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What changed in Sunrise Realty Trust, Inc.'s 10-K — 2024 vs 2025

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Paragraph-level year-over-year comparison of Sunrise Realty Trust, Inc.'s 2024 and 2025 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2025 report.

+350 added−385 removedSource: 10-K (2026-03-12) vs 10-K (2025-03-06)

Top changes in Sunrise Realty Trust, Inc.'s 2025 10-K

350 paragraphs added · 385 removed · 259 edited across 7 sections

Item 1. Business

Business — how the company describes what it does

46 edited+7 added−19 removed167 unchanged
Biggest changeWe intend to fund these potential loans using cash and unused borrowing capacity under our senior secured revolving credit facility (the “Revolving Credit Facilit y”), obtained under the Loan and Security Agreement, dated as of November 6, 2024, by and among the Company and certain of its subsidiaries, as borrowers, the lenders party thereto, and East West Bank, as Agent, Joint Lead Arranger, Joint Book Runner, Co-Syndication Agent and Co-Documentation Agent (as amended, restated, or otherwise modified from time to time, the “Revolving Credit Agreement”), our un secured revolving credit facility (as amended, restated, or otherwise modified from time to time, the “SRTF Credit Facilit y”), obtained under the Loan and Security Agreement, dated as of December 9, 2024, by and among the Company, as borrower, the lenders party thereto from time to time, and SRT Finance LLC, as agent and lender (the “SRTF Credit Agreement”), net proceeds of future debt or equity offerings and/or, depending upon the timing of closing, net proceeds from loan repayments.
Biggest changeWe intend to fund these potential loans using cash and unused borrowing capacity under our senior secured revolving credit facility (the “Revolving Credit Facility”), obtained under the Loan and Security Agreement, dated as of November 6, 2024, by and among the Company and certain of its subsidiaries, as borrowers, the lenders party thereto, and East West Bank, as Agent, Joint Lead Arranger, Joint Book Runner, Co-Syndication Agent and Co-Documentation Agent (as amended, restated, or otherwise modified from time to time, the “Revolving Credit Agreement”), our unsecured revolving credit facility (as amended, restated, or otherwise modified from time to time, the “SRTF Credit Facility”), dated as of December 9, 2024, by and among the Company, as borrower, the lenders party thereto from time to time, and SRT Finance LLC, as agent and lender (the “SRTF Credit Agreement”), obtained under the Loan and Security Agreement, net proceeds of future debt or equity offerings, including in connection with our at-the-market offering program (the “ATM Program”), and/or, depending upon the timing of closing, net proceeds from loan repayments. 5 Table of Contents Market Opportunity We plan to capitalize on developments in CRE credit markets where non-bank lenders have provided an increasing share of CRE financings as a result of the reduction in available CRE credit across the U.S.
The service by any personnel of our Manager and its affiliates as a member of the Investment Committee will not, by itself, be dispositive in the determination as to whether such personnel is deemed “investment personnel” of our Manager and its affiliates for purposes of expense reimbursement.
The service by any personnel of our Manager and its affiliates as a member of the Investment Committee will not, by itself, be dispositive in the determination as to whether such personnel is deemed “investment personnel” of our Manager and its affiliates for purposes of expense reimbursement.
Investment Company Act We have not been and are not currently required to be registered under the Investment Company Act pursuant to Section 3(c)(5) (the “Section 3(c)(5) Exemption”) of the Investment Company Act.
Investment Company Act We have not been and are not currently required to be registered under the Investment Company Act pursuant to Section 3(c)(5)(C) (the “Section 3(c)(5)(C) Exemption”) of the Investment Company Act.
Termination for Cause We may terminate our Management Agreement effective upon 30 days’ prior written notice, without payment of any termination fee, if (i) our Manager, its agents or its assignees breach any material provision of our Management Agreement and such breach shall continue for a period of 30 days after written notice thereof specifying such breach and requesting 9 Table of Contents that the same be remedied in such 30-day period (or 45 days after written notice of such breach if our Manager takes steps to cure such breach within 30 days of the written notice); (ii) there is a commencement of any proceeding relating to our Manager’s bankruptcy or insolvency, including an order for relief in an involuntary bankruptcy case or our Manager authorizing or filing a voluntary bankruptcy petition; (iii) any Manager change of control occurs that a majority of the independent directors determines is materially detrimental to us taken as a whole; (iv) our Manager is dissolved; or (v) our Manager commits fraud against us, misappropriates or embezzles our funds, or acts, or fails to act, in a manner constituting bad faith, willful misconduct, gross negligence or reckless disregard in the performance of its duties under the Management Agreement; provided, however, that if any of the actions or omissions described in this clause (vi) are caused by an employee, personnel and/or officer of our Manager or one of its affiliates and our Manager (or such affiliate) takes all necessary and appropriate action against such person and cures the damage caused by such actions or omissions within 30 days of our Manager’s actual knowledge of its commission or omission, we shall not have the right to terminate our Management Agreement.
Termination for Cause We may terminate our Management Agreement effective upon 30 days’ prior written notice, without payment of any termination fee, if (i) our Manager, its agents or its assignees breach any material provision of our Management Agreement and such breach shall continue for a period of 30 days after written notice thereof specifying such breach and requesting that the same be remedied in such 30-day period (or 45 days after written notice of such breach if our Manager takes steps to cure such breach within 30 days of the written notice); (ii) there is a commencement of any proceeding relating to our Manager’s bankruptcy or insolvency, including an order for relief in an involuntary bankruptcy case or our Manager authorizing or filing a voluntary bankruptcy petition; (iii) any Manager change of control occurs that a majority of the independent directors determines is materially detrimental to us taken as a whole; (iv) our Manager is dissolved; or (v) our Manager commits fraud against us, misappropriates or embezzles our funds, or acts, or fails to act, in a manner constituting bad faith, willful misconduct, gross negligence or reckless disregard in the performance of its duties under the Management Agreement; provided, however, that if any of the actions or omissions described in this clause (vi) are caused by an employee, personnel and/or officer of our Manager or one of its affiliates and our Manager (or such affiliate) takes all necessary and appropriate action against such person and cures the damage caused by such actions or omissions within 30 days of our Manager’s actual knowledge of its commission or omission, we shall not have the right to terminate our Management Agreement.
Tannenbaum and Brian Sedrish • Portfolio is proactively managed to monitor ongoing performance and loan covenant compliance We require a significant amount of information from each of our borrowers and guarantors, typically including: ownership structure charts; the borrower’s and related entities’ governing documents; a list of judgments, liens, and criminal convictions against key personnel/management; a list of pending or threatened claims/litigation by or against the borrower or its guarantor(s) including the status of any claim; information about other liabilities, including loans, foreclosures and 7 Table of Contents bankruptcies; lending and banking references; recent certificates of good standing for all loan party entities; and other background information such as Google, credit and Lexis/Nexis searches.
Tannenbaum and Brian Sedrish • Portfolio is proactively managed to monitor ongoing performance and loan covenant compliance We require a significant amount of information from each of our borrowers and guarantors, typically including: ownership structure charts; the borrower’s and related entities’ governing documents; a list of judgments, liens, and criminal convictions against key personnel/management; a list of pending or threatened claims/litigation by or against the borrower or its guarantor(s) including the status of any claim; information about other liabilities, including loans, foreclosures and bankruptcies; lending and banking references; recent certificates of good standing for all loan party entities; and other background information such as Google, credit and Lexis/Nexis searches.
The value of our common stock paid as partial or full consideration of any Internalization Transaction shall be calculated based on the volume-weighted average of the closing market price of our common stock for the ten consecutive trading days immediately preceding the date with respect to which value must be determined; provided, however, that if our common stock is not traded on a securities exchange at the time of closing of any such Internalization Transaction, then the number of shares of common stock shall be determined by 10 Table of Contents agreement between our Board and our Manager or, in the absence of such agreement, the Internalization Price shall be paid in cash.
The value of our common stock paid as partial or full consideration of any Internalization Transaction shall be calculated based on the volume-weighted average of the closing market price of our common stock for the ten consecutive trading days immediately preceding the date with respect to which value must be determined; provided, however, that if our common stock is not traded on a securities exchange at the time of closing of any such Internalization Transaction, then the number of shares of common stock shall be determined by agreement between our Board and our Manager or, in the absence of such agreement, the Internalization Price shall be paid in cash.
Within its targeted geographic region, we expect that the following states, which are and are expected to continue exhibiting above average population and employment growth, will represent a greater share of the overall geographic exposure: GA, FL, NC, SC, TN and TX.
Within its targeted geographic region, we expect that the following states, which are and are expected to continue exhibiting above average population and employment growth, will represent a greater share of the overall geographic exposure: AZ, FL, GA, NC, NV, SC, TN and TX.
Item 1. Business The following description of the business of Sunrise Realty Trust, Inc. should be read in conjunction with the information included elsewhere in this Annual Report on Form 10-K for the year ended December 31, 2024. Unless the context otherwise requires, the terms “SUNS,” “we,” “us,” or “our” refers to Sunrise Realty Trust, Inc.
Item 1. Business The following description of the business of Sunrise Realty Trust, Inc. should be read in conjunction with the information included elsewhere in this Annual Report on Form 10-K for the year ended December 31, 2025. Unless the context otherwise requires, the terms “Company,” “SUNS,” “we,” “us,” or “our” refers to Sunrise Realty Trust, Inc.
We anticipate that this supply lag will persist for the foreseeable future. 6 Table of Contents • Experience and Strategic Presence : We believe that our size and institutional infrastructure, as well as our management team’s expertise in transitional real estate, distressed debt and recapitalizations; cycle-tested track record in CRE credit; deep knowledge of the Southern U.S.
We anticipate that this supply lag will persist for the foreseeable future. • Experience and Strategic Presence : We believe that our size and institutional infrastructure, as well as our management team’s expertise in transitional real estate, distressed debt and recapitalizations; cycle-tested track record in CRE credit; deep knowledge of the Southern U.S.
Our Manager has entered into the Administrative Services Agreement with TCG Services, which sets forth the terms on which TCG Services provides 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 and other services that are necessary or useful for us.
Our Manager has entered into the Administrative Services Agreement with TCG Services, which sets forth the terms on which TCG Services provides certain administrative services, including providing personnel, office facilities, information technology and other equipment and legal, ac counting, human resources, clerical, bookkeeping and record keeping services at such facilities and other services that are necessary or useful for us.
A Covered Person may seek approval for making an investment in or engaging in outside activity with a borrower by sending a written request to our legal department describing the nature of the investment or the outside activity, the time commitment involved, the parties for whom such Covered Person will be working with or associated with, and other relevant particulars of such activity.
A Covered Person may seek approval for making an investment in or engaging in outside activity with a borrower by sending a written request to our legal department describing the nature of the investment or the outside activity, the time 12 Table of Contents commitment involved, the parties for whom such Covered Person will be working with or associated with, and other relevant particulars of such activity.
The Investment Committee has the following responsibilities: (i) reviewing loan opportunities for us presented to it by senior investment professionals of our Manager and (ii) reviewing our loan portfolios for compliance with the Investment Guidelines established pursuant to our Management Agreement at least on a quarterly basis, or more frequently as necessary.
The Investment Committee has the following responsibilities: (i) reviewing loan opportunities for us presented to it by senior investment professionals of our Manager and (ii) reviewing our loan portfolios 10 Table of Contents for compliance with the Investment Guidelines established pursuant to our Management Agreement at least on a quarterly basis, or more frequently as necessary.
These policies may and are expected to change and be 11 Table of Contents updated from time to time, for example, to reflect the ongoing experience of our Manager and its affiliates with respect to allocation matters, changes in circumstances, such as changes in relevant market conditions, certain regulatory considerations, and the acceptance of additional clients by our Manager and its affiliates.
These policies may and are expected to change and be updated from time to time, for example, to reflect the ongoing experience of our Manager and its affiliates with respect to allocation matters, changes in circumstances, such as changes in relevant market conditions, certain regulatory considerations, and the acceptance of additional clients by our Manager and its affiliates.
Internalization of our Manager In the event that certain conditions are met, we have the option to internalize our Manager. Any such transaction will require the approval of a committee consisting solely of our independent directors and shareholder approval as further described below.
Internalization of our Manager In the event that certain conditions are met, we have the option to internalize our Manager. Any such transaction will require the approval of a committee consisting solely of our independent directors and shareholder approval as further 9 Table of Contents described below.
The investment personnel provided by our Manager and the investment committee members of our Manager have over 60 years of combined investment management experience and are a valuable resource to us.
The investment personnel provided by our Manager and the investment committee members of our Manager have over 70 years of combined investment management experience and are a valuable resource to us.
In the event that our Manager’s Chief Compliance Officer personally is required to obtain any consents, pre-approvals or other determinations pursuant to the Manager COI Policy that would, with respect to any other Covered Person, be made by our Manager’s Chief Compliance Officer himself, then 12 Table of Contents in such cases our Manager’s Chief Financial Officer shall be responsible for granting or making any such consents, pre-approvals or other determinations with respect to our Manager’s Chief Compliance Officer.
In the event that our Manager’s Chief Compliance Officer personally is required to obtain any consents, pre-approvals or other determinations pursuant to the Manager COI Policy that would, with respect to any other Covered Person, be made by our Manager’s Chief Compliance Officer himself, then in such cases our Manager’s Chief Financial Officer shall be responsible for granting or making any such consents, pre-approvals or other determinations with respect to our Manager’s Chief Compliance Officer.
We 4 Table of Contents may also originate a whole loan and subsequently create a mezzanine loan by partnering with a senior lender (likely a national or regional bank, or an insurance company), who will acquire the senior portion of the loan from us.
We may also originate a whole loan and subsequently create a mezzanine loan by partnering with a senior lender (likely a national or regional bank, or an insurance company), who will acquire the senior portion of the loan from us.
Our investments are primarily concentrated in those states/districts that SUNS considers to be part of the Southern U.S. Those states/districts include AL, AR, DE, FL, GA, KY, LA, MD, MS, NC, OK, SC, TN, TX, VA, WV and D.C.
Our investments are primarily concentrated in those states/districts that SUNS considers to be part of the Southern U.S. Those states/districts include AL, AR, AZ, DE, FL, GA, KY, LA, MD, MS, NC, NM, NV, OK, SC, TN, TX, UT, VA, WV and D.C.
It is possible that regulations that will be adopted in the future will apply to us or that existing regulations that are currently not applicable to us will begin to apply to us as our business evolves. 19 Table of Contents REIT Qualification We intend to make an election to be taxed as a REIT for U.S. federal income tax purposes, commencing with our taxable year ended December 31, 2024.
It is possible that regulations that will be adopted in the future will apply to us or that existing regulations that are currently not applicable to us will begin to apply to us as our business evolves. 19 Table of Contents REIT Qualification We elected to be taxed as a REIT for U.S. federal income tax purposes, commencing with our taxable year ended December 31, 2024.
The policy recognizes that because of commonality and/or overlap of investment objectives and policies among the Funds, investment and/or disposition opportunities that are attractive to SUNS may be attractive to one or more other Funds.
The policy recognizes that because of commonality and/or overlap of investment objectives and policies among the Funds, investment and/or disposition 11 Table of Contents opportunities that are attractive to SUNS may be attractive to one or more other Funds.
Real estate mortgages are excluded from the term “investment securities.” We rely on the Section 3(c)(5) Exemption, which is available for entities “primarily engaged in the business of purchasing or otherwise acquiring mortgages and other liens on and interests in real estate.” This exemption generally requires that at least 55% of an entity’s portfolio must be comprised of qualifying assets and at least another 25% of the portfolio must be comprised of real estate-related assets under the Investment Company Act (and no more than 20% comprised of non-qualifying or non-real estate assets).
We rely on the Section 3(c)(5)(C) Exemption, which is available for entities “primarily engaged in the business of purchasing or otherwise acquiring mortgages and other liens on and interests in real estate.” This exemption generally requires that at least 55% of an entity’s portfolio must be comprised of qualifying assets and at least another 25% of the portfolio must be comprised of additional qualifying assets or real estate-related assets under the Investment Company Act (and no more than 20% comprised of non-qualifying or non-real estate assets).
On the whole, our Manager and its affiliates have sourced a pool of approximately $40.7 billion CRE deals. We are in various stages of our evaluation process with respect to these loans.
On the whole, our Manager and its affiliates have sourced a pool of approximately $81.1 billion CRE deals. We are in various stages of our evaluation process with respect to these loans.
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 On February 22, 2024, Advanced Flower Capital Inc.
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 In July 2024, we separated from Advanced Flower Capital Inc.
