Terra Property Trust, Inc. 10-K

Item 9A. 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 December 31, 2020. Based on that evaluation, our chief executive officer and chief financial officer 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. Evaluation of Internal Controls over Financial Reporting Our management is responsible for establishing and maintaining adequate internal control over financial reporting as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act. Our internal control over financial reporting is designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of our consolidated financial statements for external purposes in accordance with generally accepted accounting principles. Our internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of our assets, (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of consolidated financial statements in accordance with U.S. generally accepted accounting principles, and that our receipts and expenditures are being made only in accordance with authorizations of our Manager, and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of our assets that could have a material effect on the consolidated financial statements. Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements in our consolidated financial statements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate. Under the supervision and with the participation of our management, including the chief executive officer and chief financial officer of our Manager (performing functions equivalent to those a principal executive officer and principal financial officer of our company would perform if we had any officers), we conducted an evaluation of the effectiveness of our internal control over financial reporting using the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) in Internal Control-Integrated Framework (2013). Based on its evaluation, our management concluded that our internal control over financial reporting was effective as of the end of the fiscal year covered by this Annual Report on Form 10-K. This Annual Report on Form 10-K does not include an attestation report of our registered accounting firm due to a transition period established by the rules of the SEC for “emerging growth companies.” 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. Item 9B. Other Information. On March 12, 2021, Terra Mortgage Portfolio II, LLC, our indirect wholly-owned subsidiary, entered into a Business Loan and Security Agreement (the “Revolving Line of Credit”) with Western Alliance Bank (“WAB”) to provide for advances up to 55 the lesser of $75.0 million or the amount determined by the borrowing base, which is based on the eligible assets pledged to the lender. Borrowings under the Revolving Line of Credit bear interest at an annual rate of LIBOR + 3.25% with a combined floor of 4.0% per annum. The Revolving Line of Credit matures on March 12, 2023 with an annual 12-month extension available at our’s option, which are subject to certain conditions. In connection with the Revolving Line of Credit, we entered into a limited guaranty (the “Guaranty”) in favor of WAB, pursuant to which we will guarantee the payment of up to 25% of the amount outstanding under the Revolving Line of Credit. Under the Revolving Line of Credit and the Guaranty, we will be required to maintain (i) a minimum total net worth of $250.0 million; (ii) a $2.0 million quarterly operating profit; and (iii) a ratio of total debt to total net worth of no more than 2.50 to 1.00. The Revolving Line of Credit contains terms, conditions, covenants, and representations and warranties that are customary and typical for a transaction of this nature. The Revolving Line of Credit contains various affirmative and negative covenants, including maintenance of a debt to total net worth ratio and limitations on the incurrence of liens and indebtedness, loans, distributions, change of management and ownership, changes in the nature of business and transactions with affiliates. The Revolving Line of Credit also includes customary events of default, including a cross-default provision applicable to our debt obligations or those of Terra Mortgage Portfolio II, LLC. The occurrence of an event of default may result in termination of the Revolving Line of Credit and acceleration of amounts due under the Revolving Line of Credit. In connection with the closing of the Revolving Line of Credit, we pledged a $11.5 million first mortgage to the borrowing base and drew down $8.0 million on the Revolving Line of Credit. The foregoing descriptions of the Revolving Line of Credit and the Guaranty are not complete and are qualified in their entirety by reference to the full text of the Revolving Line of Credit and the Guaranty, copies of which are attached as Exhibits 10.8 and 10.9 of this Annual Report on Form 10-K and are incorporated herein by reference. PART III Item 10. Directors, Executive Officers and Corporate Governance. Set forth below is the information concerning our directors and executive officers. Board of Directors Our board of directors consists of four members. Our board of directors has determined that each of our directors satisfies the listing standards for independence of the New York Stock Exchange (“NYSE”), except for Andrew M. Axelrod, our Chairman and Vikram S. Uppal our and our Manager’s Chief Executive Officer. Our bylaws provide that a majority of the entire board of directors may at any time increase or decrease the number of directors. However, the number of directors may never be less than the minimum number required by the MGCL (which is currently one) nor, unless our bylaws are amended, more than 15. The following sets forth certain information with respect to our directors: Name Age Position held Andrew M. Axelrod 38 Chairman of the Board of Directors Vikram S. Uppal 37 Chief Executive Officer, Chief Investment Officer and Director Roger H. Beless 59 Director Michael L. Evans 68 Director Andrew M. Axelrod has served as Chairman of our board of directors and as a member of the board of directors of Terra Capital Partners since February 2018. Mr. Axelrod founded Axar Capital Management in April 2015 and currently serves as its Managing Partner and Portfolio Manager, and is responsible for all investment, risk and business management functions. He has been the Chief Executive Officer and Executive Chairman of the board of directors of Axar Acquisition Corp. since October 2016. Before founding Axar Capital Management in 2015, Mr. Axelrod worked at Mount Kellett Capital Management, a private investment organization from 2009 to 2014. At Mount Kellett Capital Management, he was promoted to Co-Head of North America Investments in 2011 and became a Partner in 2013. Prior to joining Mount Kellett Capital Management, Mr. 56 Axelrod worked at Kohlberg Kravis Roberts & Co. L.P. from 2007 to 2008 and The Goldman Sachs Group, Inc. from 2005 to 2006. Mr. Axelrod graduated magna cum laude with a B.S. in Economics from Duke University. Vikram S. Uppal has served as one of our directors since February 2018 and as Chief Executive Officer for our company, our Manager, Terra Fund Advisors and Terra Capital Partners since December 2018 and as a director of Terra RECO since October 2020. Mr. Uppal has also served as Chief Investment Officer for our company, Terra Capital Partners and our Manager since February 2018. Mr. Uppal is also the Chief Executive Officer of Terra Income Advisors and Terra Fund 6 since April 2019. Prior to joining Terra Capital Partners, Mr. Uppal was a Partner and Head of Real Estate at Axar Capital Management since 2016. Prior to Axar Capital Management, Mr. Uppal was a Managing Director on the Investment Team at Fortress Investment Group's Credit and Real Estate Funds from 2015 to 2016. From 2012 to 2015, Mr. Uppal worked at Mount Kellett Capital Management, a private investment organization, and served as Co-Head of North American Real Estate Investments. Mr. Uppal holds a B.S. from the University of St. Thomas and a M.S. from Columbia University. Roger H. Beless has served as one of our independent directors since February 2018. Since May 2016, Mr. Beless has served as Chief Operating Officer at Street Lights Residential, where he oversees capital markets, asset and portfolio management and acquisitions, and company operations. From June 2012 until March 2016, Mr. Beless served as Managing Director for Mount Kellett Capital Management, where he oversaw global real estate asset management. Prior to joining Mount Kellett, Mr. Beless spent nearly 20 years with Goldman Sachs/Archon Group where he held a number of positions, including co-head of US Real Estate and Chief Operating Officer for Archon Residential, where he oversaw acquisitions, asset management, property management and dispositions. Mr. Beless also spent four years in Tokyo, Japan where he led the startup of Goldman Sachs Realty Japan, Ltd. He currently serves on the board of Lion Heart Children’s Academy and the advisory board of Apartment Life. Mr. Beless holds a Bachelor’s of B.A. in Economics and Finance from Baylor University and a M.B.A from Southern Methodist University. Michael L. Evans has served as one of our independent directors since October 2017. Mr. Evans has served as a member of the board of directors of Terra Fund 6 from March 2015 to April 2019. Since December 2012, Mr. Evans has been the Managing Director and Chief Financial Officer of Newport LLC (formerly known as Newport Board Group), a CEO and board advisory firm. From June 2010 to September 2011, Mr. Evans served as the Interim Country Manager and Advisory Board Member for Concern Worldwide U.S. Inc., a non-profit humanitarian organization. From January 1977 until June 2010, Mr. Evans was with Ernst & Young, LLP (“Ernst & Young”), and served as a partner since 1984. During his nearly 34 years with Ernst & Young, he served as a tax, audit and consulting services partner, specializing in real estate companies and publicly-traded entities. Mr. Evans currently serves on the Advisory Board of Marcus & Millichap, Inc., the Independent Counsel Board of Prologis Targeted U.S. Logistics Fund and the board of directors of Newport LLC and Sen Plex, Inc. Mr. Evans is a licensed attorney and a C.P.A. (inactive) in California. He is currently a contributing business writer for Forbes.com and Allbusiness.com. Mr. Evans received a B.S.B. in accounting from the University of Minnesota, a J.D. from William Mitchell College of Law and an M.B.A. from Golden Gate University. Executive Officers The names, ages, positions and biographies of our officers and the officers of our Manager are as follows: Name Age Position(s) Held with the Company Position(s) Held with our Manager Andrew M. Axelrod 38 Chairman of the Board of Directors Member of the Board of Managers (1) Bruce D. Batkin 67 N/A Member of the Board of Managers (1) Vikram S. Uppal 37 Chief Executive Officer, Chief Investment Officer Chief Executive Officer, Chief Investment Officer Gregory M. Pinkus 56 Chief Operating Officer and Chief Financial Officer Chief Operating Officer and Chief Financial Officer Daniel J. Cooperman 46 Chief Originations Officer Chief Originations Officer _______________ (1) Our Manager is managed by Terra Capital Partners and does not have a board of managers. Messrs. Axelrod, Batkin and Uppal are members of the board of managers of Terra Capital Partners. For biographical information regarding Messrs. Axelrod and Uppal, see “Item 10. — Board of Directors” above. Bruce D. Batkin has served as the Vice Chairman of the Terra Capital Partners from its formation in 2001 and its commencement of operations in 2002 until February 2018 and as a member of the Board of Managers of our Manager since 57 February 2018. He served as one of our directors from January 2016, and as the Vice Chairman of our board of directors from December 2018, to March 2020. Mr. Batkin also serves as the Vice Chairman of the board of directors (or managers, as applicable) of Terra International, Terra Income Advisors, Terra Fund Advisors and Terra Fund 5 International. He served as our Chief Executive Officer from January 2016 to November 2018. He has also served as Chief Executive Officer of Terra Capital Advisors, Terra Capital Advisors 2, Terra Income Advisors 2, Terra Fund Advisors, Fund 5 International, Terra Fund 6, Terra International and Terra Fund 7 from April 2009, September 2012, October 2016, September 2017, June 2014, March 2015, October 2016 and October 2016, respectively, until November 30, 2018. He has also served as Chief Executive Officer and director of Terra Fund 6, from May 2013 to April 2019, as Chairman of the board of director of Terra Fund 6 from April 2019 to November 2019, and as Chief Executive Officer of Terra Income Advisors from May 2013 to April 2019. As a co-founder of Terra Capital Partners, he served as its President and Chief Executive Officer from its formation in 2001 and its commencement of operations in 2002 to November 2018, managing its real estate debt and equity investment programs. Mr. Batkin has over 40 years’ experience in real estate acquisition, finance, development, management and investment banking. Prior to founding Terra Capital Partners, he held senior management positions at Merrill Lynch & Co. Inc., Donaldson, Lufkin & Jenrette Securities Corporation (now Credit Suisse (USA) Inc.), ABN AMRO Bank N.V. and several private real estate development partnerships. Mr. Batkin has acquired major commercial properties throughout the United States and has acted as managing partner in over $5 billion of real estate investments for domestic and foreign investors. He is a member of the Harvard Alumni Real Estate Board and the Cornell Real Estate Council and the Committee for Economic Development; he sits on the Advisory Board of the Baker Program in Real Estate at Cornell University and the Dean's Advisory Council of the College of Art, Architecture and Planning at Cornell University; and he is a participant in the semiannual Yale CEO Summit. Mr. Batkin received a Bachelor of Architecture from Cornell University and an M.B.A. from Harvard Business School. Gregory M. Pinkus has served as the Chief Financial Officer, Treasurer and Secretary of our company and the Chief Financial Officer and Chief Operating Officer of our Manager, Terra Fund Advisors, and Terra Income Advisors since January 2016, October 2017, October 2017, and May 2013, respectively. He has served as (i) the Chief Financial Officer of Terra Capital Advisors, Terra Capital Advisors 2 and Terra Income Advisors 2 since May 2012, September 2012 and October 2016; (ii) the Chief Operating Officer of Terra Capital Advisors, Terra Capital Advisors 2 and Terra Capital Partners since July 2014; (iii) the Chief Operating Officer of Terra Income Advisors 2 since October 2016; (iv) the Chief Financial Officer, Treasurer and Secretary of Terra Fund 6 since May 2013 and Chief Operating Officer of Terra Fund 6 since July 2014; (v) the Chief Financial Officer and Chief Operating Officer of Fund 5 International, Terra International and Terra Fund 7 since June 2014, October 2016 and October 2016, respectively; and (vi) a director of Terra RECO since October 2020. Prior to joining Terra Capital Partners in May 2012, he served as Assistant Controller for W.P. Carey & Co. from 2006 to August 2010 and as Controller from August 2010 to May 2012. Mr. Pinkus also served as Controller and Vice President of Finance for several early-stage technology companies during the period of 1999 to 2005. Additionally, he managed large-scale information technology budgets at New York Life Insurance Company from 2003 to 2004 and oversaw an international reporting group at Bank of America from 1992 to 1996. Mr. Pinkus is a Certified Public Accountant and member of the American Institute of Certified Public Accountants. He holds a B.S. in Accounting from the Leonard N. Stern School of Business at New York University. Daniel J. Cooperman has served as Chief Originations Officer of our company, our Manager, Terra Fund Advisors and Terra Income Advisors since January 2016, September 2017, September 2017 and February 2015, respectively. Mr. Cooperman has served as Chief Originations Officer of (i) each of Terra Capital Advisors and Terra Capital Advisors 2 since January 2015, having previously served as Managing Director of Originations until January 2015 of Terra Capital Advisors and Terra Capital Advisors 2 since April 2009 and September 2012, respectively; (ii) Fund 5 International since January 2015, having previously served as Managing Director of Originations from June 2014 to June 2014; (iii) Terra Fund 6 since February 2015, having previously served as Managing Director of Originations from May 2013 until February 2015; and (iv) each of Terra Income Advisors 2, Terra International, and Terra Fund 7 since October 2016. Mr. Cooperman has 18 years’ experience in the acquisition, financing, leasing and asset management of commercial real estate with an aggregate value of over $5 billion. Prior to the formation of Terra Capital Partners in 2001 and its commencement of operations in 2002, Mr. Cooperman handled mortgage and mezzanine placement activities for The Greenwich Group International, LLC. Prior to joining The Greenwich Group, Mr. Cooperman worked in Chase Manhattan Bank’s Global Properties Group, where he was responsible for financial analysis and due diligence for the bank’s strategic real estate acquisitions and divestitures. Prior to that time, he was responsible for acquisitions and asset management for JGS, a Japanese conglomerate with global real estate holdings. Mr. Cooperman holds a B.S. in Finance from the University of Colorado at Boulder. Code of Ethics Our Manager has adopted a Code of Business Conduct and Ethics (the “Code of Ethics”) pursuant to Rule 17j‑1 of the Advisers Act, which applies to, among others, the senior officers of our Manager, including the Chief Executive Officer and the Chief Financial Officer, as well as every officer, director, employee and “access person” (as defined within the Code of Ethics). 58 We will also provide the Code of Ethics, free of charge, to stockholders who request it. Requests should be directed to Bernadette Murphy, at Terra Property Trust, Inc., 550 Fifth Avenue, 6th Floor, New York, New York 10036. Audit Committee We have established an audit committee of the board of directors (the “Audit Committee”) that operates pursuant to a charter and consists of three members. The Audit Committee is responsible for selecting, engaging and supervising our independent accountants, reviewing the plans, scope and results of the audit engagement with our independent accountants, approving professional services provided by our independent accountants (including compensation therefor), reviewing the independence of our independent accountants and reviewing the adequacy of our internal controls over financial reporting. The members of the Audit Committee are Messrs. Beless and Evans, each of whom is independent. Mr. Evans serves as the chairman of the Audit Committee. Our board of directors has determined that Mr. Evans is an “audit committee financial expert” as defined under Item 407 of regulation S-K promulgated under the Exchange Act. Our board of directors has determined that each of Messrs. Beless and Evans meets the current independence and experience requirements of Rule 10A-3 of the Exchange Act. Item 11. Executive Compensation. We have entered into a management agreement with our Manager, pursuant to which our Manager provides certain services to our company and we pay fees associated with such services. The officers of our Manager do not receive any compensation from us. Each of our officers is an employee of our Manager. Because our management agreement provides that our Manager is responsible for managing our affairs, our officers do not receive cash compensation from us for serving as our officers. Our Manager is responsible for managing our day-to-day operations and all matters affecting our business and affairs, including responsibility for determining when to buy and sell real estate-related assets. Our Manager is not obligated under the management agreement to dedicate any of its personnel exclusively to us, nor is it or its personnel obligated to dedicate any specific portion of its or their time to the business. Our officers, in their capacities as officers or personnel of our Manager or its affiliates, will devote such portion of their time to our affairs as is necessary to enable us to operate our business. Compensation of the Directors In 2020, our independent directors earned $60,000 annual base director’s fee. In addition, in 2020, the chairperson of the Audit Committee earned an annual cash retainer of $15,000 and the other members of the Audit Committee earned an annual cash retainer of $10,000. We also reimburse all members of our board of directors for their travel related expenses incurred in connection with their attendance at board and committee meetings. We pay directors’ fees only to those directors who are independent under the NYSE listing standards. The following table sets forth compensation of our directors for the year ended December 31, 2020: Name Fees Earned or Paid in Cash All Other Compensation Total Jeffrey M. Altman (1) $ 17,500 $ — $ 17,500 Roger H. Beless $ 65,000 $ — $ 65,000 Michael L. Evans $ 75,000 $ — $ 75,000 Spencer E. Goldenberg (1) $ 17,500 $ — $ 17,500 John S. Gregorits (1) $ 15,000 $ — $ 15,000 _______________ (1) In connection with the Merger in March 2020, the size of our board of directors was reduced from eight directors to four directors and the directorship of each of Messrs. Altman, Goldenberg and Gregorits was terminated. Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters. The following table sets forth certain information regarding the ownership of shares of our common stock by: (1) each of our directors; 59 (2) each of our executive officers; (3) holders of more than 5% of our capital stock; and (4) all of our directors and executive officers as a group. Each listed person’s beneficial ownership includes: (1) all shares the investor actually owns beneficially or of record; (2) all shares over which the investor has or shares voting or dispositive control (such as in the capacity as a general partner of an investment fund); (3) all shares the investor has the right to acquire within 60 days; and Unless otherwise indicated, all shares are owned directly, and the indicated person has sole voting and investment power. Except as indicated in the footnotes to the table below, the business address of the stockholders listed below is the address of our principal executive office, 550 Fifth Avenue, 6th Floor, New York, NY 10036. Name Number of Shares Beneficially Owned Percentage of All Shares Andrew M. Axelrod — — Vikram S. Uppal (1) 49,427.63 * Gregory M. Pinkus — — Daniel J. Cooperman — — Roger H. Beless — — Michael L. Evans — — All directors and executive officers as a group (6 persons) — — 5% or Greater Beneficial Owners Terra JV (2) 17,029,775.95 87.4% Terra Offshore REIT (2) 2,457,684.59 12.6% _______________ * Represents beneficial ownership of less than 1%. (1) On April 6, 2020, Mr. Uppal purchased 22 units of limited liability company interest (the “Units”) of Terra Fund 5 in a secondary market transaction. The Units are held through Lakshmi 15 LLC, a family limited liability company over which Mr. Uppal exercises voting and investment control. The shares of our common stock indicated on this report as being held indirectly by Mr. Uppal are held indirectly by Terra Fund 5 through a controlled subsidiary. Mr. Uppal is the Chief Executive Officer and Chief Investment Officer of Terra Fund Advisors, the manager of Terra Fund 5. Accordingly, Mr. Uppal disclaims beneficial ownership of the shares of our common stock reported herein except to the extent of his pecuniary interest therein, and this report shall not be deemed an admission that he is the beneficial owner of such shares for purposes of Section 16 or for any other purpose. (2) Terra Fund 5 is managed by Terra Fund Advisors, its managing member. The shares of common stock held by Terra Fund 5 are subject to the provisions of the Voting Agreement and certain related agreements described in greater detail under “Item 13. Certain Relationships and Related Transactions.” The inclusion of these shares of our common stock shall not be deemed an admission of beneficial ownership of the reported securities for purposes of Section 16 or for any other purposes. Item 13. Certain Relationships and Related Transactions, and Director Independence. Potential conflicts include those set forth below. The Axar Transaction On February 8, 2018, an entity (“Axar”), wholly owned by a pooled investment vehicle advised by Axar Capital Management, a Delaware limited partnership, entered into an investment agreement with Terra Capital Partners and its affiliates 60 (which we refer to collectively as the “Axar Transaction”). As a result of the Axar Transaction, Terra REIT Advisors, a newly formed subsidiary of Terra Capital Partners, became our external manager, Terra Fund Advisors was admitted as the replacement manager of Terra Fund 5, the equity interests in Terra Fund Advisors were distributed to the equity owners of Terra Capital Partners on a pro rata basis, and the equity interests in another subsidiary of Terra Capital Partners, Terra Income Advisors, which serves as the external advisor to Terra Fund 6, were distributed to the equity owners of Terra Capital Partners on a pro rata basis. In addition, as a result of the Axar transaction and subsequent transactions on November 30, 2018 and April 30, 2019, Axar acquired 100% of the equity interests of Terra Capital Partners, 49% of the economic interests in Terra Fund Advisors, and 100% of the equity interests in Terra Income Advisors. The Axar Transaction was approved unanimously by the independent directors of our company and the independent directors of Terra Fund 6, with each having formed a special committee to evaluate the Axar Transaction. In connection with the transaction, Andrew M. Axelrod, Founder of Axar Capital Management, was appointed as Chairman of Terra Capital Partners and as Chairman of the board of directors of our company and Vikram S. Uppal, Head of Real Estate of Axar Capital Management prior to the Axar Transaction, was appointed as Chief Investment Officer of Terra Capital Partners and as a member of the board of directors of Terra Capital Partners and our company. Axar Capital Management received certain approval rights over certain major decisions impacting Terra Fund Advisors and Terra Income Advisors and also arranged for certain nomination and voting rights in respect of the board of directors of our company. At the same time, the prior owners of Terra Capital Partners retained certain approval rights over major decisions impacting Terra Capital Partners (and thereby our Manager). Terra International Fund 3, L.P. On September 30, 2019, we entered into a Contribution and Repurchase Agreement with Terra International Fund 3, L.P. (“Terra International 3”) and Terra Offshore REIT (formerly known as International Fund 3 REIT), a then wholly-owned subsidiary of Terra International 3, which we amended and restated on November 13, 2019. Pursuant to this agreement, Terra International 3, through Terra Offshore REIT, contributed cash in the amount of $3,620,000 to us in exchange for 212,690.95 shares of common stock, at a price of $17.02 per share. The shares were issued in a private placement in reliance on Section 4(a)(2) of the Securities Act, and the rules and regulations promulgated thereunder. On April 29, 2020, we repurchased, at a price of $17.02 per share, the 212,690.95 shares of common stock that we had previously sold to Terra Offshore REIT on September 30, 2019. At the same time, Terra International 3 redeemed all of its limited partnership interest and ceased operations. Our Manager also serves as adviser to Terra Offshore REIT. Merger and Issuance of Common Stock to Terra Offshore REIT On February 28, 2020, we entered into a merger agreement pursuant to which Terra Property Trust 2 was merged with and into us, with us continuing as the surviving corporation, effective March 1, 2020. In connection with the Merger, each share of common stock, par value $0.01 per share, of Terra Property Trust 2 issued and outstanding immediately prior to the effective time of the Merger was converted into the right to receive from us a number of shares of our common stock, par value $0.01 per share, equal to an exchange ratio, which was 1.2031. As a result, Terra Fund 7, the sole stockholder of Terra Property Trust 2, received 2,116,785.76 shares of our common stock as consideration in the Merger. The shares of common stock were issued in a private placement in reliance on Section 4(a)(2) under the Securities Act of 1933, as amended, and the rules and regulations promulgated thereunder. In addition, on March 2, 2020, we entered into two separate contribution agreements, one by and among us, Terra Offshore REIT and Terra Income Fund International, and another by and among us, Terra Offshore REIT and Terra Secured Income Fund 5 International, pursuant to which we issued 2,457,684.59 shares of our common stock to Terra Offshore REIT in exchange for the settlement of $32.1 million of participation interests in loans also held by the Company, $8.6 million in cash and other net working capital. The shares of common stock were issued in a private placement in reliance on Section 4(a)(2) under the Securities Act and the rules and regulations promulgated thereunder. As of December 31, 2020, Terra JV owns 87.4% of the issued and outstanding shares of our common stock with the remainder held by Terra Offshore REIT, and Terra Fund 5 and Terra Fund 7 own an 87.6% and 12.4% interest, respectively, in Terra JV. Voting Agreement On March 2, 2020, we, Terra Fund 5, Terra JV and Terra REIT Advisors also entered into the Amended and Restated Voting Agreement (the “Voting Agreement”), pursuant to which Terra Fund 5 assigned its rights and obligations under the 61 Voting Agreement to Terra JV. Consistent with the original voting agreement dated February 8, 2018, for the period that Terra REIT Advisors remains our external manager, Terra REIT Advisors will have the right to nominate two individuals to serve as our directors and, until Terra JV no longer holds at least 10% of our outstanding shares of common stock, Terra JV will have the right to nominate one individual to serve as one of our directors. Except as otherwise required by law or the provisions of other agreements to which the parties are or may in the future become bound, the parties have agreed to vote all shares of our common stock directly or indirectly owned in favor (or against removal) of the directors properly nominated in accordance with the Voting Agreement. Other than with respect to the election of directors, the Voting Agreement requires that Terra Fund 5 vote all shares of our common stock directly or indirectly owned by Terra Fund 5 in accordance with the recommendations made by our board of directors. Management Agreement As part of the Axar Transaction, Terra Income Advisors assigned all of its rights, title and interest in and to its current external management agreement with our company to our Manager and immediately thereafter, we and our Manager amended and restated such management agreement. Such amended and restated management agreement has the same economic terms and is in all material respects otherwise on the same terms as the management agreement between Terra Income Advisors and our company in effect immediately prior to the Axar Transaction, except for the identity of our manager. Receipt of Fees and Other Compensation by Our Manager and its Affiliates We pay substantial fees to our Manager. Further, we must reimburse our Manager for costs incurred by it in managing us and our portfolio of real estate-related loans. We have entered into a management agreement with our Manager pursuant to which our Manager provides certain management services to us, subject to oversight by our board of directors. Our Manager’s responsibilities to us include, among others, investing in, and disposing of, assets, borrowing money, entering into contracts and agreements in connection with our business and purpose, providing administrative support and performing such other services as are delegated to our Manager by our board of directors. In performing its duties, our Manager is subject to a fiduciary responsibility for the safekeeping and use of all of our funds and assets. In consideration for providing such services, our Manager is entitled to certain fees from as described below. The original management agreement between Terra Capital Advisors and us was entered into on January 1, 2016. On September 1, 2016, our company terminated the original management agreement and entered a management agreement with Terra Income Advisors. As described above, as part of the Axar Transaction, Terra Income Advisors assigned all of its rights, title and interest in and to its current external management agreement with us to our Manager and immediately thereafter, we and our Manager amended and restated such management agreement. The current management agreement runs co-terminus with Terra Fund 5's amended and restated operating agreement, which terminates on December 31, 2023, unless sooner dissolved in accordance with its terms of our amended and restated operating agreement. During the years ended December 31, 2020 and 2019, we paid our Manager in the aggregate the following fees under the management agreement: $4.5 million and $3.7 million in asset management fee, respectively, $1.0 million and $0.9 million in asset servicing fees, respectively, $1.4 million and $2.0 million in origination and extension fees, respectively; $0.5 million and $1.4 million in disposition, respectively, and $6.0 million and $4.9 million of operating expense reimbursements, respectively. It is anticipated that our Manager will exercise its discretion through our management agreement with our company. The agreements and arrangements, including those relating to compensation, between us and our Manager and its affiliates are not the result of arm’s-length negotiations and may create conflicts between our Manager and its affiliates, on the one hand, and us on the other. Our Manager and its Affiliates May Compete With Us Our Manager and its affiliates may engage in real estate-related transactions on their own behalf or on behalf of other entities. Our Manager and its affiliates have, and in the future will have, legal and financial obligations with respect to its other programs that are similar to our Manager’s obligations to us. For example, our Manager and affiliates of our Manager are the external managers to Terra Fund 6 and Terra RECO, all of which follow investment strategies that are similar to our strategy. Competition for investments among the real estate-related investment programs sponsored by our Manager and its affiliates will create a conflict of interest. In determining which program should receive an investment opportunity, our Manager will first evaluate the objectives of each program to determine if the opportunity is suitable for each program. If the proposed investment 62 is appropriate for more than one program, our Manager will then evaluate the portfolio of each program, in terms of diversity of geography, underlying property type, tenant concentration and borrower, to determine if the investment is most suitable for one program in order to create portfolio diversification. If such analysis is not determinative, our Manager will allocate the investment to the program with uncommitted funds available for the longest period or, to the extent feasible, prorate the investment between the programs in accordance with uninvested funds. Related Party Transactions Related party transactions are those where we or our Manager on our behalf, transact with affiliated companies, including companies managed by our Manager or its affiliates. Our Manager and its affiliates are permitted to enter into certain transactions and perform certain services for us. Such transactions, or the potential for such transactions, could cause conflicts for our Manager with respect to performing its duties. Related party transactions will not be the result of an arm’s-length negotiation. Participation Agreements and Secured Borrowing We have diversified our exposure to loans and borrowers by entering into participation agreements in respect of certain of our loans whereby we transferred a portion of the loans on a pari passu basis to related parties, and to a lesser extent, unrelated parties, with the principal balance of participation obligations totaling $71.3 million as of December 31, 2020. Additionally, we sold a portion of a loan with a principal balance of $18.3 million to a third-party that didn’t qualify for sale accounting treatment. However, we do not have direct liability to a participant under our participation agreements 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). If we enter into participation agreements in the future, we generally expect to enter into such agreements only at the time of origination of the investment. For additional information concerning our participation agreements, see “Item 7— Management’s Discussion and Analysis of Financial Condition and Results of Operations — Participation Agreements and Secured Borrowing.” Allocation of Our Manager’s Time We rely on our Manager to manage our day-to-day activities and to implement our investment strategy. Our Manager is presently, and plans in the future to continue to be, involved with activities that are unrelated to us. As a result of these activities, our Manager, its employees and certain of its affiliates will have conflicts of interest in allocating their time between us and the other activities in which they are or may become involved, including the management of Terra Fund 6 and Terra RECO. The employees of our Manager will devote only as much of its or their time to our business as it and its employees, in their judgment, determine is reasonably required, which may be substantially less than their full time. Therefore, our Manager, its personnel and certain affiliates may experience conflicts of interest in allocating management time, services and functions among us and any other business ventures in which they or any of their key personnel, as applicable, are or may become involved. This could result in actions that are more favorable to other affiliated entities than to us. However, we believe that the members of our Manager’s senior management and the other key debt finance professionals performing services for us on behalf of our Manager have sufficient time to fully discharge their responsibilities to us and to the other businesses in which they are involved. We believe that our Manager’s executive officers will devote the time required to manage our business and expect that the amount of time a particular executive officer or affiliate devotes to us will vary during the course of the year and depend on business activities at the given time. We expect that these executive officers and affiliates will generally devote more time to programs raising and investing capital than to programs that have completed their offering stages, though from time to time each program will have its unique demands. Because many of the operational aspects of Terra Capital Partners-sponsored programs are very similar, there are significant efficiencies created by the same team of individuals at our Manager providing services to multiple programs. For example, our Manager has streamlined the structure for financial reporting, internal controls and investment approval processes for the programs. Competition and Allocation of Investment Opportunities Employees of our Manager or its affiliates are simultaneously providing investment advisory or management services to other affiliated entities, including Terra Fund 6 and Terra RECO. Our Manager may determine it appropriate for us and one or more other investment programs managed by our Manager or any of its affiliates to participate in an investment opportunity. To the extent we are able to make co-investments with investment programs managed by our Manager or its affiliates, these co-investment opportunities may give rise to conflicts of 63 interest or perceived conflicts of interest among us and the other participating programs. In addition, conflicts of interest or perceived conflicts of interest may also arise in determining which investment opportunities should be presented to us and other participating programs. To mitigate these conflicts, our Manager will seek to execute such transactions on a fair and equitable basis and in accordance with its allocation policies, taking into account various factors, which may include: the source of origination of the investment opportunity; objectives and strategies; tax considerations; risk, diversification or investment concentration parameters; characteristics of the security; size of available investment; available liquidity and liquidity requirements; regulatory restrictions; and/or such other factors as may be relevant to a particular transaction. Receipt of Compensation by Affiliates The payments to our Manager and certain of its affiliates have not been determined through arm’s-length negotiations, and are payable regardless of our profitability. Our Manager receives fees for their services, including an origination fee, asset management fee, asset servicing fee, disposition fee and transaction break-up fee. To the extent the terms of the management arrangement with our Manager are amended in the future, including if we enter into a new management agreement with our Manager or its affiliates, the terms of any such arrangement will not have been determined through arm’s-length negotiations and may be payable, in whole or in part, regardless of profitability. Other Conflicts of Interest We will be subject to conflicts of interest arising out of our relationship with our Manager and its affiliates. In the future, we may enter into additional transactions with our Manager, Terra Capital Partners or its affiliates. In particular, we may invest in, or acquire, certain of our investments through joint ventures with our Manager, Terra Capital Partners or its affiliates or purchase assets from, sell