tpt-20250331

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q


☑			QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the Quarterly Period Ended March 31, 2025


☐			TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the Transition Period from to

Commission File Number: 001-40496

Terra Property Trust, Inc.

(Exact name of registrant as specified in its charter)


Maryland						81-0963486
(State or other jurisdiction of incorporation or organization)						(I.R.S. Employer Identification No.)

205 West 28th Street, 12th Floor

New York, New York 10001

(Address of principal executive offices)

(212) 753-5100

(Registrant’s telephone number, including area code)

Securities registered pursuant to section 12(b) of the Securities Exchange Act of 1934:

Title of each class

Trading Symbol(s)

Name of exchange on
which registered

6.00% Notes due 2026

TPTA

New York Stock Exchange

Securities registered pursuant to section 12(g) of the Securities Exchange Act of 1934:

Class B Common Stock, $0.01 par value per share

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes þ No o

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes þ No ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.


Large accelerated filer	¨	Accelerated filer	¨
Non-accelerated filer	þ	Smaller reporting company	☑
		Emerging growth company	☑

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☑

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☑

As of May 9, 2025, the registrant had 24,338,690 shares of Class B Common Stock, $0.01 par value, outstanding. No market value has been computed based upon the fact that no active trading market had been established as of the date of this document.

TABLE OF CONTENTS


		Page
PART I	FINANCIAL INFORMATION

Item 1.	Consolidated Financial Statements:

	Consolidated Balance Sheets as of March 31, 2025 (unaudited) and December 31, 2024	2

	Consolidated Statements of Operations and Comprehensive Income (Loss) for the three months ended March 31, 2025 and 2024 (unaudited)	3

	Consolidated Statements of Changes in Equity for the three months ended March 31, 2025 and 2024 (unaudited)	4

	Consolidated Statements of Cash Flows for the three months ended March 31, 2025 and 2024 (unaudited)	5

	Notes to Consolidated Financial Statements (unaudited)	7

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	35

Item 3.	Quantitative and Qualitative Disclosures About Market Risk	50

Item 4.	Controls and Procedures	51

PART II	OTHER INFORMATION

Item 1.	Legal Proceedings	51

Item 1A.	Risk Factors	52

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	52

Item 3.	Defaults upon Senior Securities	52

Item 4.	Mine Safety Disclosures	52

Item 5.	Other Information	52

Item 6.	Exhibits	52

Signatures		54

PART I - FINANCIAL INFORMATION

Item 1. Financial Statements

Terra Property Trust, Inc.

Consolidated Balance Sheets


	March 31, 2025		December 31, 2024
	(Unaudited)
Assets
Cash and cash equivalents	$	11,941,464	$	8,578,456
Restricted cash	1,490,779		2,937,959
Cash held in escrow by lender	6,744,251		7,448,611
Available-for-sale debt securities	1,108,922		963,178
Loans held for investment, net of allowance for credit losses of $47,678,644 and $45,381,465	192,866,547		233,571,416
Loans held for investment acquired through participation, net of allowance for credit losses of $647,078 and $759,991	32,582,673		41,077,729
Equity interest in unconsolidated investments	108,132,968		106,816,146
Real estate owned, net (Note 5)
Land, building and building improvements, net	122,810,480		123,597,789
Lease intangible assets, net	5,079,610		5,641,030
Interest receivable	6,107,733		5,440,620
Due from related parties	930,576		859,267
Other assets	5,433,535		5,886,858
Total assets	$	495,229,538	$	542,819,059
Liabilities and Equity
Liabilities:
Unsecured notes payable, net	$	120,967,200	$	120,424,100
Secured financing agreements, net	165,687,688		205,718,782
Obligations under participation agreements (Note 7 )	18,849,311		18,177,106
Interest reserve and other deposits held on investments	1,490,779		2,937,959
Lease intangible liabilities, net (Note 5)	3,498,170		3,902,416
Due to Manager (Note 7)	793,280		1,597,552
Interest payable	1,323,729		1,350,384
Accounts payable and accrued expenses	1,678,630		2,189,486
Unearned income	326,352		127,485
Other liabilities	672,507		667,723
Total liabilities	315,287,646		357,092,993
Commitments and contingencies (Note 9)
Equity:
Preferred stock, $0.01 par value, 50,000,000 shares authorized and none issued	—		—
Class A Common Stock, $0.01 par value, 450,000,000 shares authorized and no shares issued, as of both March 31, 2025 and December 31, 2024	—		—
Class B Common Stock, $0.01 par value, 450,000,000 shares authorized and 24,338,581 and 24,337,952 shares issued and outstanding as of March 31, 2025 and December 31, 2024, respectively	243,386		243,380
Additional paid-in capital	444,485,095		444,478,936
Accumulated deficit	(264,746,858)		(258,810,775)
Accumulated other comprehensive loss	(39,731)		(185,475)
Total equity	179,941,892		185,726,066
Total liabilities and equity	$	495,229,538	$	542,819,059

See notes to unaudited consolidated financial statements.

Terra Property Trust, Inc.

Consolidated Statements of Operations and Comprehensive Income (Loss)

(Unaudited)


	Three Months Ended March 31,
		2025		2024
Revenues
Interest income		$	10,205,897	$	12,148,735
Real estate operating revenue		2,184,195		2,719,701
Other operating income		66,657		140,909
		12,456,749		15,009,345
Operating expenses
Operating expenses reimbursed to Manager		1,429,953		2,178,164
Asset management fee		1,367,789		1,715,042
Asset servicing fee		329,600		406,525
Provision for credit losses		2,119,736		1,873,111
Real estate operating expenses		975,228		691,006
Depreciation and amortization		1,345,937		2,116,682
Professional fees		518,354		885,569
Directors’ fees		83,750		83,750
Other		202,190		262,911
		8,372,537		10,212,760
Operating income		4,084,212		4,796,585
Other income and expenses
Interest expense on secured financing		(4,548,870)		(7,289,912)
Interest expense on unsecured notes payable		(2,491,537)		(2,440,375)
Interest expense on obligations under participation agreements		(888,904)		(618,495)
Unrealized loss on investments, net		(75)		(22,931)
Income (loss) from equity interest in unconsolidated investments		2,560,110		(473,387)
Realized loss on investments, net		—		(135,459)
		(5,369,276)		(10,980,559)
Net loss		$	(1,285,064)	$	(6,183,974)
Other comprehensive income (loss)
Unrealized gain (loss) on available-for-sale debt securities		145,744		(335,782)
		145,744		(335,782)
Comprehensive loss		$	(1,139,320)	$	(6,519,756)
Per share data
Loss per share — basic and diluted		$	(0.05)	$	(0.25)
Weighted-average shares — basic and diluted		24,338,162		24,336,157
Distributions declared per common share		$	0.19	$	0.19

See notes to unaudited consolidated financial statements.

Terra Property Trust, Inc.

Consolidated Statements of Changes in Equity

(Unaudited)


	Preferred Stock		Class A Common Stock			Class B Common Stock			Additional Paid-in Capital		Accumulated Deficit		Accumulated Other Comprehensive Income (Loss)
			$0.01 Par Value			$0.01 Par Value
			Shares	Amount		Shares	Amount								Total Equity
Balance at January 1, 2025	$	—	—	$	—	24,337,952	$	243,380	$	444,478,936	$	(258,810,775)	$	(185,475)	$	185,726,066
Shares issued from reinvestment of shareholder distributions	—		—	—		629	6		6,159		—		—		6,165
Distributions declared on common shares ($0.19 per share)	—		—	—		—	—		—		(4,651,019)		—		(4,651,019)
Net loss	—		—	—		—	—		—		(1,285,064)		—		(1,285,064)
Other comprehensive income:
Unrealized gain on available-for-sale debt securities	—		—	—		—	—		—		—		145,744		145,744
Balance at March 31, 2025	$	—	—	$	—	24,338,581	$	243,386	$	444,485,095	$	(264,746,858)	$	(39,731)	$	179,941,892


	Preferred Stock		Class A Common Stock			Class B Common Stock			Additional Paid-in Capital		Accumulated Deficit		Accumulated Other Comprehensive Loss
			$0.01 Par Value			$0.01 Par Value
			Shares	Amount		Shares	Amount								Total Equity
Balance at January 1, 2024	$	—	—	$	—	24,336,033	$	243,360	$	444,458,206	$	(203,047,758)	$	—	$	241,653,808
Shares issued from reinvestment of shareholder distributions	—		—	—		391	4		4,470		—				4,474
Distributions declared on common shares ($0.19 per share)	—		—	—		—	—		—		(4,650,636)				(4,650,636)
Net loss	—		—	—		—	—		—		(6,183,974)				(6,183,974)
Other comprehensive loss:
Unrealized loss on available-for-sale debt securities	$	—	—	$	—	—	$	—	$	—	—		(335,782)		(335,782)
Balance at March 31, 2024	$	—	—	$	—	24,336,424	$	243,364	$	444,462,676	$	(213,882,368)	$	(335,782)	$	230,487,890

See notes to unaudited consolidated financial statements.

Terra Property Trust, Inc.

Consolidated Statements of Cash Flows

(Unaudited)


	Three Months Ended March 31,
	2025		2024
Cash flows from operating activities:
Net loss	$	(1,285,064)	$	(6,183,974)
Adjustments to reconcile net loss to net cash provided by (used in) operating activities:
Depreciation and amortization	1,345,937		2,116,682
Provision for credit losses	2,119,736		1,873,111
Amortization of net purchase premiums on loans	6,913		78,132
Straight-line rent adjustments	(34,409)		(58,436)
Amortization of deferred financing costs	527,134		978,280
Amortization of discount on unsecured notes payable	492,612		445,205
Amortization of above- and below-market rent intangibles	(404,245)		(824,843)
Amortization and accretion of investment-related fees, net	(562,336)		(475,630)
Realized loss on investments, net	—		135,459
Unrealized loss on investments, net	75		22,931
Distributions received from equity interest in unconsolidated investments	1,267,522		648,911
(Income) loss from equity interest in unconsolidated investments	(2,560,110)		473,387
Changes in operating assets and liabilities:
Interest receivable	(667,113)		(1,476,810)
Due from related parties	(71,309)		(437,085)
Other assets	321,481		999,329
Due to Manager	634,068		(1,646,207)
Unearned income	198,867		141,237
Interest payable	(26,655)		(167,149)
Accounts payable and accrued expenses	(510,856)		(751,637)
Other liabilities	69,313		(77,673)
Net cash provided by (used in) operating activities	861,561		(4,186,780)
Cash flows from investing activities:
Proceeds from repayments of loans	53,958,313		46,981,320
Origination, purchase and funding of loans	(7,883,421)		(7,173,474)
Capital contributions to and purchase of equity interests in unconsolidated investments	(263,387)		(6,476,877)
Distributions in excess of income	239,154		—
Repayments of promissory note receivable	168,966		—
Funding for promissory note receivable	—		(1,225,656)
Proceeds from sale of marketable securities	—		1,292,897
Net cash provided by investing activities	46,219,625		33,398,210

See notes to unaudited consolidated financial statements.

Terra Property Trust, Inc.

Consolidated Statements of Cash Flows (Continued)


	Three Months Ended March 31,
	2025		2024
Cash flows from financing activities:
Principal repayments on secured financing	(43,700,349)		(84,780,619)
Proceeds from secured financing	3,254,091		53,019,501
Proceeds from obligations under participation agreements	668,574		15,000,000
Distributions paid	(4,644,854)		(4,646,162)
Payment of financing costs	—		(929,335)
Change in interest reserve and other deposits held on investments	(1,447,180)		142,378
Net cash used in financing activities	(45,869,718)		(22,194,237)
Net increase in cash, cash equivalents and restricted cash	1,211,468		7,017,193
Cash, cash equivalents and restricted cash at beginning of period	18,965,026		19,536,777
Cash, cash equivalents and restricted cash at end of period (Note 2)	$	20,176,494	$	26,553,970


	Three Months Ended March 31,
	2025		2024
Supplemental disclosure of cash flow information:
Cash paid for interest	$	6,936,220	$	9,091,697

Supplemental non-cash information:
Reinvestment of shareholder distributions	$	6,165	$	4,474

See notes to unaudited consolidated financial statements.

Terra Property Trust, Inc.

Notes to Consolidated Financial Statements (Unaudited)

March 31, 2025

Note 1. Business

Terra Property Trust, Inc. (and, together with its consolidated subsidiaries, the “Company” or “Terra Property Trust”) is a real estate investment trust (“REIT”) that originates, invests in and manages a diverse portfolio of real estate and real estate-related assets. The Company was incorporated under the Maryland General Corporation Law on December 31, 2015. The Company focuses primarily on commercial real estate credit investments, including first mortgage loans, subordinated loans (including B-notes, mezzanine and preferred equity) and credit facilities throughout the United States. The Company’s loans finance the acquisition, development or recapitalization of high-quality commercial real estate in the United States. The Company focuses on middle market loans in the approximately $10 million to $50 million range, which in the Company’s experience have been subject to less competition, offer higher risk-adjusted returns than larger loans with similar risk metrics and facilitate portfolio diversification. The Company may also make strategic real estate equity and non-real estate-related investments that align with its investment objectives and criteria.

On January 1, 2016, Terra Secured Income Fund 5, LLC (“Terra Fund 5”), the Company’s then parent, contributed its consolidated portfolio of net assets to the Company pursuant to a contribution agreement in exchange for shares of the Company’s common stock. Upon receipt of the contribution of the consolidated portfolio of net assets from Terra Fund 5, the Company commenced its operations on January 1, 2016. On March 2, 2020, the Company engaged in a series of transactions pursuant to which the Company issued an aggregate of 4,574,470.35 shares of its common stock in exchange for the settlement of an aggregate of $49.8 million of participation interests in loans held by the Company, cash of $25.5 million and other working capital.

The Company has elected to be taxed, and to qualify annually thereafter, as a REIT under Sections 856 through 860 of the Internal Revenue Code of 1986, as amended (the “Internal Revenue Code”), commencing with the taxable year ended December 31, 2016. As a REIT, the Company is not subject to federal income taxes on income and gains distributed to the stockholders as long as certain requirements are satisfied, principally relating to the nature of income and the level of distributions, as well as other factors. The Company also operates its business in a manner that permits it to maintain its exemption from registration as an “investment company” under the Investment Company Act of 1940, as amended (the “1940 Act”).

The Company’s investment activities are externally managed by Terra REIT Advisors, LLC (the “Manager”), a subsidiary of the Company’s sponsor, Terra Capital Partners, LLC (“Terra Capital Partners”), pursuant to a management agreement (the “Management Agreement”), under the oversight of the Company’s board of directors (the “Board”) (Note 7). The Company does not currently have any employees and does not expect to have any employees. Services necessary for the Company’s business are provided by individuals who are employees of the Manager or by individuals who were contracted by the Company or by the Manager to work on behalf of the Company pursuant to the terms of the Management Agreement.

On October 1, 2022, pursuant to that certain Agreement and Plan of Merger, dated as of May 2, 2022 (the “Merger Agreement”), Terra Income Fund 6, Inc. (“Terra BDC”), merged with and into Terra Income Fund 6, LLC (“Terra LLC”), a wholly owned subsidiary of the Company, with Terra LLC continuing as the surviving entity of the merger (the “BDC Merger”) and as a wholly owned subsidiary of the Company. Pursuant to the terms of the transactions described in the Merger Agreement, approximately 4,847,910 shares of the Company’s Class B Common Stock, $0.01 par value per share (“Class B Common Stock”), were issued to former Terra BDC stockholders in connection with the BDC Merger, based on the number of outstanding shares of Terra BDC Common Stock as of October 1, 2022.

On December 20, 2023, Terra Fund 5 announced that effective December 29, 2023 (the “Distribution Date”), Terra Fund 5 would distribute all of its shares of the Company’s Class B Common Stock to its members as part of the winding up of Terra Fund 5. On the Distribution Date, each member of Terra Fund 5 received 2,252.02 shares of the Company’s Class B Common Stock for each unit of membership interest in Terra Fund 5 held by such member. Because Terra Fund 5 previously owned its interests in the shares of Class B Common Stock indirectly through its ownership of interests in Terra JV, LLC (“Terra JV”), prior to the Distribution Date, Terra JV first distributed the shares of Class B Common Stock to Terra Fund 5 and Terra Secured Income Fund 7, LLC (“Terra Fund 7”), and Terra Fund 5 then distributed those shares to its members on the Distribution Date and Terra Fund 7 became a direct stockholder of the Company’s Class B Common Stock.

Notes to Unaudited Consolidated Financial Statements

As of March 31, 2025, Terra Fund 7 and Terra Offshore Funds REIT, LLC (“Terra Offshore REIT”) held 8.7% and 10.1%, respectively, of the issued and outstanding shares of the Company’s common stock.

Note 2. Summary of Significant Accounting Policies

Basis of Presentation

The accompanying consolidated financial statements have been prepared in accordance with United States generally accepted accounting principles (“U.S. GAAP”) and include the accounts of the Company and its consolidated subsidiaries. The accompanying consolidated financial statements of the Company and related financial information have been prepared pursuant to the requirements for reporting on Form 10-Q and Articles 6 or 10 of Regulation S-X. Certain prior period amounts have been reclassified to conform to the current period presentation.

Consolidation

The Company consolidates entities in which it has a controlling financial interest based on either the variable interest entity (“VIE”) or voting interest model. The Company is required to first apply the VIE model to determine whether it holds a variable interest in an entity, and if so, whether the entity is a VIE. If the Company determines it does not hold a variable interest in a VIE, it then applies the voting interest model. Under the voting interest model, the Company consolidates an entity when it holds a majority voting interest in an entity.

The Company accounts for investments in which it has significant influence but not a controlling financial interest using the equity method of accounting (see Note 4).

VIE Model

An entity is considered to be a VIE if any of the following conditions exist: (a) the total equity investment at risk is not sufficient to permit the entity to finance its activities without additional subordinated financial support, (b) the holders of the equity investment at risk, as a group, lack either the direct or indirect ability through voting rights or similar rights to make decisions that have a significant effect on the success of the entity or the obligation to absorb the entity’s expected losses or right to receive the entity’s expected residual returns, or (c) the voting rights of some equity investors are disproportionate to their obligation to absorb losses of the entity, their rights to receive returns from an entity, or both and substantially all of the entity’s activities either involve or are conducted on behalf of an investor with disproportionately few voting rights.

Under the VIE model, limited partnerships are considered VIEs unless a limited partner holds substantive kick-out or participating rights over a general partner. The Company consolidates entities that are VIEs when the Company determines it is the primary beneficiary. Generally, the primary beneficiary of a VIE is a reporting entity that has (a) the power to direct the activities that most significantly affect the VIE’s economic performance, and (b) the obligation to absorb losses of, or the right to receive benefits from, the VIE that could potentially be significant to the VIE.

Loans Held for Investment

The Company originates, acquires, and structures, or acquires through participations, real estate-related loans generally to be held to maturity (collectively the “loans”). Loans held for investment are carried at the principal amount outstanding, adjusted for the accretion of discounts on investments and exit fees, and the amortization of premiums on investments and origination fees. The Company’s preferred equity investments, which are economically similar to mezzanine loans and subordinate to any loans but senior to common equity, are accounted for as loans held for investment. Loans are carried at amortized cost less allowance for credit losses. Amortized cost is the amount at which a financing receivable or a loan is originated or acquired, adjusted for accretion, or amortization of premium, discount, and net deferred fees or costs, collection of cash and write-offs.

