Sunrise Realty Trust, Inc. (SUNS)

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

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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.

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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:

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) provisio

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Item 7.     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 our accompanying notes and other information included in this Annual 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 “Risk Factors,” in this Annual Report. Unless the context otherwise requires, as used in this section the terms “we,” “us,” “our,” or “SUNS,” refers to Sunrise Realty Trust, Inc.

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Business 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 TCG.

In July 2024, we separated from Advanced Flower Capital Inc. (“AFC”) through a spin-off transaction (the “Spin-Off”). 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. 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. 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.

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 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.

Developments During the Year Ended December 31, 2025:

Updates to Our Loan Portfolio During the Year Ended December 31, 2025

In January 2025, our senior loan for a mixed-use property in Houston, Texas was repaid in full. 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”). 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. The Note

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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 Note is secured by a first priority collateral assignment of the senior mortgage loan, including assignment in blank of the mortgage and other loan documents, a pledge of 100% of the issued and outstanding limited liability company interests in borrower, reserve accounts, and other customary collateral.

In January 2025, we and affiliated co-investors entered into a $74.5 million senior secured mortgage loan for the construction of a build-to-suit net leased credit tenant project located in New Orleans, Louisiana. The loan proceeds will be used to commence and facilitate construction. We committed a total of $44.0 million, and affiliated co-investors committed the remaining $30.5 million, funding $0.6 million and $0.4 million, respectively, on close. The senior secured loan was issued at a discount of 1.0% and matures in three years. The loan bears interest at a rate of SOFR plus 5.60%, with a rate index floor of 4.50%. The senior loan is secured by a first priority mortgage on the property subject only to the ground lease, pledge of 100% of borrower’s equity interest, assignment of leases, security deposits, and reserve accounts as well as all future rental and sales income associated with the project.

In March 2025, we entered into an assignment and assumption agreement with an affiliated co-lender owned by Mr. 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. 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.

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. 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. 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.

In March 2025, we and an affiliated co-investor purchased $35.0 million of a $243 million subordinate loan for the construction of a mixed-use property in Miami, Florida. We committed approximately $26.3 million and the affiliate committed the remaining $8.8 million. The subordinate loan matures in December 2028. 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 subordinate loan will be used to, among other things, fund the completion of construction. During the second quarter of 2025, the borrower exercised their right to curtail the mezzanine loan. The loan commitment we hold was reduced by approximately $1.2 million.

In June 2025, we and an affiliated co-investor purchased $14.25 million of a $59.8 million senior loan for the construction of a multi-family residential property in Park City, Utah. We committed a total of $9.25 million and the affiliate committed the remaining $5.0 million. The senior loan matures in August 2027. At closing, we funded approximately $0.3 million and the affiliate funded approximately $0.2 million. The loan bears interest at a cash rate of U.S. prime rate plus 3.25%, with a rate index floor of 8.0%. The senior loan is secured by a first priority lien and security interest in certain real property as described on the loan agreement. 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. 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 senior loan is secured by a first priority lien and security interest in certain real property as described on the loan agreement. The proceeds of the senior loan will be used to, among other things, fund the completion of construction.

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In September 2025, our subordinate loan for a residential property in Sarasota, Florida was repaid in full. The loan had an original maturity date of May 2027. The outstanding principal on the date of repayment was approximately $25.5 million.

In October 2025, we and an affiliated co-investor entered into two separate senior secured mortgage loans with the same commercial real estate developer for an aggregate commitment of $36.6 million, comprised of a $13.4 million industrial senior loan in Doral, Florida (the “Doral Loan”), and a $23.2 million industrial senior loan in West Palm Beach, Florida (the “West Palm Beach Loan” and, together, the “Loans”). We (i) committed $9.4 million and funded $8.6 million upon closing to the Doral Loan, while the affiliated co-investor committed $4.0 million and funded $3.7 million and (ii) committed $16.2 million and funded $1.8 million upon closing to the West Palm Beach Loan, while the affiliated co-investor committed $7.0 million and funded $0.8 million. The Loans were issued at a discount of 1.0% and mature in October 2027. The Loans bear interest at a rate of SOFR plus 6.20%, with a rate index floor of 3.75%. Each Loan is secured by a first mortgage, equity pledge, and other customary collateral with regard to the properties. The Loans are not cross collateralized and are separately secured by their respective collateral. The proceeds will be used to finance the development of luxury industrial suites featuring showroom-style layouts, mezzanine lounges, and premium finishes. The West Palm Beach Loan will be used to finance closing costs, construction, and reserves for a new development, while the Doral Loan will be used to refinance existing debt and repatriate equity associated with a comparable project.

