume of transactions and declined those that did not meet our return or structure requirements. Our liquidity lets us stay selective rather than accept mispriced risks. Importantly, over the last several weeks, our investment team has seen a noticeable pickup in transactions that fit our targeted criteria, which we believe reflects the growing realization among borrowers and their advisers that rates are staying higher for longer and that continued inactivity is no longer a viable option. We continue to see healthy financing request volume. And while conversion still depends on pricing, structure, and sponsor alignment, the opportunity set in front of us has broadened.

The Panther National repayment shortly after quarter end is a clean example of the model end-to-end. The credit facility, originated on the TCG Real Estate Platform in August 2024 and secured by a 392-acre private golf and residential community in Palm Beach Gardens, Florida, was repaid in full. The investment ran its full cycle in under 2 years: origination, business plan execution, and repayment at par. Its attractive unlevered return let us hold the position with limited balance sheet leverage. That is the SUNS approach: earning return through underwriting, structuring, and execution rather than through leverage.

Our pipeline remains active, and we stay focused on deals with strong risk-adjusted returns. During the second quarter, the TCG Real Estate Platform signed a term sheet for a $93 million senior construction loan for a multifamily development in Texas, which we expect to structure with a third-party partner on an A/B [indiscernible] basis. This is the kind of transitional structured situation we target rather than stabilized senior lending. That is a ground-up business plan in a specific targeted submarket with the A/B structure allocating risk to fit our return requirements. We have additional deals in the pipeline and are negotiating further transactions.

Turning to the portfolio. I'd like to begin with an update on our owned asset, the Thompson San Antonio. SUNS and its affiliates have entered into a purchase and sale agreement to sell the property to a third-party buyer who has funded 2 nonrefundable option payments totaling $6 million, which will be credited against the purchase price should the closing occur on or before September 30, 2026. As part of the transaction, SUNS and its affiliates have agreed to provide seller financing to help facilitate the purchase.

Separately, SUNS and its affiliates continue to pursue available remedies under the former sponsor's guarantee.

Entering the second half of the year, our priorities are clear: recycle capital from repayments, continue to fund construction loans in our existing book, and deploy selectively into transactions with strong risk-adjusted returns and negotiated downside protection. With our current loans -- with all of our loans current, modest balance sheet leverage, and the Panther proceeds available for redeployment, we look forward to deploying capital into new opportunities with attractive risk-adjusted returns. With that, I will now turn the call over to Brandon, our Chief Financial Officer.

Thank you, Brian. For the quarter ended June 30, 2026, we generated net interest income of $5.8 million and distributable earnings of $3.9 million, or $0.29 per basic weighted average common share, and had GAAP net income of $3.1 million, or $0.23 per basic weighted average common share. We believe that providing distributable earnings is helpful to stockholders in assessing the overall performance of SUNS' business. Distributable earnings represents net income computed in accordance with GAAP, excluding noncash items such as stock compensation expense, unrealized gains or losses, and the provision for current expected credit losses, also known as CECL.

In the second quarter of 2026, SUNS funded $25.4 million of new and existing loans and received $26 million of repayments. We ended the second quarter of 2026 with $377.4 million of current commitments and $298.7 million of principal outstanding across 14 loans. As of August 3, 2026, our portfolio consisted of $315 million of current commitments and $248.8 million of principal outstanding across 12 loans, which reflects the full repayment of the Panther National senior term loan and construction revolver subsequent to the quarter end. All loans are current and performing with a weighted average portfolio yield to maturity of approximately 12.3%.

As of June 30, 2026, our CECL reserve was approximately $1.1 million, or 37 basis points of loans held at carrying value. As of June 30, 2026, our total debt outstanding was approximately $141.7 million. Subsequent to quarter end, the Panther National repayment proceeds were used to reduce our borrowings. And as of August 3, 2026, our total debt outstanding was approximately $85.6 million. As of June 30, 2026, we had total assets of $330.7 million, and our total shareholder equity was $181.8 million with a book value of $13.45 per share.

For the quarter ended June 30, 2026, the Board of Directors declared a $0.30 dividend -- stock dividend per share outstanding, which was paid on July 15, 2026, to shareholders of record as of June 30, 2026. For the first 6 months of 2026, distributable earnings of $0.65 per basic weighted average share exceeds the $0.60 per share of dividends declared over the same period. 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 Jade Rahmani from KBW.

This is Jason Sabshon on for Jade. So just to touch on the SRT deal. Do you expect it to be neutral earnings and dividends or potentially accretive?

The combination of SUNS and SRT in the merger should get margin benefit from the reduction in G&A costs. There's a lot of duplicative costs. It's the same exact assets in different -- a little bit different proportions. So together, they should get an earnings increase.

Got it. And then do you have any interest in pursuing other M&A within the mortgage REIT space?

I think one at a time is just fine for us, but thanks for the question.

Got it. And so just curious, what are you seeing on underlying property fundamentals in multifamily and residential in your markets and on the deals backing your loans?

Brian?

Sure. Yes, I'll take that. It definitely depends on what -- where the mortgage -- where the assets are located. I would say, generally, we've definitely seen in the markets that we have spent a lot of time in that what was expected has come true and that the absorption has caught up to the supply out there. As we know, there was a cliff in new construction on multifamily. So that certainly helped. It's now getting absorbed. You're seeing some actual rent increases, less concessions in the markets that we're spending time on. So that's certainly a positive.

And I see given elevated rates, we certainly are not seeing a tremendous amount of new construction, depends obviously on the markets. In some of the South Florida markets that we play in, we have definitely seen continued strong demand. I think that will continue. We have to be mindful of absorption and how quickly things lease up, but generally positive. Same thing I would confirm on our existing book as well.

And then just as a last question, on the hotel, potentially, what would you expect seller financing to look like potentially LTV or rate?

Brandon, can you answer that question?

I don't think we can answer this.

I can't answer at this time, but I would anticipate kind of normal seller rates.

Our next question comes from Gaurav Mehta from Alliance Global Partners.

I wanted to ask a few questions on the merger. I understand the rationale that you guys have talked about merging the 2 REITs. But I guess in terms of timing, why did you guys decide to pursue this transaction at this time?

The transaction really was -- the timing of the transaction was more towards SRT's timing than SUNS' timing to the combination. But for SUNS, it increases our scale and increases our ability to get unsecured financing, which I still would like to get outside unsecured financing. I'd like to get a credit rating. I think that's important. I also like to redo our credit facilities a little better when you have size and scale.

The other interesting thing, which I don't know if was clear on this transaction, is anyway, as I said the same assets that are split into 2 buckets, and that provided some complexity for our lenders because who is in control of the assets and how they would lend the assets and be secured by them. So this removes that complexity, which we think will help us get better financing.

And so in terms of like the overlap on the same asset, is it like 100% overlap between SRT and SUNS?

100% of the assets are the same. There are some different proportions of ownership. Every asset in SUNS is in SRT.

Okay. Understood. And maybe lastly on the valuation. In the press release, when you say 6% premium to SRT's book relative to SUNS, does that mean the value for SRT is 1.06x book? Or how should I think about that, the book valuation?

Brandon?

Yes, that's the way to think about it. So it was a book value for book value transaction with them giving a 6% premium on their book value.

I'm showing no further questions at this time. I would now like to turn it back to Robyn Tannenbaum, President of Sunrise Realty Trust, for closing remarks.

Thank you so much for joining us today, and we look forward to keeping you updated on the merger and our progress.

Thank you, Robyn, for your participation in today's conference. This does conclude the program. You may now disconnect. Thank you.

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.