Allowance for Credit Losses

The Company follows the provisions of Accounting Standards Codification (“ASC”) 326, Financial Instruments – Credit Losses to estimate potential credit losses related to its loans. ASC 326 mandates the use of a current expected credit loss (“CECL”) methodology for estimating future credit losses of certain financial instruments measured at amortized cost, instead of the “incurred loss” methodology previously required under U.S. GAAP. The CECL methodology requires the consideration of possible credit losses over the life of an instrument as opposed to estimating credit losses upon the occurrence of an actual loss event under the previous “incurred loss” methodology. As permitted by ASC 326, the Company elected not to measure an

Notes to Unaudited Consolidated Financial Statements

allowance for credit losses on accrued interest receivable (which is presented separately on the consolidated balance sheets), but rather write off in a timely manner by reversing interest income that would likely be uncollectible.

Performing Loans

The Company uses a model-based approach for estimating the allowance for credit losses on performing loans on a collective basis, including future funding commitments for which the Company does not have the unconditional right to cancel, as these loans share similar risk characteristics. The Company utilizes information obtained from internal and external sources relating to past events, current economic conditions and reasonable and supportable forecasts about the future to determine the expected credit losses for its loan portfolio. The Company utilizes a commercial mortgage-based, third-party loan loss model and because the Company does not have a meaningful history of realized credit losses on its loan portfolio, it subscribes to a database service to provide historical proxy loan loss information. The Company employs logistic regression to forecast expected losses at the loan level based on a commercial real estate loan securitization database that contains activity dating back to 1998. The Company has chosen to incorporate a weighted average macroeconomic forecast that encompasses baseline, upside and downside scenarios, into its allowance for credit losses on performing loans estimate during the reasonable and supportable forecast period which is currently eight quarters. The Company selects certain economic variables from a group of independent variables such as Commercial Real Estate Price Index, unemployment and interest rate which are included in the model as part of macroeconomic forecast and updated regularly based on current economic trends. The specific loan level information input into the model includes loan-to-value and debt service coverage ratio metrics, as well as principal balances, property type, location, coupon rate, coupon rate type, original or remaining term, expected repayment dates and contractual future funding commitments. Based on the inputs, the loan loss model determines a loan loss rate through the generation of a probability of default (PD) and loss given default (LGD) for each loan. The allowance for credit losses on performing loans is then calculated by applying the loan loss rate to the total outstanding loan balance of each loan. A significant amount of judgment is applied in selecting inputs and analyzing results produced by the models to determine the allowance for credit losses on performing loans. Changes in such estimates can significantly affect the expected credit losses.

Beyond the Company’s reasonable and supportable forecast period, the Company reverts to historical loss information on a straight-line basis over the remaining contractual loan term, taken from a period that most accurately reflects the expectation of conditions expected to exist during the period of reversion. The Company may adjust historical loss information for differences in risk that may not reflect the characteristics of its current portfolio, including but not limited to, loan-to-value and debt service coverage ratios, among other relevant factors. The method of reversion selected represents the best estimate of the collectability of the investments and is reevaluated each reporting period.

The determination of the performing loans credit loss estimate considers historical loss information and current economic conditions for each loan, reversion period and reasonable and supportable forecasts about the future. The reasonable and supportable forecast period is determined based on the Company’s assessment of the most likely scenario of assumptions and plausible outcomes for the U.S. economy. The Company regularly evaluates the reasonable and supportable forecast period to determine if a change is needed.

The Company also performs a qualitative assessment and applies qualitative adjustments as necessary, usually due to limitations of the loan loss model. The Company’s qualitative analysis includes a review of data that may directly impact its estimates including internal and external information about the loan or property including current market conditions, asset specific conditions, property operations or borrower/sponsor details (i.e., refinance, sale, bankruptcy) which allows the Company to determine the amount of the expected loss more accurately and reasonably for these investments. The Company also evaluates the contractual life of its loans to determine if changes are needed for certain contractual extension options, renewals, modifications, and prepayments.

Unfunded Commitments

Some of the Company’s performing loans include commitments to fund incremental proceeds to the borrowers over the life of the loan and these unfunded commitments are also subject to the CECL methodology because the Company does not have an unconditional right to cancel such commitments. The allowance for credit losses related to unfunded commitments is recorded as a component of other liabilities on the Company’s consolidated balance sheets. This allowance for credit losses is estimated using the same method outlined above for the Company’s outstanding performing loan balances and increases or decreases are also recorded in earnings on the consolidated statements of operations.

Non-Performing Loans

During the loan review process, all non-performing loans are evaluated for collectability, which includes both loans in default and loans where we do not expect to collect all amounts due for both principal and interest according to the contractual terms of the loan. The Company removes these loans from the model-based approach described above and analyzes them

Notes to Unaudited Consolidated Financial Statements

separately. The credit loss reserve for these loans is calculated as any excess of the amortized cost of the loan over (i) the present value of expected future cash flows discounted at the appropriate discount rate or (ii) the fair value of collateral, if repayment is expected solely from the collateral.

Loans Not Secured by Real Estate

As of both March 31, 2025 and December 31, 2024, the Company had one loan that was not secured by real estate. This loan, which is included in other assets on the consolidated balance sheets, is recorded at amortized cost. The Company performs a separate analysis based on recoverability to determine the allowance for credit losses on this loan. As of March 31, 2025 and December 31, 2024, the Company did not record any allowance for credit losses on this loan because the Company believes that it will be able to collect all outstanding interest and principal on or before the loan’s maturity date.

Equity Interest in Unconsolidated Investments

The Company accounts for its equity interests in unconsolidated investments under the equity method of accounting, i.e., at cost, increased or decreased by its share of earnings or losses, less distributions, plus contributions and other adjustments required by equity method accounting.

The Company classifies distributions received from equity method investments using the cumulative earnings approach. Distributions received are considered returns on the investment and classified as cash inflows from operating activities. If, however, the investor’s cumulative distributions received, less distributions received in prior periods determined to be returns of investment, exceed cumulative equity in earnings recognized, the excess is considered a return of investment and is classified as cash inflows from investing activities.

The Company evaluates its equity interest in unconsolidated investments on a periodic basis to determine if there are any indicators that the value of its equity investments may be impaired and whether or not that impairment is other-than-temporary. To the extent an impairment has occurred and is determined to be other-than-temporary, the Company measures the charge as the excess of the carrying value of its investment over its estimated fair value, which is determined by calculating its share of the estimated fair market value of the underlying net assets based on the terms of the applicable partnership or joint venture agreements.

Equity Securities Without Readily Determinable Fair Value

The Company accounts for its equity securities without readily determinable fair value at cost, which is included in other assets on the consolidated balance sheets. The Company has elected the measurement alternative and therefore will evaluate whether the security continues to qualify for the alternative at each reporting period. The Company evaluates its equity security without readily determinable fair value on a periodic basis to determine if there is an observable price change in an orderly transaction for similar investments or if there are any indicators that the value of its equity security may be impaired. The Company will make fair value adjustments, if any, or reductions for any impairment to derive the carrying value of the investment.

Available-For-Sale Debt Securities

Real Estate Owned, Net

Real estate acquired is recorded at its estimated fair value at acquisition and is shown net of accumulated depreciation and impairment charges.

Acquisition of properties generally are accounted for as asset acquisitions. Under asset acquisition accounting, the costs to acquire real estate, including transaction costs, are accumulated and then allocated to individual assets and liabilities acquired based upon their relative fair value. The Company allocates the purchase price of its real estate acquisitions to land, building, tenant improvements, acquired in-place leases, intangibles for the value of any above or below market leases at fair value and to any other identified intangible assets or liabilities. The Company amortizes the value allocated to in-place leases over the remaining lease term, which is reported in depreciation and amortization expense on its consolidated statements of operations.

Notes to Unaudited Consolidated Financial Statements

The value allocated to above or below market leases are amortized over the remaining lease term as an adjustment to rental income.

Real estate assets are depreciated using the straight-line method over their estimated useful lives: buildings and improvements - not to exceed 40 years, and tenant improvements - shorter of the lease term or life of the asset. Ordinary repairs and maintenance which are not reimbursed by the tenants are expensed as incurred. Major replacements and betterments which improve or extend the life of the asset are capitalized and depreciated over their estimated useful life.

Management reviews the Company’s real estate for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. The review of recoverability is based on estimated future cash flows and the estimated liquidation value of such real estate assets, and provides for impairment if such undiscounted cash flows are insufficient to recover the carrying amount of the real estate assets. If impaired, the real estate asset will be written down to its estimated fair value.

Revenue Recognition

Revenue is recognized to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services.

Interest Income: Interest income is accrued based upon the outstanding principal amount and contractual terms of the loans and preferred equity investments that the Company expects to collect, and it is accrued and recorded on a daily basis. Discounts and premiums on investments purchased are accreted or amortized over the expected life of the respective loan using the effective yield method, and are included in interest income in the consolidated statements of operations. Loan origination fees and exit fees, net of portions attributable to obligations under participation agreements, are capitalized and amortized or accreted to interest income over the life of the investment using the effective yield method. Outstanding interest receivable is assessed for recoverability. The Company generally reverses the accrued and unpaid interest against interest income and no longer accrues for the interest when, in the opinion of the Manager, recovery of interest and principal becomes not probable. Interest is then recorded on the basis of cash received until accrual is resumed when the loan becomes contractually current and performance is demonstrated. Interest payments received on non-accrual loans may be recognized as income or applied to principal depending upon management’s judgment regarding collectability.

The Company holds loans in its portfolio that may contain paid-in-kind (“PIK”) interest provisions. The PIK interest, which represents contractually deferred interest that is added to the principal balance that is due at maturity, is recorded on the accrual basis.

Real Estate Operating Revenues: Real estate operating revenue is derived from leasing of space to various types of tenants. The leases are for fixed terms of varying length and generally provide for annual rent increases and expense reimbursements to be paid in monthly installments. Lease revenue, or rental income from leases, is recognized on a straight-line basis over the term of the respective leases. Additionally, the Company recorded above- and below-market lease intangibles, which are included in real estate owned, net, in connection with the acquisition of the real estate properties. These intangible assets and liabilities are amortized to lease revenue over the remaining contractual lease term.

Other Revenues: Prepayment fee income is recognized as prepayments occur. All other income is recognized when earned.

Cash, Cash Equivalents and Restricted Cash

The Company considers all highly liquid investments, with original maturities of ninety days or less when purchased, as cash equivalents. Cash and cash equivalents are exposed to concentrations of credit risk. The Company maintains all of its cash at financial institutions which, at times, may exceed the amount insured by the Federal Deposit Insurance Corporation.

Restricted cash represents cash held as additional collateral by the Company on behalf of the borrowers related to the investments in loans or preferred equity instruments for the purpose of such borrowers making interest and property-related operating payments. Restricted cash is not available for general corporate purposes. The related liability is recorded in “Interest reserve and other deposits held on investments” on the consolidated balance sheets.

Cash held in escrow by lender represents amounts funded to an escrow account for debt services and tenant improvements. Cash held in escrow is restricted and is not available for general corporate purposes.

Notes to Unaudited Consolidated Financial Statements

The following table provides a reconciliation of cash, cash equivalents and restricted cash in the Company’s consolidated balance sheets to the total amount shown in its consolidated statements of cash flows as of:


	March 31,
	2025		2024
Cash and cash equivalents	$	11,941,464	$	17,914,875
Restricted cash	1,490,779		4,097,364
Cash held in escrow by lender	6,744,251		4,541,731
Total cash, cash equivalents and restricted cash shown in the consolidated statements of cash flows	$	20,176,494	$	26,553,970

Participation Interests

Loan participations from the Company which do not qualify for sale treatment remain on the Company’s consolidated balance sheets and the proceeds are recorded as obligations under participation agreements. For the investments for which participation has been granted, the interest earned on the entire loan balance is recorded within “Interest income” and the interest related to the participation interest is recorded within “Interest expense from obligations under participation agreements” in the consolidated statements of operations. Interest expense from obligations under participation agreement is reversed when recovery of interest income on the related loan becomes not probable. See “Obligations Under Participation Agreements” in Note 8 for additional information.

Secured Financing Agreements, Net

The Company's secured financing agreements include two master repurchase agreements, a revolving line of credit, non-recourse property mortgages, note-on-note financing arrangements, secured borrowing and a term loan. The Company accounts for borrowings under these financing arrangements as secured transactions, which are carried at their contractual amounts (cost), net of unamortized deferred financing fees. See “Secured Financing Arrangements” in Note 8 for additional information.

Fair Value Measurements

U.S. GAAP establishes market-based or observable inputs as the preferred source of values, followed by valuation models using management assumptions in the absence of market inputs. The Company has not elected the fair value option for its financial instruments, including loans held for investment, loans held for investment acquired through participation, obligations under participation agreements, secured borrowing, unsecured notes, mortgage loan payable, term loan payable, repurchase agreement payment and revolving line of credit. Such financial instruments are carried at amortized cost, less impairment, where applicable. Marketable securities are financial instruments that are reported at fair value.

Deferred Financing Costs

Deferred financing costs represent fees and expenses incurred in connection with obtaining financing for investments. These costs are presented on the consolidated balance sheets as a direct deduction of the debt liability to which the costs pertain. These costs are amortized using the effective interest method and are included in interest expense on the applicable borrowings in the consolidated statements of operations over the life of the borrowings.

Income Taxes

The Company has elected to be taxed as a REIT under the Internal Revenue Code commencing with the taxable year ended December 31, 2016. In order to qualify as a REIT, the Company is required, among other things, to distribute dividends equal to at least 90% of its REIT net taxable income to the stockholders and meet certain tests regarding the nature of its income and assets. As a REIT, the Company is not subject to federal income taxes on income and gains distributed to the stockholders as long as certain requirements are satisfied, principally relating to the nature of income and the level of distributions, as well as other factors. If the Company fails to continue to qualify as a REIT in any taxable year and does not qualify for certain statutory relief provisions, the Company will be subject to U.S. federal and state income taxes at regular corporate rates (including any applicable alternative minimum tax) beginning with the year in which it fails to qualify and may be precluded from being able to elect to be treated as a REIT for the Company’s four subsequent taxable years. Any gains from the sale of foreclosed properties within two years are subject to U.S. federal and state income taxes at regular corporate rates. As of March 31, 2025, the Company had satisfied all the requirements for a REIT.

Notes to Unaudited Consolidated Financial Statements

The Company did not have any uncertain tax positions that met the recognition or measurement criteria of ASC 740-10-25, Income Taxes, nor did the Company have any unrecognized tax benefits as of the periods presented herein. The Company recognizes interest and penalties, if any, related to unrecognized tax liabilities as income tax expense in its consolidated statements of operations. For the three months ended March 31, 2025 and 2024, the Company did not incur any interest or penalties. Although the Company files federal and state tax returns, its major tax jurisdiction is federal. The Company’s 2021-2024 federal tax returns remain subject to examination by the Internal Revenue Service.

Earnings Per Share

The Company has a simple equity capital structure with only common stock outstanding. As a result, earnings per share, as presented, represents both basic and dilutive per-share amounts for the periods presented in the consolidated financial statements. Income per basic share of common stock is calculated by dividing net income allocable to common stock by the weighted-average number of shares of common stock issued and outstanding during such period.

Use of Estimates

The preparation of consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities as of the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results may ultimately differ from those estimates, and those differences could be material.

Segment Information

The Company’s primary business is originating, acquiring and structuring real estate-related loans related to high quality commercial real estate. From time to time, the Company may assume control of properties acquired in connection with foreclosures or deed in lieu of foreclosure, or it may acquire operating real estate properties that meet its investment criteria.

The Company operates as one segment, which is also its sole reportable segment, focused on mezzanine loans, senior loans and preferred equity investments, and to a lesser extent, owning and managing real estate. The Company’s chief operating decision maker (“CODM”) is its senior management team, comprised of its chief executive officer who is also the chief investment officer, chief operating officer, chief financial officer, chief originations officer and the head of asset management of the Manager.

The Company generates its revenue primarily from originating, acquiring, investing in, and managing real estate-related debt investments. The CODM evaluates the performance of any real estate owned assets with that of its real estate-related debt investments. Additionally, the Company seeks to enhance its returns on equity by utilizing leverage, and generally finance its real estate-related investments with leverage obtained through a variety of sources, including secured and unsecured debt instruments.

The CODM evaluates performance and allocates resources based on consolidated net income (loss), which is also reported as consolidated net income (loss) on the Company’s consolidated statement of operations. The Company’s consolidated net income (loss) is primarily derived through the difference between the interest income earned on its loans and the cost at which its to finance them. Accordingly, interest expense, as reported on its consolidated statement of operations, is its most significant segment expense. Additionally, the measure of segment assets is reflected on the balance sheet as total consolidated assets.

The CODM uses consolidated net income (loss) to make key operating decisions, such as identifying attractive investment opportunities, evaluating underwriting standards, determining the appropriate level of leverage to enhance returns on equity and deciding on the sources of financing.

Recent Accounting Pronouncements

In November 2023, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update “ASU” 2023-07 “Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures” (“ASU 2023-07”). ASU 2023-07 intends to improve reportable segment disclosure requirements, enhance interim disclosure requirements and provide new segment disclosure requirements for entities with a single reportable segment. ASU 2023-07 is effective for fiscal years beginning after December 15, 2023, and for interim periods within fiscal years beginning after December 15, 2024. ASU 2023-07 is to be adopted retrospectively to all prior periods presented. The Company adopted this ASU on December 31, 2024. The adoption of the standard has not impacted the Company's financial statements but has resulted in incremental disclosures, which are included within “Segment Information” above.

Notes to Unaudited Consolidated Financial Statements

In December 2023, the FASB issued ASU 2023-09 “Improvements to Income Tax Disclosures” (“ASU 2023-09”). ASU 2023-09 intends to improve the transparency of income tax disclosures. ASU 2023-09 is effective for fiscal years beginning after December 15, 2024 and is to be adopted on a prospective basis with the option to apply retrospectively. The Company is currently assessing the impact of this guidance; however, it does not expect the adoption of this standard to have a material impact to its consolidated financial statements.

Note 3. Loans Held for Investment

The Company elected the practical expedient under ASC 326 to exclude accrued interest from amortized cost. As of March 31, 2025 and December 31, 2024, accrued interest receivable of $6.1 million and $5.4 million, respectively, is included in interest receivable on the consolidated balance sheets, and is excluded from the amortized cost of loans held for investment.

Portfolio Summary

The table below provides a summary of the Company’s loan portfolio. Carrying value represents the amortized cost of loan, net of applicable allowance for credit losses.


	March 31, 2025									December 31, 2024
	Fixed Rate			Floating Rate (1)(2)(3)			Total			Fixed Rate			Floating Rate (1)(2)(3)			Total
Number of loans	2			8			10			2			11			13
Principal balance	$	12,823,878		$	258,356,255		$	271,180,133		$	12,680,463		$	304,574,560		$	317,255,023
Carrying value	$	12,132,565		$	213,316,655		$	225,449,220		$	12,106,695		$	262,542,450		$	274,649,145
Fair value	$	11,786,330		$	214,841,092		$	226,627,422		$	11,740,671		$	264,796,547		$	276,537,218
Weighted-average coupon rate (4)	8.50		%	14.06		%	13.86		%	8.50		%	13.18		%	13.04		%
Weighted-average remaining term (years) (5)	2.44			0.74			0.82			2.68			0.84			0.91

_______________

(1)These loans pay a coupon rate of Secured Overnight Financing Rate (“SOFR”) or forward-looking term rate based on SOFR (“Term SOFR”), as applicable, plus a fixed spread. Coupon rates shown were determined using the average SOFR of 4.33% and Term SOFR of 4.32% as of March 31, 2025 and average SOFR of 4.53% and Term SOFR of 4.33% as of December 31, 2024.

