Sunrise Realty Trust, Inc. 10-Q

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our consolidated financial statements and the accompanying notes and other information included in this Quarterly Report on Form 10-Q (the “Quarterly Report”). This discussion and analysis contains forward-looking statements that involve risks and uncertainties which could cause our actual results to differ materially from those anticipated in these forward-looking statements, including, but not limited to, risks and uncertainties discussed under the heading “Cautionary Note Regarding Forward-Looking Statements,” in this Form 10-Q, “Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2025. Overview SUNS is a Maryland corporation that was formed on August 28, 2023 and that made its first investment in January 2024. We are a real estate focused debt fund, actively pursuing opportunities to finance transitional commercial real estate projects located across the Southern U.S. We are an integral part of the platform of affiliated asset managers under the Tannenbaum Capital Group (“TCG”). Our investment focus includes originating or acquiring loans backed by single assets or portfolios of assets that typically have (i) an investment hold size of approximately $15-100 million, secured by CRE assets, including transitional or construction projects, across diverse property types, (ii) a duration of approximately 2-5 years, (iii) interest rates that are determined periodically on the basis of a floating base lending rate (e.g., Secured Overnight Financing Rate (“SOFR”)) plus a credit spread, (iv) a loan-to-value (“LTV”) ratio of no greater than approximately 75% on an individual investment basis and (v) no more than approximately 75% LTV across the portfolio, in each case, at the time of origination or acquisition, and are led by experienced borrowers and well-capitalized sponsors with high quality business plans. Our loans typically feature origination fees and/or exit fees. We target a portfolio net internal rate of return (“IRR”) in the low-teens, which we believe may increase to the mid-teens after including total interest and other revenue from the portfolio, including loans funded from drawing on our leverage, net of our interest expense from our portfolio lenders. We are also 22 Index 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. We are an externally managed Maryland corporation and elected to be taxed as a REIT under Section 856 of the Internal Revenue Code of 1986, as amended (the “Code”), commencing with our taxable year ended December 31, 2024. We believe our organization and current and proposed method of operation will enable us to qualify as a REIT. However, no assurances can be given that our beliefs or expectations will be fulfilled, since qualification as a REIT depends on our continuing to satisfy numerous asset, income, distribution and other tests, which in turn depends, in part, on our operating results and ability to obtain financing. We also intend to operate our business in a manner that will permit us to maintain our exemption from registration under the Investment Company Act. 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, 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. In addition, Section 107 of the JOBS Act provides that an “emerging growth company” can take advantage of the extended transition period provided in Section 7(a)(2)(B) of the Securities Act for complying with new or revised accounting standards. In other words, an “emerging growth company” can delay the adoption of certain accounting standards until those standards would otherwise apply to private companies. We have elected to take advantage of the extended transition period. 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. We will 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. Developments During the First Quarter March 31, 2026: Updates to Our Loan Portfolio During the First Quarter March 31, 2026 In January 2026, we and an affiliated co-investor entered into and exited a $21.6 million senior bridge loan to finance the acquisition of a ranch located in Colorado. We 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. In February 2026, we and an affiliated co-investor entered into a $69.3 million subordinate B-note secured by a portfolio of 15 hotel properties. We committed approximately $48.3 million, and an affiliated co-investor committed the remaining $21.0 million, funding $45.3 million and $19.7 million, respectively, upon closing. 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%. The subordinate B-note is secured by a first mortgage (and lease-hold mortgage on two properties) and related collateral interests pursuant to the terms of the credit agreement and related loan documents. The proceeds of the loan will be used to refinance existing debt, provides an “earn out” and stabilizes the assets. In February 2026, we and the affiliate co-lender on our senior hospitality loan in San Antonio, Texas (the “San Antonio Loan”) San Antonio loan, formed 123 Lex Ave Holdings LLC (the “Lex Ave JV”). In connection with the formation of the Lex Ave JV, the underlying hotel property securing the loan was acquired through a credit bid equal to the aggregate unpaid principal balance of approximately $40.6 million. Upon foreclosure, legal title to the property was obtained by the lenders and was contemporaneously contributed to the Lex Ave JV. Following the contribution, we hold a 65.0% ownership interest in the Lex Ave JV. As a result of these transactions, we derecognized the San Antonio loan from its consolidated balance sheet. 