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ORGANIZATION
 6 Months Ended
Jun. 30, 2024
Organization, Consolidation and Presentation of Financial Statements [Abstract]  
ORGANIZATION ORGANIZATION
Sunrise Realty Trust, Inc. (the “Company” or “SUNS”) (f/k/a CRE South LLC) was formed on August 28, 2023, and converted from a Delaware limited liability company to a Maryland corporation in February 2024. As of June 30, 2024, SUNS was a wholly-owned subsidiary of AFC Gamma, Inc. (“AFC Gamma”) and an institutional lender to the commercial real estate sector.
SUNS is externally managed and advised by Sunrise Manager LLC (“SUNS Manager” or the “Manager”), a registered investment adviser under the Investment Advisers Act of 1940, as amended (the “Advisers Act”), to provide debt capital solutions to commercial real estate markets in the Southern United States. SUNS focuses on originating, underwriting and managing commercial real estate (“CRE”) debt investments 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. SUNS intends to create a diversified investment portfolio, targeting investments in senior mortgage loans, mezzanine loans, whole loans, B-notes, commercial mortgage-backed securities (“CMBS”) and debt-like preferred equity securities across CRE asset classes. SUNS intends for its investment mix to include high quality residential, including multi-family, condominiums and single-family communities, retail, office, hospitality, industrial, mixed use and specialty-use real estate.
Spin-Off
On February 22, 2024, AFC Gamma announced that its Board unanimously approved a plan to spin-off AFC Gamma’s CRE portfolio into an independent, publicly traded company, SUNS (the “Spin-Off”). SUNS intends to elect to be taxed as a real estate investment trust (“REIT”) for United States federal income tax purposes under the Internal Revenue Code of 1986, as amended (the “Code”), commencing with the taxable year ending December 31, 2024. The Spin-Off was effected by the transfer of AFC Gamma’s CRE portfolio from AFC Gamma to SUNS and the distribution of all of the outstanding shares of SUNS’ common stock, par value $0.01 per share (the “Common Stock”) to all of AFC Gamma’s shareholders of record as of the close of business on July 8, 2024 (the “Record Date”). AFC Gamma’s shareholders of record as of the Record Date received one share of SUNS Common Stock for every three shares of AFC Gamma common stock held as of the Record Date. The Spin-Off was completed July 9, 2024 (the “Distribution Date”). On the Distribution Date, SUNS became an independent, publicly traded company, trading on the Nasdaq Capital Market under the symbol “SUNS”. AFC Gamma retained no ownership interest in the Company following the Spin-Off. SUNS has historically operated as a part of AFC Gamma; consequently, stand-alone financial statements have not historically been prepared.
In connection with the Spin-Off, the Company entered into several agreements with AFC Gamma that govern the relationship between the Company and AFC Gamma following the Spin-Off, including the Separation and Distribution Agreement and the Tax Matters Agreement. These agreements provide for the allocation between AFC Gamma and SUNS of the assets, liabilities and obligations (including, among others, investments, property and tax-related assets and liabilities) of AFC Gamma and its subsidiaries attributable to periods prior to, at and after the Spin-Off. Moreover, in preparation for the Spin-Off, the management of SUNS entered into a new management agreement with SUNS Manager, which became effective concurrently with the completion of the Spin-Off. The Manager also entered into an Administrative Services Agreement (the “Administrative Services Agreement”) with TCG Services LLC, an affiliate of the Manager and Leonard Tannenbaum, the Company’s Executive Chairman, and Robyn Tannenbaum, the Company’s President.
The Company operates in one operating segment and is primarily focused on originating CRE debt investments 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. The Company intends to create a diversified investment portfolio, targeting investments in senior mortgage loans, mezzanine loans, whole loans, B-notes, CMBS and debt-like preferred equity securities across CRE asset classes. The Company intends for its investment mix to include high quality residential, including multi-family, condominiums and single-family communities, retail, office, hospitality, industrial, mixed use and specialty-use real estate.
The Company intends to elect to be taxed as a REIT for United States federal income tax purposes under the Code, commencing with the taxable year ending December 31, 2024. The Company generally will not be subject to United States federal income taxes on its REIT taxable income as long as it annually distributes all of its REIT taxable income prior to the deduction for dividends paid to shareholders and complies with various other requirements as a REIT.