We believe we qualify for the exemption under this section and our current intention is to continue to focus on originating and investing in loans collateralized by real estate so that at least 55% of our assets are “qualifying assets” and no more than 20% of our assets are non-qualifying or non-real estate assets.
We believe we qualify for the exemption under this section and our current intention is to continue to focus on originating and investing in loans collateralized by real estate so that at least 55% of our assets are “qualifying assets,” at least 80% of our assets are a combination of qualifying assets and real estate-related assets, and no more than 20% of our assets are non-qualifying or non-real estate assets.
However, if, in the future, we do acquire assets that do not meet this test, we may qualify as an “investment company” and be required to register as such under the Investment Company Act, which could have a material adverse effect on us.
However, if, in the future, we do acquire assets that do not meet this test, we may be required to register as an investment company under the Investment Company Act, which could have a material adverse effect on us.
In the face of this competition, we have access to our Manager’s and TCG’s investment professionals and their financing industry expertise and relationships, which may provide us with a competitive advantage in competing effectively for attractive investment opportunities and help us assess risks and determine appropriate pricing for certain potential investments.
In addition, competition for attractive investments could delay the investment of our capital. 7 Table of Contents In the face of this competition, we have access to our Manager’s and TCG’s investment professionals and their financing industry expertise and relationships, which may provide us with a competitive advantage in competing effectively for attractive investment opportunities and help us assess risks and determine appropriate pricing for certain potential investments.
The Manager has agreed to waive (i) the inclusion of the net proceeds from the January 2025 Offering (hereinafter defined) 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. 13 Table of Contents Management Compensation Our Manager manages our day-to-day affairs.
The Manager agreed to waive (i) the inclusion of the net proceeds from the January 2025 Offering (hereinafter defined) 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 year ended December 31, 2024, our Manager did not seek reimbursement for our allocable share of Mr. Tannenbaum’s compensation, but did seek reimbursement for our allocable share of Mrs. Tannenbaum’s compensation. Monthly in cash.
For the years ended December 31, 2025 and 2024, our Manager did not seek reimbursement for our allocable share of Mr. Tannenbaum’s compensation, but did seek reimbursement for our allocable share of Mrs. Tannenbaum’s compensation. Monthly in cash.
Competition may result in realizing fewer investments, higher prices, acceptance of greater risk, greater defaults, lower yields or a narrower spread of yields over our borrowing costs. In addition, competition for attractive investments could delay the investment of our capital.
Competition may result in realizing fewer investments, higher prices, acceptance of greater risk, greater defaults, lower yields or a narrower spread of yields over our borrowing costs.
Our Manager shall be responsible for preparing, or causing to be prepared, at our sole cost and expense: (i) any reports and other information relating to any proposed or consummated loan as may be reasonably requested; (ii) all reports, financial or otherwise, with respect to us, reasonably required by our Board; (iii) all materials and data necessary to complete such reports and other materials, including an annual audit of our books of accounts by a nationally recognized independent accounting firm; and (iv) regular reports for our Board to enable our Board to review our acquisitions, portfolio composition and characteristics, credit quality, performance and compliance with the policies approved by our Board.
Our Manager shall be responsible for preparing, or causing to be prepared, at our sole cost and expense: (i) any reports and other information relating to any proposed or consummated loan as may be reasonably requested; (ii) all reports, financial or otherwise, with respect to us, reasonably required by our Board; (iii) all materials and data necessary to complete such reports and other materials, including an annual audit of our books of accounts by a nationally recognized independent accounting firm; and (iv) regular reports for our Board to enable our Board to review our acquisitions, portfolio composition and characteristics, credit quality, performance and compliance with the policies approved by our Board. 8 Table of Contents Indemnification and Liability Our Management Agreement provides for customary indemnification of our Manager and its affiliates, and certain of our and their respective members, shareholders, managers, partners, trustees, personnel, officers, directors, employees, consultants and Sub-Managers, as applicable.
Legacy portfolio issues have caused banks and other traditional CRE lenders to retrench from CRE, and elevated interest rates have drained liquidity from the CRE capital markets. $2.0 trillion of looming CRE maturities by 2026 will have to be addressed, and capital providers with liquidity and speed of execution will be better positioned to take advantage of this market dislocation.
These opportunities are outlined below along with our view of our competitive strengths in identifying meaningful investment opportunities. • Unique Market Opportunity : Legacy portfolio issues have caused banks and other traditional CRE lenders to retrench from CRE, and elevated interest rates have drained liquidity from the CRE capital markets. $2.0 trillion of looming CRE maturities by 2027 will have to be addressed, and capital providers with liquidity and speed of execution will be better positioned to take advantage of this market dislocation.
Our Manager and Our Management Agreement Our Manager We are currently externally managed and advised by Sunrise Manager LLC, a registered investment adviser under the Investment Advisers Act of 1940, as amended (the “Advisers Act”). As of December 31, 2024, our Manager was beneficially owned 67.8% by Leonard M.
Our Manager and Our Management Agreement Our Manager We are currently externally managed and advised by Sunrise Manager LLC, a registered investment adviser under the Investment Advisers Act of 1940, as amended (the “Advisers Act”). As of the date of this Annual Report on Form 10-K, our Manager was beneficially owned approximately 37% by Leonard M.
Sedrish or any of their or our respective affiliates or entities in which any such person is an executive. and, subject to compliance with the Manager COI Policy (as defined below) and our code of business conduct and ethics, our Manager may allocate such loans and participate in such loans as our Manager deems reasonable under the circumstances in good faith with the Allocation Policy (as discussed below).
Co-Investments Certain investment opportunities in loans, which may be suitable for us, may also be suitable for other accounts, private funds, pooled investment vehicles or other entities managed or advised, directly or indirectly, by our Manager or any of their or our respective affiliates or entities in which any such person is an executive and, subject to compliance with the Manager COI Policy (as defined below) and our code of business conduct and ethics, our Manager may allocate such loans and participate in such loans as our Manager deems reasonable under the circumstances in good faith with the Allocation Policy (as discussed below).
We seek to lend to experienced borrowers in order to: (i) finance acquisitions, (ii) refinance existing indebtedness, (iii) fund value-add and transitional business plans, or (iv) provide portfolio-level liquidity solutions directly or via purchases of existing loans.
We intend to primarily invest in senior mortgage loans, mezzanine loans, B-notes, CMBS and debt-like preferred equity securities across CRE asset classes. 3 Table of Contents We seek to lend to experienced borrowers in order to: (i) finance acquisitions, (ii) refinance existing indebtedness, (iii) fund value-add and transitional business plans, or (iv) provide portfolio-level liquidity solutions directly or via purchases of existing loans.
Tannenbaum, our Executive Chairman, 8.8% by Robyn Tannenbaum, our President, and 18.4% by Tannenbaum family members and trusts. Each of our officers is an employee of our Manager and/or its affiliates, and certain of our officers are members of our Manager’s Investment Committee.
Each of our officers is an employee of our Manager and/or its affiliates, and certain of our officers are members of our Manager’s Investment Committee.
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”).
Overview SUNS is a Maryland corporation that was formed on August 28, 2023, that elected to be treated as a real estate investment trust for U.S. federal income tax purposes for its taxable year ended December 31, 2024, and made its first investment in January 2024.
On July 9, 2024, AFC completed the separation of its CRE portfolio (the “Separation”) through the spin-off of the Company from AFC (the “Spin-Off”) 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”) through a spin-off transaction (the “Spin-Off”). The separation was effected by the transfer of AFC’s commercial real estate portfolio from AFC to us, and the distribution of all of the outstanding shares of our common stock to all of AFC’s stockholders of record (the “Distribution”) as of the close of business on July 8, 2024 (the “Record Date”).
As of December 31, 2024, our Manager, through the Administrative Services Agreement with TCG Services and the Services Agreement with SRT Group, has access to the services of over 30 professionals, including seven investment 8 Table of Contents professionals.
As of the date of this Annual Report on Form 10-K, our Manager, through the Administrative Services Agreement with TCG Services and the Services Agreement with SRT Group, has access to the services of over 35 professionals, including seven investment professionals.
Credit Quality 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.
Credit Quality 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. 4 Table of Contents Current and Prospective Portfolio Our Portfolio For information about our loan portfolio, see “Management’s Discussion and Analysis of Financial Condition and Results of Operations-Loan Portfolio” and the notes to our consolidated financial statements included in this Annual Report.
We are currently completing our underwriting process and negotiating definitive loan documents for each of the potential loan investments related to our active non-binding term sheets. The potential loans remain subject to satisfactory completion of our underwriting and due diligence processes, definitive documentation and final approval by members of the investment committee of our Manager (the “Investment Committee”), as applicable.
We are currently completing our underwriting process and negotiating definitive loan documents for each of the potential loan investments related to our active non-binding term sheets.
TCG Services is an affiliate of our Manager and Leonard Tannenbaum, our Executive Chairman, and Robyn Tannenbaum, our President. Our Manager has also entered into a Services Agreement with SRT Group, an affiliate of the Manager, Mr. Tannenbaum, Mrs.
TCG Services is an affiliate of our Manager and Mr. Tannenbaum, and Mrs. Tannenbaum. Our Manager has also entered into a Services Agreement with SRT Group, an affiliate of the Manager, Mr. Tannenbaum, Mrs. Tannenbaum, Mr. Sedrish, Mr. Hetzel and Mr. Katz, that sets forth the terms on which SRT Group provides investment personnel to us.
Returns are anticipated to be generated through a combination of current and/or accrued interest payments, origination and exit fees, minimum multiple-of-capital payments and extension and other fees. We intend to primarily invest in senior mortgage loans, mezzanine loans, B-notes, CMBS and debt-like preferred equity securities across CRE asset classes.
Returns are anticipated to be generated through a combination of current and/or accrued interest payments, origination and exit fees, minimum multiple-of-capital payments and extension and other fees.
Allocation Policy Our Manager and its affiliates endeavor to allocate loan opportunities in a fair and equitable manner, subject to their internal policies.
The Co-Investment Exemptive Order establishes a framework designed to ensure that investment opportunities are allocated in a manner the Manager believes to be fair and equitable over time consistent with our investment strategy. Allocation Policy Our Manager and its affiliates endeavor to allocate loan opportunities in a fair and equitable manner, subject to their internal policies.
Underwriting and Investment Process Pursuant to the Management Agreement, our Manager manages our loans and day-to-day operations, 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 our Board.
Underwriting and Investment Process Pursuant to the Management Agreement, our Manager manages our loans and day-to-day operations, 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 our Board. 6 Table of Contents We believe that our Manager’s rigorous investment process on our behalf enables us to make investments with potential for value creation as it seeks to provide capital to strong sponsors with readily executable business plans while endeavoring to implement significant downside protections.
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. 5 Table of Contents Our Loan Origination Pipeline As of March 1, 2025 , we had a potentially actionable pipeline through the TCG Real Estate platform of approximately $1.4 billion of commercial real estate deal commitments under review by our Manager and its affiliates, including two signed, non-binding term sheets totaling approximately $115 million of commitments, of which we expect to be allocated a portion.
Our Loan Origination Pipeline As of February 27, 2026 , we had a potentially actionable pipeline through the TCG Real Estate platform of approximately $0.7 billion of commercial real estate deal commitments under review by our Manager and its affiliates, including one signed, non-binding term sheet totaling approximately $35 million of commitments, of which we expect to be allocated a portion.
As a result, there can be no assurance that we will move forward with any of these potential investments.
The potential loans remain subject to satisfactory completion of our underwriting and due diligence processes, definitive documentation and final approval by members of the investment comm ittee of our Manager (the “Investment Committee”), as applicable. As a result, there can be no assurance that we will move forward with any of these potential investments.
Removed
(f/k/a AFC Gamma, Inc.) (“AFC” or the “Former Parent”) announced a plan to separate into two independent, publicly traded companies. Prior to the Spin-Off (as defined below), the Company held AFC’s CRE portfolio as a wholly-owned subsidiary of AFC.
Added
SUNS is an integral part of the platform of affiliated asset managers under the Tannenbaum Capital Group (“TCG”).
Removed
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. The Spin-Off was completed on July 9, 2024 (the “Distribution Date”).
Added
As a result of the Spin-Off, we are now an independent, public company trading under the symbol “SUNS” on The Nasdaq Stock Market (“Nasdaq”).
Removed
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 us following the Spin-Off.
Added
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.
Removed
Prior to the Spin-Off, AFC contributed cash to us, bringing our total net assets, comprised of cash and our CRE portfolio, to approximately $114.8 million in connection with the Spin-Off.
Added
While the Federal Reserve made three rate cuts in each of 2024 and 2025, there is uncertainty as to the timing and extent of future rate cuts in light of ongoing inflationary challenges and generally resilient macroeconomic data.
Removed
In connection with the Spin-Off, we entered into several agreements with AFC that govern the relationship between us and AFC following the Spin-Off, including a separation and distribution agreement (the “Separation and Distribution Agreement”) and a tax matters agreement (the “Tax Matters Agreement”).
Added
Tannenbaum, our Executive Chairman, 8% by Robyn Tannenbaum, our President, 42% by other Tannenbaum family members and trusts, 7% by Mr. Sedrish, our Chief Executive Officer, 2% by Brandon Hetzel, our Chief Financial Officer, and 1% by Gabriel Katz, our Chief Legal Officer.
Removed
These agreements provide for the allocation 3 Table of Contents between AFC and us 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.
Added
We, alongside the Manager and certain of its affiliates, are party to a co-investment exemptive relief order issued by the SEC on March 11, 2026 (the "Co-Investment Exemptive Order”), that permits us to co-invest in certain investments alongside affiliated investment vehicles, subject to the conditions of the Co-Investment Exemptive Order and the Manager’s allocation policies and procedures.
Removed
Moreover, concurrent with the completion of the Spin-Off on July 9, 2024, our management agreement with our Manager (the “Management Agreement”) became effective.
Added
For the year ended December 31, 2025, Base Management Fees waived were $0.6 million and Incentive Fees waived were $0.5 million . 13 Table of Contents Management Compensation Our Manager manages our day-to-day affairs.
Removed
Our Manager entered into an administrative services agreement (the “Administrative Services Agreement”) with TCG Services LLC (“TCG Services”), that sets forth the terms on which TCG Services provides 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 and other services that are necessary or useful for us.
Removed
TCG Services is an affiliate of our Manager and Leonard Tannenbaum, our Executive Chairman, and Robyn Tannenbaum, our President. Our Manager also entered into a Services Agreement (the “Services Agreement”) with SRT Group LLC (“SRT Group”), an affiliate of our Manager, Mr. Tannenbaum, Mrs. Tannenbaum, Brian Sedrish, our Chief Executive Officer, and Brandon Hetzel, our Chief Financial Officer and Treasurer.
Removed
The Services Agreement sets forth the terms on which SRT Group provides investment personnel to us. Effective July 1, 2024, Jodi Hanson Bond and James Fagan resigned from AFC’s Board of Directors and joined our Board of Directors (our “Board”). Additionally, Alexander Frank was appointed as a director of the Company and remains a director of AFC.
Removed
In addition, effective July 1, 2024, Leonard M. Tannenbaum was appointed as our Executive Chairman (and remains Chairman of AFC) and Brian Sedrish was appointed as our Chief Executive Officer and as a member of our Board.
Removed
Brandon Hetzel continued in his role as our Chief Financial Officer and Treasurer (and remains the Chief Financial Officer and Treasurer of AFC), and Robyn Tannenbaum continued in her role as our President (and remains the President and Chief Investment Officer of AFC).
Removed
Current and Prospective Portfolio Our Portfolio For information about our loan portfolio, see “Management’s Discussion and Analysis of Financial Condition and Results of Operations-Loan Portfolio” and the notes to our consolidated financial statements included in this Annual Report.
Removed
Market Opportunity We plan to capitalize on developments in CRE credit markets where non-bank lenders have provided an increasing share of CRE financings as a result of the reduction in available CRE credit across the U.S.
Removed
These opportunities are outlined below along with our view of our competitive strengths in identifying meaningful investment opportunities. • Unique Market Opportunity : A rapid rise in interest rates has caused significant impairment and disruption to the CRE capital markets.
Removed
We believe that our Manager’s rigorous investment process on our behalf enables us to make investments with potential for value creation as it seeks to provide capital to strong sponsors with readily executable business plans while endeavoring to implement significant downside protections.
Removed
Tannenbaum, and Brian Sedrish, our Chief Executive Officer, and Brandon Hetzel, our Chief Financial Officer and Treasurer, that sets forth the terms on which SRT Group provides investment personnel to us.
Removed
Indemnification and Liability Our Management Agreement provides for customary indemnification of our Manager and its affiliates, and certain of our and their respective members, shareholders, managers, partners, trustees, personnel, officers, directors, employees, consultants and Sub-Managers, as applicable.
Removed
Co-Investments Certain investment opportunities in loans, which may be suitable for us, may also be suitable for other accounts, private funds, pooled investment vehicles or other entities managed or advised, directly or indirectly, by our Manager, Mr. Tannenbaum, Mrs. Tannenbaum, Mr.

Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

114 edited+21 added−38 removed538 unchanged
Biggest changeThese risks include, but are not limited to, the following: • Competition for the capital investments that we make may reduce the return of these investments, which could adversely affect our operating results and financial condition. • Our investments’ lack of liquidity may adversely affect our business. • Our existing portfolio is, and our future portfolio may be, concentrated in a limited number of investments, which subjects us to an increased risk of significant loss if any asset declines in value. • In the event of borrower distress or a default, we may lack the liquidity necessary to protect our investment or avoid a corresponding default on any obligations we may have in connection with our own financing. • We may need to foreclose on certain of the loans we originate or acquire, which could result in losses that materially and adversely affect us. • If our Manager overestimates the yields or incorrectly prices the risks of our investments, we may experience losses. • We were recently formed and have limited operating history, and may not be able to successfully operate our business, integrate new assets and/or manage our growth or to generate sufficient revenue to make or sustain distributions to our shareholders. • Declines in market prices and liquidity in the capital markets can result in significant net unrealized losses of our portfolio, which in turn would reduce our book value. • A prolonged economic slowdown, a lengthy or severe recession or declining real estate values could impair our investments and harm our operating results. • Investments in non-conforming and non-investment grade rated investments involve an increased risk of default and loss. 21 Table of Contents • Investments in subordinated mortgage interests, mezzanine loans and other assets that are subordinated or otherwise junior in a borrower’s capital structure may expose us to greater risk of loss. • Our portfolio is concentrated in the Southern U.S., and we will be subject to economic and other risks of doing business in those geographic markets. • Our investments expose us to risks associated with debt-oriented real estate investments generally. • If the loans that we originate or acquire do not comply with applicable laws, we may be subject to penalties, which could materially and adversely affect us. • Climate change has the potential to impact the properties underlying our investments and our ability to identify attractive investment opportunities. • Changes in laws or regulations governing our operations, including laws and regulations governing REITs, or those of our competitors, or changes in the interpretation thereof, or newly enacted laws or regulations, could result in increased competition for our target assets, require changes to our business practices and collectively could adversely impact our revenues and impose additional costs on us, which could materially and adversely affect us. • Our growth depends on external sources of capital, which may not be available on favorable terms or at all. • We may incur significant debt, which may subject us to restrictive covenants and increased risk of loss and may reduce cash available for distributions to our shareholders. • Monetary policy actions by the United States Federal Reserve could adversely impact both our borrowers and our financial condition. • Interest rate fluctuations could increase our financing costs, which could lead to a significant decrease in our results of operations, cash flows and the market value of our investments. • 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. • Following the Spin-Off, our financial profile changed, and we are a smaller, less diversified company than AFC prior to the Spin-Off. • We may not achieve some or all of the expected benefits of the Spin-Off, and the Spin-Off may materially adversely affect our business. • The terms we received in our agreements with AFC and its subsidiaries involve potential conflicts of interest and could be less beneficial than the terms we may have otherwise received from unaffiliated third parties. • Some of our directors and officers may have actual or potential conflicts of interest because of their equity ownership in AFC. • Maintenance of our exemption from registration under the Investment Company Act may impose significant limits on our operations. • Our future success depends on our Manager and its key personnel and investment professionals.
Biggest changeThese risks include, but are not limited to, the following: • Competition for the capital investments that we make may reduce the return of these investments, which could adversely affect our operating results and financial condition. • Our investments’ lack of liquidity may adversely affect our business. • Our existing portfolio is, and our future portfolio may be, concentrated in a limited number of investments, which subjects us to an increased risk of significant loss if any asset declines in value. • In the event of borrower distress or a default, we may lack the liquidity necessary to protect our investment or avoid a corresponding default on any obligations we may have in connection with our own financing. • We may need to foreclose on certain of the loans we originate or acquire, which could result in losses that materially and adversely affect us. • If our Manager overestimates the yields or incorrectly prices the risks of our investments, we may experience losses. • We were recently formed and have limited operating history, and may not be able to successfully operate our business, integrate new assets and/or manage our growth or to generate sufficient revenue to make or sustain distributions to our shareholders. • Declines in market prices and liquidity in the capital markets can result in significant net unrealized losses of our portfolio, which in turn would reduce our book value. • A prolonged economic slowdown, a lengthy or severe recession or declining real estate values could impair our investments and harm our operating results. • Investments in non-conforming and non-investment grade rated investments involve an increased risk of default and loss. 21 Table of Contents • Investments in subordinated mortgage interests, mezzanine loans and other assets that are subordinated or otherwise junior in a borrower’s capital structure may expose us to greater risk of loss. • Our portfolio is concentrated in the Southern U.S., and we will be subject to economic and other risks of doing business in those geographic markets. • Our investments expose us to risks associated with debt-oriented real estate investments generally. • If the loans that we originate or acquire do not comply with applicable laws, we may be subject to penalties, which could materially and adversely affect us. • Climate change has the potential to impact the properties underlying our investments and our ability to identify attractive investment opportunities. • Changes in laws or regulations governing our operations, including laws and regulations governing REITs, or those of our competitors, or changes in the interpretation thereof, or newly enacted laws or regulations, could result in increased competition for our target assets, require changes to our business practices and collectively could adversely impact our revenues and impose additional costs on us, which could materially and adversely affect us. • Our growth depends on external sources of capital, which may not be available on favorable terms or at all. • We may incur significant debt, which may subject us to restrictive covenants and increased risk of loss and may reduce cash available for distributions to our shareholders. • Monetary policy actions by the United States Federal Reserve could adversely impact both our borrowers and our financial condition. • Interest rate fluctuations could increase our financing costs, which could lead to a significant decrease in our results of operations, cash flows and the market value of our investments. • Maintenance of our exemption from registration under the Investment Company Act may impose significant limits on our operations. • Our future success depends on our Manager and its key personnel and investment professionals.
Our Charter and Bylaws include, among others, provisions that: • authorize our Board, without your approval, to cause us to issue additional shares of our common stock or to raise capital through the creation and issuance of shares of our preferred stock , par value $0.01 per share (“preferred stock”), debt securities convertible into common stock, options, warrants and other rights, on terms and for consideration as our Board in its sole discretion may determine; • authorize “blank check” preferred stock, which could be issued by our Board without shareholder approval, subject to certain specified limitations, and may contain voting, liquidation, dividend and other rights senior to our common stock; • establish a classified Board such that not all members of the Board are elected at each annual meeting of shareholders, which may delay the ability of our shareholders to change the membership of a majority of our Board; • specify that only our Board, the chairman of our Board, our chief executive officer or president or, upon the written request of shareholders entitled to cast not less than a majority of the votes entitled to be cast, our secretary can call special meetings of our shareholders; • establish advance notice procedures for shareholder proposals to be brought before an annual meeting of our shareholders, including proposed nominations of individuals for election to our Board; • provide that a majority of directors then in office, even though less than a quorum, may fill any vacancy on our Board, whether resulting from an increase in the number of directors or otherwise , and that any director elected to fill such vacancy shall serve for the remainder of the full term of the class to which such director was elected and until his or her successor is duly elected and qualifies; • specify that no shareholder is permitted to cumulate votes at any election of directors; • provide our Board the exclusive power to adopt, alter or repeal any provision of our Bylaws and to make new Bylaws; and • require supermajority votes of the holders of our common stock to amend specified provisions of our Charter.
Our Charter and Bylaws include, among others, provisions that: • authorize our Board, without your approval, to cause us to issue additional shares of our common stock or to raise capital through the creation and issuance of shares of our preferred stock , par value $0.01 per share (“preferred stock”), debt securities convertible into common stock, options, warrants and other rights, on terms and for consideration as our Board in its sole discretion may determine; • authorize “blank check” preferred stock, which could be issued by our Board without shareholder approval, subject to certain specified limitations, and may contain voting, liquidation, dividend and other rights senior to our common stock; • establish a classified Board such that not all members of the Board are elected at each annual meeting of shareholders, which may delay the ability of our shareholders to change the membership of a majority of our Board; • specify that only our Board, the chairman of our Board, our chief executive officer or president or, upon the written request of shareholders entitled to cast not less than a majority of the votes entitled to be cast, our secretary can call special meetings of our shareholders; • establish advance notice procedures for shareholder proposals to be brought before an annual meeting of our shareholders, including proposed nominations of individuals for election to our Board; • provide that a majority of directors then in office, even though less than a quorum, may fill any vacancy on our Board, whether resulting from an increase in the number of directors or otherwise , and that any director elected to fill such vacancy shall serve for the remainder of the full term of the class to which such director was elected and until his or her successor is duly elected and qualifies; 43 Table of Contents • specify that no shareholder is permitted to cumulate votes at any election of directors; • provide our Board the exclusive power to adopt, alter or repeal any provision of our Bylaws and to make new Bylaws; and • require supermajority votes of the holders of our common stock to amend specified provisions of our Charter.
The exemption contained in 3(c)(5)(C) is available for entities “primarily engaged in the business of purchasing or otherwise acquiring mortgages and other liens on and interests in real estate.” This exemption generally requires that at least 55% of an entity’s portfolio must be comprised of qualifying assets and at least another 25% of the portfolio must be comprised of real estate-related assets under the Investment Company Act (and no more than 20% comprised of non-qualifying or non-real assets).
The exemption contained in 3(c)(5)(C) is available for entities “primarily engaged in the business of purchasing or otherwise acquiring mortgages and other liens on and interests in real estate.” This exemption generally requires that at least 55% of an entity’s portfolio must be comprised of qualifying assets and at least another 25% of the portfolio must be comprised of additional qualifying assets or real estate-related assets under the Investment Company Act (and no more than 20% comprised of non-qualifying or non-real estate assets).
Some of the factors that could negatively affect or result in fluctuations in the market price of our common stock include: ▪ our actual or projected operating results, financial condition, cash flows and liquidity or changes in business strategy or prospects; ▪ changes in governmental policies, regulations or laws; ▪ loss of a major funding source or inability to obtain new favorable funding sources in the future; ▪ equity issuances by us, or share resales by our shareholders, or the perception that such issuances or resales may occur; ▪ actual, anticipated or perceived accounting or internal control problems; ▪ publication of research reports about us or the commercial real estate industry; ▪ our value of the properties securing our loans; ▪ changes in market valuations of similar companies; ▪ adverse market reaction to any increased indebtedness we may incur in the future; ▪ additions to or departures of the executive officers or key personnel supporting or assisting us from our Manager or its affiliates, including our Manager’s investment professionals; ▪ speculation in the press or investment community about us or other similar companies; ▪ our failure to meet, or the lowering of, our earnings estimates or those of any securities analysts; ▪ increases in market interest rates, which may lead investors to demand a higher distribution yield for our common stock (if we have begun to make distributions to our shareholders) and which could cause the cost of our interest expenses on our debt to increase; ▪ failure to qualify or maintain our qualification as a REIT or exemption from the Investment Company Act; ▪ price and volume fluctuations in the stock market generally; and ▪ general market and economic conditions, including the state of the credit and capital markets.
Some of the factors that could negatively affect or result in fluctuations in the market price of our common stock include: ▪ our actual or projected operating results, financial condition, cash flows and liquidity or changes in business strategy or prospects; ▪ changes in governmental policies, regulations or laws; ▪ loss of a major funding source or inability to obtain new favorable funding sources in the future; ▪ equity issuances by us, or share resales by our shareholders, or the perception that such issuances or resales may occur; ▪ actual, anticipated or perceived accounting or internal control problems; ▪ publication of research reports about us or the commercial real estate industry; ▪ our value of the properties securing our loans; ▪ changes in market valuations of similar companies; ▪ adverse market reaction to any increased indebtedness we may incur in the future; 57 Table of Contents ▪ additions to or departures of the executive officers or key personnel supporting or assisting us from our Manager or its affiliates, including our Manager’s investment professionals; ▪ speculation in the press or investment community about us or other similar companies; ▪ our failure to meet, or the lowering of, our earnings estimates or those of any securities analysts; ▪ increases in market interest rates, which may lead investors to demand a higher distribution yield for our common stock (if we have begun to make distributions to our shareholders) and which could cause the cost of our interest expenses on our debt to increase; ▪ failure to qualify or maintain our qualification as a REIT or exemption from the Investment Company Act; ▪ price and volume fluctuations in the stock market generally; and ▪ general market and economic conditions, including the state of the credit and capital markets.
Recent concerns about the real estate market, elevated interest rates, inflation, energy costs and geopolitical issues have contributed to increased volatility and diminished expectations for the economy and markets going forward. We cannot predict the degree to which economic conditions generally, and the conditions for CRE debt investing in particular, will improve or decline.
Recent concerns about the real estate market, elevated interest rates, tariffs, inflation, energy costs and geopolitical issues have contributed to increased volatility and diminished expectations for the economy and markets going forward. We cannot predict the degree to which economic conditions generally, and the conditions for CRE debt investing in particular, will improve or decline.
Given the restrictive covenants in our Revolving Credit Facility, our indebtedness could have significant adverse consequences to us, such as: • limiting our ability to satisfy our financial obligations; • limiting our ability to obtain additional financing to fund our working capital needs, acquisitions, capital expenditures or other debt service requirements or for other purposes; • limiting our ability to use operating cash flow in other areas of our business because we must dedicate a substantial portion of these funds to service debt; • limiting our ability to compete with other companies who are not as highly leveraged, as we may be less capable of responding to adverse economic and industry conditions; • restricting us from making strategic acquisitions, developing properties or exploiting business opportunities; • covenants in the agreements governing our and our subsidiaries’ existing and future indebtedness; • exposing us to potential events of default (if not cured or waived) under financial and operating covenants contained in our or our subsidiaries’ debt instruments that could have a material adverse effect on our business, financial condition and operating results; • increasing our vulnerability to a downturn in general economic conditions; and • limiting our ability to react to changing market conditions in our industry and in our borrowers’ industries.
Given the restrictive covenants in our Revolving Credit Facility, our indebtedness could have significant adverse consequences to us, such as: • limiting our ability to satisfy our financial obligations; • limiting our ability to obtain additional financing to fund our working capital needs, acquisitions, capital expenditures or other debt service requirements or for other purposes; 40 Table of Contents • limiting our ability to use operating cash flow in other areas of our business because we must dedicate a substantial portion of these funds to service debt; • limiting our ability to compete with other companies who are not as highly leveraged, as we may be less capable of responding to adverse economic and industry conditions; • restricting us from making strategic acquisitions, developing properties or exploiting business opportunities; • covenants in the agreements governing our and our subsidiaries’ existing and future indebtedness; • exposing us to potential events of default (if not cured or waived) under financial and operating covenants contained in our or our subsidiaries’ debt instruments that could have a material adverse effect on our business, financial condition and operating results; • increasing our vulnerability to a downturn in general economic conditions; and • limiting our ability to react to changing market conditions in our industry and in our borrowers’ industries.
Tannenbaum, Mr. Sedrish and Mr. Hetzel. Additionally, our Investment Committee and the investment committee of SRT both currently include Mr. Tannenbaum and Mr. Sedrish. As a result, we and our Manager must dedicate a high level of attention to minimizing potential conflicts and other potential issues with respect to the selection of our investments.
Tannenbaum, Mr. Sedrish, Mr. Hetzel and Mr. Katz. Additionally, our Investment Committee and the investment committee of SRT both currently include Mr. Tannenbaum and Mr. Sedrish. As a result, we and our Manager must dedicate a high level of attention to minimizing potential conflicts and other potential issues with respect to the selection of our investments.
Interest rate hedging may fail to protect or could adversely affect us because, among other things: ▪ interest rate hedging can be expensive, particularly during periods of rising and volatile interest rates; ▪ available interest rate hedging may not correspond directly with the interest rate risk for which protection is sought; ▪ the duration of the hedge may not match the duration of the related liability or asset; ▪ our hedging opportunities may be limited by the treatment of hedging transactions, and income from hedging transactions, under the rules determining REIT qualification; ▪ the credit quality of the party owing money on the hedge may be downgraded to such an extent that it impairs our ability to sell or assign our side of the hedging transaction; ▪ the party owing money in the hedging transaction may default on its obligation to pay; and ▪ we may purchase a hedge that turns out not to be necessary, i.e., a hedge that is out of the money.
Interest rate hedging may fail to protect or could adversely affect us because, among other things: ▪ interest rate hedging can be expensive, particularly during periods of rising and volatile interest rates; ▪ available interest rate hedging may not correspond directly with the interest rate risk for which protection is sought; ▪ the duration of the hedge may not match the duration of the related liability or asset; ▪ our hedging opportunities may be limited by the treatment of hedging transactions, and income from hedging transactions, under the rules determining REIT qualification; 42 Table of Contents ▪ the credit quality of the party owing money on the hedge may be downgraded to such an extent that it impairs our ability to sell or assign our side of the hedging transaction; ▪ the party owing money in the hedging transaction may default on its obligation to pay; and ▪ we may purchase a hedge that turns out not to be necessary, i.e., a hedge that is out of the money.
We are an “emerging growth company,” as defined in the Jumpstart Our Business Startups Act (“JOBS Act”), and we are eligible to take advantage of certain exemptions from various reporting requirements that are applicable to other public companies that are not “emerging growth companies” including, but not limited to, not being required to comply with the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act of 2002, as amended (“Sarbanes-Oxley”), reduced disclosure obligations regarding executive compensation in our periodic reports and proxy statements, and exemptions from the requirements of holding a non-binding advisory vote on executive compensation and shareholder approval of any golden parachute payments not previously approved.
We are an “emerging growth company,” as defined in the Jumpstart Our Business Startups Act (“JOBS Act”), and we are eligible to take advantage of certain exemptions from various reporting requirements that are applicable to other public companies that are not “emerging growth companies” including, but not limited to, not being required to comply with the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act of 2002, as amended (“Sarbanes-Oxley”), reduced disclosure obligations regarding executive compensation in our periodic reports and proxy statements, and exemptions from the requirements of holding a non-binding advisory vote on executive compensation and shareholder 59 Table of Contents approval of any golden parachute payments not previously approved.
Additionally, the U.S. government’s credit and deficit concerns, the European sovereign debt crisis, the potential trade war with China, relations between Russia and Ukraine and the conflict between Israel and Hamas and Israel and Hezbollah could cause interest rates to be volatile, which may negatively impact our ability to access the debt markets on favorable terms.
Further, the U.S. government’s credit and deficit concerns, the European sovereign debt crisis, the potential trade war with China, relations between Russia and Ukraine and the conflict between Israel and Hamas and Israel and Hezbollah could cause interest rates to be volatile, which may negatively impact our ability to access the debt markets on favorable terms.
