suns-20250331

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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q


☒			QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 2025


☐			TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from __________ to __________

Commission File Number: 001-41971

SUNRISE REALTY TRUST, INC.

(Exact name of registrant as specified in its charter)


Maryland						93-3168928
(State or other jurisdiction of incorporation or organization)						(I.R.S. Employer Identification Number)

525 Okeechobee Blvd., Suite 1650, West Palm Beach, FL 33401

(Address of principal executive offices) (Zip Code)

(561) 530-3315

(Registrant’s telephone number, including area code)

N/A

(Former name, former address and former fiscal year, if changed since last report)

Securities registered pursuant to Section 12(b) of the Act:


Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock, $0.01 par value per share	SUNS	The Nasdaq Stock Market LLC

Securities registered pursuant to Section 12(g) of the Act: None

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer

☐

Accelerated filer

☐

Non-accelerated filer

☒

Smaller reporting company

☒

Emerging growth company

☒

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒


Class			Outstanding at May 1, 2025
Common stock, $0.01 par value per share			13,421,494

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SUNRISE REALTY TRUST, INC.

TABLE OF CONTENTS

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Part I.	Financial Information
Item 1.	Financial Statements	1
	Balance Sheets as of March 31, 2025 (unaudited) and December 31, 2024	1
	Statements of Operations for the three months ended March 31, 2025 and 2024 (unaudited)	2

	Statements of Shareholders' Equity for the three months ended March 31, 2025 and 2024 (unaudited)	3
	Statement of Cash Flows for the three months ended March 31, 2025 and 2024 (unaudited)	4
	Notes to the Financial Statements (unaudited)	5
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	20
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	30
Item 4.	Controls and Procedures	32
Part II.	Other Information	32
Item 1.	Legal Proceedings	33
Item 1A.	Risk Factors	33
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	33
Item 3.	Defaults Upon Senior Securities	33
Item 4.	Mine Safety Disclosures	33
Item 5.	Other Information	33
Item 6.	Exhibits	34

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PART I – FINANCIAL INFORMATION

Item 1. Financial Statements

SUNRISE REALTY TRUST, INC.

CONSOLIDATED BALANCE SHEETS


	As of
	March 31, 2025		December 31, 2024
	(unaudited)
Assets


Loans held for investment at carrying value, net	$	230,494,191	$	130,733,630

Current expected credit loss reserve	(13,713)		(21,782)
Loans held for investment at carrying value, net of current expected credit loss reserve	230,480,478		130,711,848

Cash and cash equivalents	1,642,780		184,626,770

Interest receivable	1,672,886		1,138,561

Prepaid expenses and other assets	646,421		1,058,601
Total assets	$	234,442,565	$	317,535,780

Liabilities

Accrued interest	$	132,297	$	131,617

Dividends payable	4,026,448		2,941,964
Current expected credit loss reserve	144,115		18,398
Accrued management and incentive fees	—		393,063
Accrued direct administrative expenses	640,437		715,574
Accounts payable and other liabilities	1,491,170		357,417

Line of credit payable	43,200,000		123,840,000
Line of credit payable to affiliate	—		75,000,000
Total liabilities	49,634,467		203,398,033
Commitments and contingencies (Note 7)
Shareholders' equity

Preferred stock, par value $0.01 per share, 10,000 and 0 shares authorized at March 31, 2025 and December 31, 2024 and 0 shares issued and outstanding at March 31, 2025 and December 31, 2024, respectively	—		—
Common stock, par value $0.01 per share, 50,000,000 shares authorized at March 31, 2025 and December 31, 2024 and 13,421,494 and 7,004,676 shares issued and outstanding at March 31, 2025 and December 31, 2024, respectively	134,215		70,047
Additional paid-in capital	186,555,228		115,022,034

Accumulated (deficit) earnings	(1,881,345)		(954,334)
Total shareholders' equity	184,808,098		114,137,747

Total liabilities and shareholders' equity	$	234,442,565	$	317,535,780

See accompanying notes to the consolidated financial statements

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SUNRISE REALTY TRUST, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS

(unaudited)


	Three months ended March 31,
	2025		2024
Revenue
Interest income	$	4,958,523	$	2,026,306
Interest expense	(336,159)		—
Net interest income	4,622,364		2,026,306
Expenses
Management and incentive fees	—		—
General and administrative expenses	753,126		543

Stock-based compensation	243,621		—
Professional fees	408,532		263,418
Total expenses	1,405,279		263,961
(Provision for) reversal of current expected credit losses	(117,648)		—



Net income before income taxes	3,099,437		1,762,345
Income tax expense	—		—
Net income	$	3,099,437	$	1,762,345

Earnings per common share:
Basic earnings per common share	$	0.27	$	0.26
Diluted earnings per common share	$	0.27	$	0.26

Weighted average number of common shares outstanding:
Basic weighted average shares of common stock outstanding	11,208,015		6,889,032
Diluted weighted average shares of common stock outstanding	11,221,016		6,889,032

See accompanying notes to the consolidated financial statements

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SUNRISE REALTY TRUST, INC.

CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY

(unaudited)


Three months ended March 31, 2025
	Member's Equity			Common Stock				Additional Paid-In Capital		Accumulated Earnings (Deficit)		Total Shareholders' Equity
			Shares		Amount
Balance as of December 31, 2024	$	—		7,004,676		$	70,047	$	115,022,034	$	(954,334)	$	114,137,747




Issuance of common stock, net of offering costs	—			6,400,000		64,000		71,289,741		—		71,353,741
Stock-based compensation	—			16,818		168		243,453		—		243,621
Dividends declared on common shares ($0.30 per share)	—			—		—		—		(4,026,448)		(4,026,448)



Net income	—			—		—		—		3,099,437		3,099,437
Balance as of March 31, 2025	$	—		13,421,494		$	134,215	$	186,555,228	$	(1,881,345)	$	184,808,098


Three months ended March 31, 2024
	Member's Equity			Common Stock				Additional Paid-In Capital		Accumulated Earnings (Deficit)		Total Shareholders' Equity
			Shares		Amount
Balance as of December 31, 2023	$	31,234,622		—		$	—	$	—	$	—	$	31,234,622

Capital contributions	—			—		—		17,000,000		—		17,000,000
Distributions	—			—		—		(2,600,000)		—		(2,600,000)
Effect of corporate conversion on member's equity	(31,234,622)			100		1		30,999,999		234,622		—





Net income	—			—		—		—		1,762,345		1,762,345
Balance as of March 31, 2024	$	—		100		$	1	$	45,399,999	$	1,996,967	$	47,396,967

See accompanying notes to the consolidated financial statements

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SUNRISE REALTY TRUST, INC.

CONSOLIDATED STATEMENT OF CASH FLOWS

(unaudited)


	Three months ended March 31,
	2025		2024
Operating activities:
Net income	$	3,099,437	$	1,762,345
Adjustments to reconcile net income to net cash provided by (used in) operating activities:
Provision for (reversal of) current expected credit losses	117,648		—

Amortization of deferred financing costs	68,050		—

Accretion of deferred loan original issue discount and other discounts	(292,672)		(14,094)
Stock-based compensation	243,621		—
Interest drawn on loans	(3,740,082)		—

Changes in operating assets and liabilities:

Interest receivable	(534,325)		(838,558)

Prepaid expenses and other assets	378,337		—

Accrued interest	680		—
Accrued management and incentive fees	(393,063)		—
Accrued direct administrative expenses	(75,137)		—
Accounts payable and other liabilities	212,915		208,115
Net cash provided by (used in) operating activities	(914,591)		1,117,808

Cash flows from investing activities:
Issuance of and fundings on loans	(104,743,576)		(48,859,181)





Principal repayment of loans	9,015,769		2,445,037
Net cash (used in) provided by investing activities	(95,727,807)		(46,414,144)

Cash flows from financing activities:
Net transfers and distributions from (to) Former Parent	—		17,000,000
Proceeds from sale of common stock	72,588,000		—

Payment of offering costs - equity offering	(313,421)		—
Distributions	—		(2,600,000)
Payment of financing costs	(34,207)		—

Borrowings on revolving credit facilities	81,060,000		—
Repayment of revolving credit facilities	(236,700,000)		—
Dividends paid to common shareholders	(2,941,964)		—

Net cash provided by (used in) financing activities	(86,341,592)		14,400,000

Net increase (decrease) in cash and cash equivalents	(182,983,990)		(30,896,336)
Cash and cash equivalents, beginning of period	184,626,770		31,244,622
Cash and cash equivalents, end of period	$	1,642,780	$	348,286

Supplemental disclosure of non-cash activity:


OID withheld from funding of loans	$	1,412,778	$	281,888





Dividends declared and not yet paid	$	4,026,448	$	—
Offering costs included in accounts payable and other liabilities	$	920,838	$	—


Supplemental information:
Interest paid during the period	$	267,429	$	—
Income taxes paid during the period	$	—	$	—

See accompanying notes to the consolidated financial statements

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SUNRISE REALTY TRUST, INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

As of March 31, 2025

(unaudited)

1. ORGANIZATION

Sunrise Realty Trust, Inc. (the “Company” or “SUNS”) was formed on August 28, 2023, and converted from a Delaware limited liability company to a Maryland corporation in February 2024. The Company is an institutional lender that provides debt capital solutions to the commercial real estate (“CRE”) market in the Southern United States. The Company focuses on originating, underwriting and managing CRE debt investments 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 Company intends to further diversify its investment portfolio, targeting investments in senior mortgage loans, mezzanine loans, B-notes, commercial mortgage-backed securities (“CMBS”) and debt-like preferred equity securities across CRE asset classes. The Company intends for its investment mix to include high quality residential (including multi-family, condominiums and single-family residential communities), retail, office, hospitality, industrial, mixed-use and specialty-use real estate. The Company operates in one operating segment.

SUNS is externally managed and advised by Sunrise Manager LLC (“SUNS Manager” or the “Manager”), a registered investment adviser under the Investment Advisers Act of 1940, as amended (the “Advisers Act”). The Company conducts its business through the parent company, Sunrise Realty Trust, Inc., and several subsidiaries. The Company consolidates all of its subsidiaries, which are consolidated within the Company’s consolidated financial statements.

The Company intends to elect to be taxed as a REIT for United States federal income tax purposes under the Internal Revenue Code (the “Code”), commencing with the taxable year ending December 31, 2024. The Company generally will not be subject to United States federal income taxes on its REIT taxable income as long as it annually distributes all of its REIT taxable income prior to the deduction for dividends paid to shareholders and complies with various other requirements as a REIT.

Spin-Off

On July 9, 2024, Advanced Flower Capital Inc. (f/k/a AFC Gamma, Inc.) (“AFC” or the “Former Parent”) announced the completion of the previously announced separation and spin-off of AFC’s CRE portfolio into an independent, publicly traded company, SUNS (the “Spin-Off”). The Spin-Off was effected by the transfer of AFC’s CRE portfolio from AFC to SUNS and the distribution of all of the outstanding shares of SUNS’ common stock, par value $0.01 per share (the “Common Stock”) to all of AFC’s shareholders of record as of the close of business on July 8, 2024 (the “Record Date”). AFC’s shareholders of record as of the Record Date received one share of SUNS Common Stock for every three shares of AFC common stock held as of the Record Date. The Spin-Off was completed on July 9, 2024 (the “Distribution Date”). On the Distribution Date, SUNS became an independent, publicly traded company, trading on the Nasdaq Capital Market under the symbol “SUNS”. AFC retained no ownership interest in the Company following the Spin-Off.

In connection with the Spin-Off, the Company entered into several agreements with AFC that govern the relationship between the Company and AFC following the Spin-Off, including the Separation and Distribution Agreement and the Tax Matters Agreement. These agreements provide for the allocation between AFC and SUNS of the assets, liabilities and obligations (including, among others, investments, property and tax-related assets and liabilities) of AFC and its subsidiaries attributable to periods prior to, at and after the Spin-Off. Moreover, in preparation for the Spin-Off, the management of SUNS entered into a new management agreement with SUNS Manager, which became effective concurrently with the completion of the Spin-Off. The Manager also entered into (i) an Administrative Services Agreement (the “Administrative Services Agreement”) with TCG Services LLC, an affiliate of the Manager and Leonard Tannenbaum, the Company’s Executive Chairman, and Robyn Tannenbaum, the Company’s President, and (ii) a Services Agreement (the “Services Agreement”) with SRT Group LLC, an affiliate of the Manager, Mr. Tannenbaum, Mrs. Tannenbaum, Mr. Sedrish and Mr. Hetzel.

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2. SIGNIFICANT ACCOUNTING POLICIES

The accompanying unaudited interim financial statements should be read in conjunction with the audited financial statements and results of operations included in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2024 filed with the U.S. Securities and Exchange Commission (“SEC”).

Refer to Note 2 to the Company’s Annual Report on Form 10-K for a description of the Company’s significant accounting policies. The Company has included disclosures below regarding basis of presentation and other accounting policies that (i) are required to be disclosed quarterly, (ii) have material changes or (iii) the Company views as critical as of the date of this report.

Basis of Presentation

The accompanying unaudited interim consolidated financial statements and related notes have been prepared on the accrual basis of accounting in conformity with accounting principles generally accepted in the United States of America (“GAAP”) and in conformity with the rules and regulations of the SEC applicable to interim financial information and include the accounts of the Company and its wholly-owned subsidiaries. The unaudited interim consolidated financial statements reflect all adjustments that, in the opinion of management, are necessary for the fair presentation of the Company’s results of operations and financial condition as of and for the periods presented. All intercompany balances and transactions have been eliminated in consolidation. The historical financial statements of the Company for the periods prior to the completion of the Spin-Off are prepared from AFC’s historical accounting records and are presented on a standalone basis as if the Company’s operations have been conducted independently from AFC.

