Sunrise Realty Trust (NASDAQ:SUNS) reported second-quarter distributable earnings of $0.29 per basic weighted average share and announced a definitive agreement to acquire Southern Realty Trust, a private mortgage REIT on the TCG Real Estate platform.
For the first six months of 2026, Sunrise generated distributable earnings of $0.65 per share, exceeding the $0.60 per share in dividends declared during the period, Executive Chairman Leonard Tannenbaum said. The company declared a $0.30 per-share dividend for the second quarter, which was paid July 15 to shareholders of record as of June 30.
Proposed Southern Realty Trust Merger
SRT shareholders would receive newly issued Sunrise common stock using an exchange ratio that provides a 6% premium to SRT’s book value per share relative to Sunrise’s book value per share as of the measurement date. Chief Financial Officer Brandon Hetzel described the arrangement as a book-value-for-book-value transaction in which SRT receives a 6% premium on its book value.
Both companies formed independent special committees made up entirely of independent directors, Tannenbaum said. Oppenheimer & Company advised Sunrise’s committee, while KBW, Keefe, Bruyette & Woods advised SRT’s committee. The special committees and both companies’ boards unanimously approved the transaction.
The companies expect the merger to close in the fourth quarter of 2026, subject to shareholder approvals and customary closing conditions. Sunrise said it expects to file a proxy statement with the Securities and Exchange Commission containing additional information.
Management said all assets in Sunrise’s portfolio are also held by SRT, although in differing ownership proportions. Tannenbaum said consolidating the platforms would remove complexity for lenders related to control of the assets and how the assets can secure financing.
Sunrise expects the transaction to increase its equity base by approximately 60%. Management said the larger platform could improve trading liquidity, broaden index eligibility, enhance access to unsecured financing markets and attract investors with minimum market-capitalization requirements.
The company also expects cost savings from eliminating duplicative accounting, legal, audit, board and regulatory compliance expenses. CEO Brian Sedrish said the combination should produce margin benefits from lower general and administrative costs and “should get an earnings increase.”
In connection with the closing, Sunrise’s management agreement would be amended and restated. Changes would include:
- A reduction in the incentive fee rate to 17.5% from 20%.
- A reduction in the hurdle rate to 7% from 8%.
- A $1 million aggregate management-fee waiver over the four quarters following closing.
Commercial Real Estate Lending Environment
Sedrish said industry estimates indicate roughly $900 billion of commercial real estate loans will mature in 2026, followed by a comparable volume in 2027. Many of those loans originated between 2019 and 2022, when interest rates were lower, creating refinancing gaps as current senior debt capacity does not support prior leverage levels.
He said Sunrise is focused on providing structured capital for borrowers that need to address those gaps. The company does not seek to compete in conventional stabilized first-mortgage lending, where Sedrish said bank competition has compressed spreads, particularly in stabilized and near-stabilized multifamily, industrial and data-center properties.
“What has stayed scarce in this cycle is not senior debt, it’s equity,” Sedrish said. He added that sponsors facing loan maturities and required principal paydowns are increasingly engaging with financing structures that provide appropriate returns and protections for Sunrise.
Management said transaction activity remained uneven during the quarter, but the investment team has recently seen a noticeable increase in opportunities that meet its criteria. During the second quarter, the TCG Real Estate platform signed a term sheet for a $93 million senior construction loan for a Texas multifamily development. Sunrise expects to structure that financing with a third-party partner using an A-note/B-note arrangement.
On multifamily fundamentals, Sedrish said absorption has caught up with supply in markets where the company has focused, following a decline in new construction. He said the company has observed rent increases and fewer concessions in those markets, while demand in certain South Florida markets has remained strong.
Portfolio, Repayments and Balance Sheet
For the second quarter, Sunrise reported net interest income of $5.8 million, distributable earnings of $3.9 million, or $0.29 per basic share, and GAAP net income of $3.1 million, or $0.23 per basic share.
The company funded $25.4 million of new and existing loans during the quarter and received $26 million in repayments. As of June 30, Sunrise had $377.4 million of current commitments and $298.7 million of principal outstanding across 14 loans.
Subsequent to quarter-end, the Panther National Senior Term Loan and Construction Revolver were repaid in full. The credit facility, which originated in August 2024 and was secured by a 392-acre private golf and residential community in Palm Beach Gardens, Florida, completed its investment cycle in less than two years, Sedrish said.
As of Aug. 3, Sunrise had $315 million of current commitments and $248.8 million of principal outstanding across 12 loans. All loans were current and performing, with a weighted-average portfolio yield to maturity of approximately 12.3%.
Total debt outstanding was approximately $141.7 million at June 30. After applying Panther National repayment proceeds to reduce borrowings, total debt was approximately $85.6 million as of Aug. 3. Sunrise ended the quarter with total assets of $330.7 million, shareholder equity of $181.8 million and book value of $13.45 per share.
Thompson San Antonio Sale Agreement
Sunrise and its affiliates entered into a purchase and sale agreement to sell The Thompson San Antonio to a third-party buyer. The buyer has funded two non-refundable option payments totaling $6 million, which will be credited against the purchase price if the transaction closes by Sept. 30.
Sunrise and its affiliates also agreed to provide seller financing to facilitate the purchase. Management did not provide details on the potential loan-to-value ratio or rate, though Tannenbaum said he anticipated “normal seller note rates.” The company and its affiliate continue to pursue remedies under the former sponsor’s guarantee.
About Sunrise Realty Trust (NASDAQ:SUNS)
Sunrise Realty Trust is a real estate investment trust (REIT) that focuses on acquiring, owning and leasing convenience store and fuel retail properties under long-term net leases. The company targets sale-leaseback transactions and joint-venture investments with high-credit tenants in the convenience retail sector. Sunrise Realty Trust’s portfolio comprises single-tenant properties that benefit from predictable cash flows, structured lease agreements and tenant-driven site improvements, providing exposure to a segment of the retail real estate market that aligns closely with consumer essentials.
The company’s primary business activities include sourcing and underwriting new property investments, negotiating sale-leaseback and ground lease transactions, and managing asset performance throughout the lease term.
