Sunrise Real Estate Group, Inc. (SRRE): A 2024 10-K Deep Dive and Investment Review

Investment Score: 3.0 / 10

Warren.AI 💰 3.0 / 10

In this comprehensive review, we examine Sunrise Real Estate Group, Inc. (NASDAQ: SRRE), its 2024 annual report (Form 10-K), operations, financial highlights, and key risks. Whether you’re a current shareholder or researching China‐based real estate plays, this article offers the essential analysis you need.

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1. Company Overview

Sunrise Real Estate Group, Inc. ("SRRE") is a Texas‐incorporated holding company trading on the OTC Pink under the symbol SRRE. Established in 1996 as Parallax Entertainment, SRRE pivoted into real estate in a 2004 reverse merger with offshore entities CY-SRRE (Cayman Islands) and LRY (British Virgin Islands). Today, SRRE’s primary business is conducted through wholly‐owned and majority‐owned subsidiaries based in the People’s Republic of China (PRC), focusing on:

• Real Estate Development: Large‐scale residential and mixed‐use projects in Linyi and Huaian.
• Property Leasing & Management: Rental of unsold units and office/residential assets.
• Property Agency & Consulting: Outsourced marketing/sales solutions for mid‐sized developers.
• Strategic Investments: Minorities in skincare/e‐commerce affiliates and wealth‐management products.

Recent Corporate History & Structure

• CY-SRRE & LRY: Reverse acquisition targets that gave SRRE full ownership of China operating platforms.
• Key Subsidiaries:
• SHXJY: High‐end real estate consulting and brokerage.
• SHSY: Property marketing and managed services partner.
• LYSY & LYRL: Linyi villa development, now 80% under SRRE voting control.
• HAZB & HATX: Huaian Tianxi Times master‐planned community, 78.46% indirect SRRE ownership.
• Equity Investments: 19.91% stake in Shanghai Daerwei Trading Co. (cosmetics/e‐commerce).

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2. Business Segments & Operations

2.1 Real Estate Development

Linyi Project (LYSY):

• Site: ~103,385 sqm for villa‐style community.
• Phases:
• Phase 1 (2015): 121 units (119 sold).
• Phase 2 (2020): 84 units (all sold).
• Phase 3 (2021–ongoing): 51 units (22 sold, 12 pre‐sold as of Mar 2025).

Huaian Project (HATX):

• Site Acquisition: 78,030 sqm purchased 2018.
• Phases:
• Phase 1 (2019): 82,218 sqm / 679 units (655 sold through Mar 2025).
• Phase 2 (2020): 99,123 sqm / 873 units (595 sold through Mar 2025).

Key Operating Highlights:

• Phase completions drive both top‐line recognition and margin.
• Land‐use rights fully owned by HAZB (78.46% SRRE indirectly).
• No significant VIE structures — direct WFOE ownership in compliance with Negative List.

2.2 Property Leasing & Management

• Office portfolio: 5,152 sqm across two floors in Sovereign Tower, Suzhou.
• Commercial leasing: 8,268 sqm of unsold Huaian retail units.
• Business generated 9% of 2024 revenue via stable recurring cash flows.

2.3 Financial & Strategic Investments

• 19.91% in Shanghai Daerwei (cosmetics e‐commerce) — now non‐core after profitability challenges.
• Wealth‐management products: $23.97M parked in bank investment funds (2.08–2.70% yield).

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3. 2024 Financial Highlights

Key Metrics (2024 vs 2023)

Metric	2024	2023	% Change
Net Revenue	$15.61M	$24.83M	–37.2%
Gross Profit	$2.11M	$4.94M	–57.2%
Operating Loss	$(2.13M)	$(0.61M)	–248%
Net Loss to SRRE	$(9.05M)	$(10.13M)	–10.6%
Total Net Loss	$(18.33M)	$(26.26M)	–30.2%
Cash & Equivalents	$19.95M	$20.45M	–2.4%
Transactional Assets	$23.97M	$26.51M	–9.5%
Real Estate U/D	$63.95M	$88.74M	–27.9%
Promissory Notes	$1.39M	$1.41M	–1.5%
Payables to Affiliates	$33.82M	$32.07M	+5.5%
Accumulated Deficit	$90.36M	$99.17M	–8.8%

3.1 Revenue Analysis

• House Sales (91%): $14.20M in 2024 vs $23.43M; fewer handovers in Huaian ↓39%.
• Property Management (9%): $1.41M vs $1.41M; flat as new leasing rates offset fewer units.

3.2 Cost & Impairments

• COGS: $13.50M vs $19.89M; margins pressured by land carry cost and slower pre‐sales.
• Impairments:
• Real Estate UD: $11.32M vs $19.59M (Linyi & Huaian project write‐downs).
• Goodwill: $0 vs $1.13M in 2023.