This Quarterly Report on Form 10-Q includes financial information of the Company through July 9, 2024 (prior to consummation of the Separation, the Distribution and the Spin-Off) and the period from July 9, 2024 to March 31, 2025 (from and after consummation of the Separation, the Distribution and the Spin-Off), and does not fully reflect what the Company’s results of operations, cash flows and financial condition would have been had it been an independent company for prior periods presented.

The aggregate net effect of transactions between the Company and related parties that have been historically settled other than in cash are reflected in the Balance Sheets as Member’s Equity and Shareholder’s Equity and in the Statements of Cash Flows as Net Transfers and Distributions From (to) Former Parent. For additional information, see Note 12, “Related Party Transactions,” and Note 8, “Shareholders’ Equity.”

The current period’s results of operations will not necessarily be indicative of results that ultimately may be realized for the year ending December 31, 2025.

Use of Estimates in the Preparation of Financial Statements

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect certain reported amounts and disclosures. Actual results could differ from those estimates. Significant estimates include the current expected credit losses (“CECL”) reserve.

Recent Accounting Pronouncements

The Company is an “emerging growth company,” as defined in the Jumpstart Our Business Startups Act (“JOBS Act”). Section 107 of the JOBS Act provides that an “emerging growth company” can take advantage of the extended transition period provided in Section 7(a)(2)(B) of the Securities Act for complying with new or revised accounting standards. In other words, an “emerging growth company” can delay the adoption of certain accounting standards until those standards would otherwise apply to private companies. The Company has elected to take advantage of this extended transition period. As a result, the Company will not be subject to the same implementation timing for new or revised accounting standards as other public companies that are not emerging growth companies, which may make comparison of the Company’s financials to those of other public companies more difficult.

In December 2023, the FASB issued ASU 2023-09—Income Taxes (Topic 740): Improvements to Income Tax Disclosures (“ASU 2023-09”). ASU 2023-09 improves the transparency of income tax disclosures related to rate reconciliation and income taxes. ASU 2023-09 is effective for annual periods beginning after December 15, 2024. For entities other than public business entities, the amendments are effective for annual periods beginning after December 15, 2025. Early adoption is permitted for annual financial statements that have not yet been issued or made available for issuance. The

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amendments should be applied prospectively, however, retrospective application is permitted. The adoption of ASU 2023-09 is not expected to have a material impact on the Company’s consolidated financial statements.

In November 2024, the FASB issued ASU 2024-03—Income Statement—Reporting Comprehensive Income—Expense Disaggregation Disclosures (Subtopic 220-40): Disaggregation of Income Statement Expenses (“ASU 2024-03”) and in January 2025, the FASB issued ASU 2025-01—Income Statement—Reporting Comprehensive Income—Expense Disaggregation Disclosures (Subtopic 220-40): Clarifying the Effective Date (“ASU 2025-01”), which requires additional disclosure of the nature of expenses included in the income statement as well as disclosures about specific types of expenses included in the expense captions presented in the income statement. ASU 2024-03, as clarified by ASU 2025-01, is effective for fiscal years beginning after December 15, 2026 and interim periods within fiscal years beginning after December 15, 2027, with early adoption permitted. The adoption of ASU 2024-03 is not expected to have a material impact on the Company’s consolidated financial statements.

3. LOANS HELD FOR INVESTMENT AT CARRYING VALUE

As of March 31, 2025 and December 31, 2024, the Company’s portfolio included twelve and nine loans held at carrying value, respectively. The aggregate originated commitment under these loans was approximately $352.1 million and $190.9 million, respectively, and outstanding principal was approximately $233.4 million and $132.6 million, respectively, as of March 31, 2025 and December 31, 2024. During the three months ended March 31, 2025, the Company funded approximately $109.8 million of new loans and additional principal on existing loans and had approximately $9.0 million of principal repayments of loans held at carrying value. As of March 31, 2025 and December 31, 2024, approximately 89% and 79%, respectively, of the Company’s loans held at carrying value had floating interest rates. As of March 31, 2025, these floating benchmark rates included one-month Secured Overnight Financing Rate (“SOFR”) quoted at 4.3% and subject to a weighted average floor of 4.1% based on outstanding principal.

The following tables summarizes the Company’s loans held at carrying value as of March 31, 2025 and December 31, 2024:


	As of March 31, 2025
	Outstanding Principal(1)		Original Issue Discount		Carrying Value(1)		Weighted Average Remaining Life (Years)(2)

Senior mortgage loans(3)(4)	$	202,709,486	$	(2,647,593)	$	200,061,893	2.5
Subordinate debt	30,671,220		(238,922)		30,432,298		2.4
Total loans held at carrying value	$	233,380,706	$	(2,886,515)	$	230,494,191	2.5


	As of December 31, 2024
	Outstanding Principal(1)		Original Issue Discount		Carrying Value(1)		Weighted Average Remaining Life (Years)(2)

Senior mortgage loans(3)	$	109,300,553	$	(1,495,512)	$	107,805,041	2.6
Subordinate debt	23,255,736		(327,147)		22,928,589		2.4
Total loans held at carrying value	$	132,556,289	$	(1,822,659)	$	130,733,630	2.6

(1)The difference between the Carrying Value and the Outstanding Principal amount of the loans consists of unaccreted OID and loan origination costs.

(2)Weighted average remaining life is calculated based on the carrying value of each respective group of loans as of March 31, 2025 and December 31, 2024.

(3)Senior mortgage loans include senior loans that also have a contiguous subordinate loan because as a whole, the expected credit quality of the subordinate loan is more similar to that of a senior loan.

(4)If the Company holds both the A-note and B-note, the loan is categorized as a senior mortgage loan.

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The following table presents changes in loans held at carrying value as of and for the three months ended March 31, 2025:


	Principal		Original Issue Discount		Carrying Value

Total loans held at carrying value at December 31, 2024	$	132,556,289	$	(1,822,659)	$	130,733,630
New fundings	106,100,104		(1,356,528)		104,743,576
Interest drawn on loans	3,740,082		—		3,740,082
Accretion of original issue discount	—		292,672		292,672
Loan repayments	(9,015,769)		—		(9,015,769)


Total loans held at carrying value at March 31, 2025	$	233,380,706	$	(2,886,515)	$	230,494,191

A more detailed listing of the Company’s loans held at carrying value portfolio based on information available as of March 31, 2025 is as follows:


Loan Type	Location	Outstanding Principal(1)		Original Issue Discount		Carrying Value(1)		Interest Rate			Maturity Date(2)	Payment Terms(3)

Senior mortgage loans:
Residential	Austin, TX	$	13,818,709	$	(105,655)	$	13,713,054	9.0	%	(4)	7/3/2027	I/O
Hospitality	San Antonio, TX	26,793,821		(212,333)		26,581,488		10.9	%	(5)	8/9/2027	I/O
Residential	PBG, FL	28,614,957		(309,896)		28,305,061		12.6	%	(6)	9/1/2027	I/O
Residential	PBG, FL	24,321,302		(273,438)		24,047,864		10.6	%	(7)	9/1/2027	I/O
Residential	Fort Lauderdale, FL	4,964,427		(242,308)		4,722,119		11.4	%	(8)	12/30/2026	I/O
Hospitality	Austin, TX	30,635,540		(355,556)		30,279,984		9.8	%	(9)	12/11/2027	I/O
Residential	Aventura, FL	28,711,352		(280,769)		28,430,583		9.3	%	(10)	1/27/2027	I/O
Net Leased Tenant	New Orleans, LA	599,378		(415,556)		183,822		10.1	%	(11)	1/30/2028	I/O
Residential	Dallas, TX	44,250,000		(452,083)		43,797,917		8.0	%	(12)	3/14/2028	I/O
Subordinate debt:
Residential	Sarasota, FL	23,891,764		(183,227)		23,708,537		13.0	%	(13)	5/12/2027	I/O
Residential	Miami, FL	2,246,271		(111,944)		2,134,327		13.3	%	(14)	11/15/2027	I/O
Residential	Miami, FL	4,533,185		56,250		4,589,435		14.8	%	(15)	12/13/2028	I/O
Total loans held at carrying value		$	233,380,706	$	(2,886,515)	$	230,494,191

(1)The difference between the Carrying Value and the Outstanding Principal amount of the loans consists of unaccreted OID and loan origination costs.

(2)Certain loans are subject to contractual extension options and may be subject to performance based or other conditions as stipulated in the loan agreement. Actual maturities may differ from contractual maturities stated herein as certain borrowers may have the right to prepay with or without paying a prepayment penalty. The Company may also extend contractual maturities and amend other terms of the loans in connection with loan modifications.

(3)I/O = interest-only, P/I = principal and interest. P/I loans may include interest-only periods for a portion of the loan term.

(4)Base interest rate of 4.25% plus SOFR (SOFR floor of 4.75%).

(5)Base interest rate of 6.35% plus SOFR (SOFR floor of 4.50%).

(6)Base interest rate of 8.25% plus SOFR (SOFR floor of 4.00%).

(7)Base interest rate of 6.25% plus SOFR (SOFR floor of 4.00%).

(8)Cash interest rate represents a blended rate of differing cash interest rates applicable to each of the A-Notes and B-Notes to which the Company is a lender under the credit agreements. The A-Notes bear interest at a base interest rate of 4.75% plus SOFR (SOFR floor of 4.75%) and the B-Notes bear interest at a base interest rate of 11.00% plus SOFR (SOFR floor of 4.75%).

(9)Base interest rate of 5.50% plus SOFR (SOFR floor of 4.00%).

(10)Base interest rate of 5.00% plus SOFR (SOFR floor of 4.00%).

(11)Base interest rate of 5.60% plus SOFR (SOFR floor of 4.50%).

(12)Base interest rate of 3.65% plus SOFR (SOFR floor of 3.90%).

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(13)Base interest rate of 13.00%.

(14)Base interest rate of 13.25%.

(15)Base interest rate of 9.50% plus SOFR (SOFR floor of 4.00%) and PIK interest rate of 1.00%.

4. CURRENT EXPECTED CREDIT LOSSES

As of March 31, 2025 and December 31, 2024, the Company’s CECL Reserve for its loans held at carrying value is approximately $157.8 thousand and $40.2 thousand, respectively, or 0.07%, and 0.03%, respectively, of the Company’s total loans held at carrying value of approximately $230.5 million and $130.7 million, respectively, and is bifurcated between the current expected credit loss reserve (contra-asset) related to outstanding balances on loans held at carrying value of approximately $13.7 thousand and $21.8 thousand, respectively, and a liability for unfunded commitments of approximately $144.1 thousand and $18.4 thousand, respectively. The liability was based on the unfunded portion of the loan commitment over the full contractual period over which the Company is exposed to credit risk through a current obligation to extend credit. Management considered the likelihood that funding will occur and, if funded, the expected credit loss on the funded portion.

Activity related to the CECL Reserve for outstanding balances and unfunded commitments on the Company’s loans held at carrying value as of and for the three months ended March 31, 2025 was as follows:


	Outstanding(1)		Unfunded(2)		Total
Balance at December 31, 2024	$	21,782	$	18,398	$	40,180
Provision for (reversal of) current expected credit losses	(8,069)		125,717		117,648
Write-offs	—		—		—
Recoveries	—		—		—
Balance at March 31, 2025	$	13,713	$	144,115	$	157,828

(1)As of March 31, 2025 and December 31, 2024, the CECL Reserve related to outstanding balances on loans held at carrying value is recorded within current expected credit loss reserve in the Company’s consolidated balance sheets.

(2)As of March 31, 2025 and December 31, 2024, the CECL Reserve related to unfunded commitments on loans held at carrying value is recorded within current expected credit loss reserve as a liability in the Company’s consolidated balance sheets.

The Company continuously evaluates the credit quality of each loan by assessing the risk factors of each loan and assigning a risk rating based on a variety of factors. Risk factors may include property type, geographic and local market dynamics, physical condition, projected cash flow, loan structure and exit plan, loan-to-value ratio, fixed charge coverage ratio, project sponsorship, and other factors deemed necessary by the Company. Based on a 5-point scale, the Company’s loans are rated “1” through “5,” from less risk to greater risk, which ratings are defined as follows:


Rating			Definition
1			Very Low Risk — Investment exceeds performance expectations. Trends and risk factors since time of investment are favorable.
2			Low Risk — Investment performing consistent with expectations and a full return of principal and interest expected. Trends and risk factors are neutral to favorable.
3			Medium Risk — Performing investments requiring closer monitoring. Trends and risk factors show some deterioration.
4			High Risk/ Potential for Loss — Investment underperforming with the potential of some interest loss. Trends and risk factors are negative.
5			Impaired/ Loss Likely — Investment underperforming with expected loss of interest, and full recovery of principal is unlikely.

The risk ratings are primarily based on historical data as well as taking into account future economic conditions.