In October 2025, we and an affiliated co-investor entered into a $45.0 million senior bridge loan to refinance a retail property located in Houston, Texas. We committed a total of $30.0 million, and an affiliated co-investor committed the remaining $15.0 million, funding $21.6 million and $10.8 million, respectively, upon closing. 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%. 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.

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.

As amended, the Revolving Credit Facility modified certain financial covenants, requiring 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.

Interest is payable on the Revolving Credit Facility in cash in arrears at the rate per annum of SOFR plus 2.75%, with a SOFR floor of 2.63%; provided, however, that the interest rate will increase by an additional 0.25% during any Increase Rate Month (as defined in the Revolving Credit Agreement).

In connection with the Revolving Credit Agreement and related amendments, we incurred certain closing costs of approximately $0.5 million, which were included in prepaid expenses and other assets on our consolidated balance sheets and amortized over the life of the Revolving Credit Facility.

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.

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. Amendment Number One modified the 1.00% annual fee such that the fee is payable quarterly rather than annually, with no change to the total fee.

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Interest is payable on the SRTF Credit Facility at a rate per annum equal to 8.00%. In connection with the SRTF Credit Agreement and related amendments, the Company incurred certain closing costs of approximately $25.5 thousand, which were included in prepaid expenses and other assets on the Company’s consolidated balance sheets and amortized over the life of the SRTF Revolving Credit Facility.

At-the-Market Offering Program (“ATM Program”)

On August 1, 2025, we filed a shelf registration statement on Form S-3 (File No. 333-289188) (the “Shelf Registration Statement”), which was declared effective on August 6, 2025. Under the Shelf Registration Statement, we may, from time to time, issue and sell up to $500.0 million of our 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 Shelf Registration Statement also included a prospectus for the ATM Program to sell up to an aggregate of $50.0 million of shares of our Common Stock that may be issued and sold from time to time under the Equity Distribution Agreement, dated August 13, 2025 (the “Agreement”), by and among the Company, our Manager and Raymond James & Associates, Inc., as Sales Agent. Under the terms of the Agreement, we have agreed to pay the Sales Agent a commission of up to 2.0% of the gross proceeds from each sale of Common Stock under the Agreement.

During the year ended December 31, 2025, we did not sell any shares of our Common Stock under the Agreement.

Dividend Reinvestment Plan

On September 3, 2025, we 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 our common stock (which shares, at our 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. There were no shares issued under the DRIP during the year ended December 31, 2025.

Dividends Declared Per Share

During the years ended December 31, 2025 and 2024, we declared the following cash dividends:

Recent Developments

In January 2026, the Company 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. 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.

In December 2025, TCG RE Agent LLC (“TCG RE Agent”) delivered a notice of default on behalf of the lenders with respect to our senior hospitality loan in San Antonio, Texas (the “San Antonio Loan”) based on certain payment defaults, including failure to make its November interest payment when due, for which we determined foreclosure was probable. The San Antonio Loan was placed on nonaccrual status effective October 10, 2025. In connection with the event of default, TCG RE Agent took control of cash escrows held by TCG RE Agent of $0.6 million that were available for capital expenditure reserves to the loan and applied it toward a principal repayment in accordance with the terms of the loan agreement, of which we were proportionally allocated $0.4 million during the year ended December 31, 2025. As of

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December 31, 2025, our portion of the San Antonio Loan had an unpaid principal balance of approximately $26.4 million and amortized cost of $26.2 million. Additionally, in anticipation of a potential foreclosure, the Company formed a joint venture entity with the affiliate co-lender on the San Antonio Loan in proportion to their holdings in the San Antonio Loan, with the Company owning 65.0% of the joint venture. In March 2026, the co-lenders exercised their right to foreclose on the hotel property that was the underlying collateral for the San Antonio Loan. The joint venture acquired the hotel property through a credit bid equal to the aggregate unpaid principal balance of approximately $40.6 million. The timing and outcome of the proceedings and the amount of any recovery remain uncertain.

