Sunrise Realty Trust Inc.

Company Overview

Business Model: Sunrise Realty Trust, Inc. (the "Company" or "SUNS") is a Maryland corporation that operates as an institutional lender, providing debt capital solutions to the commercial real estate ("CRE") market. The Company focuses on originating and investing in secured CRE loans and providing capital to high-quality borrowers and sponsors with transitional business plans collateralized by CRE assets with opportunities for near-term value creation, as well as recapitalization opportunities. The investment portfolio targets senior mortgage loans, mezzanine loans, B-notes, commercial mortgage-backed securities ("CMBS"), and debt-like preferred equity securities across diverse CRE asset classes. The Company elected to be taxed as a real estate investment trust ("REIT") for U.S. federal income tax purposes commencing with its taxable year ended December 31, 2024, and is externally managed by Sunrise Manager LLC.

Market Position: The Company aims to capitalize on developments in CRE credit markets where non-bank lenders have gained market share due to tighter bank lending parameters, regulatory requirements, and market dislocations caused by rising interest rates. The Company believes its competitive strengths include a unique market opportunity driven by $2.0 trillion of looming CRE maturities by 2027, a supply-demand imbalance in the Southern U.S., and its strategic local presence and deep network of relationships. The Company also highlights its flexible funding structure compared to traditional REIT land ownership models, allowing for quicker capital redeployment.

Recent Strategic Developments:

• Spin-Off from Advanced Flower Capital Inc. ("AFC"): In July 2024, the Company separated from AFC through a spin-off, becoming an independent, publicly traded company on The Nasdaq Stock Market LLC under the symbol "SUNS."
• Portfolio Expansion: The Company expanded its loan portfolio from nine loans in 2024 to sixteen loans in 2025, with new fundings of approximately $224.4 million during 2025.
• Capital Raising: Completed a registered public offering in January 2025, raising approximately $70.8 million in net proceeds. Established a shelf registration statement in August 2025 for up to $500.0 million in securities and an at-the-market offering program for up to $50.0 million of common stock.
• Credit Facilities Expansion: Increased the aggregate commitment of its senior secured revolving credit facility (the "Revolving Credit Facility") from $50.0 million to $140.0 million during 2025, and further to $165.0 million in February 2026.
• Dividend Reinvestment Plan ("DRIP"): Established a DRIP in September 2025, registering 1,000,000 shares for issuance.
• San Antonio Loan Foreclosure: In March 2026, the Company, through a joint venture, acquired a hotel property in San Antonio, Texas, via credit bid following a loan default.

Geographic Footprint: The Company's investments are primarily concentrated in the Southern U.S., including Alabama, Arkansas, Arizona, Delaware, Florida, Georgia, Kentucky, Louisiana, Maryland, Mississippi, North Carolina, New Mexico, Nevada, Oklahoma, South Carolina, Tennessee, Texas, Utah, Virginia, West Virginia, and Washington D.C. The Company expects states exhibiting above-average population and employment growth, specifically Arizona, Florida, Georgia, North Carolina, Nevada, South Carolina, Tennessee, and Texas, to represent a greater share of its geographic exposure.

Financial Performance

Revenue Analysis

Profitability Metrics:

• Gross Margin: 81.8% (2025)
• Operating Margin: 46.0% (2025)
• Net Margin: 46.0% (2025)

Investment in Growth:

• R&D Expenditure: Not explicitly stated.
• Capital Expenditures: Not explicitly stated.
• Strategic Investments: New loan fundings and additional principal on existing loans totaled approximately $207.1 million in 2025, compared to $160.4 million in 2024.

Business Segment Analysis

Institutional Lending

Financial Performance:

• Revenue (Interest Income): $26.4 million (+143.2% YoY)
• Operating Margin: 46.0%
• Key Growth Drivers: Expansion of the loan portfolio from nine loans in 2024 to sixteen loans in 2025, with new fundings of $207.1 million in 2025. The weighted average yield to maturity (YTM) for the portfolio was 10.0% as of December 31, 2025.

Product Portfolio:

• Major product lines and services: Origination and investment in secured CRE loans, including senior mortgage loans, mezzanine loans, B-notes, CMBS, and debt-like preferred equity securities.
• New product launches or major updates: The Company continues to diversify its investment mix across high-quality residential (multi-family, condominiums, single-family residential communities), retail, office, hospitality, industrial, mixed-use, and specialty-use real estate.