Prospective investors should be aware that changes in the regulatory and business landscape as a result of the Dodd-Frank Act and as a result of other current or future legislation and regulation may decrease the restrictions on banks and other financial institutions and allow them to compete with us for investment opportunities that were previously not available or attractive to, or otherwise pursued by, them, which could have a material adverse impact on us.
Prospective investors should be 36 Table of Contents aware that changes in the regulatory and business landscape as a result of the Dodd-Frank Act and as a result of other current or future legislation and regulation may decrease the restrictions on banks and other financial institutions and allow them to compete with us for investment opportunities that were previously not available or attractive to, or otherwise pursued by, them, which could have a material adverse impact on us.
In recent years, financial markets have been affected at times by a number of global macroeconomic and political events, including the following: large sovereign debts and fiscal deficits of several countries in Europe and in emerging markets jurisdictions, levels of non-performing loans on the balance sheets of European banks, the potential effect of any European country leaving the Eurozone, the effect of the United Kingdom leaving the European Union, and 39 Table of Contents market volatility and loss of investor confidence driven by political events.
In recent years, financial markets have been affected at times by a number of global macroeconomic and political events, including the following: large sovereign debts and fiscal deficits of several countries in Europe and in emerging markets jurisdictions, levels of non-performing loans on the balance sheets of European banks, the potential effect of any European country leaving the Eurozone, the effect of the United Kingdom leaving the European Union, and market volatility and loss of investor confidence driven by political events.
Changes in our Manager’s investment process may result in inferior, among other things, due diligence and underwriting standards, which may adversely affect the performance of our portfolio. We do not have a policy that expressly prohibits our directors, managers, officers, shareholders or affiliates, as applicable, from engaging for their own account in business activities of the types conducted by us.
Changes in our Manager’s investment process may result in inferior, among other things, due diligence and underwriting standards, which may adversely affect the performance of our portfolio. 52 Table of Contents We do not have a policy that expressly prohibits our directors, managers, officers, shareholders or affiliates, as applicable, from engaging for their own account in business activities of the types conducted by us.
Additionally, each of these matters have been resolved with no admission of wrongdoing by any party and the dismissals of all claims against each of the named individuals but we cannot provide assurance that these prior legal proceedings or future legal proceedings involving us, our Manager, our Manager’s key personnel or investment professionals or its affiliates or our officers or directors will not cause reputational harm for us.
Additionally, each of these matters have been resolved with no admission of wrongdoing by any party and the dismissals of all claims against each of the named individuals but we cannot provide assurance that these prior legal proceedings or future legal 53 Table of Contents proceedings involving us, our Manager, our Manager’s key personnel or investment professionals or its affiliates or our officers or directors will not cause reputational harm for us.
We may not be in a position to take advantage of attractive investment opportunities for growth if we are unable, due to global or regional economic uncertainty, changes in the state or federal regulatory environment relating to our business, our own operating or financial performance or otherwise, to access capital markets on a timely basis and on favorable terms 38 Table of Contents or at all.
We may not be in a position to take advantage of attractive investment opportunities for growth if we are unable, due to global or regional economic uncertainty, changes in the state or federal regulatory environment relating to our business, our own operating or financial performance or otherwise, to access capital markets on a timely basis and on favorable terms or at all.
As a result, our Board may, subject to certain specified 45 Table of Contents limitations, establish a class or series of shares of our common stock and our preferred stock that could delay or prevent a merger, third-party tender offer, change of control or similar transaction or a change in incumbent management that might involve a premium price for shares of our common stock or otherwise be in the best interests of our shareholders.
As a result, our Board may, subject to certain specified limitations, establish a class or series of shares of our common stock and our preferred stock that could delay or prevent a merger, third-party tender offer, change of control or similar transaction or a change in incumbent management that might involve a premium price for shares of our common stock or otherwise be in the best interests of our shareholders.
Currently, there is uncertainty as to the IRS’s position 57 Table of Contents regarding whether certain arrangements that REITs have with their shareholders could give rise to the inadvertent payment of a preferential dividend (e.g., the pricing methodology for stock purchased under a distribution reinvestment program inadvertently causing a greater than 5% discount on the price of such stock purchased).
Currently, there is uncertainty as to the IRS’s position regarding whether certain arrangements that REITs have with their shareholders could give rise to the inadvertent payment of a preferential dividend (e.g., the pricing methodology for stock purchased under a distribution reinvestment program inadvertently causing a greater than 5% discount on the price of such stock purchased).
We can give no assurances that these affiliates will be able to perform their obligations to our Manager under any such services 49 Table of Contents agreement that is ultimately entered into. This could, in turn, have a material adverse effect on our business, financial condition and results of operations, and our ability to pay dividends to our shareholders.
We can give no assurances that these affiliates will be able to perform their obligations to our Manager under any such services agreement that is ultimately entered into. This could, in turn, have a material adverse effect on our business, financial condition and results of operations, and our ability to pay dividends to our shareholders.
Our access to capital depends upon a number of factors over which we have little or no control, including, but not limited to: • general economic or market conditions; • the market’s view of the quality of our assets; • the market’s perception of our growth potential; • the current regulatory environment with respect to our business; and • our current and potential future earnings and cash distributions.
Our access to capital depends upon a number of factors over which we have little or no control, including, but not limited to: • general economic or market conditions; • the market’s view of the quality of our assets; • the market’s perception of our growth potential; 38 Table of Contents • the current regulatory environment with respect to our business; and • our current and potential future earnings and cash distributions.
Compliance with these rules and regulations may significantly increase our legal and financial compliance costs, make some activities more difficult, time-consuming 61 Table of Contents or costly and increase demand on our systems and resources. As a result, our executive officers’ attention may be diverted from other business concerns, which could adversely affect our business and results of operations.
Compliance with these rules and regulations may significantly increase our legal and financial compliance costs, make some activities more difficult, time-consuming or costly and increase demand on our systems and resources. As a result, our executive officers’ attention may be diverted from other business concerns, which could adversely affect our business and results of operations.
If we experience a decline in the fair value of our assets, our results of operations, financial condition and our ability to make distributions to our shareholders could be materially and adversely affected. Any credit ratings assigned to our investments will be subject to ongoing evaluations and revisions, and we cannot assure you that those ratings will not be downgraded.
If we experience a decline in the fair value of our assets, our results of operations, financial condition and our ability to make distributions to our shareholders could be materially and adversely affected. 30 Table of Contents Any credit ratings assigned to our investments will be subject to ongoing evaluations and revisions, and we cannot assure you that those ratings will not be downgraded.
A consequence of this limited number of investments is that the aggregate returns we realize may be significantly adversely affected if a small number of investments perform poorly, if we need to write down the value of any one investment and/or if an investment is repaid prior to maturity and we are not able to promptly redeploy the 24 Table of Contents proceeds.
A consequence of this limited number of investments is that the aggregate returns we realize may be significantly adversely affected if a small number of investments perform poorly, if we need to write down the value of any one investment and/or if an investment is repaid prior to maturity and we are not able to promptly redeploy the proceeds.
The MGCL also permits various exemptions from these provisions, including business combinations that are exempted by the board of directors before the time that the interested shareholder becomes an interested shareholder. Pursuant to the statute, our Board has adopted a resolution exempting any business combination with Leonard M. Tannenbaum, or any of his affiliates.
The MGCL also permits various exemptions from these provisions, including 44 Table of Contents business combinations that are exempted by the board of directors before the time that the interested shareholder becomes an interested shareholder. Pursuant to the statute, our Board has adopted a resolution exempting any business combination with Leonard M. Tannenbaum, or any of his affiliates.
Such cash may be held in an account for the benefit of our shareholders that may be invested in money market accounts or other similar temporary investments. 29 Table of Contents In the event we are unable to find suitable investments or other real estate related investments such cash may be maintained for longer periods which would be dilutive to investment returns of shareholders.
Such cash may be held in an account for the benefit of our shareholders that may be invested in money market accounts or other similar temporary investments. In the event we are unable to find suitable investments or other real estate related investments such cash may be maintained for longer periods which would be dilutive to investment returns of shareholders.
In addition, various laws and regulations currently exist that restrict the investment activities of banks and certain other financial institutions but do not apply to us, which we believe creates opportunities for us to originate loans and participate 36 Table of Contents in certain other investments that are not available or attractive to these more regulated institutions.
In addition, various laws and regulations currently exist that restrict the investment activities of banks and certain other financial institutions but do not apply to us, which we believe creates opportunities for us to originate loans and participate in certain other investments that are not available or attractive to these more regulated institutions.
Any lending facilities which we enter would be expected to contain customary negative covenants and other financial and operating covenants similar to the restrictive covenants in the Revolving Credit Facility that, among other things, may 41 Table of Contents affect our ability to incur additional debt, make certain investments or acquisitions, reduce liquidity below certain levels, make distributions to our shareholders, redeem debt or equity securities and impact our flexibility to determine our operating policies and investment strategies.
Any lending facilities which we enter would be expected to contain customary negative covenants and other financial and operating covenants similar to the restrictive covenants in the Revolving Credit Facility that, among other things, may affect our ability to incur additional debt, make certain investments or acquisitions, reduce liquidity below certain levels, make distributions to our shareholders, redeem debt or equity securities and impact our flexibility to determine our operating policies and investment strategies.
Foreclosure may create a negative public perception of the related property, resulting in a diminution of its value. Even if we are successful in foreclosing on a loan, the liquidation proceeds upon sale of the underlying real estate may not be sufficient to recover our cost basis in the loan, resulting in a loss to us.
Foreclosure may create a negative public perception of the related property, resulting in a diminution of its value. Even if 26 Table of Contents we are successful in foreclosing on a loan, the liquidation proceeds upon sale of the underlying real estate may not be sufficient to recover our cost basis in the loan, resulting in a loss to us.
If such construction or renovation is not completed in a timely manner, or if it costs more than 27 Table of Contents expected, the borrower may experience a prolonged reduction of net operating income and may be unable to make payments of interest or principal to us, which could materially and adversely affect us.
If such construction or renovation is not completed in a timely manner, or if it costs more than expected, the borrower may experience a prolonged reduction of net operating income and may be unable to make payments of interest or principal to us, which could materially and adversely affect us.
Subject to qualifying and maintaining our qualification as a REIT, we may enter into interest rate swap agreements or pursue other interest rate hedging strategies. Our hedging activity will vary in scope based on the level of interest rates, the 42 Table of Contents type of portfolio investments held, and other changing market conditions.
Subject to qualifying and maintaining our qualification as a REIT, we may enter into interest rate swap agreements or pursue other interest rate hedging strategies. Our hedging activity will vary in scope based on the level of interest rates, the type of portfolio investments held, and other changing market conditions.
Currently, an affiliate of our Manager sponsors and manages SRT, a private vehicle which is a part of the TCG platform and that intends to elect to be treated as a REIT, with an investment strategy to provide capital solutions, including loans, to CRE markets in the Southern U.S., similar to SUNS.
Currently, an affiliate of our Manager sponsors and manages SRT, a private vehicle which is a part of the TCG platform and that elected to be treated as a REIT, with an investment strategy to provide capital solutions, including loans, to CRE markets in the Southern U.S., similar to SUNS.
Our internal control over financial reporting may not prevent or detect misstatements because of its inherent limitations, including the possibility of human error, the circumvention or overriding of controls, or fraud. Even effective internal controls can provide only reasonable assurance with respect to the preparation and fair presentation of financial statements.
Our internal control over financial reporting may not prevent or detect misstatements because of its inherent limitations, including the possibility of human error, the circumvention or overriding of controls, or fraud. Even effective internal 60 Table of Contents controls can provide only reasonable assurance with respect to the preparation and fair presentation of financial statements.
We could also become subject to cross-default and acceleration rights and, with respect to collateralized debt, the posting of additional collateral and foreclosure rights upon default. Further, such restrictions could also make it difficult for us to satisfy the qualification requirements necessary to maintain our status as a REIT.
We could also become subject to cross-default and acceleration rights and, with respect to collateralized debt, the posting of additional collateral and foreclosure rights upon default. Further, such 41 Table of Contents restrictions could also make it difficult for us to satisfy the qualification requirements necessary to maintain our status as a REIT.
As a result of all these factors, our failure to qualify as a REIT could impair our ability to expand our business and raise capital, and it could adversely affect the value of our common stock. Even if we qualify as a REIT, we may face other tax liabilities that reduce our cash flows.
As a result of all these factors, our failure to qualify as a REIT could impair our ability to expand our business and raise capital, and it could adversely affect the value of our common stock. 54 Table of Contents Even if we qualify as a REIT, we may face other tax liabilities that reduce our cash flows.
This provision increases the cost to us of terminating the Management Agreement and adversely affects our ability to terminate our Manager without cause. Even if we terminate our Management Agreement for cause, we may be required to continue to retain our Manager for 30 days following the occurrence of events giving rise to a for-cause termination.
This provision increases the cost to us of terminating the Management Agreement and adversely affects our ability to terminate our Manager without cause. 51 Table of Contents Even if we terminate our Management Agreement for cause, we may be required to continue to retain our Manager for 30 days following the occurrence of events giving rise to a for-cause termination.
Because such valuations are subjective, the fair value of certain of our assets may fluctuate over short periods of time and our determinations of fair value may differ materially from the values that would have been used if a ready market for these investments existed.
Because such valuations are subjective, the fair value of certain of our assets may fluctuate over short periods of time and our determinations of fair value may differ 28 Table of Contents materially from the values that would have been used if a ready market for these investments existed.
These activities could be viewed as creating a conflict of interest insofar as the time and effort of the professional staff of our Manager and its officers and employees will not be devoted exclusively to our business; instead it will be allocated between our business and the management of these other investment vehicles.
These activities could be viewed as creating a conflict of interest insofar as the time and effort of the 50 Table of Contents professional staff of our Manager and its officers and employees will not be devoted exclusively to our business; instead it will be allocated between our business and the management of these other investment vehicles.
These investments would be expected to provide a lower net return than we seek to achieve from investment in our target investments. We expect to reallocate any such investments into our target portfolio within specified time frames, subject to the availability of appropriate investment opportunities.
These investments would be expected to provide a lower net return than we seek to achieve from investment in our target investments. We expect to reallocate any such investments into our target portfolio within specified time frames, 23 Table of Contents subject to the availability of appropriate investment opportunities.
In the event of default and the exhaustion of any equity support, reserve fund, letter of credit, subordinated loans or B-notes, and any classes of securities junior to those in which we invest, we will not be able to recover all of our investment in the securities we purchase.
In the event 27 Table of Contents of default and the exhaustion of any equity support, reserve fund, letter of credit, subordinated loans or B-notes, and any classes of securities junior to those in which we invest, we will not be able to recover all of our investment in the securities we purchase.
Although we do not intend to hold a significant amount of assets as inventory or primarily for sale to customers in the ordinary course of our business, the characterization of an asset sale as a prohibited transaction depends on the particular facts and circumstances.
Although we do not intend to hold a significant amount of assets as inventory or primarily for 55 Table of Contents sale to customers in the ordinary course of our business, the characterization of an asset sale as a prohibited transaction depends on the particular facts and circumstances.
We therefore cannot assure our 60 Table of Contents shareholders that we will achieve investment results and other circumstances that will allow us to make a specified level of cash distributions or year-to-year increases in cash distributions. As one of our significant shareholders and a significant beneficial owner of our Manager, Leonard M.
We therefore cannot assure our shareholders that we will achieve investment results and other circumstances that will allow us to make a specified level of cash distributions or year-to-year increases in cash distributions. As one of our significant shareholders and a significant beneficial owner of our Manager, Leonard M.
We rely completely on our Manager to provide us with investment advisory services and general management services. All of our executive officers also serve as officers or employees of our Manager or its affiliates. Our Manager has significant discretion as to the implementation of our investment and operating policies and strategies.
We rely completely on our Manager to provide us with investment advisory services and general management 47 Table of Contents services. All of our executive officers also serve as officers or employees of our Manager or its affiliates. Our Manager has significant discretion as to the implementation of our investment and operating policies and strategies.
The risk of non-performance by the obligor on such an instrument may be greater and the ease with which we can dispose of or enter into closing transactions with respect to such an instrument may be less than in the case of an exchange-traded instrument.
The risk of non-performance by the obligor on such an instrument may be greater and the ease 34 Table of Contents with which we can dispose of or enter into closing transactions with respect to such an instrument may be less than in the case of an exchange-traded instrument.
The internal policies of our Manager and its affiliates, which may be amended without our consent, are intended to enable us to share equitably with any other investment vehicles that are managed by our Manager 50 Table of Contents or affiliates of our Manager, such as SRT.
The internal policies of our Manager and its affiliates, which may be amended without our consent, are intended to enable us to share equitably with any other investment vehicles that are managed by our Manager or affiliates of our Manager, such as SRT.
To the extent such investment vehicles seek to acquire the same target assets as us, subject to the internal policies of our Manager and its affiliates described above, the scope of opportunities otherwise available to us may be adversely affected and/or reduced.
To the extent such investment vehicles seek to acquire the same target assets as us, subject to the internal policies 49 Table of Contents of our Manager and its affiliates described above, the scope of opportunities otherwise available to us may be adversely affected and/or reduced.
Our Manager has great latitude in determining the types of loans that are proper for us, which could result in loan returns that are substantially below expectations or that result in losses, which would materially and 53 Table of Contents adversely affect our business operations and results.
Our Manager has great latitude in determining the types of loans that are proper for us, which could result in loan returns that are substantially below expectations or that result in losses, which would materially and adversely affect our business operations and results.
In addition, our investments in senior loans may be effectively subordinated to the extent we borrow under a warehouse line (which can be in the form of a repurchase facility) or similar facility and pledge the senior loan as collateral.
