管理層發言
Good day, and thank you for standing by. Welcome to Sunrise Realty Trust first quarter 2026 earnings call. At this time, all participants are in a listen-only mode. After the speakers' presentation, we will open up for questions. To ask a question during the session, you will need to press *1 on your telephone. You will then hear an automated message advising that your hand is raised. To withdraw your question, please press *1 again. Please be advised that today's call is being recorded. I would now like to hand it over to our first speaker, Gabriel A. Katz, Chief Legal Officer. Please go ahead.
Good morning, and thank you all for joining Sunrise Realty Trust earnings call for the quarter ended 03/31/2026. I am joined this morning by Leonard Mark Tannenbaum, our Executive Chairman, Brian Sedrish, our Chief Executive Officer, and Brandon Hetzel, our Chief Financial Officer. Before we begin, I would like to note that this call is being recorded. Replay information is included on our 04/15/2026 press release, which is posted on the investor relations portion of our website at sunriserealtytrust.com, along with our first quarter 2026 earnings release and investor presentation. Today's conference call includes forward-looking statements and projections that reflect the company's current views with respect to, among other things, market developments, our investment pipeline, anticipated portfolio yield, and financial performance and projections in 2026 and beyond. These statements are subject to inherent uncertainties in predicting future results. Please refer to Sunrise Realty Trust's most recent periodic filings with the SEC, including our quarterly report on Form 10-Q filed earlier this morning, for certain conditions and significant factors that could cause actual results to differ materially from these forward-looking statements and projections. During today's conference call, management will refer to non-GAAP measures, including distributable earnings. Please see our first quarter earnings release uploaded to our website for reconciliations of the non-GAAP financial measures with the most directly comparable GAAP measures. The format for today's call is as follows. Len will provide a general business and capital markets overview; next Brian will cover our view on the state of commercial real estate lending markets, discuss our existing portfolio, and provide an outlook for our investment pipeline. Then Brandon will provide an update on our financial position. After that, we will open the lines for Q&A. With that, I will now turn the call over to our Executive Chairman, Leonard Mark Tannenbaum.
Thank you, Gabe. Good morning, and welcome to our first quarter 2026 earnings conference call. For the quarter ended 03/31/2026, SUNS generated distributable earnings of $0.35 per share of common stock, which covered our dividend of $0.30 per share. The quarter was positively impacted by a short-term loan on a Colorado property, new deal closings, and the payoff of a loan to a multifamily property in Dallas. We were pleased with our first quarter results, which reflected the continued earnings power of our portfolio, the benefit of construction and other existing commitments funding during the quarter, and our ability to recycle capital through repayments and new originations at an attractive risk-adjusted return. During the quarter, we completed the foreclosure of our loans secured by Thompson San Antonio, a 162-key Class A hotel in Texas. We believe we are now better positioned to evaluate value-maximizing alternatives since the asset is not subject to the former sponsor's hotel management agreement and brand affiliation. Shortly after taking title, we engaged Eastdil to market the asset, and the first round of bidding recently concluded. We received multiple attractive offers and expect the process to continue over the upcoming quarters. The ultimate transaction could take the form of an all-cash sale, or a sale that includes lower-levered seller financing from SUNS and its affiliates combined with a meaningful equity contribution from the buyer. Based on the interest to date, we remain positive about our ability to resolve the investment in a timely manner. On the capital markets front, in March, we completed the expansion of our senior secured revolving facility to $165 million with the addition of Customers Bank, which committed an additional $25 million to our facility. With that, I will turn it over to Brian to discuss the market environment and walk through our portfolio in more detail.