23 Index In March 2026, our secured mortgage loan for a class A multi-family residential development in Dallas, Texas was repaid in full. The outstanding principal on the date of repayment was approximately $45.0 million. We received and recognized approximately $1.2 million relating to the repayment premium. Dividends Declared Per Share During the three months ended March 31, 2026 and 2025, we declared the following cash dividends: Date Declared Payable to Shareholders of Record at the Close of Business on Payment Date Amount per Share Total Amount March 4, 2025 March 31, 2025 April 15, 2025 $ 0.30 $ 4,026,448 2025 Period Subtotal $ 0.30 $ 4,026,448 March 10, 2026 March 31, 2026 April 15, 2026 $ 0.30 $ 4,055,897 2026 Period Subtotal $ 0.30 $ 4,055,897 Recent Developments On April 1, 2026, our senior loan for a residential property in Austin, TX was repaid in full. The outstanding principal balance of the senior secured term loan on the date of repayment was approximately $14.1 million. 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. 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 March 31, 2026 and December 31, 2025 was approximately $13.50 and $13.56, respectively. Non-GAAP Metrics Distributable Earnings In addition to using certain financial metrics prepared in accordance with GAAP to evaluate our performance, we also use Distributable Earnings to evaluate our performance, excluding the effects of certain transactions and GAAP adjustments we believe are not necessarily indicative of our current loan activity and operations. Distributable Earnings is a measure that is not prepared in accordance with GAAP. We use these non-GAAP financial measures both to explain our results to shareholders and the investment community and in the internal evaluation and management of our businesses. Our management believes that these non-GAAP financial measures and the information they provide are useful to investors since these measures permit investors and shareholders to assess the overall performance of our business using the same tools that our management uses to evaluate our past performance and prospects for future performance. The determination of Distributable Earnings is substantially similar to the determination of Core Earnings under our Management Agreement, provided that Core Earnings is a component of the calculation of any Incentive Compensation earned under the Management Agreement for the applicable time period. Thus, Core Earnings is calculated without giving effect to Incentive Compensation expense, while the calculation of Distributable Earnings accounts for any Incentive Compensation earned for such time period. 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. 24 Index We believe providing Distributable Earnings on a supplemental basis to our net income as determined in accordance with GAAP is helpful to shareholders in assessing the overall performance of our business. As a REIT, we are required to distribute at least 90% of our annual REIT taxable income, subject to certain adjustments, and to pay tax at regular corporate rates to the extent that we annually distribute less than 100% of such taxable income. Given these requirements and our belief that dividends are generally one of the principal reasons that shareholders invest in our Common Stock, we generally intend to attempt to pay dividends to our shareholders in an amount at least equal to such REIT taxable income, if and to the extent authorized by our Board of Directors. Distributable Earnings is one of many factors considered by our Board of Directors in authorizing dividends and, while not a direct measure of net taxable income, over time, the measure can be considered a useful indicator of our dividends. Distributable Earnings is a non-GAAP financial measure and should not be considered as a substitute for GAAP net income. 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. The following table provides a reconciliation of GAAP net income to Distributable Earnings: Three Months Ended March 31, 2026 2025 Net income $ 4,253,350 $ 3,099,437 Adjustments to net income: Stock-based compensation expense 369,962 243,621 Depreciation and amortization — — Unrealized (gains) losses, or other non-cash items — — Provision for current expected credit losses 60,283 117,648 TRS (income) loss — — One-time events pursuant to changes in GAAP and certain non-cash charges — — Distributable earnings $ 4,683,595 $ 3,460,706 Basic weighted average shares of common stock outstanding 13,319,225 11,208,015 Distributable earnings per basic weighted average share $ 0.35 $ 0.31 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. Our net interest margin, which includes the accretion and amortization of OID, is recognized based on the contractual rate and the outstanding principal balance of the loans we originate. 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. 