Sunrise Realty Trust's Q3 2025: Contradictions Emerge on Geographic Expansion, Leverage Strategy, Debt Plans, and Dividend Outlook

Date of Call: November 13, 2025

Financials Results

• EPS: Distributable earnings: $0.31 per basic share; GAAP net income: $0.30 per basic share (no YOY comparison provided)

Guidance:

• Target leverage is expected to increase from ~0.4x as commitments fund toward long-term target of 1.0–1.5x and a goal of achieving an investment-grade rating in 3–5 years.
• Management intends to pursue capital markets issuance (preferred or unsecured/baby bonds) this quarter or next if market conditions permit.
• Expect potential NIM expansion as SOFR falls below portfolio SOFR floors (avg floor ~4%; credit lines floor ~2.6%).
• Pipeline: ~2 term sheets ~$170M with SUNS to receive a portion; recent post-quarter closings totaled ~$56M.

Business Commentary:

• Pipeline and Market Activity:
• SUNS Realty Trust reported a significant increase in financing requests over the past quarter, reflecting greater confidence in short-term interest rate stability.

• This renewed interest is encouraging more sponsors to engage in capital planning, particularly in refinancing opportunities and new acquisitions.

• Portfolio and Financial Performance:

• The company generated distributable earnings of $0.31 per share, covering its dividend of $0.30, despite slower market dynamics in Q3.

• SUNS' portfolio maintains a weighted average loan to cost to closing of 56%, indicating conservative positioning and strong credit performance.

• Leverage and Investment Strategy:

• SUNS' leverage remains below its targeted range, currently at 0.4x, as compared to the peer average.

• The company aims for an investment-grade rating in the next 3-5 years, with plans to increase leverage to 1-1.5x, while maintaining disciplined underwriting.

• Dividend Coverage and Shareholder Confidence:

• SUNS Realty Trust's dividend is consistently covered by its distributable earnings, reflecting stable financial health.
• CEO Brian Sedrish remains confident in the opportunity set ahead, with a focus on transitional real estate projects in the Southern U.S.

Sentiment Analysis:

Overall Tone: Positive

• Management highlighted distributable earnings of $0.31 covering the $0.30 dividend, a pickup in market activity and improved pipeline, described the portfolio as "performing as expected," and expressed confidence in pursuing preferred/unsecured issuance while avoiding repo/over‑levering.

Q&A:

• Question from Timothy D'Agostino (B. Riley Securities, Inc., Research Division): In the investor deck you mentioned the pipeline assets are broadening your presence across the Southern U.S. — what new geographies within the Southern U.S. are you seeing in that pipeline?
  Response: Focus remains the Southern U.S.; primary pipeline markets are Florida, Texas, North Carolina, Georgia and Tennessee.

• Question from Timothy D'Agostino (B. Riley Securities, Inc., Research Division): Within the geographies you mentioned, are there any that stand out as the most attractive in terms of investment?
  Response: Texas and Florida stand out, with the Carolinas and Tennessee also attractive—attractiveness varies by asset class and local dynamics.

• Question from Jade Rahmani (Keefe, Bruyette, & Woods, Inc., Research Division): How are things going on the debt side of the business strategy? I know you have been focused on further syndication bank participation in the repo line as well as plans for bond issuance?
  Response: We will not pursue a repo line; instead expanding bank lines and plan to access capital markets (preferred or unsecured) when the market is receptive to support conservative leverage goals.

• Question from Jade Rahmani (Keefe, Bruyette, & Woods, Inc., Research Division): Where do you think the cost of the preferred would be?
  Response: Market comps are around 7–8%, with recent deals at ~8%; management won’t price materially higher to protect net interest margin.

• Question from Jade Rahmani (Keefe, Bruyette, & Woods, Inc., Research Division): You prefer to do that then to take up leverage through a warehouse line?
  Response: Yes — management prefers longer‑term preferred or unsecured issuance over repo/warehouse to avoid over‑levering and protect downside.

• Question from Jade Rahmani (Keefe, Bruyette, & Woods, Inc., Research Division): Could you please comment on the portfolio underlying performance and any trends in the underlying deals? How are the largest deals trending?
  Response: Portfolio is performing as expected: construction, presales and leasing are progressing normally with occasional minor delays; some for‑sale projects showing a pickup in activity (notably South Florida).

Contradiction Point 1

Geographic Focus and Expansion

It involves discrepancies in the company's stated geographic focus and expansion plans, which are crucial for understanding their growth strategy and market penetration.