assets to or arrange financing from or provide financing to its other vehicles. Any such transactions will require approval of our Manager. Any such transactions will require approval of a majority of our independent directors. There can be no assurance that any procedural protections will be sufficient to assure that these transactions will be made on terms that will be at least as favorable to us as those that would have been obtained in an arm’s-length transaction. Item 14. Principal Accounting Fees and Services. During the years ended December 31, 2020 and 2019, KPMG LLP (“KPMG”) served as our independent auditor and provided certain tax and other services. Our board of directors currently anticipates that it will engage KPMG as our independent auditor to audit our financial statements for the year ending December 31, 2021, subject to agreeing on fee estimates for the audit work. Our board of directors reserves the right, however, to select a new auditor at any time in the future in its discretion if it deems such decision to be in the best interests of us and our stockholders. Any such decision would be disclosed to the stockholders in accordance with applicable securities laws. The following table displays fees for professional services by KPMG for the years ended December 31, 2020 and 2019: Years Ended December 31, 2020 2019 Audit Fees $ 463,000 $ 409,500 Audit-Related Fees — 50,000 Tax Fees 68,380 65,800 All Other Fees — — Total $ 531,380 $ 525,300 Audit Fees . Audit fees include fees for services that normally would be provided by KPMG in connection with statutory and regulatory filings or engagements and that generally only an independent accountant can provide. In addition to fees for the audit of our annual financial statements and the review of our quarterly financial statements in accordance with standards of the Public Company Accounting Oversight Board (“PCAOB”), this category contains fees for comfort letters, statutory audits, consents, and assistance with and review of documents filed with the SEC. 64 Audit-Related Fees . Audit-related services consist of fees billed for assurance and related services that are reasonably related to the performance of the audit or review of our financial statements and are not reported under “Audit Fees.” These services include attest services that are not required by statute or regulation and consultations concerning financial accounting and reporting standards. Tax Services Fees . Tax services fees consist of fees billed for professional tax services. These services also include assistance regarding federal, state, and local tax compliance. All Other Fees . Other fees would include fees for products and services other than the services reported above. The Audit Committee’s charter provides that the Audit Committee shall review and pre-approve the engagement fees and the terms of all auditing and non-auditing services to be provided by our external auditors and evaluate the effect thereof on the independence of the external auditors. All audit and tax services provided to us were reviewed and pre-approved by the Audit Committee, which concluded that the provision of such services by KPMG LLP was compatible with the maintenance of that firm’s independence in the conduct of its auditing functions. PART IV Item 15. Exhibits and Financial Statement Schedules. The following exhibits are included, or incorporated by reference, in this Annual Report on Form 10-K: (1) Financial Statements The index to our financial statements and schedule is on page F-1 of this Annual Report on Form 10-K. (2) Financial Statement Schedule None (3) 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 2.1 Contribution Agreement by and among Terra Secured Income Fund, LLC, Terra Secured Income Fund 2, LLC, Terra Secured Income Fund 3, LLC, Terra Secured Income Fund 4, LLC, the registrant, and Terra Property Trust, Inc., dated January 1, 2016 (incorporated by reference to Exhibit 2.1 to the Registration Statement on Form 10 (File No. 000-56117) filed with the SEC on November 6, 2019). 2.2 Amendment No. 1 to the Contribution Agreement by and among Terra Secured Income Fund, LLC, Terra Secured Income Fund 2, LLC, Terra Secured Income Fund 3, LLC, Terra Secured Income Fund 4, LLC, the registrant, and Terra Property Trust, Inc., dated December 31, 2016 (incorporated by reference to Exhibit 2.2 to the Registration Statement on Form 10 (File No. 000-56117) filed with the SEC on November 6, 2019). 2.3 Agreement and Plan of Merger, dated February 28, 2020, by and among Terra Property Trust, Inc., Terra Property Trust 2, Inc. and Terra Secured Income Fund 7, LLC (incorporated by reference to Exhibit 2.1 to the Current Report on Form 8-K (File No. 000-56117) filed with the SEC on March 5, 2020). 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 Articles of Amendment and Restatement of Terra Property Trust, Inc. (incorporated by reference to Exhibit 3.2 to the Registration Statement on Amendment No.1 to Form 10 (File No. 000-56117) filed with the SEC on December 16, 2019). 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 Annual Report on Form 10-K filed with the SEC on February 28, 2020). 65 Exhibit No. Description and Method of Filing 10.1 Amended and Restated Management Agreement between Terra Property Trust, Inc., and Terra REIT Advisors, LLC, dated February 8, 2018 (incorporated by reference to Exhibit 10.1 to the Registration Statement on Form 10 (File No. 000-56117) filed with the SEC on November 6, 2019). 10.2 Amended and Restated Voting Agreement by and among Terra Property Trust, Inc., Terra Secured Income Fund 5, LLC, Terra JV, LLC and Terra REIT Advisors, LLC, dated March 2, 2020 (incorporated by reference to Exhibit 10.1 to Quarterly Report on Form 10-Q filed with the SEC on May 15, 2020). 10.3 Stockholder Rights Agreement among Terra JV, LLC and Terra Property Trust, Inc., dated March 2, 2020 (incorporated by reference to Exhibit 10.2 to Quarterly Report on Form 10-Q (File No. 000-56117) filed with the SEC on May 15, 2020). 10.4 Contribution Agreement by and among Terra Property Trust, Terra International Fund 3 REIT, LLC and Terra Income Fund International, dated March 2, 2020 (incorporated by reference to Exhibit 10.3 to Quarterly Report on Form 10-Q (File No. 000-56117) filed with the SEC on May 15, 2020). 10.5 Contribution Agreement by and among Terra Property Trust, Terra International Fund 3 REIT, LLC and Terra Secured Income Fund 5 International, dated March 2, 2020 (incorporated by reference to Exhibit 10.4 to Quarterly Report on Form 10-Q (File No. 000-56117) filed with the SEC on May 15, 2020). 10.6 Indenture and Credit Agreement, dated as of September 3, 2020, by and among Terra Mortgage Capital I, LLC, as Issuer, Goldman Sachs Bank USA, as initial Class A lender, and Wells Fargo Bank, National Association, as trustee, custodian, collateral agent, loan agent and note administrator (incorporated by reference to Exhibit 10.1 to Current Report on Form 8-K (File No. 000-56117) filed with the SEC on September 17, 2020). 10.7 Guaranty, dated as of September 3, 2020, by and among Terra Property Trust, Inc., as guarantor, for the benefit of Goldman Sachs Bank USA (incorporated by reference to Exhibit 10.2 to Current Report on Form 8-K (File No. 000-56117) filed with the SEC on September 17, 2020). 10.8* Business Loan and Security Agreement, dated as of March 12, 2021, by and among Terra Mortgage Portfolio II, LLC, as the Borrower, and Western Alliance Bank, as the Lender. 10.9* Limited Guaranty, dated as of March 12, 2021, by and among Terra Property Trust, Inc., as Guarantor, for the benefit of Western Alliance Bank. 21.1 * Subsidiaries 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 - t he 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 104 Cover Page Interactive Data File Included as Exhibit 101 (embedded within the Inline XBRL document) ______________ * Filed herewith. ** Furnished herewith. Item 16. Form 10-K Summary. None. 66 Terra Property Trust, Inc. Index to Consolidated Financial Statements Page Report of Independent Registered Public Accounting Firm F- 2 Consolidated Financial Statements: Consolidated Balance Sheets as of December 31, 20 20 and 201 9 F- 2 Consolidated Statements of Operations for the years ended December 31, 20 20 and 201 9 F- 4 Consolidated Statements of Comprehensive Income for the years ended December 31, 2020 and 2019 F-5 Consolidated Statements of Changes in Equity for the years ended December 31, 20 20 and 201 9 F- 6 Consolidated Statements of Cash Flows for the years ended December 31, 20 20 and 201 9 F- 7 Notes to Consolidated Financial Statements F- 10 Schedule III — Real Estate and Accumulated Depreciation as of December 31, 2 020 F- 42 Schedule IV — Mortgage Loans on Real Estate as of December 31, 20 20 F- 43 Schedules other than those listed are omitted as they are not applicable for the required or equivalent information has been included in the consolidated financial statements or notes thereto. F-1 Report of Independent Registered Public Accounting Firm To the Stockholders and Board of Directors Terra Property Trust, Inc.: Opinion on the Consolidated Financial Statements We have audited the accompanying consolidated balance sheets of Terra Property Trust, Inc. and subsidiaries (the Company) as of December 31, 2020 and 2019, the related consolidated statements of operations, comprehensive income, changes in equity, and cash flows for the years then ended, and the related notes and financial statement schedules III and IV (collectively, the consolidated financial statements). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2020 and 2019, and the results of its operations and its cash flows for the years then ended, in conformity with U.S. generally accepted accounting principles. Basis for Opinion These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits, we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion. Our audits included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that our audits provide a reasonable basis for our opinion. /s/ KPMG LLP We have served as the Company’s auditor since 2016. New York, New York March 18, 2021 F-2 Terra Property Trust, Inc. Consolidated Balance Sheets December 31, 2020 2019 Assets Cash and cash equivalents $ 18,607,952 $ 29,609,484 Restricted cash 12,145,616 18,542,163 Cash held in escrow by lender 2,166,755 2,398,053 Marketable securities 1,287,500 — Loans held for investment, net 417,986,462 375,462,222 Loans held for investment acquired through participation, net 4,294,053 3,150,546 Equity investment in a limited partnership 36,259,959 — Real estate owned, net ( Note 6 ) Land, building and building improvements, net 63,385,339 64,751,247 Lease intangible assets, net 9,793,600 12,845,228 Operating lease right-of-use assets 16,105,888 16,112,925 Interest receivable 2,509,589 1,876,799 Other assets 3,934,468 2,594,411 Total assets $ 588,477,181 $ 527,343,078 Liabilities and Equity Liabilities: Term loan payable, net of deferred financing fees $ 105,245,801 $ — Obligations under participation agreements ( Note 8 ) 71,581,897 103,186,327 Repurchase agreement payable, net of deferred financing fees — 79,608,437 Mortgage loan payable, net of deferred financing fees and other 44,117,293 44,753,633 Secured borrowing 18,187,663 — Interest reserve and other deposits held on investments 12,145,616 18,542,163 Operating lease liabilities 16,105,888 16,112,925 Lease intangible liabilities, net ( Note 6 ) 10,249,776 11,424,809 Due to Manager ( Note 8 ) 1,257,098 1,037,168 Interest payable 1,185,502 1,076,231 Accounts payable and accrued expenses 3,968,603 1,749,525 Unearned income 677,856 624,021 Other liabilities 429,123 1,684,106 Total liabilities 285,152,116 279,799,345 Commitments and contingencies ( Note 10 ) Equity: Preferred stock, $0.01 par value, 50,000,000 shares authorized and none issued — — 12.5% Series A Cumulative Non-Voting Preferred Stock at liquidation preference, 125 shares authorized and 125 shares issued and outstanding at both December 31, 2020 and 2019 125,000 125,000 Common stock, $0.01 par value, 450,000,000 shares authorized and 19,487,460 and 15,125,681 shares issued and outstanding at December 31, 2020 and 2019, respectively 194,875 151,257 Additional paid-in capital 373,443,672 301,727,297 Accumulated deficit ( 70,438,482 ) ( 54,459,821 ) Total equity 303,325,065 247,543,733 Total liabilities and equity $ 588,477,181 $ 527,343,078 See notes to consolidated financial statements . F-3 Terra Property Trust, Inc. Consolidated Statements of Operations Years Ended December 31, 2020 2019 Revenues Interest income $ 39,392,209 $ 40,888,079 Real estate operating revenue 10,423,563 9,806,507 Prepayment fee income — 285,838 Other operating income 505,116 419,101 50,320,888 51,399,525 Operating expenses Operating expenses reimbursed to Manager 6,041,075 4,875,153 Asset management fee 4,480,706 3,671,474 Asset servicing fee 1,008,256 854,096 Provision for loan losses 3,738,758 — Real estate operating expenses 4,505,119 3,989,911 Depreciation and amortization 4,635,980 3,785,977 Impairment charge — 1,550,000 Professional fees (1) 1,695,876 3,373,554 Directors fees 190,000 335,000 Other 371,444 172,232 26,667,214 22,607,397 Operating income 23,653,674 28,792,128 Other income and expenses Interest expense from obligations under participation agreements ( 8,514,804 ) ( 11,773,346 ) Interest expense on repurchase agreement payable ( 3,727,466 ) ( 4,713,440 ) Interest expense on mortgage loan payable ( 2,976,913 ) ( 3,093,284 ) Interest expense on revolving credit facility ( 1,398,103 ) ( 169,283 ) Interest expense on term loan payable ( 2,137,651 ) — Interest expense on secured borrowing ( 633,850 ) — Net loss on extinguishment of obligations under participation agreements ( 319,453 ) — Realized gains on marketable securities 1,160,162 — Unrealized gains on marketable securities 111,494 — Income from equity investment in a limited partnership 38,640 — ( 18,397,944 ) ( 19,749,353 ) Net income $ 5,255,730 $ 9,042,775 Preferred stock dividend declared ( 15,624 ) ( 15,624 ) Net income allocable to common stock $ 5,240,106 $ 9,027,151 Earnings per share — basic and diluted $ 0.28 $ 0.60 Weighted-average shares — basic and diluted 18,813,066 14,967,183 Distributions declared per common share $ 1.16 $ 2.03 _______________ (1) Amount for the year ended December 31, 2019 included $ 2.4 million of professional fees directly incurred, and which were previously deferred, in contemplation of the Company becoming a public entity. In the second quarter of 2019, Management decided to postpone indefinitely the Company’s public offering. See notes to consolidated financial statements. F-4 Terra Property Trust, Inc. Consolidated Statements of Comprehensive Income Years Ended December 31, 2020 2019 Comprehensive income, net of tax Net income $ 5,255,730 $ 9,042,775 Other comprehensive income Net unrealized gains on marketable securities 192,919 — Reclassification of net realized gains on marketable securities into earnings ( 192,919 ) — — — Total comprehensive income $ 5,255,730 $ 9,042,775 Preferred stock dividend declared ( 15,624 ) ( 15,624 ) Comprehensive income attributable to common shares $ 5,240,106 $ 9,027,151 See notes to consolidated financial statements. F-5 Terra Property Trust, Inc. Consolidated Statements of Changes in Equity Preferred Stock 12.5% Series A Cumulative Non-Voting Preferred Stock Common Stock Additional Paid-in Capital Accumulated Deficit Accumulated Other Comprehensive Income $0.01 Par Value Shares Amount Shares Amount Total equity Balance at January 1, 2020 $ — 125 $ 125,000 15,125,681 $ 151,257 $ 301,727,297 $ ( 54,459,821 ) $ — $ 247,543,733 Issuance of common stock ( Note 3 ) — — — 4,574,470 45,745 75,334,248 — 75,379,993 Repurchase of common stock ( 212,691 ) ( 2,127 ) ( 3,617,873 ) ( 3,620,000 ) Distributions declared on common shares ($1.16 per share) — — — — — — ( 21,218,767 ) — ( 21,218,767 ) Distributions declared on preferred shares — — — — — — ( 15,624 ) — ( 15,624 ) Comprehensive income: Net income — — — — — — 5,255,730 — 5,255,730 Net unrealized gains on marketable securities — — — — — — — 192,919 192,919 Reclassification of net realized gains on marketable securities into earnings — — — — — — — ( 192,919 ) ( 192,919 ) Balance at December 31, 2020 — 125 $ 125,000 19,487,460 $ 194,875 $ 373,443,672 $ ( 70,438,482 ) $ — $ 303,325,065 Preferred Stock 12.5% Series A Cumulative Non-Voting Preferred Stock Common Stock Additional Paid-in Capital Accumulated Deficit Accumulated Other Comprehensive Income $0.01 Par Value Shares Amount Shares Amount Total equity Balance at January 1, 2019 $ — 125 $ 125,000 14,912,990 $ 149,130 $ 298,109,424 $ ( 33,091,195 ) $ — $ 265,292,359 Issuance of common stock — — — 212,691 2,127 3,617,873 — — 3,620,000 Distributions declared on common shares ($2.03 per share) — — — — — — ( 30,395,777 ) — ( 30,395,777 ) Distributions declared on preferred shares — — — — — — ( 15,624 ) — ( 15,624 ) Comprehensive income: Net income — — — — — — 9,042,775 — 9,042,775 Net unrealized gains on marketable securities — — — — — — — — — Reclassification of net realized gains on marketable securities into earnings — — — — — — — — — Balance at December 31, 2019 — 125 $ 125,000 15,125,681 $ 151,257 $ 301,727,297 $ ( 54,459,821 ) $ — $ 247,543,733 See notes to consolidated financial statements . F-6 Terra Property Trust, Inc. Consolidated Statements of Cash Flows Years Ended December 31, 2020 2019 Cash flows from operating activities: Net income $ 5,255,730 $ 9,042,775 Adjustments to reconcile net income to net cash provided by operating activities: Paid-in-kind interest income, net ( 2,937,909 ) ( 1,682,721 ) Depreciation and amortization 4,635,980 3,785,977 Provision for loan losses 3,738,758 — Impairment charge — 1,550,000 Lease termination fee income ( 236,000 ) — Amortization of net purchase premiums on loans 57,155 81,642 Straight-line rent adjustments ( 714,334 ) ( 681,920 ) Amortization of deferred financing costs 1,644,944 1,993,486 Net loss on extinguishment of obligations under participation agreements 319,453 — Amortization of above- and below-market rent intangibles ( 1,027,129 ) ( 446,997 ) Amortization and accretion of investment-related fees, net ( 4,140 ) ( 85,764 ) Amortization of above-market rent ground lease ( 130,348 ) ( 130,348 ) Realized gains on marketable securities ( 1,160,162 ) — Unrealized gains on marketable securities ( 111,494 ) — Income from equity investment in a limited partnership ( 38,640 ) — Changes in operating assets and liabilities: Interest receivable ( 632,790 ) 575,627 Other assets ( 956,735 ) 1,639,202 Due to Manager ( 409,927 ) ( 213,485 ) Unearned income ( 490,233 ) 553,539 Interest payable 109,271 ( 135,511 ) Accounts payable and accrued expenses 2,245,242 725,749 Other liabilities ( 1,229,232 ) 931,549 Net cash provided by operating activities 7,927,460 17,502,800 Cash flows from investing activities: Origination and purchase of loans ( 108,488,411 ) ( 185,327,219 ) Proceeds from repayments of loans 66,144,729 181,131,959 Purchase of partnership interest in a limited partnership ( 35,862,692 ) — Purchase of marketable securities ( 6,039,567 ) — Proceeds from sale of marketable securities 6,023,723 — Capital expenditures on real estate — ( 242,071 ) Net cash used in investing activities ( 78,222,218 ) ( 4,437,331 ) Cash flows from financing activities: Proceeds from borrowings under the term loan 107,584,451 — Proceeds from borrowings under revolving credit facility 35,000,000 16,000,000 Proceeds from borrowings under repurchase agreement 22,860,134 81,134,436 Proceeds from issuance of common stock in the Merger 16,897,074 — Proceeds from issuance of common stock to Terra Offshore REIT 8,600,000 — Proceeds from secured borrowing 18,281,848 — Distributions paid ( 21,234,391 ) ( 30,411,401 ) Proceeds from obligations under participation agreements 22,498,765 34,665,630 Repayment of borrowings under repurchase agreement ( 103,994,570 ) ( 34,200,000 ) Payment for repurchase of common stock ( 3,620,000 ) — Repayment of borrowings under revolving credit facility ( 35,000,000 ) ( 16,000,000 ) Proceeds from issuance of common stock — 3,620,000 Change in interest reserve and other deposits held on investments ( 6,396,547 ) 1,171,501 Repayment of mortgage principal ( 594,255 ) ( 385,520 ) Payment of financing costs ( 2,361,369 ) ( 405,673 ) Repayments of obligations under participation agreements ( 5,855,759 ) ( 46,243,595 ) Net cash provided by financing activities 52,665,381 8,945,378 Net (decrease) increase in cash, cash equivalents and restricted cash ( 17,629,377 ) 22,010,847 Cash, cash equivalents and restricted cash at beginning of year 50,549,700 28,538,853 Cash, cash equivalents and restricted cash at end of year ( Note 2 ) $ 32,920,323 $ 50,549,700 F-7 Terra Property Trust, Inc. Consolidated Statements of Cash Flows (Continued) Years Ended December 31, 2020 2019 Supplemental Disclosure of Cash Flows Information: Cash paid for interest $ 16,317,378 $ 17,308,592 Supplemental Non-Cash Financing Activities: Merger On February 28, 2020, Terra Property Trust, Inc. ( the “Company”) entered into certain Agreement and Plan of Merger (the “Merger Agreement”), by and among the Company, Terra Property Trust 