Index

As of March 31, 2025, the carrying value, excluding the CECL Reserve, of the Company’s loans held at carrying value within each risk rating by year of origination is as follows:


Risk Rating:	2025		2024		Total
1	$	—	$	—	$	—
2	77,001,757		153,492,434		230,494,191
3	—		—		—
4	—		—		—
5	—		—		—
Total	$	77,001,757	$	153,492,434	$	230,494,191

5. INTEREST RECEIVABLE

The following table summarizes the interest receivable balance for the Company as of March 31, 2025 and December 31, 2024:



	As of March 31, 2025		As of December 31, 2024

Interest receivable	$	1,658,532	$	1,118,927
Unused fees receivable	10,551		11,821
Other fees receivable	3,803		7,813
Total interest receivable	$	1,672,886	$	1,138,561

6. DEBT

Revolving Credit Facility

On November 6, 2024, the Company entered into the Loan and Security Agreement (as amended, restated or otherwise modified from time to time, the “Revolving Credit Agreement”) by and among the Company, as borrower, the lenders party thereto, and East West Bank, as administrative agent, joint lead arranger, joint book runner, co-syndication agent and co-documentation agent (“East West Bank”). The Revolving Credit Agreement provides for a senior secured revolving credit facility (the “Revolving Credit Facility”) that contains initial aggregate commitments of $50.0 million from one or more FDIC-insured banking institutions, which may be borrowed, repaid and redrawn, subject to a borrowing base based on eligible loan obligations held by the Company and subject to the satisfaction of other conditions provided under the Revolving Credit Agreement. Pursuant to the terms of the Revolving Credit Agreement, the amount of total commitments may be increased to up to $200.0 million in aggregate, subject to available borrowing base and lenders’ willingness to provide additional commitments. The Revolving Credit Facility has a maturity date of November 8, 2027.

Interest is payable on the Revolving Credit Facility in cash in arrears at the rate per annum of SOFR plus 2.75%, with a SOFR floor of 2.63%; provided, however, that the interest rate will increase by an additional 0.25% during any Increase Rate Month (as defined in the Revolving Credit Agreement).

The Company is required to pay certain fees to the agent and the lenders under the Revolving Credit Agreement, including a $75.0 thousand agent fee payable to the agent and a 0.25% per annum loan fee payable ratably to the lenders, in each case, payable on the closing date and on the annual anniversary thereafter. Commencing on the six-month anniversary of the closing date, the Revolving Credit Facility has an unused line fee of 0.25% per annum, payable semi-annually in arrears. Based on the terms of the Revolving Credit Agreement, the unused line fee is waived if our average revolver usage exceeds the minimum amount required per the Revolving Credit Agreement. Based on the terms of the Revolving Credit Agreement, the Company did not incur an unused line fee during the three months ended March 31, 2025. In connection with the Revolving Credit Agreement and related amendments, the Company incurred certain closing costs of approximately $0.6 million, which were included in prepaid expenses and other assets on the Company’s consolidated balance sheets and amortized over the life of the facility.

The Revolving Credit Facility is guaranteed by certain material subsidiaries of the Company and is secured by substantially all assets of the Company; provided that upon the meeting of certain conditions, the facility will be secured only by certain

Index

assets of the Company comprising of or relating to loan obligations designed for inclusion in the borrowing base. In addition, the Company is subject to various financial and other covenants, including a liquidity and debt service coverage ratio covenant.

On December 9, 2024, the Company entered into Amendment Number One to Loan and Security Agreement, by and among the Company and certain of its subsidiaries, as borrowers, the lenders party thereto and East West Bank, pursuant to which, among other things, the maximum revolver usage was temporarily increased until January 8, 2025, to the sum of (i) $50.0 million plus (ii) the lesser of $75.0 million and the aggregate amount of funds maintained in the Company’s borrowing base cash account. Following January 8, 2025, the maximum revolver usage automatically reverted back to $50.0 million.

On December 30, 2024, the Company entered into Amendment Number Two to Loan and Security Agreement, by and among the Company and certain of its subsidiaries, as borrowers, the lenders party thereto, and East West Bank, pursuant to which, among other things, the parties agreed to additional representations, covenants and other amendments to maintain its REIT status and limit the use of participation interests in any underlying obligor loan receivables secured as collateral.

On February 26, 2025, the Company entered into Amendment Number Three to Loan and Security Agreement, by and among the Company and certain of its subsidiaries, as borrowers, the lenders party thereto, and East West Bank, pursuant to which, among other things, the parties agreed to reduce the procedural requirements for obligor loan receivables to become eligible under the borrowing base.

As of March 31, 2025 and December 31, 2024, outstanding borrowings under the Revolving Credit Facility were $43.2 million and $123.8 million, respectively, and $6.8 million and $1.2 million were available for borrowing as of March 31, 2025 and December 31, 2024, respectively. As of March 31, 2025, the interest rate on the Company’s borrowings under the Revolving Credit Facility was 7.07%.

SRTF Credit Facility

In September 2024, the Company entered into an unsecured revolving credit agreement (the “Credit Agreement”), by and between the Company, as borrower, and SRT Finance LLC, as agent and lender. SRT Finance LLC is indirectly owned by Leonard M. Tannenbaum, Executive Chairman of the Company’s Board of Directors and one of the Company’s officers, and Robyn Tannenbaum, President of the Company, along with their family members and associated family trusts. The Credit Agreement provides for an unsecured revolving credit facility (the “SRTF Revolving Credit Facility”) with a $50.0 million commitment, which may be borrowed, repaid and redrawn, subject to a draw fee and the other conditions provided in the Credit Agreement. Interest is payable on the SRTF Revolving Credit Facility at 1-month SOFR (subject to a 3.0% floor) plus a margin of 2.75%, with a maturity date of December 31, 2025. The Company did not incur any fees or costs related to the origination of the SRTF Revolving Credit Facility, and the SRTF Revolving Credit Facility did not have any unused fees.

On November 6, 2024, in conjunction with the entry by the Company into the Revolving Credit Facility, the Company terminated the unsecured revolving credit agreement (the “Credit Agreement”) dated September 26, 2024, by and between the Company, as borrower, and SRT Finance LLC, as agent and lender. Upon execution of the Revolving Credit Facility, the lenders’ commitments under the Credit Agreement were terminated and the liability of the Company and its subsidiaries with respect to their obligations under the Credit Agreement was discharged.

On December 9, 2024, the Company entered into a new unsecured revolving credit agreement (the “SRTF Credit Agreement”), by and among the Company, as borrower, the lenders party thereto from time to time, and SRT Finance LLC, as agent and lender. SRT Finance LLC continues to be indirectly owned by Mr. Tannenbaum and Mrs. Tannenbaum, along with their family members and associated family trusts. The SRTF Credit Agreement provides for an unsecured revolving credit facility (the “SRTF Credit Facility”) with a $75.0 million commitment, which may be borrowed, repaid and redrawn, subject to a draw fee and the other conditions provided in the SRTF Credit Agreement. Interest is payable on the SRTF Credit Facility at a rate per annum equal to 8.00%. The SRTF Credit Facility matures on the earlier of (i) May 31, 2028 and (ii) the date of the closing of any Refinancing Indebtedness (as defined in the SRTF Credit Agreement) with an aggregate principal amount equal to or greater than $75.0 million. Commencing on January 1, 2026, the Company is required to pay an annual fee equal to 1.00% of the aggregate commitments ratably to the lenders, payable on the first business day of each calendar year; provided that the fee due and payable on January 3, 2028 will be prorated on the basis of a year of 360 days for the actual number of days elapsed from and including January 1, 2028 until and excluding May 31, 2028. In connection with the SRTF Credit Agreement, the Company incurred certain closing costs of approximately $20.0 thousand, which were included in prepaid expenses and other assets on the Company’s consolidated balance sheets and amortized over the life of the facility.

Index

As of March 31, 2025 and December 31, 2024, outstanding borrowings under the SRTF Credit Facility were zero and $75.0 million, respectively, and $75.0 million and zero were available for borrowing as of March 31, 2025 and December 31, 2024, respectively. As of March 31, 2025, the interest rate on the Company’s borrowings under the SRTF Credit Facility was 8.00%.

The Company did not incur any interest expense during the three months ended March 31, 2024. The following table reflects a summary of interest expense incurred during the three months ended March 31, 2025:


	Three Months Ended March 31, 2025
	Revolving Credit Facility		SRTF Revolving Credit Facility		Total Borrowings

Interest expense	$	245,505	$	22,604	$	268,109
Unused fee expense	—		—		—
Amortization of deferred financing costs	66,633		1,417		68,050
Total interest expense	$	312,138	$	24,021	$	336,159

7. COMMITMENTS AND CONTINGENCIES

As of March 31, 2025 and December 31, 2024, the Company had the following commitments to fund various investments:



	As of March 31, 2025		As of December 31, 2024

Total loan commitments	$	352,076,936	$	190,921,475
Less: drawn commitments	(233,380,706)		(132,556,289)
Total undrawn commitments	$	118,696,230	$	58,365,186

The Company from time to time may be a party to litigation in the normal course of business. The Company investigates these claims as they arise. If the potential loss from any claim or legal claim is considered probable and the amount can be estimated, the Company accrues a liability for the estimated loss. As of March 31, 2025, the Company is not aware of any legal claims that could materially impact its business, financial condition or results of operations.

8. SHAREHOLDERS’ EQUITY

Corporate Conversion

On February 20, 2024, the Company completed a corporate conversion, converting from a Delaware limited liability company to a Maryland corporation. Pursuant to the certificate of incorporation effected in connection with the corporate conversion, the Company’s authorized capital stock consists of 50,000,000 shares of voting Common Stock and 10,000 shares of Preferred Stock (defined below), par value $0.01 per share.

Preferred Stock

As of March 31, 2025 and December 31, 2024, the Company authorized 10,000 and zero shares of Preferred Stock, par value $0.01 per share (the “Preferred Stock”), respectively, of which none have been issued. The Company’s Board of Directors (the “Board of Directors”) has the authority, without action by our shareholders, to issue up to 10,000 shares of Preferred Stock in one or more series or classes and to designate the rights, preferences and privileges of each series or class, which may be greater than the rights of SUNS’ Common Stock. There were no shares of Preferred Stock designated or outstanding as of March 31, 2025 and December 31, 2024, respectively.

Index

Common Stock

As of March 31, 2025 and December 31, 2024, the Company authorized 50,000,000 shares of Common Stock, respectively, and issued 13,421,494 and 7,004,676 shares of Common Stock, respectively.

On January 29, 2025, the Company completed a registered public offering of 5,750,000 shares of common stock at a public offering price of $12.00 per share (the “January 2025 Offering”), of which 1,000,000 shares of common stock were sold to Leonard M. Tannenbaum, the Company’s Executive Chairman, at the public offering price. The Company received net proceeds from the January 2025 Offering of $65.3 million, net of underwriting discounts of $3.7 million. In connection with the January 2025 Offering, the underwriters were granted an over-allotment option to purchase up to an additional 862,500 shares of the Company’s common stock. On January 31, 2025, the underwriters partially exercised the over-allotment option with respect to 650,000 shares of common stock and the Company received additional net proceeds of $7.3 million, net of underwriting discounts of $0.5 million. The Company incurred approximately $1.2 million of expenses in connection with the offering. After giving effect to the partial exercise of the over-allotment option, the total number of shares sold by the Company in the public offering was 6,400,000 shares and total gross proceeds, before deducting underwriting discounts and commissions, and other offering expenses payable by the Company, were approximately $76.8 million. The net proceeds to the Company totaled approximately $71.4 million.

Spin-Off

On July 1, 2024, the Board of Directors approved a forward stock split of shares of the Company’s Common Stock, at a ratio of 68,890.32-for-one (to be effected in the form of a stock dividend for purposes of the Maryland General Corporation Law), pursuant to which 68,890.32 additional shares of the Company’s Common Stock were issued for each outstanding share of the Company’s Common Stock (the “Forward Stock Split”), payable prior to the consummation of the Spin-Off. The Forward Stock Split took effect immediately prior to the distribution of the shares of the Company’s common stock to the shareholders of AFC common stock.

As a result of the Forward Stock Split, the number of outstanding shares of the Company’s Common Stock increased to 6,889,032 shares outstanding as of July 9, 2024, of which 88,685 were restricted shares at the time of Spin-Off.

The Spin-Off was effected by the transfer of AFC’s CRE portfolio from AFC to SUNS and the distribution of all of the outstanding shares of SUNS Common Stock to all of AFC’s shareholders of record as of the close of business on July 8, 2024. AFC’s shareholders of record as of the Record Date received one share of SUNS Common Stock for every three shares of AFC common stock held as of the close of business on July 8, 2024, the Record Date for the distribution, as well as a cash payment in lieu of any fractional shares. The Spin-Off was completed on July 9, 2024. Immediately after the Spin-Off, the Company was no longer a wholly owned subsidiary of AFC.

On July 9, 2024, AFC non-vested restricted stock awards that were outstanding on the Distribution Date were converted into AFC restricted stock awards and SUNS restricted stock awards. Upon completion of the Spin-Off, the AFC restricted stock awards were converted into 88,685 shares of SUNS restricted stock. The vesting schedule remains the same as the original awards.

Stock Incentive Plan

The Company has established the 2024 Stock Incentive Plan (the “2024 Plan”). The 2024 Plan authorizes stock options, stock appreciation rights, restricted stock, stock bonuses, stock units and other forms of awards granted or denominated in the Company’s Common Stock or units of Common Stock. The 2024 Plan retains flexibility to offer competitive incentives and to tailor benefits to specific needs and circumstances. Any award may be structured to be paid or settled in cash. The Company has granted, and currently intends to continue to grant, restricted stock awards to participants in the 2024 Plan, but it may also grant any other type of award available under the 2024 Plan in the future. Persons eligible to receive awards under the 2024 Plan include officers or employees of the Company or any of its subsidiaries, directors of the Company, employees of the Manager and certain directors, consultants and other service providers to the Company or any of its subsidiaries.