Thank you, Len, and good morning. Before turning to the portfolio, I wanted to briefly discuss what we are seeing in the commercial real estate lending market and why we believe SUNS is well positioned. Over the last two years, we have worked to construct a loan book that capitalizes on our team's expertise in providing capital to sponsors of transitional real estate business plans, with projects situated in growing southern markets backed by competent owners. Our team seeks to primarily invest in transactions that require a lender which can underwrite complex business plans and create the necessary structure to ensure downside protection. These types of deals are where our team believes it can create alpha. Within the broader transaction market, we continue to see a meaningful divide between acquisitions and refinancings. Acquisitions where the cost basis has been reset to today's market are generally where the underwriting works most cleanly and where we have been most active. Pricing on refinancings is harder to establish because relatively few comparable assets actually trade, which creates a wide range of outcomes. We find a subset of refinancings interesting, specifically situations where an incumbent senior lender is forcing a sponsor's hand to be taken out. Capital markets activity in the quarter was more volatile than recent quarters, driven primarily by geopolitical developments. Treasury yields moved meaningfully higher and securitization spreads widened before partially retracing. From our seat, sponsor inquiry activity remained healthy throughout the period, but several transactions in our pipeline paused for several weeks while sponsors and their counterparties reassessed cost of capital. By quarter end, activity had largely normalized. Importantly, because we underwrite to unlevered returns rather than relying on capital markets execution to manufacture our yield, this kind of episodic volatility has limited impact on the deals we have already closed and modest impact on our forward pipeline. Across the markets we lend into, the picture in the Southern United States is not uniform, and we think this nuance matters in how we deploy capital. Florida and the Southeast more broadly remain constructive across most asset classes, supported by sustained in-migration and continued employment growth. The major Texas markets are showing signs of tightening on the residential side, with concession burn-off underway in select submarkets. Some of the more recently overbuilt western Sun Belt markets are still working through excess supply, and many have not yet reached an equilibrium. We remain disciplined about where we deploy, and have leaned into reset-basis opportunities in the markets that have begun to stabilize. On the competitive landscape, regional banks are going to continue to sit back on smaller, simpler, stabilized deals, and the larger debt funds and commercial mortgage REITs continue to compete aggressively for stabilized multifamily and industrial loans, where spreads have tightened back to the mid-200s over SOFR in many instances. That is not where we play. Our focus remains on transitional business plans where the deal requires structuring, sponsor selection, and asset-level conviction, not just an attractive cost of funds. Said differently, in a market where many lenders are competing on price, we continue to focus on the less trafficked business plans that require operational and development expertise and a sound understanding of local market dynamics. The other dynamic worth highlighting is the growing wave of stress in 2021 and 2022 vintage bridge and construction loans coming due. The market is going to need to clear billions of dollars of this paper through sales, modifications, and recapitalizations over the next two years. That is not a headwind for SUNS. We did not originate that vintage at scale. Our book is overwhelmingly post-rate-hike paper at reset basis, and the disgorgement cycle is precisely what creates the acquisition opportunities for the sponsors that we lend to. Turning to the portfolio: in 2026, the TCG real estate platform originated $91 million of loans, of which SUNS committed $62 million across two loans. These included $14 million of a $22 million senior bridge loan to finance the acquisition of an 11,000-acre portion of Silver Mountain Ranch in Colorado, which was originated, closed, and exited during the quarter, and $48 million of a $69 million B-note as part of the $406 million refinancing of a 15-property portfolio of Graduate by Hilton Hotels for AJ Capital Partners. Over the period, SUNS funded $90 million of new and existing loans, and received $70 million of repayments, including full repayment on two loans: Silver Mountain Ranch and Bohem. As of 03/31/2026, the SUNS portfolio had $397 million of commitments, with $299 million funded across 15 loans. Subsequent to quarter end, Bovi Belterra was fully repaid. Looking ahead, we remain focused on disciplined origination, active portfolio management, and prudent capital allocation. We believe the current market favors lenders with flexible capital, structuring expertise, and selectivity around basis, sponsorship, and downside protection. SUNS is well positioned to capitalize on this environment, balancing growth with risk management and long-term shareholder value. With that, I will now turn the call over to Brandon Hetzel, our Chief Financial Officer.
Thank you, Brian. For the quarter ended 03/31/2026, we generated net interest income of $7.3 million and distributable earnings of $4.7 million, or $0.35 per basic weighted average common share, and had GAAP net income of $4.3 million, or $0.32 per basic weighted average common share. The quarter included one-time fees from two investments: a $400 thousand fee on the short-term Silver Mountain Ranch bridge loan, and a $1.2 million prepayment fee on the Bohem loan. We believe that providing distributable earnings is helpful to shareholders in assessing the overall performance of SUNS' business. Distributable earnings represents net income computed in accordance with GAAP excluding non-cash items such as stock compensation expense, unrealized gains or losses, and the provision for current expected credit losses. We ended 03/31/2026 with $397.1 million of current commitments, and $299.3 million of principal outstanding spread across 15 loans. As of 05/08/2026, our portfolio consists of $380.2 million of current commitments and $292.1 million of principal outstanding across 14 loans. All loans are current and performing with a weighted average portfolio yield to maturity of approximately 12.4%. As of 03/31/2026, our CECL reserve was $550 thousand, or 19 basis points of our loans at carrying value. As of 03/31/2026, we had total assets of $330 million, and our total shareholders' equity was $182.5 million with a book value of $13.00 per share. For the quarter ended 03/31/2026, the Board of Directors declared a $0.30 dividend per share outstanding. The dividend was paid on 04/15/2026 to shareholders of record as of 03/31/2026. With that, I will now turn it back over to the operator to start the Q&A.