2, Inc. (“TPT2”) and Terra Secured Income Fund 7, LLC (“Terra Fund 7”), the sole stockholder of TPT2, pursuant to which, effective March 1, 2020, TPT2 was merged with and into the Company, with the Company continuing as the surviving corporation (the “Merger”). In connection with the Merger, the Company issued 2,116,785.76 shares of common stock, par value $ 0.01 per share, were issued to Terra Fund 7 ( Note 3 ). The following table presents a summary of the consideration exchanged and settlement of the Company’s obligations under participation agreements as a result of the Merger: Total Consideration Equity issued in the Merger $ 34,630,615 Proceeds from equity issued in the Merger 16,897,074 $ 17,733,541 Net assets exchanged Settlement of obligations under participation agreements $ 17,688,741 Interest receivable 134,543 Other assets 18,384 Accounts payable and accrued expenses ( 57,433 ) Due to Manager ( 50,694 ) $ 17,733,541 Non-cash Proceeds from Issuance of Common Stock to Terra Offshore REIT In addition, on March 2, 2020, the Company entered into two separate contribution agreements, one by and among the Company, Terra Offshore Funds REIT, LLC (formerly known as Terra International Fund 3 REIT, LLC) (the “Terra Offshore REIT”) and Terra Income Fund International, and another by and among the Company, Terra Offshore REIT and Terra Secured Income Fund 5 International, pursuant to which the Company issued an aggregate of 2,457,684.59 shares of common stock in exchange for the settlement of $ 32.1 million of participation interests in loans held by the Company, $ 8.6 million in cash, and other net working capital (“Issuance of Common Stock to Terra Offshore REIT”) ( Note 3 ). The following table presents a summary of the consideration exchanged and settlement of the Company’s obligations under participation agreements as a result of the Issuance of Common Stock to Terra Offshore REIT: Total Consideration Equity issued to Terra Offshore REIT $ 40,749,378 Proceeds from equity issued to Terra Offshore REIT 8,600,000 $ 32,149,378 Net Assets exchanged Settlement of obligations under participation agreements $ 32,112,257 Interest receivable 270,947 Due to Manager ( 233,826 ) Net assets acquired excluding cash and cash equivalents $ 32,149,378 F-8 Terra Property Trust, Inc. Consolidated Statements of Cash Flows (Continued) Supplemental Non-Cash Investing Activities: Lease Termination In June 2020, the Company received a notice from a tenant occupying a portion of the office building that the Company acquired in July 2018 via foreclosure of their intention to terminate the lease ( Note 6 ). The following table presents a summary of assets received and written off in connection with the lease termination effective September 4, 2020: Lease Termination Fees: Cash $ 142,620 Furniture & Fixture 236,000 $ 378,620 Assets and Liabilities Write-offs: In-place lease intangible assets $ 869,694 Below-market rent liabilities ( 616,392 ) Rent receivable 125,318 $ 378,620 Deed in Lieu of Foreclosure On January 9, 2019, the Company acquired 4.9 acres of adjacent land encumbering a $ 14.3 million first mortgage via deed in lieu of foreclosure in exchange for the payment of the first mortgage and related fees and expenses ( Note 6 ). The following table summarizes the carrying value of the first mortgage and the fair value of asset acquired in the transaction as of the date of the deed in lieu of foreclosure: Carrying Value of First Mortgage Loan held for investment $ 14,325,000 Interest receivable 439,300 Restricted cash applied against loan principal amount ( 60,941 ) $ 14,703,359 Assets Acquired at Fair Value Land $ 14,703,359 See notes to consolidated financial statements . F-9 Terra Property Trust, Inc. Notes to Consolidated Financial Statements December 31, 2020 Note 1. Business Terra Property Trust, Inc. (and, together with its consolidated subsidiaries, the “Company” or “Terra Property Trust”) was incorporated under the general corporation laws of the State of Maryland on December 31, 2015. Terra Property Trust is a real estate credit focused company that originates, structures, funds and manages commercial real estate investments, including mezzanine loans, first mortgage loans, subordinated mortgage loans and preferred equity investments. The Company’s loans finance the acquisition, construction, development or redevelopment of quality commercial real estate in the United States. The Company focuses on the origination of middle market loans in the approximately $ 10 million to $ 50 million range, to finance properties in primary and secondary markets. The Company believes these loans are subject to less competition and offer higher risk adjusted returns than larger loans with similar risk/return metrics. 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. As of December 31, 2020, Terra JV, LLC (“Terra JV”) held 87.4 % of the issued and outstanding shares of the Company's common stock with the remainder held by Terra Offshore REIT ( Note 3 ). The Company has elected to be taxed, and to qualify annually thereafter, as a real estate investment trust (“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 exclusion from registration under the Investment Company Act of 1940, as amended. The Company’s investment activities are externally managed by Terra REIT Advisors, LLC (“Terra REIT Advisors” or the “Manager”), a subsidiary of the Company’s sponsor, Terra Capital Partners, LLC, pursuant to a management agreement (the “Management Agreement”), under the oversight of the Company’s board of directors ( Note 8 ). 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. Note 2. Summary of Significant Accounting Policies Principles of Consolidation The consolidated financial statements include all of the Company’s accounts and those of its consolidated subsidiaries. All significant intercompany balances and transactions have been eliminated in 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 5 ). 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 F-10 (Preliminary and Confidential V1) Notes to Consolidated Financial Statements 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 VIE unless the limited partners hold substantive kick-out or participating rights over the 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 real estate-related loans generally to be held to maturity. 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 cost less allowance for loan losses. Allowance for Loan Losses The Company’s loans are typically collateralized by either the sponsors’ equity interest in the real estate properties or the underlying real estate properties. As a result, the Company regularly evaluates the extent and impact of any credit migration associated with the performance and/or value of the underlying collateral property as well as the financial and operating capability of the borrower/sponsor on a loan-by-loan basis. Specifically, a property’s operating results and any cash reserves are analyzed and used to assess (i) whether cash from operations and/or reserve balances are sufficient to cover the debt service requirements currently and into the future; (ii) the ability of the borrower to refinance the loan; and/or (iii) the property’s liquidation value. The Company also evaluates the financial wherewithal of the sponsor as well as its competency in managing and operating the real estate property. In addition, the Company considers the overall economic environment, real estate sector, and geographic sub-market in which the borrower operates. Such analyses are completed and reviewed by asset management and finance personnel, who utilize various data sources, including (i) periodic financial data such as debt service coverage ratio, property occupancy, tenant profile, rental rates, operating expenses, the borrower’s exit plan, the capitalization and discount rates; (ii) site inspections; and (iii) current credit spreads and discussions with market participants. The Manager performs a quarterly evaluation for possible impairment of the Company’s portfolio of loans. A loan is impaired if it is deemed probable that the Company will not be able to collect all amounts due according to the contractual terms of the loan. Impairment is measured based on the present value of expected future cash flows or the fair value of the collateral, if the loan is collateral dependent. Upon measurement of impairment, the Company records an allowance to reduce the carrying value of the loan with a corresponding charge to net income. In conjunction with the quarterly evaluation of loans not considered impaired, the Manager assesses the risk factors of each loan and assigns each 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 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 The Company records an allowance for loan losses equal to (i) 1.5% of the aggregate carrying amount of loans rated as a “4”, plus (ii) 5% of the aggregate carrying amount of loans rated as a “5”, plus (iii) impaired loan reserves, if any. There may be circumstances where the Company modifies a loan by granting the borrower a concession that it might not otherwise consider when a borrower is experiencing financial difficulty or is expected to experience financial difficulty in the F-11 Notes to Consolidated Financial Statements foreseeable future. Such concessionary modifications are classified as troubled debt restructurings (“TDR”s) unless the modification solely results in a delay in a payment that is insignificant. Loans classified as TDRs are considered impaired loans for reporting and measurement purposes. Equity Investment in a Limited Partnership The Company accounts for its equity interest in a limited partnership 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. Marketable Securities The Company from time to time invests in short term debt and equity securities. These securities are classified as available-for-sale and are carried at fair value. Changes in the fair value of equity securities are recognized in earnings. Changes in the fair value of debt securities are reported in other comprehensive income until a gain or loss on the securities is realized. 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. 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 provide 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. Leases The Company determines if an arrangement is a lease at inception. Operating leases in which the Company is the lessee are included in operating lease right-of-use (“ROU”) assets and operating lease liabilities in the consolidated balance sheets. ROU assets represent the Company’s right to use an underlying asset for the lease term and lease liabilities represent its obligation to make lease payments arising from the lease. Operating lease ROU assets and liabilities are recognized at commencement date based on the present value of lease payments over the lease term. As the Company’s lease typically does not provide an implicit rate, the Company uses its incremental borrowing rate based on the information available at commencement date in determining the present value of lease payments. The Company uses the implicit rate when readily determinable. The operating lease ROU asset also includes any lease payments made in advance and excludes lease incentives if there were any. The Company’s lease term may include options to extend or terminate the lease when it is reasonably certain that it will exercise that option. Lease expense for lease payments is recognized on a straight-line basis over the lease term. F-12 Notes to Consolidated Financial Statements 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. Income accrual is generally suspended for loans at the earlier of the date at which payments become 90 days past due or when, in the opinion of the Manager, recovery of income and principal becomes doubtful. Outstanding interest receivable is assessed for recoverability. Interest is then recorded on the basis of cash received until accrual is resumed when the loan becomes contractually current and performance is demonstrated to be resumed. 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 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. 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: December 31, 2020 2019 Cash and cash equivalents $ 18,607,952 $ 29,609,484 Restricted cash 12,145,616 18,542,163 Cash held in escrow by lender 2,166,755 2,398,053 Total cash, cash equivalents and restricted cash shown in the consolidated statements of cash flows $ 32,920,323 $ 50,549,700 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 F-13 Notes to Consolidated Financial Statements 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 doubtful. See “ Obligations under Participation Agreements ” in Note 9 for additional information. Term Loan The Company finances certain of its senior loans through borrowings under an indenture and credit agreement. The Company accounts for the borrowings as a term loan, which is carried at the contractual amount (cost), net of unamortized deferred financing fees. Repurchase Agreement The Company financed certain of its senior loans through repurchase transactions under a master repurchase agreement. The Company accounted for the repurchase transactions as secured borrowing transactions, which are carried at their contractual amounts (cost), net of unamortized deferred financing fees. Fair Value Measurements United States generally accepted accounting principles (“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, mortgage loan payable, repurchase agreement payable and revolving credit facility payable. Such financial instruments are carried at 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 in 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 Sections 856 through 860 of 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 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 for taxable years before 2018) 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 December 31, 2020, the Company has satisfied all the requirements for a REIT. No provision for federal income taxes has been included in the consolidated financial statements for the years ended December 31, 2020 and 2019. The Company did not have any uncertain tax positions that met the recognition or measurement criteria of Accounting Standards Codification (“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 years ended December 31, 2020 and 2019, 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 2017-2019 federal tax returns remain subject to examination by the Internal Revenue Service. F-14 Notes to Consolidated Financial Statements Earnings Per Share The Company has a simple equity capital structure with only common stock and preferred stock outstanding. As a result, earnings per share, as presented, represent 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. As of December 31, 2020, there has been an ongoing global outbreak of a novel coronavirus (“COVID-19”), which has spread to over 200 countries and territories, including the United States, and has spread to every state in the United States. The World Health Organization has designated COVID-19 as a pandemic, and numerous countries, including the United States, have declared national emergencies with respect to COVID-19. The global impact of the pandemic has been rapidly evolving, and as cases of COVID-19 have continued to be identified in additional countries, many countries have reacted by instituting quarantines and restrictions on travel, closing financial markets and/or restricting trading and operations of non-essential offices and retail centers. Such actions are creating disruption in global supply chains, and adversely impacting many industries. The pandemic could have a continued adverse impact on economic and market conditions and trigger a period of global economic slowdown. The rapid development and fluidity of this situation precludes any prediction as to the ultimate adverse impact of COVID-19 on economic and market conditions. The Company believes the estimates and assumptions underlying its consolidated financial statements are reasonable and supportable based on the information available as of December 31, 2020, however uncertainty over the ultimate impact COVID-19 will have on the global economy generally, and the Company’s business in particular, makes any estimates and assumptions as of December 31, 2020 inherently less certain than they would be absent the current and potential impacts of COVID-19. Actual results may ultimately differ from those estimates. 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 acquire real estate encumbering the senior loans through foreclosure. However, management treats the operations of the real estate acquired through foreclosure as the continuation of the original senior loans. The Company operates in a single segment focused on mezzanine loans, other loans and preferred equity investments, and to a lesser extent, owning and managing real estate. Recent Accounting Pronouncements In June 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2016-13, Financial Instruments — Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments (“ASU 2016-13”). ASU 2016-13 introduces a new model for recognizing credit losses on financial instruments based on an estimate of current expected credit losses. In April 2019, the FASB issued additional amendments to clarify the scope of ASU 2016-13 and address issues related to accrued interest receivable balances, recoveries, variable interest rates and prepayments, among other things. In May 2019, the FASB issued ASU 2019-05 — Targeted Transition Relief, which provides an option to irrevocably elect the fair value option for certain financial assets previously measured at amortized cost basis. In October 2019, the FASB decided that for smaller reporting companies, ASU 2016-13 and related amendments will be effective for fiscal years beginning after December 15, 2022, including interim periods within those fiscal years. The Company meets the definition of a smaller reporting company under the regulation of the Securities and Exchange Commission. As such, the Company will adopt this ASU and related amendments on January 1, 2023. Management is currently evaluating the impact this change will have on the Company’s consolidated financial statements and disclosures. In August 2018, the FASB issued ASU 2018-13, Fair Value Measurement (Topic 820): Disclosure framework — Changes to the Disclosure Requirements for Fair Value Measurement (“ASU 2018-13”). The objective of ASU 2018-13 is to improve the effectiveness of disclosures in the notes to financial statements by facilitating clear communication of information required by U.S. GAAP. The amendments in ASU 2018-13 added, removed and modified certain fair value measurement disclosure requirements. ASU 2018-13 is effective for all entities for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2019. The amendments on changes in unrealized gains and losses, the range and weighted average of significant unobservable inputs used to develop Level 3 fair value measurements, and the narrative description of measurement uncertainty should be applied prospectively for only the most recent interim or annual period presented in the initial fiscal year F-15 Notes to Consolidated Financial Statements of adoption. All other amendments should be applied retrospectively to all periods presented upon their effective date. The Company adopted ASU 2018-13 on January 1, 2020. The adoption of ASU 2018-13 did not have a material impact on its consolidated financial statements and disclosures. London Interbank Offered Rate (“LIBOR”) is a benchmark interest rate referenced in a variety of agreements that are used by all types of entities. At the end of 2021, banks will no longer be required to report information that is used to determine LIBOR. As a result, LIBOR could be discontinued. Other interest rates used globally could also be discontinued for similar reasons. In March 2020, the FASB issued ASU 2020-04, Reference Rate Reform (Topic 848) — Facilitation of the Effects of Reference Rate Reform on Financial Reporting (“ASU 2020-04”). The amendments in ASU 2020-04 provide companies with optional guidance to ease the potential accounting burden associated with transitioning away from reference rates that are expected to be discontinued. The provisions of optional relief include: (i) contract modifications - account for the modification as a continuation of the existing contract without additional analysis; (ii) hedging accounting - continue hedge accounting when certain critical terms of a hedging relationship change; and (iii) held-to-maturity (HTM) debt securities - one-time sale and/or transfer to available for sale or trading may be made for HTM debt securities that both reference an eligible reference rate and were classified as HTM before January 1, 2020. Companies can apply the amendments in ASU 2020-04 immediately. However, ASU 2020-04 will only be available for a limited time (generally through December 31, 2022). The Company is currently evaluating the impact of the reference rate reform and ASU 2020-04 on its consolidated financial statements and disclosures. Note 3. Merger and Issuance of Common Stock to Terra Offshore