(2)As of March 31, 2025 and December 31, 2024, amount included $169.1 million and $208.0 million of senior mortgages used as collateral for $82.8 million and $123.2 million of borrowings under secured financing agreements, respectively (Note 8).

(3)As of March 31, 2025 and December 31, 2024, 7 and 10 loans, respectively, were subject to a SOFR or Term SOFR floor, as applicable.

(4)Excludes non-performing loans for which recovery of interest income was not probable.

(5)Excludes loans that are in maturity default and represents current effective maturity as of March 31, 2025 and December 31, 2024, exclusive of any extension available.

Notes to Unaudited Consolidated Financial Statements

Lending Activities

The following tables present the activities of the Company’s loan portfolio:


	Loans Held for Investment, Net		Loans Held for Investment through Participation Interests, Net		Total
Balance, January 1, 2025	$	233,571,416	$	41,077,729	$	274,649,145
Principal repayments received	(44,000,000)		(9,958,313)		(53,958,313)
Origination, purchase and funding of loans	6,467,740		1,415,681		7,883,421
Net amortization of premiums on loans	(6,913)		—		(6,913)
Accrual, payment and accretion of investment-related fees and other, net	(868,516)		(65,337)		(933,853)
(Provision for) reversal of provision for credit losses	(2,297,180)		112,913		(2,184,267)
Balance, March 31, 2025	$	192,866,547	$	32,582,673	$	225,449,220


	Loans Held for Investment, Net		Loans Held for Investment through Participation Interests, Net		Total
Balance, January 1, 2024	$	417,913,773	$	38,558,485	$	456,472,258
Principal repayments received	(46,981,320)		—		(46,981,320)
Origination, purchase and funding of loans	7,173,474		—		7,173,474
Net amortization of premiums on loans	(78,132)		—		(78,132)
Accrual, payment and accretion of investment-related fees and other, net	448,541		(7,788)		440,753
Provision for credit losses	(1,306,358)		(461,412)		(1,767,770)
Balance, March 31, 2024	$	377,169,978	$	38,089,285	$	415,259,263

Portfolio Information

The tables below detail the types of loans in the Company’s loan portfolio, as well as the property type and geographic location of the properties securing these loans. Carrying value represents the amortized cost of loan, net of applicable allowance for credit losses.


	March 31, 2025						December 31, 2024
Loan Structure	Principal Balance		Carrying Value		% of Total		Principal Balance		Carrying Value		% of Total
First mortgages	$	169,122,522	$	170,022,605	75.4	%	$	207,985,740	$	209,496,879	76.3	%
Preferred equity investments	95,057,611		48,447,927		21.5	%	94,224,551		50,114,256		18.2	%
Mezzanine loans	7,000,000		6,978,688		3.1	%	15,044,732		15,038,010		5.5	%
Total	$	271,180,133	$	225,449,220	100.0	%	$	317,255,023	$	274,649,145	100.0	%

Notes to Unaudited Consolidated Financial Statements


	March 31, 2025						December 31, 2024
Property Type	Principal Balance		Carrying Value		% of Total		Principal Balance		Carrying Value		% of Total
Multifamily	$	66,461,136	$	66,128,294	29.3	%	$	60,969,051	$	60,662,514	22.1	%
Infill land	55,816,006		56,634,067		25.1	%	56,307,815		57,050,952		20.8	%
Office	100,819,571		54,785,090		24.3	%	116,539,650		72,991,791		26.6	%
Mixed-use	41,083,420		40,923,081		18.2	%	48,438,507		48,067,655		17.5	%
Industrial	7,000,000		6,978,688		3.1	%	7,000,000		6,966,233		2.5	%
Student housing	—		—		—	%	28,000,000		28,910,000		10.5	%
Total	$	271,180,133	$	225,449,220	100.0	%	$	317,255,023	$	274,649,145	100.0	%


	March 31, 2025						December 31, 2024
Geographic Location	Principal Balance		Carrying Value		% of Total		Principal Balance		Carrying Value		% of Total
United States
California	$	48,255,341	$	48,673,189	21.5	%	$	71,006,023	$	71,273,115	26.0	%
Arizona	32,909,916		32,582,673		14.5	%	33,407,815		33,005,952		12.0	%
Washington	31,638,858		31,744,601		14.1	%	26,894,593		26,907,157		9.8	%
Georgia	30,842,779		30,934,415		13.7	%	30,562,858		30,586,450		11.1	%
New York	75,800,670		29,004,553		12.9	%	75,657,255		31,536,808		11.5	%
New Jersey	22,906,090		24,051,394		10.7	%	22,900,000		24,045,000		8.8	%
North Carolina	21,826,479		21,479,707		9.5	%	21,826,479		21,418,430		7.8	%
Massachusetts	7,000,000		6,978,688		3.1	%	7,000,000		6,966,233		2.5	%
Utah	—		—		—	%	28,000,000		28,910,000		10.5	%
Total	$	271,180,133	$	225,449,220	100.0	%	$	317,255,023	$	274,649,145	100.0	%

Allowance for Credit Losses

As described in Note 2, the Company follows the provisions of ASC 326, which requires entities to recognize credit losses on financial instruments based on an estimate of current expected credit losses.

Certain of the Company’s performing loans contain provisions for future funding commitments, which are subject to the borrower meeting certain performance-related metrics that are monitored by the Company. These unfunded commitments amounted to approximately $11.2 million and $18.7 million as of March 31, 2025 and December 31, 2024, respectively. The liability for credit losses on unfunded commitments is included in other liabilities on the consolidated balance sheets.

As discussed in Note 2, for loans that are considered non-performing, the Company removes them from the model-based approach and analyzes them separately for recoverability. As of March 31, 2025 and December 31, 2024, the Company had four and four non-performing loans with total amortized cost of $119.3 million and $128.6 million, respectively. Accordingly, the Company utilized the estimated fair value of the loan collateral or sponsor’s guarantee to estimate the total specific allowance for credit losses of $46.8 million and $44.1 million as of March 31, 2025 and December 31, 2024, respectively. Please see “Note 6. Fair Value Measurements – Valuation Process for Fair Value Measurement” for information on how the fair values of these loans were determined.

The following table presents the activity in allowance for credit losses:


	Three Months Ended March 31, 2025
	Allowance on Non-Performing Loans		Allowance on Performing Loans				Total
			Funded		Unfunded
Allowance for credit losses, beginning of period	$	44,120,447	$	2,021,008	$	150,024	$	46,291,479
Provision for (reversal of provision for) credit losses	2,675,670		(491,403)		(64,531)		2,119,736
Allowance for credit losses, end of period	$	46,796,117	$	1,529,605	$	85,493	$	48,411,215

Notes to Unaudited Consolidated Financial Statements


	Three Months Ended March 31, 2024
	Allowance on Non-Performing Loans		Allowance on Performing Loans				Total
			Funded		Unfunded
Allowance for credit losses, beginning of period	$	54,642,775	$	2,333,250	$	326,907	$	57,302,932
Provision for credit losses	1,065,480		702,290		105,341		1,873,111
Allowance for credit losses, end of period	$	55,708,255	$	3,035,540	$	432,248	$	59,176,043

Accrued Interest Receivable

The Company elected not to measure a CECL reserve on accrued interest receivable due to the Company’s policy of writing off uncollectible accrued interest receivable balances in a timely manner. If the Company determines it has uncollectible accrued interest receivable, it generally would reverse the accrued and unpaid interest against interest income and no longer accrue for interest. For the three months ended March 31, 2025 and 2024, the Company did not reverse any interest income accrual because all accrued interest income was deemed collectible. For the three months ended March 31, 2025 and 2024, the Company suspended interest income accrual of $3.4 million and $5.8 million on two and four loans, respectively, because recovery of such income was not probable. As of both March 31, 2025 and December 31, 2024, there was no interest receivable recognized on these loans.

Loan Risk Rating

The Company assesses the risk factors of each performing loan and assigns each performing loan a risk rating between 1 and 5, which is an average of the numerical ratings in the following categories: (i) sponsor capability and financial condition; (ii) loan and collateral performance relative to underwriting; (iii) quality and stability of collateral cash flows and/or reserve balances; and (iv) loan to value. Based on a 5-point scale, the Company’s performing loans are rated “1” through “5”, from less risk to greater risk, as follows:


Risk Rating						Description
1						Very low risk
2						Low risk
3						Moderate/average risk
4						Higher risk
5						Highest risk

Additionally, as discussed in Note 2, during the loan review process, if the Company determines that it is not able to collect all amounts due for both principal and interest according to the contractual terms of a loan, or if a loan is in maturity default, the Company considers that loan non-performing.

The following tables present the amortized cost of the Company’s loan portfolio by year of origination and loan risk rating:


	March 31, 2025
Loan Risk Rating	Number of Loans	Amortized Cost		% of Total		Amortized Cost by Year Originated
						2025		2024		2023		2022		2021		Prior
1	—	$	—	—	%	$	—	$	—	$	—	$	—	$	—	$	—
2	1	7,000,000		2.6	%	—		—		—		—		—		7,000,000
3	3	84,961,368		31.0	%	—		31,067,779		31,960,215		—		21,933,374		—
4	2	62,518,135		22.8	%	—		—		—		33,229,751		—		29,288,384
5	—	—		—	%	—		—		—		—		—		—
Non-performing (1)	4	119,295,439		43.6	%	—		—		—		43,494,769		—		75,800,670
	10	273,774,942		100.0	%	$	—	$	31,067,779	$	31,960,215	$	76,724,520	$	21,933,374	$	112,089,054
Allowance for credit losses		(48,325,722)
Total carrying value, net		$	225,449,220

_______________

(1)Amount includes two loans that are in maturity default with total amortized costs of $43.5 million. The Company expects to recover the principal and interest payments in full and therefore, no specific allowance for loan losses was recorded on these two loans.

Notes to Unaudited Consolidated Financial Statements


	December 31, 2024
Loan Risk Rating	Number of Loans	Amortized Cost		% of Total		Amortized Cost by Year Originated
						2024		2023		2022		2021		2020		Prior
1	—	$	—	—	%	$	—	$	—	$	—	$	—	$	—	$	—
2	1	7,000,000		2.2	%	—		—		—		—		—		7,000,000
3	5	104,009,643		32.4	%	30,812,857		27,121,997		—		30,035,052		—		16,039,737
4	3	81,168,702		25.3	%	—		—		52,494,051		—		28,674,651		—
5	—	—		—	%	—		—		—		—		—		—
Non-performing	4	128,612,255		40.1	%	—		—		24,045,000		28,910,000		—		75,657,255
	13	320,790,600		100.0	%	$	30,812,857	$	27,121,997	$	76,539,051	$	58,945,052	$	28,674,651	$	98,696,992
Allowance for credit losses		(46,141,455)
Total carrying value, net		$	274,649,145

Note 4. Equity Interest in Unconsolidated Investments

The Company owns interests in a limited partnership, joint ventures and a preferred equity investment with profit-sharing feature. The Company accounts for its interests in these investments under the equity method of accounting (Note 2).

Equity Interest in a Limited Partnership

On August 3, 2020, the Company entered into a subscription agreement with Mavik Real Estate Special Opportunities Fund, LP (“RESOF”) whereby the Company committed to fund up to $50.0 million to purchase a limited partnership interest in RESOF. RESOF’s primary investment objective is to generate attractive risk-adjusted returns by purchasing performing and non-performing mortgages, loans, mezzanines and other credit instruments supported by underlying commercial real estate assets. RESOF may also opportunistically originate high-yield mortgages or loans in real estate special situations including rescue financings, bridge loans, restructurings and bankruptcies (including debtor-in-possession loans). The general partner of RESOF is Mavik Real Estate Special Opportunities Fund GP, LLC, which is a subsidiary of the Company’s sponsor, Terra Capital Partners. The Company evaluated its equity interest in RESOF and determined it does not have a controlling financial interest and is not the primary beneficiary. Accordingly, the equity interest in RESOF is accounted for as an equity method investment.

The following tables present a summary of information regarding the Company’ equity interest in RESOF:


	March 31, 2025					December 31, 2024
	Ownership Interest	Carrying Value		Unfunded Commitment		Ownership Interest	Carrying Value		Unfunded Commitment
Equity interest in RESOF	14.9%	$	49,110,580	$	11,333,135	14.9%	$	48,171,168	$	10,065,613


	Three Months Ended March 31,
		2025		2024
Income from equity interest in RESOF		$	2,206,934	$	998,339
Distributions received from RESOF		$	1,267,522	$	648,911

Notes to Unaudited Consolidated Financial Statements

The following tables present summarized financial information of the Company’s equity interest in RESOF. Amounts provided are the total amounts attributable to the investment and do not represent the Company’s proportionate share:


	March 31, 2025		December 31, 2024
Investments at fair value (cost of $481,517,550 and $465,401,329, respectively)	$	486,021,301	$	468,862,953
Other assets	18,328,625		34,769,227
Total assets	504,349,926		503,632,180
Secured financing agreements, net of financing costs	124,395,845		100,033,166
Obligations under participation agreement (proceeds of $43,347,388 and $51,754,396, respectively)	43,782,466		73,672,431
Other liabilities	15,494,620		14,114,335
Total liabilities	183,672,931		187,819,932
Partners’ capital	$	320,676,995	$	315,812,248


	Three Months Ended March 31,
		2025		2024
Total investment income		$	19,150,780	$	10,833,147
Total expenses		6,820,394		4,182,329
Net investment income		12,330,386		6,650,818
Net change in unrealized appreciation (depreciation) on investments		1,038,111		(527,912)
Net increase in partners’ capital resulting from operations		$	13,368,497	$	6,122,906

Equity Interest in Joint Ventures

The Company beneficially owns equity interests in joint ventures that invest in real estate properties, opportunistic debt and equity securities, and indirectly, together with other non-affiliated entities, non-real estate operating companies. Non-real estate-related investments may take various forms, including preferred and common equity interests in private companies and other financial assets. The Company evaluated its equity interests in these entities and determined it does not have a controlling financial interest and is not the primary beneficiary. Accordingly, the equity interests in the joint ventures are accounted for as equity method investments.

The following tables present a summary of the Company’s equity interest in the joint ventures:


		March 31, 2025			December 31, 2024
Entity	Co-owner	Beneficial Ownership Interest	Carrying Value		Beneficial Ownership Interest	Carrying Value
LEL Arlington JV LLC	Third party/Affiliate	27.2%	$	5,433,333	27.2%	$	5,761,522
TCG Corinthian FL Portfolio JV LLV	Third party/Affiliate	30.6%	5,434,194		30.6%	5,694,696
610 Walnut Investors LLC	Third party	33.6%	2,267,650		33.6%	2,672,379
MASPEN MS I LLC (1)	Affiliates	2.4%	64,039		2.4%	62,878
Axar Special Opportunity Fund VI-B LLC (2)	N/A	99.0%	21,788,144		100.0%	20,957,270
XS Acquisition Holdco LLC (3)	Third parties	46.0%	7,534,382		46.0%	7,599,187
			$	42,521,742		$	42,747,932

_______________

(1)In May 2024, the Company contributed $50,000 to this entity for the purpose of investing in opportunistic equity and debt securities. This entity is jointly owned with two related parties managed by the Manager.

(2)In June 2024, the Company made a $20.0 million capital commitment to an entity that has indirectly invested, together with other non-affiliated entities, in a non-real estate operating company. Through November 2024, $10.0 million of the

Notes to Unaudited Consolidated Financial Statements

commitment was funded. In December 2024, through a series of transactions, a wholly owned subsidiary of the Company issued a $10.0 million term loan payable to the entity in exchange for the satisfaction of the remaining funding commitment to this entity (Note 8). The Company determined it is not a primary beneficiary of the entity and therefore accounts for the investment using the equity method of accounting.

(3)In September 2024, the Company purchased preferred and common units in an entity that invests in a non-real estate operating company. The preferred units carry interest at an annual rate of 15%, of which 10% is paid in cash and 5% is accrued. The Company determined it is not a primary beneficiary of the entity and therefore accounts for the investment using the equity method of accounting.


	Three Months Ended March 31,
		2025		2024
Loss from equity interest in the joint ventures		$	(250,393)	$	(1,471,726)
Distributions received from the joint ventures		$	239,154	$	—

The following tables present estimated combined summarized financial information of the Company’s equity interest in the joint ventures. Amounts provided are the total amounts attributable to the joint ventures and do not represent the Company’s proportionate share.


	March 31, 2025		December 31, 2024
Net investments in real estate	$	194,923,267	$	196,206,089
Other assets	100,822,320		100,379,328
Total assets	295,745,587		296,585,417
Secured financing agreements	211,820,808		210,398,952
Other liabilities	8,441,714		8,948,512
Total liabilities	220,262,522		219,347,464
Members’ capital	$	75,483,065	$	77,237,953


	Three Months Ended March 31,
		2025		2024
Revenues		$	6,187,151	$	4,462,871
Operating expenses		(3,172,006)		(2,472,969)
Depreciation and amortization expense		(1,961,529)		(1,955,076)
Interest expense		(4,271,689)		(3,362,558)
Unrealized gain (loss)		780,091		(852,253)
Net loss		$	(2,437,982)	$	(4,179,985)

Other Equity Investments

In June 2024, the Company entered into a preferred equity agreement with TCC Boundary Partners LLC. The investment carries interest at an annual rate of 15.0% and matures on June 30, 2029. Additionally, the Company will receive distributions in the event that net proceeds from the sale of underlying property exceed certain internal rate of return thresholds. Because the Company shares residual profit from the sale of underlying property with the borrower, the Company accounts for the investment using the equity method of accounting. As of March 31, 2025 and December 31, 2024, the Company's investment had a carrying value of $16.5 million and $15.9 million, respectively. For the three months ended March 31, 2025, the Company recorded $0.6 million in equity income from TCC Boundary Partners LLC and did not receive any distributions. There was no such equity income recorded or distributions received during the three months ended March 31, 2024.

Note 5. Real Estate Owned, Net

Real Estate Activities

2024 — In January 2024, a lease for a space in one of the industrial properties was terminated and the Company received a termination fee of $0.03 million. In connection with the lease termination, the Company wrote off the related unamortized in-

Notes to Unaudited Consolidated Financial Statements

place lease of $0.3 million and unamortized below-market rent of $0.1 million. Subsequent to the lease termination, the Company entered into a new lease with another tenant for the same space.

