United States securities and exchange commission logo
March 21, 2024
Brandon Hetzel
Chief Financial Officer
Sunrise Realty Trust, Inc.
525 Okeechobee Blvd Suite 1650
West Palm Beach, FL 33401
Re: Sunrise Realty
Trust, Inc.
Registration
Statement on Form 10-12B
Filed February 22,
2024
File No. 001-41971
Dear Brandon Hetzel:
We have reviewed your
filing and have the following comments.
Please respond to this letter within ten business days by
providing the requested
information or advise us as soon as possible when you will respond. If
you do not believe a
comment applies to your facts and circumstances, please tell us why in
your response.
After reviewing your response and any amendment you may file in
response to this letter,
we may have additional comments.
Exhibit 99.1 to Registration Statement on Form 10-12B filed February 22,
2024
Risk Factors
Subject to the approval of our Board..., page 16
1. We note your risk
factor disclosure on page 25 of your Information Statement regarding
your external manager's
ability to change the investment strategies without the consent of
your stockholders.
Please include disclosure about how stockholders will be informed of
any changes to the
investment strategies.
In connection with the separation into two public companies..., page 34
2. We note your disclosure
that in connection with the separation, you will enter into an
indemnification
agreement with AFC Gamma. Please file the indemnification agreement
as an exhibit to your
registration statement, or advise.
Brandon Hetzel
FirstName LastNameBrandon Hetzel
Sunrise Realty Trust, Inc.
Comapany
March NameSunrise Realty Trust, Inc.
21, 2024
March2 21, 2024 Page 2
Page
FirstName LastName
Our Bylaws designate the Circuit Court for Baltimore City, Maryland as the sole
and exclusive
forum..., page 37
3. We note your risk factor disclosure on page 37 of your Information
Statement that your
bylaws designate the federal district courts of the United States as
the sole and exclusive
forum for the resolution of any claim arising under the Securities
Act. Section 22 of the
Securities Act creates concurrent jurisdiction for federal and state
courts over all suits
brought to enforce any duty or liability created by the Securities Act
or the rules and
regulations thereunder. Please revise your disclosure to state that
there is uncertainty as to
whether a court would enforce such provision and that investors cannot
waive compliance
with the federal securities laws and the rules and regulations
thereunder.
Unaudited Pro Forma Statement of Operations, page 64
4. Please revise the footnotes to the unaudited pro forma statement of
operations to disclose
the assumptions made in arriving at the amount of each adjustment,
providing the detail
necessary for a reader to be able to recalculate the amount of each
adjustment.
Management's Discussion and Analysis of Financial Condition and Results of
Operations
Recent Developments, page 67
5. Please revise the discussion of the loans to provide a more robust
discussion of the
reserves being held on each loan, including how the reserves are
recorded and how it is
anticipated that they will be drawn down. Clarify why the reserves are
not reflected in the
unaudited pro forma financial statements. Also expand your disclosure
to address the
credit quality of the loans acquired.
Business
Target Investments and Portfolio, page 76
6. Within your discussion of your target investments and portfolio,
please clarify the
meaning of "markets in the Southern US benefiting from economic
tailwinds with growth
potential," including, as an example only, the specific commercial
real estate sub-
industries that the company intends to target.
Current and Prospective Portfolio, page 76
7. Please revise your disclosure regarding your current portfolio to
provide details
regarding the commercial real estate collateral type (e.g., office,
hotel, retail, etc.),
geographic location, and other portfolio characteristics (e.g.,
interest rate type, loan size,
etc.), or advise us why it is not material to investors.
Directors and Executive Officers, page 80
8. Please revise your disclosure regarding Leonard M. Tannenbaum and
Alexander Frank to
include a discussion of the 2015 and 2018 cease and desist orders
involving Fifth Street
Brandon Hetzel
FirstName LastNameBrandon Hetzel
Sunrise Realty Trust, Inc.
Comapany
March NameSunrise Realty Trust, Inc.