In February 2025, the Company’s Board of Directors approved grants of restricted stock to the Company’s directors and certain officers, as well as certain employees of the Manager or its affiliates, with an aggregate of 19,625 shares of restricted stock granted to such eligible persons. The restricted stock awards granted in February 2025 under the 2024 Plan vest over a three-year period, with approximately 33% vesting on each of the first, second and third anniversaries of the vesting commencement date.

Index

As of March 31, 2025, there were 132,462 shares of restricted stock granted under the 2024 Plan.

As of March 31, 2025, the maximum number of shares of the Company’s Common Stock that may be delivered pursuant to awards under the 2024 Plan (the “Share Limit”) equaled 1,191,122 shares, of which 1,058,660 shares remained available for future issuance under the 2024 Plan. At the discretion of the Company’s Board of Directors, the Company waived the evergreen provision in connection with the Minimum Annual Increase (as defined in the 2024 Plan) under the 2024 Plan for the 2024 fiscal year. In January 2025, the Company completed an offering of the Company’s Common Stock and pursuant to the evergreen provision in the 2024 Plan with respect to the public offerings, the total number of shares reserved for issuance under the 2024 Plan automatically increased by ten percent of the total number of shares of Common Stock sold by the Company in the January 2025 Offering, which equaled 640,000 shares. Shares that are subject to or underlie awards that expire or, for any reason, are cancelled, terminated, forfeited, fail to vest or are not paid or delivered under the 2024 Plan will not be counted against the Share Limit and will again be available for subsequent awards under the 2024 Plan.

The stock-based compensation expense for the Company was approximately $0.2 million and zero for the three months ended March 31, 2025 and 2024, respectively.

The following table summarizes restricted stock (i) converted upon Spin-Off, (ii) granted, (iii) vested and (iv) forfeited for the Company’s directors and officers and employees of the Manager as of March 31, 2025 and December 31, 2024:


	As of March 31, 2025	As of December 31, 2024
Converted upon Spin-Off	88,685	88,685
Granted	135,269	115,644
Vested	(35,476)	(805)
Forfeited	(2,807)	—
Balance	185,671	203,524

The fair value of the Company’s restricted stock awards is based on the Company’s stock price on the date of grant. The following tables summarize the restricted stock activity as of and during the three months ended March 31, 2025:


	Number of shares of restricted stock	Weighted-average grant date fair value
Balance as of December 31, 2024	203,524	$	13.16

Granted	19,625	11.78
Vested	(34,671)	13.13
Forfeited	(2,807)	13.27
Balance as of March 31, 2025	185,671	$	13.02

The total fair value of shares vested during the three months ended March 31, 2025 was approximately $0.5 million. During the three months ended March 31, 2025, 19,625 shares of restricted stock were granted with a weighted-average grant date fair value of $11.78. There were no shares of restricted stock that were granted or that vested during the three months ended March 31, 2024.

As of March 31, 2025, there was approximately $2.1 million of total unrecognized compensation cost related to non-vested restricted stock. That cost is expected to be recognized over a weighted-average period of 2.30 years.

9. EARNINGS PER SHARE

In connection with the Spin-Off, all of the outstanding shares of the Company’s Common Stock were distributed to AFC’s shareholders of record as of the close of business on July 8, 2024 and AFC’s shareholders received one share of the Company’s Common Stock for every three shares of AFC common stock held. As a result, on July 9, 2024, the Company had 6,889,032 shares of Common Stock outstanding. This share amount is utilized for the calculation of basic and diluted earnings per share for all periods presented prior to the Spin-Off. For periods prior to the Spin-Off, there were no dilutive equity instruments, as there were no equity awards of the Company outstanding prior to the Spin-Off. After the Spin-Off, actual outstanding shares are used to calculate both basic and diluted weighted average number of common shares outstanding.

Index

The following information sets forth the computations of basic and diluted weighted average earnings per common share for the three months ended March 31, 2025 and 2024:


	Three months ended March 31,
	2025		2024

Net income attributable to common shareholders	$	3,099,437	$	1,762,345

Dividends paid on unvested restricted stock	(85,480)		—
Net income attributable to common shareholders	3,013,957		1,762,345
Divided by:
Basic weighted average shares of common stock outstanding	11,208,015		6,889,032
Weighted average unvested restricted stock	13,001		—
Diluted weighted average shares of common stock outstanding	11,221,016		6,889,032
Basic weighted average earnings per common share	$	0.27	$	0.26
Diluted weighted average earnings per common share	$	0.27	$	0.26

Diluted earnings per common share was computed using the treasury stock method for restricted stock. Diluted weighted average earnings per common share excluded 87,463 and zero weighted average unvested restricted stock due to anti-dilutive effect for the three months ended March 31, 2025 and 2024, respectively.

10. INCOME TAX

Prior to the Spin-Off, the Company was a wholly-owned subsidiary of AFC and was a disregarded entity for tax purposes. As such, the Company did not file a tax return. The Company’s entire share of taxable income or loss was previously included in the tax return of AFC. The Company was formed on August 28, 2023 and converted from a Delaware limited liability company to a Maryland corporation in February 2024. The Company intends to elect to be taxed as a REIT for U.S. federal income tax purposes, commencing with the taxable year ending December 31, 2024. The Company believes that, commencing with such taxable year, the Company is organized and operated in such manner as to qualify for taxation as a REIT under the U.S. federal income tax laws, and the Company intends to continue to operate in such a manner. However, no assurances can be given that our beliefs or expectations will be fulfilled, since qualification as a REIT depends on our continuing to satisfy numerous asset, income, and distribution tests, which in turn depends, in part, on our operating results. The Company will elect to be taxed as a REIT only if the Company believes that we have been organized in conformity with the requirements for qualification and taxation as a REIT under the U.S. federal income tax laws, and that our method of operation will enable us to satisfy the requirements for qualification and taxation as a REIT under the U.S. federal income tax laws for such taxable year and thereafter.

So long as the Company qualifies for taxation as a REIT, the Company generally will not be subject to U.S. federal income tax on the portion of our taxable income or capital gain that is distributed to shareholders annually. The income tax provision for the Company was zero for the three months ended March 31, 2025.

For the three months ended March 31, 2025, the Company incurred no expense for U.S. federal excise tax. Excise tax represents a 4% tax on the sum of a portion of the Company’s ordinary income and net capital gains not distributed during the period. If it is determined that an excise tax liability exists for the current period, the Company will accrue excise tax on estimated excess taxable income as such taxable income is earned. The expense is calculated in accordance with applicable tax regulations.

The Company does not have any unrecognized tax benefits and the Company does not expect that to change in the next 12 months.

11. FAIR VALUE

Fair Value of Financial Instruments

GAAP requires disclosure of fair value information about financial instruments, whether or not recognized at fair value in the balance sheets, for which it is practicable to estimate that value.

Index

The following table details the book value and fair value of the Company’s financial instruments not recognized at fair value in the unaudited interim balance sheets as of March 31, 2025:


	As of March 31, 2025
	Carrying Value		Fair Value
Financial assets:
Cash and cash equivalents	$	1,642,780	$	1,642,780
Loans held for investment at carrying value	$	230,494,191	$	232,111,442

Estimates of fair value for cash and cash equivalents are measured using observable, quoted market prices, or Level 1 inputs. The Company’s loans held for investment are measured using unobservable inputs, or Level 3 inputs.

12. RELATED PARTY TRANSACTIONS

Management Agreement

On February 22, 2024, the Company and the Manager, entered into a management agreement (the “Management Agreement”), effective upon the listing of the Company’s Common Stock. Following the completion of the Spin-Off on July 9, 2024, the Company is managed by its Board of Directors and the Company’s executive officers and by SUNS Manager, as provided for under our Management Agreement.

Pursuant to the Management Agreement, the Manager manages the loans and day-to-day operations of the Company, subject at all times to the further terms and conditions set forth in the Management Agreement and such further limitations or parameters as may be imposed from time to time by the Company’s Board of Directors.

The Manager receives base management fees (the “Base Management Fees”) that are calculated and payable quarterly in arrears, in an amount equal to 0.375% of the Company’s Equity (as defined in the Management Agreement), subject to certain adjustments, less 50% of the aggregate amount of any other fees (“Outside Fees”), including any agency fees relating to the Company’s loans, but excluding the Incentive Compensation (as defined below) and any diligence fees paid to and earned by the Manager and paid by third parties in connection with the Manager’s due diligence of potential loans.

There was no Base Management Fees incurred for the three months ended March 31, 2025 and 2024. Refer to fee waiver below.

In addition to the Base Management Fees, the Manager is entitled to receive incentive compensation (the “Incentive Compensation” or “Incentive Fees”) with respect to each fiscal quarter (or portion thereof that the Management Agreement is in effect) based upon the Company’s achievement of targeted levels of Core Earnings. “Core Earnings” is defined in the Management Agreement as, for a given period, the net income (loss) for such period, computed in accordance with GAAP, excluding (i) non-cash equity compensation expense, (ii) Incentive Compensation, (iii) depreciation and amortization, (iv) any unrealized gains or losses or other non-cash items that are included in net income for the applicable reporting period, regardless of whether such items are included in other comprehensive income or loss, or in net income and (v) one-time events pursuant to changes in GAAP and certain non-cash charges, in each case after discussions between the Manager and the Company’s independent directors and approval by a majority of the independent directors.

There was no Incentive Compensation incurred for the three months ended March 31, 2025 and 2024. Refer to fee waiver below.

Fee Waiver

From time to time, the Manager may waive fees it would otherwise be entitled to under the terms of the Management Agreement. The Manager has agreed to waive (i) the inclusion of the net proceeds from the January 2025 Offering in the Company’s Equity for purposes of calculating the management fee until the earlier of (a) December 31, 2025 and (b) the quarter in which the total amount of the net proceeds of the January 2025 Offering have been utilized to fund loans in our portfolio and (ii) an additional $1.0 million in fees.

For the three months ended March 31, 2025, $568,790 of Base Management Fees and $298,306 of Incentive Fees were waived.

Index

Administrative Services Agreement

In July 2024, SUNS Manager entered into the Administrative Services Agreement with TCG Services LLC, an affiliate of SUNS Manager, Mr. Tannenbaum and Mrs. Tannenbaum. The Administrative Services Agreement sets forth the terms on which TCG Services LLC will provide SUNS certain administrative services, including providing personnel, office facilities, information technology and other equipment and legal, accounting, human resources, clerical, bookkeeping and record keeping services at such facilities as well as other services.

Services Agreement

In July 2024, SUNS Manager entered into a Services Agreement with SRT Group LLC, an affiliate of SUNS Manager, Mr. Tannenbaum, Mrs. Tannenbaum, Mr. Sedrish and Mr. Hetzel. The Services Agreement sets forth the terms on which SRT Group LLC will provide SUNS its investment personnel.

The Company is required to pay all of its allocable costs and expenses and reimburse the Manager or its affiliates for such expenses paid or incurred on behalf of the Company by the Manager or its affiliates, excepting only those expenses that are specifically the responsibility of the Manager pursuant to the Management Agreement.

Until the completion of the Spin-Off, there were no Base Management Fees or Incentive Fees incurred by the Company. The following table summarizes the related party costs incurred by the Company for the three months ended March 31, 2025 and 2024:


	Three months ended March 31,
	2025		2024
Affiliate costs


Base management fees	$	—	$	—
Incentive fees earned	—		—
General and administrative expenses reimbursable to Manager	617,554		—
Total	$	617,554	$	—

Amounts payable to the Company’s Manager as of March 31, 2025 and December 31, 2024 were approximately $0.6 million and $1.1 million, respectively.

The Company’s Manager is beneficially owned by certain officers as of the date of this Quarterly Report on Form 10-Q: 63.1%, by Mr. Tannenbaum, the Company’s Executive Chairman, 8.1% by Mrs. Tannenbaum, the Company’s President, 9.3% by other Tannenbaum family members and trusts, and 7.0% by Mr. Sedrish, the Company’s Chief Executive Officer.

Investments in Loans

From time to time, the Company may co-invest with other investment vehicles managed by the SUNS Manager or its affiliates, including by means of splitting loans, participating in loans or other means of syndicating loans. The Company is not obligated to provide, nor has it provided, any financial support to the other managed investment vehicles. As such, the Company’s risk is limited to the carrying value of its investment in any such loan. Additionally, SUNS Manager or its affiliates, may from time to time serve as administrative and collateral agents to the lenders under our co-investments. As of March 31, 2025, there were twelve co-invested loans held by the Company and affiliates of the Company.

Unsecured Revolving Credit Facility with Affiliate

The Company entered the Revolving Credit Facility with SRT Finance LLC, an affiliate of the Company and Mr. and Mrs. Tannenbaum. Refer to Note 6 for more information.

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13. DIVIDENDS AND DISTRIBUTIONS

The following table summarizes the Company’s dividends declared during the three months ended March 31, 2025. No dividends were declared during the three months ended March 31, 2024.


	Declaration Date	Record Date	Payment Date	Per Common Share Distribution Amount		Total Distribution Amount



Regular cash dividend	3/4/2025	3/31/2025	4/15/2025	$	0.30	$	4,026,448
2025 Period Subtotal				$	0.30	$	4,026,448

14. REPORTABLE SEGMENTS

ASC 280, Segment Reporting, establishes standards for reporting financial and descriptive information about an enterprise’s reportable segments. The Company is an institutional lender that provides debt capital solutions to CRE markets in the Southern United States. The Company generates revenue from 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 accounting policies of the institutional lending segment are the same as those described in the summary of significant accounting policies.