In addition, our investments in senior loans may be effectively subordinated to the extent we borrow under a warehouse line (which can be in the form of a repurchase facility) 31 Table of Contents or similar facility and pledge the senior loan as collateral.
Net operating income of an income-producing property can be adversely affected by, among other things, • tenant mix; • success of tenant businesses; • property management decisions; • property location, condition and design; • competition from comparable types of properties; • changes in laws that increase operating expenses or limit rents that may be charged; • changes in national, regional or local economic conditions or specific industry segments, including the credit and securitization markets; • declines in regional or local real estate values; • declines in regional or local rental or occupancy rates; • increases in interest rates, real estate tax rates and other operating expenses; • inability to pass increases in costs of operations along to tenants; 25 Table of Contents • costs of remediation and liabilities associated with environmental conditions; • the potential for uninsured or underinsured property losses; • in the case of transitional mortgage loans, limited cash flows at the beginning; • changes in governmental laws and regulations, including fiscal policies, zoning ordinances and environmental legislation and the related costs of compliance; and • acts of God, terrorist attacks, social unrest and civil disturbances.
Net operating income of an income-producing property can be adversely affected by, among other things, • tenant mix; • success of tenant businesses; • property management decisions; • property location, condition and design; • competition from comparable types of properties; • changes in laws that increase operating expenses or limit rents that may be charged; • changes in national, regional or local economic conditions or specific industry segments, including the credit and securitization markets; • declines in regional or local real estate values; • declines in regional or local rental or occupancy rates; • increases in interest rates, real estate tax rates and other operating expenses; • inability to pass increases in costs of operations along to tenants; • costs of remediation and liabilities associated with environmental conditions; • the potential for uninsured or underinsured property losses; • in the case of transitional mortgage loans, limited cash flows at the beginning; • changes in governmental laws and regulations, including fiscal policies, zoning ordinances and environmental legislation and the related costs of compliance; and • acts of God, terrorist attacks, social unrest and civil disturbances. 25 Table of Contents The estimates of market opportunity and forecasts of market growth included in this registration statement may prove to be inaccurate.
As of December 31, 2024, our portfolio consisted of loans to eight different borrowers (such portfolio, our “Existing Portfolio”). We are subject to all of the business risks and uncertainties associated with any new business, including the risk that we will not achieve our investment objectives and that the value of your investment could decline substantially.
As of December 31, 2025, our portfolio consisted of loans to fifteen different borrowers (such portfolio, our “Existing Portfolio”). We are subject to all of the business risks and uncertainties associated with any new business, including the risk that we will not achieve our investment objectives and that the value of your investment could decline substantially.
If we purchase assets at a premium to par value, when borrowers prepay their loans faster than expected, the corresponding prepayments on the asset may reduce the expected yield on such securities because we will have to amortize the related premium on an accelerated basis.
If we purchase assets at a premium to par value, when borrowers prepay their loans faster than expected, the corresponding prepayments on the asset may reduce the expected yield on such securities because we 33 Table of Contents will have to amortize the related premium on an accelerated basis.
The value of such derivatives also depends upon the price of the underlying instrument or commodity. Such derivatives and other 34 Table of Contents customized instruments also are subject to the risk of non-performance by the relevant counterparty.
The value of such derivatives also depends upon the price of the underlying instrument or commodity. Such derivatives and other customized instruments also are subject to the risk of non-performance by the relevant counterparty.
Our failure to meet 59 Table of Contents investors’ expectations with regard to future earnings and cash distributions likely would materially and adversely affect the valuation of our equity.
Our failure to meet investors’ expectations with regard to future earnings and cash distributions likely would materially and adversely affect the valuation of our equity.
For example, in 2015, Fifth Street Finance Corporation (“FSC”) and Fifth Street Asset Management (“Fifth Street”) and 54 Table of Contents certain officers and directors of FSC and Fifth Street, including Mr.
For example, in 2015, Fifth Street Finance Corporation (“FSC”) and Fifth Street Asset Management (“Fifth Street”) and certain officers and directors of FSC and Fifth Street, including Mr.
The rules governing the standards that must be met for management to assess our internal control over financial reporting are complex and require significant documentation, testing and possible remediation.
The rules governing the standards that must be 61 Table of Contents met for management to assess our internal control over financial reporting are complex and require significant documentation, testing and possible remediation.
This geographic concentration exposes us to the risks associated with the real estate and commercial lending industry in general to a greater extent within the states and regions in which our CRE investments will be concentrated.
Our portfolio is concentrated in the Southern U.S. This geographic concentration exposes us to the risks associated with the real estate and commercial lending industry in general to a greater extent within the states and regions in which our CRE investments will be concentrated.
Furthermore, claims may be 26 Table of Contents asserted by lenders or borrowers that might interfere with enforcement of our rights.
Furthermore, claims may be asserted by lenders or borrowers that might interfere with enforcement of our rights.
We may not find a suitable replacement for our Manager if the Management Agreement is terminated or if such key personnel or investment professionals leave the employment of our Manager or its affiliates or otherwise become unavailable to us. • Our growth depends on the ability of our Manager to make loans on favorable terms that satisfy our investment strategy and otherwise generate attractive risk-adjusted returns initially and consistently from time to time. • There are various conflicts of interest in our relationship with our Manager that could result in decisions that are not in the best interests of our shareholders. • Failure to qualify as a REIT would cause us to be taxed as a regular corporation, which would substantially reduce funds available for distributions to our shareholders. • Even if we qualify as a REIT, we may face other tax liabilities that reduce our cash flows. • REIT distribution requirements could adversely affect our ability to execute our business plan and liquidity and may force us to borrow funds during unfavorable market conditions. 22 Table of Contents • Complying with REIT requirements may limit our ability to hedge our operational risks effectively and may cause us to incur tax liabilities.
We may not find a suitable replacement for our Manager if the Management Agreement is terminated or if such key personnel or investment professionals leave the employment of our Manager or its affiliates or otherwise become unavailable to us. • Our growth depends on the ability of our Manager to make loans on favorable terms that satisfy our investment strategy and otherwise generate attractive risk-adjusted returns initially and consistently from time to time. • There are various conflicts of interest in our relationship with our Manager that could result in decisions that are not in the best interests of our shareholders. • Failure to qualify as a REIT would cause us to be taxed as a regular corporation, which would substantially reduce funds available for distributions to our shareholders. • Even if we qualify as a REIT, we may face other tax liabilities that reduce our cash flows. • REIT distribution requirements could adversely affect our ability to execute our business plan and liquidity and may force us to borrow funds during unfavorable market conditions. • Complying with REIT requirements may limit our ability to hedge our operational risks effectively and may cause us to incur tax liabilities. • Cybersecurity risks may cause a disruption to our operations, a compromise or corruption of our confidential information, and/or damage to our business relationships, which could negatively impact our business. • We may utilize artificial intelligence, which exposes us to liability and affects our business.
The more favorable rates applicable to regular corporate dividends could cause investors who are individuals to perceive investments in REITs to be relatively less attractive than investments in the stocks of non-REIT corporations that pay dividends, which could adversely affect the value of the stock of REITs, including our equity. However, for tax years beginning before January 1, 2026, U.S.
The more favorable rates applicable to regular corporate dividends could cause investors who are individuals to perceive investments in REITs to be relatively less attractive than investments in the stocks of non-REIT corporations that pay dividends, which could adversely affect the value of the stock of REITs, including our equity. However, U.S.
As a result, a partial loss in the value of the underlying collateral can result in a total loss of the value of the mezzanine 31 Table of Contents loan.
As a result, a partial loss in the value of the underlying collateral can result in a total loss of the value of the mezzanine loan.
Our Board is authorized, without your approval, to cause us to issue additional shares of our common stock or to raise capital through the creation and issuance of our preferred stock, debt securities convertible into common stock, options, warrants and other rights, on terms and for consideration as our Board in its sole discretion may determine. 62 Table of Contents Sales of substantial amounts of our capital stock or other securities convertible into our capital stock could cause the valuation of our capital stock to decrease significantly.
Our Board is authorized, without your approval, to cause us to issue additional shares of our common stock or to raise capital through the creation and issuance of our preferred stock, debt securities convertible into common stock, options, warrants and other rights, on terms and for consideration as our Board in its sole discretion may determine.
As of December 31, 2024, approximately 27% of the aggregate outstanding principal amount of our portfolio of loans fund the construction of commercial properties.
As of December 31, 2025, approximately 44% of the aggregate outstanding principal amount of our portfolio of loans fund the construction of commercial properties.
In addition, we may have to acquire additional assets that we might not otherwise have acquired or may have to forego opportunities to acquire assets that we would otherwise want to acquire and would be important to our investment strategy.
In addition, we may have to acquire additional assets that we might not otherwise have acquired or 46 Table of Contents may have to forgo opportunities to acquire assets that we would otherwise want to acquire and would be important to our investment strategy.
To the extent that an owner of a property underlying one of our loans becomes liable for removal costs, the ability of the owner to make payments to us may be reduced, which in turn may adversely affect the value of the relevant loan held by us and could materially and adversely affect us. 35 Table of Contents Climate change has the potential to impact the properties underlying our investments.
To the extent that an owner of a property underlying one of our loans becomes liable for removal costs, the ability of the owner to make payments to us may be reduced, which in turn may adversely affect the value of the relevant loan held by us and could materially and adversely affect us.
We, as well as our borrowers, are affected by the fiscal and monetary policies of the United States Government and its agencies, including the policies of the Federal Reserve, which regulates the supply of money and credit in the United States.
Monetary policy actions by the United States Federal Reserve could adversely impact both our borrowers and our financial condition. We, as well as our borrowers, are affected by the fiscal and monetary policies of the United States Government and its agencies, including the policies of the Federal Reserve, which regulates the supply of money and credit in the United States.
If we fail to comply with the relevant laws and regulations, we could suffer financial losses, a disruption of our business, liability to investors, regulatory intervention or reputational damage.
If we fail to comply with the relevant laws and regulations, we could suffer financial losses, a disruption of our business, liability to investors, regulatory intervention or reputational damage. We may utilize artificial intelligence, which exposes us to liability and affects our business.
Terminating our Management Agreement without cause is difficult and costly. Our independent directors and the Audit and Valuation Committee of our Board will review our Manager’s performance and the applicable Base Management Fees and Incentive Compensation at least annually.
Our independent directors and the Audit and Valuation Committee of our Board will review our Manager’s performance and the applicable Base Management Fees and Incentive Compensation at least annually.
Currently, it is not possible to predict how legislation or new regulations that may be adopted to address greenhouse gas emissions will impact CRE properties.
Climate change has the potential to impact the properties underlying our investments. Currently, it is not possible to predict how legislation or new regulations that may be adopted to address greenhouse gas emissions will impact CRE properties.
There 51 Table of Contents can be no assurance that any procedural protections will be sufficient to ensure that these transactions will be made on terms that will be at least as favorable to us as those that would have been obtained in an arm’s-length transaction. Fees and expenses .
There can be no assurance that any procedural protections will be sufficient to ensure that these transactions will be made on terms that will be at least as favorable to us as those that would have been obtained in an arm’s-length transaction. Affiliated Title Agency Services.
The CRE market estimates and growth forecasts are uncertain and based on assumptions and estimates that may be inaccurate. Our addressable market depends on a number of factors, including the fluctuation of interest rates, changes in the competitive landscape, volume of near-term CRE loan maturities, migration to the Southern U.S. and changes in economic conditions.
Our addressable market depends on a number of factors, including the fluctuation of interest rates, changes in the competitive landscape, volume of near-term CRE loan maturities, migration to the Southern U.S. and changes in economic conditions.
If our portfolio of investments is concentrated in a particular property type, type of loan or type of security, economic and business downturns relating generally to such type of asset may result in defaults on a number of our investments within a short time period, which may reduce our net income and the value of our common stock and accordingly reduce our ability to pay dividends to our shareholders.
If our portfolio of investments is concentrated in a particular property type, type of loan or type of security, economic and business downturns relating generally to such type of asset may result in defaults on a number of our investments within a short time period, which may reduce our net income and the value of our common stock and accordingly reduce our ability to pay dividends to our shareholders. 24 Table of Contents Our portfolio is concentrated in the Southern U.S., and we will be subject to economic and other risks of doing business in those geographic markets.
In addition, future legislation, new regulations, administrative interpretations or court decisions may significantly change the U.S. tax laws or the application of the U.S. tax laws with respect to qualification as a REIT for federal income tax purposes or the federal income tax consequences of such qualification. 55 Table of Contents If we fail to qualify as a REIT in any taxable year, we will face serious tax consequences that will substantially reduce the funds available for distributions to our shareholders because: • we would not be allowed a deduction for distributions paid to shareholders in computing our taxable income and would be subject to U.S. federal income tax at regular corporate rates; • we could be subject to increased state and local taxes; and • unless we are entitled to relief under statutory provisions, we would not be able to re-elect to be taxed as a REIT for four taxable years following the year in which we were disqualified.
If we fail to qualify as a REIT in any taxable year, we will face serious tax consequences that will substantially reduce the funds available for distributions to our shareholders because: • we would not be allowed a deduction for distributions paid to shareholders in computing our taxable income and would be subject to U.S. federal income tax at regular corporate rates; • we could be subject to increased state and local taxes; and • unless we are entitled to relief under statutory provisions, we would not be able to re-elect to be taxed as a REIT for four taxable years following the year in which we were disqualified.
Investors cannot waive compliance with the federal securities laws and the rules and regulations thereunder. In addition, the exclusive forum provisions described above do not apply to any actions brought under the Exchange Act. Ownership limitations contained in the Charter may restrict change of control or business combination opportunities in which our shareholders might receive a premium for their shares.
In addition, the exclusive forum provisions described above do not apply to any actions brought under the Exchange Act. 45 Table of Contents Ownership limitations contained in the Charter may restrict change of control or business combination opportunities in which our shareholders might receive a premium for their shares.
In certain limited cases (for example, in connection with a workout, restructuring or foreclosure proceeding involving one or more of our investments), the success of our investment strategy will depend, in part, on our ability to effectuate loan modifications and/or restructure and improve the operations of our borrowers.
Investment in the loans or securities of financially or operationally troubled borrowers or issuers involves a high degree of credit and market risk. 32 Table of Contents In certain limited cases (for example, in connection with a workout, restructuring or foreclosure proceeding involving one or more of our investments), the success of our investment strategy will depend, in part, on our ability to effectuate loan modifications and/or restructure and improve the operations of our borrowers.
To the extent that we fund distributions from sources other than cash flows from operations, including borrowings, offering proceeds or proceeds from asset sales, the value of your investment will decline, and such distributions may constitute a return of capital and we may have fewer funds available for the funding of loans or less income-producing assets and your overall return may be reduced.
Therefore, if we choose to pay a distribution, we may choose to use cash flows from financing activities, including borrowings (including borrowings secured by our assets) and net proceeds of this or a prior offering, from the sale of assets or from other sources to fund distributions to our shareholders. 58 Table of Contents To the extent that we fund distributions from sources other than cash flows from operations, including borrowings, offering proceeds or proceeds from asset sales, the value of your investment will decline, and such distributions may constitute a return of capital and we may have fewer funds available for the funding of loans or less income-producing assets and your overall return may be reduced.
Many of our investments will likely be in the form of positions or securities that are not publicly-traded. The fair value of securities and other investments that are not publicly-traded may not be readily determinable.
Some of our investments may be recorded at fair value and, as a result, there will be uncertainty as to the value of these investments. Many of our investments will likely be in the form of positions or securities that are not publicly-traded. The fair value of securities and other investments that are not publicly-traded may not be readily determinable.
If we cease to qualify as a REIT, we would become subject to U.S. federal income tax on our net taxable income, and we generally would no longer be required to distribute any of our net taxable income to our shareholders, which may have adverse consequences on the total return to our shareholders.
If we cease to qualify as a REIT, we would become subject to U.S. federal income tax on our net taxable income, and we generally would no longer be required to distribute any of our net taxable income to our shareholders, which may have adverse consequences on the total return to our shareholders. 56 Table of Contents Complying with REIT requirements may limit our ability to hedge our operational risks effectively and may cause us to incur tax liabilities.
Moreover, we could face limitations in selling equity interests in these securitizations to outside investors, or selling any debt securities issued in connection with these securitizations that might be considered to be equity interests for tax purposes.
Moreover, we could face limitations in selling equity interests in these securitizations to outside investors, or selling any debt securities issued in connection with these securitizations that might be considered to be equity interests for tax purposes. These limitations may prevent us from using certain techniques to maximize our returns from securitization transactions.
There is no guarantee that the policies and procedures adopted by us, the terms and conditions of the Management Agreement or the policies and procedures adopted by our Manager and its affiliates, will enable us to identify, adequately address or mitigate these conflicts of interest.
There is no guarantee that the policies and procedures adopted by us, the terms and conditions of the Management Agreement or the policies and procedures adopted by our Manager and its affiliates, will enable us to identify, adequately address or mitigate these conflicts of interest. 48 Table of Contents Some examples of conflicts of interest that may arise by virtue of our relationship with our Manager include: Manager’s advisory activities .
If the decline in commercial real estate asset values and/or income occurs quickly, this may be especially difficult to accomplish. 48 Table of Contents This difficulty may be exacerbated by the illiquid nature of any non-qualifying assets that we may own.
If the decline in commercial real estate asset values and/or income occurs quickly, this may be especially difficult to accomplish. This difficulty may be exacerbated by the illiquid nature of any non-qualifying assets that we may own. We may have to make investment decisions that we otherwise would not make absent REIT and Investment Company Act considerations.
Your investment return in our common stock may be reduced if we are required to register as an investment company under the Investment Company Act. We intend to conduct our operations so that we will be exempt from the provisions of the Investment Company Act pursuant to an exemption contained in 3(c)(5) thereunder.
We intend to conduct our operations so that we will be exempt from the provisions of the Investment Company Act pursuant to an exemption contained in 3(c)(5)(C) thereunder.
In the event we fail to timely invest the net proceeds of our January 2025 Offering or do not deploy sufficient capital to meet our targeted leverage, our results of operations and financial condition may be adversely affected. Monetary policy actions by the United States Federal Reserve could adversely impact both our borrowers and our financial condition.
In the event we fail to timely invest the net proceeds of our January 2025 Offering or do 29 Table of Contents not deploy sufficient capital to meet our targeted leverage, our results of operations and financial condition may be adversely affected.

