SUNS

• Proposed Merger with Southern Realty Trust (SRT)

  • On the call date, Suns announced a definitive merger agreement to acquire SRT, a private mortgage REIT on the TCG real estate platform. SRT holds $107 million in equity, and the combined pro forma total equity value will be approximately $290 million as of June 30, 2026.
  • SRT shareholders will receive newly issued Suns common stock, with a 6% premium applied to SRT's book value per share relative to Suns' book value per share as of the measurement date. The transaction was unanimously approved by independent special committees and full boards of both companies.
  • Post-closing, the management agreement will be amended: the incentive fee rate will drop from 20% to 17.5%, the hurdle rate will decrease from 8% to 7%, and Suns' manager will provide an aggregate $1 million management fee waiver over the first four quarters post-closing.
  • Expected strategic benefits include a ~60% immediate increase in equity base to lower cost of capital, improved trading liquidity, eligibility for broader index inclusion, enhanced access to unsecured debt markets, attraction of a larger investor base, and G&A cost savings from eliminating duplicative operating costs across two separate REIT platforms. Management notes minimal integration risk as both portfolios are already overseen by the same team, with overlapping underlying assets.
  • The transaction is expected to close in Q4 2026, pending shareholder approval and customary closing conditions.

• Market Environment and Portfolio Strategy

  • There is approximately $900 billion in commercial real estate (CRE) loan maturities in 2026, with a similar volume in 2027; most of these loans were originated between 2019-2022 at historic low rates, creating a refinancing gap from outdated leverage levels that does not typically stem from underlying asset value declines. This gap is the core market for Suns' structured capital.
  • Transaction activity remained uneven in Q2 2026 due to ongoing interest rate volatility, with borrowers delaying discretionary transactions. Durable demand comes from need-driven refinancings for borrowers with maturing loans and existing equity to protect, who are willing to accept pricing and structural terms that compensate Suns for risk.
  • Commercial banks have re-entered stabilized CRE lending, compressing spreads in commodity first mortgage lending — a segment Suns deliberately avoids, allowing the firm to focus on scarce structured capital opportunities that deliver higher unlevered returns.
  • Suns maintains a selective approach, declining transactions that do not meet return or structural requirements, supported by ample liquidity. The firm has seen a recent pickup in deal flow matching its targeted criteria as borrowers accept that rates will remain elevated for longer.

• Recent Operational Updates

  • Shortly after quarter end, the $93 million Panther National credit facility (originated 2024, secured by a Florida golf and residential community) was repaid in full at par, delivering an attractive full-cycle return in under two years, consistent with the firm's strategy of earning returns via underwriting rather than excessive leverage.
  • During Q2 2026, Suns funded $25.4 million in new and existing loans and received $26 million in loan repayments. As of August 3, 2026, after the Panther National repayment, outstanding principal totaled $248.8 million across 12 loans, and total debt outstanding was reduced to $85.6 million.
  • The firm has an executed purchase and sale agreement to sell the Thompson San Antonio owned hotel property, with the buyer having paid $6 million in non-refundable option payments, targeting closing by September 30, 2026. Suns will provide seller financing for the transaction, and continues to pursue remedies under the former sponsor's guarantee.
  • The TCG Real Estate Platform signed a term sheet for a $93 million senior construction loan for a Texas multifamily development, which will be structured via an A-note/B-note split with a third-party partner, matching the firm's focus on transitional structured opportunities.

Management did not provide formal full-year financial guidance, but shared the following forward-looking outlooks:

• The proposed SRT merger is expected to be accretive to earnings due to expected G&A cost savings from eliminating duplicative operating expenses.
• The merger is on track to close in the fourth quarter of 2026, subject to customary closing conditions including shareholder approval of both firms.
• The opportunity set for structured CRE lending is expanding as borrowers accept that elevated interest rates will persist, leading to growing qualified deal flow matching Suns' investment criteria.
• The firm's core near-term priorities are to recycle capital from loan repayments, fund existing construction loans in the current portfolio, and deploy capital selectively into new opportunities that meet the firm's requirements for strong risk-adjusted returns and downside protection.

Sunrise Realty Trust (Suns) is a single-segment commercial real estate mortgage REIT, so no separate product segment breakdown is provided. For the quarter ended June 30, 2026: GAAP net income was $3.1 million (23 cents per basic share), net interest income was $5.8 million, and distributable earnings were $3.9 million (29 cents per basic share). For the first half of 2026, cumulative distributable earnings were $0.65 per share, exceeding the $0.60 per share in declared dividends over the same period. As of June 30, 2026, the firm held $298.7 million in outstanding principal across 14 loans, with total assets of $330.7 million, total shareholder equity of $181.8 million, and a book value of $13.45 per share. All loans were current as of quarter end and the subsequent period, with a weighted average portfolio yield to maturity of approximately 12.3%.

• All forward-looking statements related to the merger, investment pipeline, and future financial performance are subject to inherent uncertainty, and actual results may differ materially based on factors disclosed in the firm's SEC filings, particularly the Form 10-Q filed the same day as the call.
• The proposed merger is not guaranteed to close, as it is subject to unmet conditions including shareholder approval from both Suns and SRT, along with other customary closing requirements.
• Ongoing interest rate volatility creates uncertainty in CRE transaction activity, and there is no guarantee that current higher pipeline volume will translate to closed transactions that meet the firm's pricing, structural, and return requirements.
• While management notes minimal integration risk, any merger carries inherent execution uncertainty that could impact expected cost savings and strategic benefits.

Q: The analyst asked whether the proposed SRT merger will be neutral, accretive, or dilutive to earnings and dividends for Suns shareholders, and whether the firm plans to pursue additional M&A in the mortgage REIT space. / A: Management stated the merger will deliver an earnings increase (accretive) due to G&A cost savings from eliminating duplicative overhead between the two firms, as they already manage overlapping assets across the platforms. In response to the question of future M&A, management said it is focusing solely on completing this merger for the time being, with no immediate plans for additional transactions.

Q: The analyst asked about the current state of underlying property fundamentals for multifamily assets in the markets where Suns lends. / A: Management noted fundamentals vary by market, but in the sub-markets Suns targets, multifamily supply is now being absorbed after the earlier wave of new construction. The firm is seeing rent growth and fewer concessions in its targeted markets, which is a positive trend for collateral performance.

Q: The analyst asked why management chose to pursue the SRT merger at the current timing. / A: Management explained the timing was largely driven by SRT's considerations, but the merger delivers key strategic benefits to Suns. It increases scale to enable access to unsecured financing, a credit rating, and improved credit facility terms, while also eliminating structural complexity from overlapping assets split across two separate REIT platforms, which will improve lender terms.

Q: The analyst asked for clarification on the 6% SRT book value premium valuation terms: does this mean SRT is valued at 1.06x book value for the transaction. / A: Management confirmed this interpretation is correct: the merger is structured as a book-for-book transaction, with SRT shareholders receiving a 6% premium on their book value relative to Suns' book value.