Real Estate Owned, Net

Real estate owned is comprised of eight industrial buildings located in Texas with lease intangible assets and liabilities. The following table presents the components of real estate owned, net as of:


	March 31, 2025						December 31, 2024
	Cost		Accumulated Depreciation/Amortization		Net		Cost		Accumulated Depreciation/Amortization		Net
Real estate:
Land	$	23,785,004	$	—	$	23,785,004	$	23,785,004	$	—	$	23,785,004
Building and building improvements	104,924,745		(5,927,457)		98,997,288		104,924,745		(5,140,431)		99,784,314
Tenant improvements	29,585		(1,397)		28,188		29,585		(1,114)		28,471
Total real estate	128,739,334		(5,928,854)		122,810,480		128,739,334		(5,141,545)		123,597,789
Lease intangible assets:
In-place lease	12,060,731		(6,981,121)		5,079,610		12,060,731		(6,419,701)		5,641,030
Total intangible assets	12,060,731		(6,981,121)		5,079,610		12,060,731		(6,419,701)		5,641,030
Lease intangible liabilities:
Below-market rent	(8,649,073)		5,150,903		(3,498,170)		(8,649,073)		4,746,657		(3,902,416)
Total intangible liabilities	(8,649,073)		5,150,903		(3,498,170)		(8,649,073)		4,746,657		(3,902,416)
Total real estate	$	132,150,992	$	(7,759,072)	$	124,391,920	$	132,150,992	$	(6,814,589)	$	125,336,403

Real Estate Operating Revenues and Expenses

The following table presents the components of real estate operating revenues and expenses that are included in the consolidated statements of operations:


	Three Months Ended March 31,
		2025		2024
Real estate operating revenues:
Lease revenue		$	1,659,881	$	2,104,222
Other operating income		524,314		615,479
Total		$	2,184,195	$	2,719,701
Real estate operating expenses:
Utilities		$	27,444	$	11,720
Real estate taxes		298,742		390,810
Repairs and maintenances		280,961		26,972
Management fees		63,873		62,254
Other operating expenses		304,208		199,250
Total		$	975,228	$	691,006

The following table presents the amortization of intangibles that is included in the consolidated statements of operations:


	Three Months Ended March 31,
		2025		2024
Net amortization of above- and below-market rent intangibles (1)		$	(404,245)	$	(824,843)
Amortization of in-place lease intangibles (2)		$	561,420	$	1,334,785

_______________

Notes to Unaudited Consolidated Financial Statements

(1)Net amortization of above- and below-market rent intangibles is recorded as an adjustment to real estate operating revenue on the consolidated statements of operations.

(2)Amortization of in-place lease intangibles is included in depreciation and amortization expense on the consolidated statements of operations.

Note 6. Fair Value Measurements

The Company follows the provisions of ASC 820, Fair Value Measurement (“ASC 820”), which defines fair value, establishes a framework for measuring fair value, and expands disclosures about fair value measurements. ASC 820 established a fair value hierarchy that prioritizes and ranks the level of market price observability used in measuring investments at fair value. Market price observability is impacted by a number of factors, including the type of investment, the characteristics specific to the investment, and the state of the marketplace (including the existence and transparency of transactions between market participants). Investments with readily available, actively quoted prices or for which fair value can be measured from actively quoted prices in an orderly market will generally have a higher degree of market price observability and a lesser degree of judgment used in measuring fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and the lowest priority to unobservable inputs (Level 3 measurements). Investments measured and reported at fair value are classified and disclosed into one of the following categories based on the inputs as follows:

Level 1 — Quoted prices (unadjusted) in active markets for identical assets and liabilities that the Company has the ability to access.

Level 2 — Pricing inputs are other than quoted prices in active markets, including, but not limited to, quoted prices for similar assets and liabilities in markets that are active, quoted prices for identical or similar assets or liabilities in markets that are not active, inputs other than quoted prices that are observable for the assets or liabilities (such as interest rates, yield curves, volatilities, rate of prepayment, loss severities, credit risks and default rates) or other market corroborated inputs.

Level 3 — Significant unobservable inputs are based on the best information available in the circumstances, to the extent observable inputs are not available, including the Company’s own assumptions used in determining the fair value of investments. Fair value for these investments is determined using valuation methodologies that consider a range of factors, including but not limited to the price at which the investment was acquired, the nature of the investment, local market conditions, trading values on public exchanges for comparable securities, current and projected operating performance, and financing transactions subsequent to the acquisition of the investment. The inputs into the determination of fair value require significant management judgment.

In certain cases, the inputs used to measure fair value may fall into different levels of the fair value hierarchy. In such cases, an investment’s level within the fair value hierarchy is based on the lowest level of input that is significant to the fair value measurement. The Company’s assessment of the significance of a particular input to the fair value measurement in its entirety requires judgment, and considers factors specific to the investment.

As of March 31, 2025 and December 31, 2024, the Company had not elected the fair value option for its financial instruments, including loans held for investment, loans held for investment acquired through participation, equity securities without readily determinable fair value, secured financing agreements, unsecured notes payable and obligations under participation agreements. Such financial instruments are carried at cost, less impairment or less net deferred costs, where applicable. Marketable securities and derivatives are financial instruments that are reported at fair value.

Financial Instruments Carried at Fair Value on a Recurring Basis

From time to time, the Company may invest in debt securities. These securities are classified as available-for-sale debt securities and are carried at fair value. Changes in the fair value of the available-for-sale debt securities are reported in other comprehensive income or loss until a gain or loss on the securities is realized. In 2024, the Company owned certain trading equity securities that were carried at fair value. Changes in the fair value of the trading equity securities were reported in earnings. The trading equity securities were sold by April 2024. Additionally, the Company may invest in short-term money market funds. These funds are included in cash and cash equivalents on the consolidated balance sheet due to their short-term nature and can be easily converted to cash.

As discussed in Note 8, in March 2023, the Company entered into a loan agreement with a lender to provide financing for the acquisition of real estate properties (Note 5). In connection with the financing, the Company purchased an interest rate cap for $258,500 to effectively cap the related index rate at 5.0%. The interest rate cap met all the criteria of a derivative under ASC

Notes to Unaudited Consolidated Financial Statements

815, but it did not meet the criteria under ASC 815-20-25 to qualify for hedging accounting. As such, the interest rate cap is reported at fair value and is included in other assets on the consolidated balance sheets, and the change in the fair value of the interest rate cap is reported in Unrealized gain (loss) on investments, net on the consolidated statements of operations.

The following tables present fair value measurements of marketable securities and derivatives, by major class according to the fair value hierarchy as of:


	March 31, 2025
	Fair Value Measurements
	Level 1		Level 2		Level 3		Total
Money market fund (1)	$	2,385,577	$	—	$	—	$	2,385,577
Available-for-sale debt securities	1,108,922		—		—		1,108,922
Derivative - interest rate cap (2)	—		—		—		—
Total	$	3,494,499	$	—	$	—	$	3,494,499


	December 31, 2024
	Fair Value Measurements
	Level 1		Level 2		Level 3		Total
Money market fund (1)	$	2,360,936	$	—	$	—	$	2,360,936
Available-for-sale debt securities	963,178		—		—		963,178
Derivative - interest rate cap (2)	—		75		—		75
Total	$	3,324,114	$	75	$	—	$	3,324,189

______________

(1)Amount is included in cash and cash equivalents on the consolidated balance sheets.

(2)Amount is included in other assets on the consolidated balance sheets. The interest rate cap matures in May 2025.

The following table presents the activities of the securities and derivatives:


	Three Months Ended March 31,
	2025				2024
	Available-For-Sale Debt Securities		Derivatives		Available-For-Sale Debt Securities		Trading Equity Securities		Derivatives
Beginning balance	$	963,178	$	75	$	1,148,653	$	3,813,226	$	83,807
Proceeds from sale	—		—				(1,292,897)		—
Reclassification of net realized loss on investments into earnings	—		—				(135,459)		—
Unrealized gain (loss) on investments	145,744		(75)		(335,781)		(23,052)		121
Ending balance	$	1,108,922	$	—	$	812,872	$	2,361,818	$	83,928

Notes to Unaudited Consolidated Financial Statements

Financial Instruments Not Carried at Fair Value

The following table presents the carrying value, which represents the amortized cost of loan, net of applicable allowance for credit losses, and estimated fair value of the Company’s financial instruments that are not carried at fair value on the consolidated balance sheets as of:


		March 31, 2025						December 31, 2024
	Level	Principal Amount		Carrying Value		Fair Value		Principal Amount		Carrying Value		Fair Value
Assets:
Loans
Loans held for investment	3	$	238,270,217	$	192,866,547	$	193,382,455	$	275,802,476	$	233,571,416	$	234,665,528
Loans held for investment acquired through participation	3	32,909,916		32,582,673		33,244,967		41,452,547		41,077,729		41,871,690
Total loans		271,180,133		225,449,220		226,627,422		317,255,023		274,649,145		276,537,218
Equity securities without readily determinable fair value (1)	3	2,000,000		2,002,353		2,000,000		2,000,000		2,002,353		2,000,000
Total assets		$	273,180,133	$	227,451,573	$	228,627,422	$	319,255,023	$	276,651,498	$	278,537,218
Liabilities:
Unsecured notes payable	1	$	123,500,000	$	120,967,200	$	97,655,500	$	123,500,000	$	120,424,100	$	88,764,850
Secured financing agreements	3	167,147,684		165,687,688		166,153,474		207,593,942		205,718,782		206,731,436
Obligations under participation agreements	3	18,668,574		18,849,311		18,849,311		18,000,000		18,177,106		18,254,853
Total liabilities		$	309,316,258	$	305,504,199	$	282,658,285	$	349,093,942	$	344,319,988	$	313,751,139

_____________

(1)Amount is included in Other assets on the consolidated balance sheets.

The Company estimated that its other financial assets and liabilities, not included in the tables above, had fair values that approximated their carrying values at both March 31, 2025 and 2024 due to their short-term nature.

Valuation Process for Fair Value Measurement

The fair value of the Company’s investment in available-for-sale debt securities and its unsecured notes payable is determined based on quoted prices in an active market and is classified as Level 1 of the fair value hierarchy.

Market quotations are not readily available for the Company’s real estate-related loan investments, all of which are included in Level 3 of the fair value hierarchy, and therefore these investments are valued utilizing a yield approach, i.e., a discounted cash flow methodology to arrive at an estimate of the fair value of each respective investment in the portfolio using an estimated market yield. In following this methodology, investments are evaluated individually, and management takes into account, in determining the risk-adjusted discount rate for each of the Company’s investments, relevant factors, which may include available current market data on applicable yields of comparable debt/preferred equity instruments; market credit spreads and yield curves; the investment’s yield; covenants of the investment, including prepayment provisions; the ability of our borrowers and investees to make payments and their net operating income and debt-service coverage ratio; construction progress reports and construction budget analysis; the nature, quality and realizable value of any collateral (and loan-to-value ratio); the forces that influence the local markets in which the asset (the collateral) is purchased and sold, such as capitalization rates, occupancy rates, rental rates and replacement costs; and the anticipated duration of each real estate-related loan investment.

The Manager designates a valuation committee to oversee the entire valuation process of the Company’s Level 3 investments. The valuation committee is comprised of members of the Manager’s senior management, deal and portfolio management teams, who meet on a quarterly basis, or more frequently as needed, to review the Company investments being valued as well as the inputs used in the proprietary valuation model. Valuations determined by the valuation committee are supported by pertinent data and, in addition to a proprietary valuation model, are based on market data, industry accepted third-party valuation models and discount rates or other methods the valuation committee deems to be appropriate. Because there is no readily available market for these investments, the fair values of these investments are approved in good faith by the Company’s board of directors (which is made up exclusively of independent directors).

Notes to Unaudited Consolidated Financial Statements

The fair values of the Company’s secured financing agreements, which includes mortgage loan payable, secured borrowing, term loan payable and revolving line of credit are determined by discounting the contractual cash flows at the interest rate the Company estimates such arrangements would bear if executed in the current market.

The following tables summarize the valuation techniques and significant unobservable inputs used by the Company to value the Level 3 loans as of March 31, 2025 and December 31, 2024. The tables are not intended to be all-inclusive, but instead identify the significant unobservable inputs relevant to the determination of fair values.


	Fair Value at March 31, 2025		Primary Valuation Technique	Unobservable Inputs	March 31, 2025
Asset Category					Minimum		Maximum		Weighted Average
Assets:
Loans held for investment, net	$	193,382,455	Discounted cash flow	Discount rate	6.75	%	19.33	%	10.12	%
			Discounted cash flow	Terminal capitalization rate	5.75	%	5.75	%	5.75	%
Loans held for investment acquired through participation, net	33,244,967		Discounted cash flow	Discount rate	17.02	%	17.02	%	17.02	%
Equity securities (1)	2,000,000		N/A	N/A	N/A		N/A		N/A
Total Level 3 Assets	$	228,627,422
Liabilities:
Secured financing agreements	$	166,153,474	Discounted cash flow	Discount rate	6.86	%	11.28	%	12.96	%
Obligation under participation agreement	18,849,311		Discounted cash flow	Discount rate	19.33	%	19.33	%	19.33	%
Total Level 3 Liabilities	$	185,002,785


	Fair Value at December 31, 2024		Primary Valuation Technique	Unobservable Inputs	December 31, 2024
Asset Category					Minimum		Maximum		Weighted Average
Assets:
Loans held for investment, net	$	234,665,528	Discounted cash flow	Discount rate	6.75	%	16.48	%	9.63	%
			Discounted cash flow	Terminal capitalization rate	5.75	%	5.75	%	5.75	%
Loans held for investment acquired through participation, net	41,871,690		Discounted cash flow	Discount rate	15.07	%	17.03	%	16.65	%
Equity securities (1)	2,000,000		N/A	N/A	N/A		N/A		N/A
Total Level 3 Assets	$	278,537,218
Liabilities:
Secured financing agreements	$	206,731,436	Discounted cash flow	Discount rate	6.33	%	11.28	%	12.17	%
Obligation under participation agreement	18,254,853		Discounted cash flow	Discount rate	14.78	%	14.78	%	14.78	%
Total Level 3 Liabilities	$	224,986,289

_______________

(1)Fair market value is based on purchase price.

Note 7. Related Party Transactions

Management Agreement

The Company entered into the Management Agreement with the Manager whereby the Manager is responsible for its day-to-day operations. The following table presents a summary of fees paid and costs reimbursed to the Manager in connection with providing services to the Company that are included on the consolidated statements of operations:


	Three Months Ended March 31,
		2025		2024
Origination and extension fee expense (1)		$	698,879	$	262,772
Asset management fee		1,367,789		1,715,042
Asset servicing fee		329,600		406,525
Operating expenses reimbursed to Manager		1,429,953		2,178,164
Disposition fee (2)		320,000		340,000
Total		$	4,146,221	$	4,902,503

Notes to Unaudited Consolidated Financial Statements

_______________

(1)Origination and extension fee expense is generally offset with origination and extension fee income. Any excess is deferred and amortized to interest income over the term of the loan on the consolidated statements of operations.

(2)Disposition fee is generally offset with exit fee income and included in interest income on the consolidated statements of operations.

Origination and Extension Fee Expense

Pursuant to the Management Agreement, the Manager or its affiliates receives an origination fee in the amount of 1.0% of the amount used to originate, fund, acquire or structure investments, including any third-party expenses related to such investments. In the event that the term of any loan held by the Company is extended, the Manager also receives an extension fee equal to the lesser of (i) 1.0% of the principal amount of the loan being extended or (ii) the amount of fee paid to the Company by the borrower in connection with such extension.

Asset Management Fee

Under the terms of the Management Agreement, the Manager or its affiliates provides the Company with certain investment management services in return for a management fee. The Company pays a monthly asset management fee at an annual rate of 1.0% of the aggregate funds under management, which includes the loan origination price or aggregate gross acquisition price, as defined in the Management Agreement, for each investment and cash held by the Company.

Asset Servicing Fee

The Manager or its affiliates receives from the Company a monthly servicing fee at an annual rate of 0.25% of the aggregate gross origination price or acquisition price, as defined in the Management Agreement, for each investment held by the Company.

Transaction Breakup Fee

In the event that the Company receives any “breakup fees,” “busted-deal fees,” termination fees, or similar fees or liquidated damages from a third-party in connection with the termination or non-consummation of any investment or disposition transaction, the Manager will be entitled to receive one-half of such amounts, in addition to the reimbursement of all out-of-pocket fees and expenses incurred by the Manager with respect to its evaluation and pursuit of such transactions. As of March 31, 2025 and December 31, 2024, the Company had not received any breakup fees.

Operating Expenses

The Company reimburses the Manager for operating expenses incurred in connection with services provided to the operations of the Company, including the Company’s allocable share of the Manager’s overhead, such as rent, employee costs, utilities, and technology costs.

Disposition Fee

Pursuant to the Management Agreement, the Manager or its affiliates receive a disposition fee in the amount of 1.0% of the gross sale price received by the Company from the disposition of an investment, but not upon the maturity, prepayment, workout, modification or extension of a loan unless there is a corresponding fee paid by the borrower, in which case the disposition fee will be the lesser of (i) 1.0% of the principal amount of the loan and (ii) the amount of the fee paid by the borrower in connection with such transaction. If the Company takes ownership of a property as a result of a workout or foreclosure of a loan, the Company will pay a disposition fee upon the sale of such property equal to 1.0% of the sales price.

The term of the Management Agreement will expire on December 31, 2027 (the “Initial Term”) and will automatically renew for an unlimited number of additional one-year terms upon each anniversary date of the last day of the Initial Term (each, a “Renewal Term”), unless terminated by the Company or the Manager during the Initial Term or a Renewal Term in accordance with the terms of the Management Agreement (as described below).

The Management Agreement may be terminated by the Company during the Initial Term or any Renewal Term upon a finding by either (i) at least two-thirds of the independent directors on the Board or (ii) the holders of a majority of the

Notes to Unaudited Consolidated Financial Statements

outstanding shares of the Company’s common stock (other than those shares held by members of the Company’s senior management team or affiliates of the Manager) that either (a) there has been unsatisfactory performance by the Manager that is materially detrimental to the Company, or (b) the compensation payable to the Manager pursuant to the Management Agreement is unfair; provided, however, that the Company will not have the right to terminate the Management Agreement on the basis of unfair compensation to the Manager if the Manager agrees to continue to provide its services under the Management Agreement in exchange for reduced fees that at least two-thirds of the independent directors on the Board determine to be fair pursuant to the procedures set forth in the Management Agreement. The Company must deliver prior written notice of any such termination to the Manager at least 180 days prior to the last calendar day of the Initial Term or the then-current Renewal Term, as applicable, and the Management Agreement will terminate effective as of the last calendar day of the Initial Term or the then-current Renewal Term, as applicable.

Upon any termination of the Management Agreement by the Company as discussed above, the Company will pay the Manager, on the date on which such termination is effective, a termination fee in an amount equal to three times the average annual fees of all types and expense reimbursements received by or owed to the Manager pursuant to the Management Agreement during the 24-month period immediately preceding such termination (the “Termination Fee”), calculated as of the end of the most recently completed monthly prior to the date of such termination.

The Company may also terminate the Management Agreement, effective upon 30 calendar days’ prior written notice from the Board to the Manager, without payment of any Termination Fees or other penalties, upon (i) the material breach of the Management Agreement by the Manager or its affiliates that continues for 30 days after written notice thereof to the Manager (or 45 days after delivery of written notice thereof if the Manager takes diligent steps to cure such breach within 30 days of delivery of the written notice), (ii) any fraud or other criminal conduct, gross negligence or breach of fiduciary duty by the Manager or its affiliates in connection with the Management Agreement, as determined by a final, non-appealable judgment of a court of competent jurisdiction, (iii) the Manager’s bankruptcy, insolvency or dissolution, or (iv) an Internalization Event (as defined in the Management Agreement). No Termination Fee or other penalty is payable upon such a termination by the Company.