The presentation of financial results as one reportable segment is consistent with the way the Company operates its business and is consistent with the manner in which the Company’s Chief Operating Decision Maker (“CODM”), the Company’s Chief Executive Officer, evaluates performance and makes resource and operating decisions for the business. The Company has no operations outside of the United States. The Company’s portfolio exhibits similar economic characteristics, similar yields and is operated using consistent business strategies. The Company operates as one operating segment and has one reportable operating segment for activities related to institutional lending.

The CODM assesses performance and evaluates the allocation of resources of the Company on a consolidated basis, based on the Company’s net income, which is reported on the Company’s consolidated statements of operations. The CODM is regularly provided with only the consolidated expenses, as noted on the consolidated statement of operations. Significant segment expenses are listed on the accompanying consolidated statement of operations. The measure of segment assets is reported on the consolidated balance sheets as total assets.

The CODM uses net income to evaluate income generated from segment assets and in deciding the amount of dividends to be distributed, as well as using net income as a basis for evaluating lender terms for CRE loans with borrowers and sponsors.

Interest income earned on the Company’s portfolio was concentrated with five borrowers each comprising more than 10% of consolidated interest income for an aggregate amount of $4.0 million, or 81%, of consolidated interest income during the three months ended March 31, 2025. Interest income earned on the Company’s portfolio was concentrated with two borrowers each comprising more than 10% of consolidated interest income for an aggregate amount of $2.0 million, or 98%, of consolidated interest income during the three months ended March 31, 2024.

15. SUBSEQUENT EVENTS

The Company has evaluated subsequent events through the date the consolidated financial statements were available to be issued. There were no material subsequent events that required disclosure in these unaudited interim financial statements.

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CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

This Quarterly Report on Form 10-Q (this “Quarterly Report”), filed by Sunrise Realty Trust, Inc. (the “Company,” “SUNS,” “we,” “us,” and “our”), and the information incorporated by reference herein, or made in other reports, filings with the SEC, and press releases contain “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995, Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, and we intend such statements to be covered by the safe harbor provisions contained therein. These forward-looking statements are based on our current intent, belief, expectations and views of future events. The forward-looking statements include, without limitation, any statement that may predict, forecast, indicate or imply future results or performance, and may contain the words “believe,” “anticipate,” “expect,” “estimate,” “project,” “could,” “would,” “will,” “can,” “continuing,” “may,” “aim,” “intend,” “ongoing,” “plan,” “predict,” “potential,” “should,” “seeks,” “likely to” or words or phrases of similar meaning. Specifically, this Quarterly Report includes forward-looking statements regarding (i) our portfolio and strategies for the growth of our commercial real estate lending business; (ii) our working capital, liquidity and capital requirements; (iii) potential state and federal legislative and regulatory matters; (iv) our expectations and estimates regarding certain tax, legal and accounting matters, including the impact on our financial statements and/or those of our borrowers; (v) the amount, collectability and timing of cash flows, if any, from our loans; (vi) our expected ranges of originations and repayments; (vii) estimates relating to our ability to make distributions to our shareholders in the future; and (viii) our investment strategy.

These forward-looking statements reflect management’s current views about future events, and are subject to risks, uncertainties and assumptions. Our actual results may differ materially from the future results and events expressed or implied by the forward-looking statements. Key factors that could prevent us from achieving our goals, and cause the assumptions underlying forward-looking statements and the actual results to differ materially from those expressed in or implied by those forward-looking statements include, but are not limited to, the following:

•our ability to identify a successful business and investment strategy and execute on our strategy;

•the ability of our Manager to locate suitable loan opportunities for us and to monitor and actively manage our portfolio and implement our investment strategy;

•our ability to meet our expected ranges of originations and repayments;

•our ability to obtain our target mix of loan and collateral types with our expected ranges of yields;

•the allocation of loan opportunities to us by our Manager and our ability to close those loans;

•changes in general economic conditions, in our industry and in the commercial finance and commercial real estate markets;

•we have limited history of operating as an independent company, and our historical financial information is not necessarily representative of the results that we would have achieved as a separate, publicly traded company and may not be a reliable indicator of our future results;

•the state of the U.S. economy generally or in the specific geographic regions in which we operate, including as a result of the impact of natural disasters;

•the impact of a protracted decline in the liquidity of credit markets on our business;

•the amount, collectability and timing of our cash flows, if any, from our loans;

•our ability to obtain and maintain competitive financing arrangements;

•our ability to achieve our expected leverage;

•changes in the value of our loans;

•losses that may be exacerbated due to the concentration of our portfolio in a limited number of loans and borrowers;

•our investment and underwriting process;

•the rates of default or recovery rates on our loans;

•the degree to which our hedging strategies may or may not protect us from interest rate volatility;

•the availability of investment opportunities in mortgage-related and real estate-related instruments and other securities;

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•interest rate mismatches between our loans and our borrowings used to fund such loans;

•the departure of any of the executive officers or key personnel supporting and assisting us from our Manager or its affiliates;

•impact of and changes in governmental regulations, tax law and rates, accounting guidance, tariffs and similar matters;

•the impact of a changing interest rate environment on our results of operations, cash flows and the market value of our loans;

•our ability to maintain our exemption from registration under the Investment Company Act of 1940 (the “Investment Company Act”);

•our ability to qualify and maintain our qualification as a real estate investment trust (a “REIT”) for U.S. federal income tax purposes;

•estimates relating to our ability to make distributions to our shareholders in the future;

•our understanding of our competition;

•market trends in our industry, interest rates, real estate values, the securities markets or the general economy;

•we may not achieve some or all of the expected benefits of the Spin-Off;

•we may have indemnification liabilities to AFC under the Separation and Distribution Agreement;

•there had been no public market for SUNS Common Stock prior to the Distribution and an active trading market may not be sustained or be liquid in the future, which may cause the market price of SUNS Common Stock to decline significantly and make it difficult for investors to sell their shares;

•we may issue shares of preferred or common stock in the future, which could dilute your percentage ownership of SUNS;

•use of proceeds of our securities offerings; and

•litigation, including costs associated with prosecuting or defending claims and any adverse outcomes.

The above list of factors is not exhaustive or necessarily in order of importance.

Please see the section entitled “Risk Factors” located in our Annual Report on Form 10-K, filed with the SEC on March 6, 2025, for a further discussion of these and other risks and uncertainties which could affect our future results. These forward-looking statements apply only as of the date of this report and we undertake no obligation to update or revise any forward-looking statements to reflect events or circumstances after the date of such statements or to reflect the occurrence of anticipated or unanticipated events, except as required by applicable law.

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our consolidated financial statements and the accompanying notes and other information included in this Quarterly Report on Form 10-Q (the “Quarterly Report”). This discussion and analysis contains forward-looking statements that involve risks and uncertainties which could cause our actual results to differ materially from those anticipated in these forward-looking statements, including, but not limited to, risks and uncertainties discussed under the heading “Cautionary Note Regarding Forward-Looking Statements,” in this Form 10-Q and “Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2024.

Overview

SUNS is a Maryland corporation that was formed on August 28, 2023, that intends to elect to be treated as a real estate investment trust for U.S. federal income tax purposes and that made its first investment in January 2024. SUNS is an integral part of the platform of affiliated asset managers under the Tannenbaum Capital Group (“TCG”). We are led by a veteran team of commercial real estate investment professionals and our external manager, Sunrise Manager LLC (our “Manager”), which, alongside other TCG platform asset managers pursuing similar or adjacent opportunities, are supported by the marketing, reporting, legal and other non-investment support services provided by the team of professionals within the TCG platform. Our and our Manager’s relationship with TCG provide us with investment opportunities through a

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robust relationship network of commercial real estate owners, operators and related businesses as well as significant back-office personnel to assist in management of loans.

Our focus is on originating and investing in secured commercial real estate (“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. SUNS intends to further diversify its investment portfolio, targeting investments in senior mortgage loans, mezzanine loans, B-notes, commercial mortgage-backed securities (“CMBS”) and debt-like preferred equity securities across CRE asset classes. We intend for SUNS’ investment mix to include loans secured by high quality residential (including multi-family, condominiums and single-family residential communities), retail, office, hospitality, industrial, mixed-use and specialty-use real estate.

Our investment focus includes originating or acquiring loans backed by single assets or portfolios of assets that typically have (i) an investment hold size of approximately $15-100 million, secured by CRE assets, including transitional or construction projects, across diverse property types, (ii) a duration of approximately 2-5 years, (iii) interest rates that are determined periodically on the basis of a floating base lending rate (e.g., Secured Overnight Financing Rate (“SOFR”)) plus a credit spread, (iv) a loan-to-value (“LTV”) ratio of no greater than approximately 75% on an individual investment basis and (v) no more than approximately 75% LTV across the portfolio, in each case, at the time of origination or acquisition, and are led by experienced borrowers and well-capitalized sponsors with high quality business plans. Our loans typically feature origination fees and/or exit fees. We target a portfolio net internal rate of return (“IRR”) in the low-teens, which we believe may increase to the mid-teens after including total interest and other revenue from the portfolio, including loans funded from drawing on our leverage, net of our interest expense from our portfolio lenders. We are also targeting a near to mid-term target capitalization of one-third equity, one-third secured debt availability and one-third unsecured debt. We do not expect to be fully drawn on our secured debt availability and, as a result, we are targeting an expected leverage ratio of 1.5:1 debt-to-equity.

Spin-Off

The Spin-Off of SUNS into an independent, publicly traded company was completed on July 9, 2024 through a pro-rata distribution of all of the outstanding shares of our common stock to all of AFC’s shareholders of record (the “Distribution”) as of the close of business on July 8, 2024 (the “Record Date”). AFC’s shareholders of record as of the Record Date received one share of our common stock for every three shares of AFC common stock held as of the Record Date.

Developments During the First Quarter March 31, 2025:

Updates to Our Loan Portfolio During the First Quarter March 31, 2025

In January 2025, our senior loan for the mixed-use property in Houston, Texas was repaid in full. The outstanding principal on the date of repayment was approximately $0.2 million. We received and recognized approximately $23.5 thousand relating to the repayment premium.

In January 2025, we and an affiliated co-investor entered into a $41.0 million note-on-note financing agreement for the acquisition of a senior secured mortgage loan (the “Note”). The Note is secured by a residential property consisting of senior living, medical offices and retail space located in Aventura, Florida. We committed a total of $30.8 million, and the affiliate committed the remaining $10.3 million, funding $28.5 million and $9.5 million, respectively, on close. The Note was issued at a discount of 1.0% and matures in two years with an exit fee of 1.0% and one 12-month extension option. The Note bears interest at a rate of SOFR plus 5.00%, with a rate index floor of 4.00%. The Note is secured by a first priority collateral assignment of the senior mortgage loan, including assignment in blank of the mortgage and other loan documents, a pledge of 100% of the issued and outstanding limited liability company interests in borrower, reserve accounts, and other customary collateral.

In January 2025, we and affiliated co-investors entered into a $74.5 million senior secured mortgage loan for the construction of a build-to-suit net leased credit tenant project located in New Orleans, Louisiana. The loan proceeds will be used to commence and facilitate construction. We committed a total of $44.0 million, and affiliated co-investors committed the remaining $30.5 million, funding $0.6 million and $0.4 million, respectively, on close. The senior secured loan was issued at a discount of 1.0% and matures in three years. The loan bears interest at a rate of SOFR plus 5.60%, with a rate index floor of 4.50%. The senior loan is secured by a first priority mortgage on the property subject only to the ground

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lease, pledge of 100% of borrower’s equity interest, assignment of leases, security deposits, and reserve accounts as well as all future rental and sales income associated with the project.

In March 2025, we entered into an assignment and assumption agreement with an affiliated co-lender owned by Mr. Tannenbaum, our Executive Chairman, pursuant to which we purchased $10.6 million of the senior term loan and $9.4 million of the home construction revolver on the property in Palm Beach Gardens, FL, with $9.9 million and $7.4 million currently funded under such loans, respectively. The loans were purchased at par less remaining unamortized OID plus accrued interest. We did not pay any fees or premium to the affiliate for our acquisition of the affiliate’s loan commitments. Following the purchase, we hold $31.9 million in commitments of the senior term loan and $28.1 million in commitments of the home construction revolver.

In March 2025, we and an affiliated co-investor entered into a $62.0 million senior secured mortgage loan for the refinance of a class A multi-family residential development in Dallas, Texas. We committed approximately $46.5 million and the affiliate committed the remaining $15.5 million. The senior secured loan was issued at a discount of 1.0% and matures in March 2028. At closing, we funded approximately $44.3 million and the affiliate funded $14.8 million. The loan bears interest at a rate of SOFR plus 3.65%, with a rate index floor of 3.90%. The senior secured loan is secured by a lease-hold and fee joinder mortgage on the property and other customary collateral. The proceeds of the senior secured loan will be used to, among other things, refinance the existing debt and fund reserves and closing expenses.

In March 2025, we and an affiliated co-investor purchased $35.0 million of a $243 million subordinate loan for the construction of a mixed-use property in Miami, Florida. We committed approximately $26.3 million and the affiliate committed the remaining $8.8 million. The subordinate loan matures in December 2028. At closing, we funded approximately $4.4 million and the affiliate funded approximately $1.5 million. The loan bears interest at a cash rate of SOFR plus 9.5%, with a rate index floor of 4.0%, and interest paid-in kind of 1.0%. The subordinate loan is secured by the equity interests of the borrower and other customary collateral. The proceeds of the subordinate loan will be used to, among other things, fund the completion of construction.

Dividends Declared Per Share

During the three months ended March 31, 2025, we declared the following cash dividends. No dividends were declared during the three months ended March 31, 2024.