In February 2026, we and an affiliated co-investor entered into a $69.3 million subordinate B-note secured by a portfolio of 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 entered into Amendment Number Seven to the Loan and Security Agreement (“Amendment Number Seven”), by and among the Company and certain subsidiaries, as borrowers, the lenders party thereto, and East West Bank, 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.

In March 2026, the Company’s Board of Directors declared a regular cash dividend of $0.30 per outstanding share of common stock for the first quarter of 2026 to shareholders of record as of March 31, 2026, which will be paid on April 15, 2026.

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 December 31, 2025 and 2024 was approximately $13.56 and $16.29, 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

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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 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:

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.

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Results of Operations for the years ended December 31, 2025 and 2024

The following table summarizes our consolidated results of operations for the years ended December 31, 2025 and 2024:

Net income. 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. Interest income increased approximately $15.5 million, or 143.2%, for the year ended December 31, 2025 as compared to the year ended December 31, 2024. The increase was due to the expansion of our portfolio from nine loans to sixteen loans as we deploy capital.

Interest expense. Interest expense increased approximately $4.6 million for the year ended December 31, 2025, as compared to the year ended December 31, 2024, due to the lines of credit available in the current period and increase in related borrowings.

Management and incentive fees. Management fees increased approximately $1.3 million for the year ended December 31, 2025, as compared to the year ended December 31, 2024. Incentive Fees increased approximately $0.4 million for the year ended December 31, 2025, as compared to the year ended December 31, 2024. The Management Agreement was not in place until the completion of the Spin-Off in July 2024, while the current period year-to-date amounts were reduced by the fee waiver in conjunction with the January 2025 Offering during the first and second quarters of 2025. 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 increase was primarily due to reimbursable shared expenses under the Management Agreement, which did not take effect until the completion of the Spin-Off in July 2024. Reimbursable shared expenses recorded within general and administrative expenses increased approximately $1.3 million for the year ended December 31, 2025, compared to the year ended December 31, 2024, respectively.

Stock-based compensation. 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. 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. Other costs within professional fees related to legal, audit, and board of director fees.

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Provision for Current Expected Credit Losses

The provision for current expected credit losses increased $2.0 million for the year ended December 31, 2025 as compared to the year ended December 31, 2024. The CECL Reserve balance as of December 31, 2025 was approximately $2.1 million, or 0.68%, of our total loans held at carrying value of approximately $302.7 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 $1.9 million and (ii) a liability for unfunded commitments of approximately $0.2 million. 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. 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.

Loan Portfolio

The table below summarizes our total loan portfolio as of December 31, 2025, unless otherwise specified.

(1)YTM excludes loans on nonaccrual status. 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 December 31, 2025 applied through maturity. Actual results could differ from those estimates and assumptions.

(2)Effective October 10, 2025, the Company placed the borrower on nonaccrual status.

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(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.

(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 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. 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. As of December 31, 2025, these floating benchmark rates included one-month Secured Overnight Financing Rate (“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.

The following tables summarize our loans held at carrying value as of December 31, 2025 and 2024:

(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, 2025 and 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.

(4)If the Company holds both the A-note and B-note, the loan is categorized as a senior mortgage loan.

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The following table presents changes in loans held at carrying value as of and for the year ended December 31, 2025:

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 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.

As of December 31, 2025 and 2024, all of our cash was unrestricted and totaled approximately $6.4 million and $184.6 million, respectively.

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.

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.

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. 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. 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. After giving effect to the partial exercise of the over-allotment option, the total number of shares sold by us in the public offering was 6,400,000 shares and total gross proceeds, before deducting underwriting discounts and commissions, and other offering expenses payable by us, were approximately $76.8 million. The net proceeds totaled approximately $70.8 million.

Our registration statement on Form S-3 (File No. 333-289188) (the “Shelf Registration Statement”) became effective on August 6, 2025, allowing us to issue and sell, from time to time in one or more offerings, 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”),

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which was 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. During the year ended December 31, 2025, we did not sell any shares of our common stock under the ATM Program.

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. 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.

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). 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.