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Item 1C. Cybersecurity

Cybersecurity — threats and controls disclosure

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Biggest changeOur Manager and the MSSP engage in periodic assessment and training regarding the policies, standards and practices designed to address cybersecurity threats and incidents. Our cybersecurity risk management is integrated into our overall enterprise risk management and shares common methodologies, reporting channels and governance processes that apply across our enterprise risk management.
Biggest changeOur Manager and the MSSP engage in periodic assessment and training regarding the policies, standards and practices designed to address cybersecurity threats and incidents. Our cybersecurity risk management is integrated into our overall enterprise risk 62 Table of Contents management and shares common methodologies, reporting channels and governance processes that apply across our enterprise risk management.
The Audit and Valuation Committee has adopted a charter that provides that the Audit and Valuation Committee must periodically review and discuss with the Company’s management team the Company’s guidelines and policies with respect to risk assessment and risk management of cybersecurity and other risk exposures relevant to the Company’s computerized information system controls and security.
The Audit and Valuation Committee has adopted a charter which provides that the Audit and Valuation Committee must periodically review and discuss with the Company’s management team the Company’s guidelines and policies with respect to risk assessment and risk management of cybersecurity and other risk exposures relevant to the Company’s computerized information system controls and security.
Consequently, the 63 Table of Contents Company also relies on the processes for assessing, identifying, and managing material risks from cybersecurity threats under the Manager’s Written Information Security Policy.
Consequently, the Company also relies on the processes for assessing, identifying, and managing material risks from cybersecurity threats under the Manager’s Written Information Security Policy.

Item 3. Legal Proceedings

Legal Proceedings — active lawsuits and investigations

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Biggest changeItem 3. Legal Proceedings 64 Table of Contents 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.
Biggest changeItem 3. 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 December 31, 2025 , we were not subject to any material legal proceedings.
As of December 31, 2024 , we were not subject to any material legal proceedings. Item 4. Mine Safety Disclosures Not applicable. PART II
Item 4. Mine Safety Disclosures Not applicable. PART II

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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Biggest changeEquity Compensation Plan Information See Note 8 to our consolidated financial statements for the year ended December 31, 2024 included in this Annual Report for information regarding our 2024 Plan.
Biggest changeEquity Compensation Plan Information See Note 8 to our consolidated financial statements for the year ended December 31, 2025 included in this Annual Report for information regarding our 2024 Plan. Recent Sales of Unregistered Securities None. Issuer Purchases of Equity Securities During the three months ended December 31, 2025, we did not repurchase any shares of our Common Stock.
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities Our common stock is listed for trading on the Nasdaq Stock Market under the symbol “SUNS.” On March 1, 2025, the closing price of our common stock, as reported on the Nasdaq, was $12.18 per share.
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities Our common stock is listed for trading on the Nasdaq Stock Market under the symbol “SUNS.” On February 27, 2026, the closing price of our common stock, as reported on the Nasdaq, was $9.37 per share.
There were 65 holders of record of our common stock as of March 1, 2025. This number does not include beneficial owners who hold shares of our common stock in street name.
There were 66 holders of record of our 63 Table of Contents common stock as of February 27, 2026. This number does not include beneficial owners who hold shares of our common stock in street name.
Removed
Recent Sales of Unregistered Securities None. 65 Table of Contents Issuer Purchases of Equity Securities During the three months ended December 31, 2024, we did not repurchase any shares of our Common Stock. Item 6. Reserved None.