Market Dynamics:

• Competitive positioning within segment: The Company positions itself as an alternative financing provider, leveraging market dislocations where traditional banks have retrenched. It benefits from its strategic presence in the Southern U.S. and the robust relationship network of the Tannenbaum Capital Group platform.
• Key customer types and market trends: High-quality borrowers and sponsors with transitional business plans collateralized by CRE assets with opportunities for near-term value creation and recapitalization. The market is characterized by a supply-demand imbalance in the Southern U.S. and significant CRE loan maturities by 2027.

Loan Portfolio Breakdown (as of December 31, 2025):

• Total Loans Held for Investment (Carrying Value): $302.7 million
• Number of Loans: 16
• Outstanding Principal: $305.5 million
• Aggregate Originated Commitment: $420.7 million
• Weighted Average Remaining Life: 1.9 years
• Floating Interest Rate Loans: Approximately 96% of the portfolio.
• Weighted Average SOFR Floor: 4.1%
• Weighted Average U.S. Prime Rate Floor: 8.0%
• Top 3 Borrower Concentration: Approximately 36.4% of aggregate outstanding principal balances and 35.4% of total loan commitments.
• Nonaccrual Loans: One senior hospitality loan in San Antonio, Texas, with an unpaid principal balance of approximately $26.4 million, placed on nonaccrual status effective October 10, 2025.

Capital Allocation Strategy

Shareholder Returns:

• Share Repurchases: No shares were repurchased during the three months ended December 31, 2025.
• Dividend Payments: $16.1 million in 2025, compared to $4.4 million in 2024.
• Dividend Yield: Approximately 12.8% based on 2025 dividends per share ($1.20) and the closing price on February 27, 2026 ($9.37).
• Future Capital Return Commitments: Established a dividend reinvestment plan (DRIP) on September 3, 2025, registering 1,000,000 shares for issuance.

Balance Sheet Position (as of December 31, 2025):

• Cash and Equivalents: $6.4 million
• Total Debt: $122.0 million (Revolving Credit Facility: $102.3 million; SRTF Credit Facility: $19.8 million)
• Net Cash Position: $(115.6) million
• Credit Rating: Not disclosed.
• Debt Maturity Profile: Revolving Credit Facility matures November 8, 2027. SRTF Credit Facility matures May 31, 2028.

Cash Flow Generation:

• Operating Cash Flow: $(3.4) million (2025), compared to $1.6 million (2024). The decrease was primarily due to an increase in interest income paid from interest drawn on loans, offset by related incoming cash payments from borrowers due to portfolio expansion.
• Free Cash Flow: Not explicitly stated.
• Cash Conversion Metrics: Not explicitly stated.

Operational Excellence

Production & Service Model: The Company is externally managed by Sunrise Manager LLC, which is a registered investment adviser. The Manager oversees the Company's loans and day-to-day operations, subject to Board oversight. The operational philosophy centers on a rigorous investment process, including direct origination, disciplined underwriting, Investment Committee review, and proactive post-closing portfolio management.

Supply Chain Architecture: Key Suppliers & Partners:

• Administrative Services: TCG Services LLC (an affiliate of Sunrise Manager LLC) provides personnel, office facilities, IT, legal, accounting, human resources, clerical, bookkeeping, and record-keeping services.
• Investment Personnel: SRT Group LLC (an affiliate of Sunrise Manager LLC) provides investment professionals.
• Financing Partners: East West Bank (Agent, Joint Lead Arranger for Revolving Credit Facility), SRT Finance LLC (Agent and Lender for SRTF Credit Facility, an affiliate).
• Title Agency Services: Diamond Foundation Title LLC (an affiliated title agent company) may provide title agency services, primarily in rate-regulated states or under specific conditions.

Facility Network:

• Headquarters: West Palm Beach, Florida. The office is leased by Sunrise Manager LLC or an affiliate, with the Company reimbursing its allocable share of expenses.
• Research & Development: Not explicitly stated as a separate facility, but R&D focus is integrated into the Manager's investment process.
• Distribution: Not applicable as the Company is a lender.

Operational Metrics: The Company's loan portfolio expanded from 9 loans in 2024 to 16 loans in 2025. The Company monitors loan performance through borrower, economic, property, and market reviews, and assigns risk ratings (1-5, less risk to greater risk). As of December 31, 2025, the majority of loans were rated "1" or "2" (Very Low Risk or Low Risk), with one loan rated "5" (Impaired/Loss Likely).