REIT Merger On February 28, 2020, the Company entered into the Merger Agreement pursuant to which TPT2 was merged with and into the Company, with the Company continuing as the surviving corporation, effective March 1, 2020. In connection with the Merger, each share of common stock, par value $ 0.01 per share, of TPT2 issued and outstanding immediately prior to the effective time of the Merger was converted into the right to receive from the Company a number of shares of common stock, par value $ 0.01 per share, of the Company equal to an exchange ratio, which was 1.2031 . The exchange ratio was based on the relative net asset values of the Company and TPT2 as of December 31, 2019 as adjusted to reflect changes in the net working capital of each of the Company and TPT2 during the period from January 1, 2020 through March 1, 2020, the effective time for the Merger. For purposes of determining the respective fair values of the Company and TPT2, the value of the loans (or participation interests therein) held by each of the Company and TPT2 was the value of such loans (or participation interests) as set forth in the audited financial statements of the Company as of and for the year ended December 31, 2019. As a result, Terra Fund 7, the sole stockholder of TPT2, received 2,116,785.76 shares of common stock of the Company as consideration in the Merger. The shares of common stock were issued in a private placement in reliance on Section 4(a)(2) under the Securities Act of 1933, as amended (the “Securities Act”), and the rules and regulations promulgated thereunder. The following table presents a summary of the consideration exchanged and settlement of the Company’s obligations under participation agreements as a result of the Merger: Total Consideration Equity issued in the Merger $ 34,630,615 $ 34,630,615 Net Assets of TPT2 Received in the Merger Loans held for investment acquired through participation $ 17,688,741 Cash and cash equivalents 16,897,074 Interest receivable 134,543 Other assets 18,384 Accounts payable and accrued expenses ( 57,433 ) Due to Manager ( 50,694 ) Total identifiable net assets $ 34,630,615 F-16 Notes to Consolidated Financial Statements The fair value of the 2,116,785.76 shares of the Company’s stock issued in the Merger as consideration paid for TPT2 was derived from the fair value per share of the Company as of December 31, 2019 as adjusted to reflect the change in the net working capital of the Company during the period from January 1, 2020 through March 1, 2020, the effective time of the Merger. In connection with the Merger, the size of the board of directors of the Company was reduced from eight directors to four directors, with Andrew M. Axelrod, Vikram S. Uppal, Roger H. Beless and Michael L. Evans continuing as directors of the Company. Issuance of Common Stock to Terra Offshore REIT In addition, on March 2, 2020, the Company entered into two separate contribution agreements, one by and among the Company, Terra Offshore REIT and Terra Income Fund International, and another by and among the Company, Terra Offshore REIT and Terra Secured Income Fund 5 International, pursuant to which the Company issued 2,457,684.59 shares of common stock of the Company to Terra Offshore REIT in exchange for the settlement of $ 32.1 million of participation interests in loans also held by the Company, $ 8.6 million in cash and other net working capital. The shares of common stock were issued in a private placement in reliance on Section 4(a)(2) under the Securities Act and the rules and regulations promulgated thereunder. The fair value of the 2,457,684.59 shares of the Company’s stock issued in the transaction as consideration paid for Terra Offshore REIT was derived from the fair value per share of the Company as of December 31, 2019, which was the most recently determined fair value per share of the Company. The following table presents a summary of the consideration exchanged and settlement of the Company’s obligations under participation agreements as a result of the Issuance of Common Stock to Terra Offshore REIT: Total Consideration Equity issued to Terra Offshore REIT $ 40,749,378 $ 40,749,378 Net Assets of Terra Offshore REIT Received Investments through participation interest, at fair value $ 32,112,257 Cash and cash equivalents 8,600,000 Interest receivable 270,947 Due to Manager ( 233,826 ) Total identifiable net assets $ 40,749,378 On April 29, 2020, the Company repurchased 212,691 shares of common stock at a price of $ 17.02 per share that the Company had previously sold to Terra Offshore REIT on September 30, 2019 ( Note 8 ). Terra JV, LLC Prior to the completion of the Merger and the Issuance of Common Stock to Terra Offshore REIT transactions described above, Terra Fund 5 owned approximately 98.6 % of the issued and outstanding shares of the Company’s common stock indirectly through its wholly owned subsidiary, Terra JV, of which Terra Fund 5 was the sole managing member, and the remaining issued and outstanding shares of the Company’s common stock were owned by Terra Offshore REIT. As described above, the Company acquired TPT2 in the Merger and, in connection with such transaction, Terra Fund 7 contributed the shares of the Company’s common stock received as consideration in the Merger to Terra JV and became a co-managing member of Terra JV pursuant to the amended and restated operating agreement of Terra JV, dated March 2, 2020 (the “JV Agreement”). The JV Agreement and related stockholders agreement between Terra JV and the Company, dated March 2, 2020, provide for the joint approval of Terra Fund 5 and Terra Fund 7 with respect to certain major decisions that are taken by Terra JV and the Company. On March 2, 2020, the Company, Terra Fund 5, Terra JV and Terra REIT Advisors also entered into the Amended and Restated Voting Agreement (the “Voting Agreement”), pursuant to which Terra Fund 5 assigned its rights and obligations under the Voting Agreement to Terra JV. Consistent with the original voting agreement dated February 8, 2018, for the period that Terra REIT Advisors remains the external manager of the Company, Terra REIT Advisors will have the right to nominate F-17 Notes to Consolidated Financial Statements two individuals to serve as directors of the Company and, until Terra JV no longer holds at least 10 % of the outstanding shares of the Company’s common stock, Terra JV will have the right to nominate one individual to serve as a director of the Company. As of December 31, 2020, Terra JV owns 87.4 % of the issued and outstanding shares of the Company’s common stock with the remainder held by Terra Offshore REIT, and Terra Fund 5 and Terra Fund 7 own an 87.6 % and 12.4 % interest, respectively, in Terra JV. Net Loss on Extinguishment of Obligations Under Participation Agreements As discussed in Note 8 , 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 obligations under participation agreements were released as a result of the Merger and the Issuance of Common Stock to Terra Offshore REIT. In connection with these transactions, the Company recognized a net loss of $ 0.3 million for the three months ended March 31, 2020, which was primarily related to transaction costs incurred in connection with both transactions. Note 4. Loans Held for Investment Portfolio Summary The following table provides a summary of the Company’s loan portfolio as of December 31, 2020 and 2019: December 31, 2020 December 31, 2019 Fixed Rate Floating Rate (1)(2)(3) Total Fixed Rate Floating Rate (1)(2)(3) Total Number of loans 6 14 20 8 15 23 Principal balance $ 56,335,792 $ 367,838,966 $ 424,174,758 $ 70,692,767 $ 306,695,550 $ 377,388,317 Carrying value $ 56,464,310 $ 365,816,205 $ 422,280,515 $ 71,469,137 $ 307,143,631 $ 378,612,768 Fair value $ 56,284,334 $ 363,122,860 $ 419,407,194 $ 71,516,432 $ 307,643,983 $ 379,160,415 Weighted-average coupon rate 12.17 % 7.95 % 8.51 % 11.93 % 9.13 % 9.65 % Weighted-average remaining term (years) 1.78 1.44 1.48 2.28 2.09 2.13 _______________ (1) These loans pay a coupon rate of LIBOR plus a fixed spread. Coupon rate shown was determined using LIBOR of 0.14 % and 1.76 % as of December 31, 2020 and 2019, respectively. (2) As of December 31, 2020, amounts included $ 184.2 million of senior mortgages used as collateral for $ 107.6 million of borrowings under a term loan ( Note 9 ). These borrowings bear interest at an annual rate of LIBOR plus 4.25 % with a LIBOR floor of 1.00 % as of December 31, 2020. As of December 31, 2019, amounts included $ 114.8 million of senior mortgages used as collateral for $ 81.1 million of borrowings under a repurchase agreement ( Note 9 ). These borrowings bore interest at an annual rate of LIBOR plus a spread ranging from 2.25 % to 2.50 % as of December 31, 2019. The repurchase agreement was terminated in September 2020. (3) As of both December 31, 2020 and 2019, twelve of these loans are subject to a LIBOR floor. F-18 Notes to Consolidated Financial Statements Lending Activities The following table presents the activities of the Company’s loan portfolio for the years ended December 31, 2020 and 2019: Loans Held for Investment Loans Held for Investment through Participation Interests Total Balance, January 1, 2020 $ 375,462,222 $ 3,150,546 $ 378,612,768 New loans made 107,359,299 1,129,112 108,488,411 Principal repayments received ( 66,144,729 ) — ( 66,144,729 ) PIK interest (1) 4,442,759 — 4,442,759 Net amortization of premiums on loans ( 61,391 ) — ( 61,391 ) Accrual, payment and accretion of investment-related fees and other, net 667,060 14,395 681,455 Provision for loan losses ( 3,738,758 ) — ( 3,738,758 ) Balance, December 31, 2020 $ 417,986,462 $ 4,294,053 $ 422,280,515 Loans Held for Investment Loans Held for Investment through Participation Interests Total Balance, January 1, 2019 $ 388,243,974 $ — $ 388,243,974 New loans made 182,206,332 3,120,887 185,327,219 Principal repayments received ( 181,131,959 ) — ( 181,131,959 ) Foreclosure of collateral (2) ( 14,325,000 ) — ( 14,325,000 ) PIK interest (1) 2,476,355 — 2,476,355 Net amortization of premiums on loans ( 104,426 ) — ( 104,426 ) Accrual, payment and accretion of investment-related fees, net (3) ( 1,903,054 ) 29,659 ( 1,873,395 ) Balance, December 31, 2019 $ 375,462,222 $ 3,150,546 $ 378,612,768 _______________ (1) Certain loans in the Company’s portfolio contain PIK interest provisions. The PIK interest represents contractually deferred interest that is added to the principal balance. PIK interest related to obligations under participation agreements amounted to $ 1.5 million and $ 0.8 million for the years ended December 31, 2020 and 2019, respectively. (2) On January 9, 2019, the Company acquired 4.9 acres of adjacent land encumbering a $ 14.3 million first mortgage via deed in lieu of foreclosure in exchange for the relief of the first mortgage and related fees and expenses ( Note 6 ). (3) Amount for the year ended December 31, 2019 included $ 0.5 million of deferred origination fees that were previously recorded as unearned income. F-19 Notes to Consolidated Financial Statements 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 as of December 31, 2020 and 2019: December 31, 2020 December 31, 2019 Loan Structure Principal Balance Carrying Value % of Total Principal Balance Carrying Value % of Total First mortgages $ 254,042,847 $ 255,093,989 60.5 % $ 178,130,623 $ 178,203,675 47.1 % Preferred equity investments 141,590,632 142,002,144 33.6 % 157,144,040 157,737,763 41.6 % Mezzanine loans 28,541,279 28,923,140 6.8 % 42,113,654 42,671,330 11.3 % Allowance for loan losses — ( 3,738,758 ) ( 0.9 ) % — — — % Total $ 424,174,758 $ 422,280,515 100.0 % $ 377,388,317 $ 378,612,768 100.0 % December 31, 2020 December 31, 2019 Property Type Principal Balance Carrying Value % of Total Principal Balance Carrying Value % of Total Office $ 182,698,225 $ 183,053,751 43.3 % $ 142,055,845 $ 141,870,355 37.5 % Multifamily 87,978,759 88,627,207 21.0 % 76,640,369 77,136,016 20.4 % Student housing 55,294,414 55,643,591 13.2 % 58,049,717 58,553,496 15.5 % Hotel 53,392,809 53,687,304 12.7 % 46,598,011 46,731,939 12.3 % Infill land 27,210,551 27,305,496 6.5 % 36,444,375 36,624,375 9.7 % Condominium 10,600,000 10,701,924 2.5 % 10,600,000 10,696,587 2.8 % Industrial 7,000,000 7,000,000 1.7 % 7,000,000 7,000,000 1.8 % Allowance for loan losses — ( 3,738,758 ) ( 0.9 ) % — — — % Total $ 424,174,758 $ 422,280,515 100.0 % $ 377,388,317 $ 378,612,768 100.0 % December 31, 2020 December 31, 2019 Geographic Location Principal Balance Carrying Value % of Total Principal Balance Carrying Value % of Total United States California $ 200,279,688 $ 200,990,328 47.6 % $ 150,988,463 $ 151,108,109 39.9 % New York 79,187,004 79,310,276 18.8 % 79,734,323 79,896,663 21.1 % Georgia 74,116,787 74,505,752 17.6 % 61,772,764 61,957,443 16.4 % North Carolina 33,242,567 33,438,806 7.9 % 32,592,767 32,766,311 8.7 % Washington 23,500,000 23,682,536 5.6 % 23,500,000 23,661,724 6.2 % Massachusetts 7,000,000 7,000,000 1.7 % 7,000,000 7,000,000 1.8 % Texas 3,848,712 3,887,200 0.9 % 3,500,000 3,531,776 0.9 % Illinois — — — % 8,004,877 8,071,562 2.1 % Kansas — — — % 6,200,000 6,251,649 1.7 % Other (1) 3,000,000 3,204,375 0.8 % 4,095,123 4,367,531 1.2 % Allowance for loan losses — ( 3,738,758 ) ( 0.9 ) % — — — % Total $ 424,174,758 $ 422,280,515 100.0 % $ 377,388,317 $ 378,612,768 100.0 % _______________ (1) Other includes a $ 3.0 million loan with collateral located in South Carolina at both December 31, 2020 and 2019. Other also includes $ 1.1 million of the unused portion of a credit facility at December 31, 2019. Loan Risk Rating As described in Note 2 , the Manager evaluates the Company’s loan portfolio on a quarterly basis or more frequently as needed. In conjunction with the quarterly review of the Company’s loan portfolio, the Manager assesses the risk factors of each loan, and assigns a risk rating based on a five-point scale with “1” being the lowest risk and “5” being the greatest risk. F-20 Notes to Consolidated Financial Statements The following table allocates the principal balance and the carrying value of the Company’s loans based on the loan risk rating as of December 31, 2020 and 2019: December 31, 2020 December 31, 2019 Loan Risk Rating Number of Loans Principal Balance Carrying Value % of Total Number of Loans Principal Balance Carrying Value % of Total 1 0 $ — $ — — % — $ — $ — — % 2 1 7,000,000 7,000,000 1.6 % 5 50,000,000 50,284,751 13.3 % 3 14 323,696,475 325,284,285 76.4 % 17 322,648,317 323,588,017 85.4 % 4 (1) 3 72,861,587 73,079,804 17.2 % — — — — % 5 (1) 1 3,848,712 3,887,200 0.9 % — — — — % Other (2) 1 16,767,984 16,767,984 3.9 % 1 4,740,000 4,740,000 1.3 % 20 $ 424,174,758 426,019,273 100.0 % 23 $ 377,388,317 378,612,768 100.0 % Allowance for loan losses ( 3,738,758 ) — Total, net of allowance for loan losses $ 422,280,515 $ 378,612,768 _______________ (1) The increase in number of loans with a loan risk rating of “4” and “5” was due to the higher risk in select loans as a result of asset-specific factors that are particularly negatively impacted by the COVID-19 pandemic. (2) These loans were deemed impaired and removed from the pool of loans on which a general allowance is calculated. For the year ended December 31, 2020, the Company recorded a specific allowance of $ 2.5 million on this loan as a result of a decline in the fair value of the collateral. For the year ended December 31, 2019, no specific reserve for loan losses was recorded on this loan because the fair value of the collateral was greater than carrying value of the loan. In March 2020, this loan was repaid in full. As of December 31, 2020, the Company had three loans with a loan risk rating of “4” and one loan with a loan risk rating of “5”, and recorded a general allowance for loan losses of $ 1.3 million. The following table presents the activity in the Company’s allowance for loan losses for the years ended December 31, 2020 and 2019: Years Ended December 31, 2020 2019 Allowance for loan losses, beginning of period $ — $ — Provision for loan losses 3,738,758 — Charge-offs — — Recoveries — — Allowance for loan losses, end of period $ 3,738,758 $ — The allowance for loan losses reserve reflects the macroeconomic impact of the COVID-19 pandemic on commercial real estate markets generally and is not specific to any loan losses or impairments in our portfolio. See Note 2 for further discussion of COVID-19. Note 5. Equity Investment in a Limited Partnership On August 3, 2020, the Company entered into a subscription agreement with Terra Real Estate Credit Opportunities Fund, LP (“Terra RECO”) whereby the Company committed to fund up to $ 50.0 million to purchase a limited partnership interest in Terra RECO. Terra RECO ’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. Terra RECO 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 Terra RECO is Terra Real Estate Credit Opportunities Fund GP, LLC , which is a subsidiary of the Company’s sponsor, Terra Capital Partners, LLC . As of December 31, 2020, the unfunded commitment was $ 14.1 million. F-21 Notes to Consolidated Financial Statements The Company evaluated its equity interest in Terra RECO and determined it does not have a controlling financial interest and is not the primarily beneficiary. Accordingly, the equity interest in Terra RECO is accounted for as an equity method investment. As of December 31, 2020, the Company owned a 90.3 %, or $ 36.3 million, of equity interest in Terra RECO. For the year ended December 31, 2020, the Company recorded equity income from Terra RECO of $ 38,640 and did not receive any distributions from Terra RECO. The following tables present summarized financial information of the Company’s equity investment in Terra RECO. Amounts provided are the total amounts attributable to the investment and do not represent the Company’s proportionate share: December 31, 2020 Investments at fair value (cost of $44,174,031) $ 44,715,979 Other assets 5,331,840 Total assets 50,047,819 Obligations under participation agreement (proceeds of $6,222,830) 6,347,478 Other liabilities 4,204,147 Total liabilities $ 10,551,625 Partners’ capital $ 39,496,194 Year Ended December 31, 2020 Total investment income $ 239,837 Total expenses 614,362 Net investment loss ( 374,525 ) Unrealized appreciation on investments 417,300 Net increase in partners' capital resulting from operations $ 42,775 Note 6. Real Estate Owned, Net Real Estate Activities 2020 — In June 2020, the Company received a notice from a tenant occupying a portion of the office building that the Company acquired in July 2018 via foreclosure of their intention to terminate the lease. In connection with the lease termination effective September 4, 2020, the Company received from the tenant lease termination fee of $ 0.4 million, which included approximately $ 0.2 million of cash and $ 0.2 million of the furniture and fixtures in the office space. The furniture and fixtures have a remaining useful life of 2.5 years and are being depreciated on a straight-line basis over the remaining useful life. Additionally, the Company wrote off the related unamortized in-place lease intangible assets of $ 0.9 million, unamortized below-market rent intangible liabilities of $ 0.6 million and rent receivable of $ 0.1 million. There was no gain or loss recognized on the lease termination. 