分析師問答
Thank you. Please wait for your name to be announced. To withdraw your question, please press *1 again. Please stand by while we are compiling the Q&A roster. One moment for your first question. Our first question will come from the line of Gaurav Mehta from Alliance Global Partners. Your line is open.
Thank you. Good morning. I wanted to go back to your comments around the pipeline and to get some more color on what you guys were seeing for acquisition financing versus refinancing. And within the current pipeline, what is the sort of mix between different kinds of property types?
Sure. This is Brian. Thanks for the question. The pipeline, as mentioned in the prepared remarks, has definitely shown that banks have returned to more of the most stabilized assets—multifamily, industrial, existing standing assets. Spreads have compressed in those areas, and that has not been our focus. What we are seeing a lot of is a big void as a result of these lenders focusing, and some of our competitors focusing on industrial and stabilized multifamily. That has created a big opportunity and void in the markets for more transitional product. So that could include multifamily; it does include multifamily. We are seeing more transitional assets. There is a clear bifurcation between acquisition and refinancings. On the refinancing side, we are seeing opportunities where sponsors need to inject incremental equity to see them through to the stabilization period. Those are the series of deals that we are focusing on. And then across asset classes, anything with any degree of complexity is really creating a separation from our side and others. Those have really been the big areas that we have been focusing on. That is what really makes up the majority of our pipeline.
Okay, thanks for that color. As a follow-up, on regions in the prepared remarks, you talked about Florida and some Southeast markets in demand and then you highlighted some markets still seeing supply. So I guess in terms of capital deployment, should we expect that you would be more focused on Florida and other markets where you are seeing demand, or would you be open to other opportunities in some of the markets where there is still supply and maybe sort of reset opportunities that you talked about?
I would expect the majority of our deals will continue to be in those Southern states that we are focused on. That has really been our focus; that is where we think we have a competitive advantage, and that is the path of growth. That continues to be the case. We are seeing that now more pronounced than we have seen in a while. As we mentioned on the West Coast and in some Sunbelt states, there has been some supply overhang; we are seeing that absorb in the markets that we are focusing on. That is the majority of our pipeline and the majority of what we are doing. Opportunistically, we will find interesting deals away from that, but I would expect a large majority in our core markets.
Okay. Thanks. Last question on the REO. Is that asset currently being marketed for sale? I know earlier you said that you guys received a few offers, and it could be an all-cash sale or you could do some lower-levered financing. Have you accepted an offer or is it still in the market?
Good question. It is still in the market with Eastdil. We have not accepted an offer. We are evaluating a number of opportunities, and we will tell you as soon as we accept an offer.
Okay. And maybe lastly on the balance sheet, the investment in real estate JV, that is the REO asset that you talked about?
Yes. Correct.
Okay. Thank you. That is all I had.
Our next question will come from the line of Jason Sabshon from KBW. Your line is open.
Hi. This is Jason on for James. Thanks for taking the question. So to start, do you expect to generate any near-term income from the San Antonio JV? You mentioned a few possible outcomes, but is there one that you see is most likely? And what would the timeline to exit be? Thanks.
So one of the things that I have to be candid about in the quarter is that on the negative side, even though I think we did have a very good quarter, we did not get any income from the hotel. We probably will not get income from the hotel this quarter or in the current quarter. In the next quarter, it is harder to say because it does get resolved in a reasonable timeline, but I think it will be over the next couple of quarters. So we do not anticipate any income from the hotel until it gets sold, or gets sold and we have a note attached to it.
Got it. Thanks. Separately, you just touched on it, but can we just have some more color on what drove up interest income during the quarter? I know you mentioned $400 thousand fee on a short-term loan and $1.2 million prepay fee, but there is also the new hospitality loan. Were there any other drivers? It was up $3.1 million quarter over quarter, so just curious.
Yeah. You just touched on the majority of the increase. As you mentioned, the $1.2 million prepayment fee related to the Bohem loan also included accretion of unaccreted OID related to that loan. Second was the short-term bridge loan we did to Silver Mountain Ranch, which contributed about $400 thousand to the interest income. And then, on top of that, there was the new investment which was about $48 million into the Graduate Hotel investment. So those three drivers were the main increase, as well as additional construction fundings of our construction loans on the normal cadence.
Got it. Thanks. And then on the short-term loan, just curious, how large was that loan?
The entire loan was approximately $21 million; SUNS' portion was about $14 million and that loan was outstanding for about one week.
Got it. Thanks. And then lastly, on forward originations, what would be the target mix of senior and subordinate going forward? Currently, you are around 75% senior, so I am just curious.