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

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Biggest changeLoan Type Location Original Funding Date Loan Maturity Current Commitments as of 12/31/2024 % of Total SUNS Principal Balance as of 12/31/2024 Cash Interest Rate Fixed/ Floating Amortization During Term YTM (1) Senior mortgage loans: Mixed-use Houston, TX 1/4/2024 2/26/2026 $ 6,345,411 3.3% $ 5,120,604 12.50% Fixed No 22% Residential Austin, TX 7/3/2024 7/3/2027 14,087,288 7.4% 13,186,390 9.00% Floating No 10% Hospitality San Antonio, TX 7/31/2024 8/9/2027 27,300,000 14.3% 26,073,292 10.85% Floating No 13% Residential PBG, FL (2) 8/5/2024 9/1/2027 21,250,000 11.1% 18,855,922 12.58% Floating No 13% Residential PBG, FL (2) 8/5/2024 9/1/2027 18,750,000 9.8% 12,300,793 10.58% Floating No 12% Residential Fort Lauderdale, FL 11/1/2024 12/30/2026 30,000,000 15.7% 3,868,815 11.42% Floating No 14% Hospitality Austin, TX 12/12/2024 12/11/2027 32,000,000 16.8% 29,894,737 9.83% Floating No 11% Subordinate debt: Residential Sarasota, FL 1/31/2024 5/12/2027 28,188,776 14.8% 23,121,470 13.00% Fixed No 14% Residential Miami, FL 11/15/2024 11/15/2027 13,000,000 6.8% 134,266 13.25% Fixed No 15% Subtotal (3) $ 190,921,475 100.0% $ 132,556,289 11.12% 13% 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.
Biggest changeLoan Type Location Original Funding Date Loan Maturity Current Commitments as of 12/31/2025 % of Total Principal Balance as of 12/31/2025 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 3.3% $ 14,087,288 9.8% N/A Floating No 11% Hospitality San Antonio, TX (2) 7/31/2024 8/9/2027 26,885,919 6.4% 26,379,740 10.9% N/A Floating No —% Residential PBG, FL (3) 8/5/2024 9/1/2027 31,875,000 7.6% 30,980,393 12.3% N/A Floating No 14% Residential PBG, FL (3) 8/5/2024 9/1/2027 28,125,000 6.7% 25,033,676 10.3% N/A Floating No 12% Residential Fort Lauderdale, FL (4) 11/1/2024 12/30/2026 30,000,000 7.1% 13,623,628 11.5% N/A Floating No 15% Hospitality Austin, TX 12/12/2024 12/11/2027 32,000,000 7.6% 32,000,000 9.5% N/A Floating No 12% Residential Aventura, FL 1/27/2025 1/27/2027 30,750,872 7.3% 30,750,872 9.0% N/A Floating No 11% Net Leased Tenant New Orleans, LA (4) 1/30/2025 1/30/2028 44,000,000 10.5% 10,241,076 10.1% N/A Floating No 11% Residential Dallas, TX 3/14/2025 3/14/2028 45,000,000 10.7% 44,822,482 7.6% N/A Floating No 8% Residential Park City, UT 6/11/2025 8/1/2027 9,250,000 2.2% 3,269,089 11.3% N/A Floating No 13% Residential Miami, FL 9/26/2025 9/25/2028 35,000,000 8.3% 19,094,668 8.4% N/A Floating No 10% Industrial Doral, FL 10/6/2025 10/6/2027 9,380,000 2.2% 8,653,728 10.0% N/A Floating No 12% Industrial West Palm Beach, FL 10/16/2025 10/16/2027 16,240,000 3.9% 1,770,103 10.0% N/A Floating No 12% Retail Houston, TX 10/24/2025 10/24/2028 30,000,000 7.1% 21,972,177 9.5% N/A Floating No 11% Subordinate debt: Residential Miami, FL 11/15/2024 11/15/2027 13,000,000 3.1% 10,920,110 13.3% N/A Fixed No 15% Residential Miami, FL 3/21/2025 12/13/2028 25,113,445 6.0% 11,914,155 13.5% 1.0% Floating No 15% Subtotal (5) $ 420,707,524 100.0% $ 305,513,185 10.0% 0.0% 12% Wtd Average (1) YTM excludes loans on nonaccrual status.
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.
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 a 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.
FASB ASC Topic 740, Income Taxes (“ASC 740”), prescribes a recognition threshold and measurement attribute for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. ASC 740 also provides guidance on derecognition, classification, interest and penalties, accounting in interim periods, disclosure and transition.
ASC Topic 740, Income Taxes (“ASC 740”), prescribes a recognition threshold and measurement attribute for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. ASC 740 also provides guidance on derecognition, classification, interest and penalties, accounting in interim periods, disclosure and transition.
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 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 69 Table of Contents 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.
The CECL Reserve balance as of December 31, 2024 was approximatel y $40.2 thousand, or 0.03%, of our total loans held at carrying value of approximately $130.7 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 $21.8 thousand and (ii) a liability for unfunded commitments of approximately $18.4 thousand .
The CECL Reserve balance as of December 31, 2024 was approximately $40.2 thousand, or 0.03%, of our total loans held at carrying value balance of approximately $130.7 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 $21.8 thousand and (ii) a liability for unfunded commitments of approximately $18.4 thousand.
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 December 31, 2024 applied through maturity. Actual results could differ from those estimates and assumptions.
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 December 31, 2025 applied through maturity. Actual results could differ from those estimates and assumptions.
As of December 31, 2024, 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.
As of December 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.
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 .
SRTF Credit Facility On December 9, 2024, we 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.
We have analyzed our various federal and state filing positions and believe that our income tax filing positions and deductions are well documented and supported as of December 31, 2024. Based on our evaluation, there is no reserve for an y uncertain income tax positions.
We have analyzed our various federal and state filing positions and believe that our income tax filing positions and deductions are well documented and supported as of December 31, 2025. Based on our evaluation, there is no reserve for an y uncertain income tax positions.
Accrued interest and penalties, if any, are included within other liabilities in the consolidated balance sheets. 80 Table of Contents JOBS Act The JOBS Act permits an emerging growth company such as us to take advantage of an extended transition period to comply with new or revised accounting standards applicable to public companies until those standards would otherwise apply to private companies.
Accrued interest and penalties, if any, are included within other liabilities in the consolidated balance sheets. JOBS Act The JOBS Act permits an emerging growth company such as us to take advantage of an extended transition period to comply with new or revised accounting standards applicable to public companies until those standards would otherwise apply to private companies.
We continuously evaluate the credit quality of each loan by assessing the risk factors of each loan. Loan Portfolio The table below summarizes our total loan portfolio as of December 31, 2024, unless otherwise specified.
We continuously evaluate the credit quality of each loan by assessing the risk factors of each loan. Loan Portfolio The table below summarizes our total loan portfolio as of December 31, 2025, unless otherwise specified.
Income Taxes We are a Maryland corporation and intend to elect to be taxed as a REIT under the Code, commencing with our taxable year ended December 31, 2024. We believe we have qualified, and our method of operation will enable us to continue to qualify, as a REIT.
Income Taxes We are a Maryland corporation and have elected to be taxed as a REIT under the Code, commencing with our taxable year ended December 31, 2024. We believe we have qualified, and our method of operation will enable us to continue to qualify, as a REIT.
In accordance with ASC 820-10, if we elected the ASC 825-10 fair value option, we would consider its principal market as the market in which we exit our investments with the greatest volume and level of activity.
In accordance with ASC 820-10, if we elected the fair value option under ASC 825-10, Financial Instruments, we would consider its principal market as the market in which we exit our investments with the greatest volume and level of activity.
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.
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, the net proceeds of future debt or equity offerings, including in connection with our ATM Program, payments of principal and interest we receive on our portfolio of assets and cash generated from our operating results.
ASC 820-10 specifies a 78 Table of Contents hierarchy of valuation techniques based on whether the inputs to those valuation techniques are observable or unobservable.
ASC 820-10 specifies a hierarchy of valuation techniques based on whether the inputs to those valuation techniques are observable or unobservable.
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.
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.
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.
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 when determining the amount to allocate to its CECL Reserve.
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).
Revolving Credit Facility On November 6, 2024, we entered into the Revolving Credit Facility, which contained an initial aggregate commitment of $50.0 million, which may be borrowed, repaid and redrawn (subject to a borrowing base based on eligible loan obligations held by us and subject to the satisfaction of other conditions provided under the Revolving Credit Agreement).
As of December 31, 2024 and 2023, all of our cash was unrestricted and totaled approximately $184.6 million and $31.2 million, respectively.
As of December 31, 2025 and 2024, all of our cash was unrestricted and totaled approximately $6.4 million and $184.6 million, respectively.
SUNS intends to create a diversified investment portfolio, targeting investments in senior mortgage loans, mezzanine loans, B-notes, CMBS and debt-like preferred equity securities across CRE asset classes. We intend for SUNS’ 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 intend to further diversify our investment portfolio, targeting investments in senior mortgage loans, mezzanine loans, B-notes, CMBS and debt-like preferred equity securities across CRE asset classes. We intend for our 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.
The 90% distribution requirement does not require the distribution of net capital gains. 77 Table of Contents 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.
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.
As a result, we 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 our financials to those of other public companies more difficult. 66 Table of Contents We could remain an “emerging growth company” until the earliest to occur of the following: (1) the last day of the fiscal year (a) following the fifth anniversary of the date of the first sale of our common stock pursuant to an effective registration statement under the Securities Act, (b) in which we have total annual revenue of at least $1.235 billion, or (c) in which we are deemed to be a large accelerated filer, which generally means the market value of our common equity that is held by non-affiliates exceeds $700 million as of the end of the prior fiscal year’s second fiscal quarter; and (2) the date on which we have issued more than $1 billion in non-convertible debt securities during the prior three-year period.
We could remain an “emerging growth company” until the earliest to occur of the following: (1) the last day of the fiscal year (a) following the fifth anniversary of the date of the first sale of our common stock pursuant to an effective registration statement under the Securities Act, (b) in which we have total annual revenue of at least $1.235 billion, or (c) in which we are deemed to be a large accelerated filer, which generally means the market value of our common equity that is held by non-affiliates exceeds $700 million as of the end of the prior fiscal year’s second fiscal quarter; and (2) the date on which we have issued more than $1 billion in non-convertible debt securities during the prior three-year period.
The aggregate originated commitment under these loans was approximately $190.9 million and zero, respectively, and outstanding principal was approximately $132.6 million and zero, respectively, as of December 31, 2024 and December 31, 2023 .
The aggregate originated commitment under these loans was approximately $420.7 million and $190.9 million, respectively, and outstanding principal was approximately $305.5 million and $132.6 million, respectively, as of December 31, 2025 and 2024 .
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.
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.
The interest drawn on loans is computed at the contractual rate specified in each applicable agreement and is accrued and added to the principal balance of the loan monthly in arrears and recorded as interest income.
Interest Drawn on Loans We have loans in our portfolio that contain provisions for funded interest. The interest drawn on loans is computed at the contractual rate specified in each applicable agreement and is accrued and added to the principal balance of the loan monthly in arrears and recorded as interest income.
Interest payments received on nonaccrual loans are generally recognized on a cash basis and may be recognized as income or applied to principal depending upon management’s judgment regarding the borrower’s ability to make pending principal and interest payments.
Accrued and unpaid interest is generally reversed against interest income in the period the loan is placed on nonaccrual status. Interest payments received on nonaccrual loans are generally recognized on a cash basis and may be recognized as income or applied to principal depending upon management’s judgment regarding the borrower’s ability to make pending principal and interest payments.
Contractual Obligations, Other Commitments, and Off-Balance Sheet Arrangements Our contractual obligations as of December 31, 2024 are as follows: As of December 31, 2024 Less than 1 year 1-3 years 3-5 years More than 5 years Total Unfunded commitments $ — $ 58,365,186 $ — $ — $ 58,365,186 Total $ — $ 58,365,186 $ — $ — $ 58,365,186 As of December 31, 2024 , all unfunded commitments were related to our total loan commitments and were available for funding in less than three years.
Contractual Obligations, Other Commitments, and Off-Balance Sheet Arrangements Our contractual obligations as of December 31, 2025 are as follows: As of December 31, 2025 Less than 1 year 1-3 years 3-5 years More than 5 years Total Unfunded commitments $ 16,376,372 $ 98,890,529 $ — $ — $ 115,266,901 Total $ 16,376,372 $ 98,890,529 $ — $ — $ 115,266,901 As of December 31, 2025 , all unfunded commitments were related to our total loan commitments and were available for funding in less than three years.
Our net income allocable to our common shareholders for the year ended December 31, 2024, was approximately $6.9 million, or $1.01 per basic weighted average common share. Net interest income was comprised of interest income earned of approximately $10.8 million, net of interest expense of approximately $(0.2) million.
Our net income allocable to our common shareholders for the year ended December 31, 2025, was approximately $12.1 million, or $0.93 per basic common share, compared to net income allocable to our common shareholders of approximately $6.9 million, or $1.01 per basic common share, for the year ended December 31, 2024. Interest income.
Net Cash Provided by (Used in) Financing Activities Net cash provided by financing activities during the year ended December 31, 2024 was approximately $276.9 million, compared to $31.0 million for the period from August 28, 2023 to December 31, 2023.
Net Cash (Used in) Provided by Financing Activities Net cash used in financing activities during the year ended December 31, 2025 was approximately $(21.7) million, compared to net cash provided by financing activities of $276.9 million for the year ended December 31, 2024.
(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) The interest subtotal rate is a weighted average rate.
(2) Effective October 10, 2025, the Company placed the borrower on nonaccrual status. 72 Table of Contents (3) 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.
The amount of total commitments under the Revolving Credit Facility may be increased to up to $200.0 million in aggregate, subject to available borrowing base and lenders’ willingness to provide additional commitments. See “Developments During the Year Ended December 31, 2024— Revolving Credit Facility” above.
The amount of total commitments under the Revolving Credit Facility may be increased to up to $200.0 million in aggregate, subject to available borrowing base and lenders’ commitment to provide additional commitments.
Delayed draw loans earn interest or unused fees on the 79 Table of Contents undrawn portion of the loan, which is recognized as interest income in the period earned. Other fees, including prepayment fees and exit fees, are also recognized as interest income when received.
Delayed draw loans earn interest or unused fees on the undrawn portion of the loan, which is recognized as interest income in the period earned. Other fees, including prepayment fees and exit fees, are also recognized as interest income when received. Any such fees will be generated in connection with our investments and recognized as earned in accordance with GAAP.
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”).
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.
For loans where we have deemed the borrower/sponsor to be experiencing financial difficulty, we may elect to apply a practical expedient in which the fair value of the underlying collateral is compared to the amortized cost of the loan in determining a specific CECL allowance.
For loans where we have deemed the borrower/sponsor to be experiencing financial difficulty, we may elect to apply a practical expedient in which the fair value of the underlying collateral is compared to the amortized cost of the loan in determining a specific CECL allowance. 78 Table of Contents Revenue Recognition Interest income from loans is accrued based on the outstanding principal amount and the contractual terms of each loan.
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.
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.
During the year December 31, 2024 , we funded approximately $165.7 million of new loans and additional principal and had approximately $33.2 million of principal repayments of loans held at carrying value. As of December 31, 2024 and December 31, 2023, approximately 79% and zero , respectively, of our loans held at carrying value had floating interest rates.
During the year ended December 31, 2025 , we funded approximately $224.4 million of new loans and additional principal on existing loans and had approximately $51.5 million of principal repayments of loans held at carrying value. As of December 31, 2025 and 2024 , approximately 96% and 79%, respectively, of our loans held at carrying value had floating interest rates.
Net Cash (Used in) Provided by Investing Activities Net cash used in investing activities during the year ended December 31, 2024 was approximately $(125.2) million, compared to zero for the period from August 28, 2023 to December 31, 2023.
Net Cash Used in Investing Activities Net cash used in investing activities during the year ended December 31, 2025 was approximately $(153.1) million, compared to $(125.2) for the year ended December 31, 2024.
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.
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. 76 Table of Contents Dividends We elected 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.
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. In January 2025, our senior loan for the mixed-use property in Houston, Texas was repaid in full.
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 $1.8 million of expenses in connection with the offering.
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%.
SRTF Credit Facility On December 9, 2024, we 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 .
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.
The separation was effected by the transfer of AFC’s commercial real estate portfolio to us and the distribution of all of the outstanding shares of our common stock to all of AFC’s stockholders of record as of the close of business on July 8, 2024.
See “ Special Note Regarding Forward-Looking Statements ” and “ Risk Factors .” Recent Developments 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 (the “January 2025 Offering”), of which 1,000,000 shares of common stock were sold to Leonard M.
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.
As of December 31, 2024, t hese floating benchmark rates included one-month SOFR subject to a weighted average floor of 4.2% and quoted at 4.3%. 74 Table of Contents The following tables summarize our loans held at carrying value as of December 31, 2024: 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.
The following tables summarize our loans held at carrying value as of December 31, 2025 and 2024 : As of December 31, 2025 Outstanding Principal (1) Original Issue (Discount) Premium Carrying Value (1) Weighted Average Remaining Life (Years) (2) Senior mortgage loans (3)(4) $ 282,678,920 $ (2,803,998) $ 279,874,922 1.9 Subordinate debt 22,834,265 (34,444) 22,799,821 2.4 Total loans held at carrying value $ 305,513,185 $ (2,838,442) $ 302,674,743 1.9 As of December 31, 2024 Outstanding Principal (1) Original Issue (Discount) Premium Carrying Value (1) Weighted Average Remaining Life (Years) (2) Senior mortgage loans (3)(4) $ 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 or premium and loan origination costs.
(2) Weighted average remaining life is calculated based on the carrying value of each respective group of loans as of 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.
(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.
See “Developments During the Year Ended December 31, 2024— SRTF Credit Facility” above. 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.
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.
The decrease of approximately $(125.2) million was primarily due to an increase in issuance and fundings on loans of approximately $(158.3) million, partially offset by an increase in principal repayments of loans of approximately $33.2 million.
The increase in net cash used of approximately $(27.9) million was primarily due to an increase in issuance and fundings on loans of approximately $(46.2) million, offset by an increase in principal repayments of loans of approximately $18.4 million.
Professional fees included approximately $0.6 million in spin-off costs incurred during the year ended December 31, 2024. Other costs within professional fees related to legal, audit, and board of director fees.
Professional fees included approximately $0.6 million in Spin-Off costs incurred during the year ended December 31, 2024. No Spin-Off costs were incurred during the year ended December 31, 2025.
The senior secured loan was issued at a discount of 1.0% and matures in August 2027. At closing, we funded approximately $25.0 million and the affiliate funded approximately $13.5 million. The senior secured loan bears interest at a rate of SOFR plus 6.35%, with a rate index floor of 4.50%.
We committed a total of $35.0 million and the affiliates committed the remaining $25.0 million. The senior loan matures in September 2028. At closing, we funded approximately $13.7 million and the affiliates funded approximately $9.8 million. The loan bears interest at a cash rate of SOFR plus 4.75%, with a rate index floor of 3.50%.
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.
Revolving Credit Facility On November 6, 2024, we entered into the Revolving Credit Facility, which contained an initial aggregate commitment of $50.0 million, which may be borrowed, repaid and redrawn (subject to a borrowing base based on eligible loan obligations held by us and subject to the satisfaction of other conditions provided under the Revolving Credit Agreement).
The following table presents changes in loans held at carrying value as of and for the year ended December 31, 2024: Principal Original Issue Discount Carrying Value Total loans held at carrying value at December 31, 2023 $ — $ — $ — New fundings 160,425,359 (2,085,761) 158,339,598 Interest drawn on loans 5,291,615 — 5,291,615 Accretion of original issue discount — 263,102 263,102 Loan repayments (33,160,685) — (33,160,685) Total loans held at carrying value at December 31, 2024 $ 132,556,289 $ (1,822,659) $ 130,733,630 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.
(4) If the Company holds both the A-note and B-note, the loan is categorized as a senior mortgage loan. 73 Table of Contents The following table presents changes in loans held at carrying value as of and for the year ended December 31, 2025: Principal Original Issue (Discount) Premium Carrying Value Total loans held at carrying value at December 31, 2024 $ 132,556,289 $ (1,822,659) $ 130,733,630 New fundings 207,073,953 (2,497,278) 204,576,675 Interest drawn on loans 17,354,062 — 17,354,062 Accretion of original issue discount and premium, net — 1,481,495 1,481,495 Loan repayments (51,516,841) — (51,516,841) PIK interest 45,722 — 45,722 Total loans held at carrying value at December 31, 2025 $ 305,513,185 $ (2,838,442) $ 302,674,743 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.
Management places loans on nonaccrual status when principal or interest payments are past due 30 days or more or when full recovery of interest and principal is doubtful. Accrued and unpaid interest is generally reversed against interest income in the period the loan is placed on nonaccrual status.
Revenue from OID is also recognized in interest income from loans over the initial loan term as a yield adjustment using the effective interest method. Management places loans on nonaccrual status when principal or interest payments are past due 30 days or more or when full recovery of interest and principal is doubtful.
Generally, a TRS can engage in activities that, if conducted by us other than through a TRS, could result in the receipt of non-qualified income or the ownership of non-qualified assets. However, several provisions regarding the arrangements between a REIT and its TRSs ensure that a TRS will be subject to an appropriate level of U.S. federal income taxation.
However, several provisions regarding the arrangements between a REIT and its TRSs 79 Table of Contents ensure that a TRS will be subject to an appropriate level of U.S. federal income taxation.
We did not pay any fees or premium to the affiliate for our acquisition of the affiliate’s loan commitments.
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.
We are an institutional lender that provides debt capital solutions to CRE markets in the Southern United States. SUNS’ focus is on originating 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.
As a result of the Spin-Off, we are now an independent, public company trading under the symbol “SUNS” on Nasdaq. Our focus is on originating and investing in secured CRE loans and providing capital to high-quality borrowers and sponsors with transitional business plans collateralized by CRE assets with opportunities for near-term value creation, as well as recapitalization opportunities.
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.
Subsequently, we entered into a series of amendments to the Revolving Credit Facility that, among other things, increased the aggregate commitment from $50.0 million to $165.0 million. The amount of total commitments under the Revolving Credit Facility may be increased to up to $200.0 million in aggregate, subject to available borrowing base and lenders’ commitment to provide additional commitments.
Following the purchase, we hold $31.9 million in commitments of the senior term loan with $29.8 million in principal outstanding, and $28.1 million in commitments of the home construction revolver with $22.2 million of principal outstanding. 71 Table of Contents 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.
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.
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 senior bridge loan was issued at a discount of 1.0% and matures in October 2028. The loan bears interest at a rate of SOFR plus 5.75%, with a rate index floor of 3.75%.
Stock-based compensation was approximately $0.3 million for the year ended December 31, 2024, driven by restricted stock awards granted and restricted stock awards converted as part of the Spin-Off. 73 Table of Contents Provision for Current Expected Credit Losses The provision for current expected credit losses for the year ended December 31, 2024 was approximately $40.2 thousand.
Stock-based compensation increased $0.7 million during the year ended December 31, 2025, as compared to the year ended December 31, 2024, driven by restricted stock awards granted and restricted stock awards converted as part of the Spin-Off. Professional fees. Professional fees decreased $(0.2) million during the year ended December 31, 2025, as compared to the year ended December 31, 2024.
On December 9, 2024, the Company entered into a new unsecured revolving credit agreement ( as amended, restated or otherwise modified from time to time, 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.
In December 2025, we entered into Amendment Number One to the SRTF Credit Agreement (“Amendment Number One”), by and among the Company, as borrower, the lenders party thereto from time to time, and SRT Finance LLC, as agent and lender party thereto.
The increase of approximately $245.9 million during the period from August 28, 2023 to December 31, 2023 to the year ended December 31, 2024 was primarily due to an increase in net transfers and distributions from our Former Parent of approximately $49.1 million and an increase of $248.8 million in borrowings on the revolving credit facilities, offset by $(50.0) million in repayments on the SRTF Revolving Credit Facility.
The decrease of approximately $(298.6) million was primarily due to an increase of $(240.9) million in repayments on the revolving credit facilities and decrease in net transfers and distributions from our Former Parent of approximately $(80.1) million, partially offset by an decrease of $(34.8) million in borrowings on the revolving credit facilities and an increase of $72.6 million from offering proceeds relating to the January 2025 Offering.
Cash Flows The following table sets forth changes in cash and cash equivalents for the year ended December 31, 2024 and during the period from August 28, 2023 to December 31, 2023 : Year ended December 31, 2024 Period from August 28, 2023 to December 31, 2023 Net cash provided by (used in) operating activities $ 1,640,535 $ 244,622 Net cash (used in) provided by investing activities (125,178,913) — Net cash provided by (used in) financing activities 276,920,526 31,000,000 Change in cash and cash equivalents $ 153,382,148 $ 31,244,622 Net Cash Provided by (Used in) Operating Activities Net cash provided by operating activities during the year ended December 31, 2024 was approximately $1.6 million, compared to approximately $0.2 million for the period from August 28, 2023 to December 31, 2023.
Debt Service As of December 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. 75 Table of Contents Cash Flows The following table sets forth changes in cash and cash equivalents for the years ended December 31, 2025 and 2024: Years ended December 31, 2025 2024 Net cash (used in) provided by operating activities $ (3,430,578) $ 1,640,535 Net cash used in investing activities (153,059,834) (125,178,913) Net cash (used in) provided by financing activities (21,691,030) 276,920,526 Change in cash and cash equivalents $ (178,181,442) $ 153,382,148 Net Cash (Used in) Provided by Operating Activities Net cash used in operating activities during the year ended December 31, 2025 was approximately $(3.4) million, compared to net cash provided by operating activities of approximately $1.6 million for the year ended December 31, 2024.
Unless the context otherwise requires, as used in this section the terms “we,” “us,” “our,” or “SUNS,” refers to Sunrise Realty Trust, Inc.
Unless the context otherwise requires, as used in this section the terms “we,” “us,” “our,” or “SUNS,” refers to Sunrise Realty Trust, Inc. 64 Table of Contents Business Overview SUNS is a Maryland corporation that was formed on August 28, 2023 and that made its first investment in January 2024.
For the year ended December 31, 2024, operating expenses were approximately $3.7 million, mainly relating to approximately $1.3 million in general and administrative expenses, $1.3 million in professional fees and $0.8 million in management fees.
For the year ended December 31, 2025, Base Management Fees and Incentive Fees waived were $0.6 million and $0.5 million, respectively . General and administrative expenses . General and administrative expenses increased $1.6 million during the year ended December 31, 2025, as compared to the year ended December 31, 2024.
The revolving loan and mortgage loan were each issued at a discount of 1.25%. The revolving loan bears interest at a rate of SOFR plus 6.25%, with a rate index floor of 4.00%, and unused fee of 2.00%.
The Note bears interest at a rate of SOFR plus 5.00%, with a rate index floor of 4.00%.
ASC 820-10, Fair Value Measurements and Disclosures (“ASC 820-10”) expands the application of fair value accounting and defines fair value, establishes a framework for measuring fair value in accordance with GAAP and expands disclosure of fair value measurements.
We accrete or amortize any discounts or premiums on loans held for investment over the life of the related loan held for investment utilizing the effective interest method. 77 Table of Contents ASC 820-10, Fair Value Measurement (“ASC 820-10”), part of the FASB Accounting Standards Codification (“ASC”), expands the application of fair value accounting and defines fair value, establishes a framework for measuring fair value in accordance with GAAP and expands disclosure of fair value measurements.
OID is recognized as a discount to the funded loan principal and is accreted to income over the term of the loan.
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 loan bears interest at a rate of SOFR plus 4.25%, with a rate index floor of 4.75%. The senior secured loan is secured by a deed of trust on the property, any deposit and reserve accounts established by the terms of the senior secured loan and other customary collateral.
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.
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. 72 Table of Contents The following table provides a reconciliation of GAAP net income to Distributable Earnings: Year ended December 31, 2024 Period from August 28, 2023 to December 31, 2023 Net income $ 6,868,421 $ 234,622 Adjustments to net income: Stock-based compensation expense 338,404 — Depreciation and amortization — — Unrealized (gains) losses, or other non-cash items — — Provision for (reversal of) current expected credit losses 40,180 — TRS (income) loss — — One-time events pursuant to changes in GAAP and certain non-cash charges — — Distributable earnings $ 7,247,005 $ 234,622 Basic weighted average shares of common stock outstanding 6,800,841 6,889,032 Distributable earnings per basic weighted average share $ 1.07 $ 0.03 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 following table provides a reconciliation of GAAP net income to Distributable Earnings: Years ended December 31, 2025 2024 Net income $ 12,142,409 $ 6,868,421 Adjustments to net income: Stock-based compensation expense 1,019,168 338,404 Depreciation and amortization — — Unrealized (gains) losses, or other non-cash items — — Provision for current expected credit losses 2,029,056 40,180 TRS (income) loss — — One-time events pursuant to changes in GAAP and certain non-cash charges — — Distributable earnings $ 15,190,633 $ 7,247,005 Basic weighted average shares of common stock outstanding 12,742,894 6,800,841 Distributable earnings per basic weighted average share $ 1.19 $ 1.07 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.
The senior secured loan is secured by a first-priority mortgage on the property and a security interest in all of the equity interests held by the borrower. The proceeds of the senior secured loan will be used to, among other things, fund the completion of reserves and refinance existing debt.
The senior bridge loan is secured by a first priority deed of trust and related collateral interests pursuant to the terms of the credit agreement and related loan documents. The proceeds of the senior bridge loan will be used to refinance existing debt and fund tenant improvements, leasing costs, reserves, and closing expenses.
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. 75 Table of Contents 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.
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.
The proceeds of the senior secured loan will be used to, among other things, fund the completion of construction and other reserves and refinance existing debt.
The proceeds of the senior secured loan will be used to, among other things, refinance the existing debt and fund reserves and closing expenses. During the fourth quarter of 2025, conditions for the earn-out were not met and the total loan commitment was reduced by $2.0 million, of which our commitment was reduced $1.5 million.
Loans Held for Investment at Carrying Value As of December 31, 2024 and December 31, 2023, our portfolio included nine and zero loans held at carrying value, respectively.
(4) If the Company holds both the A-note and B-note, the loan is categorized as a senior mortgage loan. (5) The interest and PIK subtotal rates are weighted average rates. Loans Held for Investment at Carrying Value As of December 31, 2025 and 2024 , our portfolio included sixteen and nine loans held at carrying value, respectively.
The book value per share of our Common Stock as of December 31, 2024 and 2023 was approximately $16.29 and $4.53, respectively, on a post-split share basis.
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 December 31, 2025 and 2024 was approximately $13.56 and $16.29, respectively.
We committed a total of approximately $14.1 million and the affiliate committed the remaining approximately $21.1 million. The senior secured loan was issued at a discount of 1.0% and matures in July 2027. At closing, we funded approximately $11.4 million and the affiliate funded approximately $17.0 million.
The Company committed a total of $14.0 million, and an affiliated co-investor committed the remaining $7.6 million, funding $14.0 million and $7.6 million, respectively, upon closing. The senior bridge loan was issued at a discount of 3.0% and matures in July 2026. The senior bridge loan was fully paid off four days after closing in January 2026.
The proceeds of the mortgage loan will be used to, among other things, fund the completion of construction and other reserves and refinance existing debt. The mortgage loan and the revolving loan each mature in September 2027.
The proceeds of the senior loan will be used to, among other things, fund the completion of construction. In September 2025, we and affiliated co-investors purchased $60.0 million of a $370.0 million senior first mortgage loan for the construction of a multi-family residential property in Miami, Florida.
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.
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 65 Table of Contents 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.
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 intend to raise future equity capital and issue debt securities in order to fund our future investments in loans.
A total of 1,000,000 shares of common stock has been registered for issuance under the DRIP. There were no shares issued under the DRIP during the year ended December 31, 2025. We intend to raise future equity capital and issue debt securities in order to fund our future investments in loans.
We committed a total of approximately $32.0 million, and the affiliate committed the remaining $25.0 million. The senior secured loan was issued at a discount of 1.25% and matures in December 2027. At closing, we funded approximately $29.9 million and the affiliate funded approximately $23.4 million.
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.
The senior secured loan bears interest at a rate of SOFR plus 5.50%, with a rate index floor of 4.00%. The senior secured loan is secured by a deed of trust on the property and other customary collateral. The proceeds of the senior secured loan will be used to, among other things, refinance existing debt and fund reserves.
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 revolving loan will be used to, among other things, fund the completion of reserves, fund home construction costs and refinance existing debt. The mortgage loan bears an interest rate of SOFR plus 8.25%, with a rate index floor of 4.00%.
The financing also included approximately $336.7 million of Senior A-note debt held by an unaffiliated third party and will refinance existing indebtedness on the properties. The loan bears interest at a rate of SOFR plus 8.25%, with a rate index floor of 3.00%.