The Manager may terminate the Management Agreement, effective upon 60 days’ prior written from the Manager to the Company, if the Company breaches the Management Agreement and such breach continues for 30 days after written notice thereof. The Company will pay the Manager the Termination Fee upon such termination by the Manager.

Management Agreement Amendment

As discussed herein, the Company may make real estate and non-real estate related investments of any type that align with its investment objectives and criteria. Accordingly, on May 8, 2025, the Company and the Manager entered into an amendment to the Management Agreement, effective as of January 1, 2025 (the “Amendment”), in order to clarify that the origination, asset management, asset servicing, disposition and breakup fees that the Company pays to the Manager pursuant to the Management Agreement are payable with respect to all real estate and non-real estate investments of any type that the Company originates or acquires. Unless otherwise specifically noted, all references herein to the “Management Agreement” refer to the Management Agreement as modified by the Amendment.

Due From Affiliate

On December 1, 2022, the Company entered into a revolving promissory note receivable with Mavik Special Opps Co-Investments, LP, an affiliate of the Company. The promissory note receivable bears interest at the Prime Rate, as such Prime Rate is published in the Wall Street Journal, computed on the basis of the actual number of days elapsed and a year of 365 days. In January 2024, the promissory note was amended to (i) extend the maturity date from June 30, 2024 to April 30, 2025 and to (ii) modify the interest rate from Prime Rate, as such Prime Rate is published in the Wall Street Journal, computed on the basis of the actual number of days elapsed and a year of 365 days, to 15.0%. During the three months ended March 31, 2025 and 2024, the Company provided funding under the promissory note receivable of none and $1.2 million, respectively. In July 2024, the promissory note receivable was repaid in full, and has a balance of zero as of both March 31, 2025 and December 31, 2024.

Due from Related Parties

As of March 31, 2025 and December 31, 2024, amount due from related parties was $0.9 million and $0.9 million, primarily related to operational cash requirements the Company paid on behalf of its affiliates.

Notes to Unaudited Consolidated Financial Statements

Promissory Note Payable

On January 24, 2024, the Company, as borrower, entered into a revolving promissory note payable with Terra LLC. The promissory note payable bears interest at the Prime Rate, as such Prime Rate is published in the Wall Street Journal, computed on the basis of the actual number of days elapsed and a year of 365 days. The promissory note matures on March 31, 2027. As of March 31, 2025 and December 31, 2024, amount outstanding under this promissory note payable was $43.6 million and $45.1 million, respectively. The activity associated with this agreement is eliminated in consolidation and therefore has no impact on the Company’s consolidated financial statements.

Cost Sharing and Reimbursement Agreement

The Company and Terra LLC have entered into a cost sharing and reimbursement agreement effective October 1, 2022, pursuant to which Terra LLC is responsible for its allocable share of the Company’s expenses, including fees paid by the Company to the Manager based on relative assets under management. These fees are eliminated in consolidation and therefore have no impact on the Company’s consolidated financial statements.

Distributions Paid

For the three months ended March 31, 2025 and 2024, the Company made distributions to investors totaling $4.7 million and $4.7 million, respectively, all of which were returns of capital (Note 10).

Due to Manager

As of March 31, 2025 and December 31, 2024, approximately $0.8 million and $1.6 million, respectively, was due to the Manager, as reflected on the consolidated balance sheets, primarily related to the present value of the disposition fees on individual loans due to the Manager.

Mavik Real Estate Special Opportunities Fund, LP

On August 3, 2020, the Company entered into a subscription agreement with RESOF whereby the Company committed to fund up to $50.0 million to purchase limited partnership interests in RESOF. For more information on this investment, please see Note 4.

Participation Agreements

In the normal course of business, the Company may enter into participation agreements with related parties, primarily other affiliated funds managed by the Manager, and to a lesser extent, unrelated parties (the “Participants”). The purpose of the participation agreements is to allow the Company and an affiliate to originate a specified loan when, individually, the Company does not have the liquidity to do so or to achieve a certain level of portfolio diversification. The Company may transfer portions of its investments to other Participants or it may be a Participant to a loan held by another entity.

ASC 860, Transfers and Servicing (“ASC 860”), establishes accounting and reporting standards for transfers of financial assets. ASC 860-10 provides consistent standards for distinguishing transfers of financial assets that are sales from transfers that are secured borrowings. The Company has determined that the participation agreements it enters into are accounted for as secured borrowings under ASC 860 (see “Participation Interests” in Note 2 and “Obligations Under Participation Agreements” in Note 8).

Participation Interests Purchased by the Company

From time to time, the Company may purchase investments from affiliates pursuant to participation agreements. In accordance with the terms of each participation agreement, each Participant’s rights and obligations, as well as the proceeds received from the related borrower/issuer of the loan, are based upon their respective pro rata participation interest in the loan.

Notes to Unaudited Consolidated Financial Statements

The table below lists the participation interests purchased by the Company pursuant to participation agreements as of:


	March 31, 2025
	Participating Interests	Principal Balance		Carrying Value

Mesa AZ Industrial Owner, LLC (1)	38.27%	$	32,909,916	$	32,582,673
		$	32,909,916	$	32,582,673


	December 31, 2024
	Participating Interests	Principal Balance		Carrying Value

Mesa AZ Industrial Owner, LLC (1)	38.27%	$	33,407,815	$	33,005,953
UNJ Sole Member, LLC (1)(2)	40.80%	8,044,732		8,071,776
		$	41,452,547	$	41,077,729

________________

(1)The loan is held in the name of Mavik Real Estate Special Opportunities Fund REIT, LLC, a related-party REIT managed by the Manager.

(2)This loan was repaid in January 2025.

Transfers of Participation Interests by the Company

The following table summarizes the investment that was subject to a participation agreement with an investment partnership affiliated with the Manager as of:


					March 31, 2025
					Transfers treated as obligations under participation agreements
	Principal		Carrying Value		% Transferred		Principal		Carrying Value
Asano Bankers Hill, LLC (1)	$	19,256,941	$	19,443,374	96.9	%	$	18,668,574	$	18,849,311


					December 31, 2024
					Transfers treated as obligations under participation agreements
	Principal		Carrying Value		% Transferred		Principal		Carrying Value
Asano Bankers Hill, LLC (1)	$	18,567,296	$	18,577,448	96.9	%	$	18,000,000	$	18,177,106

________________

(1)Participant is a certain separately managed account, an investment partnership managed by the Manager.

This investment is held in the name of the Company, but the Participant’s rights and obligations, including interest income and other income (e.g., exit fee, prepayment income) and related fees/expenses (e.g., disposition fees, asset management and asset servicing fees), are based upon its pro rata participation interest in such participated investment, as specified in the participation agreement. The Participant’s share of the investment is repayable only from the proceeds received from the related borrower/issuer of the investment and, therefore, the Participant also is subject to credit risk (i.e., risk of default by the underlying borrower/issuer). Pursuant to the participation agreement with this entity, the Company receives and allocates the interest income and other related investment income to the Participant based on its pro rata participation interest. The Participant pays any expenses, including any fees to the Manager, only on its pro rata participation interest, subject to the terms of the governing fee arrangements.

Notes to Unaudited Consolidated Financial Statements

Note 8. Debt

Unsecured Notes Payable

The following table presents a summary of the Company’s unsecured notes payable outstanding as of:


	Coupon Rate		Effective Rate (1)		Maturity Date	March 31, 2025		December 31, 2024
6.00% Senior Notes Due 2026	6.00	%	7.00	%	6/30/2026	$	85,125,000	$	85,125,000
7.00% Senior Notes Due 2026 (2)	7.00	%	11.16	%	3/31/2026	38,375,000		38,375,000
Total principal amount						123,500,000		123,500,000
Unamortized issue discount						(760,073)		(902,312)
Unamortized purchase discount (2)						(1,502,944)		(1,853,316)
Unamortized deferred financing costs						(269,783)		(320,272)
Unsecured notes payable, net						$	120,967,200	$	120,424,100

_______________

(1)Includes issue discount, purchase discount and deferred financing costs that are amortized to interest expense over the life of the notes.

(2)In connection with the BDC Merger, Terra LLC assumed all the obligations under the 7.00% Senior Notes and recorded a purchase discount of $4.6 million, representing the difference between the carrying value and the fair value of the notes on the date of the merger.

The 6.00% Senior Notes Due 2026

On June 10, 2021, the Company issued $78.5 million in aggregate principal amount of its 6.00% notes due 2026, and on June 25, 2021, the underwriters partially exercised their option to purchase an additional $6.6 million of the notes (collectively the “6.00% Senior Notes Due 2026”). The 6.00% Senior Notes Due 2026 may be redeemed in whole or in part at any time or from time to time at the Company’s option on or after June 10, 2023, at a redemption price equal to 100% of the outstanding principal amount thereof, plus accrued and unpaid interest.

The 7.00% Senior Notes Due 2026

On February 10, 2021, Terra BDC issued $34.8 million in aggregate principal amount of 7.00% fixed-rate notes due 2026, and on February 26, 2021, the underwriters exercised the option to purchase an additional $3.6 million of the notes (collectively the “7.00% Senior Notes Due 2026”). In connection with the BDC Merger, Terra LLC agreed to take all necessary action to assume the payment of the principal of and interest on all of the outstanding 7.00% Senior Notes Due 2026. The 7.00% Senior Notes Due 2026 may be redeemed in whole or in part at any time or from time to time at Terra LLC’s option on or after February 10, 2023, at a redemption price equal to 100% of the outstanding principal amount thereof, plus accrued and unpaid interest.

Covenant Compliance

The Company’s unsecured notes payable contain certain financial covenants. As of March 31, 2025, the Company was in compliance with such covenants.

Notes to Unaudited Consolidated Financial Statements

Secured Financing Arrangements

The following table is a summary of the Company’s secured financing agreements in place as of:


	March 31, 2025										December 31, 2024
	Current Maturity	Extended Maturity	Weighted Average Interest Rate (1)		Pledged Asset Carrying Value		Maximum Facility Size		Principal Amount		Principal Amount
Repurchase Agreements:
Goldman Sachs Bank facility (2)(3)	February 2027	February 2027	8.97	%	$	52,414,122	$	32,027,813	$	32,027,813	$	48,188,441
UBS AG facility (2)(4)	November 2024	(5)	(4)		—		—		—		—
Total					52,414,122		32,027,813		32,027,813		48,188,441
Non-Recourse Financing:
Promissory notes payable (2)(6)	September 2025 - March 2026	March 2026 - March 2027	9.36	%	55,795,995		N/A		24,948,481		40,694,390
Property mortgages - fixed rate	June 2028	June 2028	6.25	%	77,807,437		N/A		40,250,000		40,250,000
Property mortgages - variable rate (7)	April 2027	April 2028	7.82	%	46,584,483		N/A		34,100,000		34,100,000
Total					180,187,915				99,298,481		115,044,390
Other Secured Financing:
Revolving line of credit (2)(8)	June 2025	June 2025	7.67	%	32,582,673		12,571,390		12,571,390		16,361,111
Term loan (9)	December 2027	December 2028	(9)		49,110,580		10,000,000		10,000,000		10,000,000
Secured borrowing	November 2026	November 2026	9.85	%	29,229,815		13,250,000		13,250,000		18,000,000
Total					110,923,068		35,821,390		35,821,390		44,361,111
					$	343,525,105	$	67,849,203	167,147,684		207,593,942
Unamortized deferred financing costs and other									(1,459,996)		(1,875,160)
Secured financing agreements, net									$	165,687,688	$	205,718,782

_______________

(1)Amount is calculated using the applicable index rate as of March 31, 2025.

(2)These facilities were used to finance the Company’s senior loan investments.

(3)Interest rate is based on Term SOFR (subject to underlying loan floors on a case-by-case basis) plus a spread ranging from 4.25% to 5.25%.

(4)Interest rate is based on Term SOFR plus a spread of 1.97%. In February 2024, the outstanding balance was repaid. In March 2024, the Company amended the side letter to the UBS AG facility agreement to reduce the maximum amount available under this facility to zero. In connection with this amendment, UBS AG waived the payment of any fees and the meeting of any representations, warranties or covenants for the period commencing on December 31, 2023 until such time as there are amounts outstanding under the UBS AG facility agreement.

(5)The maturity of this facility can be extended annually on mutually agreeable terms.

(6)Interest rate is based on Term SOFR plus a spread ranging from 4.75% to 5.98% with a combined floor rate ranging from 9.0% to 11.28%.

(7)Interest rate is based on Term SOFR plus a spread of 3.5% with a Term SOFR floor of 3.75%.

(8)Interest rate is based on Term SOFR + 3.5% with a combined floor of 7.0%.

(9)In December 2024, through a series of transactions, a wholly owned subsidiary of the Company issued a $10.0 million term loan payable to an entity in which the Company has an equity investment in exchange for the satisfaction of the remaining funding commitment of the Company to that entity (Note 4). This loan is interest-free until June 30, 2025, after that interest is charged at a fixed rate of 9.0% per annum. The term loan payable is collateralized by the Company’s equity interest in RESOF and the Company serves as a guarantor under the loan. Under the terms of the loan agreement, the Company is required to maintain certain loan-to-value ratio and investment rating. Additionally, the Company’s interest in RESOF is only available to pay the debt under the term loan and not available to pay the debt under any other financing arrangements.

In the normal course of business, the Company is in discussions with its lenders to extend, amend, or replace any financing facilities which contain near term expirations.

Notes to Unaudited Consolidated Financial Statements

The following table presents certain information about the Company’s secured financing agreements:


	Three Months Ended March 31,
		2025		2024
Amortization of deferred financing costs and others		$	526,414	$	946,148

Proceeds from secured financing		$	3,254,091	$	53,019,501
Repayments of secured financing		$	(43,700,349)	$	(84,780,619)

Repurchase Agreements

The Company seeks to mitigate risks associated with its repurchase agreements by managing risk related to the credit quality of its assets, interest rates, liquidity, the rate of prepayment and market value. The margin call provisions under the repurchase facilities provide the lender with certain rights in the event of a decline in the credit of the underlying assets purchased. To monitor credit risk associated with the performance and value of its loans and investments, the Company’s asset management team regularly reviews its investment portfolios and is in regular contact with its borrowers, monitoring performance of the collateral and enforcing its rights as necessary. The Company further seeks to manage risks associated with the repurchase agreements by matching the maturities and interest rate characteristics of its loans with the related repurchase agreement.

Covenant Compliance

The Company’s secured financing agreements contain certain financial tests and covenants. In the event of a default or any breach of covenant of a related agreement, the lender has the right to accelerate all amounts due, charge interest at a default rate, retain all cash flow from the loans originated and/or sell such loans in a private sale on terms possibly unfavorable to the Company. As of March 31, 2025, the Company was in compliance with all such covenants, as amended or waived.

Scheduled Debt Principal Payments

Scheduled debt principal payments for each of the five calendar years following March 31, 2025 are as follows:


Years Ending December 31,	Total
2025 (April 1 through December 31)	$	15,821,390
2026	158,448,481
2027	76,127,813
2028	40,250,000
2029	—
	290,647,684
Unamortized deferred financing costs and other	(3,992,796)
Total	$	286,654,888

Obligations Under Participation Agreements

As discussed in Note 2, the Company follows the guidance in ASC 860 when accounting for loan participations. Such guidance requires the transferred interests meet certain criteria in order for the transaction to be recorded as a sale. Loan participations from the Company which do not qualify for sale treatment remain on the Company’s consolidated balance sheets and the proceeds are recorded as obligations under participation agreements. As of March 31, 2025 and December 31, 2024, obligations under participation agreements were $18.8 million and $18.2 million, respectively. (see “Participation Agreements” in Note 7). The interest rate on the obligations under participation agreements was 19.33% and 19.53%, respectively.

Note 9. Commitments and Contingencies

Unfunded Commitments on Loans Held for Investment

Certain of the Company’s loans contain provisions for future fundings, which are subject to the borrower meeting certain performance-related metrics that are monitored by the Company. These fundings amounted to approximately $11.2 million and $18.7 million as of March 31, 2025 and December 31, 2024, respectively. The Company expects to maintain sufficient cash on

Notes to Unaudited Consolidated Financial Statements

hand to fund such commitments through matching these commitments with principal repayments on outstanding loans or draw downs on credit facilities.

Unfunded Investment Commitment

As discussed in Note 4, on August 3, 2020, the Company entered into a subscription agreement with RESOF whereby the Company committed to fund up to $50.0 million to purchase limited partnership interests in RESOF. As of March 31, 2025 and December 31, 2024, the unfunded investment commitment was $11.3 million and $10.1 million, respectively.

Other

The Company enters into contracts that contain a variety of indemnification provisions. The Company’s maximum exposure under these arrangements is unknown; however, the Company has not had prior claims or losses pursuant to these contracts. The Manager has reviewed the Company’s existing contracts and expects the risk of loss to the Company to be remote.

Additionally, from time to time, the Company and individuals employed by the Company and the Company’s Manager may be a party to certain legal proceedings in the ordinary course of business, including proceedings relating to the enforcement of the Company’s rights under contracts with borrowers and investees. While the outcome of these legal proceedings cannot be predicted with certainty, the Company does not expect that such proceedings will have a material effect upon the financial condition or results of operations.

See Note 7 for a discussion of the Company’s commitments to the Manager.

Note 10. Equity

Earnings Per Share

The following table presents earnings per share:


	Three Months Ended March 31,
		2025		2024
Net loss		$	(1,285,064)	$	(6,183,974)
Weighted-average shares outstanding - basic and diluted		24,338,162		24,336,157
Loss per share - basic and diluted		$	(0.05)	$	(0.25)

Preferred Stock

The Company’s charter gives it authority to issue 50,000,000 shares of preferred stock, $0.01 par value per share (“Preferred Stock”). The Board may classify any unissued shares of Preferred Stock and reclassify any previously classified but unissued shares of Preferred Stock of any series from time to time, into one or more classes or series of stock. As of March 31, 2025 and December 31, 2024, there were no shares of Preferred Stock issued or outstanding.

Common Stock

On October 1, 2022, in connection with the BDC Merger, the Company amended its charter to increase the shares authorized from 500,000,000 to 950,000,000, consisting of 450,000,000 shares of Class A Common Stock, $0.01 par value per share (“Class A Common Stock”), 450,000,000 shares of Class B Common Stock, and 50,000,000 shares of Preferred Stock. Concurrently, 4,847,910 shares of Class B Common Stock were issued to former Terra BDC stockholders and each share of the Company’s common stock issued and outstanding immediately prior to the effective time of the BDC Merger was automatically changed into one issued and outstanding share of Class B Common Stock. As of March 31, 2025, Terra Fund 7 and Terra Offshore REIT held 8.7% and 10.1%, respectively, of the issued and outstanding shares of the Company’s common stock.

The Class B Common Stock rank equally with and have identical preferences, rights, voting powers, restrictions, limitations as to dividends and other distributions, qualifications, and terms and conditions of redemption as each other share of the Company’s common stock, except as set forth below with respect to conversion.

Notes to Unaudited Consolidated Financial Statements

In connection with the potential liquidity transactions discussed in Note 1, on December 1, 2023, the Company amended its articles of amendment and restatement (the “A&R Articles”) to provide the Board with greater flexibility to pursue a direct listing. In connection with a listing of shares of Class A Common Stock on a national securities exchange, the outstanding shares of Class B Common Stock will be convertible on a one-for-one basis into listed shares of Class A Common Stock, subject to certain conversion terms and holding periods. Currently, there are no outstanding shares of Class A Common Stock.