25 Index Results of Operations f or the three months ended March 31, 2026 and 2025 The following table summarizes our consolidated results of operations for the three months ended March 31, 2026 and 2025: Three Months Ended March 31, 2026 2025 Revenue Interest income $ 10,272,686 $ 4,958,523 Interest expense (2,967,637) (336,159) Net interest income 7,305,049 4,622,364 Expenses Management and incentive fees 1,635,136 — General and administrative expenses 743,099 753,126 Stock-based compensation 369,962 243,621 Professional fees 243,219 408,532 Total expenses 2,991,416 1,405,279 Provision for current expected credit losses (60,283) (117,648) Net income $ 4,253,350 $ 3,099,437 Net income. Our net income allocable to our common shareholders for the three months ended March 31, 2026, was approximately $4.3 million, or $0.32 per basic weighted average common share, compared to net income allocable to our common shareholders of approximately $3.1 million, or $0.27 per basic weighted average common share for the three months ended March 31, 2025. Interest income. Interest income increased approximately $5.3 million, or 107.2%, for the three months ended March 31, 2026, as compared to the same period in the prior year. The increase reflects a higher average investment balance driven by increased capital deployment. In addition, the Company recognized approximately $1.2 million of repayment premium income related to the early repayment of a $45.0 million secured mortgage loan in March 2026. Interest expense. Interest expense increased approximately $2.6 million for the three months ended March 31, 2026, compared to the same period in 2025, primarily driven by increased utilization of the Company’s lines of credit to support portfolio growth. Management and incentive fees. Management and incentive fees increased approximately $1.6 million for the three months ended March 31, 2026, compared to the same period in 2025. Base Management Fees incurred for the three months ended March 31, 2026 were approximately $0.7 million. Incentive Fees incurred for the three months ended March 31, 2026 were approximately $0.9 million. For the three months ended March 31, 2025 , approximately $0.6 million of Base Management Fees and $0.3 million of Incentive Fees were waived. Professional fees. Professional fees decreased $(0.2) million during the three months ended March 31, 2026, as compared to the same period in 2025. Provision for current expected credit losses. The provision for current expected credit losses for the three months ended March 31, 2026 was approximately $0.1 million. The CECL Reserve balance as of March 31, 2026 was approximatel y $0.6 million, or 0.19%, of our total loans held at carrying value of approximately $296.8 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 $0.3 million and (ii) a liability for unfunded commitments of approximately $0.2 million . 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. We continuously evaluate the credit quality of each loan by assessing the risk factors of each loan. 26 Index Loan Portfolio The table below summarizes our total loan portfolio as of March 31, 2026, unless otherwise specified. Loan Type Location Original Funding Date Loan Maturity Current Commitments as of 03/31/2026 % of Total Principal Balance as of 03/31/2026 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 3.5% $ 14,087,288 9.8% N/A Floating No 11% Residential Palm Beach Gardens, FL (2) 8/5/2024 9/1/2027 31,875,000 8.0% 28,637,600 12.3% N/A Floating No 14% Residential Palm Beach Gardens, FL (2) 8/5/2024 9/1/2027 28,125,000 7.1% 25,114,339 10.3% N/A Floating No 12% Residential Fort Lauderdale, FL (3) 11/1/2024 12/30/2026 30,000,000 7.6% 16,672,674 11.5% N/A Floating No 15% Hospitality Austin, TX 12/12/2024 12/11/2027 32,000,000 8.1% 32,000,000 9.5% N/A Floating No 11% Residential Aventura, FL 1/27/2025 1/27/2027 30,750,872 7.7% 30,750,872 9.0% N/A Floating No 11% Net Leased Tenant New Orleans, LA (3) 1/30/2025 1/30/2028 44,000,000 11.0% 18,196,973 10.1% N/A Floating No 11% Residential Park City, UT 6/11/2025 8/1/2027 9,250,000 2.3% 4,295,478 11.3% N/A Floating No 13% Residential Miami, FL 9/26/2025 9/25/2028 35,000,000 8.8% 23,468,054 8.4% N/A Floating No 10% Industrial Doral, FL 10/6/2025 10/6/2027 9,380,000 2.4% 8,887,586 10.0% N/A Floating No 12% Industrial West Palm Beach, FL 10/16/2025 10/16/2027 16,240,000 4.1% 1,830,567 10.0% N/A Floating No 12% Retail Houston, TX 10/24/2025 10/24/2028 30,000,000 7.6% 22,218,757 9.5% N/A Floating No 11% Subordinate debt: Residential Miami, FL 11/15/2024 11/15/2027 13,000,000 3.3% 11,296,455 13.3% N/A Fixed No 15% Residential Miami, FL 3/21/2025 12/13/2028 25,113,445 6.3% 16,536,991 13.5% 1.0% Floating No 15% Hospitality Diversified 2/13/2026 2/13/2029 48,265,092 12.2% 45,293,104 11.3% N/A Floating No 13% Subtotal (4) $ 397,086,697 100.0% $ 299,286,738 10.5% 0.1% 12% 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. OID is recognized as a discount to the funded loan principal and is accreted to income over the term of the loan. The estimated YTM calculations require management to make estimates and assumptions, including, but not limited to, the timing and amounts of loan draws on delayed draw loans, the timing and collectability of exit fees, the probability and timing of prepayments and the probability of contingent features occurring. For example, certain credit agreements contain provisions pursuant to which certain interest rates and fees earned by us under such credit agreements will decrease upon the satisfaction of certain specified criteria which we believe may improve the risk profile of the applicable borrower. 