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

8 edited+2 added−0 removed33 unchanged
Biggest changeGenerally, 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. 81 Table of Contents 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.
Biggest changeGenerally, 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.
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.
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 80 Table of Contents upon an assessment of the expected market yield for a similarly structured loan with a similar level of risk.
Actual economic conditions or implementation of 82 Table of Contents 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.
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.
As of December 31, 2024 and 2023, 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 through its independent Audit and Valuation Committee.
As of December 31, 2025 and 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.
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.
These factors could lower our net 81 Table of Contents 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.
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 $1.0 million and a hypothetical 100 basis points decrease in the floating benchmark rate would result in a decrease in annual interest income of approximately $(0.1) million.
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 $2.9 million and a hypothetical 100 basis points decrease in the floating benchmark rate would result in a decrease in annual interest income of approximately $1.1 million due to the effects of the benchmark floor.
Our loan portfolio as of December 31, 2024 was concentrated with the top three borrowers representing approximately 49.0% of the aggregate outstanding principal balances and approximately 53.4% of the total loan commitments.
Our loan portfolio as of December 31, 2025 was concentrated with the top three borrowers representing approximately 36.4% of the aggregate outstanding principal balances and approximately 35.4% of the total loan commitments.
As of December 31, 2024, we had six floating-rate loans, representing approximately 79% of our portfolio based on aggregate outstanding principal balances. These floating benchmark rates included one-month SOFR subject to a weighted average floor of 4.2% and quoted at 4.3%.
These floating benchmark rates included one-month SOFR quoted at 3.7% and subject to a weighted average floor of 4.1%, and U.S. prime rate quoted at 6.75% and subject to a weighted average floor of 8.0% based on outstanding principal.
Added
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.
Added
As of December 31, 2025, we had 15 floating-rate loans, representing approximately 96% of our portfolio based on aggregate outstanding principal balances.