Market Access & Customer Relationships

Go-to-Market Strategy: The Company's strategy focuses on direct origination of loans with borrowers. It leverages a robust relationship network of commercial real estate owners, operators, and related businesses provided by the Tannenbaum Capital Group platform.

Distribution Channels:

• Direct Sales: The primary channel involves direct origination of loans with borrowers.
• Channel Partners: Not explicitly detailed, but the TCG platform provides a network for investment opportunities.
• Digital Platforms: Not explicitly mentioned for sales, but information technology is used in operations.

Customer Portfolio:

• Enterprise Customers: The Company targets high-quality borrowers and sponsors with transitional business plans collateralized by CRE assets.
• Customer Concentration: As of December 31, 2025, the top three borrowers represented approximately 36.4% of the aggregate outstanding principal balances and 35.4% of the total loan commitments.
• Strategic Partnerships: Co-investments with affiliated investment vehicles are common, with 16 co-invested loans as of December 31, 2025.

Geographic Revenue Distribution: The Company's investments are primarily concentrated in the Southern U.S. Interest income for 2025 was concentrated with four borrowers, each comprising more than 10% of consolidated interest income, totaling $15.3 million or 58% of consolidated interest income.

Competitive Intelligence

Market Structure & Dynamics

Industry Characteristics: The CRE credit market has seen a shift towards non-bank lenders due to tighter lending parameters, increased regulatory requirements for traditional banks, and market dislocations from rising interest rates. A significant volume of CRE maturities ($2.0 trillion by 2027) creates opportunities for capital providers with liquidity and speed. The Southern U.S. market benefits from positive demographic trends and a supply-demand imbalance in residential and commercial real estate.

Competitive Positioning Matrix:

Direct Competitors

Primary Competitors: The Company competes with a variety of institutional investors, including other REITs, debt funds, specialty finance companies, savings and loan associations, banks, mortgage bankers, insurance companies, investment banking firms, financial institutions, private equity and hedge funds.

Emerging Competitive Threats: Not explicitly detailed beyond general competition.

Competitive Response Strategy: The Company's strategy involves capitalizing on current CRE market dislocations, focusing on the Southern U.S. due to favorable demographic and economic trends, leveraging its management team's expertise and strategic local presence, building a diversified portfolio of CRE investments (senior mortgage, mezzanine, B-notes, CMBS, preferred equity), and utilizing the Tannenbaum Capital Group platform for investment opportunities and back-office support.

Risk Assessment Framework

Strategic & Market Risks

• Market Dynamics: Competition for attractive lending opportunities may reduce returns. Illiquidity of target investments may hinder timely sales. Portfolio concentration in a limited number of investments (top 3 borrowers represent 36.4% of outstanding principal) increases risk of significant loss.
• Technology Disruption: Not explicitly mentioned as a specific risk, but general reliance on IT systems is noted.
• Customer Concentration: High concentration in a few borrowers could lead to significant losses if any perform poorly.
• Overestimation of Yields/Incorrect Pricing: Manager's estimates of future cash flows, returns, and appreciation may not be accurate, leading to losses.
• Fair Value Uncertainty: Many investments are not publicly traded, and fair value determinations are subjective, potentially differing from realized values.
• Interest Rate Fluctuations: Rising interest rates could increase financing costs faster than interest income on floating-rate assets, or decrease the market value of fixed-rate assets.
• Economic Slowdown/Recession: Prolonged economic downturns or declining real estate values could impair investments and harm operating results.
• Non-conforming/Non-investment Grade Investments: Many investments may not conform to conventional loan standards, carrying higher default and loss risk.
• Subordinated Interests: Investments in mezzanine loans and other subordinated assets expose the Company to greater risk of loss.
• Geographic Concentration: Concentration in the Southern U.S. exposes the Company to regional economic and real estate risks.
• Debt-Oriented Real Estate Risks: Deterioration of real estate fundamentals could negatively impact borrower repayment ability and increase default risk.
• CMBS Losses: Investments in CMBS are subject to losses, with junior security holders bearing the first losses.
• Special Servicing Control: The Company may not control special servicing of CMBS, potentially leading to actions adverse to its interests.
• Ground Lease Termination: Loans secured by properties subject to ground leases face risks if the ground lease terminates unexpectedly.
• Distressed Loans/Bankruptcy: Investments in distressed loans or non-performing assets subject the Company to losses and risks related to bankruptcy proceedings.
• Lender Liability Claims: Risk of claims if deemed too involved in a borrower's business.
• Lack of Influence on Borrowers: As a debt investor, the Company may not be able to influence borrower decisions that could decrease investment value.
• Insurance Coverage: Certain catastrophic losses may be uninsurable or not economically insurable.
• Prepayment Rates: Prepayment rates can adversely affect the yield on loans and portfolio value.
• CRE Valuation Subjectivity: Valuation of CRE assets is inherently subjective and uncertain.
• Climate Change: Potential impact on properties underlying investments, increased costs, and investor ESG considerations.