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 March 31, 2026 applied through maturity. Actual results could differ from those estimates and assumptions. (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) If the Company holds both the A-note and B-note, the loan is categorized as a senior mortgage loan. (4) The interest subtotal rate is a weighted average rate. Loans Held for Investment at Carrying Value As of March 31, 2026 and December 31, 2025, our portfolio included 15 and 16 loans held at carrying value, respectively. The aggregate originated commitment under these loans was approximately $397.1 million and $420.7 million, respectively, and outstanding principal was approximately $299.3 million and $305.5 million, respectively, as of March 31, 2026 and 2025 . During the three months ended March 31, 2026 , we funded approximately $90.2 million of new loans and additional principal on existing loans and had approximately $70.1 million of principal repayments of loans held at carrying value. As of March 31, 2026 and December 31, 2025, approximately 96% and 96%, respectively, of our loans held at carrying value had floating interest rates. As of March 31, 2026, t hese floating benchmark rates included one-month SOFR quoted at 3.7% and subject to a weighted average floor of 3.9% and U.S. prime rate subject to a weighted average floor of 8.0% and quoted at 6.75% based on outstanding principal. 27 Index The following tables summarize our loans held at carrying value as of March 31, 2026 and December 31, 2025 : As of March 31, 2026 Outstanding Principal (1) Original Issue Discount Carrying Value (1) Weighted Average Remaining Life (Years) (2) Senior mortgage loans (3)(4) $ 226,160,188 $ (1,962,510) $ 224,197,678 1.6 Subordinate debt 73,126,550 (483,198) 72,643,352 2.6 Total loans held at carrying value $ 299,286,738 $ (2,445,708) $ 296,841,030 1.8 As of December 31, 2025 Outstanding Principal (1) Original Issue Discount 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 (1) The difference between the carrying value and the outstanding principal amount of the loans consists of unaccreted OID and loan origination costs. (2) Weighted average remaining life is calculated based on the carrying value of each respective group of loans as of March 31, 2026 and December 31, 2025 . (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. (4) If the Company holds both the A-note and B-note, the loan is categorized as a senior mortgage loan. The following table presents changes in loans held at carrying value as of and for the three months ended March 31, 2026: Principal Original Issue (Discount) Premium Carrying Value Total loans held at carrying value at December 31, 2025 $ 305,513,185 $ (2,838,442) $ 302,674,743 New fundings 86,095,064 (903,135) 85,191,929 Interest drawn on loans 4,124,684 — 4,124,684 Accretion of original issue discount and premium, net — 1,129,036 1,129,036 Loan repayments (70,099,302) — (70,099,302) Foreclosure and contribution to real estate joint venture (26,379,740) 166,833 (26,212,907) PIK interest 32,847 — 32,847 Total loans held at carrying value at March 31, 2026 $ 299,286,738 $ (2,445,708) $ 296,841,030 Collateral Overview Our loans are secured by various types of assets of our borrowers, including real property and certain personal property and other assets to the extent permitted by applicable laws and the regulations governing our borrowers. Our debt investments will primarily be secured by real estate assets that are expected to be diversified across asset classes, including high quality residential (including multi-family, condominiums and single-family residential communities), retail, office, hospitality, industrial, mixed-use and specialty-use real estate. 28 Index Upon default of a loan, we may seek to sell the loan to a third-party or have an affiliate or a third party work with the borrower to have the borrower sell collateral securing the loan to a third party or institute a foreclosure proceeding to have such collateral sold, in each case, to generate funds towards the payoff of the loan. While we believe that the appraised value of any real estate assets or other collateral securing our loans may impact the amount of the recovery in each such scenario, the amount of any such recovery from the sale of such real estate or other collateral may be less than the appraised value of such collateral and the sale of such collateral may not be sufficient to pay off the remaining balance on the defaulted loan. If we do not or cannot sell a foreclosed property, we would then come to own and operate it as “real estate owned” (“REO”). During the three months ended March 31, 2026 , the Company acquired one REO asset through foreclosure proceedings and contemporaneously contributed such asset to the Lex Ave JV (see Note 6). We may pursue a sale of a defaulted loan if we believe that a sale would yield higher proceeds or that a sale could be accomplished more quickly than a foreclosure proceeding while yielding proceeds comparable to what would be expected from a foreclosure sale. To the extent that we determine that the proceeds are more likely to be maximized through instituting a foreclosure sale or through taking title to the underlying collateral, we will be subject to the rules and regulations under state law that govern foreclosure sales. 