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 December 31, 2025, we had $102.3 million of outstanding borrowings under the Revolving Credit Facility and $37.7 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 December 31, 2025, 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 December 31, 2025, we had $19.8 million outstanding borrowings under the SRTF Credit Facility and $55.2 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 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.

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Cash Flows

The following table sets forth changes in cash and cash equivalents for the years ended December 31, 2025 and 2024:

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. The decrease of approximately $(5.1) million period over period was primarily due to an increase in interest income paid from interest drawn on loans, offset by related incoming cash payments from our borrowers due to the expansion of our portfolio.

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. 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.

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. 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.

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, 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 Annual 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.

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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

Our financial statements are prepared in accordance with GAAP which requires the use of estimates and assumptions that involve the exercise of judgment as to future uncertainties. In accordance with SEC guidance, the following discussion addresses the accounting policies that we believe apply to us based on the nature of our initial operations. Our most critical accounting policies involve decisions and assessments that could affect our reported assets and liabilities, as well as our reported revenues and expenses. We believe that all of the decisions and assessments used to prepare our financial statements are based upon reasonable assumptions given the information available to us at that time. Those accounting policies and estimates that we believe are most critical to an investor’s understanding of our financial results and condition and require complex management judgment are discussed below.

Loans Held for Investment

We originate commercial real estate debt and related instruments generally to be held for investment. Loans held for investment are carried at cost, net of unamortized loan original issue discount and origination costs and other original issue discounts (the “carrying value”). Although we generally hold our target investments as long-term loans, we may occasionally classify some of our loans as held for sale. Loans held for sale are carried at fair value, with changes in fair value recorded through earnings.

Loans are generally collateralized by real estate, equipment and/or other assets of borrowers to the extent permitted by applicable laws and the regulations governing such borrowers. The extent of any credit deterioration associated with the performance and/or value of the underlying collateral property and the financial and operating capability of the borrower could impact the expected amounts received. We monitor performance of our loans held for investment portfolio under the following methodology: (i) borrower review, which analyzes the borrower’s ability to execute on its original business plan, reviews its financial condition, assesses pending litigation and considers its general level of responsiveness and cooperation; (ii) economic review, which considers underlying collateral (i.e., leasing performance, unit sales and cash flow of the collateral and its ability to cover debt service, as well as the residual loan balance at maturity); (iii) property review, which considers current environmental risks, changes in insurance costs or coverage, current site visibility, capital expenditures and market perception; and (iv) market review, which analyzes the collateral from a supply and demand perspective of similar property types, as well as from a capital markets perspective.

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.

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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. ASC 820-10 determines fair value to be the price that would be received for an investment in a current sale, which assumes an orderly transaction between market participants on the measurement date. ASC 820-10 assumes that the loan is sold in its principal market to market participants or, in the absence of a principal market, the most advantageous market, which may be a hypothetical market. Market participants are defined as buyers and sellers in the principal or most advantageous market that are independent, knowledgeable, and willing and able to transact. 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. ASC 820-10 specifies a hierarchy of valuation techniques based on whether the inputs to those valuation techniques are observable or unobservable. In accordance with ASC 820-10, these inputs are summarized in the three broad levels listed below:

•Level 1—Valuations based on quoted prices in active markets for identical assets or liabilities that we have the ability to access.

•Level 2—Valuations based on quoted prices in markets that are not active or for which all significant inputs are observable, either directly or indirectly.

•Level 3—Valuations based on inputs that are unobservable and significant to the overall fair value measurement.

If inputs used to measure fair value fall into different levels of the fair value hierarchy, a loan’s level is based on the lowest level of input that is significant to the fair value measurement. Our assessment of the significance of a particular input to the fair value measurement in its entirety requires judgment and considers factors specific to the loan. This includes loans that are valued using “bid” and “ask” prices obtained from independent third-party pricing services or directly from brokers.

Financial instruments with readily available quoted prices generally will have a higher degree of market price observability and a lesser degree of judgment inherent in measuring fair value. As such, we obtain and analyze readily available market quotations provided by pricing vendors and brokers for all of our loans for which quotations are available. In determining the fair value of a particular loan, pricing vendors and brokers use observable market information, including both binding and non-binding indicative quotations.