I would think it would be somewhere in that range. The majority of what we are doing is on the senior side. We will selectively find interesting relatively low-levered subordinate debt tranches, which we have done in the past. Sometimes those are senior lenders approaching us and asking us if we want to team with them. We are doing more and more of that now as we create more relationships with seniors, but we will continue to have the majority, a supermajority, be on the senior side.
Thanks.
Thank you. Our next question will come from the line of Timothy D'Agostino from B. Riley Securities. Your line is open.
Hi. Good morning. Thanks for taking the question and congrats on the quarter. Looking at Slide 11 in the deck, looking through the deals sourced all the way down to SUNS' loan funded, over the past couple quarters deal selectivity has kind of hovered around this 1.5%. I guess what would you need or want to see in the market for your selectivity to go up? I know you talked about balancing growth versus risk, but just understanding at what point you would start selecting more deals and growing the portfolio? Thank you.
I think there are two things. One, none of us in the market have really seen the kind of collapse that would generate a large volume of deeply distressed, opportunistic loans at big discounts. That has not presented itself to any meaningful size, much to everyone's chagrin. If that sort of situation emerges, we would see banks more willing to enter into DPOs with existing borrowers where we could team up with those borrowers, and that would create more opportunities. The other big thing is simply more acquisition volume. What happened in the last quarter is acquisition volume increased pretty significantly. I think if that is sustained, and if rates stabilize and start coming down—which is unclear right now but will eventually happen—that will bring about more investment activity and create more opportunity for us, particularly in transitional-type loans. As rates come down, those transitional deals will increase and create many more opportunities for us, which I think would increase our volume.
Okay. Great. That is super helpful. And across the markets you are in, I know you also speak to making opportunistic investments. Have there been any new markets that stand out to you? Just trying to get a better sense of what you are looking at and what is interesting out there.
I hesitate to be boring, but the reality is that the most interesting deals have been in those Southern markets that we have consistently focused on. Data I recently saw suggested an uptick in continued migration into Florida. You had massive in-migration that was moving back toward equilibrium, but more recently there has been a meaningful increase in migration into Florida. That has knock-on effects for retail demand and rental demand. Those are the markets we continue to find interesting. Selectively, we will look at opportunistic deals in other markets out West, but for the most part we are sticking to our core markets.
Okay. That is great commentary. Thank you so much, and congrats on the quarter again.
Thank you.
Once again, press *1 for questions. Our next question will come from the line of Tyler Anton Batory from Oppenheimer. Your line is open.
Good morning. Thanks for taking my questions. First, on the outlook this year: there were some one-time items positively impacting Q1 contributing to that $0.35 in distributable EPS. What is a good run rate to think about in terms of distributable earnings this year? Do you still think in line with the dividend or covering the dividend is a good way to think about things?
Do you want to answer that, Brandon?
Sure. We will not give specific guidance or projections for distributable earnings throughout the year, but we will say that from time to time we will have various fees that can positively impact our income, and that is normal course of business for these types of loans. Q1 did benefit from those two short-term items, but the Board does not underwrite the dividend based on one-off items. They look at the medium-term earnings power of the portfolio, including expected fundings and existing commitments, repayments, leverage, plus any forward origination. So we will not give specific guidance going forward, but we did want to point out the short-term items so you could back into a run rate.
Appreciate that. In terms of repayments, $70 million this quarter—some were well before maturity. Just trying to understand if that is a bigger trend or playing out in the portfolio, in terms of loans being repaid earlier than expected.
It is actually only one that was repaid early—the Bohem loan. Of the $70 million, one was the short-term loan that was in and out during the period, as well as repayments and draws around the Panther National loan. That is a revolving loan where they will draw and repay, and that gets grossed up into those repayment numbers. In other words, we are not seeing anything abnormal.
Okay. That was what I was trying to get at. Thank you. And then the last one: on the San Antonio issue, it seemed to have come up quickly. When you look across the rest of the portfolio, is there anything concerning or anything you are watching closely in terms of a potential negative outcome similar to San Antonio?
I understand it did sneak up on some people and it did happen relatively quickly. We do expect a resolution in the coming quarters and not a bad resolution. Right now, there is nothing else on the watch list—no other loans on the watch list. Things are doing a little bit better or a little bit worse in certain places, but everything is within the tolerances of our plan.
Very helpful. I will leave it there. Thank you.
Thank you. I am not showing any further questions in the queue. I would now like to turn it back over to Brian Sedrish for closing remarks.
Thank you all for joining our Q1 call today. We are excited about the opportunity set ahead of us and look forward to sharing our progress with you over the coming quarters. Have a good rest of your week.
Thank you for your participation in today's conference. This does conclude the program. You may now disconnect. Everyone, have a great day.