Date Declared	Payable to Shareholders of Record at the Close of Business on	Payment Date	Amount per Share		Total Amount


March 4, 2025	March 31, 2025	April 15, 2025	$	0.30	$	4,026,448

2025 Period Subtotal			$	0.30	$	4,026,448

Recent Developments

None.

Key Financial Measures and Indicators

As a commercial real estate finance company, we believe the key financial measures and indicators for our business are Distributable Earnings (as defined below), book value per share and dividends declared per share.

Non-GAAP Metrics

Distributable Earnings

In addition to using certain financial metrics prepared in accordance with GAAP to evaluate our performance, we also use Distributable Earnings to evaluate our performance, excluding the effects of certain transactions and GAAP adjustments we believe are not necessarily indicative of our current loan activity and operations. Distributable Earnings is a measure that is not prepared in accordance with GAAP. We use these non-GAAP financial measures both to explain our results to shareholders and the investment community and in the internal evaluation and management of our businesses. Our management believes that these non-GAAP financial measures and the information they provide are useful to investors since these measures permit investors and shareholders to assess the overall performance of our business using the same tools that our management uses to evaluate our past performance and prospects for future performance. The determination of Distributable Earnings is substantially similar to the determination of Core Earnings under our Management Agreement,

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provided that Core Earnings is a component of the calculation of any Incentive Compensation earned under the Management Agreement for the applicable time period. Thus, Core Earnings is calculated without giving effect to Incentive Compensation expense, while the calculation of Distributable Earnings accounts for any Incentive Compensation earned for such time period.

We define Distributable Earnings as, for a specified period, the net income (loss) computed in accordance with GAAP, excluding (i) stock-based compensation expense, (ii) depreciation and amortization, (iii) any unrealized gains, losses or other non-cash items recorded in net income (loss) for the period, regardless of whether such items are included in other comprehensive income or loss, or in net income (loss); provided that Distributable Earnings does not exclude, in the case of investments with a deferred interest feature (such as OID, debt instruments with PIK interest and zero coupon securities), accrued income that we have not yet received in cash, (iv) provision for (reversal of) current expected credit losses, (v) TRS (income) loss, net of any dividends received from TRS and (vi) one-time events pursuant to changes in GAAP and certain non-cash charges, in each case after discussions between our Manager and our independent directors and after approval by a majority of such independent directors.

We believe providing Distributable Earnings on a supplemental basis to our net income as determined in accordance with GAAP is helpful to shareholders in assessing the overall performance of our business. As a REIT, we are required to distribute at least 90% of our annual REIT taxable income, subject to certain adjustments, and to pay tax at regular corporate rates to the extent that we annually distribute less than 100% of such taxable income. Given these requirements and our belief that dividends are generally one of the principal reasons that shareholders invest in our Common Stock, we generally intend to attempt to pay dividends to our shareholders in an amount at least equal to such REIT taxable income, if and to the extent authorized by our Board of Directors. Distributable Earnings is one of many factors considered by our Board of Directors in authorizing dividends and, while not a direct measure of net taxable income, over time, the measure can be considered a useful indicator of our dividends.

Distributable Earnings is a non-GAAP financial measure and should not be considered as a substitute for GAAP net income. We caution readers that our methodology for calculating Distributable Earnings may differ from the methodologies employed by other REITs to calculate the same or similar supplemental performance measures, and as a result, our reported Distributable Earnings may not be comparable to similar measures presented by other REITs.

The following table provides a reconciliation of GAAP net income to Distributable Earnings:


	Three months ended March 31,
	2025		2024

Net income	$	3,099,437	$	1,762,345
Adjustments to net income:
Stock-based compensation expense	243,621		—
Depreciation and amortization	—		—
Unrealized (gains) losses, or other non-cash items	—		—
Provision for (reversal of) current expected credit losses	117,648		—
TRS (income) loss	—		—
One-time events pursuant to changes in GAAP and certain non-cash charges	—		—
Distributable earnings	$	3,460,706	$	1,762,345
Basic weighted average shares of common stock outstanding	11,208,015		6,889,032
Distributable earnings per basic weighted average share	$	0.31	$	0.26

Book Value Per Share

We believe that book value per share is helpful to shareholders in evaluating our growth as we scale our equity capital base and continue to invest in our target investments. The book value per share of our Common Stock as of March 31, 2025 and December 31, 2024 was approximately $13.77 and $16.29, respectively.

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Factors Impacting our Operating Results

The results of our operations are affected by a number of factors and primarily depend on, among other things, the level of our net interest margin, the market value of our assets and the supply of, and demand for, commercial real estate debt and other financial assets in the marketplace. Our net interest margin, which includes the accretion and amortization of OID, is recognized based on the contractual rate and the outstanding principal balance of the loans we originate. Interest rates will vary according to the type of loan, conditions in the financial markets, creditworthiness of our borrowers, competition and other factors, some of which cannot be predicted with any certainty. Our operating results may also be impacted by credit losses in excess of initial anticipations or unanticipated credit events experienced by our borrowers.

Results of Operations for the three months ended March 31, 2025 and 2024

Our net income allocable to our common shareholders for the three months ended March 31, 2025, was approximately $3.1 million, or $0.27 per basic weighted average common share, compared to net income allocable to our common shareholders of approximately $1.8 million, or $0.26 per basic weighted average common share for the three months ended March 31, 2024.

Interest income increased approximately $2.9 million, or 144.7%, for the three months ended March 31, 2025, as compared to the three months ended March 31, 2024. The increase was due to the expansion of our portfolio from two borrowers to twelve as we deploy capital.

Interest expense increased approximately $0.3 million due to the lines of credit available in the current period and related borrowings that were not in place in the prior period.

General and administrative expenses increased $0.8 million during the three months ended March 31, 2025, as compared to the three months ended March 31, 2024. The increase was primarily due to reimbursable shared expenses under the Management Agreement, which did not take effect until the completion of the Spin-Off in July 2024.

Stock-based compensation increased $0.2 million during the three months ended March 31, 2025, as compared to the three months ended March 31, 2024, driven by restricted stock awards granted and restricted stock awards converted as part of the Spin-Off.

Professional fees increased $0.1 million during the three months ended March 31, 2025, as compared to the three months ended March 31, 2024. Professional fees included approximately $0.2 million in Spin-Off costs incurred in the prior period. Other costs within professional fees related to legal, audit, and board of director fees.

Provision for Current Expected Credit Losses

The provision for current expected credit losses for the three months ended March 31, 2025 was approximately $117.6 thousand. The CECL Reserve balance as of March 31, 2025 was approximately $157.8 thousand, or 0.07%, of our total loans held at carrying value of approximately $230.5 million and was bifurcated between (i) the current expected credit loss reserve (contra-asset) related to outstanding balances on loans held at carrying value of $13.7 thousand and (ii) a liability for unfunded commitments of approximately $144.1 thousand. The liability is based on the unfunded portion of loan commitments over the full contractual period over which we are exposed to credit risk through a current obligation to extend credit. Management considered the likelihood that funding will occur, and if funded, the expected credit loss on the funded portion. We continuously evaluate the credit quality of each loan by assessing the risk factors of each loan.

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Loan Portfolio

The table below summarizes our total loan portfolio as of March 31, 2025, unless otherwise specified.


Loan Type	Location		Original Funding Date	Loan Maturity	Current Commitments as of 3/31/2025		% of Total SUNS	Principal Balance as of 3/31/2025		Cash Interest Rate	PIK	Fixed/ Floating	Amortization During Term	YTM(1)
Senior mortgage loans:

Residential	Austin, TX		7/3/2024	7/3/2027	$	14,087,288	4.0%	$	13,818,709	9.0%	N/A	Floating	No	10%
Hospitality	San Antonio, TX		7/31/2024	8/9/2027	27,300,000		7.7%	26,793,821		10.9%	N/A	Floating	No	13%
Residential	PBG, FL	(2)	8/5/2024	9/1/2027	31,875,000		9.1%	28,614,957		12.6%	N/A	Floating	No	13%
Residential	PBG, FL	(2)	8/5/2024	9/1/2027	28,125,000		8.0%	24,321,302		10.6%	N/A	Floating	No	12%
Residential	Fort Lauderdale, FL	(3)	11/1/2024	12/30/2026	30,000,000		8.5%	4,964,427		11.4%	N/A	Floating	No	14%
Hospitality	Austin, TX		12/12/2024	12/11/2027	32,000,000		9.1%	30,635,540		9.8%	N/A	Floating	No	11%
Residential	Aventura, FL		1/27/2025	1/27/2027	30,750,872		8.7%	28,711,352		9.3%	N/A	Floating	No	11%
Net Leased Tenant	New Orleans, LA	(3)	1/30/2025	1/30/2028	44,000,000		12.5%	599,378		10.1%	N/A	Floating	No	11%
Residential	Dallas, TX		3/14/2025	3/14/2028	46,500,000		13.2%	44,250,000		8.0%	N/A	Floating	No	9%
Subordinate debt:
Residential	Sarasota, FL		1/31/2024	5/12/2027	28,188,776		8.0%	23,891,764		13.0%	N/A	Fixed	No	14%
Residential	Miami, FL		11/15/2024	11/15/2027	13,000,000		3.7%	2,246,271		13.3%	N/A	Fixed	No	15%
Residential	Miami, FL		3/21/2025	12/13/2028	26,250,000		7.5%	4,533,185		13.8%	1.0%	Floating	No	15%
				Subtotal(4)	$	352,076,936	100.0%	$	233,380,706	10.4%	0.0%			12%
														Wtd Average

(1)Estimated YTM includes a variety of fees and features that affect the total yield, which may include, but is not limited to, OID, exit fees, prepayment fees, unused fees and contingent features. OID is recognized as a discount to the funded loan principal and is accreted to income over the term of the loan.

The estimated YTM calculations require management to make estimates and assumptions, including, but not limited to, the timing and amounts of loan draws on delayed draw loans, the timing and collectability of exit fees, the probability and timing of prepayments and the probability of contingent features occurring. For example, certain credit agreements contain provisions pursuant to which certain interest rates and fees earned by us under such credit agreements will decrease upon the satisfaction of certain specified criteria which we believe may improve the risk profile of the applicable borrower. To be conservative, we have not assumed any prepayment penalties or early payoffs in our estimated YTM calculation. Estimated YTM is based on current management estimates and assumptions, which may change. Estimated YTM is calculated using the interest rate as of March 31, 2025 applied through maturity. Actual results could differ from those estimates and assumptions.

(2)This loan is structured as a senior term loan and home construction revolver, of which the proceeds will be used to fund varying development projects. Under each credit facility, the borrower is able to re-draw funds after repayment through maturity.

(3)If the Company holds both the A-note and B-note, the loan is categorized as a senior mortgage loan.

(4)The interest subtotal rate is a weighted average rate.

Loans Held for Investment at Carrying Value

As of March 31, 2025 and December 31, 2024, our portfolio included twelve and nine loans held at carrying value, respectively. The aggregate originated commitment under these loans was approximately $352.1 million and $190.9 million, respectively, and outstanding principal was approximately $233.4 million and $132.6 million, respectively, as of March 31, 2025 and December 31, 2024. During the three March 31, 2025, we funded approximately $109.8 million of new loans and additional principal on existing loans and had approximately $9.0 million of principal repayments of loans held at carrying value. As of March 31, 2025 and December 31, 2024, approximately 89% and 79%, respectively, of our loans held at carrying value had floating interest rates. As of March 31, 2025, these floating benchmark rates included one-month SOFR quoted at 4.3% and subject to a weighted average floor of 4.1% based on outstanding principal.

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The following tables summarize our loans held at carrying value as of March 31, 2025 and December 31, 2024:


	As of March 31, 2025
	Outstanding Principal(1)		Original Issue Discount		Carrying Value(1)		Weighted Average Remaining Life (Years)(2)

Senior mortgage loans(3)(4)	$	202,709,486	$	(2,647,593)	$	200,061,893	2.5
Subordinate debt	30,671,220		(238,922)		30,432,298		2.4
Total loans held at carrying value	$	233,380,706	$	(2,886,515)	$	230,494,191	2.5


	As of December 31, 2024
	Outstanding Principal(1)		Original Issue Discount		Carrying Value(1)		Weighted Average Remaining Life (Years)(2)

Senior mortgage loans(3)	$	109,300,553	$	(1,495,512)	$	107,805,041	2.6
Subordinate debt	23,255,736		(327,147)		22,928,589		2.4
Total loans held at carrying value	$	132,556,289	$	(1,822,659)	$	130,733,630	2.6

(1)The difference between the Carrying Value and the Outstanding Principal amount of the loans consists of unaccreted OID and loan origination costs.

(2)Weighted average remaining life is calculated based on the carrying value of each respective group of loans as of March 31, 2025 and December 31, 2024.

(4)If the Company holds both the A-note and B-note, the loan is categorized as a senior mortgage loan.

The following table presents changes in loans held at carrying value as of and for the three months ended March 31, 2025:


	Principal		Original Issue Discount		Carrying Value

Total loans held at carrying value at December 31, 2024	$	132,556,289	$	(1,822,659)	$	130,733,630
New fundings	106,100,104		(1,356,528)		104,743,576
Interest drawn on loans	3,740,082		—		3,740,082
Accretion of original issue discount	—		292,672		292,672
Loan repayments	(9,015,769)		—		(9,015,769)


Total loans held at carrying value at March 31, 2025	$	233,380,706	$	(2,886,515)	$	230,494,191

Collateral Overview

Our loans are secured by various types of assets of our borrowers, including real property and certain personal property and other assets to the extent permitted by applicable laws and the regulations governing our borrowers.