Operational & Execution Risks

• Growth Management: Inability to successfully integrate new loans and manage growth effectively could adversely affect results.
• Due Diligence Failures: Due diligence may not reveal all relevant facts, leading to losses.
• Reliance on Manager: Complete reliance on Sunrise Manager LLC and its key personnel for day-to-day operations and investment decisions.
• Licensing Requirements: Failure to obtain or maintain required state licenses could incur expenses or disrupt business.
• Third-Party Claims: Risk of claims asserting the Company caused directors/officers to breach non-competition/non-solicitation agreements.
• Epidemic/Pandemic Impact: Could disrupt borrowers' operations and the Company's business plan.
• Ineffective Internal Controls: Could impact business and operating results, leading to misstatements or fraud.
• Cybersecurity: Reliance on information technology exposes the Company to security breaches and disruptions.
• AI Utilization: Use of artificial intelligence may expose the Company to liability and affect its business.

Financial & Regulatory Risks

• External Capital Dependency: Growth depends on external sources of capital, which may not be available on favorable terms.
• Leverage Risk: Use of borrowings magnifies potential for gain or loss and increases investment risk.
• Global Economic Conditions: Global economic, political, and market conditions could adversely affect the business and access to debt markets.
• Significant Debt/Restrictive Covenants: Incurring substantial debt may subject the Company to restrictive covenants and increased loss risk.
• Debt Service Obligations: Inability to generate sufficient cash flow to meet debt service obligations.
• Bank Credit Facility Collateral: Future bank credit facilities may require collateral or debt paydown.
• Basel III Standards: Adoption of Basel III and other regulatory standards may negatively impact access to financing.
• Hedging Risks: Hedging activities may adversely affect earnings, limit gains, or result in losses.
• Counterparty Risk: Subject to credit risk with respect to counterparties to derivative contracts.
• REIT Qualification Failure: Failure to qualify as a REIT would result in corporate taxation, substantially reducing funds for distributions.
• Other Tax Liabilities: Even as a REIT, the Company may face federal, state, and local taxes.
• REIT Distribution Requirements: May force the Company to borrow funds or sell assets to meet distribution requirements.
• Foregoing Opportunities for REIT Compliance: Compliance may limit the ability to make or hold otherwise attractive loans.
• Prohibited Transactions Tax: Limits the ability to engage in certain property sales.
• Legislative/Regulatory Tax Changes: Changes to REIT tax laws could adversely affect the business.
• Preferential Dividends: Risk of inadvertently paying preferential dividends, affecting REIT status.
• Board's Ability to Revoke REIT Election: Board can revoke REIT election without shareholder approval.
• Non-Qualified Dividends: REIT dividends generally do not qualify for reduced tax rates applicable to qualified dividend income.

Geopolitical & External Risks

• Geopolitical Exposure: Global economic, political, and market conditions, including sovereign debts, financial market instability, and geopolitical conflicts (e.g., Russia/Ukraine, Israel/Hamas/Hezbollah), can significantly impact the business.
• Trade Relations: Not explicitly mentioned.
• Sanctions & Export Controls: Not explicitly mentioned.

Innovation & Technology Leadership

Research & Development Focus: The Company's core focus is on originating and investing in secured CRE loans, with an emphasis on value creation and recapitalization opportunities. While not explicitly detailing R&D facilities or a pipeline, the Manager's rigorous investment process and evaluation of potential investments imply an ongoing analytical and strategic development effort.

Intellectual Property Portfolio: Not explicitly mentioned.

Technology Partnerships: The Company relies on its Manager's corporate information technology, accounting, and financial reporting platforms. The Manager, through an affiliate, utilizes a third-party managed & cybersecurity services provider (MSSP) for cybersecurity services, including threat detection, vulnerability assessment, and incident response.

