Sunrise Realty Trust, Inc. Q1 FY2026 earnings call

General Portfolio & Capital Updates

• Distributable earnings of $0.35 per share fully covered the declared $0.30 per share common dividend for the quarter.
• The company completed the foreclosure on the Thompson San Antonio 162-key Class A hotel REO asset, removing it from the prior sponsor's management and brand structure. Eastill has been engaged to market the asset, the first bidding round has concluded with multiple attractive offers received, and the sales process is ongoing.
• In March 2026, Sunrise expanded its senior secured revolving facility to $165 million, with Customers Bank committing an additional $25 million to the facility.
• During Q1 2026, Sunrise funded $90 million in new and existing loans, and received $70 million in loan repayments, including full payoff of the Silver Mountain Ranch and Boheme loans. Subsequent to quarter end, the Jovi Belterra loan was also fully repaid.
• Total assets as of quarter end were $330 million, with total shareholder equity of $182.5 million and a book value of $13.50 per share.

Market Positioning & Strategy

• The company focuses on transitional real estate loans to sponsors in growing southern U.S. markets, prioritizing complex deals that require specialized underwriting and structuring for downside protection, rather than competing on price for stabilized multifamily/industrial loans, where spreads have tightened to the mid-200s over SOFR.
• Management notes a clear market divide: acquisition deals with market-reset cost bases have cleaner underwriting and are the company's primary area of activity; only select refinancing deals where incumbent senior lenders are forcing sponsor buyouts are pursued.
• Southern market fundamentals: Florida and the broader Southeast remain constructive, supported by sustained in-migration and employment growth; major Texas markets are seeing residential concession burn-off; some overbuilt western Sunbelt markets are still working through excess supply, and the company pursues only reset-basis opportunities in stabilizing markets here.
• Management expects the coming two-year cycle of maturing 2021/2022 vintage bridge and construction loans to create new acquisition opportunities, as Sunrise's portfolio is overwhelmingly post-interest-rate-hike loans at reset market basis, and it did not originate the 2021/2022 vintage at scale.

Sunrise Realty Trust operates a single commercial real estate lending segment with no distinct reported product segments. As of March 31, 2026, the segment held $397 million of total portfolio commitments and $299.3 million of funded principal across 15 performing loans. For Q1 2026, the segment generated GAAP net income of $4.3 million ($0.32 per basic share), net interest income of $7.3 million, and distributable earnings of $4.7 million ($0.35 per basic share). The weighted average portfolio yield to maturity is approximately 12.4%, and the CECL credit loss reserve stood at $550,000 (19 basis points of total loan carrying value) at quarter end.

• Management does not provide specific full-year guidance for distributable earnings, but notes that Q1 2026 results included one-time positive fee items that will not recur at the same run rate. The board sets dividend policy based on medium-term portfolio earnings power rather than single-quarter results, and Q1 distributable earnings covered the declared dividend.
• The company expects the Thompson San Antonio REO asset sales process to conclude over the next one to two quarters, with no material near-term income expected from the asset prior to closing a transaction.
• Management expects the vast majority of future capital deployment to remain focused on core southern U.S. growth markets, with only opportunistic deals pursued outside this footprint.
• The company expects to maintain its current target origination mix, with a super majority of new originations remaining senior loans, consistent with the current ~75% senior mix.

• Geopolitical volatility drove higher Treasury yield movement and wider securitization spreads during Q1 2026, which caused some pipeline transactions to pause while sponsors reassessed capital costs, though activity normalized by quarter end. Management notes that its underwriting approach based on unlevered returns limits the impact of this volatility on closed deals and the forward pipeline.
• A growing wave of maturing 2021/2022 vintage bridge and construction loans will need to be cleared via sales, modifications and recapitalizations over the next two years, though management notes this is a net opportunity rather than a headwind for Sunrise.
• The Thompson San Antonio foreclosure created a temporary period of no income from the asset prior to its expected sale over the next two quarters.
• Forward transaction volume depends on sustained increases in acquisition volume and stabilized or falling interest rates, both of which are uncertain in the current market environment.

Q: What is the current mix of acquisition vs refinancing deals in the pipeline, how is asset class allocation shaped, and what is the geographic focus for future deployment? / A: Most competitors are focused on simple, stabilized multifamily and industrial assets, which has created a large market void for complex transitional loans. That transitional segment, including both acquisition financing and select refinancing where sponsors need to add incremental equity to reach stabilization, makes up the majority of Sunrise's pipeline. A huge majority of future deals will continue to be in core southern U.S. growth markets where the company has a competitive advantage, though opportunistic deals outside the footprint may be pursued occasionally. Overbuilt western Sunbelt supply overhang is gradually absorbing, and the company only pursues reset-basis opportunities in those markets.

Q: Is the Thompson San Antonio REO asset still being marketed, when is a sale expected to close, and will the company generate any near-term income from it? / A: The asset is still actively being marketed, no offer has been accepted yet, and management is currently evaluating multiple bids. The company does not expect any material income from the asset before the transaction closes, which is anticipated to occur over the next one to two quarters. The transaction could be an all-cash sale, or a sale with low-leverage seller financing from Sunrise.

Q: What market conditions would increase origination volume and allow the company to grow its portfolio faster from the current high-selectivity pace? / A: Two primary changes would drive higher volume: First, larger-scale opportunities for discounted opportunistic loans from bank DPOs (distressed property dispositions) have not yet materialized at scale, and increased availability of these opportunities would raise volume. Second, sustained increases in acquisition volume, which would follow stabilized or falling interest rates, would create more transitional deal opportunities that align with the company's strategy.

Q: What drove the quarter-over-quarter increase in interest income in Q1 2026, and is early repayment a larger emerging trend in the portfolio? / A: The increase was driven by three main one-off and new activity factors: a $1.2 million prepayment fee (plus accrued OID) on the Boheme loan, a $400,000 fee on the 1-week $14 million Silver Mountain Ranch short-term bridge loan, and new funding for the $48 million Graduate Hotels B-note, plus regular construction draws on existing loans. Early repayments are not an emerging trend: only the Boheme loan was repaid early, the bulk of Q1's $70 million in total repayments came from the short-term in/out Silver Mountain loan and revolving draw/repayment activity on the Panther National loan, which is normal. There are no other assets in the portfolio currently on the watchlist for outcomes similar to the Thompson San Antonio foreclosure.