2019 — On January 9, 2019, the Company acquired 4.9 acres of adjacent land encumbering a first mortgage via deed in lieu of foreclosure in exchange for the payment of the first mortgage and related fees and expenses. The following table summarizes the carrying value of the first mortgage prior to the deed in lieu of foreclosure on January 9, 2019: Carrying Value of First Mortgage Loan held for investment $ 14,325,000 Interest receivable 439,300 Restricted cash applied against loan principal amount ( 60,941 ) $ 14,703,359 The table below summarizes the allocation of the estimated fair value of the real estate acquired on January 9, 2019 based on the policy described in Note 2 : F-22 Notes to Consolidated Financial Statements Assets Acquired Real estate owned: Land $ 14,703,359 The Company capitalized transaction costs of approximately $ 0.2 million to land. For the year ended December 31, 2019, the Company recorded an impairment charge of $ 1.6 million on the land in order to reduce the carrying value of the land to its estimated fair value, which was the estimated selling price less the cost of sale. Real Estate Owned, Net Real estate owned is comprised of 4.9 acres of adjacent land located in Pennsylvania and a multi-tenant office building, with lease intangible assets and liabilities, located in California. The following table presents the components of real estate owned, net: December 31, 2020 December 31, 2019 Cost Accumulated Depreciation/Amortization Net Cost Accumulated Depreciation/Amortization Net Real estate: Land $ 13,395,430 $ — $ 13,395,430 $ 13,395,430 $ — $ 13,395,430 Building and building improvements 51,725,969 ( 3,125,143 ) 48,600,826 51,725,969 ( 1,831,980 ) 49,893,989 Tenant improvements 1,854,640 ( 670,090 ) 1,184,550 1,854,640 ( 392,812 ) 1,461,828 Furniture and fixtures 236,000 ( 31,467 ) 204,533 — — — Total real estate 67,212,039 ( 3,826,700 ) 63,385,339 66,976,039 ( 2,224,792 ) 64,751,247 Lease intangible assets: In-place lease 15,852,232 ( 6,172,747 ) 9,679,485 15,852,232 ( 3,138,675 ) 12,713,557 Above-market rent 156,542 ( 42,427 ) 114,115 156,542 ( 24,871 ) 131,671 Total intangible assets 16,008,774 ( 6,215,174 ) 9,793,600 16,008,774 ( 3,163,546 ) 12,845,228 Lease intangible liabilities: Below-market rent ( 3,371,314 ) 1,702,800 ( 1,668,514 ) ( 3,371,314 ) 658,115 ( 2,713,199 ) Above-market ground lease ( 8,896,270 ) 315,008 ( 8,581,262 ) ( 8,896,270 ) 184,660 ( 8,711,610 ) Total intangible liabilities ( 12,267,584 ) 2,017,808 ( 10,249,776 ) ( 12,267,584 ) 842,775 ( 11,424,809 ) Total real estate $ 70,953,229 $ ( 8,024,066 ) $ 62,929,163 $ 70,717,229 $ ( 4,545,563 ) $ 66,171,666 F-23 Notes to Consolidated Financial Statements 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: Years Ended December 31, 2020 2019 Real estate operating revenues: Lease revenue $ 8,150,041 $ 7,683,843 Other operating income 2,273,522 2,122,664 Total $ 10,423,563 $ 9,806,507 Real estate operating expenses: Utilities $ 166,003 $ 191,657 Real estate taxes 1,925,999 1,194,192 Repairs and maintenances 659,934 618,755 Management fees 224,732 252,164 Lease expense, including amortization of above-market ground lease 1,134,152 1,135,096 Other operating expenses 394,299 598,047 Total $ 4,505,119 $ 3,989,911 Leases On July 30, 2018, the Company foreclosed on a multi-tenant office building in full satisfaction of a first mortgage and related fees and expenses. In connection with the foreclosure, the Company assumed four leases whereby the Company is the lessor to the leases. These four tenant leases had remaining lease terms ranging from 6.3 years to 8.8 years as of July 30, 2018 and provide for annual fixed rent increase. Three of the tenant leases each provides two options to renew the lease for five years each and the remaining tenant lease provides one option to renew the lease for five years. In addition, the Company assumed a ground lease whereby the Company is the lessee (or a tenant) to the ground lease. The ground lease had a remaining lease term of 68.3 years and provides for a new base rent every 5 years based on the greater of the annual base rent for the prior lease year or 9 % of the fair market value of the land. The next rent reset on the ground lease was scheduled for November 1, 2020, however the Company is currently negotiating with the landlord to determine the fair value of the land, on which the ground rent is based. Since future rent increase on the ground lease is unknown, the Company did not include the future rent increase in calculating the present value of future rent payments. The ground lease does not provide for renewal options. On the date of foreclosure, the Company performed lease classification test on the tenant leases as well as the ground lease in accordance with ASC 840. The result of the lease classification test indicated that the tenant leases and the ground lease shall be classified as operating leases on the date of foreclosure. On January 1, 2019, the Company adopted ASU 2016-02, Leases (Topic 842) (“ASU 2016-02”) using a modified retrospective transition approach and chose not to adjust comparable periods ( Note 2 ). The Company elected to use the package of practical expedients for its existing leases whereby the Company did not need to reassess whether a contract is or contains a lease, lease classification and initial direct costs. As a result, the leases continue to be classified as operating leases under ASC 842, Leases . The adoption of ASU 2016-02 did not have any impact on the tenant leases; however, for the ground lease, the Company recognized $ 16.1 million of both operating lease right-of-use assets and operating lease liabilities on its consolidated balance sheets. No cumulative effect adjustment was recorded because there was no change to operating lease cost. In addition, as of January 1, 2019, the Company had $ 0.5 million of unamortized leasing commission (initial direct costs) on the tenant leases. The Company elected to continue to amortize the remaining leasing commission through the end of the lease terms. F-24 Notes to Consolidated Financial Statements Scheduled Future Minimum Rent Income Scheduled future minimum rents, exclusive of renewals and expenses paid by tenants, under non-cancelable operating leases at December 31, 2020 are as follows: Years Ending December 31, Total 2021 $ 6,628,573 2022 7,132,812 2023 7,363,647 2024 7,600,861 2025 4,111,257 Thereafter 1,199,623 Total $ 34,036,773 Scheduled Annual Net Amortization of Intangibles Based on the intangible assets and liabilities recorded at December 31, 2020, scheduled annual net amortization of intangibles for each of the next five calendar years and thereafter is as follows: Years Ending December 31, Net Decrease in Real Estate Operating Revenue (1) Increase in Depreciation and Amortization (1) Decrease in Rent Expense (1) Total 2021 ( 338,220 ) 2,062,060 ( 130,348 ) 1,593,492 2022 ( 338,220 ) 2,062,060 ( 130,348 ) 1,593,492 2023 ( 338,220 ) 2,062,060 ( 130,348 ) 1,593,492 2024 ( 338,220 ) 2,062,060 ( 130,348 ) 1,593,492 2025 ( 181,608 ) 1,431,245 ( 130,348 ) 1,119,289 Thereafter ( 19,911 ) — ( 7,929,522 ) ( 7,949,433 ) Total $ ( 1,554,399 ) $ 9,679,485 $ ( 8,581,262 ) $ ( 456,176 ) _______________ (1) Amortization of below-market rent and above-market rent intangibles is recorded as an adjustment to lease revenues; amortization of in-place lease intangibles is included in depreciation and amortization; and amortization of above-market ground lease is recorded as a reduction to rent expense. Supplemental Ground Lease Disclosures Supplemental balance sheet information related to the ground lease was as follows: December 31, 2020 2019 Operating lease Operating lease right-of-use assets $ 16,105,888 $ 16,112,925 Operating lease liabilities $ 16,105,888 $ 16,112,925 Weighted average remaining lease term — operating lease (years) 65.8 66.8 Weighted average discount rate — operating lease 7.9 % 7.9 % F-25 Notes to Consolidated Financial Statements The component of lease expense for the ground lease was as follows: Years Ended December 31, 2020 2019 Operating lease cost $ 1,264,500 $ 1,265,445 Supplemental non-cash information related to the ground lease was as follows: Years Ended December 31, 2020 2019 Cash paid for amounts included in the measurement of lease liabilities: Operating cash flows from operating leases $ 1,264,500 $ 1,265,445 Right-of-use assets obtained in exchange for lease obligations Operating leases $ 1,264,500 $ 1,265,445 Maturities of operating lease liabilities are as follows: Years Ending December 31, Operating Lease 2021 1,264,500 2022 1,264,500 2023 1,264,500 2024 1,264,500 2025 1,264,500 Thereafter 76,871,063 Total lease payments 83,193,563 Less: Imputed interest ( 67,087,675 ) Total $ 16,105,888 Note 7. Fair Value Measurements The Company adopted 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, prepayment speeds, 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 are 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 F-26 Notes to Consolidated Financial Statements 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 December 31, 2020 and 2019, 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, term loan payable, mortgage loan payable, repurchase agreement payable and revolving credit facility payable. Such financial instruments are carried at cost, less impairment or less net deferred costs, where applicable. Marketable securities 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 short-term debt and equity securities which are classified as available-for-sale securities, which are presented at fair value on the consolidated balance sheet. Changes in the fair value of equity securities are recognized in earnings. Changes in the fair value of debt securities are reported in other comprehensive income until the securities are realized. The following tables present fair value measurements of marketable securities, by major class, as of December 31, 2020, according to the fair value hierarchy: December 31, 2020 Fair Value Measurements Level 1 Level 2 Level 3 Total Marketable Securities: Equity securities $ 1,287,500 $ — $ — $ 1,287,500 Debt securities — — — — Total $ 1,287,500 $ — $ — $ 1,287,500 The following table presents the activities of the marketable securities for the periods presented. Years Ended December 31, 2020 2019 Beginning balance $ — $ — Purchases 6,039,567 — Proceeds from sale ( 6,023,723 ) — Realized gains on marketable securities 1,160,162 — Unrealized gains on marketable securities 111,494 — Ending balance $ 1,287,500 $ — F-27 Notes to Consolidated Financial Statements Financial Instruments Not Carried at Fair Value The following table presents the carrying value, which represents the principal amount outstanding, adjusted for the accretion of purchase discounts on loans and exit fees, and the amortization of purchase premiums on loans and origination fees, and estimated fair value of the Company’s financial instruments that are not carried at fair value on the consolidated balance sheets: December 31, 2020 December 31, 2019 Level Principal Amount Carrying Value Fair Value Principal Amount Carrying Value Fair Value Loans: Loans held for investment, net 3 $ 419,924,758 $ 421,725,220 $ 415,113,225 $ 374,267,430 $ 375,462,222 $ 375,956,154 Loans held for investment acquired through participation, net 3 4,250,000 4,294,053 4,293,969 3,120,887 3,150,546 3,204,261 Allowance for loan losses — ( 3,738,758 ) — — — — Total loans $ 424,174,758 $ 422,280,515 $ 419,407,194 $ 377,388,317 $ 378,612,768 $ 379,160,415 Liabilities: Term loan payable 3 $ 107,584,451 $ 105,245,801 $ 107,248,555 $ — $ — $ — Obligations under participation agreements 3 71,266,303 71,581,897 70,693,207 102,564,795 103,186,327 103,188,783 Mortgage loan payable 3 44,020,225 44,117,293 44,348,689 44,614,480 44,753,633 44,947,378 Secured borrowing 3 18,281,848 18,187,663 17,037,032 — — — Repurchase agreement payable 3 — — — 81,134,436 79,608,437 81,134,436 Total liabilities $ 241,152,827 $ 239,132,654 $ 239,327,483 $ 228,313,711 $ 227,548,397 $ 229,270,597 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 December 31, 2020 and 2019 due to their short-term nature. Valuation Process for Fair Value Measurement The fair value of the Company’s investment in equity securities 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, including 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 portfolio company’s ability to make payments, 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 loans. 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 Manager pursuant to the Company’s valuation policy. F-28 Notes to Consolidated Financial Statements The fair values of the Company’s mortgage loan payable, repurchase agreement payable, term loan payable and revolving credit facility payable 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 table summarizes the valuation techniques and significant unobservable inputs used by the Company to value the Level 3 loans as of December 31, 2020 and 2019. 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 December 31, 2020 Primary Valuation Technique Unobservable Inputs December 31, 2020 Asset Category Minimum Maximum Weighted Average Assets: Loans held for investment, net $ 415,113,225 Discounted cash flow Discount rate 5.29 % 20.05 % 10.38 % Loans held for investment acquired through participation, net 4,293,969 Discounted cash flow Discount rate 12.89 % 12.89 % 12.89 % Total Level 3 Assets $ 419,407,194 Liabilities: Term loan payable $ 107,248,555 Discounted cash flow Discount rate 5.25 % 5.25 % 5.25 % Obligations under Participation Agreements 70,693,207 Discounted cash flow Discount rate 9.75 % 20.05 % 12.58 % Mortgage loan payable 44,348,689 Discounted cash flow Discount rate 6.08 % 6.08 % 6.08 % Secured borrowing 17,037,032 Discounted cash flow Discount rate 11.25 % 11.25 % 11.25 % Total Level 3 Liabilities $ 239,327,483 Fair Value at December 31, 2019 Primary Valuation Technique Unobservable Inputs December 31, 2019 Asset Category Minimum Maximum Weighted Average Assets: Loans held for investment, net $ 375,956,154 Discounted cash flow Discount rate 4.71 % 14.95 % 9.77 % Loans held for investment acquired through participation, net 3,204,261 Discounted cash flow Discount rate 11.90 % 11.90 % 11.90 % Total Level 3 Assets $ 379,160,415 Liabilities: Obligations under Participation Agreements $ 103,188,783 Discounted cash flow Discount rate 9.00 % 14.95 % 11.99 % Mortgage loan 44,947,378 Discounted cash flow Discount rate 6.08 % 6.08 % 6.08 % Repurchase agreement payable 81,134,436 Discounted cash flow Discount rate 4.11 % 4.75 % 4.33 % Total Level 3 Liabilities $ 229,270,597 Note 8. Related Party Transactions Management Agreement The Company entered into a Management Agreement with the Manager whereby the Manager is responsible for its day-to-day operations. The Management Agreement runs co-terminus with the amended and restated operating agreement for Terra Fund 5, which is scheduled to terminate on December 31, 2023 unless Terra Fund 5 is dissolved earlier. 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: Years Ended December 31, 2020 2019 Origination and extension fee expense (1)(2) $ 1,383,960 $ 1,992,492 Asset management fee 4,480,706 3,671,474 Asset servicing fee 1,008,256 854,096 Operating expenses reimbursed to Manager 6,041,075 4,875,153 Disposition fee (3) 504,611 1,408,055 Total $ 13,418,608 $ 12,801,270 _______________ (1) Origination and extension fee expense is generally offset with origination and extension fee income. Any excess is deferred F-29 Notes to Consolidated Financial Statements and amortized to interest income over the term of the loan. (2) Amount for the year ended December 31, 2020 excluded $ 0.4 million of origination fee paid to the Manager in connection with the Company’s equity investment in a limited partnership. This origination fee was capitalized to the carrying value of the equity investment as transaction cost. (3) 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 % of the amount used to originate, fund, acquire or structure real estate-related investments, including any third-party expenses related to such loans. In the event that the term of any real estate-related loan held by the Company is extended, the Manager also receives an extension fee equal to the lesser of (i) 1 % 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 % 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 real estate related loan 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 real estate-related loan 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 loan 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 December 31, 2020 and 2019, the Company has 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 receives a disposition fee in the amount of 1 % of the gross sale price received by the Company from the disposition of any real estate-related loan, or any portion of, or interest in, any real estate-related loan. The disposition fee is paid concurrently with the closing of any such disposition of all or any portion of any real estate-related loan or any interest therein, which is the lesser of (i) 1% of the principal amount of the loan or debt-related loan prior to such transaction or (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% of the sales price. Distributions Paid For the year ended December 31, 2020, the Company made distributions to Terra Fund 5, Terra JV and Terra Offshore REIT in the aggregate $ 21.2 million, of which $ 16.0 million were returns of capital ( Note 11 ). For the year ended December 31, 2019, the Company made distributions to Terra Fund 5 and Terra Offshore REIT totaling $ 30.4 million, of which $ 21.4 million were returns of capital ( Note 11 ). F-30 Notes to Consolidated Financial Statements Due to Manager As of December 31, 2020 and 2019, approximately $ 1.3 million and $ 1.0 million was due to the Manager, respectively, as reflected on the consolidated balance sheets, primarily related to the present value of the disposition fees on individual loans due to the Manager. Merger and Issuance of Common Stock to Terra Offshore REIT As discussed in Note 3 , on March 1, 2020, TPT2 merged with and into the Company with the Company continuing as the surviving company. In connection with the Merger, the Company issued 2,116,785.76 shares of common stock of the Company to Terra Fund 7, the sole stockholder of TPT2, as consideration in the Merger. In addition, on March 2, 2020, Terra Offshore REIT contributed cash and released obligations under the participation agreements to the Company ( Note 3 ) in exchange for the issuance of 2,457,684.59 shares of common stock of the Company. As described in Note 3 , Terra Fund 7 contributed the shares of the Company’s common stock received as consideration in the Merger to Terra JV and became a co-managing member of Terra JV pursuant to the JV Agreement. The JV Agreement and related stockholders agreement between Terra JV and the Company, dated March 2, 2020, provide for the joint approval of Terra Fund 5 and Terra Fund 7 with respect to certain major decisions that are taken by Terra JV and the Company. As of December 31, 2020, Terra JV owns 87.4 % of the issued and outstanding shares of the Company’s common stock with the remainder held by Terra Offshore REIT; and Terra Fund 5 and Terra Fund 7 own an 87.6 % and 12.4 % interest, respectively, in Terra JV. Terra Real Estate Credit Opportunities Fund, LP On August 3, 2020, the Company entered into a subscription agreement with Terra RECO whereby the Company committed to fund up to $ 50.0 million to purchase limited partnership interests in Terra RECO. For more information on this investment, please see Note 5 . Terra International Fund 3, L.P. On September 30, 2019, the Company entered into a Contribution and Repurchase Agreement with Terra International Fund 3, L.P. (“Terra International 3”) and Terra Offshore REIT, a wholly-owned subsidiary of Terra International 3. Pursuant to this agreement, Terra International 3, through Terra Offshore REIT, contributed cash in the amount of $ 3.6 million to the Company in exchange for 212,691 shares of common stock, at a price of $ 17.02 per share. In addition, Terra International 3 agreed to contribute to the Company future cash proceeds, if any, raised from time to time by it, and the Company agreed to issue shares of common stock to Terra International 3 in exchange for any such future cash proceeds, in each case pursuant to and in accordance with the terms and conditions specified in the agreement. The shares were issued in a private placement in reliance on Section 4(a)(2) of the Securities Act and the rules and regulations promulgated thereunder. Under Cayman securities law, when there is a change in the terms of the offering, previously admitted partners have rights to rescind their subscription. On September 24, 2019, Terra International 3 amended its private placement memorandum to change its term from finite life to perpetual life with limited opportunity for liquidity, as well as to change the selling commission structure and to provide for a dividend reinvestment plan. As a result of the change in the terms of the offering, Terra International 3 received requests to rescind all of the units of its limited partnership interest at a price of $ 100,000 per unit. On April 29, 2020, the Company repurchased, at a price of $ 17.02 per share, the 212,691 shares of common stock that the Company had previously sold to Terra Offshore REIT on September 30, 2019. Terra International 3 honored all of the rescission requests that it had received with proceeds from the repurchase. Participation Agreements In the normal course of business, the Company may enter into participation agreements (“PAs”) with related parties, primarily other affiliated funds managed by the Manager, and to a lesser extent, unrelated parties (the “Participants”). The purpose of the PAs 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 F-31 Notes to Consolidated Financial Statements secured borrowings under ASC 860 (See “ Participation interests ” in Note 2 and “ Obligations under Participation Agreements ” in Note 9 ). Participation Interests Purchased by the Company The below table lists the loan interests participated in by the Company via PAs as of December 31, 2020 and 2019. In accordance with the terms of each PA, 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. December 31, 2020 December 31, 2019 Participating Interests Principal Balance Carrying Value Participating Interests Principal Balance Carrying Value LD Milpitas Mezz, LP (1) 25.00 % 4,250,000 4,294,053 25.00 % 3,120,887 3,150,546 ________________ (1) On June 27, 2018, the Company entered into a participation agreement with Terra Income Fund 6, Inc. (“Terra Fund 6”) to purchase a 25 % participation interest, or $ 4.3 million, in a $ 17.0 million mezzanine loan. As of December 31, 2020, all of the commitment has been funded. Transfers of Participation Interest by the Company The following tables summarize the loans that were subject to PAs with affiliated entities as of December 31, 2020 and 2019: Transfers Treated as Obligations Under Participation Agreements as of December 31, 2020 Principal Balance Carrying Value % Transferred Principal Balance (6) Carrying Value (6) 14th & Alice Street Owner, LLC (5) $ 32,625,912 $ 32,877,544 80.00 % $ 26,100,729 $ 26,211,548 370 Lex Part Deux, LLC (2) 53,874,507 53,912,363 35.00 % 18,856,078 18,856,077 City Gardens 333 LLC (2) 28,303,628 28,307,408 14.00 % 3,962,509 3,963,010 Orange Grove Property Investors, LLC (2) 10,600,000 10,701,924 80.00 % 8,480,000 8,561,523 RS JZ Driggs, LLC (2) 8,544,513 8,629,929 50.00 % 4,272,257 4,314,965 Stonewall Station Mezz LLC (2) 10,442,567 10,537,512 44.00 % 4,594,730 4,635,937 The Bristol at Southport, LLC (5) 23,500,000 23,682,536 21.28 % 5,000,000 5,038,837 $ 167,891,127 $ 168,649,216 $ 71,266,303 $ 71,581,897 F-32 Notes to Consolidated Financial Statements Transfers Treated as Obligations Under Participation Agreements as of December 31, 2019 Principal Balance Carrying Value % Transferred Principal Balance (6) Carrying Value (6) 14th & Alice Street Owner, LLC (5) $ 12,932,034 $ 12,957,731 80.00 % $ 10,345,627 $ 10,387,090 2539 Morse, LLC (1)(3)(7) 7,000,000 7,067,422 40.00 % 2,800,001 2,825,519 370 Lex Part Deux, LLC (2)(4)(7) 48,349,948 48,425,659 47.00 % 22,724,476 22,724,476 Austin H. I. Owner LLC (1)(7) 3,500,000 3,531,776 30.00 % 1,050,000 1,059,532 City Gardens 333 LLC (1)(2)(3)(4)(7) 28,049,717 28,056,179 47.00 % 13,182,584 13,184,648 High Pointe Mezzanine Investments, LLC (3)(7) 3,000,000 3,263,285 37.20 % 1,116,000 1,217,160 NB Private Capital, LLC (1)(2)(3)(4)(7) 20,000,000 20,166,610 72.40 % 14,480,392 14,601,021 Orange Grove Property Investors, LLC (2) 10,600,000 10,696,587 80.00 % 8,480,000 8,557,205 RS JZ Driggs, LLC (2) 8,200,000 8,286,629 50.00 % 4,100,000 4,142,264 SparQ Mezz Borrower, LLC (1)(3)(7) 8,700,000 8,783,139 36.81 % 3,202,454 3,231,689 Stonewall Station Mezz LLC (2) 9,792,767 9,875,162 44.00 % 4,308,817 4,344,635 The Bristol at Southport, LLC (1)(3)(4)(7) 23,500,000 23,661,724 42.44 % 9,974,444 10,043,088 TSG-Parcel 1, LLC (1)(2)(7) 18,000,000 18,180,000 37.78 % 6,800,000 6,868,000 $ 201,624,466 $ 202,951,903 $ 102,564,795 $ 103,186,327 ________________ (1) Participant was Terra Secured Income Fund 5 International, an affiliated fund advised by the Manager. (2) Participant is Terra Fund 6, an affiliated fund advised by Terra Income Advisors. (3) Participant was Terra Income Fund International, an affiliated fund advised by the Manager. (4) Participant was TPT2, an affiliated fund managed by the Manager. (5) Participant is a third-party. (6) Amounts transferred may not agree to the proportionate share of the principal balance and fair value due to the rounding of percentage transferred. (7) As discussed in Note 3 , in March 2020, the Company settled an aggregate of $ 49.8 million of participation interests in loans held by the Company with TPT2 and Terra Offshore REIT, which Terra Offshore REIT received from Terra Secured Income Fund 5 International and Terra Income Fund International. In connection with the Merger and the Issuance of Common Stock to Terra Offshore REIT, the related participation obligations were settled. These investments are held in the name of the Company, but each of 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 their respective pro rata participation interest in such participated investments, as specified in the respective PA. 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 PAs with these entities, the Company receives and allocates the interest income and other related investment income to the Participants based on their respective pro rata participation interest. The Participants pay any expenses, including any fees to the Manager, only on their respective pro rata participation interest, subject to the terms of the respective governing fee arrangements. Secured Borrowing In March 2020, the Company entered into a financing transaction where a third-party purchased an A-note position. However, the sale of the A-note position did not qualify for sale accounting under ASC 860 and therefore, the gross amount of the loan remains in the consolidated balance sheets and the proceeds are recorded as secured borrowing. For the loan for which a portion is transferred, the interest earned on the entire loan balance is recorded within “ Interest income ” and the interest related to the transferred interest is recorded within “ Interest expense on secured borrowing ” in the consolidated statements of operations. F-33 Notes to Consolidated Financial Statements The following table summarizes the loan that was transferred to a third-party that was accounted for as secured borrowing as of December 31, 2020. Transfers Treated as Secured Borrowing as of December 31, 2020 Principal Balance Carrying Value % Transferred Principal Balance Carrying Value Windy Hill PV Five CM, LLC $ 26,454,910 $ 26,407,494 69.11 % $ 18,281,848 $ 18,187,663 $ 26,454,910 $ 26,407,494 $ 18,281,848 $ 18,187,663 Co-investment In January 2018, the Company and Terra Fund 6 co-invested in an $ 8.9 million mezzanine loan that bears interest at an annual fixed rate of 12.75 % and matured on March 31, 2019. In March 2019, the maturity of this loan was extended to July 1, 2019. In June 2019, the maturity of this loan was further extended to September 30, 2019. In August 2019, the loan was repaid in full. Note 9. Debt Term Loan On September 3, 2020, Terra Mortgage Capital I, LLC (the “Issuer” or the “Seller” ), a special-purpose indirect wholly-owned subsidiary of the Company, entered into an Indenture and Credit Agreement (the “Indenture and Credit Agreement”) with Goldman Sachs Bank USA, as initial lender (“Goldman”) and Wells Fargo Bank, National Association, as the trustee, custodian, collateral agent, loan agent and note administrator (“Wells Fargo”). The Indenture and Credit Agreement provides for (A) the borrowing by the Issuer from Goldman of approximately $ 103.0 million under a floating rate loan (the “Term Loan”) and (B) the issuance by the Issuer to Terra Mortgage Portfolio I, LLC (the “Class B Holder”) of an aggregate of approximately $ 76.7 million principal amount of Class B Income Notes due 2025 (the “Class B Notes” and, together with the Term Loan, the “Debt”). The Class B Holder is the parent of the Issuer and a wholly-owned subsidiary of the Company, and the sole holder of the Class B Notes. The Class B Holder is consolidated by the Company and the Term Loan represents amount due to Goldman under the Indenture and Credit Agreement. In addition, pursuant to the terms and conditions of the Indenture and Credit Agreement, Goldman has agreed to provide $ 3.6 million of additional future advances (the “Committed Advances”), and may provide up to $ 11.6 million of additional future discretionary advances, in connection with certain outstanding funding commitments under mortgage assets owned by the Issuer and financed under the Indenture and Credit Agreement (the “Mortgage Assets”). The stated maturity date of the Debt is March 14, 2025 . The Term Loan bears interest at a variable rate initially equal to LIBOR (the “Benchmark Rate”) (but not less than 1.0 % per annum), plus a margin of 4.25 % per annum (plus 0.50 % on and after the payment date in October 2022, plus 0.25 % on and after the payment date in October 2023), payable each month, on the day specified in the Indenture and Credit Agreement beginning in September 2020 (each a “Payment Date”). The Benchmark Rate will convert to an alternate index rate following the occurrence of certain transition events (the “Alternate Benchmark Rate”). Except as described below, and provided there is no default under the Indenture and Credit Agreement, the Class B Notes are entitled to residual amounts collected by the Issuer in respect of Mortgage Assets, after payment of debt service on the Term Loan. The Indenture and Credit Agreement is a term loan and does not contain any mark-to-market or margin provisions. Within a specified period following a monetary or material non-monetary default under a Mortgage Asset, the Class B Holder is required to prepay the portion of the Term Loan that is allocable to such Mortgage Asset (such prepayment is without premium, yield maintenance or other penalty). In connection with entering into the Indenture and Credit Agreement, the Company incurred $ 2.4 million of deferred financing costs, including a $ 1.3 million upfront fee paid to Goldman, which are being amortized to interest expense over the term of the facility. The Issuer also pays, with respect to the Committed Advances, an annual fee, payable monthly, equal to the Benchmark Rate or Alternate Benchmark Rate, as applicable, subject to a floor of 1.0 % per annum, plus 4.25 %. In connection with the Indenture and Credit Agreement, the Company entered into a non-recourse carveout Guaranty (the "Guaranty") in favor of Goldman, pursuant to which the Company guarantees the payment of certain losses, damages, costs, expenses, and other obligations incurred by Goldman in connection with the occurrence of fraud, intentional misrepresentation, F-34 Notes to Consolidated Financial Statements or willful misconduct by the Issuer, Class B Holder or the Company, and certain other occurrences including breaches of certain provisions under the Indenture and Credit Agreement. The Company also guarantees the payment of the aggregate outstanding amount of the Term Loan upon the occurrence of certain bankruptcy events. Under the Guaranty, the Company is required to maintain (a) a minimum tangible net worth in an amount not less than seventy-five percent ( 75 %) of its tangible net worth as of September 3, 2020, (b) a minimum liquidity of $ 10 million, and (c) an EBITDA to interest expense ratio of not less than 1.5 to 1.0. Failure to satisfy such maintenance covenants would constitute an event of default under the Indenture and Credit Agreement. As of December 31, 2020, the Company is in compliance with these covenants. The Term Loan is secured by first-priority security interests in substantially all of the assets of the Issuer, including all of the Mortgage Assets (other than excluded property and subject to certain permitted liens), including specified cash accounts that include the accounts into which Mortgage Asset proceeds are or will be paid. The Mortgage Assets are serviced and administered by an independent third-party servicer. The principal and interest on the Term Loan are repaid before repayment of the principal on the Class B Notes on each payment date of each month in accordance with the priority of payments as set forth in the Indenture and Credit Agreement, beginning in September 2020. Such payments are subject to certain fees for taxes, filings and administrative expenses. Upon the occurrence of a Term Loan Principal Trigger Event (as defined below), 100% of the payment of the principal proceeds are applied to the Term Loan principal after payment of certain fees and other amounts as described in the Indenture and Credit Agreement. A “Term Loan Principal Trigger Event” means as of any date of determination, an event that will be deemed to have occurred on the first date on which the aggregate principal balance of the Mortgage Assets is less than or equal to the product of (x) 75% multiplied by (y) the aggregate principal balance of the Mortgage Assets as of the closing date, plus any future advances made on such Mortgage Assets prior to such date of determination. As of December 31, 2020, there was no Term Loan Principal Trigger Event. The Class B Notes and the Term Loan are redeemable by the Issuer upon the occurrence of certain tax events in accordance with the terms and provisions of the Indenture and Credit Agreement. The following tables present detailed information with respect to each borrowing under the Term Loan as of December 31, 2020: December 31, 2020 Mortgage Assets Borrowings Under the Term Loan (1)(2) Principal Amount Carrying Value Fair Value 330 Tryon DE LLC $ 22,800,000 $ 22,901,294 $ 22,869,879 13,680,000 1389 Peachtree St, LP; 1401 Peachtree St, LP; and 1409 Peachtree St, LP 50,808,453 51,068,554 50,982,247 29,897,848 AGRE DCP Palm Springs, LLC 45,294,097 45,506,051 45,519,030 24,894,939 MSC Fields Peachtree Retreat, LLC 23,308,334 23,437,198 23,428,860 13,985,001 Patrick Henry Recovery Acquisition, LLC 18,000,000 18,039,456 17,994,495 10,800,000 University Park Berkeley, LLC 23,990,786 24,131,808 24,162,710 14,326,663 $ 184,201,670 $ 185,084,361 $ 184,957,221 $ 107,584,451 _______________ (1) Borrowings under the Term Loan bear interest at LIBOR plus 4.25 % with a LIBOR floor of 1.00 %, or 5.25 % as of December 31, 2020 using LIBOR of 0.14 %. (2) The maturity of the Term Loan is March 14, 2025 , however the maturity of each borrowing under the Term Loan matches the maturity of the respective Mortgage Asset. For the year ended December 31, 2020, the Company received proceeds from the Term Loan of $ 107.6 million, including $ 2.4 million of Committed Advances and $ 2.2 million of discretionary advances, and made no repayments. There was no Term Loan for the year ended December 31, 2019. As of December 31, 2020, the remaining amount for Committed Advances and discretionary advances was $ 1.2 million and $ 9.4 million, respectively. Repurchase Agreement On December 12, 2018, Terra Mortgage Capital I, LLC entered into an Uncommitted Master Repurchase Agreement (the “Master Repurchase Agreement”) with Goldman Sachs Bank USA. The Master Repurchase Agreement provided for advances F-35 Notes to Consolidated Financial Statements of up to $ 150.0 million in the aggregate, which the Company used to finance certain secured performing commercial real estate loans. Advances under the Master Repurchase Agreement accrued interest at a per annum pricing rate equal to the sum of (i) the 30-day LIBOR and (ii) the applicable spread, and had a maturity date of December 12, 2020 . The actual terms of financing for each asset was determined at the time of financing in accordance with the Master Repurchase Agreement. The Master Repurchase Agreement contained margin call provisions that provide Goldman with certain rights in the event of a decline in the market value of the assets purchased under the Master Repurchase Agreement. Upon the occurrence of a margin deficit event, Goldman required the Seller to make a payment to reduce the outstanding obligation to eliminate any margin deficit. For the period from January 1, 2020 to the date of the termination of the Master Repurchase Agreement on September 3, 2020, the Company received a margin call on one of the borrowings and as a result, made a repayment of $ 3.4 million to reduce the outstanding obligation under the Master Repurchase Agreement. In connection with the Master Repurchase Agreement, the Company entered into a Guarantee Agreement in favor of Goldman (the “Guarantee Agreement”), pursuant to which the Company would guarantee the obligations of the Seller under the Master Repurchase Agreement. Subject to certain exceptions, the maximum liability under the Master Repurchase Agreement would not exceed 50 % of the then currently outstanding repurchase obligations under the Master Repurchase Agreement. On September 3, 2020, the Company terminated the Master Repurchase Agreement and replaced it with the Term Loan as described above. In connection with the termination of the Master Repurchase Agreement, the Issuer repurchased all of its assets sold to Goldman pursuant to the Master Repurchase Agreement with the proceeds from the Term Loan, and Goldman released all security interests in such assets. In addition, Goldman unconditionally released the Company from, and terminated, the Guarantee Agreement in favor of Goldman, dated as of December 12, 2018, which provided for the guarantee by the Company of the obligations of the Issuer under the Master Repurchase Agreement, subject to certain exceptions and limitations. The Master Repurchase Agreement and the Guarantee Agreement contained various representations, warranties, covenants, conditions precedent to funding, events of default and indemnities that are customary for agreements of these types. In addition, the Guarantee Agreement contained financial covenants, which required the Company to maintain: (i) liquidity of at least 10 % of the then-current outstanding amount under the Master Repurchase Agreement; (ii) cash liquidity of at least the greater of $ 5 million or 5 % of the then-current outstanding amount under the Master Repurchase Agreement; (iii) tangible net worth at an amount equal to or greater than 75 % of the Company’s tangible net worth as of December 12, 2018, plus 75 % of new capital contributions thereafter; (iv) an EBITDA to interest expense ratio of not less than 1.50 to 1.00; and (v) a total indebtedness to tangible net worth ratio of not more than 3.00 to 1.00. As of December 31, 2019, the Company was in compliance with these covenants. In connection with entering into the Master Repurchase Agreement, the Company incurred $ 2.8 million of deferred financing costs, which were being amortized to interest expense over the term of the facility. In connection with the termination of the Master Repurchase Agreement, the remaining $ 0.5 million of unamortized deferred financing costs were carried over to the Term Loan to be amortized over the term of the Term Loan. As of December 31, 2019, unamortized deferred financing costs were $ 1.5 million. The following table presents summary information with respect to the Company’s outstanding borrowing under the Master Repurchase Agreement as of December 31, 2019: December 31, 2019 Arrangement Weighted Average Rate (1) Amount Outstanding Amount Remaining Available Weighted Average Term (2) Master Repurchase Agreement 4.3 % $ 81,134,436 $ 68,865,564 1.55 years _______________ (1) Amount is calculated using LIBOR of 1.76 % as of December 31, 2019. (2) The weighted average term is determined based on the current maturity of the corresponding loan. Each transaction under the facility has its own specific term. The Company may extend the maturity date of the Master Repurchase Agreement for a period of one year, subject to satisfaction of certain conditions. F-36 Notes to Consolidated Financial Statements The following table presents detailed information with respect to each borrowing under the Master Repurchase Agreement as of December 31, 2019: December 31, 2019 Collateral Borrowings Under Master Repurchase Agreement Principal Amount Carrying Value Fair Value Borrowing Date Principal Amount Interest Rate 330 Tryon DE LLC $ 22,800,000 $ 22,891,149 $ 22,906,207 2/15/2019 $ 17,100,000 LIBOR+2.25% (LIBOR floor of 2.49%) 1389 Peachtree St, LP; 1401 Peachtree St, LP; and 1409 Peachtree St, LP 38,464,429 38,510,650 38,655,000 3/7/2019 24,040,268 LIBOR+2.35% AGRE DCP Palm Springs, LLC 30,184,357 30,174,455 30,326,076 12/23/2019 22,638,268 LIBOR+2.50% (LIBOR floor of 1.8%) MSC Fields Peachtree Retreat, LLC 23,308,335 23,446,793 23,418,996 3/25/2019 17,355,900 LIBOR+2.25% (LIBOR floor of 2.00%) $ 114,757,121 $ 115,023,047 $ 115,306,279 $ 81,134,436 For the years ended December 31, 2020 and 2019, the Company borrowed $ 22.9 million and $ 81.1 million under the Master Repurchase Agreement, respectively, for the financing of new and follow-on investments, and made repayments of $ 104.0 million and $ 34.2 million, respectively. Revolving Credit Facility On June 20, 2019, Terra LOC Portfolio I, LLC, a special-purpose indirect wholly-owned subsidiary of the Company, entered into a credit agreement with Israel Discount Bank of New York to provide for revolving credit loans of up to $ 35.0 million in the aggregate (“Revolving Credit Facility”), which the Company expects to use for short term financing needed to bridge the timing of anticipated loans repayments and funding obligations. Borrowings under the Revolving Credit Facility can be either prime rate loans or LIBOR rate loans and accrue interest at an annual rate of prime rate plus 1 % or LIBOR plus 4 % with a floor of 6 %. The Revolving Credit Facility was scheduled to mature on June 20, 2020 . The Revolving Credit Facility was amended to extend the maturity to October 2, 2020. On October 2, 2020, the Company amended the Revolving Credit Facility and reduced the commitment amount to $ 15.0 million. In connection with this amendment, the interest rate was changed to prime rate plus 1 % or LIBOR plus 4 % with a floor of 4.5 % and the maturity was extended to September 2, 2021 . On March 16, 2021, the Revolving Credit Facility was terminated. In connection with obtaining the Revolving Credit Facility, the Company incurred deferred financing costs of $ 0.3 million, which was amortized over the original term of the facility. As of December 31, 2020, there was no amount outstanding under the Revolving Credit Facility. The Revolving Credit Facility required the Company to maintain: (i) an EBITDA to interest expense ratio of not less than 1.00 ; (ii) cash liquidity of at least $ 7.0 million; (iii) tangible net worth of at least $ 200.0 million; and (iii) a total indebtedness to tangible net worth ratio of not more than 1.75 to 1.00. Additionally, the Revolving Credit Facility required Terra LOC Portfolio I, LLC to maintain a tangible net worth of at least $ 100.0 million. As of December 31, 2020 and 2019, both the Company and Terra LOC Portfolio I, LLC were in compliance with these covenants. For the years