21, 2024
March3 21, 2024 Page 3
Page
FirstName LastName
Asset Management referenced on page 44 of the Information Statement or
advise us why
they are not material to an evaluation of the ability or integrity of
a director or executive
officer. Refer to Item 401(f) of Regulation S-K.
Management Compensation, page 94
9. We note that you intend to reimburse your advisor for costs associated
with salaries and
benefits to be paid to your named executive officers. In future
filings that require Item 404
of Regulation S-K disclosure, please break out the amounts paid
pursuant to the expense
reimbursement fee and specify any amounts reimbursed for salaries or
benefits of each of
your named executive officers.
Certain Relationships and Related Transactions, and Director Independence, page
100
10. Please consider providing a chart depicting the relationships between
the various related
parties including, but not limited to, Leonard Tannenbaum, TCG
Services LLC, Brian
Sedrish, and Southern Realty Trust Inc.
11. We note your disclosure on page 57 of your Information Statement that
your Chief
Executive Officer, Brian Sedrish, also manages Southern Realty Trust,
Inc., a REIT with a
similar investment strategy to that of your company. Please disclose
how investment
opportunities will be allocated between the two entities.
General
12. We note you intend to elect and operate your business as a real estate
investment trust and
are dependent on Sunrise Manager LLC and its affiliates. Please
include disclosure
comparable to that required by Industry Guide 5, including prior
performance tables for
programs with similar investment objectives, or advise us why such
disclosure is not
material to investors. For guidance, see CF Disclosure Guidance: Topic
No. 6.
13. Please provide a detailed legal analysis addressing the following
considerations under the
Investment Company Act of 1940 (the Investment Company Act ). For
each response,
where applicable, please provide such analysis (i) as of December 31,
2023; and (ii) based
on your expectations for the Company (a) immediately following AFC
Gamma s
contribution of assets, liabilities and business related to the
Spin-Off Business to the
Company, and (b) following the completion of the Spin-Off on a
going-forward basis.
Please provide a detailed legal analysis regarding whether the
Company (and its
subsidiaries) meets the definition of an investment company
under Section
3(a)(1)(A) of the Investment Company Act. In your response,
please address, in
detail, each of the factors outlined in Tonapah Mining Company of
Nevada, 26 SEC
426 (1947) and provide legal and factual support for your
analysis of each such
factor.
Brandon Hetzel
Sunrise Realty Trust, Inc.
March 21, 2024
Page 4
Please provide a detailed legal analysis regarding whether the
Company and each of
its subsidiaries meets the definition of an investment company
under Section
3(a)(1)(C) of the Investment Company Act. Please include in your
analysis all
relevant calculations under Section 3(a)(1)(C) as of the most recent
fiscal quarter end,
identifying each constituent part of the numerator(s) and
denominator(s). Please also
describe and discuss any other substantive determinations and/or
characterizations of
assets that are material to your calculations.
Notwithstanding the generality of the foregoing comments, to the
extent the
Company and its subsidiaries intend to rely on the exclusion from
the definition of
investment company provided by Section 3(c)(5)(C) of the
Investment Company
Act, please identify and provide a detailed legal analysis of
Commission statements
or other applicable precedent to support your determination that the
Company is not
engaged in the business of issuing redeemable securities,
face-amount certificates of
the installment type or periodic payment plan certificates and that
the Company is
primarily engaged in purchasing or otherwise acquiring mortgages and
other liens on
and interests in real estate for purposes of Section 3(c)(5)(C) of
the Investment
Company Act.
We remind you that the company and its management are responsible for
the accuracy
and adequacy of their disclosures, notwithstanding any review, comments, action
or absence of
action by the staff.
Please contact Paul Cline at 202-551-3851 or Kristina Marrone at
202-551-3429 if you
have questions regarding comments on the financial statements and related
matters. Please
contact Isabel Rivera at 202-551-3518 or Mary Beth Breslin at 202-551-3625 with
any other
questions.
Sincerely,
FirstName LastNameBrandon Hetzel
Division of
Corporation Finance
Comapany NameSunrise Realty Trust, Inc.
Office of Real
Estate & Construction
March 21, 2024 Page 4
cc: Jeeho M. Lee
FirstName LastName