Earnings call transcript: Sunrise Realty Trust sees stock rise after Q2 2025 earnings

Sunrise Realty Trust (SUNS) reported its financial results for the second quarter of 2025, showing solid performance with distributable earnings of $0.31 per share, covering the declared dividend of $0.30 per share. The company’s stock responded positively, rising 3.79% to $10.12 in pre-market trading. According to InvestingPro data, SUNS offers an impressive 12.28% dividend yield and trades at an attractive Price-to-Book ratio of 0.73. InvestingPro analysis indicates the stock is slightly overvalued at current levels. Despite a slowdown in the commercial real estate market in Q2, Sunrise Realty’s strategic investments and expanded credit facilities have positioned it well for future growth.

Key Takeaways

• Distributable earnings of $0.31 per share covered the dividend of $0.30.
• Stock price increased by 3.79% in pre-market trading.
• Expanded credit facilities by $90 million to enhance liquidity.
• Focus on transitional real estate projects in less competitive markets.
• Anticipated interest rate cuts could boost future deal activity.

Company Performance

Sunrise Realty Trust demonstrated resilience in Q2 2025, with distributable earnings comfortably covering its dividend. The company has focused on strategic investments in transitional real estate projects, primarily in the Southern U.S., which are less affected by increased competition. This focus, combined with expanded credit facilities, provides a strong foundation for future growth.

Financial Highlights

• Revenue: $4.78 million
• Earnings per share (GAAP): $0.25
• Distributable earnings per share: $0.31
• Total assets: $256.5 million
• Total shareholder equity: $184.3 million
• Book value per share: $13.73

Market Reaction

Following the earnings announcement, Sunrise Realty Trust’s stock rose by 3.79% to $10.12 in pre-market trading. This positive movement reflects investor confidence in the company’s financial health and strategic direction. InvestingPro data shows the company maintains strong liquidity with a current ratio of 4.72, while trading at a reasonable P/E ratio of 10.36. The stock remains within its 52-week range of $7.80 to $15.74, suggesting room for further growth as market conditions improve. Get access to 6 more exclusive InvestingPro Tips and comprehensive analysis through the Pro Research Report, available for over 1,400 US stocks.

Outlook & Guidance

Sunrise Realty Trust plans to explore unsecured debt markets in Q4 2025, targeting leverage of 1.5x. The company anticipates maintaining its portfolio composition and expects interest rate cuts to expand net interest margins, potentially boosting future earnings.

Executive Commentary

CEO Brian Sedrish highlighted the company’s unique expertise in complex deal structures, stating, "We believe that these unique core competencies allow us to capture the most attractive opportunities emerging in this current market." He also noted, "As interest rates eventually begin to creep downward, we believe that this will continue to act as a catalyst for new deal activity."

Risks and Challenges

• Macroeconomic pressures, including tariffs, could impact market conditions.
• Increased competition in the real estate market may affect future project profitability.
• Interest rate volatility could influence financing costs and margins.
• Dependence on the Southern U.S. market may expose the company to regional economic shifts.

Q&A

During the earnings call, analysts inquired about the company’s recent loan in Park City, Utah, which management described as an opportunistic investment. Questions also focused on the performance of projects in the Florida condo market and the company’s flexibility in deal timing and closing, all of which were addressed positively by the management team. InvestingPro subscribers gain exclusive access to detailed financial health scores, comprehensive valuation metrics, and expert analysis that helps decode management commentary and market positioning. The Pro Research Report provides deep-dive analysis of SUNS’s market position and growth potential.

Full transcript - Sunrise Realty Trust Inc (SUNS) Q2 2025:

: Good day,

Conference Operator: and thank you for standing by. Welcome to the Sunrise Realty Trust Second Quarter twenty twenty five Earnings Call. At this time, all participants are in a listen only mode. After the speakers’ presentation, there will be a question and answer session. Please be advised today’s conference is being recorded.

I would now like to turn the conference over to your speaker today, Gabriel Katz, Chief Legal Officer. Please go ahead.

Gabriel Katz, Chief Legal Officer, Sunrise Realty Trust: Good morning, and thank you all for joining Sunrise Realty Trust earnings call for the quarter ended 06/30/2025. I’m joined this morning by Leonard Tanenbaum, our Executive Chairman Brian Sedrish, our Chief Executive Officer and Brandon Hetzel, our Chief Financial Officer. Before we begin, I would like to note that this call is being recorded. Replay information is included in our 06/24/2025 press release and is posted on the Investor Relations portion of our website at sunriserealtytrust.com, along with our second quarter twenty twenty five earnings release and investor presentation. Today’s conference call includes forward looking statements and projections that reflect the company’s current view with respect to, among other things, market developments, our investment pipeline, anticipated portfolio yield and financial performance and projections in 2025 and beyond.