GAAP requires disclosure of fair value information about financial and nonfinancial assets and liabilities, whether or not recognized in the financial statements, for which it is practical to estimate the value. In cases where quoted market prices are not available, fair values are based upon the application of discount rates to estimated future cash flows using market yields, or other valuation methodologies. Any changes to the valuation methodology will be reviewed by our management to ensure the changes are appropriate. The methods used may produce a fair value calculation that is not indicative of net realizable value or reflective of future fair values. Furthermore, while we anticipate that the valuation methods are appropriate and consistent with other market participants, the use of different methodologies, or assumptions, to determine the fair value of certain financial and nonfinancial assets and liabilities could result in a different estimate of fair value at the reporting date. We use inputs that are current as of the measurement date, which may fall within periods of market dislocation, during which price transparency may be reduced.

Current Expected Credit Loss Reserve (“CECL”)

We estimate our CECL Reserve using a model that considers multiple datapoints and methodologies that may include discounted cash flows (“DCF”) and other inputs which may include the risk rating of the loan, how recently the loan was originated compared to the measurement date, and expected prepayment if applicable. Calculation of the CECL Reserve requires loan specific data, which may include fixed charge coverage ratio, loan-to-value, property type and geographic location. Estimating the CECL Reserve also requires significant judgment with respect to various factors, including but not limited to the expected timing of loan repayments and our current and future view of the macroeconomic environment. We may consider loan-specific qualitative factors on certain loans to estimate our CECL Reserve, which may include (i) whether cash from the borrower’s operations is sufficient to cover the debt service requirements currently and into the future, (ii) the ability of the borrower to refinance the loan and (iii) the liquidation value of collateral. 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.

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Revenue Recognition

Interest income from loans is accrued based on the outstanding principal amount and the contractual terms of each loan. 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. 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. Nonaccrual loans are restored to accrual status when past due principal and interest are paid and, in management’s judgment, are likely to remain current. We may make exceptions to placing a loan on nonaccrual status if the loan has sufficient collateral value and is in the process of collection. 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.

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. The interest income that is drawn on the loans is added to the principal balance and is generally collected upon repayment of the outstanding principal. To maintain our status as a REIT, this non-cash source of income is included in taxable income and will increase the dividend paid to shareholders for the year earned, even though we have not yet collected the cash.

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. However, no assurances can be given that our beliefs or expectations will be fulfilled, since qualification as a REIT depends on us satisfying numerous asset, income and distribution tests which depend, in part, on our operating results.

To continue to qualify as a REIT, we must meet a number of organizational and operational requirements, including a requirement that we distribute annually to our shareholders at least 90% of our REIT taxable income prior to the deduction for dividends paid and excluding our net capital gain. To the extent that 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 1) 85% of our ordinary income for the calendar year, 2) 95% of our capital gain net income for the calendar year, and 3) any Required Distributions 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 a 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 will be 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 it is determined 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 accrue excise tax on a portion of the estimated excess taxable income as such taxable income is earned. The annual expense is calculated in accordance with applicable tax regulations. Excise tax expense is included in the line item income tax expense.

A TRS is a corporation in which we directly or indirectly own stock and that jointly with us elects to be treated as our TRS under Section 856(l) of the Code. If our TRS owns, directly or indirectly, securities representing 35% or more of the vote or value of a subsidiary corporation, that subsidiary will also be treated as our TRS. A TRS is subject to U.S. federal income tax and state and local income tax, where applicable, as a regular C corporation. 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

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ensure that a TRS will be subject to an appropriate level of U.S. federal income taxation. For example, we will be obligated to pay a 100% penalty tax on some payments that we receive or certain other amounts or on certain expenses deducted by the TRS if the economic arrangements among us, our borrowers and/or the TRS are not comparable to similar arrangements among unrelated parties.

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 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 any uncertain income tax positions. 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 have elected to avail ourselves of the extended transition period for complying with new or revised financial accounting standards.

We will remain an emerging growth company until the earliest of (i) 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.

Recently Adopted Accounting Pronouncements and Recent Accounting Pronouncements Pending Adoption

See Note 2 to our consolidated financial statements included in this Annual Report on Form 10-K, which describes recent accounting pronouncements that we have adopted and are pending adoption.