The A&R Articles also incorporate the provisions generally required by state regulators in order to become a non-traded REIT and publicly sell shares of the Company’s stock not listed on an exchange. These non-traded REIT provisions will spring into effect and become operative if the Company ultimately decides to register and sell shares in a non-traded REIT format.

Distributions

The Company generally intends to distribute substantially all of its taxable income, which does not necessarily equal net income as calculated in accordance with U.S. GAAP, to its stockholders each year to comply with the REIT provisions of the Internal Revenue Code. All distributions will be made at the discretion of the Board and will depend upon its taxable income, financial condition, maintenance of REIT status, applicable law, and other factors as the Board deems relevant.

For the three months ended March 31, 2025 and 2024, the Company made distributions to investors totaling $4.7 million and $4.7 million respectively, all of which all were returns of capital.

Dividend Reinvestment Plan

On January 20, 2023, the Board adopted a distribution reinvestment plan (the “Plan”), pursuant to which the Company’s stockholders may elect to reinvest cash distributions payable by the Company in additional shares of Class A Common Stock and Class B Common Stock, at the price per share determined pursuant to the Plan. For the three months ended March 31, 2025 and 2024, the Company issued 629 and 391 shares of Class B Common Stock for a total of $6,165 and $4,474 pursuant to the Plan, respectively.

Note 11. Subsequent Events

Management has evaluated subsequent events through the date the consolidated financial statements were available to be issued. Management has determined that there are no material events that would require adjustment to, or disclosure in, the Company’s consolidated financial statements.

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

The information contained in this section should be read in conjunction with our unaudited consolidated financial statements and related notes thereto and other financial information included elsewhere in this quarterly report on Form 10-Q. In this report, “we,” “us” and “our” refer to Terra Property Trust, Inc. (and, together with its consolidated subsidiaries, the “Company” or “Terra Property Trust”).

FORWARD-LOOKING STATEMENTS

We make forward-looking statements in this quarterly report on Form 10-Q within the meaning of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). For these statements, we claim the protections of the safe harbor for forward-looking statements contained in such Sections. The forward-looking statements contained in this quarterly report on Form 10-Q may include, but are not limited to, statements as to:

•our expected financial performance, operating results and our ability to make distributions to our stockholders in the future;

•our ability to achieve the expected synergies, cost savings and other benefits from the BDC Merger (as defined below);

•risks associated with achieving expected synergies, cost savings and other benefits from our increased scale;

•the availability of attractive risk-adjusted investment opportunities in our target asset class and other real estate-related investments that satisfy our objectives and strategies;

•the origination or acquisition of our targeted assets, including the timing of originations or acquisitions;

•volatility in our industry, interest rates and spreads, the debt or equity markets, the general economy or the real estate market specifically, whether the results of market events or otherwise;

•changes in our investment objectives and business strategy;

•the availability of financing on acceptable terms or at all;

•the performance and financial condition of our borrowers;

•changes in interest rates and the market value of our assets;

•borrower defaults or decreased recovery rates from our borrowers;

•changes in prepayment rates on our loans;

•our use of financial leverage;

•actual and potential conflicts of interest with any of the following affiliated entities: Terra Fund Advisors, LLC, Terra REIT Advisors, LLC (our “Manager”); Terra Capital Partners, LLC (“Terra Capital Partners”), our sponsor; Terra Secured Income Fund 5 International; Terra Income Fund International; Terra Secured Income Fund 7, LLC (“Terra Fund 7”); Terra Offshore Funds REIT, LLC (“Terra Offshore REIT”); Mavik Real Estate Special Opportunities Fund, LP (“RESOF”); Mavik Real Estate Special Opportunities VS2, LP (“VS2”); or any of their affiliates;

•our dependence on our Manager or its affiliates and the availability of its senior management team and other personnel;

•liquidity transactions that may be available to us in the future, including a liquidation of our assets, a sale of our company, a listing of our shares of common stock on a national securities exchange, an amendment of our charter to incorporate certain provisions generally required by state securities regulators to allow us to publicly sell unlisted shares (provided that such provisions would only take effect when a registration statement related to the publicly offered unlisted shares is declared effective), an adoption of a share repurchase plan or a strategic business

combination, in each case, which may include the distribution of our common stock indirectly owned by certain of our affiliate funds (the “Terra Funds”) to the ultimate investors in the Terra Funds, and the timing of any such transactions;

•actions and initiatives of the U.S. federal, state and local government and changes to the U.S., federal, state and local government policies and the execution and impact of these actions, initiatives and policies;

•limitations imposed on our business and our ability to satisfy complex rules in order for us to maintain our exemption exclusion or from registration under the Investment Company Act of 1940, as amended (the “1940 Act”), and to maintain our qualification as a real estate investment trust (“REIT”) for U.S. federal income tax purposes; and

•the degree and nature of our competition.

In addition, words such as “anticipate,” “believe,” “expect” and “intend” indicate a forward-looking statement, although not all forward-looking statements include these words. The forward-looking statements contained in this quarterly report on Form 10-Q involve risks and uncertainties. Our actual results could differ materially from those implied or expressed in the forward-looking statements for any reason, including the factors set forth in “Part I — Item 1A. Risk Factors” in our annual report on Form 10-K for the year ended December 31, 2024. Other factors that could cause actual results to differ materially include:

•changes in the economy;

•tariffs imposed by the current presidential administration and the threat of such tariffs;

•the availability of financing on acceptable terms or at all;

•risks associated with possible disruption in our operations or the economy generally due to terrorism or natural disasters; and

•future changes in laws or regulations and conditions in our operating areas.

We have based the forward-looking statements included in this quarterly report on Form 10-Q on information available to us on the date of this quarterly report on Form 10-Q. Except as required by the federal securities laws, we undertake no obligation to revise or update any forward-looking statements, whether as a result of new information, future events or otherwise. Stockholders are advised to consult any additional disclosures that we may make directly to stockholders or through reports that we may file in the future with the Securities and Exchange Commission (the “SEC”), including annual reports on Form 10-K, quarterly reports on Form 10-Q and current reports on Form 8-K.

Overview

We are a real estate investment trust that originates, invests in and manages a diverse portfolio of real estate and real estate-related assets. We focus primarily on commercial real estate credit investments, including first mortgage loans, subordinated loans (including B-notes, mezzanine and preferred equity) and credit facilities throughout the United States, which we collectively refer to as our targeted assets. Our loans finance the acquisition, development or recapitalization of high-quality commercial real estate in the United States. We focus on middle market loans in the approximately $10 million to $50 million range, which we believe are subject to less competition, offer higher risk-adjusted returns than larger loans with similar risk metrics and facilitate portfolio diversification. Our investment objective is to provide attractive risk-adjusted returns to our stockholders, primarily by earning high current income that allows for regular distributions, and, in certain instances, benefiting from potential capital appreciation. There can be no assurances that we will be successful in meeting our investment objective. We may also make strategic real estate equity and non-real estate-related investments that align with our investment objectives and criteria.

As of March 31, 2025, we held a net loan portfolio (gross loans less obligations under participation agreements and secured borrowing) comprised of 10 loans in eight states with an aggregate net principal balance of $252.5 million, a weighted average coupon rate of 13.3% and a weighted average remaining term to maturity of 0.8 years.

Each of our loans was originated by Terra Capital Partners or its affiliates. Our portfolio is diversified based on location of the underlying properties, loan structure and property type. As of March 31, 2025, our portfolio included underlying properties located in 10 markets, across eight states and includes property types such as multifamily housing, student housing, commercial offices, medical offices, mixed-use and infill properties. The profile of these properties ranges from stabilized and value-added properties to pre-development and construction. Our loans are structured across mezzanine debt, first mortgages, preferred equity investments and credit facilities.

We were incorporated under the Maryland General Corporation Law on December 31, 2015. Through December 31, 2015, our business was conducted through a series of predecessor private partnerships. At the beginning of 2016, we completed the merger of these private partnerships into a single entity as part of our plan to reorganize our business as a REIT for federal income tax purposes (the “REIT Formation Transaction”). Following the REIT Formation Transaction, Terra Secured Income Fund 5, LLC (“Terra Fund 5”) contributed the consolidated portfolio of net assets of certain Terra Funds to our company in exchange for all of the shares of our common stock. On March 2, 2020, we engaged in a series of transactions pursuant to which we issued an aggregate of 4,574,470.35 shares of common stock in exchange for the settlement of an aggregate of $49.8 million of participation interests in loans held by us, cash of $25.5 million and other working capital.

On October 1, 2022, pursuant to that certain Agreement and Plan of Merger, dated as of May 2, 2022 (the “Merger Agreement”), Terra Income Fund 6, Inc. (“Terra BDC”) merged with and into Terra Income Fund 6, LLC (“Terra LLC”), our wholly owned subsidiary, with Terra LLC continuing as the surviving entity of the merger (the “BDC Merger”) and as our wholly owned subsidiary. Pursuant to the terms of the transactions described in the Merger Agreement, approximately 4,847,910 shares of our Class B Common Stock, $0.01 par value per share (“Class B Common Stock”), were issued to former Terra BDC stockholders in connection with the BDC Merger, based on the number of outstanding shares of Terra BDC Common Stock as of October 1, 2022.

As of March 31, 2025, Terra Fund 7 and Terra Offshore REIT held approximately 8.7% and 10.1%, respectively, of our issued and outstanding Class B Common Stock.

As previously disclosed, we continue to explore alternative liquidity transactions on an opportunistic basis to maximize stockholder value. Examples of the alternative liquidity transactions that, depending on market conditions, may be available to us include a listing of our shares of common stock on a national securities exchange, adoption of a share repurchase plan, a liquidation of our assets, a sale of our company or a strategic business combination, in each case, which may include the further in-kind distribution of our shares of common stock indirectly owned by certain of our affiliate funds to the ultimate investors in such affiliate funds. We cannot provide any assurance that any alternative liquidity transaction will be available or, if available, that we will pursue or be successful in completing any such alternative liquidity transaction.

One of the potential future liquidity transactions that we continue to evaluate is a “direct listing” of its Class A Common Stock, $0.01 par value per share (“Class A Common Stock”), on a national securities exchange (i.e., a listing not involving a concurrent public offering of newly issued shares). If market conditions are not supportive of a direct listing that would in our view lead to a constructive trading environment for the Class A Common Stock, we will explore alternative paths to pursue our investment strategy and provide liquidity to our investors, including converting our company into a traditional “non-traded REIT.” As part of a potential conversion to a non-traded REIT, we would adopt a customary share repurchase plan pursuant to which our investors could request to have their shares of its common stock redeemed for cash.

We have elected to be taxed as a REIT for U.S. federal income tax purposes commencing with our taxable year ended December 31, 2016. So long as we qualify as a REIT, we generally are not subject to U.S. federal income tax on our net taxable income to the extent that we annually distribute all of our net taxable income to our stockholders.

Portfolio Summary

Net Loan Portfolio

The following tables provide a summary of our net loan portfolio. Carrying value represents the amortized cost of loan, net of applicable allowance for credit losses.


	March 31, 2025
	Fixed Rate			Floating Rate (1)(2)(3)			Total Gross Loans			Obligations under Participation Agreements			Total Net Loans
Number of loans	2			8			10			1			10
Principal balance	$	12,823,878		$	258,356,255		$	271,180,133		$	18,668,574		$	252,511,559
Carrying value	12,132,565			213,316,655			225,449,220			18,849,311			206,599,909
Fair value	11,786,330			214,841,092			226,627,422			18,849,311			207,778,111
Weighted average coupon rate (4)	8.50		%	14.06		%	13.86		%	19.33		%	13.28		%
Weighted-average remaining term (years) (5)	2.44			0.74			0.82			—			0.82


	December 31, 2024
	Fixed Rate			Floating Rate (1)(2)(3)			Total Gross Loans			Obligations under Participation Agreements			Total Net Loans
Number of loans	2			11			13			1			13
Principal balance	$	12,680,463		$	304,574,560		$	317,255,023		$	18,000,000		$	299,255,023
Carrying value	12,106,695			262,542,450			274,649,145			18,177,107			256,472,038
Fair value	11,740,671			264,796,547			276,537,218			18,254,853			258,282,365
Weighted average coupon rate (4)	8.50		%	13.18		%	13.04		%	19.53		%	12.52		%
Weighted-average remaining term (years) (5)	2.68			0.84			0.91			0.10			0.99

_______________

(3)As of March 31, 2025 and December 31, 2024, 7 and 10 loans, respectively, were subject to a SOFR or Term SOFR floor, as applicable.

(4)Excludes non-performing loans for which recovery of interest income was not probable.

(5)Excludes loans that are in maturity default and represents current effective maturity as of March 31, 2025 and December 31, 2024, exclusive of any extension available.

Real Estate Ownership

In addition to our net loan portfolio, we own eight industrial buildings. As of March 31, 2025 and December 31, 2024, the real estate and related lease intangible assets and liabilities had a net carrying value of $124.4 million and $125.3 million, respectively, and the mortgage loans payable encumbering the real estate properties had an outstanding principal amount of $74.4 million and $74.4 million, respectively.

Equity Interest in Unconsolidated Investments

As of both March 31, 2025 and December 31, 2024, we owned 14.9% of equity interest in a limited partnership that invests primarily in performing and non-performing mortgages, loans, mezzanines and other credit instruments supported by underlying commercial real estate assets. We also beneficially own equity interests in joint ventures that invest in real estate properties, opportunistic debt and equity securities and, indirectly, together with other non-affiliated entities, non-real estate operating companies, as well as a preferred equity investment with residual profit sharing from sale of the underlying property. These investments are accounted for using the equity method of accounting. As of March 31, 2025 and December 31, 2024, these equity interests had total carrying value of $108.1 million and $106.8 million, respectively.

Book Value Per Share

We calculate our book value per share by dividing our net equity by the number of outstanding shares of our common stock, unless otherwise determined by our Board. Our book value per share of Class B Stock Common Stock as of March 31, 2025 and December 31, 2024 was $7.39 and $7.63, respectively.

Portfolio Investment Activity

Net Loan Portfolio

For the three months ended March 31, 2025 and 2024, we invested $29.0 million and $11.4 million in new and add-on investments and had $23.7 million and $27.5 million of repayments, resulting in net repayments of $5.3 million and $16.1 million, respectively. Amounts are net of obligations under participation agreements and secured financing agreements.

Net Loan Portfolio Information

The tables below set forth the types of loans in our loan portfolio, as well as the property type and geographic location of the properties securing these loans, on a net loan basis, which represents our proportionate share of the loans, based on our economic ownership of these loans as of:


	March 31, 2025						December 31, 2024
Loan Structure	Principal Balance		Carrying Value		% of Total		Principal Balance		Carrying Value		% of Total
First mortgages	$	169,122,522	$	170,022,605	82.3	%	$	207,985,740	$	209,496,879	81.6	%
Preferred equity investments	76,389,037		29,598,616		14.3	%	76,224,551		31,937,149		12.5	%
Mezzanine loans	7,000,000		6,978,687		3.4	%	15,044,732		15,038,010		5.9	%
Total	$	252,511,559	$	206,599,908	100.0	%	$	299,255,023	$	256,472,038	100.0	%


	March 31, 2025						December 31, 2024
Property Type	Principal Balance		Carrying Value		% of Total		Principal Balance		Carrying Value		% of Total
Multifamily	$	66,461,136	$	66,128,293	32.0	%	$	60,969,051	$	60,662,514	23.7	%
Infill land	55,816,006		56,634,067		27.4	%	56,307,815		57,050,952		22.2	%
Office	100,819,571		54,785,090		26.5	%	116,539,650		72,991,791		28.4	%
Mixed-use	22,414,846		22,073,770		10.7	%	30,438,507		29,890,548		11.7	%
Industrial	7,000,000		6,978,688		3.4	%	7,000,000		6,966,233		2.7	%
Student housing	—		—		—	%	28,000,000		28,910,000		11.3	%
Total	$	252,511,559	$	206,599,908	100.0	%	$	299,255,023	$	256,472,038	100.0	%


	March 31, 2025						December 31, 2024
Geographic Location	Principal Balance		Carrying Value		% of Total		Principal Balance		Carrying Value		% of Total
United States
Arizona	$	32,909,916	$	32,582,673	15.8	%	$	33,407,815	$	33,005,952	12.9	%
Washington	31,638,858		31,744,601		15.4	%	26,894,593		26,907,157		10.5	%
Georgia	30,842,779		30,934,415		15.0	%	30,562,858		30,586,450		11.9	%
California	29,586,767		29,823,877		14.4	%	53,006,023		53,096,008		20.6	%
New York	75,800,670		29,004,553		14.0	%	75,657,255		31,536,808		12.3	%
New Jersey	22,906,090		24,051,394		11.6	%	22,900,000		24,045,000		9.4	%
North Carolina	21,826,479		21,479,707		10.4	%	21,826,479		21,418,430		8.4	%
Massachusetts	7,000,000		6,978,688		3.4	%	7,000,000		6,966,233		2.7	%
Utah	—		—		—	%	28,000,000		28,910,000		11.3	%
Total	$	252,511,559	$	206,599,908	100.0	%	$	299,255,023	$	256,472,038	100.0	%

Factors Impacting Operating Results

Our results of operations are affected by a number of factors and primarily depend on, among other things, the level of the interest income from targeted assets, the market value of our assets and the supply of, and demand for, real estate-related loans, including mezzanine loans, first mortgage loans, subordinated mortgage loans, preferred equity investments and other loans related to high quality commercial real estate in the United States, and the financing and other costs associated with our business. Interest income and borrowing costs may vary as a result of changes in interest rates, which could impact the net interest we receive on our assets. Our operating results may also be impacted by conditions in the financial markets and unanticipated credit events experienced by borrowers under our loan assets.

Credit Risk

Our loans and investments are subject to credit risk. The performance and value of our loans and investments depend upon the owners’ ability to operate the properties that serve as our collateral so that they produce cash flows adequate to pay interest

and principal due to us. To monitor this risk, our asset management team reviews our investment portfolios and is in regular contact with our borrowers, monitoring performance of the collateral and enforcing our rights as necessary.

In addition, we are exposed to the risks generally associated with the commercial real estate market, including variances in occupancy rates, capitalization rates, absorption rates, and other macroeconomic factors beyond our control. We seek to manage these risks through our Manager's underwriting and asset management processes.

We maintain all of our cash at financial institutions which, at times, may exceed the amount insured by the Federal Deposit Insurance Corporation.

Concentration Risk

We hold real estate and real estate-related loans. Thus, our investment portfolio may be subject to a more rapid change in value than would be the case if it were required to maintain a wide diversification among industries, companies and types of loans. The result of such concentration in real estate assets is that a loss in such investments could materially reduce our capital.

Interest Rate Risk

Interest rate risk represents the effect from a change in interest rates, which could result in an adverse change in the fair value of our interest-bearing financial instruments. With respect to our business operations, increases in interest rates, in general, may over time cause: (i) the interest expense associated with variable rate borrowings to increase; (ii) the value of real estate and real estate-related loans to decline; (iii) coupons on variable rate loans to reset, although on a delayed basis, to higher interest rates; (iv) to the extent applicable under the terms of our investments, prepayments on real estate-related loans to slow; and (v) to the extent we enter into interest rate swap agreements as part of our hedging strategy, the value of these agreements to increase.