These statements are subject to inherent uncertainties in predicting future results. Please refer to Sunrise Realty Trust’s most recent periodic filings with the SEC, including our quarterly report on Form 10 Q filed earlier this morning for certain conditions and significant factors that could cause actual results to differ materially from these forward looking statements and projections. During today’s conference call, management will refer to non GAAP financial measures, including distributable earnings. Please see our second quarter earnings release uploaded to our website for reconciliations of the non GAAP financial measures with the most directly comparable GAAP measures. The format for today’s call is as follows.

Len will provide a general business and capital markets overview. Next, Brian will cover our view on the state of the commercial real estate lending markets, discuss our existing portfolio and provide an outlook for our investment pipeline. Then Brandon will provide an update on our financial results. After that, we’ll open the lines for Q and A. With that, I will now turn the call over to our Executive Chairman, Leonard Tanenbaum.

Leonard Tanenbaum, Executive Chairman, Sunrise Realty Trust: Thank you, Gabe. Good morning, and welcome to our second quarter twenty twenty five earnings conference call. I am pleased with all the progress that SUNS has made over the course of the year.

Conference Operator: For the

Leonard Tanenbaum, Executive Chairman, Sunrise Realty Trust: quarter ended 06/30/2025, SUNS generated distributable earnings of $0.31 per share of common stock, which covered our dividend of $0.30 per share. Turning to our senior secured revolving credit facility, I am pleased to announce that during the second quarter, we added $90,000,000 of additional commitments from City National Bank of Florida and Everbank. We now have 140,000,000 of commitments under our senior secured credit facility, which can expand to 200,000,000. I believe that having three institutional banks in our credit facility highlights the strength of SUNS lending platform and the trust that we have built with our financing partners. As a reminder, this facility carries a very attractive interest rate at 2.75% over SOFR with a 2.63% floor.

This facility provides us the financial flexibility to pursue attractive opportunities and drive continued growth in

Brian Sedrish, Chief Executive Officer, Sunrise Realty Trust: our target markets. As we look ahead in our

Leonard Tanenbaum, Executive Chairman, Sunrise Realty Trust: capital structure, we believe the next avenue for debt capital will be in the unsecured markets. I will now turn it over to Brian to discuss the market and our portfolio.

Brian Sedrish, Chief Executive Officer, Sunrise Realty Trust: Thank you, Len, and good morning. Before turning to our current portfolio and pipeline, I wanted to take a minute to discuss what we’re seeing generally in the real estate market. Beginning in Q1 twenty twenty five, we saw a noticeable pickup in The US commercial real estate market, which somewhat slowed in q two due to tariffs and macroeconomic conditions. Recently, this investment activity has picked up again, leading to an increased demand for capital with many borrowers seeking debt for refinancings or acquisitions. We believe that this increase in activity is attributable to two main factors.

One, supply clearing the market as previous previously construction activity was somewhat muted, and two, an expectation that short term interest rates will begin a slow path downward. As interest rates eventually begin to creep downward, we believe that this will continue to act as a catalyst for new deal activity. As noted, during the second quarter, we saw a decrease in transaction activity, which we attribute in part to global uncertainty around tariffs as lenders and borrowers analyze how this may impact construction projects and business activity in general. As we have moved into the third quarter, along with the increase in transaction volume, we have also seen an increase in competitors reentering the market. Many of these competitors are focused on financing complete or near complete business plans where the underlying real estate is already producing cash flow.

At SUNS, we primarily focused on transitional real estate projects that have yet to reach stabilization or near stabilization. In this segment of the market, we are still seeing robust deal flow and we continue to see less competition. Our focus remains on this segment as we believe this part of the market still provides the strongest risk adjusted returns. SUNS originations for the quarter ended 06/30/2025 partly reflected the market dynamics observed over the period. Specifically in Q2, SUNS committed $9,000,000 to a senior secured loan for the construction of a residential property in Park City, Utah.