ended December 31, 2020 and 2019, the Company borrowed $ 35.0 million and $ 16.0 million under the Revolving Credit Facility, respectively, and made repayments of $ 35.0 million and $ 16.0 million, respectively. F-37 Notes to Consolidated Financial Statements Mortgage Loan Payable As of December 31, 2020, the Company had a $ 44.0 million mortgage loan payable collateralized by a multi-tenant office building that the Company acquired through foreclosure. The following table presents certain information about the mortgage loan payable as of December 31, 2020 and 2019: December 31, 2020 December 31, 2019 Lender Current Interest Rate Maturity Date (1) Principal Amount Carrying Value Carrying Value of Collateral Carrying Value Carrying Value of Collateral Centennial Bank LIBOR + 3.85% (LIBOR Floor of 2.23%) September 27, 2022 $ 44,020,225 $ 44,117,293 $ 49,533,733 $ 44,753,633 $ 52,776,236 _______________ (1) In September 2020, the Company exercised the option to extend the maturity of the mortgage loan payable by two years. Scheduled Debt Principal Payments Scheduled debt principal payments for each of the five calendar years following December 31, 2020 are as follows: Years Ending December 31, Total 2021 — 2022 44,020,225 2023 — 2024 — 2025 107,584,451 Thereafter — 151,604,676 Unamortized deferred financing costs ( 2,241,582 ) Total $ 149,363,094 At December 31, 2020 and 2019, the unamortized deferred financing costs were $ 2.2 million and $ 1.4 million, respectively. Obligations Under Participation Agreements and Secured Borrowing As discussed in Note 2 , the Company follows the guidance in ASC 860 when accounting for loan participations and loans sold. Such guidance requires the transferred interests meet certain criteria in order for the transaction to be recorded as a sale. Loan participations and loans transferred 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 or secured borrowing, as applicable. As of December 31, 2020 and 2019, obligations under participation agreements had a carrying value of approximately $ 71.6 million and $ 103.2 million, respectively, and the carrying value of the loans that are associated with these obligations under participation agreements was approximately $ 168.6 million and $ 203.0 million, respectively, (see “ Participation Agreements ” in Note 8 ). Additionally, as of December 31, 2020, secured borrowing had a carrying value of approximately $ 18.2 million and the carrying value of the loan that is associated with the secured borrowing was $ 26.4 million. The weighted-average interest rate on the obligations under participation agreements and secured borrowing was approximately 10.2 % and 11.8 % as of December 31, 2020 and 2019, respectively. Note 10. Commitments and Contingencies Impact of COVID-19 As further discussed in Note 2 , the full extent of the impact of COVID-19 on the global economy generally, and the Company’s business in particular, is uncertain. As of December 31, 2020, no contingencies have been recorded on the Company’s consolidated balance sheet as a result of COVID-19, however as the global pandemic continues and the economic implications worsen, it may have long-term impacts on the Company’s financial condition, results of operations, and cash flows. Refer to Note 2 for further discussion of COVID-19. F-38 Notes to Consolidated Financial Statements 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 $ 67.9 million and $ 116.7 million as of December 31, 2020 and 2019, respectively. The Company expects to maintain sufficient cash on hand to fund such unfunded commitments, primarily through matching these commitments with principal repayments on outstanding loans. Unfunded Investment Commitment As discussed in Note 8 , On August 3, 2020, the Company entered into a subscription agreement with Terra RECO whereby the Company committed to fund up to $ 50.0 million to purchase limited partnership interests in Terra RECO. As of December 31, 2020, the unfunded investment commitment was $ 14.1 million. 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. The Company is not currently subject to any material legal proceedings and, to the Company’s knowledge, no material legal proceedings are threatened against the Company. From time to time, the Company 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 its portfolio companies. While the outcome of any legal proceedings cannot be predicted with certainty, the Company does not expect that any such proceedings will have a material adverse effect upon its financial condition or results of operations. See Note 8 for a discussion of the Company’s commitments to the Manager. Note 11. Equity Earnings Per Share The following table presents earnings per share for the years ended December 31, 2020 and 2019: Years Ended December 31, 2020 2019 Net income $ 5,255,730 $ 9,042,775 Preferred stock dividend declared ( 15,624 ) ( 15,624 ) Net income allocable to common stock $ 5,240,106 $ 9,027,151 Weighted-average shares outstanding — basic and diluted 18,813,066 14,967,183 Earnings per share — basic and diluted $ 0.28 $ 0.60 Preferred Stock Classes 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 Company’s board of directors 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 December 31, 2020 and 2019, there were no Preferred Stock issued or outstanding. Series A Preferred Stock On November 30, 2016, the Company’s board of directors classified and designated 125 shares of preferred stock as a separate class of preferred stock to be known as the 12.5 % Series A Redeemable Cumulative Preferred Stock, $ 1,000 F-39 Notes to Consolidated Financial Statements liquidation value per share (“Series A Preferred Stock”). In December 2016, the Company sold 125 shares of the Series A Preferred Stock for $ 125,000 . The Series A Preferred Stock pays dividends at an annual rate of 12.5 % of the liquidation preference. These dividends are cumulative and payable semi-annually in arrears on June 30 and December 31 of each year . The Series A Preferred Stock, with respect to dividend rights and rights upon liquidation, dissolution or winding up of the Company, rank senior to common stock. The Company, at its option, may redeem the shares, with written notice, at a redemption price of $ 1,000 per share, plus any accrued unpaid distribution through the date of the redemption. The Series A Preferred Stock carries a redemption premium of $ 50 per share if redeemed prior to January 1, 2019. The Series A Preferred Stock generally has no voting rights. However, the Series A Preferred Stock holders’ voting is required if (i) authorization or issuance of any securities senior to the Series A Preferred Stock; (ii) an amendment to the Company’s charter that has a material adverse effect on the rights and preference of the Series A Preferred Stock; and (iii) any reclassification of the Series A Preferred Stock. Common Stock As discussed in Note 3 , on March 1, 2020, TPT2 merged with and into the Company with the Company continuing as the surviving corporation. In connection with the Merger, the Company issued 2,116,785.76 shares of common stock of the Company to Terra Fund 7, the sole stockholder of TPT2, as consideration in the Merger. In addition, on March 2, 2020, the Company issued 2,457,684.59 shares of common stock of the Company in exchange for the settlement of certain participation interests in loans held by the Company and cash. As described in Note 3 , Terra Fund 7 contributed the shares of the Company’s common stock received as consideration in the Merger to Terra JV and became a co-managing member of Terra JV pursuant to the JV Agreement. The JV Agreement and related stockholders agreement between Terra JV and the Company, dated March 2, 2020, provide for the joint approval of Terra Fund 5 and Terra Fund 7 with respect to certain major decisions that are taken by Terra JV and the Company. As of December 31, 2020, Terra JV owns 87.4 % of the issued and outstanding shares of the Company’s common stock with the remainder held by Terra Offshore REIT, and Terra Fund 5 and Terra Fund 7 own an 87.6 % and 12.4 % interest, respectively, in Terra JV. On September 30, 2019, the Company issued 212,691 shares of its common stock to Terra Offshore REIT at a price of $ 17.02 per share for total proceeds of $ 3.6 million. On April 29, 2020, the Company repurchased, at a price of $ 17.02 per share, the 212,691 shares it previously sold to Terra Offshore REIT ( Note 7 ). 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 Company’s board of directors and will depend upon its taxable income, financial condition, maintenance of REIT status, applicable law, and other factors as its board of directors deems relevant. For the year ended December 31, 2020, the Company made distributions to Terra Fund 5, Terra JV and Terra Offshore REIT in the aggregate of $ 21.2 million, of which $ 16.0 million were returns of capital. For the year ended December 31, 2019, the Company made distributions to Terra Fund 5 and Terra Offshore REIT totaling $ 30.4 million, of which $ 21.4 million were returns of capital. Additionally, for both the years ended December 31, 2020 and 2019, the Company made distributions to preferred stockholders of $ 15,624 . Distributions paid to stockholders consist of ordinary income, capital gains, return of capital or a combination thereof for income tax purposes. The following table presents distributions per share, declared and paid during the years ended December 31, 2020 and 2019, reported for federal tax purposes and serves as a designation of capital gain distributions, if applicable, pursuant to Section 857(b)(3)(C) of the Internal Revenue Code and Treasury Regulation § 1.857-6(e): Years Ended December 31, 2020 2019 Ordinary income $ 0.48 $ 0.78 Return of capital 0.68 1.25 $ 1.16 $ 2.03 F-40 Notes to Consolidated Financial Statements Note 12. 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 other than the one below that would require adjustment to, or disclosure in, the Company’s consolidated financial statements. On March 12, 2021, Terra Mortgage Portfolio II, LLC, an indirect wholly-owned subsidiary of the Company, entered into a Business Loan and Security Agreement (the “Revolving Line of Credit”) with Western Alliance Bank (“WAB”) to provide for advances up to the lesser of $ 75.0 million or the amount determined by the borrowing base, which is based on the eligible assets pledged to the lender. Borrowings under the Revolving Line of Credit bear interest at an annual rate of LIBOR + 3.25 % with a combined floor of 4.0 % per annum. The Revolving Line of Credit matures on March 12, 2023 with an annual 12-month extension available at the Company’s option, which are subject to certain conditions. In connection with the Revolving Line of Credit, the Company entered into a limited guaranty (the “Guaranty”) in favor of WAB, pursuant to which the Company will guarantee the payment of up to 25 % of the amount outstanding under the Revolving Line of Credit. Under the Revolving Line of credit and the Guaranty, the Company will be required to maintain (i) a minimum total net worth of $ 250.0 million; (ii) a $ 2.0 million quarterly operating profit; and (iii) a ratio of total debt to total net worth of no more than 2.50 to 1.00. The Revolving Line of Credit contains terms, conditions, covenants, and representations and warranties that are customary and typical for a transaction of this nature. The Revolving Line of Credit contains various affirmative and negative covenants, including maintenance of a debt to total net worth ratio and limitations on the incurrence of liens and indebtedness, loans, distributions, change of management and ownership, changes in the nature of business and transactions with affiliates. The Revolving Line of Credit also includes customary events of default, including a cross-default provision applicable to debt obligations of Terra Mortgage Portfolio II, LLC or the Company. The occurrence of an event of default may result in termination of the Revolving Line of Credit and acceleration of amounts due under the Revolving Line of Credit. In connection with the closing of the Revolving Line of Credit, the Company pledged a $ 11.5 million first mortgage to the borrowing base and drew down $ 8.0 million on the Revolving Line of Credit. F-41 Terra Property Trust, Inc. Schedule III – Real Estate and Accumulated Depreciation As of December 31, 2020 Initial Costs Cost Capitalized Subsequent to Acquisition Decrease in Net Investment (1) Gross Amount at Period End Description Encumbrance Land Building, Building Improvements and Furniture and Fixtures Land Building, Building Improvements and Furniture and Fixtures Total Accumulated Depreciation Date of Construction Date Acquired Life Used for Depreciation Office building in Santa Monica, CA $ 44,020,225 $ — $ 51,308,076 $ 2,508,533 $ — $ — $ 53,816,609 $ 53,816,609 $ 3,826,700 2002-2004 July 30, 2018 40 years Land in Conshohocken, PA — 14,703,359 — 242,071 ( 1,550,000 ) 13,395,430 — 13,395,430 — N/A January 9, 2019 N/A $ 44,020,225 $ 14,703,359 $ 51,308,076 $ 2,750,604 $ ( 1,550,000 ) $ 13,395,430 $ 53,816,609 $ 67,212,039 $ 3,826,700 ___________________________ (1) For the year ended December 31, 2019, the Company recorded an impairment charge of $ 1.6 million on the land in order to reduce the carrying value of the land to its estimated fair value, which is the estimated selling price less the cost of sale. At December 31, 2020, the aggregate cost of real estate for federal income tax purposes was $ 57.6 million. The changes in total real estate assets and accumulated depreciation for the year ended December 31, 2020 are as follows: Real Estate Asset Accumulated Depreciation Year Ended December 31, 2020 Year Ended December 31, 2020 Balance, beginning of year $ 66,976,039 Balance, beginning of year $ 2,224,792 Acquisition through foreclosure — Depreciation for the year 1,601,908 Improvements 236,000 Balance, end of year $ 3,826,700 Impairment charge — Balance, end of year $ 67,212,039 F-42 Terra Property Trust, Inc. Schedule IV – Mortgage Loans on Real Estate As of December 31, 2020 Portfolio Company (1) Collateral Location Property Type Interest Payment Rates Maximum Maturity Date (2) Periodic Payment Terms Prior Liens Face Amount Carrying Amount Mezzanine Loans: 150 Blackstone River Road, LLC US - MA Industrial 8.5 % 9/6/2027 Interest Only $ — $ 7,000,000 $ 7,000,000 Austin H. I. Owner LLC (3) US - TX Hotel 12.5 % 10/6/2020 Interest Only — 3,848,712 3,887,200 High Pointe Mezzanine Investments, LLC (4) US - SC Student housing 15.0 % 1/6/2024 Interest Only — 3,000,000 3,204,375 LD Milipitas Mezz, LLC (5) US - CA Hotel LIBOR +10.25% (2.75% Floor) 6/27/2023 Interest Only — 4,250,000 4,294,053 Stonewall Station Mezz LLC (4)(6)(7) US - NC Land 12.0% current 2.0% PIK 5/31/2023 Interest Only — 10,442,567 10,537,512 — 28,541,279 28,923,140 First Mortgages: 14th & Alice Street Owner, LLC (6)(8) US - CA Multifamily LIBOR + 5.75% (3.25% Floor) 3/5/2022 Interest Only — 32,625,912 32,877,544 1389 Peachtree St, LP; 1401 Peachtree St, LP; 1409 Peachtree St, LP (9) US - GA Office LIBOR + 4.5% 3/10/2024 Interest Only — 50,808,453 51,068,554 330 Tryon DE LLC (9) US - NC Office LIBOR + 3.85% (2.51% Floor) 3/1/2024 Interest Only — 22,800,000 22,901,294 870 Santa Cruz, LLC US - CA Office LIBOR + 6.75% (0.5% Floor) 12/15/2025 Interest Only — 10,760,355 10,724,590 AGRE DCP Palm Springs, LLC (9)(10) US - CA Hotel LIBOR +4.75% (1.8% Floor) 1/1/2025 Interest Only — 45,294,097 45,506,051 MSC Fields Peachtree Retreat, LLC (9) US - GA Multifamily LIBOR + 3.85% (2.0% Floor) 4/1/2024 Interest Only — 23,308,334 23,437,198 Patrick Henry Recovery Acquisition, LLC (9) US - CA Office LIBOR + 2.95% (1.5% Floor) 12/1/2024 Interest Only — 18,000,000 18,039,456 University Park Berkeley, LLC (9)(11) US - CA Student housing LIBOR + 4.2% (1.5% Floor) 3/5/2025 Interest Only — 23,990,786 24,131,808 Windy Hill PV Five CM, LLC (12) US - CA Office LIBOR + 6.0% (2.05% Floor) 9/20/2023 Interest Only — 26,454,910 26,407,494 — 254,042,847 255,093,989 F-43 Terra Property Trust, Inc. Schedule IV – Mortgage Loans on Real Estate (Continued) As of December 31, 2020 Portfolio Company (1) Collateral Location Property Type Interest Payment Rates Maximum Maturity Date (2) Periodic Payment Terms Prior Liens Face Amount Carrying Amount Preferred equity investments: 370 Lex Part Deux, LLC (6)(7) US - NY Office LIBOR + 8.25% (2.44% Floor) 1/9/2025 Interest Only — 53,874,507 53,912,363 City Gardens 333 LLC (6)(7) US - CA Student housing LIBOR + 9.95% (2.0% Floor) 4/1/2023 Interest Only — 28,303,628 28,307,408 Orange Grove Property Investors, LLC (6)(7) US - CA Condominium LIBOR + 8.0% (4.0% Floor) 6/1/2022 Interest Only — 10,600,000 10,701,924 REEC Harlem Holdings Company LLC US - NY Land LIBOR + 12.5% 3/9/2025 Interest Only — 16,767,984 16,767,984 RS JZ Driggs, LLC (6)(7)(13) US - NY Multifamily 12.3 % 8/1/2021 Interest Only — 8,544,513 8,629,929 The Bristol at Southport, LLC (6)(8) US - WA Multifamily 12.0 % 9/22/2022 Interest Only — 23,500,000 23,682,536 — 141,590,632 142,002,144 Allowance for loan losses — — ( 3,738,758 ) Total investments $ — $ 424,174,758 $ 422,280,515 ___________________________ (1) All of the Company’s loans have a prepayment penalty provision. (2) Maximum maturity date assumes all extension options are exercised. (3) This loan is currently past due. The Company is currently evaluating the options of recovering the principal amount, including foreclosing on the collateral. The latest appraisal the Company received in August 2020 indicates that the value of the collateral is sufficient to recover the principal amount. (4) The Company entered into a forbearance agreement with the borrower to allow for more time to make the interest payment. (5) On June 27, 2018, the Company entered into a participation agreement with Terra Income Fund 6, Inc. to purchase a 25 % interest, or $ 4.3 million, in a mezzanine loan. (6) The loan participations from the Company do not qualify for sale accounting under ASC 860 and therefore, the gross amount of these loans remain in Schedule IV. See “ Obligations under Participation Agreements ” in Note 9 and “ Transfers of Participation Interest by the Company ” in Note 8 in the accompanying notes to the consolidated financial statements. (7) The Company sold a portion of its interest in this loan through a participation agreement to Terra Income Fund 6, Inc., an affiliated fund advised by the Terra Income Advisors, an affiliate of the Company’s sponsor and Manager ( Note 8 ). (8) The Company sold a portion of its interest in this loan to a third-party through a participation agreement ( Note 8 ). (9) These loans were used as collateral for $ 107.6 million borrowing under a term loan ( Note 9 ). (10) In July 2020, the Company amended the loan agreement to change the interest rate to PIK 15 % for the period from July 2020 through January 2021. (11) In December 2020, the Company entered into a forbearance agreement with the borrower pursuant to which interest is accrued on the loan during the 90-day forbearance period from November 2020 to January 2021. In connection with entering into the forbearance agreement, the spread on the interest rate was increased to 4.2 % and the exit fee was increased to 0.75 %. (12) In March 2020, the Company entered into a financing transaction where a third-party purchased an A-note position. However, the sale did not qualify for sale accounting and therefore, the gross amount of the loan remains in the consolidated balance sheets. The liability is reflected as secured borrowing in the consolidated balance sheets. (13) This loan is currently past due. Given the loan is in default, the Company issued a demand notice and is currently in control of the sale process. The Company expects the sales proceeds to repay the principal in full. F-44 Terra Property Trust, Inc. Notes to Schedule IV - Mortgage Loans on Real Estate December 31, 2020 Reconciliation of Mortgage Loans on Real Estate Year Ended December 31, 2020 Balance, beginning of year $ 378,612,768 Additions during period: New mortgage loans 108,488,411 PIK interest 4,442,759 Accrual, payment and accretion of exit fees, net 681,455 Deductions during the period: Collections of principals ( 66,144,729 ) Amortization of premium ( 61,391 ) Provision for loan losses ( 3,738,758 ) Balance, end of year $ 422,280,515 F-45 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: March 18, 2021 TERRA PROPERTY TRUST, INC. By: /s/ Vikram S. Uppal Vikram S. Uppal Chief Executive Officer (Principal Executive Officer) By: /s/ Gregory M. Pinkus Gregory M. Pinkus Chief Financial Officer and Chief Operating Officer, (Principal Financial and Accounting Officer) Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated. Signature Title Date /s/ Andrew M. Axelrod Chairman of the Board March 18, 2021 Andrew M. Axelrod /s/ Vikram S. Uppal Director and Chief Executive Officer March 18, 2021 Vikram S. Uppal (Principal Executive Officer) /s/ Gregory M. Pinkus Chief Financial Officer, Chief Operating Officer, Treasurer and Secretary (Principal Financial and Accounting Officer) March 18, 2021 Gregory M. Pinkus /s/ Roger H. Beless Director March 18, 2021 Roger H. Beless /s/ Michael L. Evans Director March 18, 2021 Michael L. Evans 67