Conversely, decreases in interest rates, in general, may over time cause: (i) the interest expense associated with variable rate borrowings to decrease; (ii) the value of real estate and real estate-related loans to increase; (iii) coupons on variable rate real estate-related loans to reset, although on a delayed basis, to lower interest rates; (iv) to the extent applicable under the terms of our investments, prepayments on real estate-related loans to increase; and (v) to the extent we enter into interest rate swap agreements as part of our hedging strategy, the value of these agreements to decrease.

Prepayment Risk

Prepayments can either positively or adversely affect the yields on our loans. Prepayments on debt instruments, where permitted under the debt documents, are influenced by changes in current interest rates and a variety of economic, geographic and other factors beyond our control, and consequently, such prepayment rates cannot be predicted with certainty. If we do not collect a prepayment fee in connection with a prepayment or are unable to invest the proceeds of such prepayments received, the yield on the portfolio will decline. In addition, we may acquire assets at a discount or premium and if the asset does not repay when expected, the anticipated yield may be impacted. Under certain interest rate and prepayment scenarios we may fail to recoup fully our cost of acquisition of certain loans.

Extension Risk

Extension risk is the risk that our assets will be repaid at a slower rate than anticipated and generally increases when interest rates rise. In which case, to the extent we have financed the acquisition of an asset, we may have to finance our asset at potentially higher costs without the ability to reinvest principal into higher yielding securities because borrowers prepay their mortgages at a slower pace than originally expected, adversely impacting our net interest spread, and thus our net interest income.

Real Estate Risk

The market values of commercial and residential mortgage assets are subject to volatility and may be affected adversely by a number of factors, including, but not limited to, national, regional and local economic conditions (which may be adversely affected by industry slowdowns and other factors); local real estate conditions; changes or continued weakness in specific industry segments; construction quality, age and design; demographic factors; retroactive changes to building or similar codes; pandemics; natural disasters; and other acts of god. In addition, decreases in property values reduce the value of the collateral and the potential proceeds available to a borrower to repay the underlying loans, which could also cause us to suffer losses.

Use of Leverage

We deploy moderate amounts of leverage as part of our operating strategy, which may consist of borrowings under first mortgage financings, warehouse facilities, term loans, repurchase agreements and other credit facilities. While borrowing and leverage present opportunities for increasing total return, they may have the effect of potentially creating or increasing losses.

Market Risk

Our loans are highly illiquid, and there is no assurance that we will achieve our investment objectives, including targeted returns. Due to the illiquidity of the loans, valuation of our loans may be difficult, as there generally will be no established markets for these loans.

Results of Operations

The following table presents the comparative results of our operations:


	Three Months Ended March 31,
		2025		2024		Change
Revenues
Interest income		$	10,205,897	$	12,148,735	$	(1,942,838)
Real estate operating revenue		2,184,195		2,719,701		(535,506)
Other operating income		66,657		140,909		(74,252)
		12,456,749		15,009,345		(2,552,596)
Operating expenses
Operating expenses reimbursed to Manager		1,429,953		2,178,164		(748,211)
Asset management fee		1,367,789		1,715,042		(347,253)
Asset servicing fee		329,600		406,525		(76,925)
Provision for credit losses		2,119,736		1,873,111		246,625
Real estate operating expenses		975,228		691,006		284,222
Depreciation and amortization		1,345,937		2,116,682		(770,745)
Professional fees		518,354		885,569		(367,215)
Directors’ fees		83,750		83,750		—
Other		202,190		262,911		(60,721)
		8,372,537		10,212,760		(1,840,223)
Operating income		4,084,212		4,796,585		(712,373)
Other income and expenses
Interest expense on secured financing		(4,548,870)		(7,289,912)		2,741,042
Interest expense on unsecured notes payable		(2,491,537)		(2,440,375)		(51,162)
Interest expense on obligations under participation agreements		(888,904)		(618,495)		(270,409)
Unrealized loss on investments, net		(75)		(22,931)		22,856
Income (loss) from equity interest in unconsolidated investments		2,560,110		(473,387)		3,033,497
Realized loss on investments, net		—		(135,459)		135,459
		(5,369,276)		(10,980,559)		5,611,283
Net loss		$	(1,285,064)	$	(6,183,974)	$	4,898,910

Net Loan Portfolio

In assessing the performance of our loans, we believe it is appropriate to evaluate the loans on an economic basis, that is, gross loans net of obligations under participation agreements, promissory notes payable, revolving credit facility, secured borrowing and repurchase agreements payable.

The following table presents a reconciliation of our loan portfolio on a weighted average basis from gross to net:


	Three Months Ended March 31, 2025				Three Months Ended March 31, 2024
	Weighted Average Principal Amount (1)		Weighted Average Coupon Rate (2)		Weighted Average Principal Amount (1)		Weighted Average Coupon Rate (2)
Total portfolio
Gross loans	$	301,186,692	13.0	%	$	486,104,899	13.1	%
Obligations under participation agreements	(18,349,524)		19.3	%	(12,032,967)		20.3	%
Secured borrowing	(16,363,889)		9.9	%	—		—	%
Promissory notes payable	(23,753,749)		9.4	%	(65,985,924)		10.9	%
Repurchase agreements payable	(39,389,877)		9.0	%	(80,820,899)		8.6	%
Revolving line of credit payable	(14,789,174)		7.7	%	(46,881,127)		8.7	%
Net loans (3)	$	188,540,479	14.4	%	$	280,383,982	15.3	%
Senior loans
Gross loans	$	215,794,304	13.2	%	$	378,176,428	12.8	%
Obligations under participation agreements	—		—	%	—		—	%
Secured borrowing	(16,363,889)		9.9	%	—		—	%
Promissory notes payable	(23,753,749)		9.4	%	(65,985,924)		10.9	%
Repurchase agreements payable	(39,389,877)		9.0	%	(80,820,899)		8.6	%
Revolving line of credit payable	(14,789,174)		7.7	%	(46,881,127)		8.7	%
Net loans (3)	$	121,497,615	16.4	%	$	184,488,478	16.4	%
Subordinated loans (4)
Gross loans	$	85,392,388	12.4	%	$	107,928,471	14.0	%
Obligations under participation agreements	(18,349,524)		19.3	%	(12,032,967)		20.3	%
Net loans (3)	$	67,042,864	10.5	%	$	95,895,504	13.2	%

_______________

(1)Amount is calculated based on the number of days each loan is outstanding.

(2)Amount is calculated based on the underlying principal amount of each loan.

(3)The weighted average coupon rate represents net interest income over the period calculated using the weighted average coupon rate and weighted average principal amount shown on the table (interest income on the loans less interest expense) divided by the weighted average principal amount of the net loans during the period.

(4)Subordinated loans include mezzanine loans, preferred equity investments and credit facilities.

Interest Income

For the three months ended March 31, 2025 as compared to the three months ended March 31, 2024, interest income decreased by $1.9 million, primarily due to a decrease in contractual interest income as a result of a decrease in the weighted average principal balance of performing loans.

Real Estate Operating Revenue

For the three months ended March 31, 2025 as compared to the three months ended March 31, 2024, real estate operating revenue decreased by $0.5 million, primarily due to the write off of the unamortized below-market rent intangible in connection with a least termination in January 2024.

Other Operating Income

For the three months ended March 31, 2025 as compared to the three months ended March 31, 2024, other operating income decreased by $0.1 million, primarily due to dividend income earned on our trading equity securities in 2024 (there was no such dividend income earned in 2025).

Operating Expenses Reimbursed to Manager

Under the terms of a management agreement (the “Management Agreement”) with our Manager, we reimburse our Manager for operating expenses incurred in connection with services provided to us, including our allowable share of our Manager’s overhead, such as rent, employee costs, utilities and technology costs.

For the three months ended March 31, 2025 as compared to the three months ended March 31, 2024, operating expenses reimbursed to our Manager decreased by $0.7 million, primarily due to a decrease in the allocation ratio as a result of a decrease in our total funds under management.

Asset Management Fee

Under the terms of the Management Agreement with our Manager, we paid our Manager a monthly asset management fee at an annual rate of 1% of the aggregate funds under management, which included the aggregate gross acquisition price, net of participation interest sold to affiliates, for each investment and cash held by us.

For the three months ended March 31, 2025 as compared to the three months ended March 31, 2024, asset management fees decreased by $0.3 million, primarily due to a decrease in total assets under management resulting from repayment of loans.

Asset Servicing Fee

Under the terms of the Management Agreement with our Manager, we paid our Manager a monthly servicing fee at an annual rate of 0.25% of the aggregate gross origination price or acquisition price for each investment held by us.

For the three months ended March 31, 2025 as compared to the three months ended March 31, 2024, asset servicing fees decreased by $0.1 million, primarily due to a decrease in total assets under management resulting from the repayment of loans.

Provision for Credit Losses

We follow the provisions of Accounting Standards Codification (“ASC”) 326, Financial Instruments – Credit Losses, which requires entities to recognize credit losses on financial instruments based on an estimate of current expected credit losses.

For the three months ended March 31, 2025 and 2024, provision for credit losses was $2.1 million and $1.9 million, respectively, primarily related to a decline in our estimated recoverable amount on a non-performing subordinated loan due to an increase in senior funding.

Real Estate Operating Expenses

For the three months ended March 31, 2025 as compared to the three months ended March 31, 2024, real estate operating expenses increased by $0.3 million, primarily due to an increase in repairs and maintenance as well as other expenses, partially offset by a decrease in real estate taxes.

Depreciation and Amortization

For the three months ended March 31, 2025 as compared to the three months ended March 31, 2024, depreciation and amortization decreased by $0.8 million, primarily due to a decrease in amortization of in-place lease intangibles related to the termination of a lease for a space in one of the industrial properties in January 2024, resulting in a write off of the related unamortized in-place lease.

Professional Fees

For the three months ended March 31, 2025 as compared to the three months ended March 31, 2024, professional fees decreased by $0.4 million, primarily due to legal fees incurred in connection with a review of strategic alternatives for our company in 2024.

Interest Expense on Secured Financing

Our secured financing consists of repurchase agreements, revolving line of credit, term loan, promissory notes and property mortgages.

For the three months ended March 31, 2025 as compared to the three months ended March 31, 2024, interest expense on secured financing decreased by $2.7 million, as a result of a decrease in the weighted average principal amount outstanding.

Interest Expense on Unsecured Notes Payable

In June 2021, we issued $85.1 million in aggregate principal amount of 6.00% notes due 2026. In connection with the BDC Merger, we assumed $38.4 million in aggregate principal amount of 7.00% notes due in 2026.

For the three months ended March 31, 2025 as compared to the three months ended March 31, 2024, interest expense on unsecured notes payable increased by $0.1 million, primarily due to an increase in the amortization of financing costs using the effective interest rate method.

Interest from Obligations under Participation Agreements

For the three months ended March 31, 2025 as compared to the three months ended March 31, 2024, interest expense from obligations under participation agreements increased by $0.3 million, primarily as a result of an increase in the weighted average principal amount outstanding, partially offset by a decrease in the weighted average interest rate on the obligations under participation agreements.

Income (Loss) from Equity Interest in Unconsolidated Investments

As of both March 31, 2025 and December 31, 2024, we owned a 14.9% equity interest in RESOF, an affiliated limited partnership that invests primarily in performing and non-performing mortgages, loans, mezzanines and other credit instruments supported by underlying commercial real estate assets. We also beneficially owned equity interests in joint ventures that invest in real estate properties, opportunistic debt and equity securities and, indirectly, together with other non-affiliated entities, non-real estate operating companies, and a preferred equity investment with residual profit-sharing.

Our income (loss) from equity interest in unconsolidated investments are as follows:


	Three Months Ended March 31,
		2025		2024
Income from equity interest in RESOF		$	2,206,934	$	998,339
Loss from equity interest in the joint ventures		(250,393)		(1,471,726)
Income from other equity investment		603,569		—
		$	2,560,110	$	(473,387)

For the three months ended March 31, 2025 as compared to the three months ended March 31, 2024, equity income from RESOF increased as a result of an increase in RESOF’s net income associated with increased investments.

For the three months ended March 31, 2025 as compared to the three months ended March 31, 2024, equity loss from the joint ventures decreased primarily due to equity income recognized from our new investments in non-real estate operating companies as well as a decrease in the net loss of the real estate joint ventures resulting from the sale of a property in 2024.

Other equity investment relates to a preferred equity agreement in which we also share residual profit from the sale of underlying property with the borrower. There was no such investment during the three months ended March 31, 2024.

Realized Loss On Investments, Net

For the three months ended March 31, 2024, we sold a portion of our investments in trading securities and recognized a net loss on sale of $0.1 million. There was no such realized loss for the three months ended March 31, 2025.

Net Loss

For the three months ended March 31, 2025 as compared to the three months ended March 31, 2024, the resulting net loss decreased by $4.9 million.

Financial Condition, Liquidity and Capital Resources

Liquidity is a measure of our ability to meet potential cash requirements, including ongoing commitments to repay borrowings, funding and maintaining our assets and operations, making distributions to our stockholders and other general business needs. We use significant cash to purchase our target assets, repay principal and interest on our borrowings, make distributions to our investors and fund our operations. Our primary sources of cash generally consist of payments of principal and interest we receive on our portfolio of investments, cash generated from our operating results and unused borrowing capacity under our financing sources. We deploy moderate amounts of leverage as part of our operating strategy and use a number of sources to finance our target assets, including our senior notes, term loan, repurchase agreement and revolving line of credit. We may use other sources to finance our target assets, including bank financing and arranged financing facilities with domestic or international financing providers. In addition, we may divide the loans we originate into senior and junior tranches and dispose of the more senior tranches as an additional means of providing financing to our business.

We may also issue additional equity, equity-related and debt securities to fund our investment strategies. We may issue these securities to unaffiliated third parties or to vehicles advised by affiliates of Terra Capital Partners or third parties. As part of our capital raising transactions, we may grant to one or more of these vehicles certain control rights over our activities including rights to approve major decisions we take as part of our business. In order to qualify as a REIT, we must distribute to our stockholders, each calendar year, dividends equal to at least 90% of our REIT taxable income (including certain items of non-cash income), determined without regard to the deduction for dividends paid and excluding net capital gain. These distribution requirements limit our ability to retain earnings and thereby replenish or increase capital for our business.

We expect to fund approximately $11.2 million of the unfunded commitments to borrowers during the next twelve months. We expect to maintain sufficient liquidity to fund such commitments through matching these commitments with principal repayments on outstanding loans or draw downs on our credit facilities. Obligations under participation agreements of $18.7 million will mature in the next twelve months. We will use the proceeds from the repayment of the corresponding investment to repay the participation obligations. Our revolving line of credit with outstanding principal balance of $12.6 million is scheduled to mature on June 30, 2025. We expect to use proceeds from repayment of the underlying loan to repay the outstanding principal or refinance with another lender. Additionally, two promissory notes payable with a total outstanding principal balance of $24.9 million that are collateralized by senior loans with an aggregate principal balance of $54.5 million will mature within the next twelve months. We expect to use proceeds from the repayment of the underlying loans to repay the promissory notes payable. Finally, our 7.00% Senior Notes Due 2026 with an outstanding principal balance of $38.4 million are scheduled to mature on March 31, 2026. We intend to refinance or repay the 7.00% Senior Notes Due 2026 through debt or equity capital sources or facilities. No assurance can be given about the availability of such financings on acceptable terms or at all.

Summary of Financing

The table below summarizes our debt financing as of March 31, 2025:

Type of Financing

Maximum Amount Available

Outstanding Balance

Amount Remaining Available

Interest Rate

Maturity Date

Fixed Rate:

Unsecured notes payable

N/A

85,125,000

N/A

6.00%

June 2026

Unsecured notes payable

N/A

38,375,000

N/A

7.00%

March 2026

Property mortgages

N/A

40,250,000

N/A

6.25%

June 2028

Term loan payable

N/A

10,000,000

N/A

Interest free until 6/30/2025, after that 9.00%

December 2027

173,750,000

Variable Rate:

Property mortgages

N/A

34,100,000

N/A

Term SOFR +3.5% (Term SOFR Floor of 3.75%)

April 2027

Promissory notes payable

N/A

24,948,481

N/A

Term SOFR plus a spread ranging from 4.75% to 5.98% with a combined floor rate ranging from 9.0% to 11.28%

September 2025 - March 2026

Secured borrowing

N/A

13,250,000

N/A

Term SOFR + 5%, (combined floor rate of 9.85%

November 2026

Revolving line of
credit

12,571,390

—

Term SOFR + 3.5% (combined floor rate of 7.0%)

June 2025

Goldman Sachs Bank
repurchase agreement

32,027,813

—

Term SOFR (subject to underlying loan floors on a case-by-case basis) plus a spread ranging from 4.25% to 5.25%)

February 2027

44,599,203

116,897,684

—

Cash Flows Provided by (Used in) Operating Activities

For the three months ended March 31, 2025, cash flow provided by operating activities was $0.9 million, compared to cash flow used in operating activities of $4.2 million for the three months ended March 31, 2024. The increase in operating cash flows was primarily due to a decrease in interest expense on secured financing resulting from a decrease in the weighted average principal amount outstanding, a decrease in asset management fees resulting from the repayment of loans, as well as an increase in equity income distributions from RESOF resulting from an increase in income associated with increased investments.

Cash Flows Provided by Investing Activities

For the three months ended March 31, 2025, cash flows provided by investing activities were $46.2 million, primarily related to proceeds from repayment of loans of $54.0 million, partially offset by origination. purchase and funding of loans of $7.9 million.

For the three months ended March 31, 2024, cash flows provided by investing activities were $33.4 million, primarily related to proceeds from repayment of loans of $47.0 million, partially offset by origination, purchase and funding of loans of $7.2 million and purchase of equity interests in unconsolidated investments of $6.5 million.

Cash Flows Used in Financing Activities

For the three months ended March 31, 2025, cash flows used in financing activities were $45.9 million, primarily related to principal repayments on secured financing of $43.7 million, distributions paid of $4.6 million and a decrease in interest reserve and other deposits held on investments of $1.4 million, partially offset by proceeds from secured financing of $3.3 million and proceeds from obligations under participation agreements of $0.7 million.

For the three months ended March 31, 2024, cash flows used in financing activities were $22.2 million, primarily related to principal repayments on secured financing of $84.8 million, distributions paid of $4.6 million and payment for financing costs of $0.9 million, partially offset by proceeds from secured financing of $53.0 million and proceeds from obligations under participation agreements of $15.0 million.

Distribution Reinvestment Plan

On January 20, 2023, our Board adopted a distribution reinvestment plan (the “Plan”), pursuant to which our stockholders may elect to reinvest cash distributions payable by us in additional shares of Class A Common Stock and Class B Common Stock, at the price per share determined pursuant to the Plan.

Critical Accounting Policies and Use of Estimates

Our consolidated financial statements are prepared in conformity with United States generally accepted accounting principles, which requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting periods. Critical accounting policies are those that require the application of management’s most difficult, subjective or complex judgments, often because of the need to make estimates about the effect of matters that are inherently uncertain and that may change in subsequent periods. In preparing the consolidated financial statements, management has made estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting periods. In preparing the consolidated financial statements, management has utilized available information, including industry standards and the current economic environment, among other factors, in forming its estimates and judgments, giving due consideration to materiality. Actual results may differ from these estimates. In addition, other companies may utilize different estimates, which may impact the comparability of our results of operations to those of companies in similar businesses. As we execute our expected operating plans, we will describe additional critical accounting policies in the notes to our future consolidated financial statements in addition to those discussed below.