Turning to our pipeline, just as market activity rebounded coming out of Q2 and into Q3, our active pipeline saw significant increases in both the quantity and quality of deals sourced. As of August 1, the TCG Real Estate platform has five signed nonbinding term sheets and documentation totaling approximately 275,000,000, which includes one deal from last quarter, which is yet to close. All five of these term sheets are for first mortgage loans. We expect SUNS to be allocated a portion of these investments. TCG’s real estate active pipeline primarily comprises loans to transitional assets backed by highly qualified sponsors that require a more structured solution, whereby our team can capitalize on its expertise in pre stabilization business plans and complex deal structures.

We believe that these unique core competencies allow us to capture the most attractive opportunities emerging in this current market. Turning to our portfolio, as of 06/30/2025, the SUNS portfolio had $360,000,000 of commitments with 251,000,000 funded. We believe that the SUNS portfolio is well positioned from an interest rate perspective as 86% of our current portfolio’s outstanding principal is floating rate with a weighted average SOFR floor of 4.1%. Given the floors in place across our loan book, our credit line with an approximate floor of 2.6% presents a potential opportunity to expand SUNS’ net interest margin. We expect in the near to medium term, our portfolio composition will remain relatively unchanged with an emphasis on well located residential and mixed use assets backed by experienced and well capitalized sponsors.

I continue to remain bullish on the opportunities set in front of us and look forward to capitalizing on many of the current opportunities that we are seeing today. With that, I will now turn the call over to Brandon Hetzel, our Chief Financial Officer. Thank you, Brian.

Brandon Hetzel, Chief Financial Officer, Sunrise Realty Trust: For the quarter ended 06/30/2025, we generated net interest income of 5,700,000.0 and distributable earnings of $4,100,000 or $0.31 per basic WA common share and had GAAP net income of $3,400,000 or $0.25 per basic WA common share. We believe that providing distributable earnings is helpful to shareholders in assessing the overall performance of SUNS’ business. Distributable earnings represents net income computed in accordance with GAAP, excluding non cash items such as stock compensation expense, unrealized gains or losses, and the provision for current expected credit losses. For the quarter ended 06/30/2025, the Board of Directors declared a $0.30 dividend per share. The dividend was paid on 07/15/2025 to shareholders of record as of 06/30/2025.

We anticipate that the Board of Directors will declare the third quarter dividend on or about 09/15/2025. We ended the 2025 with $360,200,000 of current commitments and $251,000,000 of principal outstanding spread across 13 loans. As of 08/01/2025, our portfolio consisted of $360,200,000 of current commitments and $253,200,000 of principal outstanding across 13 loans, with a weighted average portfolio yield to maturity of approximately 12.2%. I’d also like to note that as of 06/30/2025, our CECL reserve was approximately 626,000 or 25 basis points for our loans at carrying value. As of 06/30/2025, we had total assets of $256,500,000 and our total shareholder equity was $184,300,000 with a book value of $13.73 per share.

With that, I will turn it back to the operator to start the Q and A.

Conference Operator: Thank you. First question comes from Randy Binner with B. Riley Securities. Your line is open.

Randy Binner, Analyst, B. Riley Securities: Okay, great. Thanks. Good morning. So a quick question, and I’m probably going to look at Slide 13 on the deck with the portfolio detail. Related to the five term sheets for $275,000,000 that’s in the pipeline.

Can you kind of size where that interest rate profile is on that?

Brian Sedrish, Chief Executive Officer, Sunrise Realty Trust: Sure. Thanks for the question. Yes. So the five that we’re talking about are firstly all first mortgages. And then as it relates to the spread, we’ve seen spreads stay relatively strong.

They are currently above the current blended portfolio rate of our existing loans.

Randy Binner, Analyst, B. Riley Securities: Okay, awesome. Thank you for that. And then on the of Park City loan is smaller, but it was interesting in that maybe that has a spread that’s higher and it’s also in a new geography. So could you speak to if there was something interesting about that one from a return perspective. And then if if you’re if you’re kind of broadening the aperture on geographies you’re looking at.

Leonard Tanenbaum, Executive Chairman, Sunrise Realty Trust: I think, it’s Lance. Yeah. I think the Park City loan was a is a much bigger loan. We we took part of it. So we did not lead or agent that one, But we found an attractive value and we were brought in as a syndicate partner.

Randy Binner, Analyst, B. Riley Securities: Okay. It should we think of like the West or the Intermountain West as being an attractive area in general or was that just more opportunistic?