Our debt investments will primarily be secured by real estate assets that are expected to be diversified across asset classes, including high quality residential (including multi-family, condominiums and single-family residential communities), retail, office, hospitality, industrial, mixed-use and specialty-use real estate.

Upon default of a loan, we may seek to sell the loan to a third-party or have an affiliate or a third party work with the borrower to have the borrower sell collateral securing the loan to a third party or institute a foreclosure proceeding to have

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such collateral sold, in each case, to generate funds towards the payoff of the loan. While we believe that the appraised value of any real estate assets or other collateral securing our loans may impact the amount of the recovery in each such scenario, the amount of any such recovery from the sale of such real estate or other collateral may be less than the appraised value of such collateral and the sale of such collateral may not be sufficient to pay off the remaining balance on the defaulted loan. If we do not or cannot sell a foreclosed property, we would then come to own and operate it as “real estate owned.”

We may pursue a sale of a defaulted loan if we believe that a sale would yield higher proceeds or that a sale could be accomplished more quickly than a foreclosure proceeding while yielding proceeds comparable to what would be expected from a foreclosure sale. To the extent that we determine that the proceeds are more likely to be maximized through instituting a foreclosure sale or through taking title to the underlying collateral, we will be subject to the rules and regulations under state law that govern foreclosure sales. However, we can provide no assurances that a third party would buy such loans or that the sales price of such loans would be sufficient to recover the outstanding principal balance, accrued interest, and fees.

Liquidity and Capital Resources

Liquidity is a measure of our ability to meet potential cash requirements, including ongoing commitments to repay borrowings, fund and maintain our assets and operations, make distributions to our shareholders and meet other general business needs. We use significant cash to purchase our target investments, repay principal and interest on our borrowings, make distributions to our shareholders and fund our operations. The sources of financing for our target investments are described below.

Our primary sources of cash generally consist of net proceeds of future debt or equity offerings, debt financing, including borrowings under the Revolving Credit Facility and the SRTF Credit Facility, payments of principal and interest we receive on our portfolio of assets and cash generated from our operating results.

As of March 31, 2025 and December 31, 2024, all of our cash was unrestricted and totaled approximately $1.6 million and $184.6 million, respectively.

As of March 31, 2025, we believe that our cash on hand, capacity available under the Revolving Credit Facility, SRTF Credit Facility and cash flows from operations will be sufficient to satisfy the operating requirements of our business through at least the next twelve months.

Capital Markets

Given the nature of our business, we constantly explore both the public and private capital markets to raise capital, subject to market and other considerations.

On January 29, 2025, we completed a registered public offering of 5,750,000 shares of common stock at a public offering price of $12.00 per share, of which 1,000,000 shares of common stock were sold to Leonard M. Tannenbaum, our Executive Chairman, at the public offering price. We received net proceeds from the January 2025 Offering of $65.3 million, net of underwriting discounts of $3.7 million. In connection with the January 2025 Offering, the underwriters were granted an over-allotment option to purchase up to an additional 862,500 shares of our common stock. On January 31, 2025, the underwriters partially exercised the over-allotment option with respect to 650,000 shares of common stock and we received additional net proceeds of $7.3 million, net of underwriting discounts of $0.5 million. We incurred approximately $1.2 million of expenses in connection with the offering. After giving effect to the partial exercise of the over-allotment option, the total number of shares sold by us in the public offering was 6,400,000 shares and total gross proceeds, before deducting underwriting discounts and commissions, and other offering expenses payable by us, were approximately $76.8 million. The net proceeds totaled approximately $71.4 million.

We intend to raise future equity capital and issue debt securities in order to fund our future investments in loans.

Revolving Credit Facility

On November 6, 2024, the Company entered into the Revolving Credit Facility, which contains initial aggregate commitments of $50.0 million, which may be borrowed, repaid and redrawn (subject to a borrowing base based on eligible loan obligations held by the Company and subject to the satisfaction of other conditions provided under the Revolving Credit Agreement). The amount of total commitments under the Revolving Credit Facility may be increased to up to

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$200.0 million in aggregate, subject to available borrowing base and lenders’ willingness to provide additional commitments.

SRTF Credit Facility

On December 9, 2024, the Company entered into the SRTF Credit Facility, which provides for an unsecured revolving credit facility with a $75.0 million commitment, which may be borrowed, repaid and redrawn, subject to a draw fee and the other conditions provided in the SRTF Credit Agreement.

Other Credit Facilities, Warehouse Facilities and Repurchase Agreements

In the future, we may also use other sources of financing to fund the origination or acquisition of our target investments, including other credit facilities and other secured and unsecured forms of borrowing. These financings may be collateralized or non-collateralized and may involve one or more lenders. We expect that these facilities will typically have maturities ranging from two to five years and may accrue interest at either fixed or floating rates.

Debt Service

As of March 31, 2025, we believe that our cash on hand, capacity available under our Revolving Credit Facility and SRTF Credit Facility, and cash flows from operations will be sufficient to service our outstanding debt during the next twelve months.

Cash Flows

The following table sets forth changes in cash and cash equivalents for the three months ended March 31, 2025 and 2024:


	Three months ended March 31,
	2025		2024


Net cash provided by (used in) operating activities	$	(914,591)	$	1,117,808
Net cash (used in) provided by investing activities	(95,727,807)		(46,414,144)
Net cash (used in) provided by financing activities	(86,341,592)		14,400,000
Change in cash and cash equivalents	$	(182,983,990)	$	(30,896,336)

Net Cash Provided by (Used in) Operating Activities

Net cash provided by operating activities during the three months ended March 31, 2025 was approximately $(0.9) million, compared to approximately $1.1 million for the three months ended March 31, 2024. The decrease of approximately $(2.0) million during the March 31, 2024 to the three months ended March 31, 2025 was primarily due to an increase in net income of approximately $1.3 million, partially offset by changes in net working capital. The most significant items in working capital were an increase in non-cash interest income capitalized of $(3.7) million, an increase in accrued management and incentive fees of $(0.4) million, partially offset by a decrease in interest receivable of approximately $0.3 million and an increase in prepaid expenses and other assets of approximately $0.4 million.

Net Cash (Used in) Provided by Investing Activities

Net cash used in investing activities during the three months ended March 31, 2025 was approximately $(95.7) million, compared to $(46.4) for the three months ended March 31, 2024. The decrease of approximately $(49.3) million was primarily due to an increase in issuance and fundings on loans of approximately $(55.9) million, partially offset by an increase in principal repayments of loans of approximately $6.6 million.

Net Cash (Used in) Provided by Financing Activities

Net cash used in financing activities during the three months ended March 31, 2025 was approximately $(86.3) million, compared to $14.4 million for the three months ended March 31, 2024. The decrease of approximately $(100.7) million was primarily due to $(236.7) million in repayments on the revolving credit facilities, partially offset by an increase of $81.1 million in borrowings on the revolving credit facilities and an increase of $72.6 million from offering proceeds relating to the January 2025 Offering.

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Contractual Obligations, Other Commitments, and Off-Balance Sheet Arrangements

Our contractual obligations as of March 31, 2025 are as follows:


	As of March 31, 2025
	Less than 1 year		1-3 years		3-5 years		More than 5 years		Total
Unfunded commitments	$	—	$	96,979,415	$	21,716,815	$	—	$	118,696,230
Total	$	—	$	96,979,415	$	21,716,815	$	—	$	118,696,230

As of March 31, 2025, all unfunded commitments were related to our total loan commitments and were available for funding in less than four years.

We may enter into certain contracts that may contain a variety of indemnification obligations. The maximum potential future payment amounts we could be required to pay under these indemnification obligations may be unlimited.

Off-balance sheet commitments consist of unfunded commitments on delayed draw loans. Other than as set forth in this Quarterly Report, we do not have any relationships with unconsolidated entities or financial partnerships, such as entities often referred to as structured investment vehicles, special purpose entities or variable interest entities, established to facilitate off-balance sheet arrangements or other contractually narrow or limited purposes. Further, we have not guaranteed any obligations of unconsolidated entities or entered into any commitment to provide, nor do we intend to provide, additional funding to any such entities.

Dividends

We intend to elect to be taxed as a REIT for U.S. federal income tax purposes, commencing with the taxable year ending December 31, 2024, and, as such, intend to annually distribute to our shareholders at least 90% of our REIT taxable income, prior to the deduction for dividends paid and excluding our net capital gain. If we distribute less than 100% of our REIT taxable income in any tax year (taking into account any distributions made in a subsequent tax year under Sections 857(b)(9) or 858 of the Code), we will pay tax at regular corporate rates on that undistributed portion. Furthermore, if we distribute less than the sum of (i) 85% of our ordinary income for the calendar year, (ii) 95% of our capital gain net income for the calendar year and (iii) any undistributed shortfall from our prior calendar year (the “Required Distribution”) to our shareholders during any calendar year (including any distributions declared by the last day of the calendar year but paid in the subsequent year), then we are required to pay non-deductible excise tax equal to 4% of any shortfall between the Required Distribution and the amount that was actually distributed. Any of these taxes would decrease cash available for distribution to our shareholders. The 90% distribution requirement does not require the distribution of net capital gains. However, if we elect to retain any of our net capital gain for any tax year, we must notify our shareholders and pay tax at regular corporate rates on the retained net capital gain. The shareholders must include their proportionate share of the retained net capital gain in their taxable income for the tax year, and they are deemed to have paid the REIT’s tax on their proportionate share of the retained capital gain. Furthermore, such retained capital gain may be subject to the nondeductible 4% excise tax. If we determine that our estimated current year taxable income (including net capital gain) will be in excess of estimated dividend distributions (including capital gains dividends) for the current year from such income, we will accrue excise tax on a portion of the estimated excess taxable income as such taxable income is earned.

To the extent that our cash available for distribution is less than the amount required to be distributed under the REIT provisions of the Code, we may be required to fund distributions from working capital or through equity, equity-related or debt financings or, in certain circumstances, asset sales, as to which our ability to consummate transactions in a timely manner on favorable terms, or at all, cannot be assured, or we may make a portion of the Required Distribution in the form of a taxable stock distribution or distribution of debt securities.

Critical Accounting Policies and Estimates

There have been no significant changes in our critical accounting policies and estimates from what was previously disclosed in our Annual Report on Form 10-K. Many of these accounting policies require judgment and the use of estimates and assumptions when they are applied in the preparation of our financial statements. On a quarterly basis, we evaluate these estimates and judgments based on historical experience as well as other factors that we believe to be reasonable under the circumstances. These estimates are subject to change in the future if underlying assumptions or factors change. Certain accounting policies, while significant, may not require the use of estimates.

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Item 3. Quantitative and Qualitative Disclosures About Market Risk

Risk Management

We intend for our investment mix to include high quality residential, including multi-family, condominiums and single-family residential communities, retail, office, hospitality, industrial, mixed-use and specialty-use real estate. We believe that our Manager’s rigorous investment process on our behalf will enable us to make investments with potential for value creation as we seek to provide capital to strong sponsors with readily executable business plans while endeavoring to implement significant downside protections.

The allocation of capital among our target assets will depend on prevailing market conditions at the time we invest, among other considerations, and may change over time in response to changes in market conditions, including with respect to interest rates and general economic and credit market conditions as well as local economic conditions in markets where we are active.

Changes in Fair Value of Our Assets

We generally hold our target investments as long-term loans; however, we may occasionally classify some of our loans as held for sale. We may carry our loans at fair value or carrying value in our balance sheets. As of March 31, 2025 and December 31, 2024, none of our loans held for investment were carried at fair value.

We evaluate our loans on a quarterly basis and fair value is determined by our Board of Directors through its independent Audit and Valuation Committee. We use an independent third-party valuation firm to provide input in the valuation of all of our unquoted investments, which we consider along with other various subjective and objective factors in making our evaluations.

Our loans are typically valued using a yield analysis, which is typically performed for non-credit impaired loans to borrowers. Alternative valuation methodologies may be used as appropriate, and can include a market analysis, income analysis, or recovery analysis. To determine fair value using a yield analysis, a current price is imputed for the loan based upon an assessment of the expected market yield for a similarly structured loan with a similar level of risk. In the yield analysis, we consider the current contractual interest rate, the maturity and other terms of the loan relative to risk of the borrower and the specific loan. A key determinant of risk, among other things, is the leverage through the loan relative to the enterprise value of the borrower. As loans held by us are substantially illiquid with no active transaction market, we depend on primary market data, including newly funded loans, as well as secondary market data with respect to high-yield debt instruments and syndicated loans, as inputs in determining the appropriate market yield, as applicable. Changes in market yields, recovery rates, and revenue multiples may change the fair value of certain of our loans. Generally, an increase in market yields may result in a decrease in the fair value of certain of our loans, while a decrease in revenue multiples and recovery rates may result in a decrease in the fair value of certain of our loans; however, this is mitigated to the extent our loans bear interest at a floating rate.

Due to the inherent uncertainty of determining the fair value of loans that do not have a readily available market value, the fair value of our loans may fluctuate from period to period. Additionally, the fair value of our loans may differ significantly from the values that would have been used had a ready market existed for such loans and may differ materially from the values that we may ultimately realize. Further, such loans are generally subject to legal and other restrictions on resale or otherwise are less liquid than publicly traded securities. If we were required to liquidate our investment in a loan in a forced or liquidation sale, we could realize significantly less than the value at which we had recorded such loan investment.