Allowance for Credit Losses

We follow the provisions of ASC 326, which requires entities to recognize credit losses on financial instruments based on an estimate of current expected credit losses (“CECL”). The CECL model requires the consideration of possible credit losses over the life of an instrument as opposed to estimating credit losses upon the occurrence of an actual loss event under the previous “incurred loss” methodology.

We use a model-based approach for estimating the allowance for credit losses on performing loans on a collective basis, including future funding commitments for which we do not have the unconditional right to cancel, as these loans share similar risk characteristics. We utilize information obtained from internal and external sources relating to past events, current economic conditions and reasonable and supportable forecasts about the future to determine the expected credit losses for our loan portfolio. We utilize a commercial mortgage-based, third-party loan loss model and because we do not have a meaningful history of realized credit losses on our loan portfolio, we subscribe to a database service to provide historical proxy loan loss information. We employ logistic regression to forecast expected losses at the loan level based on a commercial real estate loan securitization database that contains activity dating back to 1998. We have chosen to incorporate a weighted average macroeconomic forecast that encompasses baseline, upside and downside scenarios, into our allowance for credit losses on performing loans estimate during the reasonable and supportable forecast period which is currently eight quarters. We select certain economics variables from a group of independent variables such as Commercial Real Estate Price Index, unemployment and interest rate which are included in the model as part of macroeconomic forecast and updated regularly based on current economic trends. The specific loan level information input into the model includes loan-to-value and debt service coverage ratio metrics, as well as principal balances, property type, location, coupon rate, coupon rate type, original or remaining term, expected repayment dates and contractual future funding commitments. Based on the inputs, the loan loss model determines a loan loss rate through the generation of a probability of default (PD) and loss given default (LGD) for each loan. The allowance for credit losses on performing loans is then calculated by applying the loan loss rate to the total outstanding loan balance of each loan. These results require a significant amount of judgment applied in selecting inputs and analyzing the results produced by the models to determine the allowance for credit losses. Changes in such estimates can significantly affect the expected credit losses.

Management Agreement with our Manager

We currently pay the following fees to our Manager pursuant to the Management Agreement:

Origination and Extension Fee. An origination fee in the amount of 1.0% of the amount used to originate, acquire, fund or structure investments, including any third-party expenses related to such investments. In the event that the term of any loan is extended, our Manager also receives an origination fee equal to the lesser of (i) 1.0% of the principal amount of the loan being extended or (ii) the amount of fee paid by the borrower in connection with such extension.

Asset Management Fee. A monthly asset management fee at an annual rate equal to 1.0% of the aggregate funds under management, which includes the loan origination amount or aggregate gross acquisition cost, as applicable, for each investment and cash held by us.

Asset Servicing Fee. A monthly asset servicing fee at an annual rate equal to 0.25% of the aggregate gross origination price or aggregate gross acquisition price for each investment then held by us (inclusive of closing costs and expenses).

Disposition Fee. A disposition fee in the amount of 1.0% of the gross sale price received by our company from the disposition of an investment, but not upon the maturity, prepayment, workout, modification or extension of a loan unless there is a corresponding fee paid by the borrower, in which case the disposition fee will be the lesser of (i) 1.0% of the principal amount of the loan and (ii) the amount of the fee paid by the borrower in connection with such transaction. If we take ownership of a property as a result of a workout or foreclosure of a loan, we will pay a disposition fee upon the sale of such property equal to 1.0% of the sales price.

Transaction Breakup Fee. In the event that we receive any “breakup fees,” “busted-deal fees,” termination fees, or similar fees or liquidated damages from a third-party in connection with the termination or non-consummation of any investment or disposition transaction, our Manager will be entitled to receive one-half of such amounts, in addition to the reimbursement of all out-of-pocket fees and expenses incurred by our Manager with respect to its evaluation and pursuit of such transactions.

In addition to the fees described above, we reimburse our Manager for operating expenses incurred in connection with services provided to the operations of our company, including our allocable share of our Manager’s overhead, such as rent, employee costs, utilities, and technology costs.

The following table presents a summary of fees paid and costs reimbursed to our Manager in connection with providing services to us:


	Three Months Ended March 31,
		2025		2024
Origination and extension fee expense (1)		$	698,879	$	262,772
Asset management fee		1,367,789		1,715,042
Asset servicing fee		329,600		406,525
Operating expenses reimbursed to Manager		1,429,953		2,178,164
Disposition fee (2)		320,000		340,000
Total		$	4,146,221	$	4,902,503

_______________

(1)Origination and extension fee expense is generally offset with origination and extension fee income. Any excess is deferred and amortized to interest income over the term of the loan.

(2)Disposition fee is generally offset with exit fee income and included in interest income on the consolidated statements of operations.

The term of the Management Agreement will expire on December 31, 2027 (the “Initial Term”) and will automatically renew for an unlimited number of additional one-year terms upon each anniversary date of the last day of the Initial Term (each, a “Renewal Term”), unless terminated by us or the Manager during the Initial Term or a Renewal Term in accordance with the terms of the Management Agreement (as described below).

The Management Agreement may be terminated by us during the Initial Term or any Renewal Term upon a finding by either (i) at least two-thirds of the independent directors on our Board or (ii) the holders of a majority of the outstanding shares of our common stock (other than those shares held by members of the our senior management team or affiliates of our Manager) that either (a) there has been unsatisfactory performance by our Manager that is materially detrimental to us, or (b) the compensation payable to our Manager pursuant to the Management Agreement is unfair; provided, however, that we will not have the right to terminate the Management Agreement on the basis of unfair compensation to our Manager if our Manager agrees to continue to provide its services under the Management Agreement in exchange for reduced fees that at least two-thirds of the independent directors on our Board determine to be fair pursuant to the procedures set forth in the Management Agreement. We must deliver prior written notice of any such termination to our Manager at least 180 days prior to the last

calendar day of the Initial Term or the then-current Renewal Term, as applicable, and the Management Agreement will terminate effective as of the last calendar day of the Initial Term or the then-current Renewal Term, as applicable.

Upon any termination of the Management Agreement by us as discussed above, we will pay our Manager, on the date on which such termination is effective, a termination fee in an amount equal to three times the average annual fees of all types and expense reimbursements received by or owed to our Manager pursuant to the Management Agreement during the 24-month period immediately preceding such termination (the “Termination Fee”), calculated as of the end of the most recently completed monthly prior to the date of such termination.

We may also terminate the Management Agreement, effective upon 30 calendar days’ prior written notice from our Board to our Manager, without payment of any Termination Fees or other penalties, upon (i) the material breach of the Management Agreement by our Manager or its affiliates that continues for 30 days after written notice thereof to our Manager (or 45 days after delivery of written notice thereof if our Manager takes diligent steps to cure such breach within 30 days of delivery of the written notice), (ii) any fraud or other criminal conduct, gross negligence or breach of fiduciary duty by our Manager or its affiliates in connection with the Management Agreement, as determined by a final, non-appealable judgment of a court of competent jurisdiction, (iii) our Manager’s bankruptcy, insolvency or dissolution, or (iv) an Internalization Event (as defined in the Management Agreement). No Termination Fee or other penalty is payable upon such a termination by us.

Our Manager may terminate the Management Agreement, effective upon 60 days’ prior written from our Manager to us, if we breach the Management Agreement and such breach continues for 30 days after written notice thereof. We will pay our Manager the Termination Fee upon such termination by our Manager.

Management Agreement Amendment

As discussed herein, we may make real estate and non-real estate related investments of any type that align with our investment objectives and criteria. Accordingly, on May 8, 2025, we and our Manager entered into an amendment to the Management Agreement, effective as of January 1, 2025 (the “Amendment”), in order to clarify that the origination, asset management, asset servicing, disposition and breakup fees we pay to our Manager pursuant to the Management Agreement are payable with respect to all real estate and non-real estate investments of any type that we originate or acquire. Unless otherwise specifically noted, all references herein to the “Management Agreement” refer to the Management Agreement as modified by the Amendment.

Promissory Note Payable with Terra LLC

On January 24, 2024, we, as borrower, entered into a revolving promissory note payable with Terra LLC. The promissory note payable bears interest at the Prime Rate, as such Prime Rate is published in the Wall Street Journal, computed on the basis of the actual number of days elapsed and a year of 365 days. The promissory note matures on March 31, 2027. As of March 31, 2025 and December 31, 2024, amount outstanding under the promissory note payable was $43.6 million and $45.1 million, respectively. The activity associated with this agreement is eliminated in consolidation and therefore has no impact on our consolidated financial statements.

Cost Sharing and Reimbursement Agreement with Terra LLC

We have entered into a cost sharing and reimbursement agreement with Terra LLC, effective October 1, 2022 pursuant to which Terra LLC will be responsible for its allocable share of our expenses, including fees paid by us to our Manager based on relative assets under management. These fees are eliminated in consolidation and therefore have no impact on our consolidated financial statements.

Participation Agreements

We have further diversified our exposure to loans and borrowers by entering into participation agreements whereby we transferred a portion of certain of our loans on a pari passu basis to related parties, primarily other affiliated funds managed by our Manager or its affiliates, and to a lesser extent, unrelated parties.

As of March 31, 2025, the principal balance of our participation obligation was $18.7 million, which was a participation obligation to a related-party managed by the Manager.

The loans that are subject to participation agreements are held in our name, but each of the participant’s rights and obligations, including with respect to interest income and other income (e.g., exit fee, prepayment income) and related fees/expenses (e.g., disposition fees, asset management and asset servicing fees), are based upon their respective pro rata participation interest in such participated investments, as specified in the respective participation agreements. We do not have direct liability to a participant with respect to the underlying loan and the participants’ share of the investments is repayable only from the proceeds received from the related borrower/issuer of the investments and, therefore, the participants also are subject to credit risk (i.e., risk of default by the underlying borrower/issuer).

Pursuant to the participation agreement with these entities, we receive and allocate the interest income and other related investment income to the participants based on their respective pro rata participation interest. The affiliated fund participant pays related expenses also based on their respective pro rata participation interest (i.e., asset management and asset servicing fees, disposition fees) directly to our Manager, as per the terms of each respective affiliate’s management agreement.

Other than for U.S. federal income tax purposes, our loan participations do not qualify for sale treatment. As such, the investments remain on our combined consolidated balance sheets and the proceeds are recorded as obligations under participation agreements. Similarly, interest earned on the entire loan balance is recorded within “Interest income” and the interest related to the participation interest is recorded within “Interest expense from obligations under participation agreements” in the consolidated statements of operations.

For the three months ended March 31, 2025 and 2024, the weighted average outstanding principal balance on obligations under participation agreements was approximately $18.3 million and $12.0 million, respectively, and the weighted average interest rate was approximately 19.3% and 20.3%, respectively.

Item 3. Quantitative and Qualitative Disclosures About Market Risk.

We may be subject to financial market risks, including changes in interest rates. To the extent that we borrow money to make investments, our net investment income will be dependent upon the difference between the rate at which we borrow funds and the rate at which we invest these funds. In periods of rising interest rates, our cost of funds would increase, which may reduce our net investment income. As a result, there can be no assurance that a significant change in market interest rates will not have a material adverse effect on our net investment income.

The following table summarizes the aggregate principal balance of variable rate investments and indebtedness as of:


	March 31, 2025
Variable rate investments	$	258,356,255
Variable rate debt	$	116,897,684

The following table summarizes estimated changes in net investment income on our variable rate investments and indebtedness as of March 31, 2025 assuming hypothetical increases or decreases in Term SOFR or SOFR:


	1.00% Decrease		1.00% Increase
Increase (decrease) in investment income from variable rate investments	$	(2,091,750)	$	2,583,563
Decrease (increase) in interest expense from variable rate debt	632,492		(1,066,798)
Net increase (decrease) in investment income from variable rate instruments	$	(1,459,258)	$	1,516,765

We may hedge against interest rate fluctuations by using standard hedging instruments, such as futures, options and forward contracts. While hedging activities may insulate us against adverse changes in interest rates, they may also limit our ability to participate in benefits of lower interest rates with respect to our portfolio of investments with fixed interest rates. For the three months ended March 31, 2025 and 2024, we did not engage in interest rate hedging activities that qualify for hedge accounting.

Prepayment Risks

the yield on the portfolio will decline. In addition, we may acquire assets at a discount or premium and if the asset does not repay when expected, the anticipated yield may be impacted. Under certain interest rate and prepayment scenarios we may fail to recoup fully our cost of acquisition of certain loans.

Extension Risk

Real Estate Risk

Credit Risk

We are subject to varying degrees of credit risk in connection with holding a portfolio of our target assets. With respect to our loan portfolio, we seek to manage credit risk by limiting exposure to any one individual borrower and any one asset class.

Additionally, our Manager employs an asset management approach and monitors the portfolio of investments through, at a minimum, quarterly financial review of property performance including net operating income, loan-to-value, debt service coverage ratio and the debt yield. Our Manager also requires certain borrowers to establish a cash reserve, as a form of additional collateral, for the purpose of providing for future interest or property-related operating payments.

Item 4. Controls and Procedures.

Evaluation of Disclosure Controls and Procedures

As required by Rule 13a-15(b) under the Exchange Act, we carried out an evaluation, under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures as of March 31, 2025. Based on that evaluation, our management concluded that our disclosure controls and procedures were effective to provide reasonable assurance that we would meet our disclosure obligations. Notwithstanding the foregoing, a control system, no matter how well designed and operated, can provide only reasonable, not absolute, assurance that it will detect or uncover failures within the Company to disclose material information otherwise required to be set forth in our periodic reports.

Changes in Internal Control Over Financial Reporting

During the most recent fiscal quarter, there was no change in our internal controls over financial reporting, as defined under Rule 13a-15(f) under the Exchange Act, that has materially affected, or is reasonably likely to materially affect, our internal controls over financial reporting.

PART II - OTHER INFORMATION

Item 1. Legal Proceedings.

From time to time, we and individuals employed by us and our Manager may be a party to certain legal proceedings in the ordinary course of business, including proceedings relating to the enforcement of our rights under contracts with our borrowers and investees. While the outcome of these legal proceedings cannot be predicted with certainty, we do not expect that such proceedings will have a material effect upon our financial condition or results of operations.

Item 1A. Risk Factors.

There have been no material changes from the risk factors set forth in our Annual Report on Form 10-K for the year ended December 31, 2024.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.

None.

Item 3. Defaults Upon Senior Securities.

Not applicable.

Item 4. Mine Safety Disclosures.

Not applicable.

Item 5. Other Information.

On May 8, 2025, we and our Manager entered into an amendment to the Management Agreement, effective as of January 1, 2025, in order to clarify that the origination, asset management, asset servicing, disposition and breakup fees that we pay to our Manager pursuant to the Management Agreement are payable with respect to all investments of any type that we originate or acquire. For additional information on the Amendment, see “Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations – Management Agreement Amendment” in this Quarterly Report on Form 10-Q.

Item 6. Exhibits

The following exhibits are filed with this report. Documents other than those designated as being filed herewith are incorporated herein by reference.


Exhibit No.						Description and Method of Filing

3.1						Amended and Restated Bylaws of Terra Property Trust, Inc. (incorporated by reference to Exhibit 3.1 to the Registration Statement on Amendment No.1 to Form 10 (File No. 000-56117) filed with the SEC on December 16, 2019).

3.2						Second Articles of Amendment and Restatement of Terra Property Trust, Inc. (incorporated by reference to Exhibit 3.1 to the Current Report on Form 8-K filed with the SEC on December 5, 2023).

3.3						Articles of Supplementary of Terra Property Trust, Inc. Designating 12.5% Services A Redeemable Cumulative Preferred Stock (incorporated by reference to Exhibit 3.3 to the Registration Statement on Amendment No.1 to Form 10 (File No. 000-56117) filed with the SEC on December 16, 2019).

4.1						Description of Securities Registered Under Section 12 of the Securities Exchange Act of 1934 (incorporated by reference to Exhibit 4.1 to the Annual Report on Form 10-K filed with the SEC on March 15, 2024).

4.2						Indenture, dated June 10, 2021, by and between Terra Property Trust, Inc. and U.S. Bank National Association, as trustee (incorporated by reference to Exhibit 4.1 to the Company’s Registration Statement on Form 8-A (File No. 001-40496) filed with the SEC on June 14, 2021).

4.3						First Supplemental Indenture, dated June 10, 2021, by and between Terra Property Trust, Inc. and U.S. Bank National Association, as trustee (incorporated by reference to Exhibit 4.2 to the Company’s Registration Statement on Form 8-A (File No. 001-40496) filed with the SEC on June 14, 2021).

4.4						Form of Global Note representing the notes (included in Exhibit 4.2).

4.5						Indenture, dated February 10, 2021, by and between Terra Income Fund 6, Inc. and U.S. Bank National Association, as trustee (incorporated by reference to Exhibit 4.1 to the Current Report on Form 8-K filed with the SEC on February 10, 2021.)

4.6						First Supplemental Indenture, dated February 10, 2021, by and between Terra Income Fund 6, Inc. and U.S. Bank National Association, as trustee (incorporated by reference to Exhibit 4.2 of Terra Income Fund 6, Inc.’s Current Report on Form 8-K filed with the SEC on February 10, 2021).


Exhibit No.						Description and Method of Filing


4.7						Second Supplemental Indenture, dated October 1, 2022, by and among Terra Income Fund 6, Inc., Terra Merger Sub, LLC and U.S. Bank National Association, as trustee (incorporated by reference to exhibit 4.4 of Terra Income Fund 6, LLC’s Current Report on Form 8-K filed with the SEC on October 3, 2022).
10.1 *						Second Amendment to Uncommitted Master Repurchase and Securities Contract Agreement and Other Transaction Documents dated December 17, 2024, by and between Terra Mortgage Capital I, LLC, Terra Property Trust, Inc. and Goldman Sachs Bank USA
10.2 *						Seventh Amendment to Loan Documents dated January 31, 2025 by and between Terra Mortgage Portfolio II, LLC, Terra Property Trust, Inc. and Western Alliance Bank
31.1*						Certification of Chief Executive Officer pursuant to Rule 13a-14 under the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2*						Certification of Chief Financial Officer pursuant to Rule 13a-14 under the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32**						Certification of Chief Executive Officer and Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
101.INS**						Inline XBRL Instance Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document
101.SCH**						Inline XBRL Taxonomy Extension Schema Document
101.CAL**						Inline XBRL Taxonomy Extension Calculation Linkbase Document
101.LAB**						Inline XBRL Taxonomy Extension Label Linkbase Document
101.PRE**						Inline XBRL Taxonomy Extension Presentation Linkbase Document
101.DEF**						Inline XBRL Taxonomy Extension Definition Linkbase Document
104						Cover Page Interactive Data File Included as Exhibit 101 (embedded within the Inline XBRL document)

______________

* Filed herewith.

** Furnished herewith.

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

Date: May 9, 2025


			TERRA PROPERTY TRUST, INC.

			By:			/s/ Vikram S. Uppal
						Vikram S. Uppal
						Chief Executive Officer and Chief Investment Officer
						(Principal Executive Officer)

			By:			/s/ Gregory M. Pinkus
						Gregory M. Pinkus
						Chief Financial Officer, Treasurer and Secretary
						(Principal Financial and Accounting Officer)