Brian Sedrish, Chief Executive Officer, Sunrise Realty Trust: I would say that as we sort of think about the Southern half of The US, there are certain pockets where it matches up with our growth expectations. And those are the areas that we’ll go to. I think expect that we’ll continue to see a substantial percentage of our portfolio in the current states that we’re operating in, sprinkle in Georgia, in the Carolinas, Tennessee. But but that will be the majority of what we’re doing. But we will see opportunistically deals that still fit those profile of the of the opportunity set that we think is interesting, and and and we’ll take advantage of that.

And this one was one of those we’re really good about. We felt really good about the risk in this deal, given coverage, and we felt great about the the rate of return. And so we opportunistically went for it.

Randy Binner, Analyst, B. Riley Securities: Okay. Understood. Thank you.

Conference Operator: One moment one moment for our next question. One moment. Our next question comes from Jason Seption with KBW. Your line is open.

Jason Seption, Analyst, KBW: Hi. Thanks for taking my question and good morning. Yes, it would be great to get more color on your origination targets for the 2025 and 2026. And within that, what’s the split of senior and subordinate loans? Thank you.

Brian Sedrish, Chief Executive Officer, Sunrise Realty Trust: Yeah. Hey, Jason. You you wanna go ahead, Luke?

Leonard Tanenbaum, Executive Chairman, Sunrise Realty Trust: Look. I I we we try not to forecast. As you can see from the the loan slipping from the second quarter the last quarter to into this one, these loans can take a long time to close. It it it can be kind frustrating at times. You can think a loan closing can be anywhere from a month or two to one of them is eight months.

And so you’ve seen one loan slip from quarter to quarter. What I’m really pleased about is the five loans that we’ve signed and the documentation, which means they’re in active, underwriting. I can’t tell you whether they close in the third quarter or the fourth quarter or where all of them close, but we certainly most of them will will close. And we’ll have those closings going on this year. Beyond that, I’m pretty excited too.

I think we’ve got a number of other ones in the wings that we’re contemplating, but they’re not signed. So much higher chance of the loan closing after it’s signed in. We have the deposit and some documentation. Got it. Yeah.

Brian Sedrish, Chief Executive Officer, Sunrise Realty Trust: And I would just generally seeing real interesting activity. But as Len said, it’s just it’s just unclear, right, from a transaction closing perspective as to when they actually close. But I do feel really, really encouraged by our pipeline and what we’re seeing out in the marketplace.

Jason Seption, Analyst, KBW: Got it. Thank you. That makes sense. And then on the loans that are currently on your books, the Florida condo loans, in your view, how is that market performing overall? And specifically, how are those projects progressing?

Brian Sedrish, Chief Executive Officer, Sunrise Realty Trust: Sure. Yes. Now, the projects that you’re talking about are performing as expected. There hasn’t been any noticeable decrease in activity. I mean, the nice thing certainly, about a couple of our loans in the Florida area that you’re talking about is the price points are on the more, quote, unquote, affordable side of of the of the space, which is obviously opening up the aperture to a lot more buyers.

So to date, we’re seeing that activity relatively stay the same. There’s been some moderation, but the business plan for the most part is on track there.

Jason Seption, Analyst, KBW: Great. Thanks. And then separately, you talked about your leverage target at scale being 1.5 times, with part of that coming from a credit facility and another portion from unsecured debt. So I guess what’s like the target timeline for scaling leverage and any potentially unsecured issuance?

Leonard Tanenbaum, Executive Chairman, Sunrise Realty Trust: As you know, have a $75,000,000 line that’s not drawn. Right, Brandon? It’s not. Yeah. It’s not drawn.

So we want that line drawn to make it more cost efficient of capital. We’re monitoring the unsecured market. As I said in my remarks, that’s where we’re gonna go next or that’s where we plan to go next, assuming the market cooperates. It’s you also have to do deal timing. You have these deals that are closing and the ones on the wings.

And to the extent that we have funded deals that need additional firepower, we’re gonna have to go to the unsecured market and raise it. So that’s that’s the project for the fourth quarter.

Brandon Hetzel, Chief Financial Officer, Sunrise Realty Trust: And just to clarify, the 75,000,000 line is an unsecured line on top of our $140,000,000 East West Bank led credit facility.

Jason Seption, Analyst, KBW: Got it. Thank you.

Conference Operator: One moment for our next question. Our next question comes from Tyler Batory with Oppenheimer. Your line is open.