Leadership & Governance

Executive Leadership Team

Leadership Continuity: The Manager's operating agreement includes a succession plan where Robyn Tannenbaum will be appointed as Managing Member upon the resignation or removal of Leonard M. Tannenbaum.

Board Composition: The Company has a classified Board. The Board, through its Audit and Valuation Committee, oversees cybersecurity risk management and reviews the Manager's performance and fees annually. The Board has adopted a resolution exempting business combinations with Leonard M. Tannenbaum or his affiliates from certain Maryland General Corporation Law anti-takeover provisions.

Human Capital Strategy

Workforce Composition: The Company has no direct employees and is externally managed by Sunrise Manager LLC. It relies on the personnel of Sunrise Manager LLC and its affiliates, TCG Services LLC and SRT Group LLC. These affiliates provide access to over 35 professionals, including seven investment professionals, with over 70 years of combined investment management experience.

Talent Management:

• Acquisition & Retention: The Company believes its Manager's ability to attract, develop, engage, and retain key personnel is essential. The Manager's team has substantial experience in cash flow and real estate lending, construction and real estate development, portfolio management, corporate finance, and capital markets.
• Employee Value Proposition: The 2024 Stock Incentive Plan grants equity-based awards to employees and executive officers of the Manager and other eligible awardees to align interests with shareholders and provide retention incentives.

Diversity & Development: Not explicitly mentioned.

Culture & Engagement: Not explicitly mentioned.

Environmental & Social Impact

Environmental Commitments:

• Climate Strategy: The Company acknowledges the potential impact of climate change (e.g., temperature increases, sea levels, severe weather events) on the properties underlying its investments. It also notes the increasing investor focus on Environmental, Social, and Governance (ESG) factors, including climate risks.
• Carbon Neutrality: Not explicitly mentioned.
• Renewable Energy: Not explicitly mentioned.

Supply Chain Sustainability: Not explicitly mentioned.

Social Impact Initiatives: Not explicitly mentioned.

Business Cyclicality & Seasonality

Demand Patterns: The Company's business is influenced by CRE market dislocations, migration patterns (particularly to the Southern U.S.), and the prevailing interest rate environment. It aims to capitalize on the current supply-demand imbalance in the Southern U.S.

Economic Sensitivity: The Company's operations are affected by the fiscal and monetary policies of the U.S. Government and the Federal Reserve, including changes in interest rates. Global economic, political, and market conditions (e.g., inflation, geopolitical conflicts) can also significantly impact its financial performance.

Industry Cycles: Not explicitly mentioned.

Planning & Forecasting: The Company's ability to deploy capital quickly is crucial to capitalize on investment opportunities. It may hold cash pending deployment, which could be significant at times.

Regulatory Environment & Compliance

Regulatory Framework:

• Industry-Specific Regulations: The Company is subject to regulation, supervision, and licensing under various U.S. federal, state, provincial, and local statutes, including the Equal Credit Opportunity Act, USA Patriot Act, Office of Foreign Asset Control regulations, and U.S. federal and state securities laws. State licensing requirements for lenders also apply.
• International Compliance: Not explicitly mentioned.

Trade & Export Controls: Not explicitly mentioned.

Legal Proceedings: As of December 31, 2025, the Company was not subject to any material legal proceedings.

Tax Strategy & Considerations

Tax Profile: The Company elected to be taxed as a REIT for U.S. federal income tax purposes, commencing with the taxable year ended December 31, 2024. To maintain this status, it must annually distribute at least 90% of its REIT taxable income and may be subject to a 4% non-deductible excise tax if distributions fall below specified minimums. The Company may form Taxable REIT Subsidiaries (TRS) in the future, which would be subject to corporate-level income tax.

Geographic Tax Planning: Not explicitly mentioned.

Tax Reform Impact: Not explicitly mentioned.

Insurance & Risk Transfer

Risk Management Framework: The Company carries directors and officers insurance. It also relies on its Manager's rigorous investment process and proactive monitoring of loans to mitigate credit risk.

Insurance Coverage: The Company believes its policy specifications and insured limits are appropriate and adequate given the relative risk of loss, cost of coverage, and standard industry practice.

Risk Transfer Mechanisms: The Company may utilize interest rate swap agreements or other interest rate hedging strategies, subject to REIT qualification rules. It also seeks to manage credit risk through the use of non-recourse financing when available and appropriate.