3.3 Operating Expenses

• OPEX: $1.41M (↓22%); reduced marketing & business development spending.
• G&A: $2.84M (↓25%); lower tax provisions (no large LVAT settlements in 2024).

3.4 Net Results

• Net Loss to SRRE: $(9.05M) vs $(10.13M). EPS $(0.13) vs $(0.15).
• Total Net Loss: $(18.33M) vs $(26.26M).
• Non‐controlling interests: $(9.28M) vs $(16.13M), reflecting minority pro rata.

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4. Balance Sheet & Liquidity

Assets:

• Cash & Investments: $44.0M total in cash, restricted deposits and wealth products.
• Real Estate U/D: $63.95M; pipeline value with remaining pre-sales and construction.
• PP&E & Inv. Properties: $27.15M net; book value of permanent leasing assets.
• Affiliates: $13.38M equity‐method + $0.63M other.

Liabilities:

• Zero bank debt; $1.39M in small promissory notes (0% interest).
• $33.8M due to affiliates (primarily Hui Tian and related developers).
• $16.87M trade payables + $17.50M customer deposits supporting deferred revenue.
• Income tax payable: $6K current.

Cash Flow:

• OP Cash Out: $(4.18M) vs $(4.06M).
• Inv. Cash In: +$2.15M vs $(15.80M) (wealth product roll‐offs).
• Fin. Cash: $0 vs $(24.30M) dividends + repay affiliate loans.

Going Concern: Management acknowledges recurring losses, $90.4M deficit, and negative cash flow. Plans to mitigate include cost control, targeted land sales, and minority stake liquidity.

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5. Capital Structure & Ownership

• Authorized Share Capital: 200M shares; 68.69M issued & outstanding.
• Top Controllers:
• Ace Develop Properties Ltd. (Lin Chi-Jung) 62.6%.
• Lin Chi-Hung (sister in‐law) 0.49%.
• Other >5% Holders:
• Better Time Int’l (Taiwan) 5.14%.
• Good Speed Services (Taiwan) 5.05%.

No dilution from warrant or stock‐option plans.

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6. Corporate Governance & Management

Board of Directors (7 members):

• Affiliated: Lin Chi-Jung (founder), Lin Hsin-Hung (Chairman), Lin Yuan-Chiang, Chang Shu-Chen, Zhang Jian (CEO).
• Independent: Li Xiao-Gang (Audit Committee Chair & Financial Expert), Gu Liang.

Audit Committee:

• 2 independent members; R.H. CPA is auditor; no PCAOB inspection issues.

Compensation & Governance/Nominating Committees:

• 2 independent directors each; charters posted on Company website.

Internal Control:

• Material weakness in U.S. GAAP and SEC reporting expertise; remediation via external hires & training.

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7. Key Risks & Red Flags

1. Country & Regulatory: China property curbs, capital controls, currency translation risk and cybersecurity review uncertainty.2. Concentration: Heavy reliance on two regional projects (Linyi & Huaian) with local gov’t permitting risk.3. Liquidity & Losses: Recurring losses, $90M deficit, negative FCF, unsecured affiliate payables of $33.8M.4. Impairments: Two consecutive years of significant writedowns ($11.3M in 2024, $19.6M in 2023).5. Governance: Fractional independent board; insider control by family – risk of shareholder dilution.6. Internal Controls: Identified material weakness in financial reporting controls; although a remediation plan is underway.7. Legal & Ownership: Cross‐border execution risk; Chinese court enforcement uncertainty.

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8. Investment Outlook & Score (3.0 / 10)

While SRRE offers an interesting niche brokerage‐to‐full‐service model with in‐house land development capability, its execution over the last two years has been challenged by slowing sales, significant asset impairments and a weak balance sheet. Magnified by the cyclical downturn in Chinas real estate market and potential regulatory headwinds, SRRE faces an uphill battle to return to sustained profitability or positive cash flow.

Pros

• Niche outsourcing brand for mid‐sized developers in China.
• No bank debt; clean credit risk profile.
• Minority investments provide some portfolio diversification.
• Board oversight is improving with independent directors appointed.

Cons

• Substantial recurring losses (2024 Net Loss $(9.05M) attributable to SRRE equity).
• Ongoing project costs and land carry; high impairment charges in both 2023 & 2024.
• Liquidity pressure: Cash burn vs slow saleshandovers. Investor dilution potential if equity/convertible financings ensue.
• China property market risk; cross‐border capital controls could squeeze repatriation.
• Material weakness in accounting controls indicates governance/infrastructure gaps.

Investment Score: 3.0 / 10

• Low conviction given mounting losses, balance sheet stress and China policy uncertainty.
• A contrarian value investor might watch for further impairments taken, pre-sale rebound or asset monetization deals to create a margin of safety.

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