: Good morning. Thanks for taking my questions. I got disconnected earlier, so I apologize if these were already addressed. But my first question is on the macro and the market backdrop in terms of more competitors in the market. It sounds like that’s not something that’s impacting you right now, but it’s also something that you called out.

So I’m curious if you can just talk a little bit more about what you’re seeing from the competition. I’m not sure if there’s perhaps a dynamic where that gets even more intense as the year goes on, just given there’s more opportunities out there, perhaps drawing some additional interest in where you’re operating here.

Brian Sedrish, Chief Executive Officer, Sunrise Realty Trust: Tal, it’s Brian. Thanks for the question. Yeah, so the heaviest competition that we have seen has been in the near stabilized part of the financing markets, and a large part of that has been on the multi side. That’s trading much tighter right now, I think largely based upon the fact that the back leverage CLO securitization markets have come back, and that has really enabled guys to compress yields competitors. That has been a smaller component of our business.

We certainly like using and with it across our portfolio, the ability to do deals like that, but it’s been a smaller component. Really, more of the stuff that we’re playing in is more transitional where we can use our expertise in structuring. There’s definitely been more competitors come into that space, but we still have seen, for the most part, a good chunk of opportunities there. I expect that that will continue. Sure, I think there’ll be more competitors coming in.

But in terms of the opportunity set and as the market more normalizes, I think the opportunity set’s gonna increase. So I think overall, I feel really good about us continuing to be able to lean into the opportunities in that place. And look, as loans are looking to be refinanced from a bridge financing perspective prior to a more securitized, stabilized takeout financing, that’s really where also there’ll be some opportunities to do some stuff.

: Okay. Thank you for that. I also wanted to double click on the interest rate topic. And this is something that’s come up in some conversations with the clients. I want to be sure that it gets picked up.

This is also something that you briefly mentioned in the prepared remarks. But just thinking about this environment where potentially, hopefully, interest rates are going to be gliding lower, what does that mean in terms of your business? What does that mean potentially in terms of your financials? How do you think about net interest margin expanding if that does play out the rest of this year in the back half?

Leonard Tanenbaum, Executive Chairman, Sunrise Realty Trust: So that’s the really good way. Good thing is, Len, about how we’re positioned is these construction loans take a long time to fund. I think we’ve said that in previous quarters and they’re locked in on really good floors. I think our average floor is about 4.1%. And if you think about floors maybe in the new deals, they’ve come down a little bit because you’re right.

There are people anticipating, interest rate cuts. I think maybe the average floor in the newer deals. I’m not saying any of them closed. I’m not saying we were able to complete any of them are around three and three and three quarters percent. So they’re coming down a little bit, but that leaves a lot of room against our credit line at 2.6% floor to capture some really nice net interest margin.

Of course, you have to get drawn first, otherwise you don’t get the margin. The other thing, I think a drop in interest rates really helps us with as we continue to commit the portfolio to really good liens, lean loans. I think Brian said, these are first mortgage loans really that are in the pipeline today is, we’ll be able to do better in the unsecured markets. So, look, the fourth quarter, we’re keeping our eyes open and what we watch Ladder Financial, congratulations to them getting their, first investment grade rating that I’ve seen in the mortgage REIT market. I think they’re gonna set a great benchmark, for the industry.

Remember, I come out of the business development companies, the BDCs, and we were the we were one of the top five investment grade rated BDCs. And that industry compressed. So I think the good mortgage REITs are gonna start moving towards ladders type of cost of capital. Obviously not ladders, but towards ladders cost of capital. And that’s really gonna benefit all of the good mortgage REITs that are going for the lower leverage like we are.

Remember, we don’t have any repos. We’re going for a traditional leverage model. The basic leverage model, which was set over and over again, it’s about a third equity, a third sub debt, a third senior with the senior half drawn for a target leverage of one and a half times. And so we’re right on track with, performing on that.

: Okay. Great. That’s all for me. Thanks for the detail.

Brandon Hetzel, Chief Financial Officer, Sunrise Realty Trust: Thanks, Todd.

Conference Operator: And I’m not showing any further questions at this time. I’d like to turn the call back over to Brian for any further remarks.

Brian Sedrish, Chief Executive Officer, Sunrise Realty Trust: Well, thank you all for joining the call today. We are encouraged by this increased deal activity in our pipeline in the areas that we’re seeing, and we look forward to sharing our progress with all of you on the next quarter call. Goodbye.

Conference Operator: Thank you. Ladies and gentlemen, this concludes today’s presentation. You may now disconnect, and have a wonderful day.

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