Changes in Market Interest Rates and Effect on Net Interest Income

Interest rates are highly sensitive to many factors, including fiscal and monetary policies and domestic and international economic and political considerations, as well as other factors beyond our control. We are subject to interest rate risk in connection with our assets and our related financing obligations.

Our operating results depend in large part on differences between the income earned on our assets and our cost of borrowing. The cost of our borrowings generally will be based on prevailing market interest rates. During a period of rising interest rates, our borrowing costs generally will increase (a) while the yields earned on our leveraged fixed-rate loan assets will remain static, and (b) at a faster pace than the yields earned on our leveraged floating-rate loan assets, which could result in a decline in our net interest spread and net interest margin. The severity of any such decline would depend on our asset/liability composition at the time as well as the magnitude and duration of the interest rate increase. Further, an increase in short-term interest rates could also have a negative impact on the market value of our target investments. If any

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of these events happen, we could experience a decrease in net income or incur a net loss during these periods, which could adversely affect our liquidity and results of operations.

We are exposed to market risks in the ordinary course of our business. These risks primarily relate to fluctuations in interest rates. Our loans are typically valued using a yield analysis, which is typically performed for non-credit impaired loans to borrowers. Alternative valuation methodologies may be used as appropriate, and can include a market analysis, income analysis, or recovery analysis. Changes in market yields, revenue multiples, and recovery rates may change the fair value of certain of our loans. Generally, an increase in market yields may result in a decrease in the fair value of certain of our loans, while a decrease in revenue multiples and recovery rates may result in a decrease in the fair value of certain of our loans; however, this is mitigated to the extent our loans bear interest at a floating rate. As of March 31, 2025, we had ten floating-rate loans, representing approximately 89% of our portfolio based on aggregate outstanding principal balances. These floating benchmark rates included one-month SOFR quoted at 4.3% and subject to a weighted average floor of 4.1% based on outstanding principal. We estimate that a hypothetical 100 basis points increase in the floating benchmark rate would result in an increase in annual interest income of approximately $2.1 million and a hypothetical 100 basis points decrease in the floating benchmark rate would result in a decrease in annual interest income of approximately $(0.4) million due to the affects of the benchmark floor.

Interest Rate Cap Risk

We originate both fixed and floating rate loans. These are assets in which the loans may be subject to periodic and lifetime interest rate caps and floors, which limit the amount by which the asset’s interest yield may change during any given period. However, our future borrowing costs pursuant to our potential financing agreements may not be subject to similar restrictions. Therefore, in a period of increasing interest rates, interest rate costs on our borrowings could increase without limitation by caps, while the interest-rate yields on our floating-rate assets would effectively be limited. In addition, floating-rate assets may be subject to periodic payment caps that result in some portion of the interest being deferred and added to the principal outstanding. This could result in our receipt of cash income from such assets in an amount that is less than the amount that we would need to pay the interest cost on our related borrowings. These factors could lower our net interest income or cause a net loss during periods of rising interest rates, which would harm our financial condition, cash flows and results of operations.

Interest Rate Mismatch Risk

We may fund a portion of our origination of loans, or of loans that we may in the future acquire, with borrowings that are based on various benchmarks, while the interest rates on these assets may be fixed or indexed to SOFR, U.S. prime rate, or another index rate. Accordingly, any increase in an index rate will generally result in an increase in our borrowing costs that would not be matched by fixed-rate interest earnings and may not be matched by a corresponding increase in floating-rate interest earnings. Any such interest rate mismatch could adversely affect our profitability, which may negatively impact distributions to our shareholders.

Our analysis of risks is based on our Manager’s experience, estimates, models and assumptions. These analyses rely on models which utilize estimates of fair value and interest rate sensitivity. Actual economic conditions or implementation of decisions by our Manager and our management may produce results that differ significantly from the estimates and assumptions used in our models and the projected results.

Credit Risk

We are subject to varying degrees of credit risk in connection with our loans and interest receivable. Our Manager seeks to mitigate this risk by seeking to originate loans, and may in the future acquire loans, of higher quality at appropriate prices given anticipated and unanticipated losses, by employing a comprehensive review and selection process and by proactively monitoring originated and acquired loans. Nevertheless, unanticipated credit losses could occur that could adversely impact our operating results.

We expect to be subject to varying degrees of credit risk in connection with holding our portfolio of loans. We will have exposure to credit risk on our commercial real estate loans and other targeted types of loans. Our Manager will seek to manage credit risk by performing deep credit fundamental analysis of potential assets and through the use of non-recourse financing, when and where available and appropriate.

Credit risk will also be addressed through our Manager’s ongoing review, and loans will be monitored for variance from expected prepayments, defaults, severities, losses and cash flow on a quarterly basis.

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Our Investment Guidelines are not subject to any limits or proportions with respect to the mix of target investments that we make or that we may in the future acquire other than as necessary to maintain our exemption from registration under the Investment Company Act and our qualification as a REIT. Our investment decisions will depend on prevailing market conditions and may change over time in response to opportunities available in different interest rate, economic and credit environments. As a result, we cannot predict the percentage of our capital that will be invested in any individual target investment at any given time.

Our loan portfolio as of March 31, 2025 was concentrated with the top three borrowers representing approximately 41.9% of the aggregate outstanding principal balances and approximately 42.7% of the total loan commitments. We made our first investment in January 2024 and expect to continue to diversify our loan portfolio as loans in our pipeline are evaluated and are originated through the deployment of our capital.

Real Estate Risk

Commercial real estate loans are subject to volatility and may be affected adversely by a number of factors, including, but not limited to, national, regional and local economic conditions (which may be adversely affected by industry slowdowns and other factors); local real estate conditions; changes or continued weakness in specific industry segments; construction quality, age and design; demographic factors; and retroactive changes to building or similar codes. In addition, decreases in property values reduce the value of the collateral and the potential proceeds available to a borrower to repay the underlying loan or loans, as the case may be, which could also cause us to suffer losses.

Item 4. Controls and Procedures

Evaluation of Disclosure Controls and Procedures

An evaluation of the effectiveness of the design and operation of our “disclosure controls and procedures” (as defined in Rule 13a-15(e) and 15(d)-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”)), as of the end of the period covered by this Quarterly Report on Form 10-Q was made under the supervision and with the participation of our management, including our Chief Executive Officer (“CEO”) and Chief Financial Officer (“CFO”). Based upon this evaluation, our CEO and CFO have concluded that our disclosure controls and procedures (a) are effective to ensure that information required to be disclosed by us in reports filed or submitted under the Exchange Act is recorded, processed, summarized and reported within the time periods specified by the SEC rules and forms and (b) include, without limitation, controls and procedures designed to ensure that information required to be disclosed by us in reports filed or submitted under the Exchange Act is accumulated and communicated to our management, including our CEO and CFO, as appropriate to allow timely decisions regarding required disclosure.

Changes in Internal Control over Financial Reporting

There have been no changes in our internal control over financial reporting during the quarter ended March 31, 2025 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

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PART II - OTHER INFORMATION

Item 1. Legal Proceedings

From time to time, we may become involved in litigation or other legal proceedings relating to claims arising from the ordinary course of business. Furthermore, third parties may try to seek to impose liability on us in connection with our loans. As of March 31, 2025, we were not subject to any material legal proceedings.

Item 1A. Risk Factors

There have been no material changes to the risk factors disclosed in Item 1A - “Risk Factors” in the Company’s Annual Report for the fiscal year ended December 31, 2024, excepted as noted below:

Changes to U.S. tariff regulations may have an adverse effect on our business, financial condition and results of operations.

The United States recently announced a list of tariffs on specific countries and commodities which have contributed to heightened trade policy uncertainty and market volatility in the debt and equity capital markets. These market and economic disruptions, have affected, and may in the future continue to affect the U.S. imports and capital markets, which could adversely affect our borrowers, financial condition or results of operations. Specifically, the imposition of tariffs on certain foreign goods used in construction in the commercial real estate market could adversely affect us, our borrowers and the value of the real estate assets related to our investments.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

Recent Sales of Unregistered Securities

None.

Issuer Purchases of Equity Securities

During the three months ended March 31, 2025, we did not repurchase any shares of our Common Stock.

Item 3. Defaults Upon Senior Securities

None.

Item 4. Mine Safety Disclosures

Not applicable.

Item 5. Other Information

None.

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Item 6. Exhibits


Exhibit No.			Description of Exhibits
2.1			Separation and Distribution Agreement, dated as of July 8, 2024, by and between Advanced Flower Capital Inc. (f/k/a AFC Gamma, Inc.) and Sunrise Realty Trust, Inc. (filed as Exhibit 2.1 to the Company’s Current Report on Form 8-K on July 8, 2024 and incorporated herein by reference).
3.1			Articles of Amendment and Restatement of Sunrise Realty Trust, Inc. (filed as Exhibit 3.1 to the Company’s Current Report on Form 8-K on July 3, 2024 and incorporated herein by reference).
3.2			Amended and Restated Bylaws of Sunrise Realty Trust, Inc. (filed as Exhibit 3.2 to Amendment No. 2 to the Company’s Registration Statement on Form 10-12B on May 20, 2024 and incorporated herein by reference).
10.1			Tax Matters Agreement, dated as of July 8, 2024, by and between Advanced Flower Capital Inc. (f/k/a AFC Gamma, Inc.) and Sunrise Realty Trust, Inc. (filed as Exhibit 10.1 to the Company’s Current Report on Form 8-K on July 8, 2024 and incorporated herein by reference).
10.2			Management Agreement (filed as Exhibit 10.2 to Amendment No. 2 to the Company’s Registration Statement on Form 10-12B on May 20, 2024 and incorporated herein by reference).
10.3§			Form of Indemnification Agreement (filed as Exhibit 10.3 to Amendment No. 3 to the Company’s Registration Statement on Form 10-12B on June 10, 2024 and incorporated herein by reference).
10.4§			2024 Stock Incentive Plan (filed as Exhibit 10.4 to Amendment No. 3 to the Company’s Registration Statement on Form 10-12B on June 10, 2024 and incorporated herein by reference).
10.5§			Form of 2024 Stock Incentive Plan Restricted Stock Agreement (Filed as Exhibit 10.5 to the Company’s Quarterly Report on Form 10-Q on November 7, 2024 and incorporated herein by reference).
10.6			Unsecured Revolving Credit Agreement, dated September 26, 2024, by and between Sunrise Realty Trust, Inc., as borrower, and SRT Finance LLC, as agent and lender (filed as Exhibit 10.1 to the Company’s Current Report on Form 8-K on September 26, 2024 and incorporated herein by reference).
10.7			Loan and Security Agreement, dated as of November 6, 2024, among Sunrise Realty Trust, Inc., the lenders party thereto, and East West Bank, as Agent, Joint Lead Arranger, Joint Book Runner, Co-Syndication Agent and Co-Documentation Agent (Filed as Exhibit 10.7 to the Company’s Quarterly Report on Form 10-Q on November 7, 2024 and incorporated herein by reference).
1 0.8			Amendment to Loan and Security Agreement, dated as of December 9, 2024, among Sunrise Realty Trust, Inc. and Sunrise Realty Trust Holdings I LLC, as borrowers, the lenders party thereto, and East West Bank, as Agent, Joint Lead Arranger and Joint Book Runner (filed as Exhibit 10.7 to the Company’s Registration Statement on Form S-11 on January 21, 2025 and incorporated herein by reference).
1 0.9			Unsecured Revolving Credit Agreement, dated December 9, 2024, by and among Sunrise Realty Trust, Inc. as borrower, the lenders party thereto from time to time and SRT Finance LLC, as agent and lender (filed as Exhibit 10.1 to the Company’s Current Report on Form 8-K on December 9, 2024 and incorporated herein by reference).
1 0.10			Amendment Number Two to Loan and Security Agreement, dated as of December 30, 2024, among Sunrise Realty Trust, Inc. and Sunrise Realty Trust Holdings I LLC, as borrowers, East West Bank, as agent, joint lead arranger, co-syndication agent and co-documentation agent, and the financial institutions party thereto, as lenders (filed as Exhibit 10.8 to the Company’s Registration Statement on Form S-11 on January 21, 2025 and incorporated herein by reference).
1 0.11			Amendment Number Three to Loan and Security Agreement, dated as of February 26, 2025, among Sunrise Realty Trust, Inc. and Sunrise Realty Trust Holdings I LLC, as borrowers, East West Bank, as agent, joint lead arranger, co-syndication agent and co-documentation agent, and the financial institutions party thereto, as lenders (filed as Exhibit 10.11 to the Company’s Annual Report on Form 10-K on March 6, 2025 and incorporated herein by reference).
31.1*			Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2*			Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32.1**			Certification of Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
32.2**			Certification of Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
101.INS			Inline XBRL Instance Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document.
101.SCH			Inline XBRL Taxonomy Extension Schema Document.
101.DEF			Inline XBRL Taxonomy Extension Definition Linkbase Document.

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101.CAL			Inline XBRL Taxonomy Extension Calculation Linkbase Document.
101.LAB			Inline XBRL Taxonomy Extension Label Linkbase Document.
101.PRE			Inline XBRL Taxonomy Extension Presentation Linkbase Document.
104			Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101)

§ Management contract or compensatory plan or arrangement

* Filed herewith

** Furnished herewith

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.


Date: May 7, 2025
	SUNRISE REALTY TRUST, INC.

	By:	/s/ Brian Sedrish
		Brian Sedrish
		Chief Executive Officer
		(Principal Executive Officer)

	By:	/s/ Brandon Hetzel
		Brandon Hetzel
		Chief Financial Officer and Treasurer
		(Principal Financial Officer and Principal Accounting Officer)