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. 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. We use significant cash to purchase our target investments, repay principal and interest on our borrowings, make distributions to our shareholders and fund our operations. The sources of financing for our target investments are described below. Our primary sources of cash generally consist of net proceeds of future debt or equity offerings, debt financing, including borrowings under a senior secured revolving credit facility (the “Revolving Credit Facility”) and an unsecured revolving credit facility (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. As of March 31, 2026 and December 31, 2025, all of our cash was unrestricted and totaled approximately $5.7 million and $6.4 million, respectively. As of March 31, 2026, 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. 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. There were no capital markets transactions completed during the three months ended March 31, 2026. Our registration statement on Form S-3 (File No. 333-289188) (the “Shelf Registration Statement”) became effective on August 6, 2025 and allows us to offer and sell, from time to time, up to $500.0 million of our securities, including common stock, preferred stock, debt securities, warrants and rights (including as part of a unit) to purchase shares of our common stock or preferred stock. The specifics of any future offerings, along with the use of proceeds of any securities offered, will be described in detail in a prospectus supplement , or other offering materials, at the time of any offering. We may also access liquidity through our at-the-market offering program (the “ATM Program”), established in August 2025, pursuant to which we may offer and sell, from time to time, up to $50.0 million of our common stock. No shares were sold under the ATM Program during the three months ended March 31, 2026 . On September 3, 2025, the Company also established a dividend reinvestment plan (the “DRIP”). The DRIP allows shareholders to reinvest all or a portion of their cash dividends in additional shares of the Company’s common stock (which shares, at the Company’s option, are either newly issued directly from the Company or purchased by the plan administrator in the open market). A total of 1,000,000 shares of common stock has been registered for issuance under the DRIP. No shares were issued under the DRIP during the three months ended March 31, 2026. 29 Index We intend to raise future equity capital and issue debt securities in order to fund our future investments in loans. 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). During the year ended December 31, 2025, 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 $140.0 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. In February 2026, we entered into Amendment Number Seven to the Revolving Credit Facility (“Amendment Number Seven”), by and among the Company and certain subsidiaries, as borrowers, the lenders party thereto, and East West Bank as administrative agent, which, among other things (i) facilitated the entry of an additional lender; (ii) increased the aggregate commitment by $25.0 million, for a total maximum revolver usage of $165.0 million; and (iii) revised the required consent from certain lenders to advance additional funds under the Revolving Credit Agreement. As amended, the Revolving Credit Facility requires us to, among other things: (i) maintain liquidity equal to the greater of (A) $5 million and (B) an amount equal to 10% of the outstanding obligations thereunder so long as we maintain at least $5 million in qualified cash, (ii) maintain a quarterly debt service coverage ratio of at least 1.50 to 1.0 and (iii) maintain a leverage ratio of not more than 3.25x measured as of the end of each fiscal quarter. As of March 31, 2026, we had $88.1 million of outstanding borrowings under the Revolving Credit Facility and $76.9 million availability under our Revolving Credit Facility, 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). To the best of our knowledge, as of March 31, 2026 , we were in compliance in all material respects with all covenants contained in our Revolving 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 . As of March 31, 2026, we had $51.4 million of outstanding borrowings under the SRTF Credit Facility and $23.6 million availability under our SRTF Credit Facility. 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. 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. Debt Service As of March 31, 2026 , 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. 