Which new geographies in the Southern U.S. are included in the pipeline? - Timothy D'Agostino (B. Riley Securities)

2025Q3: We are staying true to our focus of primarily the Southern U.S. Florida, Texas, continue to be primary markets. We have one signed deal in the Carolinas, and we're also looking at deals in Georgia, Tennessee. - Brian Sedrish(CEO)

Are you planning to expand beyond Florida and Texas? - Randy Binner (B. Riley Securities)

2025Q1: SUNS remains focused on its target states, with a strong deal flow from Florida and Texas. However, it is exploring opportunities in other target markets like Louisiana, Atlanta, the Carolinas, Virginia, and Tennessee, aiming to diversify the portfolio while still capitalizing on opportunities in Florida and Texas. - Brian Sedrish(CEO)

Contradiction Point 2

Leverage Strategy and Funding Sources

It involves changes in the company's approach to leverage and funding, which are crucial for financial management and investor confidence.

Can you provide an update on your debt strategy, including progress on syndication, bank repo line participation, and bond issuance plans? - Jade Rahmani (KBW)

2025Q3: We're not going for a repo line. We're differentiating ourselves from other mortgage REITs by not engaging in such high-leverage deals. Instead, we're working on expanding our bank lines at an approximately 2.75% over SOFR level, which is going well. - Leonard Tannenbaum(Executive Chairman)

What is the timeline for scaling leverage and any unsecured issuance? - Jason Sabshon (KBW)

2025Q2: We are staying true to our focus of primarily the Southern U.S. Texas is also a critical part of our growth strategy. - Leonard Tannenbaum(Executive Chairman)

Contradiction Point 3

Interest Rate Environment and Strategy

It reflects differing comments on the impact of interest rates and the company's strategic response, which can influence investment decisions and financial performance.

How is the Florida condo market performing overall, and how are the projects progressing? - Jade Rahmani (KBW)

2025Q3: As you know, we have talked about the repo funding line. We have actually been able to increase our revolver on a syndicated basis, which has been a great success. So we've been able to raise a good bit of money at a lower cost than we would have if we had gone for a repo line. - Brian Sedrish(CEO)

How is the Florida condo market performing overall and specifically, and how are the projects progressing? - Jason Sabshon (KBW)

2025Q2: If the market finds that it's not attractive for repo funding, we will expand the revolver for unsecured funding. We're not sure exactly what the pace would be, but we're actively looking at expanding our revolver for more unsecured funding. - Brian Sedrish(CEO)

Contradiction Point 4

Debt Strategy and Capital Raise

It involves changes in the company's debt strategy and capital raise plans, which are important for financial management and investor confidence.

What are the updates on your debt strategy regarding syndication, bank participation in the repo line, and bond issuance plans? - Jade Rahmani (KBW)

2025Q3: We are not going for a repo line. We are differentiating ourselves from other mortgage REITs by not engaging in such high-leverage deals. Instead, we're working on expanding our bank lines at an approximately 2.75% over SOFR level, which is going well. We're considering issuing either preferred or unsecured offerings in the upcoming quarter or next, depending on market conditions. - Leonard Tannenbaum(Executive Chairman)

Can you explain SUNS' capital availability for existing commitments and new loans? - Tyler Batory (Oppenheimer)

2025Q1: SUNS has enough capital for its business plan, with $75 million in undrawn unsecured lines and expecting to fully utilize its $200 million accordion in the coming quarters. Additionally, SUNS aims to raise unsecured capital in the fourth quarter, to expand its capital base and support growth. - Leonard Tannenbaum(Executive Chairman)

Contradiction Point 5

Dividend Sustainability and Growth

It directly impacts investor expectations regarding the sustainability and potential growth of Sunrise Realty Trust's dividends.

What’s the status of your debt strategy? What are the updates on syndication, repo line bank participation, and bond issuance plans? - Jade Rahmani (KBW)

2025Q3: The $0.30 dividend is sustainable based on high visibility in future earnings from construction loans. The dividend may grow over time, although the pace isn't specified. Improved visibility in 2026 is due to high-quality loans from last year's vintage. - Leonard Tannenbaum(Executive Chairman)

Is the dividend sustainable and will earnings exceed it long-term? - Jade Rahmani (KBW)

2024Q4: The $0.30 dividend is sustainable based on high visibility in future earnings from construction loans. The dividend may grow over time, although the pace isn't specified. Improved visibility in 2026 is due to high-quality loans from last year's vintage. - Leonard Tannenbaum(Executive Chairman)