30 Index Cash Flows The following table sets forth changes in cash and cash equivalents for the three months ended March 31, 2026 and 2025: Three Months Ended March 31, 2026 2025 Net cash provided by (used in) operating activities $ 1,165,237 $ (914,591) Net cash used in investing activities (15,092,627) (95,727,807) Net cash provided by (used in) financing activities 13,140,901 (86,341,592) Change in cash and cash equivalents $ (786,489) $ (182,983,990) Net Cash Provided by (Used in) Operating Activities Net cash provided by operating activities during the three months ended March 31, 2026 was approximately $1.2 million, compared to net cash used in operating activities of approximately $(0.9) million for the three months ended March 31, 2025. The increase of approximately $2.1 million period over period was primarily due to an increase in interest income, partially offset by higher management and incentive fees paid. Net Cash Used in Investing Activities Net cash used in investing activities during the three months ended March 31, 2026 was approximately $(15.1) million, compared to $(95.7) for the three months ended March 31, 2025. The decrease in net cash used of approximately $80.6 million was primarily due to an increase in principal repayments on loans of approximately $61.1 million and a decrease in issuance and fundings on loans of approximately $19.6 million. Net Cash Provided by (Used in) Financing Activities Net cash provided by financing activities during the three months ended March 31, 2026 was approximately $13.1 million, compared to net cash used in financing activities of $(86.3) million for the three months ended March 31, 2025. The decrease in cash used in financing activities of approximately $99.5 million was primarily due to an increase of $167.0 million in repayments on the revolving credit facilities, partially offset by a decrease of $(72.6) million from offering proceeds relating to the January 2025 Offering. Contractual Obligations, Other Commitments, and Off-Balance Sheet Arrangements Our contractual obligations as of March 31, 2026 are as follows: As of March 31, 2026 Less than 1 year 1-3 years 3-5 years More than 5 years Total Unfunded commitments $ 13,327,326 $ 84,578,043 $ — $ — $ 97,905,369 Total $ 13,327,326 $ 84,578,043 $ — $ — $ 97,905,369 As of March 31, 2026 , all unfunded commitments were related to our total loan commitments and were available for funding in less than three years. We may enter into certain contracts that may contain a variety of indemnification obligations. The maximum potential future payment amounts we could be required to pay under these indemnification obligations may be unlimited. Off-balance sheet commitments consist of unfunded commitments on delayed draw loans. Other than as set forth in this Quarterly Report, we do not have any relationships with unconsolidated entities or financial partnerships, such as entities often referred to as structured investment vehicles, special purpose entities or variable interest entities, established to facilitate off-balance sheet arrangements or other contractually narrow or limited purposes. 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. 31 Index 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. If we distribute less than 100% of our REIT taxable income in any tax year (taking into account any distributions made in a subsequent tax year under Sections 857(b)(9) or 858 of the Code), we will pay tax at regular corporate rates on that undistributed portion. Furthermore, if we distribute less than the sum of (i) 85% of our ordinary income for the calendar year, (ii) 95% of our capital gain net income for the calendar year and (iii) any undistributed shortfall from our prior calendar year (the “Required Distribution”) to our shareholders during any calendar year (including any distributions declared by the last day of the calendar year but paid in the subsequent year), then we are required to pay non-deductible excise tax equal to 4% of any shortfall between the Required Distribution and the amount that was actually distributed. 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. The shareholders must include their proportionate share of the retained net capital gain in their taxable income for the tax year, and they are deemed to have paid the REIT’s tax on their proportionate share of the retained capital gain. Furthermore, such retained capital gain may be subject to the nondeductible 4% excise tax. If we determine that our estimated current year taxable income (including net capital gain) will be in excess of estimated dividend distributions (including capital gains dividends) for the current year from such income, we will accrue excise tax on a portion of the estimated excess taxable income as such taxable income is earned. To the extent that our cash available for distribution is less than the amount required to be distributed under the REIT provisions of the Code, we may be required to fund distributions from working capital or through equity, equity-related or debt financings or, in certain circumstances, asset sales, as to which our ability to consummate transactions in a timely manner on favorable terms, or at all, cannot be assured, or we may make a portion of the Required Distribution in the form of a taxable stock distribution or distribution of debt securities. Critical Accounting Policies and Estimates There have been no significant changes in our critical accounting policies and estimates from what was previously disclosed in our Annual Report on Form 10-K. Many of these accounting policies require judgment and the use of estimates and assumptions when they are applied in the preparation of our financial statements. On a quarterly basis, we evaluate these estimates and judgments based on historical experience as well as other factors that we believe to be reasonable under the circumstances. These estimates are subject to change in the future if underlying assumptions or factors change. Certain accounting policies, while significant, may not require the use of estimates.